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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OFTHE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2003

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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
      incorporation or organization) |  | (I.R.S. Employer
      Identification No.)

Registrants Address:One Station PlaceStamford, Connecticut 06902www.omicorp.com

Registrants telephone number
including area code: (203) 602-6700Securities 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

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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.

YESX          NO



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.

YESX          NO

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YESX          NO

Aggregate market value of Registrants
voting stock, held by non-affiliates, based on the closing price on the New York
Stock Exchange as of the close of business on June 30, 2003:

$457,207,187

Number of shares of the Registrants
Common Stock outstanding as of March 10, 2004:

81,025,214

The following document is hereby
incorporated by reference into Part III of this Form 10-K:

(1)   Portions
of the OMI Corporation 2004 Proxy Statement to be filed with the Securities and
Exchange Commission.



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INDEX

PART I





|Items     |  |                                                     | Page(s) |  | 
|--------- |  | --------------------------------------------------- | ------- |  | 
|         
|1.
and 2. |  | Business and Properties                             |         |  | 
|3.        |  | Legal Proceedings                                   |         |  | 
|4.        |  | Submission of Matters to a Vote of
Security Holders |         |  | 
|4A.       |  | Management and Directors                            |         |  | 
|         

PART II





|5.  |  |  | Market for OMI Corporations
Common Stock and Related 
  Stockholder Matters              |  |  |  |  |  | 17 | 
|--- |  |  | ----------------------------------------------------------------------------------------- |  |  |  |  |  | -- | 
|6.  |  |  | Selected Financial
Data                                                                   |  |  |  |  |  | 18 | 
|7.  |  |  | Managements
Discussion and Analysis of Results of Operations and
  Financial Condition   |  |  |  |  |  | 21 | 
|    |  |  | Overview                                                                                  |  |  |  |  |  | 21 | 
|    |  |  | 2003 Financial
Summary                                                                    |  |  |  |  |  | 21 | 
|    |  |  | Market Overview                                                                           |  |  |  |  |  | 23 | 
|    |  |  | Critical Accounting
Estimates                                                             |  |  |  |  |  | 27 | 
|    |  |  | Results of Operations                                                                     |  |  |  |  |  | 29 | 
|    |  |  | Financial Condition
and Capital Resources                                                 |  |  |  |  |  | 40 | 
|7A. |  |  | Quantitative and
Qualitative Disclosures about Market Risks                               |  |  |  |  |  | 47 | 
|8.  |  |  | Financial Statements
and Supplementary Data                                               |  |  |  |  |  | 48 | 
|9.  |  |  | Changes in and Disagreements
with Accountants on Accounting and   
  Financial Disclosure |  |  |  |  |  | 76 | 
|9A. |  |  | Controls and Procedures                                                                   |  |  |  |  |  | 76
|   

PART III



|10. |  | Directors and Executive Officers
of OMI Corporation            |  |  |  | 77 | 
|--- |  | -------------------------------------------------------------- |  |  |  | -- | 
|11. |  | Executive Compensation                                         |  |  |  | 77 | 
|12. |  | Security Ownership of Certain Beneficial
Owners and Management |  |  |  | 77 | 
|13. |  | Certain Relationships and Related
Transactions                 |  |  |  | 77 | 
|14. |  | Principal Accountant Fees and Services                         |  |  |  | 77
|    |  |                                                                |  |  |  |   
|   

PART IV



|15. |  | Exhibits, Financial Statement Schedules
and Reports on Form 8-K |  |  |  | 78 | 
|--- |  | --------------------------------------------------------------- |  |  |  | -- | 
|    |  | SIGNATURES                                                      |  |  |  |    | 







i

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PART I

Items 1 and 2.BUSINESS AND PROPERTIES

General

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. The 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.

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

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

Website Information

It is the Companys policy to make
all of its filings with the Securities and Exchange Commission (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, Investor Relations. These reports are
available soon after they are filed electronically with the SEC. You may read and
copy any document we file with the SEC at the SECs Public Reference Room at
450 Fifth Street, N.W., 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 http://www.sec.gov.

Interested parties may find the Board Guidelines
on Corporate Governance Issues, the charters of its Audit Committee, Compensation
Committee and Nominating/Corporate Governance Committee and the Companys Corporate
Code of Ethics also available on our website.

Development of OMIs Business

We are a leading seaborne transporter of
crude oil and refined petroleum products operating in the international shipping
markets. We believe our modern fleet of 37 vessels is one of the youngest in the
world, with an average age as of December 31, 2003 of approximately 5.8 years,1
compared to an industry average of approximately 9.8 years. 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 fleet now comprises
21 product carriers, which primarily transport refined petroleum products from refinery
locations to consuming locations, and 16 crude oil tankers, including 10 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). The remaining six vessels include one ULCC, three
Panamax tankers and two handysize tankers.



| 
|-
|1







1

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The following sets forth a summary of our current fleet:





|Crude
Oil Fleet:           |  |  |  | Number of Vessels | Aggregate dwt
|-------------------------- |  |  |  | ----------------- | -------------
|                          
|1998-2002
built Suezmaxes  |  |  |  | 10                | (a)          
|1986 built ULCC            |  |  |  | 1                 |              
|1981-1984 built
Panamaxes  |  |  |  | 3                 |              
|1993 built handysizes      |  |  |  | 2                 |              
|                          
|Total                      |  |  |  | 16                |              
|                          
|Product
Carrier Fleet:    
|                          
|1999-2004
built handysizes |  |  |  | 11                |              
|2000-2003 built handymaxes |  |  |  | 6                 |              
|2003 built
Panamaxes       |  |  |  | 2                 |              
|1988-1991 built handysizes |  |  |  | 2                 |              
|                          
|Total                      |  |  |  | 21                |              
|                          
|Total
Fleet                |  |  |  | 37                |              
|                          
|                          



|   
|---
|(a)

We expect to take delivery of three new, double
hulled, handysize ice class 1A product carriers in 2004, two more in 2005 and one
in 2006.

We have grown since our fleet renewal program
commenced, both in dwt and number of vessels, while substantially reducing the age
of our fleet. At June 30, 1998, our fleet consisted of 26 vessels (including three
jointly owned and four time chartered) aggregating 2.5 million dwt and the average
age of the owned and jointly owned vessels was approximately 15.1 years. In comparison,
our fleet at December 31, 2003 had an average age of approximately 5.8 years.

We have been successful in implementing
a chartering strategy that has allowed us to generate stable cash flow while
    retaining  significant profit generating capabilities in a strong charter
    rate environment.
In 2003, we generated approximately $116 million of time charter (TC)
 revenue from time charters on 19 product carriers and two crude carriers. Revenue

from time charters in 2004 is expected to be approximately $111 million, assuming
the six time charters that expire are not renewed. In 2003, TC revenue from time
charters  covered in excess of 100% of the following fixed expenses: company-wide
general
and administrative expense, total interest expense and operating expenses for
vessels  under time charter. While the majority of vessels are on time charter,
in excess
of two-thirds of our vessels on a tonnage basis operate in the spot market, which

allows us to generate increased cash flow in a strong charter rate environment.

Our Strategy

Our strategy includes the following initiatives:

Balanced chartering in spot and time charter markets

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 operating expenses of the
time chartered vessels. Our balanced chartering strategy helped us to be profitable
even in the weak market conditions which prevailed from the second quarter of 2001
into the fourth quarter of 2002. We were recently able to extend the charter periods
for four of our vessels, two by one year and two by two years. Additionally, of
the seven product carriers on order, four will begin five-year charters upon delivery
from the shipyard, all of which charters provide for profit sharing. However, in
excess of two-thirds of our dwt, including all of our Suezmax tankers, operate in
the spot market, which allows us to capitalize on a strong charter rate environment,
as was the case during most of 2003 when market conditions were strong.





2

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The following reflects our contracted TC revenue through 2007:







|                      |  |  |  | Actual |  | Actual |  | Actual |  | Actual |  |        |  |       |  |       |  |      
|--------------------- |  |  |  | ------ |  | ------ |  | ------ |  | ------ |  | ------ |  | ----- |  | ----- |  | -----
|(In
    Millions)     |  |  |  | 2000   |  | 2001   |  | 2002   |  | 2003   |  | 2004   |  | 2005  |  | 2006  |  | 2007 
|                     
|TC
Revenue            |  |  |  | $16.3  |  | $43.5  |  | $90.4  |  | $115.6 |  | $111.2 |  | $68.6 |  | $49.6 |  | $33.5
|Number of Vessels
(a) |  |  |  | 5      |  | 14     |  | 17     |  | 21(b)  |  | 18(c)  |  | 13(d) |  | 7(e)  |  | 7(f) 
|                     





|(a)   |  | Number of vessels at the end of
each year.                                                                                                                                                                                                                                                    | 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(b)   |  | During 2003, four newbuildings
began time charters.                                                                                                                                                                                                                                           | 
|(c)   |  | 24 vessels will operate on time
charters during 2004 (including three vessels that will begin time charters upon
delivery); assuming no extensions, 6 vessels complete time charter contracts during
the year.                                                                                | 
|(d)   |  | 20 vessels will operate on time
charters during 2005; (including two vessels that will begin time charters upon
delivery); assuming no extensions, 7 vessels complete time charters.                                                                                                          | 
|(e)   |  | 13 vessels will operate on time
charters during 2006; assuming no extensions, 6 vessels complete time charters.                                                                                                                                                                               | 
|(f)   |  | Two of the vessels will complete
their time charters in 2008, three in 2009 and two in 2010.                                                                                                                                                                                                  | 
|Note: |  | TC revenue is the amount
contracted to date in the table above and does not include projections other than
for expected delivery dates of newbuildings and offhire relating to drydock. We
intend to time charter vessels which have time charters expiring 2004-2007 at opportunistic
times. | 

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 allows 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 of normal load location.
Backhauls reduce the amount of ballast time, i.e. voyages without cargo.

Continued acquisition of modern vessels while improving
our balance sheet

Our strategy is 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. From December
31, 1999 to December 31, 2003, we invested $778 million in acquiring modern vessels,
while at the same time we decreased our net debt (total debt less cash and cash
equivalents) to total net capitalization (total capitalization less cash and







3

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cash equivalents) from 60.3% as of December 31, 1999 to 49% as of
December 31, 2003. This was aided by the issuance of approximately $148 million
in equity during that period. We will continue to monitor opportunities to acquire
modern vessels at attractive returns on capital and to dispose of old vessels.

Enter into strategic alliances

Working with other business enterprises
in our industry provides us with superior market information, scheduling efficiencies
and access to expertise. It provides opportunities to reduce ballast time which
may result in higher earnings for our vessels. All 10 of our Suezmax tankers are
marketed through a marketing alliance with another large Suezmax tanker owner, and
commencing in December 2003, our Suezmax tankers are pooled with a European shipowner.
Our three Panamax tankers are also in a pool with other Panamax shipowners.

Our Fleet

The following tables set forth additional
detail about our fleet. Our current fleet consists of crude oil tankers and product
carriers.

EXISTING FLEET



|Name of Vessel     |  |  |  | Year 
  Built | Dwt |           |  |  |  | Charter
  Expiration |        |  | Hull
  Type (a)
|------------------ |  |  |  | ------------- | --- | --------- |  |  |  | -------------------- | ------ |  | ---------------
|                  
|CRUDE
OIL TANKERS:
|                  
|Suezmax           
|SOMJIN             |  |  |  | 2001          |     | 160,183   |  |  |  |                      | SPOT   |  |                
|POTOMAC            |  |  |  | 2000          |     | 159,999   |  |  |  |                      | SPOT   |  |                
|HUDSON             |  |  |  | 2000          |     | 159,999   |  |  |  |                      | SPOT   |  |                
|DELAWARE           |  |  |  | 2002          |     | 159,452   |  |  |  |                      | SPOT   |  |                
|DAKOTA             |  |  |  | 2002          |     | 159,435   |  |  |  |                      | SPOT   |  |                
|SACRAMENTO         |  |  |  | 1998          |     | 157,411   |  |  |  |                      | SPOT   |  |                
|PECOS              |  |  |  | 1998          |     | 157,406   |  |  |  |                      | SPOT   |  |                
|SABINE             |  |  |  | 1998          |     | 157,332   |  |  |  |                      | SPOT   |  |                
|OLIVER JACOB(b)    |  |  |  | 1999          |     | 157,327   |  |  |  |                      | SPOT   |  |                
|MAX JACOB(c)       |  |  |  | 2000          |     | 157,327   |  |  |  |                      | SPOT   |  |                
|                   |  |  |  |               |     |           |  |  |  |                      |        |  |                
|Panamax            |  |  |  |               |     |           |  |  |  |                      |        |  |                
|ELBE               |  |  |  | 1984          |     | 66,800    |  |  |  |                      | SPOT   |  |                
|NILE(d)            |  |  |  | 1981          |     | 65,755    |  |  |  |                      | SPOT   |  |                
|VOLGA(d)           |  |  |  | 1981          |     | 65,689    |  |  |  |                      | SPOT   |  |                
|                   |  |  |  |               |     |           |  |  |  |                      |        |  |                
|Handysize          |  |  |  |               |     |           |  |  |  |                      |        |  |                
|TANDJUNG
AYU       |  |  |  | 1993          |     | 36,362    |  |  |  |                      | 5/2005 |  |                
|BANDAR AYU         |  |  |  | 1993          |     | 36,345    |  |  |  |                      | 7/2005 |  |                
|                  
|ULCC              
|SETTEBELLO(e)      |  |  |  | 1986          |     | 322,466   |  |  |  |                      | SPOT   |  |                
|                   |  |  |  |               |     |           |  |  |  |                      |        |  |                
|                   |  |  |  |               |     | 2,179,288 |  |  |  |                      |        |  |                
|                   |  |  |  |               |     |           |  |  |  |                      |        |  |                





4

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|Name of Vessel         |  | Year 
    Built | Dwt | Charter
    Expiration |  | Hull
    Type (a)
|---------------------- |  | --------------- | --- | ---------------------- |  | -----------------
|                      
|PRODUCT
CARRIERS:     
|                      
|Panamax               
|TAMAR                  |  | 2003            |     | 70,362                 |  | 7/2008           
|OTTAWA                 |  | 2003            |     | 70,297                 |  | 4/2008           
|                      
|Handymax              
|NECHES                 |  | 2000            |     | 47,052                 |  | 9/2004           
|SAN JACINTO            |  | 2002            |     | 47,038                 |  | 3/2005           
|GUADALUPE              |  | 2000            |     | 47,037                 |  | 11/2004          
|AMAZON                 |  | 2002            |     | 47,037                 |  | 1/2005           
|MOSELLE                |  | 2003            |     | 47,037                 |  | 2/2006           
|ROSETTA                |  | 2003            |     | 47,015                 |  | 3/2006           
|                       |  |                 |     |                        |  |                  
|Handysize              |  |                 |     |                        |  |                  
|ORONTES                |  | 2002            |     | 37,383                 |  | 3/2005           
|OHIO                   |  | 2001            |     | 37,278                 |  | 12/2004          
|ASHLEY                 |  | 2001            |     | 37,270                 |  | 11/2004          
|MARNE                  |  | 2001            |     | 37,230                 |  | 9/2004           
|LOIRE                  |  | 2004            |     | 37,106                 |  | 2/2009           
|TRINITY                |  | 2000            |     | 35,834                 |  | 10/2006          
|MADISON                |  | 2000            |     | 35,828                 |  | 9/2006           
|RHONE                  |  | 2000            |     | 35,775                 |  | 4/2005           
|CHARENTE               |  | 2001            |     | 35,751                 |  | 9/2006           
|ISERE                  |  | 1999            |     | 35,438                 |  | 9/2006           
|SEINE                  |  | 1999            |     | 35,407                 |  | 7/2005           
|SHANNON                |  | 1991            |     | 29,999                 |  | SPOT             
|ALMA                   |  | 1988            |     | 29,996                 |  | 6/2004           
|                       |  |                 |     |                        |  |                  
|                       |  |                 |     | 883,170                |  |                  
|                       |  |                 |     |                        |  |                  
|Total
Current Fleet    |  |                 |     | 3,062,458              |  |                  
|                       |  |                 |     |                        |  |                  
|                      
|VESSELS
ON ORDER      
|                       |  |                 |     |                        |  |                  
|Name of Vessel         |  | Year 
    Built | Dwt | Charter
    Expiration |  | Hull
    Type (a)
|                      
|GARONNE                |  | 4/2004          |     | 37,000                 |  | 4/2009           
|SAONE                  |  | 8/2004          |     | 37,000                 |  | 8/2009           
|GANGES                 |  | 11/2004         |     | 37,000                 |  | SPOT             
|FOX                    |  | 6/2005          |     | 37,000                 |  | 6/2010           
|TO BE NAMED            |  | 8/2005          |     | 47,000                 |  | SPOT             
|TO BE NAMED            |  | 8/2005          |     | 37,000                 |  | 8/2010           
|TO BE NAMED            |  | 4/2006          |     | 37,000                 |  | SPOT             
|                       |  |                 |     |                        |  |                  
|Total
Vessels on Order |  |                 |     | 269,000                |  |                  
|                       |  |                 |     |                        |  |                  





|   
|---
|(a)
|(b)
|(c)
|(d)
|(e)







5

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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. | 

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 our customers.

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 six 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.

Crude oil tankers

Our Suezmax tankers are commercially managed
by Alliance Chartering LLC, a marketing alliance we operate in conjunction with
Frontline Ltd., another large Suezmax tanker owner and operator. Alliance currently
manages approximately 35 Suezmax tankers, including the Suezmax fleets of Frontline
Ltd. and several smaller 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. 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 agreed to pool our ten Suezmax tankers with two Suezmax tankers
owned by a European shipowner in a pool called Gemini Tankers. Alliance
will commercially manage the vessels in the pool and revenues will be paid into
the pool for the vessel performing the charter. Revenues received by the pool will be shared by the Company
and the European shipowner according to an agreed formula.



6

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Our three Panamax crude oil tankers are
time chartered into the Star Tankers Pool. Star Tankers Inc. is a tanker pool that
operated, as of December 31, 2003, 42 Panamax vessels, the largest pool in this
class of vessel. The pool is operated by Heidenreich Marine Inc., an unaffiliated
third party that charters the vessels to customers as it deems appropriate. This
pool distributes revenues to participants according to an agreed formula. This pool
enables us to place our vessels with an operator with greater knowledge of the Panamax
market segment. We believe that our vessels receive a better rate than we would
be able to achieve by chartering the vessels in the spot market on our own. Two
of our three vessels will leave the pool during 2004, and have been reclassified
to Vessels Held for Sale in March 2004.

Product carriers

Our product carriers are available for
spot market voyages or time charters and are commercially managed by us from our
Stamford office. All but one of our 21 product carriers currently are on time charter.
The charterers of time chartered vessels decide where to send the vessels to load
and discharge. We trade one product carrier in the spot market.

Technical operations

All of our owned vessels are operated and
managed on a technical basis by our wholly owned subsidiary, OMI Marine Services
LLC, which has offices in Houston, Texas and Stamford, Connecticut. Technical management
involves crewing, maintaining and insuring the vessels and arranging for vetting
by customers, potential customers and others. OMI Marine Services LLC currently
obtains crews through Orinoco Maritime Consultancy India Pvt. Ltd. (OMCI),
an unaffiliated crewing agent in Mumbai, India. OMCI provides crews primarily to
us, most of who are from India. In addition to operating the vessels during voyages,
the crews perform general maintenance, sometimes with the help of additional personnel.
A portion of our technical management is subcontracted to the crewing agent as well,
as the crewing agent has access to many seamen who have previously served on our
vessels and therefore have knowledge of our ships and experience with our operations.

Contractual arrangements between us and
our Indian agent provide 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. Insurance is arranged and administered by personnel
in our Stamford, Connecticut office. The two vessels we charter-in, the OLIVER JACOB
and the MAX JACOB, are managed by their respective owners, who provide crews and
all technical services for these vessels and also obtain required vettings from
major oil companies.

Competition

The international shipping industry is
highly competitive with many market participants. There are approximately 3,000
tankers aggregating approximately 290 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.

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 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.



7

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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 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 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, 2003, we had approximately
50 office employees. Additionally, there are in aggregate approximately 900 seagoing
personnel on board our vessels at any one time.

Our agent signs labor contracts in India
with labor organizations that represent seagoing personnel. We are not a party to
these contracts. One of these contracts is with a union representing the ratings,
or non officer, seagoing personnel. Our agent also has entered into a contract for
officers for our vessels. Our labor relations historically have been very good with
our crews and we expect these positive relations to continue.

Customers

Our customers include major oil companies,
petroleum products traders, government agencies and various other entities that
utilize the crude oil tanker market and the product carrier market. For 2003, our
largest customers by revenues were Chartering and Shipping S.A., a subsidiary of
Total S.A. ($33,851,000 or 11% of our consolidated revenue) and El Paso Marine Company
($42,720,000 or 13% of our consolidated revenue). For 2002, our largest customers
by revenues were also Chartering and Shipping S.A. ($34,045,000 or 17% of our consolidated
revenue) and El Paso Marine Company ($28,082,000 or 14% of our consolidated revenue).
During 2001, the Company did not receive 10% of its revenue from any one entity.

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 IMO and the European Union, 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 2015 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.







8

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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 substantial compliance
with OPA 90, CERCLA and all applicable state regulations in U.S. ports where our
vessels call.

International requirements

As described in the table below, 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.

The European Parliaments new Regulation
No. 1726/2003, effective October 21, 2003, provides for an accelerated phase out
of non-double hulled tankers. Specific phase-out dates depend upon the year of construction
and whether the tanker has segregated ballast tanks, among other factors. In addition,
non-double hulled tankers cannot carry heavy grades of oil to or from member ports,
and commencing in 2005 all single hulled tankers above 15 years of age must comply
with a condition assessment program to enter or leave member states ports.
In December 2003, IMO announced the adoption of a revised accelerated phase out
schedule for single hulled tankers along with other measures, including an extended
application of the condition assessment program for single hulled tankers 15 years
old or older and a ban on the carriage of certain heavy grades of oil in single
hulled tankers, all of which are expected to enter into force April 5, 2005.

Our six single hulled vessels (one ULCC,
three Panamax tankers and two handysize product carriers) and two double sided handysize
crude oil tankers will be phased out under OPA 90, IMO and EU regulations in accordance
with the following table. However, commercial considerations arising from customer
preference for double hulled vessels will likely cause all of them to be non-competitive
before the required phase-out dates. For that reason, we sell non-double hulled
vessels whenever a good opportunity presents itself.









9

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|               |  |           
|-------------- |  | ----------
|               |  |           
|               |  |           
|Name
of Vessel |  | Year Built
|              
|              
|ULCC          
|SETTEBELLO(a)  |  | 1986      
|              
|Panamax       
|ELBE           |  | 1984      
|NILE(b)        |  | 1981      
|VOLGA(b)       |  | 1981      
|              
|Handysize     
|TANDJUNG
AYU   |  | 1993      
|BANDAR AYU     |  | 1993      
|SHANNON        |  | 1991      
|ALMA           |  | 1988      



|   
|---
|(a)
|(b)
|(c)
|(d)
|(e)

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.
OMI Marine Services LLC, 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.

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 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
and OMI Marine Services LLC have received ISM Certification.







10

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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
which 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 which 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 at least its fair market value, with deductibles
generally ranging from $100,000 to $150,000 per vessel per incident.

Protection and Indemnity 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. 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.

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.







11

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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.                                                                                                                                                                                                                                                | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|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.                                                                                                                                                                                                                                                                                                                                              | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|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 owner
of a vessel for use by the Company.                                                                                                                                                                                                                                                                                              | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|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.                                                                                                                                                        | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|Combined
          
         carriers |  | vessel capable of carrying either
liquid or dry cargos in bulk.                                                                                                                                                                                                                                                                                                     | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|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.                                                                                                                   | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|Crude oil
          
         tanker  |  | means a tanker vessel designed to
carry crude oil or low grade oil products.                                                                                                                                                                                                                                                                                        | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|Double 
       bottomed               |  | refers to a vessel with an inner
and outer bottom separated by void space.                                                                                                                                                                                                                                                                                          | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|Double hulled                         |  | refers to a vessel with an inner
and outer side and bottom separated by void space.                                                                                                                                                                                                                                                                                 | 
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                     | 
|Double sided                          |  | refers to a vessel with an inner
and outer side 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.





12

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|dwt                                  |  | means deadweight ton, which is a
unit of a vessels capacity for cargo, fuel oil, stores and crew. A vessels
dwt or total deadweight is the total weight the 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
1A                         |  | refers to a vessel designed and built
to be able to trade in areas in which ice is not greater than 80cm thick. This is
the highest standard for vessels able to trade in ice bound waters.                                                                       | 
|                                     |  |                                                                                                                                                                                                                                                                   | 
|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.                                                                                                                                                                                              | 
|                                     |  |                                                                                                                                                                                                                                                                   | 
|Lightweight                          |  | means the weight of the hull and
superstructure in long tons.                                                                                                                                                                                                     | 
|                                     |  |                                                                                                                                                                                                                                                                   | 
|MARPOL 73/78                         |  | is the International Convention for
the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978
relating thereto, which includes regulations aimed at preventing and minimizing
pollution from ships by accident and by routine operations. | 
|                                     |  |                                                                                                                                                                                                                                                                   | 
|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.                                                           
|                                    







13

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|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|----------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|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
to save fuel.                                                                                                                                                                                                                                                                                                                                                                       | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Special survey                                        |  | refers to the inspection of a vessel
by a Classification Society surveyor which 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.                                                                                                                                                                                                                                                                                                                    | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|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. | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Time Charter    Equivalent or
          
         TCE |  | the abbreviation for Time Charter
Equivalent. TCE revenues, which is time charter revenues and voyage revenues less
voyage expenses, serves as an industry standard for measuring and managing fleet
revenue.                                                                                                                                                                                                             | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Tonne-mile                                            |  | means tonnes carried by a vessel
multiplied by the distance traveled.                                                                                                                                                                                                                                                                                                                                                     | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Tonne                                                 |  | means a metric ton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                                                                                                                                                                                                                                                                                                                                                           | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Vetting                                               |  | refers to the process by which a
vessel or company is inspected and appraised.                                                                                                                                                                                                                                                                                                                                            | 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|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 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 to a destination, such as fuel cost and port and canal fees.                                                                                                                                                                                                                                                                                                       
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|War risk    insurance                                 |  | is insurance for repair or replacement of a damaged or lost vessel due to risks of war.                                                                                                                                                                                                                                                                                                                                  







14

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Item 3.LEGAL PROCEEDINGS

We and certain of our subsidiaries are
defendants in various actions arising in the ordinary course of business from shipping
operations for monetary relief arising principally from personal injuries, collision
or other casualty and from claims under charter parties. All such personal injury,
collision and casualty claims against us are fully covered by insurance, subject
to deductibles which are not material. In addition, we are subject from time to
time to other claims and actions arising in the ordinary course of business. Except
as described below, the other claims involve an amount which, if determined adversely
to our interests would not have, in our opinion, a material adverse effect on our
operations or financial condition.

We recently reached an agreement with the
Department of Justice ("DOJ") pursuant to which we pleaded guilty to one count of
knowingly violating regulations promulgated under the Act to Prevent Pollution from
Ships by failing to maintain an oil record book on one of our vessels.
Sentencing is expected in May of 2003. Assuming the presiding judge sentences us
according to our agreement with the DOJ, which she is not bound to do, the Company
will pay a $4.2 million fine and serve a probationary period of three years.

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 2003.

Item 4A.MANAGEMENT AND DIRECTORS.

Set forth below is certain information
with respect to our management and directors as of March 10, 2004.





|Name                    |  | Age |  |  |  | Position                                                    
|----------------------- |  | --- |  |  |  | ------------------------------------------------------------
|                        |  |     |  |  |  |                                                             
|Craig
H. Stevenson, Jr. |  | 50  |  |  |  | Chairman of the Board, Chief Executive
Officer              
|Robert Bugbee           |  | 43  |  |  |  | President and COO; Director                                 
|Kathleen C.
Haines      |  | 49  |  |  |  | Senior Vice President, Chief Financial
Officer and Treasurer
|Henry Blaustein         |  | 61  |  |  |  | Senior Vice President, OMI Marine
Services LLC              
|Fredric S.
London       |  | 56  |  |  |  | Senior Vice President, General Counsel                      
|Stavros Skopelitis      |  | 57  |  |  |  | Vice President                                              
|Edward Spiegel          |  | 65  |  |  |  | Director                                                    
|James D. Woods          |  | 72  |  |  |  | Director                                                    
|James N. Hood           |  | 69  |  |  |  | Director                                                    
|Michael Klebanoff       |  | 83  |  |  |  | Director                                                    
|Philip J. Shapiro       |  | 51  |  |  |  | Director                                                    
|Donald C. Trauscht      |  | 70  |  |  |  | Director                                                    
|                       

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 and directors of the Company have held
during the last five years:







15

---

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 Bugbee was 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. Haines was 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.

Henry Blaustein was elected Senior
Vice President of OMI Marine Services LLC in 1998. He had been Senior Vice President/Technical
of Old OMI since July 1997. Prior thereto he was an independent consultant.

Fredric S. London was 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.

Stavros Skopelitiswas elected Vice
President and Economist of the Company in 1998. He had been Vice President and Economist
of Old OMI since May 1996. He was elected Assistant Vice President and Economist
of Old OMI in January 1994.

Edward Spiegel was a general partner
of Goldman Sachs from 1984 to 1996. Mr. Spiegel is a Chartered Financial Analyst
and a member of the New York Society of Security Analysts.

James D. Woods is Chairman Emeritus
of Baker Hughes Inc., one of the largest companies in the oil-services industry,
and worked for it and its predecessor from 1955 to 1997. From January 1989 until
January of 1997 Mr. Woods was Chairman of the Board and Chief Executive Officer
of Baker Hughes Inc. Mr. Woods is also a director of Varco International Inc., Integrated
Electrical Services, Inc., Esco Technologies, Inc., United States Energy Company,
Inc., and Foster Wheeler, Ltd.

James N. Hood was President and
Chief Executive Officer of Teekay Shipping Corporation from 1992 to 1998, Director
of Teekay Shipping Corporation from 1993 to 1998 and consultant to Teekay Shipping
Corporation from 1998 to 2000. In addition to his 23 years of shore service in various
senior management positions, Captain Hood served at sea for 19 years, including
four years of command experience.

Michael Klebanoff is a private investor.
He was President of Old OMI from 1969 to 1983 and was Chairman of the Board of Old
OMI from 1983 until November 1995.

Philip J. Shapiro was elected director
on April 3, 2002. Since 1998 he has been the President and Chief Executive Officer
of Liberty Maritime Corporation, the largest privately held independent operator
of U.S. flag dry bulk vessels. Mr. Shapiro is an elected member of the American
Bureau of Shipping.

Donald C. Trauscht was elected director
on December 1, 2000. He has been Chairman, BW Capital Corporation since 1966. From
1967 to 1995, Mr. Trauscht held a number of positions at Borg Warner Corporation,
including Chairman and Chief Executive Officer. Mr. Trauscht is a director of Esco
Technologies, Inc., Global Motorsports, Inc., Integrated Electrical Services, Inc.
and Bourns, Inc.







16

---

PART II

Item 5.MARKET FOR OMI CORPORATIONS
COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Common Stock

OMI trades on the New York Stock Exchange
under the symbol OMM. As of March 9, 2004 the number of stockholders
of record of OMI common stock was approximately 2,865. The high and low sale prices
of the common stock, as reported by the New York Stock Exchange, were as follows:





|2003
Quarter |  | 1st   |  | 2nd   |  | 3rd   |  | 4th  
|------------ |  | ----- |  | ----- |  | ----- |  | -----
|             |  |       |  |       |  |       |  |      
|High         |  | $5.09 |  | $6.45 |  | $7.72 |  | $9.22
|Low          |  | $4.06 |  | $4.30 |  | $6.00 |  | $6.00
|             |  |       |  |       |  |       |  |      
|2002
Quarter |  | 1st   |  | 2nd   |  | 3rd   |  | 4th  
|             |  |       |  |       |  |       |  |      
|High         |  | $4.14 |  | $5.18 |  | $4.11 |  | $4.18
|Low          |  | $2.82 |  | $3.58 |  | $3.00 |  | $3.15
|            

Payment of Dividends to Stockholders

On March 10, 2004, the Board declared a
quarterly dividend of $0.05 per share, payable on April 14, 2004 to shareholders
of record at the close of business on March 22, 2004. The Company currently intends to pay a regular quarterly dividend; however,
any determination to pay dividends
in future will be at the discretion of the Board of Directors and will depend upon
OMIs results of operations, financial condition, capital restrictions, covenants
and other factors deemed relevant by the Board of Directors. Payment of dividends
is limited by the terms of certain agreements to which OMI and its subsidiaries
are party. (See Note 5 to the Consolidated Financial Statements.)

Equity Compensation Plans

The following table summarizes information,
as of December 31, 2003, 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



|                                                                  |  |                            |  |                      |  | Number of securities     
|----------------------------------------------------------------- |  | -------------------------- |  | -------------------- |  | -------------------------
|                                                                  |  |                            |  |                      |  | remaining
  available for
|                                                                  |  |                            |  |                      |  | future
  issuance under  
|                                                                  |  | Number
    of securities   |  | Weighted-average     |  | equity
  compensation    
|                                                                  |  | to be issued upon exercise |  | exercise price of    |  | plans
  (excluding       
|                                                                  |  | of outstanding options,    |  | outstanding options, |  | securities
  reflected in
|                                                                  |  | warrants and rights        |  | warrants and rights  |  | column (a))              
|                                                                  |  |                            |  |                      |  |                          
|Plan
category                                                     |  | (a)                        |  | (b)                  |  | (c)                      
|                                                                  |  |                            |  |                      |  |                          
|Equity
compensation plans approved
      
by security holders     |  | 665,067                    |  | $5.11                |  | 3,334,933                
|Equity compensation
plans not
      
approved by security holders |  | 0                          |  | N/A                  |  | 0                        
|Total                                                             |  |                            |  |                      |  |                          
|                                                                  |  | 665,067                    |  | $5.11                |  | 3,334,933                
|                                                                  |  |                            |  |                      |  |                          







17

---



Item 6.SELECTED FINANCIAL DATA

OMI CORPORATION AND SUBSIDIARIES





|                                                                                   |  | For
The Years Ended December 31,
|---------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                  
|Income
Statement Data:                                                             |  |                                 
|                                                                                  
|(in
thousands, except per share data)                                             
|Revenue(a)                                                                         |  |                                 
|Time Charter
Equivalent Revenue(b)                                                 |  |                                 
|Other
Revenue                                                                      |  |                                 
|Total TCE
and Other Revenue                                                        |  |                                 
|Operating
Expenses:                                                                |  |                                 
|Vessel
Expenses                                                                    |  |                                 
|Charter
Hire Expense                                                               |  |                                 
|Depreciation
and Amortization                                                      |  |                                 
|General
and Administrative                                                         |  |                                 
|Provision
for Settlement Loss               

and
Related Expenses                 |  |                                 
|Provision
for Impairment Loss on Vessels                                           |  |                                 
|Provision
for Loss on Lease Obligation                                             |  |                                 
|Loss
(Gain) on Disposal/Writedown               

of
AssetsNet                    |  |                                 
|Operating Income (Loss)                                                            |  |                                 
|Interest Expense                                                                   |  |                                 
|Gain (Loss) on Disposal/Writedown
of      

Investments                            |  |                                 
|(Benefit) Provision
for Income Taxes                                               |  |                                 
|Equity (Loss) in Operations of
Joint Ventures                                      |  |                                 
|Income (Loss)
Before Cumulative Effect      

of Change in Accounting
Principle    |  |                                 
|Cumulative Effect of Change in      

  Accounting
Principle(c)                    |  |                                 
|Net Income
(Loss)                                                                  |  |                                 
|                                                                                  
|                                                                                  
|                                                                                  
|Per
Share Data:                                                                   
|Basic
Earnings (Loss) Per Common Share:                                           
|Income
(Loss) Before Cumulative Effect of         

Change
in Accounting Principle |  |                                 
|Net
Income (Loss)                                                                  |  |                                 
|Diluted Earnings
(Loss) Per Common Share:                                         
|Income
(Loss) Before Cumulative Effect of         

Change
in Accounting Principle |  |                                 
|Net Income
(Loss)                                                                  |  |                                 
|Weighted
Average Shares Outstanding:                                              
|Basic                                                                              |  |                                 
|Diluted                                                                            |  |                                 
|                                                                                   |  |                                 
|                                                                                  
|Balance
Sheet Data at End of Year:                                                
|Cash
and Cash Equivalents                                                          |  |                                 
|Vessels
to be Disposed of                                                          |  |                                 
|Vessels and
Other PropertyNet                                                     |  |                                 
|Construction
in Progress (Newbuildings)                                            |  |                                 
|Total Assets                                                                       |  |                                 
|Current
Portion of Long-Term Debt                                                  |  |                                 
|Long-Term
Debt                                                                     |  |                                 
|Total
Stockholders Equity                                                         |  |                                 
|                                                                                  







18

---







|                                                                      | For
The Years Ended December 31,
|--------------------------------------------------------------------- | --------------------------------
|                                                                      |                                 
|                                                                      |                                 
|                                                                      |                                 
|                                                                      |                                 
|Other
Data:                                                          
|EBITDA(d)                                                             |                                 
|Capital
Expenditures:                                                 |                                 
|Vessels,
Other Property and Construction in         progress
payments |                                 
|Payments
for Drydocking                                               |                                 
|Ratio of Net
Debt to Net Capitalization(e)                            |                                 
|                                                                     
|Fleet
Data at End of Year:                                           
|Number
of vessels                                                     |                                 
|                                                                     

|(a) |  | Beginning with year ended December
31, 2003, we are reporting our Income Statement Data using Time Charter Equivalent
(TCE) Revenue, which equals voyage revenue and time charter revenue
less voyage expense, as is commonly used throughout the industry. Historically,
we have not presented our results using TCE Revenue. For comparative purposes only,
we have provided the presentation in the Statement of Operations Data for all of
the periods both our historical presentation of Revenue and TCE revenue. We have
provided you with a reconciliation of Revenue to TCE revenue as follows: | 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Revenue is voyage revenue, time charter revenue
and other revenue as follows:





|                     | 
|-------------------- | 
|                     | 
|                     | 
|                     | 
|                     | 
|                     | 
|Revenue:            
|Voyage
Revenue       | 
|Time Charter Revenue | 
|                     | 
|Subtotal             | 
|Other Revenue        | 
|                     | 
|Total
Revenue        | 
|                     | 

|    |  |                                                                                                                     | 
|--- |  | ------------------------------------------------------------------------------------------------------------------- | 
|(b) |  | Time
Charter Equivalent (TCE) Revenue is voyage revenue and time charter
revenue less voyage expenses as follows: | 



|                     | For
The Years Ended December 31,
|-------------------- | --------------------------------
|                     |                                 
|                     |                                 
|                     |                                 
|                     |                                 
|TCE
revenue:        
|Voyage
Revenue       |                                 
|Time Charter
Revenue |                                 
|                     |                                 
|Subtotal             |                                 
|Voyage Expenses      |                                 
|                     |                                 
|TCE
Revenue          |                                 
|                     |                                 



|(c) |  | Effective January 1, 1999, OMI
changed its accounting policy on recognition of voyage freight for vessels operating
on voyage charters from load-to-load to the discharge-to-discharge basis. Under
this method, voyage revenue is recognized evenly over the period from the departure
of a vessel from its original discharge port to departure at the next discharge
port. The cumulative effect of this accounting change is shown separately in the
Consolidated Statements of Income and resulted in income of $2,729,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(d) |  | EBITDA represents net income (loss)
before interest expense, income taxes and depreciation and amortization expense.
       EBITDA should not be considered a substitute for net income, cash flows
      from operating
activities and other operations or cash flow statement data prepared in accordance
       with accounting principles generally accepted in the United States of
      America or
as a measure of profitability or liquidity. While EBITDA is frequently used as
      a  measure of operating results and the ability to meet debt service requirements,

it is not necessarily comparable to other similarly titled captions of other
      companies  due to differences in methods of calculation. However, we use
      EBITDA to provide
additional information with respect to our ability to satisfy debt service, capital
       expenditures and working capital requirements. The following is a reconciliation

of net income (loss), as reflected in our Consolidated Statements of Income,
      to
EBITDA: | 



|                                     |  | For The Years Ended December
    31, | 
|------------------------------------ |  | ------------------------------------ | 
|                                     |  |                                      | 
|                                     |  | 2003                                 | 
|                                     |  |                                      | 
|                                     |  | (in
    thousands)                   | 
|Net
Income (Loss)                    |  | $ 76,471                             | 
|Add (Subtract):                     
|Interest
Expense                     |  | 23,854                               | 
|(Benefit) Provision for Income
Taxes |  |                                     | 
|Depreciation
and Amortization        |  | 50,891                               | 
|                                     |  |                                      | 
|EBITDA                               |  | $151,216                             | 
|                                     |  |                                      | 





| | 
| | 







19

---







|(e) |  | Ratio of Net Debt to Net Capitalization
is calculated as follows:
|--- |  | -----------------------------------------------------------------

|                                                |  |                                     
|----------------------------------------------- |  | ------------------------------------
|                                                |  | For The
    Years Ended December 31,
|                                                |  |                                     
|                                                |  |                                     
|                                                |  |                                     
|                                                |  |                                     
|Long-Term
Debt, including current portion       |  |                                     
|Cash and Cash Equivalents                       |  |                                     
|                                                |  |                                     
|Net
Debt                                        |  |                                     
|Total Stockholders Equity                      |  |                                     
|                                                |  |                                     
|                                                |  |                                     
|Net
Capitalization                              |  |                                     
|                                                |  |                                     
|Ratio of Net
        Debt to Net Capitalization |  |                                     











20

---



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 Form 10-K.

Overview

We are a leading seaborne transporter of
crude oil and refined petroleum products operating in the international shipping
     markets. Our fleet currently comprises 37 vessels (including one handysize
    product
carrier delivered February 26, 2004) aggregating approximately 3.1 million dwt,
     consisting of ten Suezmaxes (including two chartered-in vessels), three
    Panamax
tankers carrying crude oil, two Panamax product carriers, 19 handysize and handymax
     product carriers, two handysize crude oil tankers and one ULCC. In the discussions

that follow, we sometimes refer to our crude oil tankers as the Crude Oil

Fleet and our product carriers as our Clean Fleet. Please see

Part I, Items 1 & 2, Business and PropertiesOur Fleet for a list of
our
vessels.

2003 Financial Summary

Our 2003 activities have supported our
business strategies and also enhanced our competitive strengths. OMIs operating

results for fiscal year 2003 were at record levels since the Companys spin-off
 from the domestic company, OMI Corp. in 1998. The 2003 Revenues and Operating
income,
(excluding losses from disposals, non-cash losses and settlement loss) of $319.0
million  and $122.5 million, respectively, increased over 2002 by 60.2% and 212.4%,
respectively.
There were several key drivers for the increases in Revenues and Operating income
 including (1) increased spot rates in the Suezmax tanker market, (2) increased
number
of revenue earning operating days from adding modern vessels to our fleet , (3)
 increased marketability of our vessels by forming strategic alliances and capitalizing

on our experience and reputation in the industry, (4) increased utilization of
our  vessels and (5) low costs from operating an efficient and young fleet of
vessels.
Due to our strong financial performance, we were able to continue to meet our
goal  of strengthening our Balance Sheet, and at the same time, we continued
to grow as
a Company by acquiring six modern vessels  in 2003 and contracting to build eight

product carriers that will be delivered in 2004, 2005 and 2006.

We have increased revenue and operating
income by operating primarily a modernized fleet of double hull vessels through
strategic acquisitions. The key elements of our strategy are (1) concentrate in
two vessel categories: Suezmax tankers which offer size advantages and geographic
flexibility over other vessel categories and product carriers because of steady
demand for petroleum products in areas where there are no refineries nearby, (2)
maintain an optimal balance for purchasing and or selling vessels as market conditions
and opportunities arise while maintaining prudent financial ratios (e.g. Leverage
ratio), (3) enter into strategic alliances that provide us with market opportunities
that maximize our vessel utilization and earnings and (4) blend long-term contract
revenues at attractive rates and predictable profits, with our ability to capture
upside in stronger spot markets. This strategy has been effective in strong and
weak tanker markets, giving us comfort when we look at the vagaries of the shipping
market.

We have been very successful in managing
our business risk by operating our crude oil carriers, which are approximately 71%
of our aggregate deadweight (dwt), in the spot market giving us the
ability to take advantage of high rates in strong markets yet, and at the same time,
securing revenue with long-term contract revenue at attractive rates by time chartering
our product carriers. Currently 22 vessels of our 37 vessels are on time charters;
approximately 27% or (six vessels) of which have profit sharing arrangements,
have a floor rate and profit sharing without a cap. These profit sharing arrangements
enable us to benefit from strong tanker markets while protecting our downside. The
spot market, on the other hand, is very volatile and spot rates fluctuate with changing
market and economic changes (see Market Overview). Our Company benefited the most
in 2003 from the strong tanker market resulting in higher earnings for the Suezmax
fleet. Average rates earned in 2003 for the Suezmax fleet were 89% higher than average
rates earned in 2002. During the first quarter of 2004, the spot market is even
stronger then in the fourth quarter 2003 with average daily Suezmax rates at approximately
$60,000 for the majority of the quarter compared to the fourth quarter 2003 average
daily rate of $35,174. Due to the seasonal nature of this business, we anticipate
rates to be lower in the second and third quarters compared to the first quarter
of 2004; however, we expect rates to be seasonally strong. Fourth quarter rates are typically stronger than the second and third quarters, and we
expect rates during that quarter to be stronger than the normal increase because
of the need to replenish inventories in anticipation of colder months ahead.





21

---

The Company studies key performance indicators
and trends when making key financial decisions in managing our risk, such as: world
oil demand (increases / decreases in consumption of oil ), tonne-mile demand, long-haul
versus short-haul voyages or trading routes, world oil supply by geographic regions,
world tanker newbuildings (orderbook), deletions (scrappings),
and average tanker rates by vessel dwt. which is the price to transport crude oil
and refined petroleum products determined by the market factors and the supply of
and demand for tankers.

During 2003, new regulations, discussed
in detail in the Market Overview, that call for phasing out of single hull vessels
has actually impacted owners with modern fleets positively. Because 92 % of our
fleet is double hulled (excluding the three vessels we plan to dispose of in 2004),
we will benefit from the additional demand for tonnage that was previously met by
single hull vessels.

Financing for shipping companies has been
more attractive this year then in the recent past years. During the first half of
the year, we amended various loan agreements resulting in more favorable margins
and more flexible terms. Two of our largest credit facilities were modified and
resulted in several benefits for us: removal of certain restrictive covenants, reduction
of the margin over LIBOR, additional liquidity and extension of the facility for
an additional five years. Although our average debt balances were higher in 2003
compared to 2002 as a result of vessel purchases, our interest expense was lower
in comparison, due to reduction in margins and low interest rates.

The following are several other significant
items that occurred during the year ended 2003:



| |  | We acquired six vessels during 2003,
  four of which began three and five year time charters upon delivery.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
| |  | We ordered six 37,000 dwt 1A ice-class
  product carrier newbuildings in addition to one ordered in late 2002. In March 2004,
  we ordered a 47,000 dwt 1A ice-class product carrier newbuilding. In February 2004,
  one vessel was delivered and began a five year time charter. The aggregate purchase
  price of the eight vessels was $234.5 million prior to the delivery of the vessel
  in February 2004. Three of the remaining seven vessels are scheduled to be delivered
  in 2004, three in 2005 and one in 2006. We have entered into five-year time charters
  for four of the seven vessels yet to be delivered.                                                                                                                                                                                                                                                           | 
| |  | We sold five single hull product
  carriers, which resulted in loss on disposals aggregating $14.4 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 
| |  | Our management approved a plan to
  sell its largest single hull ULCC vessel at a price that is reasonable in relation
  to its current fair value. The net book value of $16.5 million, at December 31,
  2003, was reclassified to Vessels Held for Sale in the Current Asset Section of
  the Balance Sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 
| |  | We have taken an impairment charge
  of $2.8 million for two single hull Panamax vessels. In March 2004, these vessels
  were reclassified to Vessels Held for Sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
| |  | As a result of recent regulations
  (see Market Overview), OMI reduced the depreciable lives of two  vessels,
  which will accelerate the depreciation expense by $0.7 million a year from 2004
  to 2007 and $0.1 million from 2007 to 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
| |  | During November 2003, we issued
      $200 million of senior unsecured notes (the Notes). The Notes bear interest
  at 7.625% and are due in 2013. The proceeds of the Notes have been used to pay down
  outstanding balances under the Companys revolving credit facilities and
  for general corporate purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
| |  | OMI reached an agreement with
      the Department of Justice pursuant to which we pleaded guilty to one count
      of knowingly
  violating regulations promulgated under the Act to Prevent Pollution from Ships
      by failing to maintain an oil record book on one of our vessels.
      The violations were the result of crew members on vessel acting in violation
      of Company
  policies without the knowledge of OMI management. Sentencing is scheduled for
      May 2004. If the presiding judge sentences us according to the agreement,
      we will pay
  a $4.2 million fine and serve a probationary period of three years. The amount
      of the anticipated fine and related expenses, aggregating $6.0 million
      has been expensed
  in the fourth quarter 2003. Any amounts received under insurance policies will
    be recognized when received. | 



22

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In 2004, the Company plans to maintain its focus on the areas discussed
above and continue to build its capabilities as a leading transporter of crude oil
and refined petroleum products. See Financial Condition and Capital Resources.

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 which 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 Items 1. and
2. Business and Properties-Regulations for additional discussion of the tanker
industry, including projections relating to the supply of tankers and requirements
of new regulations.

Suezmax Tanker Overview

The strong tanker market which began in
the fourth quarter of 2002 continued in 2003, and the average TCE for Suezmax tankers
in the West Africa to U.S. trade was about double the level in the preceding year,
and the second highest since 1990. This was the result of higher world oil demand
due to improving world economic activity especially in the U.S., China and South
East Asia, cold weather during the winter months, a tight U.S. natural gas market,
and the decline of the U.S. Dollar, all occurring at a time of relatively low oil
inventory levels. Furthermore, the tanker market benefited from a switch of combined
carrier tonnage into the very strong dry bulk sector, heavy congestion out of the
Black Sea due to adverse weather conditions, and more long-haul Middle East OPEC
oil replacing the loss of Iraqi oil production through a pipeline to the Mediterranean
and the persistent shortfall of oil production in Venezuela, notwithstanding an
increase in the world tanker fleet. Freight rates in the crude tanker market have
continued to be strong thus far in 2004.







| |  | Note:
As at 12/31/03     | 
| |  | ------------------------ | 
| |  | Source: Industry Sources | 







23

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The average OPEC oil production in 2003 totaled about 27.1 million
barrels per day (b/d), up by 1.4 million b/d compared to 2002. At the
same time, the average oil output by the long-haul Middle East OPEC producers totaled
19.1 million b/d, up by 1.4 million b/d compared to 2002. Currently, OPEC oil production,
including Iraq, is estimated to be close to 28.1 million b/d, substantially above
its quota and the year ago level, as its members have not implemented the oil production
cut effective November 1, 2003 given the tight oil markets and high oil prices.
However, OPEC oil producers recently announced their commitment to comply with their
current oil production quotas, and to reduce them by 1.0 million b/d, to 23.5 million
b/d (excluding Iraq), beginning April 1, 2004. According to OPEC oil producers,
this decision was taken in order to support oil prices during the expected seasonal
decrease in the demand for oil in the second quarter.

World oil demand increased by about 1.6
million b/d in 2003 or about 2.1% from the 2002 level, well above the gains in each
of the previous three years. World oil demand is expected to increase by about 1.9
million b/d in 2004. This is due to increased world economic activity especially
in the United States, Latin America, China and Southeast Asia, a tight U.S. natural
gas market, and the decline of the U.S. dollar that makes oil purchases in local
currencies less expensive.

Total commercial crude oil and petroleum
products inventories in the United States, Western Europe and Japan at the end of
January 2004 were about 58 million barrels, or 2.9% higher than the year earlier
level, but 0.8% below the average of the last five years. At the same time, crude
oil inventories were 0.4% and petroleum products inventories were 1.1% below the
average of the last five years, respectively. Oil inventories are expected to increase
in the first half of 2004, but decrease in the later part of the year, and by year-end
be at about the same level as at the end of 2003.

The world tanker fleet totaled 290 million
 dwt at the end of 2003, up by 10.7 million dwt or
3.8% from the year-end 2002 level. The tanker orderbook totaled about 79.6 million
dwt, or 27.4% of the existing fleet at the end of 2003. Approximately 29.3 million
dwt are for delivery in 2004, 29.9 million dwt in 2005, 16.4 million dwt in 2006
and the balance in 2007. The tanker orderbook includes 84 Suezmaxes of about 13.2
million dwt or 35.0% of the existing internationally trading Suezmax tanker fleet.

The accelerated phase-out of single-hull
tankers due to new IMO and European Union (EU) regulations is expected
to moderate the effect of the relatively large tanker orderbook. At the end of 2003,
approximately 40.4 million dwt or 13.9% of the total tanker fleet was 20 or more
years old, including 15.6 million dwt or 5.4% of the fleet which was 25 or more
years old. Furthermore, 18 Suezmaxes were 20 or more years old, including 10 which
were 25 or more years old.

Tanker deletions totaled 90.5 million dwt
between 1999 and 2003, or on average of approximately 18.1 million dwt
    per year. Such  deletions totaled about 20 million dwt in 2003, notwithstanding
    the strong tanker
freight rate environment. These deletions include 13 Suezmaxes and 31 VLCCs.
    Tanker  deletions are likely to be high in the next few years given the age
    profile of the
tanker fleet and stricter regulations.







24

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|*                             | Percent of total tanker fleet at
    the beginning of the year. | 
|----------------------------- | --------------------------------------------------------------- | 
|Note: As at 12/31/03          |                                                                
|Source: Fearnleys, Oslo. OMI. |                                                                

The EU adopted new tanker regulations which commenced
on October 21, 2003. These regulations immediately prevent single-hull tankers from
carrying heavy fuel oil in EU waters, accelerate the phase-out of single-hull tankers
with phase-out dates depending upon the year of construction and whether the tanker
has segregated ballast tanks, and force all single-hull tankers to comply with the
Condition Assessment Scheme (CAS) from the age of 15 years, commencing
in 2005.

In response to the European Union regulations,
the IMO adopted the following new strict tanker regulations at its December 4, 2003
meeting:





|1. | Prevent single-hull tankers of 5,000
  dwt and above from carrying heavy fuel oils from early April 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Accelerate the phase-out of single-hull
  tankers to 2010 instead of 2015, in line with EU rules. This means that, single
  hull tankers without segregated ballast tanks which are 20,000 dwt and over and
  carry crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo, and 30,000
  dwt and over carrying other than the above will be banned beginning early April
  2005. Single hull tankers of the size specified above with segregated ballast tanks
  and tankers 5,000 dwt and over but less than that specified above will be banned
  by 2010. The tankers will comply with the requirements not later than the anniversary
  date of delivery of the ship in the year specified as follows:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      





25

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| |  | Allow the flag state to permit
          continued operation of category 2 or 3 tankers beyond 2010 subject to
          satisfactory result from the CAS, which will be applicable to all single
          hull tankers 15 years or older. However, tankers will not be allowed
          to trade beyond the anniversary of the date of delivery of the ship in
          2015 or the date on which the ship reaches 25 years of age, whichever
    is earlier.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | 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. Furthermore, such
          tankers will not be allowed to operate beyond the date on which they
          become 25 years of age after the date of
  delivery.                                                                                                               



These new IMO regulations will commence on April
5, 2005. At the end of 2003, there were 114.5 million dwt of tankers or 39.5% of
the total tanker fleet which will be affected by these regulations.

Product Tanker Overview

Freight rates in the product tanker market
increased substantially in 2003 and the average spot TCE for handysize product tankers
in the Caribbean was more than 50% higher than the previous year, and the second
highest since 1990. The product tanker market improvement was the result of increasing
world economic activity especially in the U.S., China and Southeast Asia, a tight
U.S. gas market and the usual seasonal oil demand gains at a time of relatively
low oil inventories in the Atlantic basin, notwithstanding a substantial increase
of the world product tanker fleet. Freight rates in the product tanker market have
continued at very high levels thus far in 2004.

The world product tanker fleet totaled
about 52.9 million dwt at the end of 2003, up by about 8.2% from the year-end 2002
level. The product tanker orderbook for delivery over the next few years totals
about 24.7 million dwt, or about 46.7% of the existing product tanker fleet at the
end of 2003. Approximately 9.4 million dwt are for delivery in 2004, 8.8 million
dwt in 2005, 5.0 million dwt in 2006 and the balance in 2007. At the end of 2003,
approximately 11.3 million dwt or 21.4 % of the existing fleet was 20 or more years
old. The orderbook for handysize and handymax product tankers at the end of 2003
totaled about 10.2 million dwt or 31.8% of the existing handysize and handymax product
tanker fleet.

Product tanker seaborne trade, measured
in tonne-miles, increased by 5.1% in 2003 compared to a compound rate of approximately
2.5% per annum during the 1990-2003 period. This was the result of increasing world
oil consumption, shortage of refinery capacity in major consumption areas and increased
refinery capacity in oil exporting regions.







| |  | Source:
Fearnleys, Oslo
| |  | -----------------------

The tanker market is expected to benefit from
    higher world oil demand due to improving world economic activity, especially
    in the U.S., Latin America, China and Southeast Asia, possible disruptions
    due to political instability in short-haul oil producers Venezuela and Nigeria
    and stricter tanker regulations by IMO and the European Union. However, given
the high tanker orderbook, tanker rates will depend on the level of world economic
   activity and oil demand growth as well as the total amount of tanker scrappings.

26

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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 revenue/expense
recognition for voyage charters, evaluation for impairment on long-lived assets,
    depreciation expense and drydock amortization because they generally require
    us to make estimates or judgments that are difficult or subjective.

Revenue 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 unit (day or month) of time, and are generally
not as complex or as subjective as voyage charters. Under a voyage charter, or a
charter in the spot market, 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 for our account. Voyage expenses, such as fuel and port charges, are recognized
ratably over the duration of the voyage. We recognize voyage revenue and voyage
expenses on the percentage of completion method of accounting, which is the most
prevalent method of accounting for voyage revenue and expenses. 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 has been on the discharge-to-discharge basis. Under this method,
voyage revenue is recognized evenly over the period from the departure of a vessel
from its prior discharge port to departure from the next discharge port. 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 method
is the predominant one used by the industry.

Management uses judgment to estimate the
number of days to a vessels next discharge port to compute the amount of revenue
and expense to recognize for voyages in progress at the end of each month using
the percentage of completion method on a discharge-to-discharge basis. Management
uses assumptions to determine these estimates that are supported by historical trends,
more specifically about the operating capability of the vessel (speed and fuel consumption)
and about the trading route and port. Actual results could differ from accruals
that are included as estimates in the consolidated balance sheets under the classifications
Traffic receivables, Prepaid expenses and other current assets and Accrued voyage
and vessel liabilities, and also under Voyage revenue and Voyage expense categories
included in the consolidated statements of income that are estimates in a period.

Evaluation for Impairments on Long-Lived Assets

Vessels and construction in progress (CIP)
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 tend to fluctuate with changes in charter
rates and the cost of newbuildings, which have been cyclical. Management reviews
vessels for potential impairment annually or 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 exits.
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.





27

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These factors can cause
underperformance relative to expected operating results and impact the useful economic
lives of the vessels. Consideration, evaluation and judgment is made for each of
these factors when making assumptions about the future performance for each vessel.
Management believes that the assumptions made to evaluate the vessels for impairment
are appropriate and reasonable. However, changes in circumstances or conditions
affecting these assumptions could result in impairment charges in future periods
that may be material.

During 2003, laws and regulations have
been adopted by the EU and by the IMO, which phase out single 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. The EUs
new tanker regulations commenced on October 21, 2003. The IMO, in response to the
EU regulations, also adopted new stricter tanker regulations at its December 4,
2003 meeting. The new IMO regulations will commence on April 5, 2005. See the Market
Overview section for more details about the impact of the latest laws and
regulations. Additionally, for an outline of phase out dates adopted by OPA 90,
EU and IMO for our six single hulled vessels see Part I, Items 1. & 2. Business
and Properties-Regulations.

During our evaluation for impairment for
the year ended December 31, 2003, OMI evaluated each of the single hulled vessels
undiscounted future cash flow in conjunction with current laws and regulations.
As a result of the impact of OPA 90 two of our Panamax vessels are scheduled to
be returned to OMI in April and August of 2004 from their current trading in a Panamax
tanker pool. As the vessels will be further restricted from trading in the future
years coupled with other factors considered in the evaluation of the estimated future
undiscounted cash flows, which were less than the vessels carrying value,
we wrote down the vessels to their 2004 discounted cash flow. The provision for
impairment losses for these vessels and aggregated $2.8 million for the year ended
December 31, 2003. In March 2004, these vessels were reclassified to Vessels Held
for Sale.

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 range from 20 to 25 years. In the shipping industry, a 25 year
life is the norm. 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. In December 2003, as a result of the IMO adopting
regulations which included new phase-out dates, two of our single hull vessels
depreciable lives were effected. There was no writedown in the 2003 financial statements
since the vessels were not impaired. The phase-out dates will increase the depreciation
expense beginning in 2004, resulting in accelerating depreciation expense between
January 2004 and June 2007 (originally was June 2009) by $0.6 million a year for
one vessel and January 2004 to August 2015 (originally was August 2016) by $0.1
million for the other vessel.

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 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

There are three methods that are used by
the shipping industry to account for drydockings; first is the prepaid method, drydock
costs are capitalized when incurred and amortized over the period to the next scheduled
drydock; second, is the accrual method, the estimated cost of the next scheduled
drydock is accrued over the period preceding such drydock, and lastly; expensing
drydocking costs in the period it is incurred.

The Company uses the prepaid method of
accounting for drydock expenses. Under the prepaid method, drydock expenses are
     capitalized and amortized until the next drydock, which we estimate to be
    a period
of two to three years. Management believes the prepaid method better matches
    costs  with revenue and minimizes any significant changes in estimates associated
    with
the accrual method, including the disposal of vessels before a drydock which
    has  been accrued before it is performed. Management uses judgment when estimating
    the
period between drydocks performed, which can result in adjustments to the estimated
     amortization of drydock expense. If the vessel is disposed of before the
    next drydock, the remaining balance in
prepaid drydock is written-off to the  gain or loss upon disposal of vessels
    in the
period when contracted.





28

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Our drydock amortization expense was $4.2 million in 2003.
This expense is included in Depreciation and amortization expense. The prepaid drydock
balance at December 31, 2003 on the Balance Sheet of $1.6 million represents unamortized
prepaid drydock balances for six of our 34 wholly owned vessels. Since our fleet
has many new and young vessels our prepaid drydock balances and related amortization
have been lower relative to the fleet size. We anticipate the majority of our vessels
to be Drydocked within the next two years which will result in significant increases
to amortization expenses relating to drydock.

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 fleets. Our vessels are deployed under either medium-to-long-term
time charters or spot market charters. 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.

Voyage and time charters 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.
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
time charter equivalent, or TCE, revenue which comprises revenue from vessels operating
on time charters, or TC revenue, and voyage revenue less voyage expenses from vessels
operating on voyage charters in the spot market. TCE revenue serves as a measure
of 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 between
geographical regions and among competitors.

Because our business has many distinct
market segments based primarily on the size and design configuration of our vessels,
the type of cargo our vessels are equipped to transport and the arrangements under
which we charter our vessels, we present various other measures of our financial
performance, including:



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

We also analyze the results of operations of our
two reportable segments, Crude Oil Fleet and Product Carrier Fleet, and our vessel
categories within those segments (e.g., Suezmaxes and Panamaxes), according to the
same metrics.

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.





29

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Charter hire expense is the payment made to the owner of the chartered-in
vessel for our use. The owner is responsible for the vessels operating expenses,
in addition to drydock and capital expenditures. We are responsible for the voyage
expenses.

Insurance expense varies with overall insurance
market conditions as well as the insureds loss record, level of insurance
and desired coverage. We locked in rates with modest increases for most of our hull
and machinery coverage, and P&I insurance with multi-year contracts. However,
one of our P&I Clubs, which is a mutual indemnity provider, assessed its members
additional amounts for several past years due to its current financial needs resulting
from the poor investment markets and an increased level of claims. Certain other
insurances, such as basic war risk, also increased. War risk premiums based on voyages
into designated war risk areas are typically for the account of the charterers.

For the Year Ended December 31, 2003 Compared to the
Year Ended December 31, 2002

Our net income was $76.5 million for the
year ended December 31, 2003 compared to net income of $15.5 million for the year
ended December 31, 2002. The following table summarizes our results of operations
for the year ended December 31, 2003, compared to the year ended December 31, 2002:





|                                                   |  |  |  | For
the Years Ended
     
December 31, |  | Net          | 
|-------------------------------------------------- |  |  |  | -------------------------------------- |  | ------------ | 
|                                                   |  |  |  | 2003                                   |  | 2002         | 
|                                                  
|                                                   |  |  |  | (In
    thousands)                     | 
|Voyage
and time charter revenue                    |  |  |  | $318,727                               |  | $198,925     | 
|Voyage expenses                                    |  |  |  | 49,555                                 |  | 35,457       | 
|                                                  
|Time
charter equivalent revenue                    |  |  |  | 269,172                                |  | 163,468      | 
|Other revenue                                      |  |  |  | 225                                    |  | 127          | 
|Vessel expenses
and charter hire expense           |  |  |  | 79,451                                 |  | 68,132       | 
|Depreciation and amortization                      |  |  |  | 50,891                                 |  | 43,583       | 
|General and
administrative expenses                |  |  |  | 16,603                                 |  | 12,689       | 
|Provision for settlement loss
and related expenses |  |  |  | 6,000                                  |  |             | 
|Provision for
impairment loss on vessels           |  |  |  | 2,770                                  |  |             | 
|Loss on disposal of assets                         |  |  |  | 14,358                                 |  | 289          | 
|                                                  
|Operating
income                                   |  |  |  | 99,324                                 |  | 38,902       | 
|                                                  
|Interest
expense                                   |  |  |  | (23,854)                               |  | (24,845)     | 
|Interest income                                    |  |  |  | 383                                    |  | 660          | 
|Gain (loss) on disposal of investments             |  |  |  | 618                                    |  | (675)        | 
|Other-net                                          |  |  |  |                                       |  | 21           | 
|Benefit for income taxes                           |  |  |  |                                       |  | 1,406        | 
|                                                  
|Net
income                                         |  |  |  | $   76,471                             |  | $     15,469 | 
|                                                  

Time charter equivalent revenue

We earned TCE revenue of $269.2 million
for the year ended December 31, 2003. The increase in TCE revenue of $105.7 million
for the year ended December 31, 2003 over the year ended December 31, 2002 is attributed
to increases for vessels operating in the spot market of $80.5 million and increases
for vessels operating on time charter of $25.2 million, illustrated in the discussion
and tables below.

TCE RevenueVessels Operating in the Spot Market

During the year ended December 31, 2003,
our average daily TCE revenue, or TCE rates, for our Suezmax fleet and product carrier
fleet showed significant improvement over the prior year. There was an increase
of 110% or $80.5 million in TCE revenue earned in the spot market during the year
ended December 31, 2003 over the comparable year 2002. Improvements in the crude
tanker fleet operating in the spot market were from higher spot rates beginning
in late 2002 to 2003 resulting from several factors described in the 2003
Financial Summary and detail under Market Overview.





30

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The following tables illustrate in thousands of dollars the increase
in spot revenue earned during the year ended December 31, 2003 over the year ended
2002:





|                                   |  |  |  | For
the Years Ended
December 31, |  | Net     |  |         | 
|---------------------------------- |  |  |  | -------------------------------- |  | ------- |  | ------- | 
|                                   |  |  |  | 2003                             |  | 2002    |  | Change  | 
|                                  
|TCE
Revenue for Vessels on Spot   
|Crude
Oil Fleet                    |  |  |  | $133,637                         |  | $54,567 |  | $79,070 | 
|Product Carrier Fleet              |  |  |  | 19,938                           |  | 18,538  |  | 1,400   | 
|                                  
|Total                              |  |  |  | $153,575                         |  | $73,105 |  | $80,470 | 
|                                  
|%
Increase in Spot Revenue in 2003 |  |  |  |                                  |  |         |  | 110%   

Increases in TCE revenue earned by vessels operating
in the spot market during the 2003 period compared to the 2002 are explained in
more detail as follows:



| |  | *Increases
        in Crude Oil Fleet*TCE
      revenue for the Suezmax vessels increased by $66.2 million primarily due
      to the
  additional revenue earned by two vessels acquired in the fourth quarter of
      2002, two vessels acquired in August 2003 and two vessels (not owned by
      OMI) that began
  operating in the new Suezmax pool in December 2003 all of which resulted in 852 more
      operating days in 2003. Additionally, average daily TCE for Suezmax vessels
      for the year ended
  December 31, 2003, was 89% higher due to improved spot rates compared to the
    average daily TCE earned for the year ended December 31, 2002. | 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|  |  | Increases in TCE revenue for the
  Panamax and ULCC vessels aggregating $12.9 million were the result of improved average
  daily TCE rates earned in 2003 compared to 2002. Additionally, the ULCC incurred
  losses in 2002 as a result of the significant number of days that the vessel was
  unemployed.                                                                                                                                                                                                                                                                                                                                                               | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
| |  | *Increases in the Product
        Carrier Fleet*TCE revenue for the product carriers operating in the spot market
  increased by $1.4 million for the year ended December 31, 2003, because of
  higher
  rates earned which was offset by 680 less operating days in 2003 due to five
  single hull vessels disposed of in 2003 and one disposed of in 2002, and one
  chartered-in
  vessel that was redelivered and offhire for drydock.                                                                                                                                                                                                                                | 

TCE RevenueVessels Operating on Time Charters

During 2003, 43% or $115.6 million of our
TCE revenue was earned by vessels operating on time charters. The TC revenue earned
was $25.2 million higher for the year ended December 31, 2003, compared to the 2002
period; however, the percent of TC revenue to total TCE revenue declined in 2003
from 55% for the year ended December 31, 2002 because the spot market was stronger
in 2003.

The following table compares TC revenue
earned for the year ended December 31, 2003 to the TC revenue earned for the year
ended December 31, 2002 in thousands of dollars and as a percent of total TCE revenue
for each 2003 and 2002 years:





|                                                        |  |  |  | For
the Years Ended
December 31, |  | Net     | 
|------------------------------------------------------- |  |  |  | -------------------------------- |  | ------- | 
|                                                        |  |  |  | 2003                             |  | 2002    | 
|                                                       
|TCE
Revenue for vessels on TC                          
|Crude
Oil Fleet                                         |  |  |  | $ 11,828                         |  | $11,924 | 
|Product Carrier Fleet                                   |  |  |  | 103,769                          |  | 78,438  | 
|                                                       
|Total                                                   |  |  |  | $115,597                         |  | $90,362 | 
|                                                       
|                                                        |  |  |  |                                  |  |         | 
|%
of TCE Revenue for vessels on TC to Total TCE Revenue |  |  |  | 43%                              |  | 55%     | 

Increases in TCE revenue earned by vessels operating
on time charters for the year ended December 31, 2003 compared to the year-ended
2002 resulted from increases of $25.3 million in the Product Carrier Fleet due to
1,345 more operating days from newbuildings delivered in 2002 and 2003. Increased
operating days from newbuildings were attributed to the delivery of four newbuildings
in January, March, April and July 2003, more operating days for the three newbuildings delivered in January and March 2002 and
additional days for the product carrier chartered-in since October 2002 that began
a time charter in April 2003.







31

---

Vessel expenses and charter hire expenseVessel
expense and charter hire expense increased $11.3 million for the year ended December
31, 2003 compared to the year ended December 31, 2002.





| |  | Vessel expensesVessel
      expenses increased $5.3 million or 10% for the year ended December 31,
      2003, compared
  to the year ended December 31, 2002, primarily as a result of additional expenses
    for the six vessels and five vessels acquired during 2003 and 2002, respectively.                                                                                                                                                                                                                       | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
| |  | Charter hire expenseCharter
      hire expense increased $6.0 million for the year ended December 31, 2003
      compared
  to the year ended December 31, 2002, primarily as a result of a product carrier
      chartered-in during the period of October 2002 to October 2003, in addition
      to increased
  charter hire expense for the vessel chartered-in during June 2002 after the
      sale leaseback and from the two vessels that commenced operating in the
      new Suezmax pool
  in December 2003. | 

Depreciation and amortization expenseDepreciation
and amortization expense increased $7.3 million during the year ended December 31,
2003, because of the acquisition of vessels and amortization for drydock expense
for drydocks performed in 2002 and 2003.

General and administrative (G&A)G
& A increased $3.9 million for the year ended December 31, 2003, over the comparable
period in 2002 because of additional expenses as a result of owning a larger fleet
in 2003. As expected, G & A expense was higher in 2003 because of the additional
expense related to costs associated with implementation of the requirements of the
Sarbanes-Oxley Act of 2002.

Loss on disposal of assetsLoss
on disposal of assets of $14.4 million for the year ended December 31, 2003, compared
to $0.3 million in the comparable period in 2002. The 2003 loss resulted from the
sale of five single hull handysize product carriers.

Loss on disposal of assets for the year
ended December 31, 2002, included a net loss of $0.3 million resulting from the
sale of one single hull handysize product carrier.

Interest expenseInterest expense
during the year ended December 31, 2003 decreased $1.0 million compared to the year
ended December 31, 2002. Interest expense was less in 2003 despite the increase
in the average outstanding debt of $60.0 million for the year ended December 31,
2003 from the 2002 average debt balance of $476.4 million. The decrease in interest
expense was primarily a result of lower average interest rates on bank debt for
the year ended 2003 compared to the year ended 2002 offset by increased rates from
the 7.625 percent unsecured senior Notes issued in November 2003.

Interest incomeInterest income
decreased during the year ended December 31, 2003, compared to the year ended December
31, 2002. The decrease was primarily due to lower average rates on cash equivalents
and lower notes receivable balances in 2003.

Gain (loss) on disposal of investmentsA
gain on disposal of investments of $0.6 million was recorded during the year ended
December 31, 2003. The gain relates primarily to the final settlement of accounts
for an investment that was dissolved in prior years. The 2002 net loss of $0.7 million
on disposal of investments resulted primarily from the writedown of two investments
offset partially by the gain from the sale of a marketable security.

SEGMENT INFORMATIONDETAILED RESULTS OF OPERATIONS

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

Comparative Year Ended December 31, 2003 Versus Year
Ended December 31, 2002 Results

Crude Oil Fleet Results Of Operations

Vessel Operating Income, which is TCE revenue
less Vessel expenses, Charter hire expense and Depreciation and amortization, increased
$66.9 million for the year ended December 31, 2003 compared to the year ended

December 31, 2002. The increase in Vessel Operating Income during 2003 was primarily attributable to an increase in the Suezmax, Panamax and ULCC TCE revenue resulting from improved spot rates, in addition to an increase in operating days and earnings due to the addition of the four Suezmaxes delivered, two in August 2003 and two in the fourth quarter of 2002.





32

---

BREAKDOWN BY FLEET



|                                                                              |  | For
The Years Ended     December 31,
|----------------------------------------------------------------------------- |  | ------------------------------------
|                                                                             
|(In
thousands, except daily TCE rates & expenses, number of vessels and days) |  |                                     
|                                                                             
|Suezmaxes:                                                                   
|TCE
revenue(1)                                                                |  |                                     
|Vessel
expenses                                                               |  |                                     
|Charter
hire expense(1)                                                       |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE (Spot)                                                      |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of OMI vessels for the period*(2),(3)                          |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|Number
of non-OMI TCE revenue days(4)                                         |  |                                     
|                                                                             
|ULCC:                                                                        
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income (Loss)                                                |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period                                      |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Panamaxes:                                                                   
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period                                      |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Handysize
Crude Oil Carriers-on Time charter:                                
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period                                      |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|Total
vessel operating income                                                 |  |                                     
|                                                                             





33

---







|                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note:Average daily vessel expenses
    are computed using the number of days in the period which OMI owned or chartered
    the vessel. 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.
|*                                                                                                                                                                                                                                                                                                                              
|(1)                                                                                                                                                                                                                                                                                                                            
|(2)                                                                                                                                                                                                                                                                                                                            
|(3)                                                                                                                                                                                                                                                                                                                            
|(4)                                                                                                                                                                                                                                                                                                                            

Product Carrier Fleet Results Of Operations

Vessel Operating Income increased $19.9
million for the year ended December 31, 2003, over the comparable year ended December
31, 2002. The increase in Vessel Operating Income for the year ended 2003 was attributable
to the increases for vessels operating in the spot market and for our product carriers
operating on time charters, which included an increase in profit sharing earned
by five vessels in the 2003 period over the 2002 period.

BREAKDOWN BY FLEET



|                                                                              |  | For
The Years Ended     December 31,
|----------------------------------------------------------------------------- |  | ------------------------------------
|                                                                             
|(In
thousands, except daily TCE rates & expenses, number of vessels and days) |  |                                     
|                                                                              |  |                                     
|Products-on
spot:                                                            
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Charter
hire expense                                                          |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period*(1),(2)                              |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Products-on
time charter:                                                    
|TCE
revenue(3)                                                                |  |                                     
|Vessel
expenses                                                               |  |                                     
|Charter
hire expense                                                          |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period*(4)                                  |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|Total
Vessel Operating Income                                                 |  |                                     
|                                                                             





|                                                                                                                                                                                                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note:Average
          daily vessel expenses  are computed using the number of days in the
          period which OMI owned or chartered
  the vessel. 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.
|*                                                                                                                                                                                                                                                                                                                                                                     
|(1)                                                                                                                                                                                                                                                                                                                                                                   
|(2)                                                                                                                                                                                                                                                                                                                                                                   
|(3)                                                                                                                                                                                                                                                                                                                                                                   
|(4)                                                                                                                                                                                                                                                                                                                                                                   





34

---

For
the Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

Consolidated Results

Our net income was $15.5 million for the
year ended December 31, 2002, compared to net income of $82.3 million for the year
ended December 31, 2001.

During 2002, we completed the following
transactions:



| |  | During the third and fourth quarter,
  we took delivery of two Suezmax newbuildings.                                                                                                                                                                                                                                                                                                                                            | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
| |  | During October, we chartered-in a
  handymax product carrier for one year.                                                                                                                                                                                                                                                                                                                                                      | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
| |  | In June, we exercised our option
  to reacquire the COLUMBIA and simultaneously sold the vessel to an unrelated party
  for $50.0 million. The vessel, renamed OLIVER JACOB, has been time chartered back
  into our fleet for a period of eight years (excluding options) and has been accounted
  for as an operating lease. The gain on the sale of approximately $4.7 million is
  being amortized over the charter period. | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
| |  | In June, we agreed to time charter
  two Panamax vessels to a major oil company for a period of five years from their
  delivery dates in 2002.                                                                                                                                                                                                                                                                                 | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
| |  | In April, we sold a 1988 built product
  carrier for $9.1 million and paid down related debt of $6.0 million.                                                                                                                                                                                                                                                                                                                   | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
| |  | In January and March, we took delivery
  of three 2002 built product carriers (two 47,000 dwt and one 37,000 dwt). Each vessel
  began a three year time charter upon delivery.                                                                                                                                                                                                                                                 | 

The following table summarizes OMI Corporations
results of operations for the year ended December 31, 2002, compared to the year
ended December 31, 2001.



|                                          |  |  |  | For
the Year Ended
December 31, |  | Net         | 
|----------------------------------------- |  |  |  | ------------------------------- |  | ----------- | 
|                                         
|                                          |  |  |  | 2002                            |  | 2001        | 
|                                         
|(In
thousands)                           
|Voyage
and time charter revenue           |  |  |  | $198,925                        |  | $209,463    | 
|Voyage Expenses                           |  |  |  | 35,457                          |  | 31,730      | 
|                                         
|Time
charter equivalent revenue           |  |  |  | 163,468                         |  | 177,733     | 
|Other revenue                             |  |  |  | 127                             |  | 473         | 
|Vessel expenses
and charter hire expense  |  |  |  | 68,132                          |  | 50,760      | 
|Depreciation and amortization             |  |  |  | 43,583                          |  | 32,688      | 
|General and
administrative expenses       |  |  |  | 12,689                          |  | 12,420      | 
|Loss (gain)on disposal of assets          |  |  |  | 289                             |  | (19,516)    | 
|                                         
|Operating
income                          |  |  |  | 38,902                          |  | 101,854     | 
|                                         
|Interest
expense                          |  |  |  | (24,845)                        |  | (20,921)    | 
|Interest income                           |  |  |  | 660                             |  | 2,071       | 
|Loss on disposal/writedown of
investments |  |  |  | (675)                           |  | (1,617)     | 
|Other-net                                 |  |  |  | 21                              |  | 735         | 
|Equity in operations of joint
ventures    |  |  |  |                                |  | 222         | 
|Benefit for
income taxes                  |  |  |  | 1,406                           |  |            | 
|                                         
|Net
income                                |  |  |  | $    15,469                     |  | $    82,344 | 
|                                         

Time charter equivalent revenueTCE
revenue of $163.5 million for the year ended December 31, 2002, decreased by $14.2
million, from $177.7 million in 2001.

Decreases in TCE revenue of $14.2 million
for the year ended December 31, 2002, compared to the year ended December 31, 2001,
were attributed primarily to decreases in:



| |  | The Suezmax fleet by $27.9 million
  and Panamax fleet by $7.9 million resulting from a significant decline in rates
  during 2002 compared to 2001. Rates began to decline during the second half of 2001
  and continued throughout most of 2002. Toward the end of the fourth quarter of 2002,
  rates began to improve again. Additionally, although there were
  eight Suezmax vessels at December 31, 2002, compared to six at December 31,
  2001, there were 77 fewer operating days in 2002 compared to 2001. There were
  more operating days in aggregate for the vessels sold or redelivered in 2001
  than there were in 2002 for the vessels delivered in the second half of the
  year. | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 





35

---



|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |  | The product carriers operating in
the spot market which declined by $21.5 million because of lower rates earned by
the older single hulled vessels during 2002 compared to 2001 coupled with 371 fewer
operating days in 2002 (292 fewer days due to the sale of a vessel earlier in 2002,
182 fewer days due to a vessel that went on a time charter in mid-2001, 38 more
offhire days for drydock in 2002 offset by additional days in 2002, 68 days for
the vessel chartered-in during October 2002 and 73 days for the second hand vessels
delivered during February and March 2001). | 
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
| |  | The ULCC TCE revenue by $8.4 million
because of unemployment of the vessel for a significant portion of the year and
a decline in spot rates for most of 2002 compared to 2001. During October 2002,
the vessel began a profitable time charter that expired in April 2003.                                                                                                                                                                                                                                                                                                               | 

Decreases in TCE revenue during the year ended
December 31, 2002, were partially offset by increases of $46.0 million from product
carriers operating on time charters for 2,781 more operating days in 2002. Three
vessels were acquired in 2002 (939 more operating days in 2002), and there were
1,842 more days in 2002 attributed to seven vessels acquired during 2001 and 183
more operating days for a vessel previously operating in the spot market in 2001
which began a time charter mid-year 2001. Additionally, TCE revenue increased by
$5.6 million for the two handysize crude oil carriers acquired in June 2001, which
operated for 340 more days during 2002.

Vessel expenses and charter hire expense.
Vessel expenses and charter hire expense increased $17.4 million for the twelve
months ended December 31, 2002.



| |  | Vessel expensesVessel
      expenses increased approximately $9.2 million primarily from additional
      vessel costs
  for the vessels acquired.                                        | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|  |  |                                                                                                                                                                                            | 
| |  | Charter hire expenseCharter
      hire expense increased by $8.2 million over 2001 as a result of chartering-in
      two
  vessels, one in December 2001, and the other in October 2002. | 

Depreciation and amortization expenseDepreciation
and amortization expense increased $10.9 million for the year ended December 31,
2002, because of the acquisition of vessels and increased amortization for drydock
expense for drydocks performed in 2002 and 2001.

General and AdministrativeG
& A expense had immaterial increases of $0.3 million for the year ended 2002
compared to the year ended 2001.

Loss (gain) on disposal/writedown of
assetsnetThe Loss (gain) on disposal/writedown of assets-net for
the year ended December 31, 2002, of $0.3 million was primarily from the sale of
a 1988 product carrier in April 2002. The gain on disposal in 2001 of $19.5 million
resulted from the sale of two vessels. The sale of a Suezmax vessel resulted in
a gain of $17.4 million while the sale of a product carrier resulted in a gain of
$0.6 million. There was also a gain of $1.5 million from the early termination of
two time charters.

Loss on disposal/writedown of investmentsLoss
on disposal/write down of investments aggregating $0.7 million for the year ended
December 31, 2002, related primarily to the write down of two investments aggregating
approximately $1.1 million, offset partially by the gain from the sale of a marketable
security. Loss on disposal/writedown of investments was approximately $1.6 million
for the year ended December 31, 2001. The 2001 loss relates to the reserve for a
loss on investment during the winding down of a joint venture.

Interest expenseInterest expense
of $24.8 million for the year ended December 31, 2002, increased $3.9 million from
$20.9 million for the year ended December 31, 2001. The net increase was primarily
due to interest expense on the financing for vessel acquisitions. The average outstanding
debt in 2002 was higher than in 2001 due to additional borrowings for acquisitions
which exceeded repayments from the disposal of vessels.

Interest incomeInterest income
of $0.7 million for the year ended December 31, 2002, decreased $1.4 million from
$2.1 million for the year ended December 31, 2001, because average cash balances
were lower in 2002 compared to 2001, interest rates were lower, and the balances
in interest earning long-term notes receivable were less in 2002.







36

---

OthernetOthernet decreased $0.7 million
for the year ended December 31, 2002. The balance in 2001 was primarily the result
of insurance settlements of claims on various vessels during the year ended December
31, 2001.

Income Tax BenefitThe income
tax benefit of $1.4 million for the year ended December 31, 2002, represents a reversal
of an accrual for taxes provided for at the time of the spin-off in 1998. All tax
years through the time we were spun-off in 1998 have been closed.

Equity in Operations of Joint VenturesEquity
in operations of joint ventures decreased by $0.2 million for the year ended December
31, 2002, compared to the year ended December 31, 2001. The reduction was from the
winding down of a joint venture in prior years.

SEGMENT INFORMATIONDETAILED
RESULTS OF OPERATIONS

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

Comparative Year Ended December 31, 2002, Versus
Year Ended December 31, 2001 Results

Crude Oil Fleet Results Of Operations

Vessel Operating Income decreased $46.5
million for the year ended December 31, 2002, compared to the year ended December
31, 2001. The net decrease in Vessel Operating Income during 2002 was primarily
attributable to a decrease of $31.9 million in the Suezmax fleet Vessel Operating
Income as a result of declines in charter rates for Suezmaxes coupled with waiting/slow
steaming days and 237 fewer operating days during 2002 due to the sale of a Suezmax
vessel in June 2001 and chartered-in vessels redelivered in 2001. Charter hire expense
in the Suezmax fleet increased $7.3 million for the year ended December 31, 2002,
related to the sale and leaseback of two vessels, one in December 2001 and one in
June 2002. The decrease of $7.8 million in operating income for the ULCC resulted
from a decline in charter rates coupled with the unemployment of the ULCC vessel
for a significant part of the year. The decrease of $9.8 million in Vessel Operating
Income of the Panamax was attributable to a decline in charter rates coupled with
waiting/slow steaming days. Decreases were offset by the increase of $3.1 million
in Vessel Operating Income attributable to two handysize crude oil carriers acquired
in June 2001 (with 340 more operating days in 2002) that continued on long-term
time charters.









37

---

BREAKDOWN BY FLEET



---

|                                                                              |  | For
The Years Ended     December 31,
|----------------------------------------------------------------------------- |  | ------------------------------------
|                                                                             
|(In
thousands, except daily TCE rates & expenses, number of vessels and days) |  |                                     
|                                                                              |  |                                     
|Suezmaxes:                                                                   
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Charter
hire expense                                                          |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE (Spot)                                                      |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Number
of vessels owned-end of period(1)                                      |  |                                     
|Number
of vessels chartered-in end of period(2),(3)                           |  |                                     
|Number
of TCE revenue days (Spot)                                             |  |                                     
|Number
of TCE revenue days (Time Charter Out)                                 |  |                                     
|                                                                             
|ULCC:                                                                        
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating (Loss) Income                                                |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels owned-end of period                                 |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Panamaxes(4):                                                                
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Number
of vessels owned-end of period                                         |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Handysize
Product Carriers on Time Charter:                                  
|TCE
revenue                                                                   |  |                                     
|Vessel
expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Number
of vessels owned-end of period(5)                                      |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|Total
Vessel Operating Income                                                 |  |                                     
|                                                                             



|                                                                                                                                                                                                                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note:Average
      daily vessel expenses are  computed using the number of days in the period
      which OMI owned or chartered the
vessel. 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.



38

---







|(1) |  | In September and October 2002,
  two Suezmax newbuildings were delivered. In June 2001, a Suezmax vessel was sold.
  During January 2001, a Suezmax newbuilding was delivered. | 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|(2) |  | In December 2001, a vessel was
  sold and leased back.                                                                                                                         | 
|(3) |  | In January and March 2001, OMI
  redelivered two chartered-in vessels.                                                                                                         | 
|(4) |  | All deployed in the spot market.                                                                                                                                               | 
|(5) |  | In June 2001, two handysize crude
  oil tankers were acquired with time charters.                                                                                              | 

Product Carrier Fleet Results Of Operations

Vessel Operating Income increased $4.2
million for the year ended December 31, 2002, compared to the year ended December
31, 2001. The increase in Vessel Operating Income for product carriers on time charters
increased $24.7 million (TCE revenue increased $46.0 million and vessel expenses
increased $12.1 million) which was attributable to the acquisition of ten vessels
(seven in 2001 and three in 2002), all of which began time charters upon delivery,
coupled with increased profit sharing earned in 2002 by five vessels, three of which
were acquired in 2001. Vessel expenses and depreciation expense also increased as
a result of the acquisition of vessels. Increases in Vessel Operating Income were
offset by decreases for product carriers on spot. This group had a decrease of $20.5
million in Vessel Operating Income, consisting of a decrease of $21.5 million in
TCE revenue and a $1.2 million decrease in vessel expenses. Decreases in revenue
resulted from the sale of one vessel and the decline in spot rates for single hulled
vessels in 2002.

BREAKDOWN BY FLEET



|                                                                              |  | For
The Years Ended     December 31,
|----------------------------------------------------------------------------- |  | ------------------------------------
|                                                                             
|(In
thousands, except daily TCE rates & expenses, number of vessels and days) |  |                                     
|                                                                              |  |                                     
|Products-on-spot:                                                            
|TCE
revenue                                                                   |  |                                     
|Vessel
Expenses                                                               |  |                                     
|Charter
Hire Expense                                                          |  |                                     
|Depreciation
and Amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE                                                             |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Number
of vessels owned-end of period(1)                                      |  |                                     
|Number
of vessels chartered-in end of period(2)                               |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|                                                                             
|Products-on time
charter:                                                    
|TCE
revenue(3)                                                                |  |                                     
|Vessel
Expenses                                                               |  |                                     
|Depreciation
and amortization                                                 |  |                                     
|                                                                             
|Vessel
Operating Income                                                       |  |                                     
|                                                                             
|Average
daily TCE(3)                                                          |  |                                     
|Average
daily vessel expense                                                  |  |                                     
|Average
number of vessels for the period(4),(5)                               |  |                                     
|Number
of TCE revenue days                                                    |  |                                     
|Total
Vessel Operating Income                                                 |  |                                     
|                                                                             



|                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note:Average daily vessel expenses are
      computed using the number of days in the period which OMI owned or chartered the
      vessel. 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.
|(1)                                                                                                                                                                                                                                                                                                                                    
|(2)                                                                                                                                                                                                                                                                                                                                    
|(3)                                                                                                                                                                                                                                                                                                                                    
|(4)                                                                                                                                                                                                                                                                                                                                    
|(5)                                                                                                                                                                                                                                                                                                                                    







39

---

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, 2003, and December
31, 2002:



|                                                       |  |  |  | For
the Years Ended
     
December 31, |  |            | 
|------------------------------------------------------ |  |  |  | -------------------------------------- |  | ---------- | 
|                                                       |  |  |  | 2003                                   |  | 2002       | 
|                                                      
|                                                       |  |  |  | (In
  millions)                        |  |            | 
|Condensed
Cash Flows                                  
|Provided
(used) by:                                   
|Operating
Activities                                   |  |  |  | $   142.5                              |  | $     54.0 | 
|Investing Activities                                   |  |  |  | (184.6)                                |  | (128.8)    | 
|Financing Activities                                   |  |  |  | 50.0                                   |  | 98.0       | 
|                                                      
|Net
Increase in Cash and Cash Equivalents              |  |  |  | 7.9                                    |  | 23.2       | 
|Cash and Cash
Equivalents at the Beginning of the Year |  |  |  | 40.9                                   |  | 17.7       | 
|                                                      
|Cash
and Cash Equivalents at the End of the Period     |  |  |  | $      48.8                            |  | $     40.9 | 
|                                                      

Working Capital

The Companys primary sources of liquidity
and capital resources are cash generated from operations and, if needed, borrowings
under its revolving credit facilities (see Long-Term Debt Obligations).
Cash and cash equivalents of $48.8 million at December 31, 2003 increased $7.9 million
from cash and cash equivalents of $40.9 million at December 31, 2002. Our working
capital increased by $40.7 million from December 31, 2002 to $48.8 million at December
31, 2003.

Net cash provided by operating activities
increased $88.5 million to $142.5 million for the year ended December 31, 2003,
compared to net cash provided by operating activities of $54.0 million for the year
ended December 31, 2002. The increase in cash provided by operating activities in
2003 resulted from higher net income and was a result of improvements in working
capital management during the year ended 2003 (see Results of Operations).

Current assets increased a net of $42.5
million resulting primarily from increases in Vessel held for sale of $16.5 million,
     Cash and cash equivalents of $7.9 million, Traffic receivables of $10.8
    million
and Other receivables of $5.5 million at December 31, 2003. Current liabilities
     increased $1.8 million at December 31, 2003, primarily because of increases
    in Account
payable and Accrued liabilities of $13.0 million offset by the reduction in the

current portion of long-term debt of $11.2 million (see Long-Term Debt
Obligations
below). Increases relating to Traffic receivables and Accrued liabilities are
attributable  to a larger fleet at December 31, 2003 and timing differences of
cash receipts and
disbursements in a particular period are not necessarily comparable between periods.

Vessels, Construction in Progress (CIP)
and Other Property

At December 31, 2003, Vessels, CIP and
Other Property-net of $1,022.8 million increased $120.0 million from $902.8 million
at December 31, 2002. Capital expenditures were primarily for the purchase of four
newbuildings (contracted for prior to 2003), two 2000 built Suezmax vessels and
CIP payments for six vessels. Vessels decreased due to the disposal of five product
carriers and for adjustments not relating to cash flow, to reclass our ULCC vessel
to Vessel held for sale and to reduce the carrying value of two Panamax vessels
for impairment charges.

Cash used by investing activities was $184.6
million for the year ended December 31, 2003, compared to cash used by investing
activities of $128.8 million for the year ended December 31, 2002. During 2003,
$217.8 million was used for the additions to vessels. During 2003, cash was primarily
used for the acquisition of six vessels and for construction in progress payments
as follows:



| |  | $41.8 million was used for the purchase
of two product carriers delivered during the first quarter, | 
|- |  | --------------------------------------------------------------------------------------------------- | 



40

---







| |  | $56.4 million was used for the purchase
  of two Panamax vessels in April and July 2003,                                                                   
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                            
| |  | $86.8 million was used for the purchase
  of two Suezmax tankers in August 2003 ($12.0 million was paid by issuing 2,000,000
  shares of OMI common stock),
|  |  |                                                                                                                                                            
| |  | $31.1 million was paid for vessels
  under construction, and                                                                                               
|  |  |                                                                                                                                                            
| |  | $1.7 million was used for capital
  expenditures for improvements to existing vessels and capitalized interest.                                            

During the year ended December 31, 2003, we sold
five product carriers from which we received proceeds from dispositions aggregating
approximately $33.0 million.

Long-Term Debt Obligations and Credit Arrangements

As of December 31, 2003, long-term debt
obligations increased $54.3 million to $564.9 million from $510.6 million at December
31, 2002. Proceeds received from increases in indebtedness were used for the purchases
of vessels and for CIP payments. Long-Term Obligations as of December 31, 2003,
consisted of the following:



| |  | Term loans under bank mortgage agreements
  at a margin plus variable rates(1) above the London Interbank
  Offering Rate (LIBOR) of $197.4 million;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                       
| |  | Reducing revolving facilities at
  a margin plus variable rates(1) above LIBOR of $167.2 million;                                                     
|  |  |                                                                                                                                                       
| |  | 7.625% Unsecured Senior Notes due
  November 2013 of $200.0 million; and                                                                              
|  |  |                                                                                                                                                       
| |  | 7% Convertible Note due February
       2004 (convertible at $7.375 per share) of $0.3 million.                                                       



|(1) |  | The interest rates at December
  31, 2003 ranged from 2.0625 percent to 3.71 percent (including margins). The margins
  ranged from 0.90% to 1.625%. Under our loan agreements, LIBOR can range from 30
  days to one year.                                                                                                                                    | 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |  |                                                                                                                                                                                                                                                                                                                                                                | 
|    |  | As of December 31, 2003,
        OMI had various interest rate swaps that fix notional amounts, aggregating
        $217.6 million
  (not including $83.0 million that is beginning in 2004) of variable rate debt
        ranging from 2.07% to 4.86% (excluding margins) with maturity dates of
        the swaps ranging
  from March 2004 to October 2005. | 

Cash provided by financing activities was $50.0
million for the year ended December 31, 2003, compared to cash provided by financing
activities of $98.0 million for the year ended December 31, 2002. During the year
ended 2003, there were $318.0 million in principal payments ($18.8 million were
scheduled payments and $299.2 million were unscheduled prepayments on the revolving
lines of credit; $200.0 million of proceeds from the 7.625% Notes were used to paydown
debt in November and December 2003) and there were $372.3 million in proceeds from
the issuance of debt for the purchase of six vessels and construction in progress
payments and $200.0 million proceeds from issuance of 7.625% senior unsecured notes.

As of December 31, 2003, the available debt undrawn under
  all credit facilities was $254.3 million. Current portion of long-term debt
  was reduced by $11.2 million during 2003. The reduction resulted from the unscheduled
  payments on our two reducing revolving credit facilities, which can be redrawn
  in future periods. Since we did not borrow all funds available under these
  two credit facilities, there are no quarterly future payments in the next 12
  months unless we draw up to the amount available, which is currently $254.3
  million. Our debt to total capitalization (debt and stockholders equity)
  at December 31, 2003 was 51 percent and net debt (total debt less cash and
  cash equivalents) to total net capitalization (total capitalization less cash
  and cash equivalents) was 49 percent. See Contractual Obligations table
below for debt requirements in the next five years.



41

---







|                                       |  |  |  | $245mCredit
    Facility(1) |  | $348m
      Credit
    Facility |  | $64.8m
      Term
    Loan |  | $40.0m
      Term
    Loan |  | $44.0m
      Term
    Loan |  |  |  |  |  |  | $34.475m
      Term
    Loan |  |  |  |  | $34.3m
      Term
    Loan | 
|-------------------------------------- |  |  |  | --------------------------- |  | ------------------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------- |  |  |  |  |  |  | ---------------------------- |  |  |  |  | -------------------------- | 
|                                      
|Amount Outstanding                     |  |  |  | $109,829                    |  | $  57,329                       |  | $62,190                    |  | $32,800                    |  | $34,250                    |  |  |  |  |  |  | $34,475                      |  |  |  |  | $33,650                    | 
|Undrawn Amount                         |  |  |  | $109,639                    |  | $144,619                        |  | n/a                        |  | n/a                        |  | n/a                        |  |  |  |  |  |  | n/a                          |  |  |  |  | n/a                        | 
|Maturity Date(s)                       |  |  |  | March                       |  | July                            |  | April & July               |  | October                    |  | Dec. 2008 &                |  |  |  |  |  |  | August                       |  |  |  |  | August                     | 
|                                       |  |  |  | 2010                        |  | 2007                            |  | 2011                       |  | 2009                       |  | March 2009                 |  |  |  |  |  |  | 2011                         |  |  |  |  | 2011                       | 
|                                       |  |  |  |                             |  |                                 |  |                            |  |                            |  |                            |  |  |  |  |  |  |                              |  |  |  |  |                            | 
|Payment at Maturity
      
    Date(s) |  |  |  | $115,250                    |  | $128,056                        |  | $9,000                     |  | $13,600                    |  | $8,200                     |  |  |  |  |  |  | $14,525                      |  |  |  |  | $14,150                    | 
|Interest Rate on December 31, 2003     |  |  |  | 2.875%
    to 3.71%         |  | 2.5 % to 
    2.56%             |  | 2.0875% 
    to 2.15 %     |  | 2.525%                     |  | 2.0625% 
    to 2.4375%    |  |  |  |  |  |  | 2.375% to
    2.4375%        |  |  |  |  | 2.4375%                    | 
|Collateralized By                      |  |  |  | 15 vessels                  |  | 11 vessels                      |  | 2 vessels                  |  | 2 vessels                  |  | 2 vessels                  |  |  |  |  |  |  | 1 vessel                     |  |  |  |  | 1 vessel                  





|   
|---
|(1)

Unsecured Senior Notes and Subsidiary Guarantees:On November 26, 2003, the Company 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, commencing on June
1, 2004. 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 Senior
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.

Restrictive Covenants

All of our loan agreements contain restrictive
covenants as to cash, net worth, maintenance of specified financial ratios and collateral
values. They also restrict the amount of certain payments, such as dividends and
repurchase its stock. As of December 31, 2003, we were in compliance with all covenants.

Interest-Rate Swaps and Future Rate Agreements

OMI entered into interest rate swap and
FRA agreements to manage interest costs and the risk associated with changing LIBOR
interest rates. As of December 31, 2003, we had various interest rate swaps/FRAs
aggregating $275.4 million (which includes a notional amount of $57.8 million on
an interest rate swap that commences in 2004) on various debt tranches within a
range of 2.07% to 4.86% expiring from March 2004 to October 2008. The Company pays
fixed-rate interest amounts and receives floating-rate interest amounts based on
three month LIBOR settings (for a term equal to the swaps reset periods).
As of December 31, 2003, the Company has recorded a liability which is included
in Other liabilities of $3.3 million related to the fair market value of these hedges
and corresponding charges of $1.3 million in Other Assets and Deferred charges and
$2.1 million to Other comprehensive income.

On February 20, 2004, we entered into an
interest rate swap agreement with a notional amount of $25.2 million for the period
February 26, 2004 to February 26, 2009. OMI will pay 3.2575% fixed rate interest
and will receive three month LIBOR.

Contracted Time Charter Revenue

The following table reflects our contracted
time charter revenue through 2008 (the schedule below does not include any estimates
for profit sharing in future periods) and includes the five new five year time charters
for the product







42

---

carriers to be delivered beginning in 2004 and 2005, two year extension
for two product carriers to 2006 and one year extensions for two product carriers
to 2005.





|                     |  | 2004   |  | 2005  |  | 2006          |  | 2007  |  | 2008  | 
|-------------------- |  | ------ |  | ----- |  | ------------- |  | ----- |  | ----- | 
|                    
|                     |  |        |  |       |  | (In
millions) |  |       |  |       | 
|TC Revenue           |  | $111.2 |  | $68.6 |  | $49.6         |  | $33.5 |  | $27.8 | 
|Number of Vessels(a) |  | 18(b)  |  | 13(c) |  | 7(d)          |  | 7     |  | 5(e)  | 





|     
|-----
|(a)  
|(b)  
|(c)  
|(d)  
|(e)  
|Note:

Capital Expenditures

2004 Drydocks

We anticipate drydocking up to fourteen
vessels during 2004 (certain drydocks, however, may be delayed until 2005) for an
estimated aggregate cost of $8.1 million, and the vessels could incur approximately
284 off-hire days.

The following is a breakdown of the estimated
drydock cost (in thousands) for the first and second half of 2004 with allocation
of off-hire days by vessel type and charter type (spot or TC):





|               |  | Number
of Days  |  | Number of Days   |  | Projected | 
|-------------- |  | --------------- |  | ---------------- |  | --------- | 
|               |  | First Half-2004 |  | Second Half-2004 |  | Costs     | 
|              
|Crude
Fleet:   |  |                 |  |                  |  |           | 
|Suezmaxes-spot |  |                |  | 40               |  | $1,400    | 
|Panamax-spot   |  | 24              |  |                 |  | 950       | 
|Handysize-TC   |  | 24              |  |                 |  | 1,400     | 
|               |  |                 |  |                  |  |           | 
|Clean
Fleet:   |  |                 |  |                  |  |           | 
|Products-spot  |  | 24              |  |                 |  | 550       | 
|Products-TC    |  | 64              |  | 108              |  | 3,750     | 
|              
|Total          |  | 136             |  | 148              |  | $8,050    | 
|              



Capital Expenditures for Vessel Purchases

As of December 31, 2003, we had commitments
to purchase seven handysize ice class 1A product carriers under construction with
contract costs aggregating $198.1 million. In March 2004, we ordered a handymax
ice class 1A product carrier for delivery in August 2005. On February 26, 2004, we took delivery of the first
vessel and three more vessels will be delivered in 2004, three more vessels in 2005
and one in 2006. Five of the vessels will begin five-year time charters upon delivery.
As of December 31, 2003, $31.0 million in payments were made. Bank financing will
provide most of the amounts to be paid. See Contractual Obligations
section for payment requirements to 2006.

In December 2003, we obtained an eight
year $50.4 million term loan to partially finance the purchase of two product carrier
newbuildings, one of which was delivered in February 2004 and the other which is
to be delivered in August 2004. Both vessels will begin five year time charters
upon delivery. The loan is split into two $25.2 million tranches. Each tranche will
be repaid in 32 quarterly installments of approximately $0.45 million plus a balloon
payment of $11.25 million due with the last installment. The outstanding balance
of the loan bears interest at LIBOR plus an applicable margin of 0.85% while the
vessels have time charters. In February 2004, $25.2 million was drawn on the first
tranche to finance the delivery of the vessel delivered.







43

---

In December 2003, we obtained a five year $24.0 million term loan
to partially finance the purchase a product carrier newbuilding, which will be delivered
in April 2004. There have been no amounts drawn on the term loan as of December
31, 2003. The loan will be repaid in 20 quarterly installments of approximately $0.55 million plus
a balloon payment of $13.55 million due with the last installment. The outstanding
balance of the loan bears interest at LIBOR plus an applicable margin of 0.90% while
the vessels have time charters.

Our management believes that cash flow
from operations, along with available borrowing capacity under our credit facilities
( see Long-Term Debt Obligations and Credit Arrangements), will be sufficient
to meet capital requirements over the next twelve months.

Contractual Obligations

The following table lists contractual obligations
by required payment periods as of December 31, 2003:





|                        |  | Payments Due
    By Period | 
|----------------------- |  | -------------------------- | 
|                       
|                        |  | Total                      | 
|                       
|                        |  |                            | 
|Contractual
Obligations |  |                            | 
|Long-Term Debt(1)       |  | $564.9                     | 
|Operating Leases(2)     |  | 90.3                       | 
|Purchase Obligations(3) |  | 167.1                      | 



|   
|---
|(1)
|(2)
|(3)

Off-Balance-Sheet Arrangements

As of December 31, 2003, we did not have
any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii)
of SEC Regulation S-K.

Other Commitments and Contingencies

For capital expenditures relating to vessel
purchases under current construction contracts see Capital Expenditures
section.

OMI reached an agreement with the Department
of Justice pursuant to which we pleaded guilty to one count of knowingly violating
regulations promulgated under the Act to Prevent Pollution from Ships by failing
to maintain an oil record book on one of our vessels. See 2003
Financial Summary for current details about the status of this agreement.

We and certain of our subsidiaries are
defendants in various actions arising from shipping operations. Such actions are
covered by insurance or, in the opinion of management, are of such nature that the
ultimate liability, if any, would not have a material adverse effect on the consolidated
financial statements.

Dividends

On March 10, 2004, the Board declared a
quarterly dividend of $0.05 per share or approximately $4.1million, payable on April
14, 2004 to shareholders of record at the close of business on March 22, 2004. The Company currently intends to pay a regular quarterly dividend; however, any determination to pay dividends in future will be at the discretion of the Board
of Directors and will depend upon OMIs results of operations, financial condition,
capital restrictions, covenants and other factors deemed relevant by the Board of
Directors. Payment of dividends is limited by the terms of certain agreements to
which OMI and its subsidiaries are party.



44

---

Restricted Stock

In 2003, the Stockholders approved
the 2003 Stock Incentive Plan, which replaced the 1998 Stock Incentive Plan. This
plan provides for the granting of options to officers, employees, consultants and
Directors for purchase of the Companys common shares. The total number of
shares that may be awarded under the Plan are 4,000,000 of which 1,400,000 shares
of Stock may be awarded as Restricted Stock. There were no stock options granted
under this plan in 2003.

In September 2003, we awarded and issued
498,314 shares of restricted stock to employees, executive officers and directors
for a total value at the date of grant of approximately $3.4 million, which was
recorded to Unearned compensation restricted stock. Restrictions lapse for one third
of the shares at the end of year three, the next third at the end of year four,
and the remaining third of the shares at the end of year five.

In April 2002, we awarded and issued 20,000
shares of restricted stock to a new director for a total value at the date of grant
of approximately $0.1 million. Restrictions lapse for 25 percent of the shares at
the end of year three, the next 25 percent at the end of year five, and the remaining
50 percent of the shares at varying years in accordance with years of service at
the individuals retirement date (if the director remains with us for at least
five years from the date of grant).

Effects of Inflation

We do 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.

Recently Issued Accounting Standards

The Financial Accounting Standards Board
FASB recently issued Statements of Financial Accounting Standards (SFAS),
which are summarized as follows:

SFAS 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
was issued in May 2003. SFAS 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both liabilities
and equity and is effective for financial instruments entered into or modified after
May 31, 2003, and for all such instruments on July 1, 2003. The provisions of SFAS
150, which the Company adopted in 2003, did not have an effect on the Companys
financial statements.

SFAS 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities was issued in April 2003.
SFAS 149 amends SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, to provide clarification on the meaning of an underlying, the
characteristics of a derivative that contains financing components and the meaning
of an initial net investment that is smaller than would be required for other types
of contracts that would be expected to have a similar response to changes in market
factors. SFAS 149 will be applied prospectively and is effective for contracts entered
into or modified after June 30, 2003. The provisions of SFAS 149, adopted by the
Company effective July 1, 2003, did not have an effect on the Companys financial
statements.

SFAS 148, Accounting for Stock-Based
Compensation-Transition and Disclosure was issued in December 2002. SFAS 148
amends SFAS 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition to SFAS 123s fair value method of accounting
for stock-based employee compensation. SFAS 148 also amends the disclosure provisions
of SFAS 123 and APB Opinion 28, Interim Financial Reporting, to require
disclosure in the summary of significant accounting policies of the effects of an
entitys accounting policy with respect to stock-based employee compensation
on reported net income and earnings per share in annual and interim financial
statements.
While SFAS 148 does not amend SFAS 123 to require companies to account for employee
stock options using the fair value method, the disclosure provisions of SFAS
148
are applicable to all companies with stock-based employee compensation, regardless
of whether they account for that compensation using the fair value method of
SFAS
123 or the intrinsic value method of APB Opinion 25. As allowed by SFAS 123,
the Company has elected to continue to utilize the accounting method prescribed
by APB
Opinion 25 and has adopted the disclosure requirements of SFAS 123 for stock
options existing prior to January 1, 2003. The Company has also elected the prospective
method for recognizing fair value on stock options granted after January 1, 2003.
The disclosure provisions under SFAS 148, effective for fiscal years ending after
December 15, 2002, have been
adopted by the Company, with the appropriate disclosures under Stock-Based
Compensation.







45

---

In January 2003, FASB released Interpretation
    No. 46, Consolidation of Variable Interest Entities (FIN
    46).
FIN 46 requires that all primary beneficiaries of Variable Interest Entities
    (VIE)
consolidate that entity. FIN 46 is effective immediately for VIEs created after
     January 31, 2003, and to VIEs to which an enterprise obtains an interest
    after that
date. It applies in the first fiscal year or interim period beginning after June
     15, 2003, to VIEs in which an enterprise holds a variable interest it acquired
    before
February 1, 2003. In December 2003, the FASB published a revision to FIN 46 (Interpretation

Accounting Research Bulletin No. 51 or FIN 46R) to clarify some of
the provisions of the interpretation and defer to the effective date of implementation
for certain entities. Under the guidance of FIN 46R, entities that do not have
interests
in structures that are commonly referred to as special purpose entities are required
to apply the provisions of the interpretation in financial statements for periods
ending after March 14, 2004. We do not have interests in special purpose entities.
The provisions of FIN 46R, which the Company adopted in March 2004, did not
have an effect on the Company's financial statements.

Forward Looking Statements

This report contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act) and Section 21E of the Securities Exchange Act of 1934,
as amended (the Exchange Act) and the Private Securities Litigation
Reform Act of 1995 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 the projected
      development of the Companys strategy and how it may act to implement
    its strategy;                                         
|  |  |                                                                                                                                                                      
| |  | estimates of future costs and other
  liabilities for certain environmental matters and investigations and the expectations
  concerning insurance coverage therefor;
|  |  |                                                                                                                                                                      
| |  | 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;                                                                                                  
|  |  |                                                                                                                                                                      
| |  | statements regarding financial 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.

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.







46

---



Item 7A.QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISKS

We have a risk exposure to changing interest
    rates. At December 31, 2003, the floating rate debt was $364.6 million
of the $564.9 million total debt, and we had interest rate swaps relating to
    the floating rate debt of $275.4 million (including $57.8 million on an interest
    rate
swap that commences in 2004). At December 31, 2002, the floating rate debt was
    $509.6 million, and we had interest rate swaps and Future Rate Agreements (FRAs) relating to the floating rate
    debt of $358.6 million (including $223.6 million on interest rate swaps and FRAs that commenced in 2003).
	Based on the floating rate debt at December 31, 2003, a one-percentage
    point increase in the floating interest rate would increase interest expense
    by $1.5 million per year.

On February 20, 2004, we entered into an
interest rate swap agreement with a notional amount of $25.2 million for the period
February 26, 2004 to February 26, 2009. We will pay 3.2575% fixed rate interest
and will receive three month LIBOR.

The fair market value of the fixed rate
debt on the balance sheet was $201.3 million as of December 31, 2003, and $1.0 million
as of December 31, 2002, respectively. Based on the fixed rate debt at December
31, 2002, if interest rates were to increase (decrease) by one percent with all
other variables remaining constant, the market value of the fixed rate debt would
increase interest expense by $2.0 million per year.

Our policy is to manage interest rate risk
through the use of interest rate derivatives based upon market conditions. We use
interest rate swaps and FRAs to manage the
impact of interest rate changes on borrowings under our variable rate credit facilities.
The interest rate swaps and FRAs are entered into with a group of financial institutions
with investment grade credit ratings, thereby minimizing the risk of credit loss.
We have entered into certain interest rate derivative transactions with certain
financial institutions to manage the impact of interest rate changes on variable
rate debt.



47

---

Item 8:FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS





|                                                                                                                                                            |  |  |  | Page
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----
|                                                                                                                                                            |  |  |  |     
|OMI
Corporation and Subsidiaries:                                                                                                                          
|Consolidated
Statements of Income for each of the three years in the period ended       December
31, 2003                                                   |  |  |  | 49  
|Consolidated
Balance Sheets as of December 31, 2003 and 2002                                                                                                |  |  |  | 50  
|Consolidated Statements of Cash
Flows for each of the three years in the period ended       December
31, 2003                                               |  |  |  | 52  
|Consolidated
Statements of Comprehensive Income and Changes in Stockholders Equity for
each       of the three years in the period ended
December 31, 2003 |  |  |  | 53  
|Notes to Consolidated Financial
Statements                                                                                                                  |  |  |  | 54  
|Independent
Auditors Report                                                                                                                                |  |  |  | 75  
|Quarterly Results of Operations
(unaudited)                                                                                                                 |  |  |  | 76  









48

---

OMI CORPORATION AND SUBSIDIARIES

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



|                                                                          |  | For
the Years Ended December 31,
|------------------------------------------------------------------------- |  | --------------------------------
|                                                                         
|                                                                          |  |                                 
|                                                                         
|REVENUE:                                                                 
|Voyage
revenue                                                            |  |                                 
|Time
charter revenue                                                      |  |                                 
|                                                                         
|Subtotal                                                                  |  |                                 
|Voyage
expense                                                            |  |                                 
|                                                                         
|Time
charter equivalent revenue                                           |  |                                 
|Other
revenue                                                             |  |                                 
|                                                                         
|Time
charter equivalent and other revenue                                 |  |                                 
|                                                                         
|OPERATING
EXPENSES:                                                      
|Vessel                                                                    |  |                                 
|Charter
hire                                                              |  |                                 
|Depreciation
and amortization                                             |  |                                 
|General
and administrative                                                |  |                                 
|Provision
for settlement and related expenses                             |  |                                 
|Provision
for impairment loss on vessels                                  |  |                                 
|Loss
(gain) on disposal of assets                                         |  |                                 
|                                                                         
|Total
operating expenses                                                  |  |                                 
|                                                                         
|OPERATING
INCOME                                                          |  |                                 
|                                                                         
|OTHER
INCOME (EXPENSE):                                                  
|Gain
(loss) on disposal/write down of investments                         |  |                                 
|Interest
expense                                                          |  |                                 
|Interest
income                                                           |  |                                 
|Othernet                                                                 |  |                                 
|                                                                         
|Net
other expense                                                         |  |                                 
|                                                                         
|Income
before income taxes and equity in operations of joint      Venture |  |                                 
|Benefit for
income taxes                                                  |  |                                 
|                                                                         
|Income
before equity in operations of joint venture                       |  |                                 
|Equity in operations
of joint venture                                     |  |                                 
|                                                                         
|NET
INCOME                                                                |  |                                 
|                                                                         
|BASIC
EARNINGS PER COMMON SHARE:                                         
|Net
income per common share                                               |  |                                 
|                                                                         
|DILUTED
EARNINGS PER COMMON SHARE:                                       
|Net
income per common share                                               |  |                                 
|                                                                         
|WEIGHTED
AVERAGE SHARES OUTSTANDING:                                     
|Basic                                                                     |  |                                 
|Diluted                                                                   |  |                                 



See notes to consolidated
financial statements.







49

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS(In
thousands)

ASSETS



|                                                                                                                   |  | December
31,
|------------------------------------------------------------------------------------------------------------------ |  | ------------
|                                                                                                                  
|                                                                                                                   |  |             
|                                                                                                                  
|CURRENT
ASSETS                                                                                                    
|Cash,
including cash equivalents:                                                                                  |  |             
|2003$39,607,
2002$38,883                                                                                         |  |             
|Receivables:                                                                                                      
|Traffic
receivables, net of allowance for doubtful accounts                   of
$1,926 in 2003 and $1,255 in 2002 |  |             
|Other                                                                                                              |  |             
|Current
restricted cash                                                                                            |  |             
|Prepaid
expenses and other current assets                                                                          |  |             
|Vessel
held for sale                                                                                               |  |             
|                                                                                                                  
|Total
current assets                                                                                               |  |             
|                                                                                                                  
|VESSELS,
CONSTRUCTION IN PROGRESS AND OTHER PROPERTY                                                              
|Vessels                                                                                                            |  |             
|Construction
in progress                                                                                           |  |             
|Other
property                                                                                                     |  |             
|                                                                                                                  
|Total
vessels, construction in progress and other property                                                         |  |             
|Less
accumulated depreciation                                                                                      |  |             
|                                                                                                                  
|Vessels,
construction in progress and other property-net                                                           |  |             
|                                                                                                                  
|DRYDOCKNET
OF AMORTIZATION                                                                                        |  |             
|OTHER
ASSETS AND DEFERRED CHARGES                                                                                  |  |             
|                                                                                                                  
|TOTAL                                                                                                              |  |             
|                                                                                                                  



See notes to consolidated financial statements.





50

---

OMI CORPORATION AND SUBSIDIARIES

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

LIABILITIES AND STOCKHOLDERS EQUITY



|                                                                                                                                         |  | December
31,
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                        
|                                                                                                                                         |  |             
|                                                                                                                                        
|CURRENT
LIABILITIES:                                                                                                                    
|Accounts
payable                                                                                                                         |  |             
|Accrued
liabilities:                                                                                                                    
|Deferred
charter hire revenue                                                                                                            |  |             
|Voyage
and vessel                                                                                                                        |  |             
|Interest                                                                                                                                 |  |             
|Other                                                                                                                                    |  |             
|Deferred
gain on sale of vessels                                                                                                         |  |             
|Current
portion of long-term debt                                                                                                        |  |             
|                                                                                                                                        
|Total
current liabilities                                                                                                                |  |             
|                                                                                                                                        
|OTHER
LIABILITIES                                                                                                                        |  |             
|LONG-TERM
DEBT                                                                                                                           |  |             
|COMMITMENTS
AND CONTINGENCIES                                                                                                           
|STOCKHOLDERS
EQUITY:                                                                                                                   
|Common
stock, $0.50 per share par value; 150,000 shares 
            authorized;
shares issued and outstanding: 200380,658, 200276,779 |  |             
|Capital
surplus                                                                                                                          |  |             
|Unearned
compensation-restricted stock                                                                                                   |  |             
|Retained
earnings                                                                                                                        |  |             
|Accumulated
other comprehensive loss                                                                                                     |  |             
|                                                                                                                                        
|Total
stockholders equity                                                                                                               |  |             
|                                                                                                                                        
|TOTAL                                                                                                                                    |  |             
|                                                                                                                                        



See notes to consolidated
    financial statements.





51

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands)





|                                                                                                      |  | For
the Years Ended December 31,
|----------------------------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                                     
|                                                                                                      |  |                                 
|                                                                                                     
|CASH
FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES                                                   
|Net
income                                                                                            |  |                                 
|Adjustments
      to reconcile net income to net cash provided 
            
by
operating activities:
|Depreciation
and amortization                                                                         |  |                                 
|Loss
(gain) on disposal of assets                                                                     |  |                                 
|(Gain)
loss on disposal/writedown of investments                                                      |  |                                 
|Provision
for impairment loss on vessels                                                              |  |                                 
|Amortization
of deferred gain on sale of vessels                                                      |  |                                 
|Amortization
of debt issue costs                                                                      |  |                                 
|Amortization
of restricted stock awards                                                               |  |                                 
|Provision
for loss on lease obligation-net of amortization                                            |  |                                 
|Deferred
income taxes                                                                                 |  |                                 
|Loss
in operations of joint venturesnet of dividends received                                        |  |                                 
|Changes
in assets and liabilities:                                                                    |  |                                 
|(Increase)
decrease in receivables and other current assets                                           |  |                                 
|Increase
(decrease) in accounts payable and accrued liabilities                                       |  |                                 
|(Increase)
decrease in other assets and deferred charges                                              |  |                                 
|Increase
(decrease) in other liabilities                                                              |  |                                 
|Other                                                                                                 |  |                                 
|                                                                                                     
|Net
cash provided by operating activities                                                             |  |                                 
|                                                                                                     
|CASH
FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:                                                  
|Proceeds
from disposition of vessels                                                                  |  |                                 
|Additions
to vessels and other property                                                               |  |                                 
|Payments
for drydocking                                                                               |  |                                 
|Proceeds
from disposition of joint ventures                                                           |  |                                 
|Proceeds
(payments) for investments                                                                   |  |                                 
|Escrow
of funds                                                                                       |  |                                 
|Proceeds
from notes receivable                                                                        |  |                                 
|                                                                                                     
|Net
cash used by investing activities                                                                 |  |                                 
|                                                                                                     
|CASH
FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:                                                  
|Payments
on debt refinanced                                                                           |  |                                 
|Proceeds
from debt refinanced                                                                         |  |                                 
|Proceeds
from issuance of debt                                                                        |  |                                 
|Repayments
of debt                                                                                    |  |                                 
|Proceeds
from issuance of common stock                                                                |  |                                 
|Payments
for debt issue costs                                                                         |  |                                 
|                                                                                                     
|Net
cash provided by financing activities                                                             |  |                                 
|                                                                                                     
|NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                  |  |                                 
|CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                        |  |                                 
|                                                                                                     
|CASH
AND CASH EQUIVALENTS AT END OF YEAR                                                              |  |                                 
|                                                                                                     

See notes to consolidated financial statements.







52

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME AND CHANGES IN STOCKHOLDERS EQUITY

For Each of The Three Years in the Period
Ended December 31, 2003(In thousands)





|                                                                         |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | Accumulated |  |          |  |         | 
|------------------------------------------------------------------------ |  | ------------ |  | ------- |  | --------- |  | ------------ |  | --------- |  | ----------- |  | ------------ |  | ----------- |  | -------- |  | ------- | 
|                                                                         |  |              |  |         |  |           |  |              |  | Unearned  |  |             |  |              |  | Other       |  | Total    |  |         | 
|                                                                         |  | Common Stock |  |         |  | Retained  |  | Compensation |  |           |  |             |  | Compensation |  | Stock-      |  | Compre-  | 
|                                                                         |  |              |  | Capital |  | (Deficit) |  | Restricted   |  | Treasury  |  | Deferred    |  | (Loss)       |  | holders'    |  | hensive  | 
|                                                                         |  | Shares       |  | Amount  |  | Surplus   |  | Earnings     |  | Stock     |  | Stock       |  | Compensation |  | Income      |  | Equity   |  | Income  | 
|                                                                        
|Balance
as of January 1, 2001                                            |  | 61,424       |  | $30,712 |  | $243,445  |  | $ (9,881)    |  |          |  | $(8,834)    |  | $(481)       |  | $ (258)     |  | $254,703 |  |         | 
|Comprehensive
income:                                                    |  |              |  |         |  |           |  |              |  |          
|Net
income                                                               |  |              |  |         |  |           |  | 82,344       |  |           |  |             |  |              |  |             |  | 82,344   |  | $82,344 | 
|Unrealized
gain on securities                                            |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | 262         |  | 262      |  | 262     | 
|Derivative
losses                                                        |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | (4,281)     |  | (4,281)  |  | (4,281) | 
|                                                                         |  |              | 
|Comprehensive
income                                                     |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  |             |  |          |  | $78,325 | 
|                                                                         |  |              | 
|Amortization
of deferred       compensation                              |  |              |  |         |  | (481)     |  |              |  |           |  |             |  | 481          |  |             |  |         |  |         | 
|Exercise of stock
Options                                                |  | 122          |  | 61      |  | 401       |  |              |  |           |  |             |  |              |  |             |  | 462      |  |         | 
|Issuance
of common stock                                                 |  | 9,830        |  | 4,915   |  | 62,901    |  |              |  |           |  |             |  |              |  |             |  | 67,816   |  |         | 
|Issuance of restricted
stock       awards                                |  | 900          |  | 450     |  | 4,671     |  |              |  | $ (5,121) |  |             |  |              |  |             |  |         |  |         | 
|Retirement
of treasury stock                                             |  | (2,028)      |  | (1,014) |  | (7,820)   |  |              |  |           |  | 8,834       |  |              |  |             |  |         |  |         | 
|Amortization of
restricted       stock awards                            |  |              |  |         |  |           |  |              |  | 510       |  |             |  |              |  |             |  | 510      |  |         | 
|                                                                         |  |              | 
|Balance
at December 31, 2001                                             |  | 70,248       |  | 35,124  |  | 303,117   |  | 72,463       |  | (4,611)   |  |            |  |             |  | (4,277)     |  | 401,816  |  |         | 
|Comprehensive
income:                                                    |  |              |  |         |  |           |  |              |  |          
|Net
income                                                               |  |              |  |         |  |           |  | 15,469       |  |           |  |             |  |              |  |             |  | 15,469   |  | $15,469 | 
|Unrealized
gain on securities                                            |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | 39          |  | 39       |  | 39      | 
|Reclassification
adjustment for             gains
realized in net income |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | (43)        |  | (43)     |  | (43)    | 
|Derivative
losses                                                        |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | (2,008)     |  | (2,008)  |  | (2,008) | 
|                                                                         |  |              | 
|Comprehensive
income                                                     |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  |             |  |          |  | $13,457 | 
|                                                                         |  |              | 
|Issuance
of common stock                                                 |  | 6,511        |  | 3,256   |  | 18,260    |  |              |  |           |  |             |  |              |  |             |  | 21,516   |  |         | 
|Issuance
of restricted stock       awards                                |  | 20           |  | 10      |  | 70        |  |              |  | (80)      |  |             |  |              |  |             |  |         |  |         | 
|Amortization of
restricted       stock awards                            |  |              |  |         |  |           |  |              |  | 1,033     |  |             |  |              |  |             |  | 1,033    |  |         | 
|                                                                         |  |              | 
|Balance
at December 31, 2002                                             |  | 76,779       |  | 38,390  |  | 321,447   |  | 87,932       |  | (3,658)   |  |            |  |             |  | (6,289)     |  | 437,822  |  |         | 
|Comprehensive
income:                                                    |  |              |  |         |  |           |  |              |  |          
|Net
income                                                               |  |              |  |         |  |           |  | 76,471       |  |           |  |             |  |              |  |             |  | 76,471   |  | $76,471 | 
|Derivative
gains                                                         |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  | 4,230       |  | 4,230    |  | 4,230   | 
|                                                                         |  |              | 
|Comprehensive
income                                                     |  |              |  |         |  |           |  |              |  |           |  |             |  |              |  |             |  |          |  | $80,701 | 
|                                                                         |  |              | 
|Issuance
of common stock                                                 |  | 2,000        |  | 1,000   |  | 10,989    |  |              |  |           |  |             |  |              |  |             |  | 11,989   |  |         | 
|Exercise
of stock options                                                |  | 1,381        |  | 691     |  | 5,271     |  |              |  |           |  |             |  |              |  |             |  | 5,962    |  |         | 
|Issuance of restricted
stock                                             |  | 498          |  | 249     |  | 3,159     |  |              |  | (3,408)   |  |             |  |              |  |             |  |         |  |         | 
|Amortization
of restricted       stock awards                            |  |              |  |         |  |           |  |              |  | 1,290     |  |             |  |              |  |             |  | 1,290    |  |         | 
|                                                                         |  |              | 
|Balance
at December 31, 2003                                             |  | 80,658       |  | $40,330 |  | $340,866  |  | $164,403     |  | $(5,776)  |  | $          |  | $           |  | $(2,059)    |  | $537,764 |  |         | 
|                                                                         |  |              | 



See notes to consolidated financial statements.







53

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For each of the Three Years in the Period
Ended December 31, 2003(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) is a bulk shipping company 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. The Company is a successor to Universal Bulk Carriers, Inc. (UBC).
UBC was a wholly-owned subsidiary of OMI Corp. (Old OMI) until June
17, 1998 at which date the Company was separated from Old OMI (renamed Marine Transport
Corporation MTC) through a tax-free distribution (Distribution)
to Old OMI shareholders of one share of UBC common stock for each share of Old OMI
common stock. The Company trades under the symbol OMM on the New York
Stock Exchange.

ReclassificationsCertain reclassifications
have been made to the 2002 and 2001 financial statements to conform to the 2003
presentation.

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

Investments in joint ventures, in which
the Company has the ability to exercise significant influence, but does not control,
(generally a 20 to 50 percent ownership interest) are accounted for by using the
equity method of accounting. All other investments are accounted for at cost.

Accounting 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 and disclosures of contingent
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 from freight billings and time charters. Under a voyage charter the
revenues and associated voyage costs, such as fuel and port charges are recognized
ratably over the estimated duration of the voyage (the percentage of completion
method of accounting). Estimated losses under a voyage charter are provided for
in full at the time such losses become evident.

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, such additional revenue is only recognized after meeting
a threshold, which is the minimum yearly charter hire. Amounts receivable or payable
arising from profit sharing arrangements are accrued based on the actual results
of the voyage recorded as at the reporting date.

OMIs 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 departure of a vessel from its original discharge port to departure from the
next discharge port.

Revenues include the operations from vessels
in the Gemini Suezmax Pool that began in December 2003. The Gemini Suezmax Pool
is operated by Gemini Tankers LLC, a wholly owned subsidiary of OMI. As of December
31, 2003, there were 12 Suezmax vessels in the pool, (10 from OMI and two from another
party).

Cash EquivalentsCash
equivalents represent liquid investments, which mature within 90 days of their purchase.
The carrying amount approximates fair value.

Restricted CashRestricted
cash is held in an escrow account pursuant to a sale/leaseback agreement. The escrow
account is collateral for the Companys obligations under an operating lease
arrangement (see Note 7).

Marketable SecuritiesMarketable
securities are investments classified as available-for-sale and are recorded at
fair value. The fair value is determined by reference to quoted market prices. Net
unrealized gains and losses on these investments are credited or charged to Other comprehensive
    income and Stockholders Equity. At December 31, 2003, and 2002 OMI
    did not have investments in Marketable securities.







54

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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)



During the year ended December 31, 2002,
OMI sold marketable securities and received net proceeds of approximately $6,129,000.
The sale resulted in a net gain of $303,000. Additionally, during the year ended
December 31, 2002, OMI wrote off $1,062,000 in the Consolidated Statements of Income,
representing the remaining investment in both marketable securities and the reversal
of the associated unrealized loss previously recorded.

At December 31, 2001, these investments
totaled $6,218,000. The accumulated unrealized gain of $262,000 was recorded to
Other comprehensive income and Stockholders Equity for the year-ended December
31, 2001.

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 lives of the assets up to the assets estimated salvage
value. The useful lives of the vessels range from 20 to 25 years. Salvage value
is based upon a vessels lightweight tonnage multiplied by a scrap rate. Other
property and leasehold improvements are amortized on the straight-line method over
the shorter of the terms of the lease or estimated useful lives of the assets, which
range from three to eight years.

Expenditures for maintenance, repairs and
minor renewals are expensed. Major replacements and renewals are capitalized.

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 $1,230,000 in 2003,
$3,114,000 in 2002 and $4,052,000 in 2001.

Impairment of Long-Lived AssetsThe
Company follows Statement of Financial Accounting Standards (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 which 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 fair value of the
related asset would be determined and 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.

DrydockDrydock costs and special
surveys are capitalized and are amortized over the period between drydocks and special
surveys, which is generally a two to three year period. The drydock amortization
expense was $4,223,000 in 2003, $3,845,000 in 2002 and $1,171,000 in 2001 and is
included in Depreciation and amortization expense.

Deferred Finance ChargesDeferred
finance charges, included in Other assets and deferred charges, were $15,217,000
at December 31, 2003 and $7,416,000 at December 31, 2002. The charges are amortized
over the life of the related debt, and the amount of the expense was $1,959,000
in 2003, $2,367,000 in 2002 and $1,618,000 in 2001. During the year ended December
31, 2003, OMI recorded a charge to Loss on disposal of assets (see Note 12) of $473,000
relating to the writedown of deferred finance fees for vessels disposed of during
the year.

Earnings Per Common ShareIn
accordance with Statement of Financial Accounting Standards (SFAS) 128
Earnings Per Share 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.







55

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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)



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.

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.

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 does not believe its operations
prospectively will be subject to income taxes in the United States of America. A
benefit for income taxes of $1,406,000 was recorded during the year ended December
31, 2002 which represented a reversal of an accrual for taxes provided for at the
time of the spin-off in 1998. All tax years through the time of the spin-off of
the Company in 1998 have been closed.

Stock-Based CompensationThe
Company currently sponsors stock option plans and restricted stock award plans (see
Notes 15 and 17). Prior to 2003, the Company accounted for these plans under the
recognition and measurement provisions by using the intrinsic value method in accordance
with APB Opinion No. 25 Accounting for Stock Issued to Employees (APB
No. 25) and related interpretations. No stock-based employee compensation
expense for stock options was reflected in net income for the years ended December
31, 2003, 2002 and 2001, with the exception of one grant that was accounted for
as a variable plan under the provisions of APB No. 25, as all other stock options
granted had an exercise price equal to the fair market value of the underlying common
stock on the date of grant. 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 stock options issued after December
31, 2002. As a result of this adoption, the Company will begin to record compensation
expense for new options issued. In accordance with the modified prospective method
of adoption, results of prior years have not been restated.

The following table illustrates the effect
     on net income and earnings per share if the fair value method had been applied
    to
all outstanding and unvested awards in each of the three years in the period
    ended December 31,
2003:



|                                                                                 |  | For
the Years Ended December 31,
|-------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                
|                                                                                 |  |                                 
|                                                                                
|Net
income as reported                                                           |  |                                 
|Stock based compensation expense
determined by using       the fair value method |  |                                 
|                                                                                
|Pro
forma net income                                                             |  |                                 
|                                                                                
|Basic
earnings per common share:                                                
|Net
income per common share, as reported                                         |  |                                 
|Net
income per common share, as pro forma                                        |  |                                 
|                                                                                
|Diluted
earnings per common share:                                               |  |                                 
|Net
income per common share, as reported                                         |  |                                 
|Net
income per common share, as pro forma                                        |  |                                 
|                                                                                









56

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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Summary of Significant Accounting
Policies (continued)



The following table is
    a summary of the average fair values of options granted during 2003, 2002
    and 2001
on the date of grant using the Black-Scholes option pricing model with the assumptions
    used for the expected volatility, risk free interest rate and dividend yield
    rate:



|                                           |  | For
the Years Ended December 31,
|------------------------------------------ |  | --------------------------------
|                                          
|                                           |  |                                 
|                                          
|Average
fair value of options granted      |  |                                 
|Expected volatility                        |  |                                 
|Risk free interest
rate                    |  |                                 
|Dividend yield rate                        |  |                                 
|Weighted average
expected lives of options |  |                                 

Derivatives and Hedging ActivitiesThe
Company accounts for derivatives in accordance with the provisions of SFAS 133 as
amended, Accounting for Derivative Instruments and Hedging Activities.
The Company is exposed to market risk, such as changes in interest rates. To manage
the volatility relating to this exposure, the Company selectively enters into derivative
transactions pursuant to the Companys policies for hedging practices. Designation
is performed on a specific exposure basis to support hedge accounting. The changes
in fair value of these hedging instruments are offset in part or in whole by corresponding
changes in the fair value or cash flows of the underlying exposures being hedged.
The Company does not hold or issue derivative financial instruments for trading
purposes.

All derivatives are recognized on the Companys
balance sheet at their fair values. 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 does not have foreign-currency cash-flow or fair-value hedges
(foreign currency hedge) or a hedge of a net investment in a foreign
operation.

During the year ended December 31, 2003,
the Company had interest rate swaps and Future Rate Agreements (FRAs)
used to effectively convert a portion of its debt from a floating to a fixed-rate
basis. The swaps and FRAs were designated and qualify as cash flow hedges.
These swap contracts and FRAs were effective hedges and therefore no ineffectiveness
was recorded in the Condensed Consolidated Statements of Income.

Recently Issued Accounting StandardsThe
FASB recently issued SFAS pronouncements and interpretations, which are summarized
as follows:

SFAS 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
was issued in May 2003. SFAS 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both liabilities
and equity and is effective for financial instruments entered into or modified after
May 31, 2003 and for all such instruments on July 1, 2003. The provisions of SFAS
150, which the Company adopted in 2003, did not have an effect on the Companys
financial statements.

SFAS 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities was issued in April 2003.
SFAS 149 amends SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, to provide clarification on the meaning of an underlying,
the characteristics of a derivative that contains financing components and the meaning
of an initial net investment that is smaller than would be required for other types
of contracts that would be expected to have a similar response to changes in market
factors. SFAS 149 will be applied prospectively and is effective for contracts entered
into or modified after June 30, 2003. The provisions of SFAS 149, adopted by the
Company effective July 1, 2003, did not have an effect on the Companys financial
statements.

SFAS 148, Accounting for Stock-Based
CompensationTransition and Disclosure was issued in December 2002. SFAS
148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition to SFAS 123s fair value method of accounting
for stock-based employee compensation. SFAS 148 alsoamends
the disclosure provisions of SFAS 123 and APB Opinion 28, Interim Financial Reporting, to require disclosure in the
    summary of significant accounting policies of the effects of an entitys
    accounting policy with respect to stock-based employee compensation on reported
    net income and earnings per share in annual and interim financial statements.







57

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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Summary of Significant Accounting
Policies (continued)

While SFAS 148 does not amend SFAS 123 to require companies to account for employee
stock options using the fair value method, the disclosure provisions of SFAS 148
are applicable to all companies with stock-based employee compensation, regardless
of whether they account for that compensation using the fair value method of SFAS
123 or the intrinsic value method of APB Opinion 25. As allowed by SFAS 123, the
Company has elected to continue to utilize the accounting method prescribed by APB
Opinion 25 and has adopted the disclosure requirements of SFAS 123 for stock options
existing prior to January 1, 2003. The Company has also elected the modified prospective
method for recognizing fair value on stock options granted after January 1, 2003.

In January 2003, FASB released Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46).
 FIN 46 requires that all primary beneficiaries of Variable Interest Entities
(VIE)
consolidate that entity. FIN 46 is effective for VIEs created after January 31,
 2003, and to VIEs to which an enterprise obtains an interest after that date.
It
applies in the first fiscal year or interim period beginning after June 15, 2003,
 to VIEs in which an enterprise holds a variable interest it acquired before
February
1, 2003. In December 2003, the FASB published a revision to FIN 46 (Interpretation

Accounting Research Bulletin No. 51 or FIN 46R) to clarify some of
the provisions of the interpretation and defer to the effective date of implementation
for certain entities. Under the guidance of FIN 46R, entities that do not have
interests
in structures that are commonly referred to as special purpose entities are required
to apply the provisions of the interpretation in financial statements for periods
ending after March 14, 2004. We do not have interests in special purpose entities.
The provisions of FIN 46R, which the Company adopted in March 2004, did not
have an effect on the Company's financial statements.

Segment ReportingThe Company
accounts for 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 Product Carrier 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
year. The computation of diluted earnings per share assumes the foregoing and the
exercise of all stock options (see Note 15) using the treasury stock method and
the conversion of the 7% Convertible Note due 2004, to the extent dilutive (see
Note 5).









58

---

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 denominator
for the calculation of basic earnings per share and diluted earnings per share are
as follows:





|                                           |  | For
the Years Ended December 31,
|------------------------------------------ |  | --------------------------------
|                                          
|                                           |  |                                 
|                                          
|Basic
earnings per share:                  |  |                                 
|Weighted
average common shares outstanding |  |                                 
|                                          
|Diluted
earnings per share:                |  |                                 
|Weighted
average common shares outstanding |  |                                 
|Options                                    |  |                                 
|                                          
|Weighted
average common sharesdiluted     |  |                                 
|                                          
|Basic
earnings per common share:           |  |                                 
|Net
income per common share                |  |                                 
|                                          
|Diluted
earnings per common share:         |  |                                 
|Net
income per common share                |  |                                 
|                                          

The effect of the assumed conversion of the
    7%  Convertible Note due 2004 of 47,258 shares in 2003, 137,033 shares in
    2002 and 220,839 shares in 2001 was not included in the respective years'
    computation of diluted earnings
per share because the average price of OMIs stock
was
less than the stock conversion price of $7.375.

Note 3Supplemental Cash Flow Information

During the years ended December 31, 2003,
2002 and 2001, interest paid totaled $22,396,000, $24,472,000 and $20,386,000, respectively.

During August 2003, OMI issued two million
shares of OMI common stock at $6.00 per share as partial payment on two 2000 built
Suezmax tankers.

During 2001, OMI issued in aggregate 5,775,000
shares of common stock between $6.00 and $8.00 per share for a total value of $41,300,000
as partial payment for the acquisitions of six vessels, and 4,049,000 shares of
common stock were issued at $7.00 per share for a total value of $28,343,000 for
two vessels that were under construction at December 31, 2001.

OMI issued 11,073 shares at $2.89 to one
director in lieu of his annual fee of $32,000 in 2002 and a total of 6,154 shares
at $6.50 to two directors in 2001, in lieu of their annual fees of $20,000 for each
director.

Note 4Investments in Joint Ventures

The operating results of the joint ventures
have been included in the accompanying consolidated financial statements, if applicable,
on the basis of ownership as follows:





|                                               |  |  |  | Percent
of
Ownership | 
|---------------------------------------------- |  |  |  | -------------------- | 
|                                              
|Alliance
Chartering LLC (Alliance).          |  |  |  | 50.0(1)              | 
|International Produce Carriers
Limited (IPC) |  |  |  | 50.0(2)             





|   
|---
|(1)
|(2)







59

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(All tabular amounts are in thousands,
except per share data)

Note 4Investments in Joint Ventures
(continued)



AllianceDuring the year
ended December 31, 2003, OMIs Suezmax fleet was chartered out on the spot
market by Alliance, a joint venture OMI operates in conjunction with Frontline Ltd.
During 2002 and 2001, all of OMIs Suezmax vessels, with the exception of one
vessel on time charter during 2001, were chartered out in the spot market by Alliance.
There was no initial investment required for this joint venture to operate.

IPCIn 2001, the Company
    had six vessels chartered to IPC and recorded aggregate revenues of $7,626,000
    (4% of
total revenues). These amounts were included in the revenue of the Company since
    the operations of IPC were not consolidated. The revenues received by IPC
    were from
numerous customers, which was divided among the vessels in the pool.
During the first quarter 2001, OMIs partner, Osprey Maritime Limited, following
 a change in control, sold all of its product tankers (including three to OMI,
see
Note 9) and the parties agreed to disband IPC. As a result of IPC being dissolved,
 OMI wrote down its investment by $1,617,000 in 2001. During 2003, a gain on
disposal
of investment relating to the final settlement of accounts for the IPC investment

of $618,000 was recorded.

Summarized financial information pertaining
to IPC accounted for by the equity method was as follows:





|                                   |  |  |  | For the Year
        Ended | 
|---------------------------------- |  |  |  | -------------------------- | 
|                                   |  |  |  | December 31, 2001          | 
|                                  
|Results
of operations:             |  |  |  |                            | 
|Revenues                           |  |  |  | $43,425                    | 
|Operating
loss                     |  |  |  | (131)                      | 
|Net
income                         |  |  |  |                           | 
|Net Assets:                        |  |  |  |                            | 
|Current
assets                     |  |  |  | $ 5,157                    | 
|Vessels
and other propertynet     |  |  |  | 2                          | 
|Other
assets                       |  |  |  | 231                        | 
|                                  
|Total
assets                       |  |  |  | 5,390                      | 
|                                  
|Less:                              |  |  |  |                            | 
|Current
liabilities                |  |  |  | 1,824                      | 
|                                  
|Total
liabilities                  |  |  |  | 1,824                      | 
|                                  
|Shareholders
and partners equity |  |  |  | $ 3,566                    | 
|                                  

Dividends of $2,494,000 were received from joint
venture for the year ended December 31, 2001 relating to settlement of the investment
sold in 1999.









60

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(All tabular amounts are in thousands,
except per share data)

Note 5Long-Term Debt and Credit
Arrangements



Long-term debt consists of the following:





|                                                                                                                                            |  | December
31,
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                           
|                                                                                                                                            |  |             
|                                                                                                                                           
|Term
loans under bank mortgage agreements at a margin plus variable rates      above
the London Interbank Offering Rate (LIBOR): (1), (2) |  |             
|Reducing revolving facilities
at a margin plus variable rates above LIBOR(1), (2)                                                           |  |             
|7.625% Unsecured
Senior Notes due November 2013                                                                                             |  |             
|7% Convertible Note due February
2004 (convertible at $7.375 per share)                                                                     |  |             
|                                                                                                                                           
|Total                                                                                                                                       |  |             
|Less current portion of long-term
debt:                                                                                                     |  |             
|Scheduled
amortization payments of debt                                                                                                     |  |             
|                                                                                                                                           
|Long-term
debt                                                                                                                              |  |             
|                                                                                                                                           



|   
|---
|(1)
|   
|   
|   
|(2)

Reducing Revolving Credit Facilities and Term Loans

The following table describes the Companys
variable rate debt obligations:





|                                 |  |  |  | $245m
  Credit
  Facility(1) |  | $348m
  Credit
Facility |  | $64.8m
  Term
  Loan |  | $40.0m
  Term
Loan |  | $44.0m
  Term
Loan |  | $34.475m
  Term
Loan |  | $34.3m
  Term
Loan | 
|-------------------------------- |  |  |  | ---------------------------- |  | ----------------------- |  | -------------------- |  | ------------------ |  | ------------------ |  | -------------------- |  | ------------------ | 
|                                
|Amount
Outstanding               |  |  |  | $109,829                     |  | $ 57,329                |  | $62,190              |  | $32,800            |  | $34,250            |  | $34,475              |  | $33,650            | 
|Undrawn
Amount                   |  |  |  | $109,639                     |  | $144,619                |  | n/a                  |  | n/a                |  | n/a                |  | n/a                  |  | n/z                | 
|Maturity
Date(s)                 |  |  |  | March                        |  | July                    |  | April &              |  | October            |  | Dec. 2008 &        |  | August               |  | August             | 
|                                 |  |  |  | 2010                         |  | 2007                    |  | July 2011            |  | 2009               |  | March 2009         |  | 2011                 |  | 2011               | 
|Payment
at Maturity      Date(s) |  |  |  | $115,250                     |  | $128,056                |  | $9,000               |  | $13,600            |  | $ 8,200            |  | $14,525              |  | $14,150            | 
|Interest
Rate on                 |  |  |  | 2.875%                       |  | 2.5% to                 |  | 2.0875%              |  |                    |  | 2.0625%            |  | 2.375% to            |  |                    | 
|December
31, 2003                |  |  |  | to 3.71%                     |  | 2.5625%                 |  | to 2.15%             |  | 2.525%             |  | to 2.4375%         |  | 2.4375%              |  | 2.4375%            | 
|Collateralized
By                |  |  |  | 15 vessels                   |  | 11 vessels              |  | 2 vessels            |  | 2 vessels          |  | 2 vessels          |  | 1 vessel             |  | 1
vessel          



|   
|---
|(1)
|   
|   







61

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(All tabular amounts are in thousands,
except per share data)

Note 5Long-Term Debt and Credit
Arrangements (continued)



Since we did not borrow
all funds available under the two credit facilities, (see table above, $245 million
(m) and $348 m credit facilities), there are no quarterly future payments
in the next 12 months unless we draw up to the amount available, which is currently
$254,300,000 in aggregate.

Unsecured Senior Notes and Subsidiary Guarantees

On November 26, 2003, the Company issued
$200,000,000 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, commencing on June 1, 2004. 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 Senior 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. The Company has no independent assets or operations within
the meaning of Rule 3-10 of Regulation S-X under the Securities Act.

Other

As of December 31, 2003 we had 7% Convertible
    Notes due February 2004 with a balance of $349,000, which was paid on March
1, 2004.

In December 2003, we obtained an eight
year $50,400,000 term loan to partially finance the purchase of two product carrier
newbuildings, one of which was delivered in February 2004 and the other which is
to be delivered in August 2004; both vessels will begin five year time charters
upon delivery. The loan is split into two $25,200,000 tranches. Each tranche will
be repaid in 32 quarterly installments of approximately $450,000 plus a balloon
payment of $11,250,000 due with the last installment. The outstanding balance of
the loan bears interest at LIBOR plus an applicable margin of 0.85% while the vessels
have time charters. In February 2004, $25,200,000 was drawn on the first tranche
to finance the delivery of the vessel delivered (see Note 18).

In December 2003, we obtained a five year
$24,000,000 term loan to partially finance the purchase a product carrier newbuilding,
which will be delivered in April 2004. There have been no amounts drawn on the term
loan as of December 31, 2003. The vessel will begin a five year time charter upon
delivery. The loan will be repaid in 20 quarterly installments of approximately
$550,000 plus a balloon payment of $13,550,000 due with the last installment. The
outstanding balance of the loan bears interest at LIBOR plus an applicable margin
of 0.90% while the vessels have time charters.

Restrictive Covenants

All of our loan agreements contain restrictive
covenants as to cash, net worth, maintenance of specified financial ratios and collateral
values. They also restrict the amount of certain payments, such as dividends and
repurchase of OMI common stock. As of December 31, 2003, we were in compliance with
all covenants.

Maturities

Aggregate maturities of debt during the
next five years from December 31, 2003, are $21,369,000 in 2004, $19,095,000 in
2005, $18,820,000 in 2006, $75,349,000 in 2007 and $25,110,000 in 2008.







62

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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 5Long-Term Debt and Credit
Arrangements (continued)



Interest-Rate Swaps
and Future Rate Agreements

OMI entered into interest rate swap
    and FRA agreements to manage interest costs and the risk associated with
    changing LIBOR
interest rates. As of December 31, 2003, we had various interest rate swaps/FRAs
    aggregating $275,390,000 (which includes a notional amount of $57,840,000
    for an
interest rate swap that commences in 2004) on various debt tranches within a
    range of 2.07% to 4.86% expiring from March 2004 to October 2008. The Company
    pays fixed-rate
interest amounts and receives floating-rate interest amounts based on three month
    LIBOR settings (for a term equal to the swaps reset periods). As of
    December  31, 2003, the Company has recorded a liability which is included
    in Other liabilities
of $3,310,000 and an asset of $1,251,000 related to the fair market value of
    these  hedges and a corresponding charge of $2,059,000 to Other comprehensive
    income.

The changes in the notional amounts were
as follows:





|                                                 |  | December
31,
|------------------------------------------------ |  | ------------
|                                                
|                                                 |  |             
|                                                
|Notional
principal amount, beginning of the year |  |             
|Increase of
notional amounts                     |  |             
|Reductions of notional amounts                   |  |             
|                                                
|Notional
principal amount, end of year           |  |             
|                                                

On February 20, 2004, we entered into an interest
rate swap agreement with a notional amount of $25,200,000 for the period February
26, 2004 to February 26, 2009. OMI will pay 3.2575% fixed rate interest and will
receive three month LIBOR.

Interest expense pertaining to interest-rate
swaps for the years ended December 31, 2003, 2002, and 2001 was $4,816,000, $4,258,000
and $945,000, respectively. The amount that is expected to be reclassified from
Other comprehensive income to the Consolidated Statement of Operations within the
next twelve months has been estimated to be approximately $4,412,000.

Note 6Fair Value of Financial Instruments

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



|                                           |  |  |  | December
    31, | 
|------------------------------------------ |  |  |  | ---------------- | 
|                                          
|                                           |  |  |  | 2003             | 
|                                          
|                                           |  |  |  | CarryingValue    | 
|                                          
|Cash
and cash equivalents                  |  |  |  | $ 48,788         | 
|Notes receivable                           |  |  |  |                 | 
|Derivatives-Interest
Rate Swaps/FRAs:      |  |  |  |                  | 
|Liability
for interest-rate swaps and FRAs |  |  |  | 3,310            | 
|Asset for interest-rate
swaps              |  |  |  | 1,251            | 
|Total debt                                 |  |  |  | $564,872         | 

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. The carrying value approximates the fair market value for the variable
rate loans. The fair value of interest-rate swaps (used for purposes other than
trading) is the estimated amount the Company would pay to terminate swap agreements at the reporting date, taking
    into account current interest rates and the current credit-worthiness of
    the swap counter-parties.









63

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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 7Operating Lease Expense

Total operating lease expense was $17,765,000,
$16,517,000 and $9,192,000 for the years ended December 31, 2003, 2002 and 2001,
respectively. Leases are for vessels (charter hire expense) and office space.

For the year ended December 31, 2003, operating
lease expense or charter hire expense includes a chartered-in a handymax product
carrier, the JAG PRATAP, for a one year period from October 2002 to October 2003.

The future minimum lease payments required
by year, under operating leases subsequent to December 31, 2003, are as follows:





| |  | 2004       |  | $19,818 | 
| |  | ---------- |  | ------- | 
| |  | 2005       |  | 19,768  | 
| |  | 2006       |  | 18,918  | 
| |  | 2007       |  | 9,193   | 
| |  | 2008       |  | 9,296   | 
| |  | Thereafter |  | 13,259  | 
|
| |  | Total      |  | $90,252 | 
|

In June 2002, the Company exercised its option
to reacquire the COLUMBIA and simultaneously sold the vessel to an unrelated party
for $50,000,000. The vessel, renamed OLIVER JACOB, has been time chartered back
for a period of eight years and has been accounted for as an operating lease. The
gain on the sale of approximately $4,700,000 is being amortized over the charter
period.

During December 2001, OMI sold a vessel,
the SOYANG, which is being chartered back from the purchaser under the name MAX
JACOB for a period of five years, not including options. The resulting lease is
being accounted for as an operating lease. The gain on the sale of approximately
$4,900,000 is being amortized over the five year lease term. As part of the charter
hire agreement, the Company was required to deposit $5,000,000 in escrow, which
is being repaid ratably over the charter period. As of December 31, 2003, the balance
in escrow was $3,000,000 ($1,000,000 in Current restricted cash and $2,000,000 in
Non-current restricted cash, included in Other Assets and Deferred Charges).

During 2001, as a result of the early termination
as permitted under the charters of two Suezmax tankers time chartered to OMI, certain
accounting adjustments were reflected in the 2001 results. Gains were recognized
over the remaining lease period upon notice of early termination of $1,440,000 for
the year ended December 31, 2001 (see Note 12). The gains were due to the accelerated
amortization of the deferred gain on the sale/leaseback of one vessel, which was
previously owned by OMI, and acceleration of the provision for loss on lease obligation
that was being amortized over the original lease term for the other vessel.





64

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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 8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) to be received subsequent to December 31, 2003
on these time charters are as follows:





| |  | 2004       |  |  |  | $111,210 | 
| |  | ---------- |  |  |  | -------- | 
| |  | 2005       |  |  |  | 68,575   | 
| |  | 2006       |  |  |  | 49,569   | 
| |  | 2007       |  |  |  | 33,470   | 
| |  | 2008       |  |  |  | 27,838   | 
| |  | Thereafter |  |  |  | 19,313   | 
|
| |  | Total      |  |  |  | $309,975 | 
|
|

During 2003, OMI secured five year time charters
for five product carriers under construction (see Note 18), of which three will
begin in 2004 and two in 2005.

During October 2003, OMI negotiated one
year extensions on time charters at fixed rates for two product carriers (which
are currently receiving base rate plus profit sharing). The charters will now expire
in April and July 2005.

During the first quarter of 2004, OMI negotiated

two year extensions on two product carriers on time charters currently receiving
    base rate plus profit sharing. The time charters will now expire in September
    2006.

Note 9Impairment Loss on Vessels and
Reduction of Depreciable Lives

The Company has evaluated the carrying
value of its vessels against the projected undiscounted cash flows as required,
under the provisions of SFAS 144 as of December 31, 2003. The Company recorded an
impairment loss of $2,770,000 to the Consolidated Statement of Income for the year
ended December 31, 2003, relating to two single-hull tankers Panamax vessels that
are to be scrapped in 2004. These vessels are considered to be impaired as of December
31, 2003, as their net book values were greater than the undiscounted projected
cash flow. In March 2004, these vessels were reclassified to Vessels Held for Sale.

In December 2003, during the Companys
periodic evaluation for vessel impairment, it was determined that two single-hull
handysize product carriers were impacted by the recent International Maritime Organization
regulation issued that included new phase-out dates for single-hull vessels. There
was no adjustment to the 2003 financial statements since the vessels were not impaired;
however, the new regulation resulted in reducing the depreciable lives of the two
vessels. The phase-out dates will increase the annual depreciation expense beginning
in 2004 by $686,000 until June 2007 and $95,000 from June 2007 to August 2015.

Note 10Vessel Held for Sale

OMIs management has approved a plan
to sell its largest single hull vessel (the ULCC). At December 31, 2003, OMI reclassified
the net book value of $16,514,000 of the ULCC to Vessel Held for Sale in the Current
Asset Section of the Consolidated Balance Sheet.









65

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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 11Acquisitions of Vessels

The following table summarizes the acquisitions of vessels during
the years ended December 31, 2003 and December 31, 2002:



|            |  |                |  | Type of  |  | Capitalized |  | Charter       | 
|----------- |  | -------------- |  | -------- |  | ----------- |  | ------------- | 
|Vessel      |  | Delivered      |  | Vessel   |  | Cost(1)     |  | Expiration    | 
|            |  |                |  |          |  |             |  |               | 
|2003:       |  |                |  |          |  |             |  |               | 
|MOSELLE     |  | February 2003  |  | Handymax |  | $ 30,284    |  | February 2006 | 
|ROSETTA     |  | March 2003     |  | Handymax |  | 30,432      |  | March 2006    | 
|OTTAWA      |  | March 2003     |  | Panamax  |  | 37,932      |  | April 2008    | 
|TAMAR       |  | July 2003      |  | Panamax  |  | 38,079      |  | July 2008     | 
|HUDSON(2)   |  | August 2003    |  | Suezmax  |  | 49,406      |  | SPOT          | 
|POTOMAC(2)  |  | August 2003    |  | Suezmax  |  | 49,400      |  | SPOT          | 
|            |  |                |  |          |  |             |  |               | 
|Total       |  |                |  |          |  | $235,533    |  |               | 
|           
|           
|           
|            |  |                |  |          |  |             |  |               | 
|2002:       |  |                |  |          |  |             |  |               | 
|AMAZON      |  | January 2002   |  | Handymax |  | $ 29,896    |  | January 2005  | 
|SAN
JACINTO |  | March 2002     |  | Handymax |  | 29,854      |  | March 2005    | 
|ORONTES     |  | March 2002     |  | Handymax |  | 30,396      |  | March 2005    | 
|DAKOTA      |  | September 2002 |  | Suezmax  |  | 58,491      |  | SPOT          | 
|DELAWARE    |  | October 2002   |  | Suezmax  |  | 58,814      |  | SPOT          | 
|            |  |                |  |          |  |             |  |               | 
|            |  |                |  |          |  | $207,451    |  |               | 
|Total       |  |                |  |          |  |             |  |               | 





|    |                                                                                                   | 
|--- | ------------------------------------------------------------------------------------------------- | 
|(1) | See Note 5 for financing of vessels.
    Capitalized costs include capitalized interest.         
|(2) | The vessel was built in 2002.
See Note 3 for shares issued as partial payment to purchase vessel.

Note 12Disposal Of Vessels

During November 2003, OMI sold a 1989 built
single hulled product carrier for $8,134,000 and recognized a loss on sale of $3,229,000.

During September 2003, OMI agreed to sell
two single hulled product carriers built in 1989 and 1990 for an aggregate sales
price of approximately $15,360,000. The vessels were delivered in October and November
2003. The aggregate loss on disposal of these vessels of $7,737,000 was recognized.

During March 2003, OMI agreed to sell two
1984 built single hulled product carriers for an aggregate sales price of approximately
$9,554,000. The vessels were delivered in April and May 2003. The aggregate loss
on disposal of these vessels of $3,392,000 was recognized.

During April 2002, OMI sold a 1988 built
product carrier for $9,100,000 and recognized a loss on sale of $302,000.

During December 2001 and June 2002, OMI
sold two vessels, the SOYANG and the COLUMBIA, respectively, and subsequently chartered
both vessels back from the purchasers (see Note 7). Both transactions are accounted
for as operating leases and the resulting gain on the sale of these vessels aggregating
approximately $9,600,000 is being amortized (net of charter hire expense) over the
respective lease periods.

In May 2001, OMI sold one of the 1990 built
product carriers purchased in March 2001 for $14,800,000 and recognized a gain on
the sale of $635,000.

In June 2001, the Company sold a 2000 built
Suezmax tanker for $64,000,000 and recognized a gain of $17,441,000 from the sale
of the vessel.





66

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(All tabular amounts are in thousands,
except per share data)

Note 12Disposal Of Vessels
(continued)

Loss (gain) on disposal
of assets-net consists of the following:



|                                                            |  | For
the Years Ended December 31,
|----------------------------------------------------------- |  | --------------------------------
|                                                            |  |                                 
|                                                            |  |                                 
|                                                            |  |                                 
|Loss
(gain) on disposal of assets                           |  |                                 
|Gain on early
termination of lease obligations (see Note 7) |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 
|                                                           

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 and dirty products. The current
fleet includes four sizes of vessels; Suezmax, ULCC, Panamax and handysize.

Product Carrier Fleetincludes
vessels that normally carry refined petroleum products such as gasoline, naphtha
and kerosene. This fleet includes three sizes of vessels, Panamax, handymax and
handysize vessels.









67

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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 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, 2003:

|                                                            |  | For
the Years Ended December 31,
|----------------------------------------------------------- |  | --------------------------------
|                                                            |  |                                 
|                                                            |  |                                 
|                                                            |  |                                 
|Revenues:                                                   |  |                                 
|Crude
Oil Fleet                                             |  |                                 
|Product
Carrier Fleet                                       |  |                                 
|                                                            |  |                                 
|Subtotal                                                    |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|Time
Charter Equivalent Revenues:(1)                        |  |                                 
|Crude
Oil Fleet                                             |  |                                 
|Product
Carrier Fleet                                       |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 
|Operating
Income:                                           |  |                                 
|Crude
Oil Fleet(2)                                          |  |                                 
|Product Carrier
    Fleet(2)                                |  |                                 
|                                                            |  |                                 
|                                                            |  |                                 
|General
and administrative expense not allocated to vessels |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 
|Identifiable
AssetsAt End of Year:                         |  |                                 
|Crude
Oil Fleet                                             |  |                                 
|Product
Carrier Fleet                                       |  |                                 
|                                                            |  |                                 
|                                                            |  |                                 
|Investments
in, and advances to joint ventures              |  |                                 
|Cash
and cash equivalents                                   |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 
|Capital
Expenditures:                                       |  |                                 
|Crude
Oil Fleet(3)                                          |  |                                 
|Product
Carrier Fleet(4)                                    |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 
|Depreciation
and Amortization:                              |  |                                 
|Crude
Oil Fleet                                             |  |                                 
|Product
Carrier Fleet                                       |  |                                 
|Other                                                       |  |                                 
|                                                            |  |                                 
|Total                                                       |  |                                 
|                                                            |  |                                 



68

---

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)

|                      |  | For the Years
    Ended December 31,
|--------------------- |  | ------------------------------------
|                      |  |                                     
|                      |  | 2003                                
|                      |  |                                     
|Interest
Expense:     |  |                                     
|Crude
Oil Fleet       |  | $    8,847                          
|Product
Carrier Fleet |  | 11,056                              
|                      |  |                                     
|                      |  | 19,903                              
|Other                 |  | 3,951                               
|                      |  |                                     
|Total                 |  | $ 23,854                            
|                      |  |                                     



|    | 
|--- | 
|(1) | 

The following is a reconciliation of TCE revenue for the year
ended December 31, 2003:

|                       |  | Crude Oil |  | Product  |  |              | 
|---------------------- |  | --------- |  | -------- |  | ------------ | 
|                       |  | Fleet     |  | Carriers |  | Consolidated | 
|                       |  |           |  |          |  |              | 
|Voyage
and TC Revenues |  | $186,955  |  | $131,772 |  | $318,727     | 
|Voyage Expenses        |  | 41,490    |  | 8,065    |  | 49,555       | 
|                       |  |           |  |          |  |              | 
|TCE
Revenue            |  | $145,465  |  | $123,707 |  | $269,172     | 
|                       |  |           |  |          |  |              | 

The following is a reconciliation of TCE revenue for the year
ended December 31, 2002:

|                       |  | Crude Oil |  | Product  |  |             
|---------------------- |  | --------- |  | -------- |  | ------------
|                       |  | Fleet     |  | Carriers |  | Consolidated
|                       |  |          
|Voyage
and TC Revenues |  | $ 93,319  |  | $105,606 |  | $198,925    
|Voyage Expenses        |  | 26,828    |  | 8,629    |  | 35,457      
|                       |  |           |  |          |  |             
|TCE
Revenue            |  | $ 66,491  |  | $ 96,977 |  | $163,468    
|                       |  |           |  |          |  |             

The following is a reconciliation of TCE revenue for the year
ended December 31, 2001:

|                       | Crude Oil |  | Product  |  |             
|---------------------- | --------- |  | -------- |  | ------------
|                       | Fleet     |  | Carriers |  | Consolidated
|                       |          
|Voyage
and TC Revenues | $127,111  |  | $ 82,353 |  | $209,464    
|Voyage Expenses        | 21,937    |  | 9,795    |  | 31,732      
|                       |           |  |          |  |             
|TCE
Revenue            | $105,174  |  | $ 72,558 |  | $177,732    
|                       |           |  |          |  |             



|    |  |                                                                             
|--- |  | ----------------------------------------------------------------------------
|(2) |  | Operating income includes loss
(gain) on disposal of assetsnet (see below).





|                                       |  | For the
    Years Ended December 31, | 
|-------------------------------------- |  | ------------------------------------ | 
|                                       |  |                                      | 
|                                       |  | 2003                                 | 
|                                       |  |                                      | 
|                                      
|Loss
(gain) on disposal of assetsnet: |  |                                      | 
|Crude
Oil Fleet                        |  | $                                   | 
|Product
Carrier Fleet                  |  | 14,358                               | 
|                                       |  |                                      | 
|Total                                  |  | $ 14,358                             | 
|                                       |  |                                      | 



|    |  |                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(3) |  | Includes
      progress payments and capitalized interest aggregating $0 in 2003, $2,081,000
      in 2002 and $49,849,000
in 2001 for newbuildings.





69

---

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)

|    |  |                                                                                                                                                    | 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(4) |  | Includes progress payments and
capitalized interest aggregating $43,395,000 in 2003, $27,317,000 in 2002 and $31,982,000
in 2001 for newbuildings. | 

For the year ended December 31, 2003, revenues
from two major customers (10% or more of Revenues) aggregated $42,720,000 or 13
percent of Consolidated Revenue from El Paso Marine Company and $33,851,000 or 11
percent from Chartering and Shipping S.A. (a subsidiary of Total). For the year
ended December 31, 2002 revenues from the same two major customers aggregated $34,045,000
or 17 percent of Consolidated Revenue from Chartering and Shipping S.A. and $28,082,000
or 14 percent from El Paso Marine Company. There were no charterers that were considered
to be major customers in 2001.

Note 14Savings Plan

The Company has a 401(k) Plan (the Plan)
which is available to full-time employees who meet the Plans eligibility requirements.
This Plan is a defined contribution plan, which permits employees to make contributions
up to ten percent of their annual salaries with the Company matching up to the first
six percent in 2003, 2002 and 2001. The Company may elect to make additional contributions
to the Plan at the discretion of the Companys Board of Directors. The Company
also has an Executive Savings Plan for certain key employees.

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, 2003:





|                       |  | 2003 |  | 2002 |  | 2001 | 
|---------------------- |  | ---- |  | ---- |  | ---- | 
|                       |  |      |  |      |  |      | 
|401
(k) Plan           |  | $264 |  | $283 |  | $428 | 
|Executive Savings Plan |  | 123  |  | 189  |  | 97   | 
|                       |  |      |  |      |  |      | 
|                       |  | $387 |  | $472 |  | $525 | 
|Total                  |  |      |  |      |  |      | 

Note 15Stock Option Plan

In 2003, the Stockholders approved
the 2003 Stock Incentive Plan, which replaced the 1998 Stock Incentive Plan. This
plan provides for the granting of options to officers, employees, consultants and
Directors for purchase of the Companys common shares. The total number of
shares that may be awarded under the Plan are 4,000,000 of which 1,400,000 shares
of Stock may be awarded as Restricted Stock (see Note 17). There were no stock options
granted under this plan in 2003.

The stockholders approved the 1998
Stock Option Plan (The 1998 Plan) on May 19, 1998. The Plan provided
for the granting of options to officers, employees, consultants and Directors for
purchase of the Companys common shares. The total number of shares that may
be awarded under the 1998 Plan were 2,500,000 not including the replacement options
granted in June 1998 to replace those which were previously granted by the Companys
former parent.

There were no options granted in 2003.
In 2002, the Company granted 30,000 options at $3.93, which is also the weighted
average fair value for the options granted. In 2001, the Company granted 17,000
options at $5.75, which is also the weighted average fair value for the options
granted.





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 15Stock Option Plan

The following table summarizes activity under the stock option plan
and the weighted average exercise prices for the three years ended December 31,
2003 (in whole numbers, not thousands except for Exercise Prices):



|                               |  |  | Number
  of |  | Weighted
  Average
|------------------------------ |  |  | ----------- |  | ------------------
|                               |  |  | Options     |  | Exercise Price    
|                               |  |  |             |  |                   
|Outstanding,
January 1, 2001   |  |  | 2,151,402   |  | $4.56             
|Granted                        |  |  | 17,000      |  | 5.75              
|Exercised                      |  |  | (122,167)   |  | 3.81              
|Forfeited                      |  |  |            |  |                  
|Expired                        |  |  |            |  |                  
|                               |  |  |             |  |                   
|Outstanding,
December 31, 2001 |  |  | 2,046,235   |  | 4.61              
|Granted                        |  |  | 30,000      |  | 3.93              
|Exercised                      |  |  |            |  |                  
|Forfeited                      |  |  |            |  |                  
|Expired                        |  |  | (30,000)    |  | 5.48              
|                               |  |  |             |  |                   
|Outstanding,
December 31, 2002 |  |  | 2,046,235   |  | 4.59              
|Granted                        |  |  |            |  |                  
|Exercised                      |  |  | (1,381,168) |  | 4.34              
|Forfeited                      |  |  |            |  |                  
|Expired                        |  |  |            |  |                  
|                               |  |  |             |  |                   
|Outstanding
December 31, 2003  |  |  | 665,067     |  | $5.11             
|                               |  |  |             |  |                   

The following table summarizes information
    about stock options outstanding as of December 31, 2003 (in whole numbers,
    except for Exercise Prices and Contractual life in years):



|               |  |                   |  | Options Outstanding |  | Options
  Outstanding
|-------------- |  | ----------------- |  | ------------------- |  | ---------------------
|               |  |                   |  |                     |  |                      
|               |  | December 31, 2003 |  | Weighted            |  | Weighted Average     
|Range of       |  | Number of         |  | Average             |  | Remaining            
|Exercise Price |  | Options           |  | Exercise Prices     |  | Contractual Life     
|               |  |                   |  |                     |  |                      
|$ 1.50  3.93  |  | 90,000            |  | $2.31               |  | $4.76                
|4.63  4.9375  |  | 127,000           |  | 4.50                |  | 4.80                 
|5.25  5.75    |  | 328,067           |  | 5.20                |  | 1.95                 
|6.67           |  | 90,000            |  | 6.67                |  | 4.47                 
|8.95           |  | 30,000            |  | 8.95                |  | 4.41                 
|               |  |                   |  |                     |  |                      
|Total          |  | 665,067           |  | $5.11               |  | $3.33                
|               |  |                   |  |                     |  |                      
|               |  |                   | 

As of December 31, 2002, there were 1,982,276
options exercisable at a weighted average price of $4.48. As of December 31, 2001,
there were 1,778,426 options exercisable at a weighted average price of $4.40. Proceeds
received from the exercise of the options are credited to the capital accounts.

See Note 16 regarding Change in Control.

Compensatory Options

In accordance with APB 25, the Company
records compensation expense relating to stock options, which were accounted
    for  using variable plan accounting. All options under variable plans were
    fully vested
by January 1, 2003. There was no compensation expense related to stock options
    for  the years ended December 31, 2003, December 31, 2002 and December 31,
    2001.



71

---

OMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(All tabular amounts are in thousands,
except per share data)

Note 15Stock Option Plan (continued)

As of December 31, 2001, capital surplus was debited for $481,000
relating to the current years adjustment to adjust unvested options to OMIs
stock price at that date (market value) and deferred compensation relating to options
that were granted pursuant to a Stock Option Award Agreement, initiated in June
2000, that modified the 1998 Performance Unit Plan. At December 31, 2001, the balance
in deferred compensation relating to options was zero, resulting from the option
prices being below OMIs stock price at that date.

Note 16Employment Agreements

OMI has employment agreements with all
of its executive officers, 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 OMI 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
five 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 five senior executives) and
150% of the then effective annual salary of the executive for the five 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

During December 2002, OMI issued 6,500,000
shares of common stock pursuant to an equity agreement. Net proceeds received were
approximately $21,483,000 (net of expenses).

See Note 3 for Issuances of common stock
relating to vessel purchases.

Restricted Stock

As of December 31, 2003, the Company had
granted an aggregate of 1,418,314 shares of restricted stock to certain of its employees,
executive officers and directors (see Note 15 for Stock Incentive Plans). The market
value of restricted stock awarded totaled an aggregate of approximately $8,609,000
on the respective grant dates in July 2001, April 2002 and September 2003, each
grant is described in more detail below, and was recorded as unearned compensation
as a separate component of stockholders equity. The Company is amortizing
unearned compensation over the vesting periods. For the years ended December 31,
2003, 2002 and 2001 we recognized compensation expense related to restricted stock
of $1,290,000, $1,033,000 and $510,000, respectively.

In September 2003, OMI awarded and issued
    498,314 shares of restricted stock to employees, executive officers and directors
    for a total value at the date of grant of approximately $3,408,000. Restrictions
    lapse for one third of the shares at the end of
year three, the next third at the end of year four, and the remaining third of
    the
shares at the end of year five.



72

---

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)

In April 2002, OMI awarded and issued 20,000
shares of restricted stock to a new director for a total value at the date of
    grant of approximately $80,000. On July 2, 2001, OMI awarded 900,000 shares
    of restricted
stock to executive officers and directors for a total value at the date of grant
    of $5,121,000. Of the 920,000 shares, restrictions lapse for 25 percent at
    the end
of year three, the next 25 percent at the end of year five, and the remaining
    50 percent of the shares at varying years in accordance with years of service
    at an
individuals retirement date (if the executive officer or director remains
with the Company for at least five years from the date of grant). Upon the issuance
of the restricted stock, unearned compensation equivalent to the market value at
the date of grant was charged to Stockholders Equity and subsequently amortized
to expense over the appropriate restriction period.

Treasury Stock

On August 4, 1998, the Board of Directors
(the BOD) approved a plan to repurchase up to 10 percent of the outstanding
shares of the Companys common stock. During 2002, the BODs amended this
plan to repurchase up to 10 percent of the outstanding stock at a given date, less
repurchases of common stock.

There were 2,076,700 shares  repurchased under
    this plan. On March 31, 2001, the Board of Directors resolved to retire
    2,028,000 shares
    of
    treasury stock aggregating $8,834,000.

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 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

On March 10, 2004, the Board declared
    a quarterly dividend of $0.05 per share or approximately $4,100,000, payable
    on April
14, 2004 to shareholders of record at the close of business on March 22, 2004.
    The Company currently intends to pay a regular quarterly dividend; however,
    any determination to pay dividends in future will be at the discretion of
    the Board
of Directors and will depend upon OMIs results of operations, financial
condition,  capital restrictions, covenants and other factors deemed relevant
by the Board of
Directors. Payment of dividends is limited by the terms of certain agreements
to  which OMI and its subsidiaries are party. (See Note 5 to the Consolidated
Financial
Statements.)





73

---

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

Contracts Relating to Vessels

OMI currently has commitments to purchase
    six ice class 1A product carriers (not including one recently delivered in
    2004)
which are under construction, four of which begin five year time charters upon
    delivery. The product carriers are expected to be delivered in April 2004,
    August 2004, November
2004, June 2005, August 2005 and April 2006. One product carrier that
    was under construction at December 31, 2003 was delivered in February 2004
    and began
a five year time charter (see Note 5). As of December 31, 2003, OMI paid $31,030,000
    for vessels under construction and paid $19,698,000 in February 2004 for
    the vessel
delivered. Bank financing will provide most of the amounts to be paid (see Note
    5). Construction and delivery payments of $147,393,000 (excluding the vessel
    delivered
in February), before financing, will be made as follows:





| |  | Year                     | Payments
| |  | ------------------------ | --------
| |  |                          |         
| |  | 2004                     | $ 73,240
| |  | 2005                     | 54,188  
| |  | 2006                     | 19,965  
| |  |                          |         
| |  | Total Remaining Payments | $147,393
| |  |                          |         

Agreement with the Department of Justice

OMI reached an agreement with the Department
of Justice pursuant to which we pleaded guilty to one count of knowingly violating
regulations promulgated under the Act to Prevent Pollution from Ships by failing
to maintain an oil record book on one of our vessels. The violations
were the result of crew members on a vessel acting in violation of Company policies
without the knowledge of OMI management. Sentencing is scheduled for May 2004. If
the presiding judge sentences us according to the agreement, we will pay a $4,200,000
fine and serve a probationary period of three years. The amount of the anticipated
fine and related expenses, aggregating $6,000,000 has been expensed in the fourth
quarter 2003. Any amounts received under insurance policies will be recognized when
received.

Other

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, are of such nature that the ultimate
liability, if any, would not have a material adverse effect on the consolidated
financial statements.



74

---

INDEPENDENT AUDITORS REPORT



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, 2003 and 2002 and the related consolidated statements of
income,
comprehensive income and changes in stockholders equity, and cash flows
for  each of the three years in the period ended December 31, 2003. 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
auditing standards generally accepted in the United States of America. 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 the
Company at December 31, 2003 and 2002, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.

DELOITTE & TOUCHE LLPNew York, New York
  March
10, 2004







75

---

Item 8.SUPPLEMENTARY DATA

Quarterly Results of Operations (Unaudited)(In
thousands, except per share amounts)





|                                                                                     |  |  |  | 2003
  Quarter Ended |  | 2002
  Quarter Ended | 
|------------------------------------------------------------------------------------ |  |  |  | -------------------- |  | -------------------- | 
|                                                                                     |  |  |  |                      |  |                      | 
|                                                                                     |  |  |  | March 31             |  | June 30              | 
|                                                                                     |  |  |  |                      |  |                      | 
|Revenues(1)                                                                          |  |  |  | $83,785              |  | $77,926              | 
|Operating Income(2)                                                                  |  |  |  | 31,765               |  | 30,919               | 
|Net income                                                                           |  |  |  | $25,728              |  | $25,440              | 
|                                                                                     |  |  |  |                      |  |                      | 
|Basic
Earnings Per Common Share:                                                     |  |  |  |                      |  |                      | 
|Net
income                                                                           |  |  |  | $  0.33              |  | $  0.33              | 
|                                                                                     |  |  |  |                      |  |                      | 
|Weighted
average number of 
      
shares of common stock
      
outstandingbasic   |  |  |  | 76,836               |  | 76,846               | 
|                                                                                     |  |  |  |                      |  |                      | 
|Diluted
Earnings Per Common Share:                                                   |  |  |  |                      |  |                      | 
|Net
income                                                                           |  |  |  | $  0.33              |  | $  0.33              | 
|                                                                                     |  |  |  |                      |  |                      | 
|Weighted
average number of 
      
shares of common stock
      
outstandingdiluted |  |  |  | 77,036               |  | 77,123               | 
|                                                                                     |  |  |  |                      |  |                      | 





|    |  |                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Revenues are comprised of voyage
revenue, time charter revenue and other revenue.                                                                                                                                                                                                  
|(2) |  | Operating income includes Provision
for settlement loss and related expenses, provision for impairment loss on vessels
and Loss on disposal of vessels in 2003; aggregating $3,215,000 in the first quarter,
$7,558,000 in the third quarter and $12,355,000 in the fourth quarter.
|(3) |  | 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 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 report, 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.

Changes in Internal Controls

There have not been any significant changes
in the Companys internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation. There were no
significant deficiencies or material weakness in the internal controls, and therefore
no corrective actions were taken.





76

---

PART III

Item 10.DIRECTORS AND EXECUTIVE OFFICERS
OF OMI CORPORATION

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 Proxy Statement to be filed
with the Securities and Exchange Commission. Certain information relating to Executive
Officers of the Company appears in Item 4A of Part I of this Form 10-K Annual Report.

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
Proxy Statement to be filed with the Securities and Exchange Commission.

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Pursuant to General Instruction G(3) the
information called for by this item is hereby incorporated by reference from OMIs
Proxy Statement 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
Proxy Statement 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 Proxy Statement to be filed with
the Securities and Exchange Commission.











77

---

PART IV

Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial
Statement Schedules1.
  Financial statements as indicated in the index are set forth on page 48. 
          2.
  Financial Statement Schedules

None.
3.
The index to Exhibits is on page 79.

(b) Reports on Form 8-K:



| |  | On October 14, 2003, OMI filed a
  Form 8-K announcing construction of additional vessel and time charters.                                                                                               | 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|  |  |                                                                                                                                                                                                           | 
| |  | On October 22, 2003, OMI filed a
  Form 8-K announcing its financial results for the third quarter of 2003.                                                                                               | 
|  |  |                                                                                                                                                                                                           | 
| |  | On November 13, 2003, OMI filed a
  Form 8-K announcing that OMI Corporation is launching $150 million Senior Notes
  Offering and an agreement to establish a $57 million equity line of credit.         | 
|  |  |                                                                                                                                                                                                           | 
| |  | On November 14, 2003, OMI filed a
  Form 8-K announcing that OMI Corporation has reached an agreement in principle with
  the U.S. Department of Justice.                                                 | 
|  |  |                                                                                                                                                                                                           | 
| |  | On November 24, 2003, OMI filed a
  Form 8-K announcing OMI Corporation has priced a $200 million senior unsecured notes
  offering.                                                                      | 
|  |  |                                                                                                                                                                                                           | 
| |  | On February 17, 2004, OMI filed a
  Form 8-K announcing its financial results for the fourth quarter of 2003.                                                                                             | 
|  |  |                                                                                                                                                                                                           | 
| |  | On March 9, 2004, OMI filed a Form 8-K to comply
        with Regulation FD for text slides presented by the Company at an investors
    conference.                                                      | 
|  |  |                                                                                                                                                                                                           | 
| |  | On March 11, 2004, OMI filed
      a Form 8-K announcing that it has established a regular quarterly dividend,
      declaration of a dividend and earnings guidance for the first quarter of
      2004. | 
|  |  |                                                                                                                                                                                                           | 
| |  | On March 12, 2004, OMI
          filed a Form 8-K announcing it has ordered a 47,000 dwt ice class 1A
          product carrier.                                                                          | 









78

---

EXHIBITS





| |  | Number |  | Incorporated
by Reference to             |  | Description
of Exhibit                             | 
| |  | ------ |  | ---------------------------------------- |  | -------------------------------------------------- | 
|
| |  | 3(i)   |  | Registration Statement on Form S-1       |  | Articles of Association of OMI                     | 
| |  |        |  | (No. 333-52771) Filed May 15, 1998       |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 3(ii)  |  | Registration Statement on Form S-1       |  | By-laws                                            | 
| |  |        |  | (No. 333-52771) Filed May 15, 1998       |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 4.1    |  | Form 8A Filed December 14, 1998          |  | Registration Statement of Preferred
Stock Purchase | 
| |  |        |  |                                          |  | Rights                                             | 
| |  |        |  |                                          |  |                                                    | 
| |  | 4.2    |  | (No. 333-72458) Filed October 30,
2001   |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 4.3    |  | Registration Statement on Form S-8       |  | 2001 Restricted Stock Plan (1)                     | 
| |  |        |  | (No. 333-72456) Filed October 30,
2001   |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 4.4    |  | Registration Statement on Form S-8       |  | OMI Corporation Executive Savings
Plan (1)         | 
| |  |        |  | (No. 333-72460) Filed October 30,
2001   |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.1   |  | Registration Statement on Form S-1       |  | Form of Common Stock Certificate                   | 
| |  |        |  | (No. 333-52771) Filed May 15, 1998       |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.2   |  | Registration Statement on Form S-1       |  | OMI Corporation Stock Option Plan
(1)              | 
| |  |        |  | (No. 333-52771) Filed May 15, 1998       |  |                                                    | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.3   |  | Form S-8 Filed June 17, 1998             |  | Employee Benefit Plan Registration
Statement (1)   | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.4   |  | Form 10-Q Filed August 13, 2001          |  | Amended Form of Employment Agreements
for          | 
| |  |        |  |                                          |  | Senior Executives (1)                              | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.5   |  | Form 10-Q Filed August 13, 2001          |  | 2001 Incentive Bonus Plan (1)                      | 
| |  |        |  |                                          |  |                                                    | 
| |  | 10.6   |  | Registration Statement on Form S-8       |  | OMI Corporation 2004 Equity Incentive
Plan (1)     | 
| |  |        |  | Filed February 12, 2004                  |  |                                                   
| |  |        |  |                                          |  |                                                   
| |  | 21     |  | Subsidiaries of the Company              |  |                                                   
| |  |        |  |                                          |  |                                                   
| |  | 23.1   |  | Consent of Deloitte & Touche
LLP         |  |                                                   
| |  |        |  |                                          |  |                                                    | 
| |  | 31.1   |  | OMI Corporations certification
by       |  |                                                    | 
| |  |        |  | the Chief Executive Officer on Form
10-K |  |                                                    | 
| |  |        |  | for the year ending December 31,
2003 as |  |                                                    | 
| |  |        |  | adopted pursuant to section 302 of       |  |                                                    | 
| |  |        |  | THE SARBANES-OXLEY ACT OF 2002.          |  |                                                   
| |  |        |  |                                          |  |                                                    | 
| |  | 31.2   |  | OMI Corporations certification
by the   |  |                                                    | 
| |  |        |  | Chief Financial Officer on Form 10-K     |  |                                                    | 
| |  |        |  | for the year ending December 31,
2003 as |  |                                                    | 
| |  |        |  | adopted pursuant to section 302 of       |  |                                                    | 
| |  |        |  | THE SARBANES-OXLEY ACT OF 2002.          |  |                                                   
| |  |        |  |                                          |  |                                                    | 
| |  | 32.1   |  | OMI Corporations certification
by the   |  |                                                    | 
| |  |        |  | Chief Executive Officer on Form 10-K
for |  |                                                    | 
| |  |        |  | the year ending December 31, 2003        |  |                                                    | 
| |  |        |  | pursuant to 18 U.S.C. Section 1350,
as   |  |                                                    | 
| |  |        |  | adopted pursuant to section 906 of       |  |                                                    | 
| |  |        |  | THE SARBANES-OXLEY ACT OF 2002.          |  |                                                   
| |  |        |  |                                          |  |                                                    | 
| |  | 32.2   |  | OMI Corporations certification
by the   |  |                                                    | 
| |  |        |  | Chief Financial Officer on Form 10-K
for |  |                                                    | 
| |  |        |  | the year ending December 31, 2003        |  |                                                    | 
| |  |        |  | pursuant to 18 U.S.C. Section 1350,
as   |  |                                                    | 
| |  |        |  | adopted pursuant to section 906 of       |  |                                                    | 
| |  |        |  | THE SARBANES-OXLEY ACT OF 2002.          |  |                                                   



|   
|---
|(1)









79

---

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.



| | By: /s/ | CRAIG H. STEVENSON                         | 
| | ------- | ------------------------------------------ | 
| |        
| |         | Craig H. Stevenson, Jr.,                   | 
| |         | Chairman of the Board of Directors
    and | 
| |         | Chief Executive Officer                    | 
| |         | March 10, 2004                             | 

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             |  | March 10, 2004 |  | 
|                            |  | (Principal Executive Officer)                    |  |                |  |  | 
|Craig H. Stevenson, Jr.     |  |                                                  |  |                |  | 
|                            |  |                                                  |  |                |  | 
|/S/
ROBERT BUGBEE           |  | President, Chief Operating Officer               |  | March 10, 2004 |  | 
|                            |  | and Director                                     |  |                |  |  | 
|Robert Bugbee               |  |                                                  |  |                |  | 
|                            |  |                                                  |  |                |  | 
|/s/
MICHAEL KLEBANOFF       |  | Director                                         |  | March 10, 2004 |  | 
|                            |  |                                                  |  |                |  |  | 
|Michael Klebanoff           |  |                                                  |  |                |  | 
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|/s/
JAMES N. HOOD           |  | Director                                         |  | March 10, 2004 |  | 
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|James N. Hood               |  |                                                  |  |                |  | 
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|/s/
PHILIP J. SHAPIRO       |  | Director                                         |  | March 10, 2004 |  | 
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|Philip J. Shapiro           |  |                                                  |  |                |  | 
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|/s/
EDWARD SPIEGEL          |  | Director                                         |  | March 10, 2004 |  | 
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|Edward Spiegel              |  |                                                  |  |                |  | 
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|/s/
DONALD C. TRAUSCHT      |  | Director                                         |  | March 10, 2004 |  | 
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|Donald C. Trauscht          |  |                                                  |  |                |  | 
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|/s/
JAMES D. WOODS          |  | Director                                         |  | March 10, 2004 |  | 
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|James D. Woods              |  |                                                  |  |                |  | 
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|/s/
KATHLEEN C. HAINES      |  | Senior Vice President, Chief                     |  | March 10, 2004 |  | 
|                            |  | Financial Officer, Treasurer and                 |  |                |  |  | 
|Kathleen C. Haines          |  | Chief Accounting Officer                         |  |                |  | 
|                            |  | (Principal Financial and
    Accounting Officer) |  |                |  | 







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