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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2004

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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6700

Securities registered pursuant to Section
12(b) of the Act:



|Common Stock, par value $.50 per share | New York Stock Exchange             
|-------------------------------------- | ------------------------------------
|Title of Class                         | Name of Exchange on which Registered

Securities registered pursuant to Section 12(g)
of the Act: None

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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.

YES     X     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.

YES     X     NO

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

YES     X     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, 2004:

$1,076,241,022

Number of shares of the Registrants
Common Stock outstanding as of March 10, 2005:

85,679,944

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

(1)     Portions
of the OMI Corporation 2005 Proxy Statement to be filed with the Securities and
Exchange Commission.



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INDEX

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|         
|---------
|PART I   
|         
|Items    
|         
|1. and 2.
|3.       
|4.       
|4A.      
|         
|PART II  
|         
|5.       
|6.       
|7.       
|         
|         
|         
|         
|         
|         
|7A.      
|8.       
|9.       
|9A.      
|         
|9B.      
|         
|PART III 
|         
|10.      
|11.      
|12.      
|13.      
|14.      
|         
|PART IV  
|         
|15.      
|         







ii

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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.

Certifications Regarding Public Disclosures and Listing
      StandardsThe unqualified certifications of the Chief Executive Officer
  and the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley
  Act regarding the quality of OMIs public disclosure are filed with the
  Securities and Exchange Commission as exhibits 31.1 and 31.2 to this Annual
  Report on Form 10-K for the year ended December 31, 2004.

In addition, the annual certification of the
    Chief Executive Officer regarding compliance by the Company with the corporate
    governance listing standards of the New York Stock Exchange was submitted
    without qualification to the New York Stock Exchange following the May 2004
    annual shareholder meeting.

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 on our website. The information on our website is not incorporated
by reference into this report.

Forward-Looking Statements

The Form 10-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E
of the Securities Exchange Act of 1934, as amended (the Exchange Act)
and are intended to be covered by the safe harbor provided for under these sections.
These statements may include words such as may, assume,
forecast, predict, strategy, believe,
estimate, project, intend, expect,
plan, anticipate, budget, potential,
or continue, and similar expressions in connection with any discussion
of the timing or nature of future operating or financial performance or other events.
For a description of the Forward Looking Statements which may appear in this Form
10-K, and risks and uncertainties associated with their Forward Looking Statements
see page 50.

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









1

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Description of Business/Properties

Development of OMIs Business

We are a leading seaborne transporter of
crude oil and refined petroleum products operating in the international shipping
markets. The Company owns and has on order only double hull tankers. Our modern
fleet comprising 42 double hull vessels is one of the youngest in the world, with
an average age of approximately 2.6 years,1 compared to an industry average
of approximately 9.3 years as of December 31, 2004.

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 27 product carriers, which primarily
transport refined petroleum products from refinery locations to consuming locations,
and 15 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).

During 2004, the Company acquired five
Suezmax crude oil tankers, all built in 2003 and 2004. We also acquired contracts
for eight product carriers under construction, three of which have since been delivered
to us. We acquired one other handysize product carrier built in 2004. We have taken
delivery of three previously ordered product carriers in the same time period, and
sold six crude oil carriers and two product carriers, six of which were single hull
and two of which were double sided, leaving us with an exclusively double hull fleet.

The following sets forth a summary of our
current fleet:





|Crude Oil Fleet:           |  |  |  | Number of Vessels | Aggregate dwt
|-------------------------- |  |  |  | ----------------- | -------------
|                          
|1998-2004
built Suezmaxes  |  |  |  | 15                | (a)          
|                           |  |  |  |                   |              
|Product Carrier
Fleet:     |  |  |  |                   |              
|                          
|1999-2004
built handysizes |  |  |  | 15                |              
|2000-2005 built handymaxes |  |  |  | 10                |              
|2003 built
Panamaxes       |  |  |  | 2                 |              
|                          
|Total                      |  |  |  | 27                |              
|                          
|Total
Fleet                |  |  |  | 42                |              
|                          
|                          

|   
|---
|(a)

We expect to take delivery of three more new
    ice  class 1A product carriers in 2005, and five product carriers, one of
    which is ice  class 1A, in 2006. We also have agreed to time charter in two
    Suezmaxes for seven  years, to commence following deliveries from the shipbuilder
    expected in June and  September of this year.

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.
While we have 16 of our 42 vessels on time charter, approximately 80% of our vessels
on a dwt basis operate in the spot market. In 2004, we generated approximately $131
million of time charter (TC) revenue from time charters on 23 product
carriers and two crude carriers. Revenue from time charters in 2005 is expected
to be approximately $83 million, assuming seven time charters that expire are not
renewed and others are not entered into. In 2004, 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.





| 
|-
|1







2

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Our Strategy

Our strategy includes the following initiatives:

Concentration in two vessel categories

We have chosen to concentrate our fleet
in two categories: Suezmax tankers, because they offer size advantages over aframax
tankers and geographic flexibility relative to VLCCs, and product carriers because
new refineries are not generally being built near the areas of greatest demand for
petroleum products. The large scale of our product carrier and Suezmax fleets relative
to many of our competitors enables us to realize economies of scale and increase
vessel utilization, and concentrated fleets 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.

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. In early 2004, we were able to extend the charter
periods for four of our vessels, two by one year and two by two years. Additionally,
of the product carriers delivered to us in 2004, three began five-year charters
upon delivery from the shipyard and two being delivered in 2005 will begin five
year time charters, all five of which charters provide for profit sharing. However,
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 2003, 2004 and currently,
when market conditions were and are strong. Of the five product carriers whose charters
expired in the fourth quarter of 2004, one was chartered for three years at a higher
rate and the others entered into the spot market. At this time, our intention is
to enter into additional time charters in order to increase the amount of predictable
revenue going forward.

Our use of time charters also mitigates
in part the seasonality of the spot market business. Generally, spot markets are
strongest in the first and fourth quarters of the calendar year, and weaker in the
second and third quarters. We also have several contracts of affreightment (COAs),
which are agreements whereby the shipowner is hired to move an agreed amount of
cargo on an agreed route at a set price per ton. Our existing COAs are of shorter
duration than most of our time charters, but serve the same function. Finally, we
have recently commenced trading in freight futures or the paper market.
We can take a long position, which is similar in effect to chartering
in a vessel (i.e. it is speculative) or a short position, which is similar
in effect to time chartering out a vessel. COAs and freight futures are additional
means of balancing risks in our business.









3

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The following table reflects our contracted TC revenue through 2009:





|Time
Charter Revenue: |  |  |  |        |      |       |      |      
|--------------------- |  |  |  | ------ | ---- | ----- | ---- | -----
|                      |  |  |  | Actual |      |       |      |      
|(In Millions)         |  |  |  | 2004   | 2005 | 2006  | 2007 | 2008 
|                     
|TC
Revenue            |  |  |  | $130.6 |      | $82.5 |      | $57.3
|Number of Vessels (a) |  |  |  | 21(b)  |      | 15(c) |      | 8(d) 
|                     

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

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. During
2004, we invested $675 million in acquiring modern vessels, while at the same time
our total debt (current portion of long-term debt plus long-term debt) to total capitalization
(debt plus stockholders equity) went from 51% as of December 31, 2003 to
55% as of December 31, 2004. During the period we issued $140 million value in
our common stock and expended $141 million in repurchasing common stock.

The rise of the total debt-to-total capitalization
     to 55% occurred due to the repurchase of 6.3 million shares of common stock
    in the fourth quarter, which reduced equity. Due to continuing strong tanker
    markets, we expect to reduce this percentage during 2005. We will
continue to monitor opportunities to acquire modern vessels at attractive returns
on capital.

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 15 of our Suezmax tankers are
marketed through a marketing alliance known as Alliance Chartering LLC (Alliance)
with another large Suezmax tanker owner Frontline Ltd. Commencing in December 2003,
our Suezmax tankers were pooled with a European shipowner in the Gemini Pool (Gemini).
This pool for double hull Suezmax vessels, is operated by Gemini Tankers LLC, a
wholly owned subsidiary of OMI and marketed by Alliance.









4

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Our Fleet

The following tables set forth additional
detail about our fleet. Our current fleet consists of two segments; crude oil fleet
and product carrier fleet.

EXISTING FLEET(a)





|                       |  |  |                |           |          | Ice |       | Year |     |            |  | Charter  
|---------------------- |  |  | -------------- | --------- | -------- | --- | ----- | ---- | --- | ---------- |  | ---------
|Name
of Vessel         |  |  | Type of Vessel |           | Class(b) |     | Built |      | Dwt | Expiration
|                      
|CRUDE
OIL FLEET:       |  |  |                |           |          |     |       |      |     |            |  |          
|ARLENE                 |  |  |                | Suezmax   |          |     |       | 2003 |     | 165,293    |  | SPOT     
|INGEBORG               |  |  |                | Suezmax   |          |     |       | 2003 |     | 165,293    |  | SPOT     
|SOMJIN                 |  |  |                | Suezmax   |          |     |       | 2001 |     | 160,183    |  | SPOT     
|HUDSON                 |  |  |                | Suezmax   |          |     |       | 2000 |     | 159,999    |  | SPOT     
|POTOMAC                |  |  |                | Suezmax   |          |     |       | 2000 |     | 159,999    |  | SPOT     
|DELAWARE               |  |  |                | Suezmax   |          |     |       | 2002 |     | 159,452    |  | SPOT     
|DAKOTA                 |  |  |                | Suezmax   |          |     |       | 2002 |     | 159,435    |  | SPOT     
|ADAIR                  |  |  |                | Suezmax   |          |     |       | 2003 |     | 159,199    |  | SPOT     
|ANGELICA               |  |  |                | Suezmax   |          |     |       | 2004 |     | 159,106    |  | SPOT     
|JANET                  |  |  |                | Suezmax   |          |     |       | 2004 |     | 159,100    |  | SPOT     
|SACRAMENTO             |  |  |                | Suezmax   |          |     |       | 1998 |     | 157,411    |  | SPOT     
|PECOS                  |  |  |                | Suezmax   |          |     |       | 1998 |     | 157,406    |  | SPOT     
|SABINE                 |  |  |                | Suezmax   |          |     |       | 1998 |     | 157,332    |  | SPOT     
|OLIVER JACOB(c)        |  |  |                | Suezmax   |          |     |       | 1999 |     | 157,327    |  | SPOT     
|MAX JACOB(c)           |  |  |                | Suezmax   |          |     |       | 2000 |     | 157,327    |  | SPOT     
|                      
|                       |  |  |                |           |          |     |       |      |     | 2,393,862  |  |          
|                      
|PRODUCT CARRIER
FLEET: |  |  |                |           |          |     |       |      |     |            |  |          
|OTTAWA                 |  |  |                | Panamax   |          |     |       | 2003 |     | 70,297     |  | Apr-08   
|TAMAR                  |  |  |                | Panamax   |          |     |       | 2003 |     | 70,362     |  | Jul-08   
|NECHES                 |  |  |                | Handymax  |          |     |       | 2000 |     | 47,052     |  | Oct-07   
|SAN JACINTO            |  |  |                | Handymax  |          |     |       | 2002 |     | 47,038     |  | SPOT     
|MOSELLE                |  |  |                | Handymax  |          |     |       | 2003 |     | 47,037     |  | Feb-06   
|GUADALUPE              |  |  |                | Handymax  |          |     |       | 2000 |     | 47,037     |  | SPOT     
|AMAZON                 |  |  |                | Handymax  |          |     |       | 2002 |     | 47,037     |  | SPOT     
|ROSETTA                |  |  |                | Handymax  |          |     |       | 2003 |     | 47,015     |  | Mar-06   
|BRAZOS(d)              |  |  |                | Handymax  |          |     |       | 2005 |     | 47,000     |  | SPOT     
|LAUREN(e)              |  |  |                | Handymax  |          |     |       | 2005 |     | 46,955     |  | SPOT     
|JEANETTE               |  |  |                | Handymax  |          |     |       | 2004 |     | 46,955     |  | SPOT     
|HORIZON                |  |  |                | Handymax  |          |     |       | 2004 |     | 46,955     |  | SPOT     
|ORONTES                |  |  |                | Handysize |          | 1B  |       | 2002 |     | 37,383     |  | Mar-06   
|OHIO                   |  |  |                | Handysize |          | 1B  |       | 2001 |     | 37,278     |  | Dec-05   
|GARONNE                |  |  |                | Handysize |          | 1A  |       | 2004 |     | 37,278     |  | Apr-09(f)
|GANGES                 |  |  |                | Handysize |          | 1A  |       | 2004 |     | 37,178     |  | SPOT     
|RUBY                   |  |  |                | Handysize |          | 1B  |       | 2004 |     | 37,384     |  | SPOT     
|ASHLEY                 |  |  |                | Handysize |          | 1B  |       | 2001 |     | 37,270     |  | SPOT     
|MARNE                  |  |  |                | Handysize |          | 1B  |       | 2001 |     | 37,230     |  | SPOT     
|LOIRE                  |  |  |                | Handysize |          | 1A  |       | 2004 |     | 37,106     |  | Feb-09(f)
|SAONE                  |  |  |                | Handysize |          | 1A  |       | 2004 |     | 36,986     |  | Jul-09(f)
|TRINITY                |  |  |                | Handysize |          |     |       | 2000 |     | 35,834     |  | Oct-06   
|MADISON                |  |  |                | Handysize |          |     |       | 2000 |     | 35,828     |  | Sep-06   







5

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Our Fleet (continued)



|                    |  |  |                |           |          | Ice |       | Year |     |            |  | Charter  
|------------------- |  |  | -------------- | --------- | -------- | --- | ----- | ---- | --- | ---------- |  | ---------
|Name of
Vessel      |  |  | Type of Vessel |           | Class(b) |     | Built |      | Dwt | Expiration
|                   
|RHONE               |  |  |                | Handysize |          |     |       | 2000 |     | 35,775     |  | Apr-05   
|CHARENTE            |  |  |                | Handysize |          |     |       | 2001 |     | 35,751     |  | Sep-06(f)
|ISERE               |  |  |                | Handysize |          |     |       | 1999 |     | 35,438     |  | Sep-06(f)
|SEINE               |  |  |                | Handysize |          |     |       | 1999 |     | 35,407     |  | Jul-05   
|                   
|                    |  |  |                |           |          |     |       |      |     | 1,159,866  |  |          
|                   
|Total
Current Fleet |  |  |                |           |          |     |       |      |     | 3,553,728  |  |          
|                   
|                   

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

Currently, we have the following eight product
carriers and two Suezmaxes to be delivered:

VESSELS TO BE ACQUIRED(a)





|                                        |  |  |                |           |          | Ice |           | Date To Be |            |           | Charter  
|--------------------------------------- |  |  | -------------- | --------- | -------- | --- | --------- | ---------- | ---------- | --------- | ---------
|Name of Vessel                          |  |  | Type of Vessel |           | Class(b) |     | Delivered | Dwt        | Expiration
|                                       
|Vessels under construction:             |  |  |                |           |          |     |           |            |            |           |          
|FOX                                     |  |  |                | Handysize |          | 1A  |           | Jun-05     | 37,000     |           | Jun-10(c)
|THAMES                                  |  |  |                | Handymax  |          | 1A  |           | Aug-05     | 47,000     |           | SPOT     
|TEVERE                                  |  |  |                | Handysize |          | 1A  |           | Aug-05     | 37,000     |           | Aug-10(c)
|WABASH                                  |  |  |                | Handymax  |          |     |           | Jan-06     | 47,000     |           | SPOT     
|KANSAS                                  |  |  |                | Handymax  |          |     |           | Mar-06     | 47,000     |           | SPOT     
|REPUBLICAN                              |  |  |                | Handymax  |          |     |           | Apr-06     | 47,000     |           | SPOT     
|RHINE                                   |  |  |                | Handysize |          | 1A  |           | Apr-06     | 37,000     |           | SPOT     
|PLATTE                                  |  |  |                | Handymax  |          |     |           | May-06     | 47,000     |           | SPOT     
|                                       
|Total                                   |  |  |                |           |          |     |           |            |            | 346,000   |          
|                                       
|Vessels to be Chartered in:             |  |  |                |           |          |     |           |            |            |           |          
|TBN(d)                                  |  |  |                | Suezmax   |          |     |           | Jun-05     | 160,000    |           | SPOT     
|TBN(d)                                  |  |  |                | Suezmax   |          |     |           | Sep-05     | 160,000    |           | SPOT     
|                                       
|Total                                   |  |  |                |           |          |     |           |            |            | 320,000   |          
|                                       
|Total Vessels to be delivered           |  |  |                |           |          |     |           |            |            | 666,000   |          
|                                       
|Total Fleet with Vessels to be Acquired |  |  |                |           |          |     |           |            |            | 4,219,728 |          
|                                       
|                                       

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

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:







6

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

Commercial operations

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

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

We charter our vessels for varying periods,
ranging from a single voyage, as in the case of our spot market charters, to multiple
years, as in the case of our long-term time charters. In general, our time charters
afford us greater assurance that we will be able to cover a fixed portion of our
costs. In addition, there is also a profit sharing element in five of our existing
time charters (and two currently under construction) 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 44 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. Our vessels may load at any oil production area
and discharge at any refinery suitable for Suezmax vessels. Typical voyages chartered
through Alliance for our Suezmax tankers are for loading crude oil in North Sea
or West African ports and discharging it at refineries in the East or Gulf Coasts
of the United States. Alliance employs objective criteria when it selects a vessel
for a particular charter. Each vessel owner receives the revenues from voyages it
performs.

Under an arrangement that commenced in
December 2003, we have pooled all of our Suezmax tankers with two Suezmax tankers
owned by a European shipowner in a pool called Gemini Tankers. Alliance
commercially manages the vessels in the pool and revenues are paid into the pool
for the vessel performing the charter. Revenues received by the pool are shared
by the Company and the European shipowner according to an agreed formula.

Product carriers

Our product carriers are available for
spot market voyages, contracts of affreightment or time charters and are commercially
managed by us from our Stamford and London offices. Sixteen of our 27 product carriers
currently







7

---

are on time charter. The charterers of time chartered vessels decide
where to send the vessels to load and discharge. We trade the other product carriers
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 Corporation provides certain services
to OMI Marine Services LLC, including arranging insurance and providing claims services.
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, most of whom are from India. In addition to operating the vessels
during voyages, the crews perform general maintenance, sometimes with the help of
additional personnel. 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. 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 3,100
tankers aggregating approximately 305.7 million dwt, and the largest tanker owner
has less than 5.0% of the total market dwt. The refined petroleum products transport
segment is even more fragmented than the crude oil transport segment with the largest
fleet being approximately 2.1% of the segment.

In the spot market, our vessels compete
with all other vessels that satisfy the size and availability requirements specified
by a customer. Competition in the spot market is based primarily on price, although
many charterers are becoming more selective with respect to the quality of vessel
they charter, focusing on a number of factors, including age, ship specifications,
such as double hulls, reliability and quality of operations. Our competitors in
the crude oil and products transport market are mainly privately owned fleets and
some government owned fleets. We also compete with oil companies and traders who
own or charter-in vessels. Competition for voyage charters may also include vessels
that are in other classes. For example, our Suezmax tankers compete with VLCC tankers
in certain markets and 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, 2004, we had approximately
50 office employees. Additionally, there are in aggregate approximately 1,200 seagoing
personnel on board our vessels at any one time.







8

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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 and another is with a union representing officers. Our labor relations
historically have been good and we expect these positive relations to continue.

Customers

Revenues from major customers, defined
as 10 percent or more of consolidated revenue was as follows:





|                             |  |  |  | 2004        |  | 2003        |  | 2002       
|---------------------------- |  |  |  | ----------- |  | ----------- |  | -----------
|                            
|Chartering
and Shipping S.A. |  |  |  | $67,327,000 |  | $34,305,000 |  | $34,468,000
|Chevron Transport Corp.      |  |  |  | 53,966,000  |  |            |  |           
|El Paso Marine
Company       |  |  |  |            |  | 43,254,000  |  | 27,762,000 
|                            

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

Regulations

Environmental regulations

Our operations are affected by U.S. federal,
state and foreign environmental protection laws and regulations, particularly OPA
90, CERCLA, the U.S. Port and Tanker Safety Act, the Act to Prevent Pollution from
Ships, regulations adopted by the 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 2010 according
to a schedule that is based on size and age of the vessel, unless the tankers are
retrofitted with double hulls. OPA 90 permits single hulled tankers to operate until
the year 2015 if they discharge at the Louisiana Offshore Oil Port (LOOP)
or off-load, or lighter, at approved lightering areas more than 60 miles offshore.

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

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.







9

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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

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 hull 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 hull tankers cannot carry heavy grades of oil to or from member ports,
and commencing in 2005 all single hull 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 hull 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 enter into force April 5, 2005.

We no longer have any non-double hull vessels
and therefore do not have issues relating to their trading.

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, as is OMCI, to whom work is subcontracted.







10

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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.

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







11

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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.

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                |  | are vessels 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.                                                                                                                                                                                                                                               
|                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Contract
of Affreightment or COA |  | COA is the abbreviation for Contract
  of Affreightment, which is an agreement providing for the transportation of a specific
  quantity of cargo over a specific time period but without designating specific vessels
  or voyage schedules, thereby allowing flexibility in scheduling. COAs can either
  have a fixed rate or a market-related rate. An example would be two shipments of
  70,000 tons per month for the next two years at the prevailing spot rate at the
  time of each loading.
|                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Crude oil tanker                 |  | means a tanker vessel designed to
  carry crude oil or low grade oil products.                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                







12

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|Double bottomed              |  | refers to a vessel with an inner
and outer bottom separated by void space.                                                                                                                                                                                                                                                                                 
|---------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|Double hull                  |  | 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.
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|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                    |  | refers to a vessel designed and built
to be able to trade in areas in which there is ice. Ice Class 1A, 1B and 1C vessels
can operate in ice areas no greater than 80cm thick, 60cm thick and 40cm thick,
respectively. The vessels do not break ice, but may follow ships that do.                                                                        
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|IMO                          |  | the abbreviation for International
Maritime Organization, an agency of the United Nations, which is the body that is
responsible for the administration of internationally developed maritime safety
and pollution treaties, including MARPOL 73/78.                                                                                                       
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|Lay-up                       |  | means taking a vessel out of service,
generally for an extended period.                                                                                                                                                                                                                                                                                    
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|Lightering                   |  | is the process of discharging a vessels
cargo into smaller vessels.                                                                                                                                                                                                                                                                                       
|                             |  |                                                                                                                                                                                                                                                                                                                                                            
|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.                                                                                                                                                                                                                                                                                                                          
|                            







13

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|OPA 90                         |  | is the abbreviation for the U.S.
  Oil Pollution Act of 1990.                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Off-hire                       |  | is any period in which a vessel under
  charter is not earning revenue.                                                                                                                                                                                                                                                                                                                                                            
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Orderbook                      |  | refers to vessels under contract
  to be constructed, usually expressed by number of vessels or dwt.                                                                                                                                                                                                                                                                                                                               
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Panamax                        |  | means a vessel of 50,000 to 80,000
  dwt.                                                                                                                                                                                                                                                                                                                                                                                          
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Pool                           |  | is a grouping of vessels in which
  the financial results are aggregated, then distributed among pool members according
  to an agreement.                                                                                                                                                                                                                                                                                         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Product
carrier                |  | means a tanker that is used to transport
  refined oil products, such as gasoline, jet fuel or heating oil.                                                                                                                                                                                                                                                                                                                        
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|P&I Insurance                  |  | is insurance obtained through a mutual
  association or P&I Club formed by shipowners to provide protection
  from large financial loss to one member by contribution towards that loss by all
  members.                                                                                                                                                                                                                        
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Scrapping                      |  | is the process by which a vessel
  is stripped of equipment and broken up, generally for reprocessing of its steel.                                                                                                                                                                                                                                                                                                                
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Sister ship                    |  | is a vessel built to the same plans
  and specifications as another vessel.                                                                                                                                                                                                                                                                                                                                                        
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Slow steaming                  |  | means slowing the speed of
      the vessel,  which saves fuel.                                                                                                                                                                                                                                                                                                                                                                    
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Special survey                 |  | refers to the inspection of a vessel
  by a Classification Society surveyor 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.                                                                                                                                                                                                                                                                                                                                                            
|                              







14

---







|Tonne                 |  | means a metric ton - 1,000 kilograms
  or 2,204.6 pounds.                                                                                                                                                                                                                 
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |  |                                                                                                                                                                                                                                                                           
|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 Spot Charter |  | is a charter under which a Charterer
  pays a transportation charge for the movement of a specific cargo between two or
  more specified ports. The shipowner pays all vessel and voyage expenses. Vessels
  performing voyage charters are said to be in the spot market.
|                      |  |                                                                                                                                                                                                                                                                           
|Voyage Expense        |  | refers to expenses incurred due to
  a vessel traveling 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.                                                                                                                                                                                 
|                     

Item 3.LEGAL PROCEEDINGS

We reached an agreement in late 2003 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. The Company was responsible due to the actions of crew on the vessel,
which were not known by personnel at the Companys offices and were against
Company policy. Sentencing was in August 2004; the Company paid a $4.2 million fine
and commenced serving a probationary period of three years. The fine and associated
costs aggregating $6 million were expensed in 2003. The Company has filed claims
with insurers with respect to the fine and costs.

The Company terminated an agreement to
acquire one of the Suezmax vessels it was to acquire in August 2004 from Athenian
Sea Carriers Ltd., as delivery was not tendered in accordance with the requirements
of the agreement. The seller disputes the matter, which is now in arbitration. If
the Company is correct, it will be entitled to certain additional expenses it incurred
and the increase in value, if any, of the vessel over the contract price. If the
Company loses, it would most likely lose the amount of its deposit, approximately
$6.4 million.

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

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

No matters were submitted to a vote of
the security holders of the Company during the fourth quarter of 2004.









15

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Item 4A.MANAGEMENT AND DIRECTORS

Set forth below is certain information
with respect to our management and directors as of March 10, 2005.





|Name                    | Age |  | Position                                                     | 
|----------------------- | --- |  | ------------------------------------------------------------ | 
|                       
|Craig
H. Stevenson, Jr. | 51  |  | Chairman of the Board, Chief Executive
Officer               | 
|Robert Bugbee           | 44  |  | President and COO; Director                                  | 
|Kathleen C.
Haines      | 50  |  | Senior Vice President, Chief Financial
Officer and Treasurer | 
|Cameron Mackey          | 37  |  | Senior Vice President, OMI Marine
Services LLC               | 
|Fredric S.
London       | 57  |  | Senior Vice President, General Counsel
and Secretary         | 
|Stavros Skopelitis      | 58  |  | Vice President                                               | 
|James D. Woods          | 73  |  | Director                                                     | 
|James N. Hood           | 70  |  | Director                                                     | 
|Michael Klebanoff       | 84  |  | Director                                                     | 
|Philip J. Shapiro       | 52  |  | Director                                                     | 
|Donald C. Trauscht      | 71  |  | Director                                                     | 
|G. Allen Brooks         | 59  |  | 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:

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.

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

Fredric S. 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 Skopelitis was 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.

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., Esco
Technologies, Inc., United States Energy Company, Inc., and Foster Wheeler, Ltd.







16

---

James N. Hoodis self employed. He 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 1988 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.

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., Integrated Electrical Services, Inc. and Bourns, Inc.

G. Allen Brooks is owner
and President of G. Allen Brooks, L.L.C., a consulting firm to the oil and gas industry.
From 1997 to early 2005 he was Executive Director at CIBC World Markets Corp., where
he headed up the firms North American oil field service industry research.









17

---

PART II

Item 5.MARKET FOR OMI CORPORATIONS
COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

OMI trades on the New York Stock Exchange
under the symbol OMM. As of March 10, 2005 the number of stockholders
of record of OMI common stock was approximately 2,788. The high and low sale
prices of the common stock, as reported by the New York Stock Exchange, were
as follows:





|2004
Quarter |  | 1st     |  | 2nd     |  | 3rd    |  | 4th   
|------------ |  | ------- |  | ------- |  | ------ |  | ------
|            
|High         |  | $11.55  |  | $12.88  |  | $16.12 |  | $22.05
|Low          |  | $  8.76 |  | $  9.36 |  | $11.81 |  | $14.68
|             |  |         |  |         |  |        |  |       
|2003
Quarter |  | 1st     |  | 2nd     |  | 3rd    |  | 4th   
|            
|High         |  | $5.09   |  | $6.45   |  | $7.72  |  | $9.22 
|Low          |  | $4.06   |  | $4.30   |  | $6.00  |  | $6.00 
|            

CHANGES IN SECURITIES, USE OF PROCEEDS ANDISSUER PURCHASES
OF EQUITY SECURITIES

Stock Repurchases

In 1998, the Board of Directors approved
the purchasing of up to 10 percent of the outstanding shares of the Companys
common stock and did not impose an expiration date on such purchases. In November
2004, the Board of Directors authorized the repurchase of the Companys
common stock with up to 40% of the proceeds from the $250 million received upon
the issuance of 2.875% Convertible Notes in December 2004. As of December 31,
2004, the Company repurchased an aggregate of 6,302,000 shares in the fourth
quarter 2004 and 7,890,000 shares during all of 2004. On December 14, 2004, the
Board of Directors established new authority for the Company to repurchase from
time to time of up to 4,250,000 shares of common stock.

The following table shows the monthly 2004
stock repurchase activity:





|              |  |  |  |                  |                |                 |                    | Total Number of  |                   
|------------- |  |  |  | ---------------- | -------------- | --------------- | ------------------ | ---------------- | ------------------
|              |  |  |  |                  |                |                 |                    | Shares Purchased | Maximum Number    
|              |  |  |  |                  |                |                 |                    | As Part of       | of Shares that May
|              |  |  |  |                  |                |                 |                    | Publicly         | Yet Be Purchased  
|              |  |  |  | Total Number of  | Average Price  | Announced Plans | Under the Plans or
|Period        |  |  |  | Shares Purchased | Paid per Share | or Program      | Programs          
|             
|April
2004    |  |  |  | 215,000          |                | $10.70          |                    | 215,000          |                   
|May 2004      |  |  |  | 1,373,000        |                | 9.95            |                    | 1,373,000        |                   
|October 2004  |  |  |  | 674,000          |                | 16.92           |                    | 674,000          |                   
|November 2004 |  |  |  | 812,000          |                | 17.46           |                    | 812,000          |                   
|December 2004 |  |  |  | 4,816,000        |                | 20.76           |                    | 4,816,000        |                   
|             
|Total         |  |  |  | 7,890,000        |                | 17.92           |                    | 7,890,000        |                   
|             
|March
2004    |  |  |  | 104,000          |                | $ 6.10          |                    | n/a              |                   
|April 2004    |  |  |  | 6,000            |                | 6.60            |                    | n/a              |                   
|             
|Total(1)      |  |  |  | 110,000          |                | 6.15            |                    | n/a              |                   
|             

|   
|---
|(1)









18

---

Restricted Stock

During the second and fourth quarters of
2004, the Company issued 251,000 shares and 36,500 shares, respectively, of its
restricted stock to senior officers, employees and directors valued at an aggregate
of $3,718,000 pursuant to the Companys 2003 Stock Incentive Plan.

Equity Compensation Plans

The following table summarizes information,
as of December 31, 2004, 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      |  |  |  | 185,000                    |  | $5.16                |  | 3,285,554               | 
|Equity compensation
plans not       approved by security holders |  |  |  |                           |  | N/A                  |  |                        | 
|                                                                
|Total                                                            |  |  |  | 185,000                    |  | 5.16                 |  | 3,285,554               | 
|                                                                
|                                                                

Payment of Dividends to Stockholders

The Company paid dividends on its common
stock in the amount of $0.05 per share on April 14, 2004 (to holders of record on
March 22), on July 14, 2004 (to holders of record on June 24, 2004) and October
13, 2004 (to holders of record on September 23, 2004). The Company paid a dividend
of $0.07 per share on January 11, 2005 to holders of record on December 22, 2004.
Aggregate payments were $18.6 million for dividends declared in 2004. The Company
currently intends to pay a regular quarterly dividend; however, any determination
to pay dividends in the future will be at the discretion of the Board of Directors
and will depend upon OMIs results of operations, financial condition, covenants
and other factors deemed relevant by the Board of Directors. Payment of dividends
is limited by the terms of certain agreements to which OMI and its subsidiaries
are party. (See Note 4 to the Consolidated Financial Statements.)









19

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Item 6.SELECTED FINANCIAL DATA

OMI CORPORATION AND SUBSIDIARIES





|                                               |  |  |  | For The Years Ended December 31,     
|---------------------------------------------- |  |  |  | -------------------------------------
|                                              
|Income
Statement Data:                         |  |  |  | 2004                                 
|                                              
|                                               |  |  |  | (in thousands, except per share data)
|Revenue                                        |  |  |  | $  564,674                           
|Operating Expenses:                            |  |  |  |                                      
|Voyage
Expense                                 |  |  |  | 80,183                               
|Vessel
Expense                                 |  |  |  | 62,801                               
|Charter
Hire Expense                           |  |  |  | 59,996                               
|Depreciation
and Amortization                  |  |  |  | 56,172                               
|General
and Administrative                     |  |  |  | 24,867                               
|Provision
for Settlement Loss                  |  |  |  |                                      
|and
Related Expenses                           |  |  |  |                                     
|Provision
for Impairment Loss on Vessels       |  |  |  |                                     
|(Gain)
Loss on Disposal of VesselsNet         |  |  |  | (1,726)                              
|Operating Income                               |  |  |  | 282,381                              
|Interest Expense                               |  |  |  | 34,460                               
|Net Income                                     |  |  |  | 245,695                              
|                                              
|Share
and Per Share Data:                      |  |  |  |                                      
|Basic Earnings per Common Share                |  |  |  | $     2.87                           
|Diluted Earnings
per Common Share              |  |  |  | $     2.86                           
|Weighted Average Shares Outstanding:           |  |  |  |                                      
|Basic                                          |  |  |  | 85,712                               
|Diluted                                        |  |  |  | 85,839                               
|Cash Dividend
Declared per Common Share        |  |  |  | $     0.22                           
|                                              
|Balance
Sheet Data at End of Year:             |  |  |  |                                      
|Cash and Cash
Equivalents                      |  |  |  | $   41,805                           
|Vessels Held for Sale                          |  |  |  |                                     
|Vessels and
Other PropertyNet                 |  |  |  | 1,487,598                            
|Construction in Progress (Newbuildings)        |  |  |  | 116,895                              
|Total Assets                                   |  |  |  | 1,771,006                            
|Current Portion of Long-Term
Debt              |  |  |  | 33,200                               
|Long-Term Debt                                 |  |  |  | 907,236                              
|Total Stockholders Equity                     |  |  |  | 767,402                              
|                                              
|Other
Data:                                    |  |  |  |                                      
|Time Charter Equivalent Revenue(a)             |  |  |  | $  483,566                           
|EBITDA(b)                                      |  |  |  | 336,327                              
|Capital Expenditures:                          |  |  |  |                                      
|Vessels,
Other Property and Construction in    |  |  |  |                                      
|Progress
Payments                              |  |  |  | 675,639                              
|Payments for
Drydocking                        |  |  |  | 4,087                                
|Ratio of Total Debt to Total
Capitalization(c) |  |  |  | 55%                                  
|Ratio of Earnings
to Fixed Charges(d)          |  |  |  | 5.5x                                 
|                                              
|Fleet
Data at End of Year:                     |  |  |  |                                      
|Number of Vessels                              |  |  |  | 42                                   
|Average Age of Fleet (Years)                   |  |  |  | 2.8                                  
|                                              
|                                              

|   
|---
|(a)







20

---







| | a non-GAAP measure, eliminates this
  distinction and provides more meaningful information to us than voyage revenues,
  the most directly comparable GAAP measure. TCE revenues are also widely used by
  investors and analysts in the tanker shipping industry for comparing financial performance
  between companies and to industry averages. The following table reconciles TCE revenues
  with voyage revenues.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                          |  |                |      | For
        The Years Ended December 31,
|----------------------------------------- |  | -------------- | ---- | ----------------------------------------
|                                         
|                                          |  | 2004           | 2003 | 2002                                    
|                                         
|                                          |  | (in thousands)
|TCE revenue:                             
|Revenue                                   |  | $564,674       |      | $323,153                                
|Less: Other Revenue                       |  | 925            |      | 225                                     
|                                         
|Voyage
          and Time Charter revenue |  | 563,749        |      | 322,928                                 
|Voyage Expenses                           |  | 80,183         |      | 53,756                                  
|                                         
|TCE
          Revenue                     |  | $483,566       |      | $269,172                                
|                                         
|                                         





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





|                                               |  |                |      | For
        The Years Ended December 31,
|---------------------------------------------- |  | -------------- | ---- | ----------------------------------------
|                                              
|                                               |  | 2004           | 2003 | 2002                                    
|                                              
|                                               |  | (in thousands)
|Net Income                                     |  | $245,695       |      | $ 76,471                                
|Add (Subtract):                               
|Interest Expense                               |  | 34,460         |      | 23,854                                  
|(Benefit) Provision for Income
          Taxes |  |               |      |                                        
|Depreciation and Amortization                  |  | 56,172         |      | 50,891                                  
|                                              
|EBITDA                                         |  | $336,327       |      | $151,216                                
|                                              
|                                              





|(c) |  | Ratio of Total Debt to Total Capitalization
  was calculated as debt (current debt plus long-term debt) divided by capitalization
  (debt plus stockholders equity).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                      
|(d) |  | The ratios of earnings to fixed
  charges were calculated as follows:                                                                                                





|                                                  |  |                               |      | For
        The Years Ended December 31,
|------------------------------------------------- |  | ----------------------------- | ---- | ----------------------------------------
|                                                 
|                                                  |  | 2004                          | 2003 | 2002                                    
|                                                 
|                                                  |  | (in thousands, except ratios)
|Earnings:                                        
|Earnings
          from continuing operations(1)  |  | $245,695                      |      | $ 76,471                                
|Add:                                             
|Fixed
          charges(2)                        |  | 53,849                        |      | 40,586                                  
|Amortization
          of capitalized interest(3) |  | 552                           |      | 480                                     
|Distributions
          from joint ventures(4)    |  |                              |      |                                        
|Subtract:                                         |  |                               |      |                                         
|Capitalized
          interest                    |  | (3,717)                       |      | (1,230)                                 
|                                                 
|Total
          Earnings                          |  | $296,379                      |      | $116,307                                
|                                                 
|Fixed charges:(2)                                
|Interest
          expense                        |  | 31,359                        |      | 21,895                                  
|Capitalized
          interest                    |  | 3,717                         |      | 1,230                                   
|Capitalized
          expense relating to debt    |  | 12,778                        |      | 10,234                                  
|Estimate
          of interest in rental expense  |  | 5,995                         |      | 7,227                                   
|                                                 
|Total Fixed charges                               |  | $ 53,849                      |      | $ 40,586                                
|                                                 
|Ratio of Earnings to Fixed Charges                |  | 5.50x                         |      | 2.87x                                   



The ratios of earnings to fixed charges were calculated based on information from our records. For purposes of these tables, earnings is calculated by adding: (1) pre-tax income from continuing operations before income or loss from equity investees; (2) fixed charges; (3) amortization of capitalized interest; and (4) distributed income of equity investees; and then subtracting: capitalized interest. Fixed charges is calculated by adding: interest expensed and capitalized; amortized capitalized expenses related to indebtedness; and an estimate of the interest within rental expense. The term equity investees means investments that we account for using the equity method.








21

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MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND
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 42 vessels (including two handymax product
carriers delivered in January and March 2005, and excluding two handysize product
carriers disposed of in January 2005) aggregating approximately 3.6 million dwt,
consisting of 15 Suezmaxes (including two chartered-in vessels), two Panamax product
carriers and 25 handysize and handymax product carriers. 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 and 2. Business and PropertiesOur Fleet, for a list of our vessels.

2004 Financial Summary

Our 2004 activities reflect our strategy
of growing the fleet by acquiring modern double hull vessels and marketing such
vessels to maximize profit in strong markets and remaining profitable in weaker
tanker markets. As of December 31, 2004, the average age of our vessels (excluding
two vessels sold and a new building delivered in January of 2005) was 2.61
years old, which makes OMI an operator and owner of one of the youngest large fleet
of double hull vessels in the world. At the same time, OMI has implemented a long-term
dividend policy to maximize shareholder value while maintaining a strong balance
sheet and being able to take advantage of opportunities in the market as they arise.
OMI is a growing Company, with strategies to maintain shareholder value and to maintain
a high quality fleet of vessels. We will continue to grow our fleet beyond our 2004
acquisitions with the delivery of 12 vessels (two vessels of which are operating
leases), seven of which will be delivered in 2005 and five in 2006.

OMIs net income of $245.7 million
for the year ended December 31, 2004 was a record level in the Companys history
(the Company was spun-off from a Delaware company in 1998). Revenue of $564.7 million
for the year ended December 31, 2004 increased $241.5 million or 75 percent over
the comparable year ended December 31, 2003. Average spot rates earned by our Suezmax
fleet were 88 percent higher for the year compared to the previous year. The following
table illustrates the five year average TCE rates for our Suezmax fleet:





|               |  | Suezmax Fleet  Daily TCE
rate
|-------------- |  | ------------------------------
|Period         |  | 2004                          
|              
|Twelve
Months  |  | $ 63,703                      
|Fourth Quarter |  | 90,062                        
|Third Quarter  |  | 49,717                        
|Second Quarter |  | 43,415                        
|First Quarter  |  | 62,285                        
|              

Our Company benefited in 2004 from the robust
tanker market (see Market Overview) resulting in higher earnings for the Suezmax
fleet. Earnings also benefited from acquisitions, with five more Suezmax vessels
acquired in mid-2004 at a time when rates were very strong compared to prior year
rates and seven product carriers delivered at various times in 2004 operating on
both time charters and in the spot market.

Due to our strong financial performance,
we were able to continue to meet our goal of strengthening our Balance Sheet. Our
current financial condition permitted us to establish a regular quarterly dividend
in the first quarter 2004. We increased the dividend paid in the fourth quarter
by 40%, from $0.05 per share to $0.07 per share, and again in the first quarter
of 2005 by another 14 % to $0.08 per share. We also repurchased 7.9 million common
shares for an aggregate of $141.4 million under a share repurchase program approved
by the Board of Directors. In December 2004, the Board of Directors established new authority for the Company
to repurchase from time to time of up to 4,250,000 shares of common stock.





| 
|-
|1







22

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Over
the past year our liquidity increased with unrestricted cash and amounts available
under our lines of credit aggregating approximately $303.0 million at December 31,
2004.

OMIs financial performance in 2004
and currently, in 2005, is based on the following key elements of our business strategy:





|(1) |  | concentration in two vessel categories:
  Suezmax tankers, which offer size advantages (over aframaxes and Panamaxes) and
  geographic flexibility (over VLCCs), and product carriers because of increasing
  demand for petroleum products in areas where no additional refineries have recently
  been built. Our product carrier sizes allow us to participate in most trading areas
  and over the last year we have added six ice class handysize product carriers to
  our fleet,
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) |  | maintain high quality vessels and
  improve standards of operation through improved environmental procedures, crew training
  and maintenance and repair procedures,                                                                                                                                                                                                                                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) |  | manage the balance of the ability
  to capture upside in stronger spot markets with predictable profits from long-term
  contracted revenues to cover a certain portion of fixed costs. This strategy has
  been effective in strong and weak tanker markets, giving us comfort when we look
  at the vagaries of the shipping markets,                                                                                                                                                
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) |  | maintain a balance between purchasing
  vessels as market conditions and opportunities arise and maintaining prudent financial
  ratios (e.g. leverage ratio),                                                                                                                                                                                                                                                                                                                         
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(5) |  | enter into strategic alliances and
  operate from geographic locations that provide us with market opportunities to improve
  our vessel utilization and earnings,                                                                                                                                                                                                                                                                                                                     
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6) |  | monitor and manage the repurchase
  of common stock when such opportunities arise, and                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(7) |  | balance paying dividends to shareholders
  with other factors, such as acquiring assets at opportunistic times.                                                                                                                                                                                                                                                                                                                                                                        

The following are several key drivers for our
Revenues and Operating income including:





|(1) |  | spot rates in the Suezmax tanker
  market and product tanker market (for those product carriers operating in the spot
  market or on time charters with profit sharing arrangements) (Note: for the next
  twelve months, we estimate a variation of $1,000 in the rate per day for vessels
  on spot would increase/decrease net income by $11 million or $0.13 per share),
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                             
|(2) |  | number of revenue earning operating
  days from the addition of vessels to our fleet,                                                                                                                                                                                                                                                                                       
|    |  |                                                                                                                                                                                                                                                                                                                                                                             
|(3) |  | marketing our vessels by the formation
  of strategic alliances (better scheduling of vessels and positioning, resulting
  in better utilization) and capitalizing on our experience and reputation in the
  industry (ability to take advantage of premium cargoes), and                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                                                                                                             
|(4) |  | controlling costs.                                                                                                                                                                                                                                                                                                                                                          

The Company studies market indicators and trends
when making decisions for managing risks, 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, inventory levels
by geographic regions, world tanker newbuildings (orderbook) and deletions
(scrappings and conversions).

Regulations (see Market Overview) that
call for the phasing out of single hull vessels have positively impacted Owners
with modern fleets. As of January 2005, our entire fleet of vessels is double hull.
Compliance with 2003 International Maritime Organization (IMO) regulations
for the phasing out of the majority of single hull vessels by 2010 is no longer
an issue to be addressed by the Company, our customers or investors, since we no
longer have non-double hull vessels.









23

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The following are several other significant items that have occurred
during 2004 and the first quarter of 2005:

Vessel Acquisitions





| |  | In March 2005, we took delivery from
the shipyard of the BRAZOS, a handymax product carrier, which operates in the spot
market.                                                                                                                                                                                                                                                                                                                                                                                                
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In January 2005, we took delivery
from the shipyard of the LAUREN, a handymax product carrier, which operates in the
spot market. We also agreed to time charter in two Suezmax vessels for seven years
upon the vessels deliveries from a shipyard in the second and third quarters
of 2005 (see Contractual Obligations section).                                                                                                                                                                                           
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In December 2004, we purchased a
2004 built 1B ice-class product carrier, the RUBY, contracted from another owner
in September. The RUBY operates in the spot market.                                                                                                                                                                                                                                                                                                                                                          
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In July and August 2004, we took
delivery of five Suezmax vessels, the ANGELICA, JANET, ADAIR, ARLENE, INGEBORG and
one product carrier, the HORIZON, and agreed to acquire seven vessels under construction
(see Capital Expenditures section). The first of which, the JEANETTE was delivered
in October 2004. The vessel was involved in a collision shortly following delivery
and was out of service until December. The JEANETTE began a short-term time charter
in December and will operate in the spot market in 2005.
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | In February, April and July 2004,
OMI took delivery of four handysize 1A ice-class product carrier newbuildings, the
LOIRE, GARONNE, SAONE and GANGES, three of which began five year time charters with
profit sharing upon delivery and one of which operates in the spot market.                                                                                                                                                                                                                                            
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | During March 2004, we contracted
for a handymax 1A ice-class product carrier scheduled to be delivered in August
2005 (see Capital Expenditures section).                                                                                                                                                                                                                                                                                                                                                                      

Dispositions of Non-Double Hull Vessels





| |  | In January 2005, we sold our last
two non-double hull vessels, the TANDJUNG AYU and BANDAR AYU. The vessels were built
in 1993 and were operating on time charters due to expire in mid-2005. A gain of
approximately $2.8 million will be recorded in the first quarter of 2005.                                                                      | 
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|  |  |                                                                                                                                                                                                                                                                                                                                                        | 
| |  | In May, June, August, November and
December 2004, OMI sold three single hull Panamax vessels, the VOLGA, NILE and ELBE,
two single hull product carriers, the SHANNON and ALMA and a 1986 built single hull
ultra large crude carrier, (ULCC), the SETTEBELLO. The aggregate net
gain on the disposal of the vessels was approximately $1.7 million. | 

Time Charter Contacts





| |  | Two time charter contracts for product
carriers expiring in 2004 and 2005 were extended, one to December 2005 and the other
to March 2006.                                             
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                        
| |  | In October 2004, OMI contracted for
  a new three year time charter for a product carrier, the NECHES, which began after
  the expiration of its previous time charter in October 2004.

Financing (see Financial Condition and Capital
Resource section)





| |  | In December 2004, we issued $250
  million of convertible senior notes due 2024 (Convertible Senior Notes).
  The notes are senior unsecured obligations of OMI Corporation and bear interest
  at the rate of 2.875% per annum.  The proceeds of the Notes were used to repurchase
  common stock, pay down outstanding balances under the Companys revolving credit
  facilities and for general corporate purposes.                                                                                   
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | During November 2004, we entered
  into a ten year $375 million credit facility at LIBOR plus a margin payable semi-annually.
  The facility repaid a portion of the $250 million unsecured bridge loan (obtained
  in July 2004 to finance the initial payments for seven vessels and seven construction
  contracts) and amended and restated our $245 million credit facility. This facility
  is secured by 13 vessels, nine of which were refinanced and four vessels of which
  were acquired in 2004.







24

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| |  | During 2004, OMI drew on various
  term loans aggregating $236.9 million, including a ten year $142 million term loan
  obtained in November 2004. The term loans are secured by nine vessels acquired in
  2004.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2005, 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 Part I, Items 1 and
2. Business and Properties Regulations, for additional discussion of the tanker
industry.

Suezmax Tanker Overview

The tanker market was very strong in the
fourth quarter of 2004, and the average TCE for Suezmax tankers in the West Africa
to U.S. trade was about double that of the preceding quarter, more than double compared
to the rate in the same period of last year, and the highest since the early 1970s.
In addition, the average Suezmax TCE rate in 2004 was the highest since the early
1970s.  This was the result of strong world oil demand due to improving world economic
activity especially in the U.S., China and Southeast Asia, slower than anticipated
return of nuclear plants taken off-hire for safety inspections in Japan, and the
decline of the value of the U.S. Dollar.  Furthermore, the tanker market benefited
from high OPEC oil production, especially from the long-haul Middle East, which
replaced the loss of Iraqi oil production through a pipeline to the Mediterranean,
the persistent shortfall of oil production in Venezuela and the loss of short-haul
oil supply due to hurricane activity in the Gulf of Mexico. Rates increased notwithstanding
an increase in the world tanker fleet.  Tanker freight rates have fallen from their
very high levels thus far in the first quarter of 2005, but they are still at very
profitable levels.







|Note:
As of 12/31/04     | 
|------------------------ | 
|Source: Industry Sources | 







25

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The average OPEC oil production in the fourth quarter of 2004 totaled
about 29.8 million barrels per day (b/d), an average increase of 2.0
million b/d, or 7.2% compared to the same period last year.  Most of OPECs
oil production growth came from the long-haul Middle East.  After a reduction to
its oil production quota, beginning April 1, 2004, OPEC increased its quota three
times by a total of 3.5 million b/d, during the balance of 2004, to 27 million b/d
(excluding Iraq).  The OPEC quota increases were the result of strong world oil
demand growth, relatively low oil inventories as well as tight oil markets and very
high oil prices.  Last December, OPEC oil producers decided to reduce their oil
production by 1.0 million b/d beginning January 1, 2005, to support weakening oil
prices and to prevent oil inventory build with the seasonally low oil demand second
quarter in mind.  However, even after the cut, which is expected to average less
than 1.0 million b/d, OPEC oil production, including Iraq, the first quarter of
2005 is expected to be at a higher rate than the same period a year ago.  In their
January 30, 2005 meeting, OPEC oil producers decided to extend last Decembers
agreement.

World oil demand in the fourth quarter
of 2004 was higher than the preceding quarter as well as substantially higher than
the same period of last year.  World oil demand in 2004 was about 2.8 million b/d,
or 3.5% higher than in 2003.  This was due to increasing world economic activity,
especially in the United States, Latin America, China and Southeast Asia.  World
oil demand is expected to increase further in the foreseeable future but at a slower
rate as measures are taken to moderate economic activity, especially in the U.S.
and China as well as expected persistent high oil prices due to low spare oil production
capacity and ongoing geopolitical risks.

Total commercial crude oil and petroleum
products inventories in the United States, Western Europe and Japan at the end of
2004 were about 32 million barrels, or 1.5% higher than the year earlier level,
and marginally above the average of the last five years.  At the same time, crude
oil inventories were 1.1% higher and petroleum products inventories were marginally
below the average of the last five years, respectively.  Oil inventories are expected
to increase early in 2005 but decrease later in the year, and by year-end be below
the level prevailing at the end of 2004.







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

The world tanker fleet totaled 305.7 million dwt
at the end of 2004, up by 17.0 million dwt or 5.9% from the year-end 2003 level.
The tanker orderbook totaled about 82.9 million dwt, or 27.1% of the existing fleet
at the end of 2004.  Approximately 28.2 million dwt are for delivery in 2005, 23.4
million dwt in 2006, 25.0 million dwt in 2007 and most of the balance in 2008.
The tanker orderbook includes 74 Suezmaxes of about 11.7 million dwt or 29.4% 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
2004, approximately 33.3 million dwt or 10.9% of the total tanker fleet was 20 or
more years old, including 11.8 million dwt or 3.9% of the fleet which was 25 or more years old.







26

---

Furthermore, 12 Suezmaxes
were 20 or more years old, including 4 which were 25 or more years old.  Tanker
sales for scrap and for Floating Production Storage Offloading (FPSO)
conversion totaled about 10.4 million dwt in 2004, including nine Suezmaxes and
11 VLCCs.

The EU adopted new tanker regulations which
commenced on October 21, 2003.  In response to the EU regulations, the IMO adopted
new strict tanker regulations which will commence on April 5, 2005.  These regulations
primarily prevent single-hull tankers of 5,000 dwt and above from carrying heavy
fuel oil from early April 2005, accelerate the phase-out of single-hull tankers
to 2010, in line with EU rules, and force all single-hull tankers to comply with
the Condition Assessment Scheme (CAS) from the age of 15 years, commencing
in 2005.  Finally, tankers with only double sides or double bottoms will be allowed
to operate beyond 2010, provided that these tankers were in service on July 1, 2001.
Such tankers will not be allowed to operate beyond the date on which they become
25 years of age after the date of delivery.

At the end of 2004, there were about 104.2
million dwt of tankers or 34.1% 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 2004 and, in the fourth quarter, the average spot TCE
for handysize product tankers in the Caribbean was more than 50% higher than the
preceding quarter rate and the rate prevailing in the same period of last year.
In addition, the average rate in 2004 was the highest level since the early 1970s.
The product tanker market strength has been the result of increasing world economic
activity especially in the U.S., China and Southeast Asia, and high growth in the
demand for oil, notwithstanding a substantial increase of the world product tanker
fleet.

The world product tanker fleet, (which
ranges from small 10,000 dwt product carriers to larger than 100,000 dwt for coated
aframax tankers) totaled about 60.0 million dwt at the end of 2004, up by about
13.4% from the year-end 2003 level.  It should be noted that about 2.6 million dwt
in the oil/chemical carrier tanker category were added to the product
tanker fleet as of September 30, 2004.  These tankers have been trading in the product
tanker market.

The product tanker orderbook for delivery
over the next few years totaled about 27.9 million dwt, or about 46.5% of the existing
product tanker fleet at the end of 2004.   It should be noted that about 2.7 million
dwt in the oil/chemical carrier tanker category were added to the product
tanker orderbook as of September 30, 2004. Approximately 9.5 million dwt are for
delivery in 2005, 9.5 million dwt in 2006, 7.2 million dwt in 2007 and most of the
balance in 2008.  At the end of 2004, approximately 11.5 million dwt or 19.2% of
the existing fleet was 20 or more years old.  The orderbook for handysize and handymax
product tankers at the end of 2004 totaled about 12.3 million dwt or 34.3% of the
existing handysize and handymax product tanker fleet.

Total commercial inventories of oil products
in the United States, Western Europe and Japan at the end of 2004 were 16 million
barrels or 1.2% higher than the same time a year ago, and marginally below the average
of the last five years.  At the same time, inventories of middle distillates, the
seasonal product, in these areas were marginally below last year but 1.1% above
the last five years average. Commercial middle distillates in the United States
at the end of 2004 were approximately 6.1% and 4.5% below last year and the last
five years average, respectively.







27

---







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

The tanker market is expected to benefit as a
result of higher world oil demand due to improving world economic activity, especially
in the U.S., Latin America, China and Southeast Asia, higher oil production by the
long-haul Middle East OPEC members, possible disruptions due to political instability
in short-haul oil producers Venezuela and Nigeria and stricter tanker regulations
by the IMO and the European Union.

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 of 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 day or month, 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.







28

---

These estimates are generally
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 are cyclical and tend to fluctuate with changes in charter
rates and the cost of newbuildings. Management reviews
vessels for potential impairment when events or circumstances indicate that their
values may have declined. In order to evaluate impairment of a vessel, assumptions
about the future condition of the vessel and its operations are made. These assumptions
are applied in a model in which we estimate the undiscounted projected future cash
flows associated with the vessel and comparisons to the vessels carrying value
to determine if a writedown to fair value is required. This process involves subjective
assumptions about future events, and discount factors to be applied to projected
cash flows when it is determined that an impairment 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. 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 were
adopted by the EU, which commenced in 2003, and by the IMO, to commence on April
5, 2005, which phase out single hulled tankers at different periods from OPA 90.
As a result, six of our single hull vessels would have been affected at various
dates in the phase out schedule of single hull vessels. OMI disposed of all of our
remaining non-double hull vessels in 2004 and in January 2005. See the Market
Overview section for more details about the impact of the latest laws and
regulations.

For the year ended December 31, 2004, there
were no impairment issues. Currently, we do not own or operate any vessels which are not double hull.

Depreciation Expense

Depreciation for financial reporting purposes
is provided on the straight-line method based on the estimated useful lives of the
assets up to the assets estimated salvage value. We estimate the useful lives
of our vessels to be approximately 25 years. 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. New regulations with
phase-out dates for non-double hull vessels affected the depreciable lives of two
vessels beginning in 2004; however both of these vessels were disposed of during
2004 and the accelerated depreciation expense for the portion of the year before
the disposal was not material.

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.







29

---

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. Our drydock amortization expense
was $1.8 million in 2004. This expense is included in Depreciation and amortization
expense. The prepaid drydock balance at December 31, 2004 on the Balance Sheet
of $3.6 million represents unamortized prepaid drydock balances for seven of
our 40 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 (clean) 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. We also have several contracts of affreightment
(COAs), which are agreements providing for the transportation of a specific
quantity of cargo over a specific time period but without designating specific vessels
or voyage schedules, thereby allowing flexibility in scheduling. COAs can either
have a fixed rate or a market-related rate.

Voyage 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.
Our use of time charters also ameliorates in part the seasonality of the spot market
business. Generally, spot markets are strongest in the first and fourth quarters
of the calendar year, and weaker in the second and third quarters. Operating the
vessel in the spot market affords the owner greater speculative opportunity, which
may result in high rates when ships are in high demand or low rates (possibly insufficient
to cover costs) when ship availability exceeds demand. Ship charter rates are affected
by world economics, international events, weather conditions, strikes, governmental
policies, supply and demand, and many other factors beyond our control.

Consistent with industry practice, we use
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 the tanker industry distinguishes
vessels in the market primarily on the size and design configuration of the vessels,
the type of cargo vessels are equipped to transport and the arrangements under which
the vessels chartered, 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, by our reportable segments, the Crude oil fleet and Clean fleet;







30

---







| |  | the number of operating or TCE revenue
  days, which is the number of days our vessels were available for employment, by
  our Crude oil fleet and Clean fleet; and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                    
| |  | average daily TCE revenue and average
  daily vessel expense by our Crude oil fleet and Clean fleet.                                                               

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.

Charter hire expense is the payment made
to the owner of a 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. Charter hire expense also includes
the offset of gross revenues of the Gemini pool for the two non-OMI vessels included
in the pool.

Insurance expense varies with overall insurance
market conditions as well as the insureds loss record, level of insurance
and desired coverage. During 2004, we had modest increases in our Protection and
Indemnity (P & I) rates, (i.e. liability insurance) while our hull
and machinery (i.e. asset insurance) costs have stayed relatively flat, notwithstanding
the rise in values of the vessels. Our loss record for P & I was worse than
expected in 2004, and rates for P & I coverage will be up during 2005. Certain
other insurances, such as basic war risk, also stayed relatively flat. War risk
premiums based on voyages into designated war risk areas are often for the account
of the charterers.

For the Year Ended December 31, 2004
Compared to the Year Ended December 31, 2003

Time Charter Equivalent Revenue

Consolidated TCE revenue comprises revenue
from vessels operating on time charters (TC) and voyage revenue less
voyage expenses from vessels operating in the spot market (spot).  The
Company earned TCE revenue of $483.5 million for the year ended December 31, 2004
compared to $269.2 million for the year ended December 31, 2003.

The following table summarizes our consolidated
TCE results for the year ended December 31, 2004, compared to the year ended December
31, 2003:





|                                 |  |  |  | For the Years Ended |      |              
|-------------------------------- |  |  |  | ------------------- | ---- | -------------
|                                 |  |  |  | December 31,        | Net 
|                                 |  |  |  | 2004                | 2003 | Change       
|                                
|                                 |  |  |  |                     |      | (In millions)
|Time
Charter Equivalent Revenue: |  |  |  |                     |      |              
|Voyage and
time charter revenue  |  |  |  | $563.7              |      | $322.9       
|Voyage expenses                  |  |  |  | 80.2                |      | 53.7         
|                                
|Time
charter equivalent revenue  |  |  |  | $483.5              |      | $269.2       
|                                
|                                

The following table summarizes TCE revenue by
our two reporting segments, the crude oil fleet and the product carrier or clean
fleet for the year ended December 31, 2004, compared to the year ended December
31, 2003:

|                                 |  |  |  | For the Years Ended |      |              
|-------------------------------- |  |  |  | ------------------- | ---- | -------------
|                                 |  |  |  | December 31,        | Net 
|                                 |  |  |  | 2004                | 2003 | Change       
|                                
|                                 |  |  |  |                     |      | (In millions)
|Time
Charter Equivalent Revenue: |  |  |  |                     |      |              
|Crude Oil Fleet                  |  |  |  | $352.3              |      | $145.5       
|Product Carrier Fleet            |  |  |  | 131.2               |      | 123.7        
|                                
|Total                            |  |  |  | $483.5              |      | $269.2       
|                                
|                                

In addition to analyzing TCE revenue by reportable
segment, we also analyze fluctuations by fleet and type of charter (spot or time).
In both 2004 and 2003, the majority of our tonnage (primarily our Suezmax vessels)
operated in the spot market giving us the ability to take advantage of the strong
spot market. Currently 80% of our vessels dwt (26 vessels) operate in the spot market
and 16 of our 42 vessels operate on time charters (see Our Fleet in Part I), five







31

---

of which have profit sharing arrangements. Our time charters with
profit sharing arrangements have a floor rate and profit sharing without a cap,
which enables us to benefit from strong tanker markets while protecting our downside.
Revenue generated by time charters gives the Company the ability to cover certain
fixed charges (vessel expenses, general and administrative expenses and interest
expense) during weak periods when spot rates are not as strong. Total revenue increased
significantly for the year ended December 31, 2004 compared with 2003 year due primarily
to higher rates in 2004 generated by vessels operating in the spot market. (See
discussion below for the fluctuation analysis of TCE revenue and the Market Overview
section for explanations for the increased rates during the periods in the spot
market.) During the year ended December 31, 2004, 73 percent or $353.0 million of
our TCE revenue was earned by vessels operating on spot and 27 percent or $130.5
million of our TCE revenue was earned by vessels operating on TC.

The following table summarizes TCE revenue
by our two reporting segments, the crude oil fleet and the product carrier fleet
by TCE revenue generated by vessels operating on spot charters for the year ended
December 31, 2004, compared to the year ended December 31, 2003:

|                                   |  |  |  | For the Years Ended |      |              
|---------------------------------- |  |  |  | ------------------- | ---- | -------------
|                                   |  |  |  | December 31,        | Net 
|                                   |  |  |  | 2004                | 2003 | Change       
|                                  
|                                   |  |  |  |                     |      | (In millions)
|TCE
Revenue for Vessels on Spot:   |  |  |  |                     |      |              
|Crude Oil Fleet                    |  |  |  | $340.4              |      | $133.6       
|Product Carrier
Fleet              |  |  |  | 12.6                |      | 19.9         
|                                  
|Total                              |  |  |  | $353.0              |      | $153.5       
|                                  
|%
Increase in Spot Revenue in 2004 |  |  |  |                     |      |              
|                                  

TCE revenue of $353.0 million was earned by vessels
operating in the spot market during the year ended December 31, 2004 compared to
$153.5 million earned during the year ended December 31, 2003. The increase in earnings
of $199.4 million (130%) was the result of (1) 1,166 more operating days in 2004
for five Suezmax vessels acquired in the third quarter of 2004 and two Suezmax vessels
acquired in August 2003 (2) higher spot rates for 10 Suezmax vessels in 2004 compared
to rates achieved in the comparable period in 2003, (3) additional TCE revenue relating
to 643 operating days generated by pool members of the Gemini Tankers Suezmax pool
operated by OMI beginning in December 2003, (4) additional TCE revenue from 145
operating days from four product carriers acquired in 2004 and (5) 100 additional
operating days from three product carriers whose TCs expired and began operating
on spot charters.

The following table summarizes TCE revenue
by our two reporting segments, the crude oil fleet and the product carrier fleet
by TCE revenue generated by vessels on time charters for the year ended December
31, 2004, compared to the year ended December 31, 2003:

|                                                             |  |  |  | For the Years Ended |      |              
|------------------------------------------------------------ |  |  |  | ------------------- | ---- | -------------
|                                                             |  |  |  | December 31,        | Net 
|                                                             |  |  |  | 2004                | 2003 | Change       
|                                                            
|                                                             |  |  |  |                     |      | (In millions)
|TCE
Revenue for Vessels on TC                                |  |  |  |                     |      |              
|Crude Oil Fleet                                              |  |  |  | $ 11.9              |      | $ 11.8       
|Product Carrier Fleet                                        |  |  |  | 118.6               |      | 103.8        
|                                                            
|Total                                                        |  |  |  | $130.5              |      | $115.6       
|                                                            
|%
of TC Revenue for Vessels on TC to Total TCE       Revenue |  |  |  | 27%                 |      | 43%          
|                                                            

TCE revenue of $130.5 million was earned by vessels
on time charter during the year ended December 31, 2004 compared to $115.6 million
earned during the year ended December 31, 2003. The increase in earnings of $14.9
million (13%) was the result of (1) 856 more operating days in 2004 for four product
carriers acquired in 2004, (2) higher profit sharing recorded on three vessels as
a result of better market conditions over the past twelve months for product carriers
and (3) higher time charter revenue for two product carrier extensions with higher
rates starting in 2004. Increases in TCE revenue earned were offset in part by decreases in TC revenue
for the expiration of four time charters in 2004 resulting in 261 less operating
days in the fourth quarter (three vessels began operating on spot charters and one
vessel that terminated its time charter was sold in August 2004).







32

---

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

Vessel expenses and charter hire expenseVessel
expense and charter hire expense increased $43.3 million for the year ended December
31, 2004 compared to the year ended December 31, 2003.





| |  | Vessel expenses Vessel
  expenses increased $6.0 for the year ended December 31, 2004 compared to the same
  periods in 2003, primarily as a result of vessels acquired offset by a reduction
  in vessel expenses for the disposal of the older single hull vessels, which had
  higher operating costs than the newbuildings acquired.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                                          
| |  | Charter hire expense Charter hire expense increased $37.3 million for the year ended December 31, 2004
  compared to the same periods in 2003, primarily for the charter hire expense for
  the two vessels that commenced operating in the Gemini Suezmax pool.                                                                        

In December 2003, OMI began operating Gemini Tankers
(Gemini), which is a wholly owned subsidiary of OMI and operates a pool
for double hull Suezmax vessels.  Currently, there are 17 Suezmax vessels (15 from
OMI and two from a European shipowner) operating in the pool. The earnings of the
pool are allocated to the pool members using an agreed upon formula.  The gross
revenues of Gemini are reflected in OMIs consolidated revenues, and the charter
hire expense for the two non-OMI vessels are included in OMIs consolidated
charter hire expense. Revenue increased by $40.8 million and charter hire expense
increased also by approximately $40.8 million relating to revenue and expenses of
the pool members consolidated with OMI Revenue and expenses on a gross basis. Since
Gemini did not commence until December 2003, there was no effect on the first eleven
months of 2003.

Depreciation and amortization expenseDepreciation
and amortization expense of $56.2 million increased $5.3 million compared to $50.9
million for the year ended December 31, 2003. Increases in depreciation expense
in 2004 resulted from the acquisition of vessels (six in 2003 and eleven in 2004),
which was partially offset by the disposal of vessels with a lower depreciable basis
(five vessels in 2003 and six in 2004).

General and administrative (G&A)G
& A increased $8.3 million for the year ended December 31, 2004, over the comparable
period primarily as a result of increases in salaries of $4.9 million for new personnel
due to increased fleet size and other additional corporate requirements as well
as bonuses, expenses of the newly formed London office (which commenced in August 2004)
and additional professional fees of $1.6 million relating to Sarbanes Oxley compliance,
audit and other professional services.

(Gain) loss on disposal of vesselsThe
Gain on disposal of vessels for the year ended December 31, 2004 of $1.7 million
resulted from the disposal of six single hull vessels, three Panamax vessels, two
product carriers and our ULCC vessel. Loss on disposal of vessels of $14.4 million
for the year ended December 31, 2003, resulted from the sale of five single hull
handysize product carriers. The following table illustrates gains and losses on
disposals by reportable segment for the years ended December 31, 2004 and 2003:





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









33

---

Interest expense Interest expense during the year ended
December 31, 2004 increased $10.6 million compared to the year ended December 31,
2003. Interest expense was higher during the year ended December 31, 2004 primarily
for two reasons: first, the increase in the average debt balance during the 2004
period as a result of additional financing for the acquisition of vessels (including
increases in amortization of debt issuance costs) and second, the increase in fixed
rate debt (the 7.625 percent $200 million unsecured Senior Notes issued in November
2003 that replaced variable rate bank debt based on LIBOR plus a margin). Additionally,
increases in interest expense in 2004 were reduced by higher capitalized interest
for more vessels under construction during 2004 compared to 2003.

The following table is a breakdown of Interest
expense for the year ended December 31, 2004 compared to the year ended December
31, 2003:



|                                                                                       |  | For the Years Ended
|-------------------------------------------------------------------------------------- |  | -------------------
|                                                                                       |  | December 31,       
|                                                                                       |  | 2004               
|                                                                                      
|                                                                                       |  | (In millions)      
|Interest
before swap interest, capitalized interest &
amortization of debt issue
costs |  | $31.7              
|Impact of swaps                                                                        |  | 3.4                
|Capitalized interest                                                                   |  | (3.7)              
|Amortization
of debt issuance cost                                                     |  | 3.1                
|                                                                                      
|Interest
expense                                                                       |  | $34.5              
|                                                                                      
|                                                                                      

Interest incomeInterest income increased
$0.5 million during the year ended December 31, 2004, compared to the year ended
December 31, 2003. The increase was primarily due to higher average cash equivalents
balance in 2004.

(Loss) gain on investmentsThe
loss on investment of $3.1 million recorded during the year ended December 31, 2004
resulted from expenses related to the terminated Stelmar acquisition. A gain on
disposal of investments of $0.6 million was recorded during the year ended December
31, 2003.

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, 2004 Versus Year
Ended December 31, 2003 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
$160.0 million for the year ended December 31, 2004 compared to the year ended December
31, 2003. The net increase in Vessel Operating Income during 2004 was primarily
attributable to increases in the Suezmax TCE revenue resulting from improved spot
rates and increased earnings for the five Suezmaxes delivered in July and August
of 2004 and two Suezmax vessels delivered in August of 2003.









34

---

BREAKDOWN BY FLEET

|                                                  |  | For the Years Ended
|------------------------------------------------- |  | -------------------
|(In thousands, except daily TCE rates & expenses, |  | December 31,       
|number of vessels and days)                       |  | 2004               
|                                                 
|CRUDE
OIL FLEET:                                 
|Suezmaxes:                                       
|TCE
revenue(1),(2)                                |  | $319,247           
|Vessel
expenses                                   |  | 18,454             
|Charter
hire expense                              |  | 59,496             
|Depreciation
and amortization                     |  | 23,393             
|                                                 
|Vessel
Operating Income                           |  | $217,904           
|                                                 
|Average
daily TCE                                 |  | $ 63,703           
|Average
daily vessel expense                      |  | 5,092              
|Average
number of OMI vessels for the period*(3)  |  | 11.9               
|Number
of OMI TCE revenue days                    |  | 4,324              
|Number
pool member TCE revenue days(4)            |  | 687                
|Handysize Crude
Oil Carriers-on Time Charter:(5) 
|TCE
revenue(1)                                    |  | $ 11,924           
|Vessel
expenses                                   |  | 2,542              
|Depreciation
and amortization                     |  | 2,857              
|                                                 
|Vessel
Operating Income                           |  | $  6,525           
|                                                 
|Average
daily TCE                                 |  | $ 16,290           
|Average
daily vessel expense                      |  | $  3,473           
|Average
number of vessels for the period          |  | 2                  
|Number
of TCE revenue days                        |  | 732                
|Other
Crude Carriers Sold in 2004:(6)            
|TCE
revenue(1)                                    |  | $ 21,187           
|Vessel
expenses                                   |  | 5,131              
|Depreciation
and amortization                     |  | 2,426              
|                                                 
|Vessel
Operating Income                           |  | $ 13,630           
|                                                 
|Number
of TCE revenue days                        |  | 782                
|                                                 
|Total
Vessel Operating Income                     |  | $238,059           
|                                                 
|                                                 



|                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: Average daily vessel expenses are computed using the number of days in the period which OMI owned 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)                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                   
|(6)                                                                                                                                                                                                                                                                                                







35

---

Product Carrier Fleet Results Of Operations

Vessel Operating Income increased $6.3
    million for the year ended December 31, 2004 over 2003. Increases in Vessel
    Operating Income in 2004 were attributable to the increases for four product
    carriers acquired in 2003 and increases for the seven product carriers acquired
    in 2004. Additionally, increases in profit sharing for the year ended 2004
    for three of the five vessels that earned profit sharing in both 2003 and
    2004 also attributed to increased Vessel Operating Income. Increases were
    offset by decreases in earnings for the five and two single hull product
    carriers that were disposed of in 2003 and 2004, respectively.

BREAKDOWN BY FLEET



|                                                  |  | For the Years Ended
|------------------------------------------------- |  | -------------------
|(In thousands, except daily TCE rates & expenses, |  | December 31,       
|number of vessels and days)                       |  | 2004               
|                                                 
|PRODUCT CARRIER FLEET:                           
|TCE
revenue:(1)                                   |  |                    
|Productson
time charter(2)                       |  | $118,646           
|Productson
spot                                  |  | 12,563             
|                                                 
|Total
TCE Revenue                                 |  | 131,209            
|Vessel
expenses                                   |  | 37,026             
|Charter
hire expense                              |  |                   
|Depreciation
and amortization                     |  | 27,134             
|                                                 
|Vessel
Operating Income                           |  | $ 67,049           
|                                                 
|Average
daily vessel expense(3)                   |  | $  4,549           
|Average
number of vessels for the period(4)       |  | 22.2               
|Productson
time charter:                         |  |                    
|Average
daily TCE                                 |  | $ 15,868           
|Number
of TCE revenue days                        |  | 7,477              
|Productson spot:                                 |  |                    
|Average
daily TCE                                 |  | $ 22,555           
|Number
of TCE revenue days                        |  | $    557           
|                                                 



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









36

---

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

Consolidated Results

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 were 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | We sold five single hull product
  carriers, which resulted in loss on disposals aggregating $14.4 million.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Management approved a plan
      to sell its largest single hull ULCC vessel. 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 took an impairment charge of $2.8
  million for two single hull Panamax vessels.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | As a result of new IMO regulations
  adopted in 2003, we reduced the depreciable lives of two vessels, which would have
  accelerated the depreciation expense by $0.7 million a year from 2004 to 2007 and
  $0.1 million from 2007 to 2015. The two vessels affected were sold in 2004.                                                                                                                                                                                                                                                      
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | 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 were used to pay down outstanding
  balances under the Companys revolving credit facilities and for general corporate
  purposes.                                                                                                                                                                                                                                  
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | We 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. The amount of the fine and related
  expenses aggregated $6.0 million, and was expensed in the fourth quarter 2003.

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.

The following table summarizes the Companys
results of time charter equivalent revenue for the year ended December 31, 2003,
compared to the year ended December 31, 2002:



|                                 |  |  |  | For the Years Ended |      |              
|-------------------------------- |  |  |  | ------------------- | ---- | -------------
|                                 |  |  |  | December 31,        | Net 
|                                 |  |  |  | 2003                | 2002 | Change       
|                                
|                                 |  |  |  |                     |      | (In millions)
|Time
Charter Equivalent Revenue: |  |  |  |                     |      |              
|Voyage and
time charter revenue  |  |  |  | $322.9              |      | $201.4       
|Voyage expenses                  |  |  |  | 53.7                |      | 37.9         
|                                
|Time
charter equivalent revenue  |  |  |  | $269.2              |      | $163.5       
|                                
|                                

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 oil tanker
fleet operating in the spot market were from higher spot rates beginning in late
2002 to 2003.







37

---

The following tables illustrate 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       
|                                  
|                                   |  |  |  |                     |      | (In millions)
|TCE
Revenue for Vessels on Spot:   |  |  |  |                     |      |              
|Crude Oil Fleet                    |  |  |  | $133.6              |      | $ 54.6       
|Product Carrier Fleet              |  |  |  | 19.9                |      | 18.5         
|                                  
|Total                              |  |  |  | $153.5              |      | $ 73.1       
|                                  
|%
Increase in Spot Revenue in 2003 |  |  |  |                     |      |              
|                                  

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), one chartered-in vessel that was
  redelivered and off-hire for drydock.                                                                                                                                                                                                   

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 2002;
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 and as a percent of total TCE revenue for each of the 2003
and 2002 years:



|                                                             |  |  |  | For the Years Ended |      |              
|------------------------------------------------------------ |  |  |  | ------------------- | ---- | -------------
|                                                             |  |  |  | December 31,        | Net 
|                                                             |  |  |  | 2003                | 2002 | Change       
|                                                            
|                                                             |  |  |  |                     |      | (In millions)
|TCE
Revenue for Vessels on TC:                               |  |  |  |                     |      |              
|Crude Oil Fleet                                              |  |  |  | $ 11.8              |      | $11.9        
|Product Carrier Fleet                                        |  |  |  | 103.8               |      | 78.5         
|                                                            
|Total                                                        |  |  |  | $115.6              |      | $90.4        
|                                                            
|%
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.







38

---

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 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 the increase in the
size of the fleet in 2003 and the additional expense related to costs associated
with implementation of the requirements of the Sarbanes-Oxley Act of 2002.

Loss on disposal of vesselsLoss
on disposal of vessels was $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 investmentsA
gain on 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 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.







39

---

BREAKDOWN BY FLEET



|                                                     |  | For the Years Ended
|---------------------------------------------------- |  | -------------------
|(In thousands, except daily TCE rates & expenses,    |  | December 31,       
|number of vessels and days)                          |  | 2003               
|                                                    
|CRUDE OIL FLEET:                                    
|Suezmaxes:                                          
|TCE
revenue(1),(2)                                   |  | $107,928           
|Vessel
expenses                                      |  | 12,571             
|Charter
hire expense(2)                              |  | 18,587             
|Depreciation
and amortization                        |  | 15,076             
|                                                    
|Vessel
Operating Income                              |  | $ 61,694           
|                                                    
|Average
daily TCE (Spot)                             |  | $ 33,961           
|Average
daily vessel expense                         |  | $  5,125           
|Average
number of OMI vessels for the period*(3),(4) |  | 8.7                
|Number
of TCE revenue days                           |  | 3,133              
|Number
of non-OMI TCE revenue days(5)                |  | 45                 
|ULCC:                                                |  |                    
|TCE
revenue(1)                                       |  | $  6,822           
|Vessel
expenses                                      |  | 1,978              
|Depreciation
and amortization                        |  | 1,959              
|                                                    
|Vessel
Operating Income (Loss)                       |  | $  2,885           
|                                                    
|Average
daily TCE                                    |  | $ 18,689           
|Average
daily vessel expense                         |  | $  5,419           
|Average
number of vessels for the period             |  | 1                  
|Number
of TCE revenue days                           |  | 365                
|Panamaxes:                                           |  |                    
|TCE
revenue(1)                                       |  | $ 18,888           
|Vessel
expenses                                      |  | 6,633              
|Depreciation
and amortization                        |  | 5,500              
|                                                    
|Vessel
Operating Income                              |  | $  6,755           
|                                                    
|Average
daily TCE                                    |  | $ 17,744           
|Average
daily vessel expense                         |  | $  6,058           
|Average
number of vessels for the period             |  | 3                  
|Number
of TCE revenue days                           |  | 1,065              
|Handysize
Crude Oil Carrierson time charter:        |  |                    
|TCE
revenue(1)                                       |  | $ 11,828           
|Vessel
expenses                                      |  | 2,242              
|Depreciation
and amortization                        |  | 2,856              
|                                                    
|Vessel
Operating Income                              |  | $  6,730           
|                                                    
|Average
daily TCE                                    |  | $ 16,193           
|Average
daily vessel expense                         |  | $  3,072           
|Average
number of vessels for the period             |  | 2                  
|Number
of TCE revenue days                           |  | 730                
|Total
Vessel Operating Income                        |  | $ 78,064           
|                                                    
|                                                    



|                                                                                                                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note:Average daily vessel expenses are computed using the number of days in the period which OMI owned 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.
|                                                                                                                                                                                                                                                                                                  
|*includes two vessels
  chartered-in during the periods shown.                                                                                                                                                                                                                                    







40

---







|(1) |  | Consistent with general
  practice in the tanker shipping industry, we use TCE revenue (defined as voyage
  and time charter revenues less voyage expenses) as a measure of equating revenue
  generated from a voyage charter to revenue generated from a time charter, which
  assists us in making operating decisions about the deployment of our vessels and
  their performance. Voyage expenses comprise all expenses relating to particular
  voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions.
  Under time-charter contracts the charterer pays the voyage expenses, whereas under
  voyage charter contracts the shipowner pays the voyage expenses. TCE revenues, a
  non-GAAP measure, eliminates this distinction and provides more meaningful information
  to us than voyage revenues, the most directly comparable GAAP measure. TCE revenues
  are also widely used by investors and analysts in the tanker shipping industry for
  comparing financial performance between companies and to industry averages.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) |  | Includes TCE revenue and
  expenses generated by the pool.  The Suezmax pool began December 2003 and includes
  our 10 Suezmaxes and two Suezmaxes owned by another pool member.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) |  | In August 2003, two 2000
  built Suezmax vessels were acquired. In September and October 2002, two Suezmax
  newbuildings were delivered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) |  | In June 2002, a Suezmax
  vessel previously chartered-in was purchased, and sold in a sale leaseback transaction.
  The vessel was chartered-in as an operating lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5) |  | Number of TCE revenue days
  for the two Suezmaxes owned by another pool member.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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
|------------------------------------------------- |  | -------------------
|(In thousands, except daily TCE rates & expenses, |  | December 31,       
|number of
    vessels and days)                   |  | 2003               
|                                                 
|PRODUCT CARRIER FLEET:                            |  |                    
|Productson
          spot:                       |  |                    
|TCE
revenue(1)                                    |  | $ 19,938           
|Vessel
expenses                                   |  | 6,657              
|Charter
hire expense                              |  | 1,242              
|Depreciation
and amortization                     |  | 4,318              
|                                                 
|Vessel
Operating Income                           |  | $  7,721           
|                                                 
|Average
daily TCE                                 |  | $ 12,913           
|Average
daily vessel expense                      |  | $  4,579           
|Average
number of vessels for the period*(2),(3)  |  | 4.2                
|Number
of TCE revenue days                        |  | 1,544              
|Productson time charter:                         |  |                    
|TCE
revenue(1),(4)                                |  | $103,769           
|Vessel
expenses                                   |  | 27,144             
|Charter
hire expense                              |  | 2,839              
|Depreciation
and amortization                     |  | 20,800             
|                                                 
|Vessel
Operating Income                           |  | $ 52,986           
|                                                 
|Average
daily TCE                                 |  | $ 15,572           
|Average
daily vessel expense                      |  | $  4,189           
|Average
number of vessels for the period*(5)      |  | 18.3               
|Number
of TCE revenue days                        |  | 6,664              
|Total
Vessel Operating Income                     |  | $ 60,707           
|                                                 
|                                                 





|                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: Average daily vessel expenses are computed using the number of days in the period which OMI owned 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.
|                                                                                                                                                                                                                                                                                                   
|* includes one chartered-in vessel. The vessel operated in the spot market from October 2002 (delivery date) until March 2003 and then went on time charter. The vessel was redelivered to its owner in October 2003.                                                                              
|                                                                                                                                                                                                                                                                                                   
|(1)                                                                                                                                                                                                                                                                                                







41

---







|    |  | Under time-charter contracts the charterer pays the voyage expenses, whereas under voyage charter contracts the shipowner pays the voyage expenses. TCE revenues, a non-GAAP measure, eliminates this distinction and provides more meaningful information to us than voyage revenues, the most directly comparable GAAP measure. TCE revenues are also widely used by investors and analysts in the tanker shipping industry for comparing financial performance between companies and to industry averages.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) |  | During 2003, three vessels
  were sold in the fourth quarter and two vessels were sold in the second quarter.
  In the second quarter of 2002, one vessel was sold.                                                                                                                                                                                                                                                                                                                                          
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3) |  | A vessel was chartered-in
  during October 2002 for a one year period.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) |  | For the year ended 2003,
  OMI recognized profit sharing, which is the amount over the base time charter rate
  for five vessels, of approximately $8.4 million compared to $4.4 million for the
  year ended 2002.                                                                                                                                                                                                                                                                                          
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5) |  | In January and March of
  2003, two handymax product carriers were acquired. In April and July of 2003, two
  Panamax product carriers were acquired. In January and March 2002, two handymax
  product carriers and one handysize product carrier were acquired.                                                                                                                                                                                                                                            

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, 2004, and December
31, 2003:



|                                                       |  |  |  | For the Years Ended |      |              
|------------------------------------------------------ |  |  |  | ------------------- | ---- | -------------
|                                                       |  |  |  | December 31,        |     
|                                                       |  |  |  | 2004                | 2003 | Change       
|                                                      
|                                                       |  |  |  |                     |      | (In millions)
|Condensed
Cash Flows                                  
|Provided
(Used) By:                                    |  |  |  |                     |      |              
|Operating Activities                                   |  |  |  | $ 266.8             |      | $
142.5      
|Investing Activities                                   |  |  |  | (622.7)             |      | (184.6)      
|Financing Activities                                   |  |  |  | 348.9               |      | 50.0         
|                                                      
|Net
(Decrease) Increase in Cash and Cash Equivalents   |  |  |  | (7.0)               |      | 7.9          
|Cash and Cash
Equivalents at the Beginning of the Year |  |  |  | 48.8                |      | 40.9         
|                                                      
|Cash
and Cash Equivalents at the End of the Year       |  |  |  | $  41.8             |      | $
48.8       
|                                                      
|                                                      

Working Capital

The primary components of working capital
are Cash and cash equivalents (Cash) and Traffic receivables.  We supplement
working capital requirements as needed with borrowings under our revolving credit
facilities (see Long-Term Debt Obligations) and other borrowings. Cash
of $41.8 million at December 31, 2004 decreased $7.0 million from $48.8 million
at December 31, 2003 as excess cash was primarily used to reduce revolving credit
facilities. Net cash provided by operating activities of $266.8 million for the
year ended December 31, 2004 increased $124.3 million compared to $142.5 million
for the year ended December 31, 2003, primarily from the significantly higher net
earnings of the Company (see Results of Operations). Our working capital
decreased by $10 million from $48.8 million at December 31, 2003 to $38.8 million
at December 31, 2004. The decrease in working capital is the result of an increase
in current assets of $17.5 million and an increase in current liabilities of $27.5
million. At December 31, 2004, current assets increased primarily from increases
in Traffic receivables of $45.6 million, partially offset by decreases in Vessel
held for sale of $16.5 million and Cash and Other receivables of $13.1 million.
At December 31, 2004, current liabilities increased primarily because of increases
in Current portion of long-term debt of $11.8 million (see Long-Term Debt
Obligations below), Dividend payable of $6.0 million, Charter hire payable
of $5.8 million and Accounts payable and accrued liabilities of $2.4 million. Increases
relating to certain current assets and liabilities are attributable to timing differences
of cash receipts and disbursements and accruals for revenue and expenses in a particular
period and are not necessarily comparable between periods.

Our current intention, subject to the Companys
    financial condition, the amount of funds generated from operations, the level
    of capital expenditures and approval by our Board of Directors, is to continue
    to pay a regular quarterly dividend to holders of our common stock. It is
    also our intention to buy back shares opportunistically. During 2004, the
    Company repurchased 7,890,000 common shares for an aggregate of $141.4 million
    (not including 0.1 million shares for $0.7 million in forfeited restricted
    stock awards) under a share repurchase program approved by the Board of Directors.







42

---

In September 2004, the Company retired all treasury
shares and resolved to retire all future common stock repurchases and forfeitures
immediately (see Acquisition and Retirement Treasury Stock section).

As of December 31, 2004, the Company had
total projected capital commitments to acquire vessels of approximately $240.2 million
(see Capital Expenditures section), which includes the remaining payments aggregating
$40.2 million for the two vessels delivered in the first quarter of 2005 and construction
in progress installments and final payments for 8 product carriers currently under
construction and to be delivered in 2005 and 2006. We anticipate drydocking approximately
twelve vessels in 2005, which could approximate $8.1 million (see 2005 Drydocks).
During the first quarter of 2005, we received proceeds from the disposal of two
vessels of approximately $36.8 million.

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

At December 31, 2004, Vessels, CIP and
Other Property aggregating $1,757.9 million increased a net of $607.2 million from
$1,150.7 million at December 31, 2003. Capital expenditures contributing to the
increase in Vessels, CIP and Other Property of $675.6 million were primarily for:





|(1) |  | Athenian Sea Carriers, Ltd. (Athenian)
  and Arcadia Ship Management (Arcadia) acquisitions (see further explanations
  below):                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                           
|    |  |                                                                                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                           
|    |  |                                                                                                                                                                                                                                                            
|    |  |                                                                                                                                                                                                                                                           
|    |  |                                                                                                                                                                                                                                                            
|(2) |  | purchase of a 2004 built product
    carrier (contracted for in September) for $37.1 million,                                                                                                                                                              
|    |  |                                                                                                                                                                                                                                                            
|(3) |  | final payments on delivery, in addition
    to installment payments, aggregating $91.6 million for four product carrier newbuildings
    delivered,                                                                                                        
|    |  |                                                                                                                                                                                                                                                            
|(4) |  | installment payments on vessels under
    construction (excluding payments on the construction contracts acquired from Athenian
    included in (1) and installments for vessels delivered in 2004 included in (3) above)
    aggregating $18.7 million and
|    |  |                                                                                                                                                                                                                                                            
|(5) |  | capital expenditures for improvements
    to vessels owned and capitalized interest aggregating $5.2 million.                                                                                                                                              

Increases in Vessels, CIP and Other Property
    were offset by $68.4 million (this amount is not net of accumulated depreciation)
    reduction to Vessels for the disposals of our three single hull Panamax vessels,
    two single hull product carriers and our ULCC vessels previously held for
    sale at December 31, 2003.

Cash used by investing activities was $622.7
million for the year ended December 31, 2004, compared to cash used by investing
activities of $184.6 million for the year ended December 31, 2003. During the 2004
period, $675.6 million was used for capital expenditures primarily for the purchase
of vessels and deposit/installments for vessels under construction and $59.2 million
was provided by cash proceeds from the sale of the six vessels, as detailed above.

In addition to cash payments for capital
expenditures mentioned above, we paid $4.1 million in drydock costs for the year
ended December 31, 2004.

Athenian Acquisition

In June 2004, OMI entered into an agreement
    for the acquisition of four double hull Suezmax vessels (two built in 2003
    and two in 2004), one product carrier built in July 2004 and seven product
    carriers under construction (one of which was delivered in October 2004) at the same
    shipyard from Athenian. The total contract cost was $585.0 million ($520.7
    million, excluding the vessel not delivered, explained in the next paragraph).
    As of December 31, 2004, there were six product carriers under construction;
    two were delivered in 2005 and the remaining four are scheduled to be delivered
    in 2006. Approximately, $142.7 million is payable to the shipyard for the
    remaining product carriers in 2005 and in 2006 (included in the Capital Expenditures
    for Vessel Acquisitions section).



43

---



The Company terminated one of the agreements
to acquire one 2003 built Suezmax vessel mentioned above that we were to acquire
from Athenian for a contract price of $64.4 million, as delivery was not tendered
in accordance with the requirements of the agreement. The seller disputes the matter,
which is now in arbitration. OMI had paid 10% or $6.4 million upon contract, which
is being held in escrow.

The 2004
acquisitions were paid with proceeds from the issuance of common stock, draw downs
from credit facilities, term loans, temporary financing that was later replaced
with long-term financing (we initially drew down on a bridge loan in July 2004)
and cash.

Capital Expenditures

2005 Drydocks

OMI evaluates certain vessels to determine
if a drydock, special survey, both a drydock combined with a special survey or a
postponement is appropriate for each vessel. On a regular basis we have certain
vessels inspected and evaluated in anticipation of a drydock during the year. Currently,
we anticipate drydocking twelve vessels, five during the first half of 2005 (three
in the first quarter) and seven during the second half of 2005, for an estimated
aggregate cost of $8.1 million. The vessels are expected to incur up to approximately
260 off-hire days.

The following is a breakdown of the estimated
drydock cost (in millions) for the first half of 2005 by quarter and the second
half of 2005 with allocation of off-hire days by vessel segment and charter type
(spot or TC) for product carriers:





|                    |  |  |  | Number of Days   | Number of Days    | Number of Days      | Projected
|------------------- |  |  |  | ---------------- | ----------------- | ------------------- | ---------
|                    |  |  |  | First Qtr. -2005 | Second Qtr. -2005 | Second half of 2005 | Costs    
|                   
|Crude
Fleet:       
|CrudeSuezmax
Fleet |  |  |  |                 |                   | 25                  |          
|Clean Fleet:        |  |  |  |                  |                   |                     |          
|ProductsTC         |  |  |  | 20               |                   | 20                  |          
|Productsspot       |  |  |  | 40               |                   |                    |          
|                   
|Total               |  |  |  | 60               |                   | 45                  |          
|                   
|                   

Capital Expenditures for Vessel Acquisitions

At December 31, 2004, we had commitments
to take delivery of 10 product carriers. The contract costs for the 10 vessels aggregated
$354.2 million. As of December 31, 2004, $113.9 million in payments have been made
on these contracts, $108.2 million of which were paid in 2004. On January 4, 2005
and March 1, 2005, two product carriers, the LAUREN and the BRAZOS, both with original
contract costs of $38.7 million each were delivered and began short-term time
charters upon delivery from the shipyard. The vessels were purchased with cash and
are unencumbered. Three of the remaining vessels will be delivered in 2005 and five
in 2006. Two of the vessels to be delivered in 2005 will begin five year time charters
upon delivery.

The following table is the remaining payments
on vessels to be delivered (in millions):





|Year                     |  |  |  |  |  |  |  |  | Payments
|------------------------ |  |  |  |  |  |  |  |  | --------
|                        
|2005                     |  |  |  |  |  |  |  |  | $135.8  
|2006                     |  |  |  |  |  |  |  |  | 104.4   
|                        
|Total
Remaining Payments |  |  |  |  |  |  |  |  | $240.2  
|                        
|                        



|                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: 2005 payments include payment of $18.7 million in January 2005 for the delivery of the LAUREN and $21.5 million in March 2005 for the delivery of the BRAZOS.







44

---

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.

Long-Term Debt Obligations and Credit Arrangements

As of December 31, 2004, long-term debt
obligations increased $375.5 million to $940.4 million from $564.9 million at December
31, 2003. Long-term obligations at December 31, 2004, consisted of the following:





| |  | Term loans under bank mortgage agreements
  at a margin plus variable rates above the London Interbank Offering Rate (LIBOR)
  of $410.4 million;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                    
| |  | Reducing revolving facilities at
  a margin plus variable rates above LIBOR of $80.0 million;                                                      
|  |  |                                                                                                                                                    
| |  | 7.625% Unsecured Senior Notes due
  December 2013 of $200.0 million and                                                                            
|  |  |                                                                                                                                                    
| |  | 2.875% Unsecured Convertible Senior
  Notes due December 2024 of $250.0 million.                                                                   

Variable rates for term loans and revolving
facilities at December 31, 2004 ranged from 2.77 percent to 3.7375 percent (including
margins). The margins ranged from 0.8 percent to 1.375 percent. Under our loan agreements,
LIBOR can range from 30 days to one year.

As of December 31, 2004, OMI had various
interest rate swaps that fix notional amount aggregating $129.8 million (not including
$62.4 million that begins in 2006) of variable rate debt ranging from 2.90 percent
to 4.86 percent (excluding margins) with maturity dates of the swaps ranging from
October 2005 to July 2009.

Cash
provided by financing activities was $348.9 million for the year ended December
31, 2004, compared to cash used by financing activities of $50.0 million for the
year ended December 31, 2003. During the year ended December 31, 2004, we made $673.6
million in principal payments ($274.2 million were scheduled payments and $399.4
million were unscheduled prepayments on our revolving lines of credit) and received
$1,049.2 million in proceeds from the issuance of debt;





| |  | $250.0 million proceeds from 2.875%
  Unsecured Convertible Senior Notes issued in December 2004 (approximately $100.0
  million of the proceeds were used to repurchase common stock and excess proceeds
  of $150 million were used to make voluntary payments on our credit facilities),
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                            
| |  | $165.0 million proceeds from our
  $375 revolving facility to repay other debt,                                                                                                                                                                                                            
|  |  |                                                                                                                                                                                                                                                                                            
| |  | $250.0 million in proceeds from a
  bridge loan (used as temporary financing for our third quarter acquisitions),                                                                                                                                                                          
|  |  |                                                                                                                                                                                                                                                                                            
| |  | $147.3 million in draw downs under
  our $348 revolving facility, (used for initial payments for the Athenian and Arcadian
  acquisitions as well as for working capital purposes) and                                                                                                     
|  |  |                                                                                                                                                                                                                                                                                            
| |  | $236.9 million in proceeds from term
  loans, which were used for the purchase of nine vessels.                                                                                                                                                                                            

We received proceeds of $137.7 million from
    the issuance of 12,204,000 shares of common stock and the exercise of stock
    options, which were also used for the Athenian acquisition. During 2004,
    we paid cash in aggregate amount of $141.4 million to repurchase 7,890,000
    shares of common stock.

Our debt to total capitalization (debt
and stockholders equity) at December 31, 2004 was 55 percent. As of December
31, 2004, the available debt under credit facilities was $261.1 million. In February
2005, we paid $60 million on our $375 million Facility, which had a balance of
$80 million at December 31, 2004.

We expect to use cash from operations and
undrawn balances available to us through our revolving credit facilities or committed
bank debt to finance capital expenditures as discussed below. Since we did not borrow
all funds available under these two credit facilities, there are currently no quarterly
future payments due in the next 12 months.









45

---

Term Loans

OMI Corporation has entered into a number
of term loans to finance the building or acquisition of vessels. All of the term
loans are secured by vessels and require periodic payments of both principal and
interest.

The following table summarizes the term
loans (in millions):





|                        |      | Maturity      |  |                         | Amount
Outstanding
|----------------------- | ---- | ------------- |  | ----------------------- | ------------------
|As of December 31, 2004 | Date |               |  | As of December 31, 2004
|                       
|$ 142.0                 |      | November 2014 |  |                         |                   
|70.8(1)                 |      | August 2012   |  |                         |                   
|64.8                    |      | July 2011     |  |                         |                   
|50.4                    |      | July 2012     |  |                         |                   
|44.0                    |      | December 2008 |  |                         |                   
|40.0                    |      | October 2009  |  |                         |                   
|34.5                    |      | August 2011   |  |                         |                   
|34.3                    |      | August 2011   |  |                         |                   
|4.0                     |      | April 2009    |  |                         |                   
|                       
|                        |      |               |  |                         |                   
|                       



|   
|---
|(1)

Reducing Revolving Credit Facilities

OMI Corporation has two reducing revolving
    credit facilities secured by vessels. On November 23, 2004, we amended and
    restated our $245.0 million facility with an original due date of March 2010
    with a ten year $375.0 million secured reducing revolving credit facility
    (the $375
    Facility).
A portion of the $375 Facility was used to repay in full a $250.0 million bridge
    loan,  which was used to finance the initial payments for 13 vessels acquired
    in July and  August 2004. Borrowings under the $375 Facility bear interest
    at LIBOR plus a margin  of 0.80%. The scheduled reductions of the available
    amount under the $375 Facility  are further reduced upon the disposal of
    a vessel pledged as collateral. As of December  31, 2004, the undrawn amount
    under the $375 Facility was $295.0 million and outstanding  borrowings were
    $80.0 million.

OMI Corporation has another secured reducing
revolving facility which matures on July 27, 2006 ($348 Facility). Borrowings
under the $348 Facility bear interest at LIBOR plus an applicable margin. The applicable
margin varies from 1.375% per annum up to 1.875% per annum depending on the ratio
of our funded debt to our consolidated operating income plus depreciation, amortization
and other non-cash charges (excluding any gains or losses on vessel sales, any writedown
amounts or any impairment reserves) determined on a trailing four quarter basis.
The scheduled reductions of the available amount under the $348 Facility are further
reduced upon the disposal of a vessel pledged as collateral. In January 2005, the
Facility was reduced by $21.8 million for the disposal of two vessels. As of December
31, 2004, the undrawn amount under the $348 Facility was $180.8 million and there
were no outstanding borrowings.

7.625% Unsecured Senior Notes Due 2013

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. The Company has no independent assets or operations within
the meaning of Rule 3-10 of Regulation S-X under the Securities Act.









46

---

2.875% Unsecured Convertible Senior Notes Due 2024

On December 7, 2004, we issued $250.0 million
of convertible senior notes due 2024 (Convertible Senior Notes). The
notes are senior unsecured obligations of OMI Corporation and bear interest at the
rate of 2.875% per annum. Interest on the notes is payable on June 1 and December
1 each year beginning June 1, 2005.

The initial conversion ratio is 32.5355
shares of our common stock per $1,000 principal amount of notes, which is equivalent
to an initial conversion price of approximately $30.74 per share or 46.5% above
our stock price of $20.98 on December 7, 2004.

The Convertible Senior Notes may be
    converted prior to maturity under the following circumstances:



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

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

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

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

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 its stock. As of December 31, 2004, we were in compliance with
all covenants.

Interest-Rate Swaps

OMI enters into interest rate swap and
future rate agreements (FRAs) to manage interest costs and the risk
 associated with changing LIBOR interest rates. As of December 31, 2004, we had
various  interest rate swaps/FRAs aggregating $192.2 million (which includes
a notional amount  of $62.4 million for an interest rate swap that commences
in 2006) on various debt  tranches within a range of 2.9% to 4.86% expiring from
October 2005 to August 2012.  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, 2004, the Company has recorded a liability
of $1.7 million and an asset of $1.5 million related to the fair market value
of these hedges and a corresponding charge of $0.2 million to Other comprehensive
income.

Contracted Time Charter Revenue

OMI has time charter contracts currently
on 18 vessels, seven with profit sharing arrangements (two contracts with profit
sharing arrangements will not begin until such vessels are delivered from the shipyard
in 2005) that expire at various anniversary dates related to the initial contract
or renewal dates to August 2010. The contracted TC revenue schedule below does not
include any estimates for profit sharing in the future periods. We have reduced
future contracted revenue for any estimated off-hire days relating to drydocks and
for the sale of two product carriers sold in January 2005 that had April and July
2005 expiration dates.







47

---

The following table reflects current contracted time charter revenue
from 2005 through 2009:





|                     |  |  |  | 2005  | 2006 | 2007  | 2008 | 2009 
|-------------------- |  |  |  | ----- | ---- | ----- | ---- | -----
|                    
|(In
millions)       
|TC
Revenue           |  |  |  | $82.5 |      | $57.3 |      | $38.9
|Number of Vessels(a) |  |  |  | 15(b) |      | 8(c)  |      | 7(d) 



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

Dividends

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

During 2004, The Board of Directors declared
quarterly dividends aggregating $0.22 per share to shareholders of record at designated
dates aggregating $ 18.6 million (the fourth quarter dividend of $6.0 million was
paid on January 11, 2005). On February 10, 2005, the Board of Directors of OMI approved
an increase in our quarterly dividend from $0.07 per share to $0.08 per share and
declared the $0.08 per share dividend to shareholders of record on March 22, 2005
which will be paid on April 12, 2005.

Acquisition and Retirement of Treasury
Stock

During 2004, the Company repurchased
    7,890,000 common shares for an aggregate of $141.4 million under a share repurchase
    program approved by the Board of Directors. The Company also received 110,391
    restricted shares, which were forfeited in 2004. In September 2004, the Company
    retired all treasury shares and resolved to retire all future common stock
    repurchases and forfeitures immediately.

On December 14, 2004, the Board of Directors
    established new authority for the Company to repurchase from time to time
    of up to 4,250,000 shares of common stock. In the first quarter of 2005 (through
    March 14, 2005), the Company has purchased 101,000
shares for an aggregate of $1.8 million.

Restricted Stock

The Company has granted an aggregate of
1,706,237 shares of restricted stock to certain of its employees, executive officers
and directors under the 2001 Restricted Stock Plan and the 2003 Stock Incentive
Plan, and 110,391 shares have been forfeited. The market value at issuance of the
1,595,846 remaining restricted shares was approximately $11.7 million. Restricted
stock awards granted in July 2001, April 2002, September 2003, May 2004, June 2004
and December 2004 were recorded as unearned compensation as a separate component
of stockholders equity. The Company is amortizing unearned compensation over
the applicable vesting periods.

In May, June and December 2004, OMI awarded
and issued 287,923 shares of restricted stock to employees, executive officers and
directors for a total value at the respective dates of grant of approximately $3.7
million. 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. 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.

Other

During August 2004, the Company terminated
the Common Stock Purchase Agreement dated as of November 13, 2003 between OMI and
Acqua Wellington North American Equities Fund, Ltd.







48

---

Other Commitments and Contingencies

Please refer to the appropriate sections
within the Liquidity and Capital Resource section for other commitments disclosed
(i.e. for capital expenditures relating to vessel purchases under current construction
contracts see Capital Expenditures section.)

Agreement with the Department of Justice

OMI reached an agreement with the U.S.
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. OMI was sentenced on August 6,
2004 according to the agreement and paid a $4.2 million fine and is serving a probationary
period of three years. The amount of the fine and related expenses, aggregating
$6.0 million was expensed in the fourth quarter of 2003.

Arbitration with Athenian Sea Carriers
Ltd.

The Company terminated one of the agreements
to acquire one 2003 built Suezmax vessel, mentioned above, that we were to acquire
from Athenian for a contract price of $64.4 million, as delivery was not tendered
in accordance with the requirements of the agreement. The seller disputes the matter,
which is now in arbitration. OMI had paid 10% or $6.4 million upon contract, which
is being held in escrow.

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; the ultimate resolution of these matters
will not have a material adverse effect on the financial condition, results of operations
or cash flows of the Company. Management accrues an estimate of expense for any
matters that are considered probable of occurring based on the facts and circumstances.

Contractual Obligations

The following table lists contractual obligations
by required payment periods as of December 31, 2004:





|                                  |  |  |  | Payments Due By Period
|--------------------------------- |  |  |  | ----------------------
|                                 
|                                  |  |  |  | Total                 
|                                 
|                                  |  |  |  | (In millions)         
|Contractual
Obligations          
|Long-Term
Debt                    |  |  |  | $940.4                
|Interest on
Fixed Rate Debt       |  |  |  | 187.6                 
|Interest on Variable Rate
Debt(1) |  |  |  | 150.5                 
|Purchase Obligations(2)           |  |  |  | 240.2                 
|Operating Leases(3)               |  |  |  | 72.9                  
|                                 



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

In February 2005, OMI agreed to time charter in
for a seven year period two new Suezmax vessels scheduled for delivery in June and
September of 2005.

Off-Balance-Sheet Arrangements

As of December 31, 2004, we did not have
any significant off-balance-sheet arrangements, as defined in Item 303(a) (4) (ii)
of SEC Regulation S-K.







49

---

Letters of CreditIn the normal course of business, we arranged
for the issuance of a letter of credit by a bank for $1.2 million as collateral,
as required by certain of our operations.

Effects of Inflation

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

Newly Issued Accounting Principles

The FASB recently issued SFAS pronouncements
and interpretations, which are summarized as follows:

In December 2004, FASB issued SFAS 123(R)
which replaces SFAS 123 and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS 123(R) requires compensation costs relating
to share-based payment transactions be recognized in financial statements. This
statement is effective as of the beginning of the first reporting period that begins
after June 15, 2005. In 2003, we adopted the fair value recognition provisions of
SFAS 123, as amended by SFAS 148, to account prospectively for stock options issued
after December 31, 2002. We are required to adopt SFAS 123(R) beginning in the third
quarter of 2005. We expect the adoption of SFAS 123(R) to not have a material adverse
impact on our net income and earnings per share, as we currently do not have share-based
payment transactions.

In January 2003, the FASB released Interpretation
No. 46, as amended, 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. The Company does 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 consolidated financial
statements.

In September 2004, the FASB reached a unanimous
consensus on Emerging Issues Task Force (EITF) 04-08, The Effect
of Contingently Convertible Debt on Diluted Earnings Per Share. EITF 04-08
requires us to include the dilutive effect of our outstanding contingent convertible
notes shares in our diluted earnings per share calculation, regardless of whether
the market price trigger or other contingent conversion feature has been met. Because
our notes include a mandatory cash settlement feature for the principal payment,
we will apply the treasury stock method. This method will result in incremental
dilutive shares when the average fair value of our common stock for a reporting
period exceeds the initial conversion price of $30.74 per share. EITF 04-08 also
requires restatement of all prior periods. Because the average fair value of our
common stock has not exceeded the initial conversion price for all periods presented,
the adoption of this statement has no effect on our historical reported diluted
earnings per share.

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 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;                                           







50

---







| |  | 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  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.

Item 7A. Quantitative and Qualitative
Disclosures about Market Risks

Interest Rate Risk

The Company is exposed to market risk from
changes in interest rates, which could impact its results of operations, financial
condition and cash flow. The Company manages its ratio of fixed to floating rate
debt with the objective of achieving a mix that reflects managements interest
rate outlook at various times. To manage this mix in a cost-effective manner, the
Company, from time-to-time, enters into interest rate swap agreements, in which
it agrees to exchange various combinations of fixed and variable interest rates
based on agreed upon notional amounts. The Company uses such derivative financial
instruments as risk management tools and not for speculative or trading purposes.
At December 31, 2004, the floating rate debt was $490.4 million of the $940.4 million
total debt, and we had interest rate swaps relating to the floating rate debt of
$192.2 million (including $62.4 million on interest rate swaps that commences in
2006). At December 31, 2003, the floating rate debt was $364.6 million, and we had
interest rate swaps relating to the floating rate debt of $275.4 million (including
$57.8 million on interest rate swaps that commenced in 2004). Based on the floating
rate debt at December 31, 2004, a one-percentage point increase in the floating
interest rate would increase interest expense by $3.0 million per year.

The fair market value of the fixed rate
debt on the balance sheet was $454.6 million as of December 31, 2004, and $201.3
million as of December 31, 2003, respectively. Based on the fixed rate debt at December
31, 2004, if interest rates were to increase or decrease by one percent with all
other variables remaining constant, the market value of the fixed rate debt would
increase or decrease interest expense by $4.5 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 to manage the impact of interest rate changes on borrowings
under our variable rate credit facilities. The interest rate swaps are entered into
with a group of financial institutions with investment grade credit ratings, thereby
minimizing the risk of credit loss.









51

---

The table below provides information about interest rates, including
our debt obligations and interest rate swaps at December 31, 2004. For debt obligations,
the table presents principal cash flows and related weighted average interest rates
by expected maturity dates. For interest rate swaps, the table presents notional
amounts and weighted average interest rates by expected contractual maturity dates.





|                        |  |  |  | Balance as of | Expected Maturities(1)
|----------------------- |  |  |  | ------------- | ----------------------
|                       
|                        |  |  |  | Dec. 31, 2004 | 2005                  
|                       
|Long-Term
Debt:         |  |  |  |               |                       
|Fixed-Rate
Debt         |  |  |  | $450,000      |                       
|Average Interest Rate   |  |  |  |               |                       
|                       
|Variable Rate
Debt(2)   |  |  |  | 490,436       |                       
|                       
|Interest Rate Swaps:(3) |  |  |  |               |                       
|Contract Amount         |  |  |  | 129,810       |                       
|Average Fixed Pay Rate  |  |  |  |               |                       
|                       



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

Spot Market Rate Risk

We use written forward freight agreements
(FFAs) as a hedge to protect against the change in spot market rates
earned by some of our vessels. FFAs involve contracts to provide a fixed number
of theoretical voyages at fixed rates thus hedging a portion of the Companys
exposure to the spot charter market. We also had exposure to the spot market by
going long. As at December 31, 2004, we were committed to forward freight agreements
totaling 70,000 metric tonnes with notional principal amount aggregating $1.5 million,
which expire between January 2005 and December 2005. The fair value of forward freight
agreements is the estimated amount that the Company would receive or pay to terminate
the agreements at the reporting date. The fair value of these agreements
was not significant at December 31, 2004.

From January 4, 2005 to March 10, 2005,
    the Company committed to forward freight agreements totaling an aggregate
    notional amount of $17,538,000. We have from time to time taken long positions,
    which have increased our exposure to the spot market. The forward freight
    agreements expire by December 2005.







52

---

Item 8:FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS





|                                                                                    |  |  |  | Page
|----------------------------------------------------------------------------------- |  |  |  | ----
|                                                                                   
|OMI
Corporation and Subsidiaries:                                                   |  |  |  |     
|Consolidated Statements of Income                                                   |  |  |  | 54  
|Consolidated
Balance Sheets                                                         |  |  |  | 55  
|Consolidated Statements of Cash
Flows                                               |  |  |  | 57  
|Consolidated
Statements of Comprehensive Income and Changes in Stockholders Equity |  |  |  | 58  
|Notes to Consolidated Financial
Statements                                          |  |  |  | 59  
|Report of Independent
Registered Public Accounting Firm                             |  |  |  | 80  
|Quarterly Results of Operations
(unaudited)                                         |  |  |  | 81  
|                                                                                    |  |  |  |     
|                                                                                   







53

---







|OMI CORPORATION AND SUBSIDIARIES
|--------------------------------

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





|                                              |  | For
  the Years Ended December 31,
|--------------------------------------------- |  | ----------------------------------
|                                             
|                                              |  | 2004                              
|                                             
|REVENUE                                       |  | $564,674                          
|                                             
|OPERATING
EXPENSES:                          
|Voyage
expense                                |  | 80,183                            
|Vessel
expense                                |  | 62,801                            
|Charter
hire expense                          |  | 59,996                            
|Depreciation
and amortization                 |  | 56,172                            
|General
and administrative                    |  | 24,867                            
|Provision
for settlement and related expenses |  |                                  
|Provision
for impairment loss on vessels      |  |                                  
|(Gain)
loss on disposal of vesselsnet        |  | (1,726)                           
|                                             
|Total
operating expenses                      |  | 282,293                           
|                                             
|OPERATING
INCOME                              |  | 282,381                           
|                                             
|OTHER
INCOME (EXPENSE):                      
|(Loss)
gain on investments                    |  | (3,098)                           
|Interest
expense                              |  | (34,460)                          
|Interest
income                               |  | 872                               
|Othernet                                     |  |                                  
|                                             
|Net
other expense                             |  | (36,686)                          
|                                             
|Income
before income taxes                    |  | 245,695                           
|Benefit for
income taxes                      |  |                                  
|                                             
|NET
INCOME                                    |  | $245,695                          
|                                             
|BASIC
EARNINGS PER COMMON SHARE               |  | $   2.87                          
|                                             
|DILUTED
EARNINGS PER COMMON SHARE             |  | $   2.86                          
|                                             
|WEIGHTED
AVERAGE SHARES OUTSTANDING:          |  |                                   
|Basic                                         |  | 85,712                            
|Diluted                                       |  | 85,839                            
|CASH DIVIDENDS
DECLARED PER SHARE             |  | $   0.22                          



See notes to consolidated financial statements.







54

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In
thousands)

ASSETS





|                                                                      |  | December
  31,
|--------------------------------------------------------------------- |  | --------------
|                                                                     
|                                                                      |  | 2004          
|                                                                     
|CURRENT
ASSETS                                                       
|Cash,
including cash equivalents:                                     |  |               
|2004$10,120,
2003$39,607                                            |  | $   41,805    
|Receivables:                                                          |  |               
|Traffic
receivables, net of allowance for doubtful accounts of $4,183 |  |               
|in
2004 and $1,926 in 2003                                            |  | 72,474        
|Other                                                                 |  | 2,834         
|Current
restricted cash                                               |  | 1,000         
|Prepaid
expenses and other current assets                             |  | 10,701        
|Vessel
held for sale                                                  |  |              
|                                                                     
|Total
current assets                                                  |  | 128,814       
|                                                                     
|VESSELS,
CONSTRUCTION IN PROGRESS AND OTHER PROPERTY                 
|Vessels                                                               |  | 1,638,002     
|Construction
in progress                                              |  | 116,895       
|Other
property                                                        |  | 3,027         
|                                                                     
|Total
vessels, construction in progress and other property            |  | 1,757,924     
|Less
accumulated depreciation                                         |  | 153,431       
|                                                                     
|Vessels,
construction in progress and other propertynet              |  | 1,604,493     
|                                                                     
|DRYDOCKNET
OF AMORTIZATION                                           |  | 3,587         
|NON-CURRENT
RESTRICTED CASH                                           |  | 7,433         
|OTHER ASSETS AND
DEFERRED CHARGES                                     |  | 26,679        
|                                                                     
|TOTAL                                                                 |  | $1,771,006    
|                                                                     
|                                                                     





See notes to consolidated
financial statements.







55

---

OMI CORPORATION AND SUBSIDIARIES

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

LIABILITIES AND STOCKHOLDERS
EQUITY





|                                                                    |  | December
  31,
|------------------------------------------------------------------- |  | --------------
|                                                                   
|                                                                    |  | 2004          
|                                                                   
|CURRENT
LIABILITIES:                                               
|Current
portion of long-term debt                                   |  | $   33,200    
|Accounts
payable                                                    |  | 13,895        
|Accrued
liabilities:                                                |  |               
|Voyage
and vessel                                                   |  | 5,393         
|Interest                                                            |  | 4,059         
|Compensation                                                        |  | 6,663         
|Other                                                               |  | 3,821         
|Deferred
charter hire revenue                                       |  | 7,597         
|Charter
hire payable                                                |  | 7,808         
|Dividend
payable                                                    |  | 5,994         
|Deferred
gain on sale of vessels                                    |  | 1,557         
|                                                                   
|Total
current liabilities                                           |  | 89,987        
|                                                                   
|OTHER
LIABILITIES                                                   |  | 6,381         
|LONG-TERM DEBT                                                      |  | 907,236       
|COMMITMENTS
AND CONTINGENCIES                                      
|STOCKHOLDERS
EQUITY:                                              
|Common
stock, $0.50 per share par value; 150,000 shares authorized, |  |               
|shares
issued and outstanding: 200485,630, 200380,658             |  | 42,815        
|Capital
surplus                                                     |  | 340,147       
|Retained
earnings                                                   |  | 391,476       
|Unearned
compensationrestricted stock                              |  | (6,851)       
|Accumulated
other comprehensive loss                                |  | (185)         
|                                                                   
|Total
stockholders equity                                          |  | 767,402       
|                                                                   
|TOTAL                                                               |  | $1,771,006    
|                                                                   
|                                                                   





See notes to consolidated
financial statements.







56

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands)





|                                                                |  | For
  the Years Ended December 31,
|--------------------------------------------------------------- |  | ----------------------------------
|                                                               
|                                                                |  | 2004                              
|                                                               
|CASH
FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES             
|Net
income                                                      |  | $  245,695                        
|Adjustments
to reconcile net income to net cash provided by     |  |                                   
|operating
activities:                                           |  |                                   
|Depreciation
and amortization                                   |  | 56,172                            
|(Gain)
loss on disposal of vesselsnet                          |  | (1,726)                           
|Loss
(gain) on investments                                      |  | 3,098                             
|Provision
for impairment loss on vessels                        |  |                                  
|Amortization
of deferred gain on sale of vessels                |  | (1,557)                           
|Amortization
of debt issue costs                                |  | 3,101                             
|Amortization
of restricted stock awards                         |  | 2,212                             
|Deferred
income taxes                                           |  |                                  
|Changes
in assets and liabilities:                              |  |                                   
|Increase
in receivables and other current assets                |  | (42,209)                          
|Increase
(decrease) in accounts payable and accrued liabilities |  | 9,304                             
|(Increase)
decrease in other assets and deferred charges        |  | (6,458)                           
|(Decrease)
increase in other liabilities                        |  | (82)                              
|Other                                                           |  | (764)                             
|                                                               
|Net
cash provided by operating activities                       |  | 266,786                           
|                                                               
|CASH
FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:            
|Proceeds
from disposition of vessels                            |  | 59,171                            
|Additions
to vessels and other property                         |  | (675,639)                         
|Payments
for drydocking                                         |  | (4,087)                           
|Payments
for investment in Stelmar                              |  | (3,098)                           
|Proceeds
for investments                                        |  |                                  
|Proceeds
from disposition of joint ventures                     |  |                                  
|Escrow
of funds                                                 |  | 1,002                             
|Proceeds
from notes receivable                                  |  |                                  
|                                                               
|Net
cash used by investing activities                           |  | (622,651)                         
|                                                               
|CASH
FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:            
|Proceeds
from issuance of debt                                  |  | 1,049,191                         
|Payments
on debt                                                |  | (673,627)                         
|Payments
on debt refinanced                                     |  |                                  
|Proceeds
from debt refinanced                                   |  |                                  
|Proceeds
from issuance of common stock                          |  | 140,129                           
|Payments
for debt issue costs                                   |  | (12,778)                          
|Payments
for the purchase of treasury stock                     |  | (141,405)                         
|Payments
on dividends to shareholders                           |  | (12,628)                          
|                                                               
|Net
cash provided by financing activities                       |  | 348,882                           
|                                                               
|NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS            |  | (6,983)                           
|CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR                  |  | 48,788                            
|                                                               
|CASH
AND CASH EQUIVALENTS AT END OF YEAR                        |  | $   41,805                        
|                                                               
|                                                               





See notes to consolidated
financial statements.







57

---

OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME AND CHANGES INSTOCKHOLDERS EQUITYFor Each of The Three Years
in the Period Ended December 31, 2004(In thousands)





|                                    |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | Accumulated |  |           |  |          | 
|----------------------------------- |  |  |  | ------------ |  | ------- |  | --------- |  | ------------ |  | -------- |  | ------------- |  | ----------- |  | --------- |  | -------- | 
|                                    |  |  |  |              |  |         |  |           |  |              |  | Unearned |  |               |  | Other       |  | Total     |  |          | 
|                                    |  |  |  | Common Stock |  |         |  |           |  | Compensation |  |          |  | Comprehensive |  | Stock-      |  | Compre-   | 
|                                    |  |  |  |              |  | Capital |  | Retained  |  | Restricted   |  | Treasury |  | (Loss)        |  | holders    |  | hensive   | 
|                                    |  |  |  | Shares       |  | Amount  |  | Surplus   |  | Earnings     |  | Stock    |  | Stock         |  | Income      |  | Equity    |  | Income   | 
|                                   
|Balance
at January 1, 2002          |  |  |  | 70,248       |  | $35,124 |  | $303,117  |  | $ 72,463     |  | $(4,611) |  |              |  | $(4,277)    |  | $401,816  |  |          | 
|Comprehensive income:               |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|Net
income                          |  |  |  |              |  |         |  |           |  | 15,469       |  |          |  |               |  |             |  | 15,469    |  | $ 15,469 | 
|Other comprehensive income:         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|Unrealized
gain on securities       |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | 39          |  | 39        |  | 39       | 
|Reclassification
adjustment         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|for
gains realized in net           |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|income                              |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | (43)        |  | (43)      |  | (43)     | 
|Net
unrealized gain on              |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|derivatives                         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | (2,008)     |  | (2,008)   |  | (2,008)  | 
|                                   
|Total
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 | 
|Other comprehensive income:         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|Net
unrealized losses on            |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|derivatives                         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | 4,230       |  | 4,230     |  | 4,230    | 
|                                   
|Total
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        |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|awards                              |  |  |  | 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   |  |          | 
|Comprehensive
income:               |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|Net
Income                          |  |  |  |              |  |         |  |           |  | 245,695      |  |          |  |               |  |             |  | 245,695   |  | $245,695 | 
|Other comprehensive
income:         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|Net
unrealized gain on              |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|derivatives                         |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  | 1,874       |  | 1,874     |  | 1,874    | 
|                                   
|Total
comprehensive income          |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  | $247,569 | 
|                                   
|Dividends
on common stock           |  |  |  |              |  |         |  |           |  | (18,622)     |  |          |  |               |  |             |  | (18,622)  |  |          | 
|Issuance of common stock            |  |  |  | 12,204       |  | 6,102   |  | 131,593   |  |              |  |          |  |               |  |             |  | 137,695   |  |          | 
|Exercise of
stock options           |  |  |  | 481          |  | 240     |  | 2,194     |  |              |  |          |  |               |  |             |  | 2,434     |  |          | 
|Purchase of treasury stock          |  |  |  |              |  |         |  |           |  |              |  | 431      |  | $(16,497)     |  |             |  | (16,066)  |  |          | 
|Purchase and
retirement of          |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|common
stock for treasury           |  |  |  | (8,000)      |  | (4,000) |  | (138,081) |  |              |  |          |  | 16,497        |  |             |  | (125,584) |  |          | 
|Issuance of
restricted stock awards |  |  |  | 287          |  | 143     |  | 3,575     |  |              |  | (3,718)  |  |               |  |             |  |           |  |          | 
|Amortization of restricted stock    |  |  |  |              |  |         |  |           |  |              |  |          |  |               |  |             |  |           |  |          | 
|awards                              |  |  |  |              |  |         |  |           |  |              |  | 2,212    |  |               |  |             |  | 2,212     |  |          | 
|                                   
|Balance
as of December 31, 2004     |  |  |  | 85,630       |  | $42,815 |  | $340,147  |  | $391,476     |  | $(6,851) |  |              |  | $ (185)     |  | $767,402  |  |          | 
|                                   
|                                   



See notes to consolidated financial statements.







58

---

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

Note 1Business and Summary of Significant
Accounting Policies



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

ReclassificationsCertain reclassifications
have been made to the 2003 and 2002 financial statements to conform to the 2004
presentation. These reclassifications have no impact on previously reported net
income or cash flows.

To conform to the presentation in 2004,
revenues and voyage expenses have each been increased by $4,201,000 in 2003 and
$2,505,000 in 2002 to reflect broker commissions paid by the Company as a component
of voyage expenses rather than as a reduction of voyage revenues. The corresponding
amount in 2004 was $7,373,000.

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.

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

Revenue Recognition Revenues
are generated from freight billings under voyage charters and time charters.

Voyage charters: Under a voyage
charter and voyages servicing contracts of affreightment (COAs) the
revenues and associated voyage costs, such as fuel, canal tolls and port charges
are recognized ratably over the estimated duration of the voyage (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. OMIs accounting
policy for recognition of voyage freight for vessels operating on voyage charters
and COAs is on the discharge-to-discharge basis. Under this method, voyage revenue
is recognized evenly over the period from the departure of a vessel from its original
discharge port to departure from the next discharge port. Demurrage income, included
in voyage revenue, represents payments by the charterer to the vessel owner when
loading and discharging time exceed the stipulated time in the voyage charter. Demurrage
income is measured in accordance with the provisions of the respective charter agreements
and the circumstances under which demurrage claims arise and is also recognized
ratably over the estimated duration of the voyage to which it pertains. The consolidated
balance sheets reflect the deferred portion of revenues and expenses, which will
be earned in subsequent periods.

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

Pool revenue: Revenues include the
gross revenue generated by vessels in the Gemini Suezmax Pool that began in December
2003.  The Gemini Pool, a pool for double hull Suezmax vessels, is operated by Gemini
Tankers LLC (Gemini), a wholly owned subsidiary of OMI.  Currently,
there are 17 Suezmax vessels (15 of OMIs and two from a European shipowner)
operating in the pool. The earnings of the pool are allocated to the pool members
using an agreed upon formula.  The gross revenues of Gemini are reflected in OMIs
consolidated revenues, and the charter hire expense for the two non-OMI vessels
are included in OMIs consolidated charter hire expense. Since Gemini did not
commence until December 2003, there was no effect on the first eleven months of
2003.







59

---

OMI CORPORATION AND SUBSIDIARIESNOTES 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)



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 includes cash held in escrow accounts pursuant to a sale/leaseback agreement
and as a deposit for a vessel acquisition, which is in arbitration (see Note 10).
The escrow account for the sale/leaseback agreement is collateral for the Companys
obligations under an operating lease arrangement (see Note 7).

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. Vessels useful lives are approximately 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 ten 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 $3,717,000 in 2004,
$1,230,000 in 2003 and $3,114,000 in 2002.

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 $1,777,000 in 2004, $4,223,000 in 2003 and $3,845,000 in 2002 and is
included in depreciation and amortization expense.

Deferred Finance ChargesDeferred
finance charges, included in Other assets and deferred charges, were $24,194,000
at December 31, 2004 and $15,217,000 at December 31, 2003. The charges are amortized
over the life of the related debt and are included in Interest expense. The amount
of the expense was $3,101,000 in 2004, $1,959,000 in 2003 and $2,367,000 in 2002.
During the years ended December 31, 2004 and December 31, 2003, OMI recorded a charge
to (gain) loss on disposal of vessels-net (see Note 11) of $700,000 and $473,000,
respectively, relating to the writedown of deferred finance fees attributed to particular
vessels disposed of during each of the years.

Earnings Per Common ShareIn
accordance with 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.

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.







60

---

OMI CORPORATION AND SUBSIDIARIESNOTES 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)



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 believes that substantially all
its operations are exempt from 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). The Company accounts 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. 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. No stock-based employee compensation expense for stock options was reflected
in net income for the years ended December 31, 2004, 2003 and 2002.

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, 2004:





|                                                              |  | For
  the Years Ended December 31,
|------------------------------------------------------------- |  | ----------------------------------
|                                                             
|                                                              |  | 2004                              
|                                                             
|Net
income as reported                                        |  | $245,695                          
|Stock based compensation expense
determined by using the fair |  |                                   
|value
method                                                  |  |                                  
|                                                             
|Pro
forma net income                                          |  | $245,695                          
|                                                             
|Basic
earnings per common share:                              |  |                                   
|Net
income per common share, as reported                      |  | $   2.87                          
|                                                             
|Net
income per common share, as pro forma                     |  | $   2.87                          
|                                                             
|Diluted
earnings per common share:                            |  |                                   
|Net
income per common share, as reported                      |  | $   2.86                          
|                                                             
|Net
income per common share, as pro forma                     |  | $   2.86                          
|                                                             
|                                                             

The following table includes a summary of the
average fair values of options granted during 2002 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 Year Ended December 31,            |  |  |  | 2002 
|------------------------------------------ |  |  |  | -----
|                                          
|Average
fair value of options granted      |  |  |  | $3.93
|Expected volatility                        |  |  |  | 73%  
|Risk free interest
rate                    |  |  |  | 2.71%
|Dividend yield rate                        |  |  |  | n/a  
|Weighted average
expected lives of options |  |  |  | 3.70 
|                                          









61

---

OMI CORPORATION AND SUBSIDIARIESNOTES 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)



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 uses derivatives to reduce market risks
associated with its operations. The Company is exposed to market risk, such as changes
in interest rates and rates derived from vessels operating in the spot market. Derivative
instruments are recorded as assets or liabilities and are measured at fair value.
Derivatives that are not hedges are adjusted to fair value through income. If the
derivative is a hedge, depending upon the nature of the hedge, changes in the fair
value of the derivatives are either offset against the fair value of assets, liabilities
or firm commitments through income, or recognized in other comprehensive income
until the hedged item is recognized in income. The ineffective portion of a derivatives
change in fair value is immediately recognized into income (see Note 5).

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

In December 2004, FASB issued SFAS 123(R)
which replaces SFAS 123 and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS 123(R) requires compensation costs relating
to share-based payment transactions be recognized in financial statements. This
statement is effective as of the beginning of the first reporting period that begins
after June 15, 2005. In 2003, we adopted the fair value recognition provisions of
SFAS 123, as amended by SFAS 148, to account prospectively for stock options issued
after December 31, 2002. We are required to adopt SFAS 123(R) beginning in the third
quarter of 2005. We expect the adoption of SFAS 123(R) to not have a material adverse
impact on our net income and earnings per share, as we currently do not have share-based
payment transactions.

In January 2003, the FASB released Interpretation
No. 46, as amended, 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. The Company does 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 consolidated financial
statements.

In September 2004, the FASB reached a unanimous
consensus on Emerging Issues Task Force (EITF) 04-08, The Effect
of Contingently Convertible Debt on Diluted Earnings Per Share. EITF 04-08
requires us to include the dilutive effect of our outstanding contingent convertible
notes shares in our diluted earnings per share calculation, regardless of whether
the market price trigger or other contingent conversion feature has been met. Because
our notes include a mandatory cash settlement feature for the principal payment,
we will apply the treasury stock method. This method will result in incremental
dilutive shares when the average fair value of our common stock for a reporting
period exceeds the initial conversion price of $30.74 per share. EITF 04-08 also
requires restatement of all prior periods. Because the average fair value of our
common stock has not exceeded the initial conversion price for all periods presented,
the adoption of this statement has no effect on our historical reported diluted
earnings per share.

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.







62

---

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

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 2.875% Unsecured
Convertible Senior Notes due 2024 (2.875% Convertible Notes) and conversion
of the 7% Convertible Note due 2004, to the extent dilutive (see Note 4).

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,
|------------------------------------------ |  | ----------------------------------
|                                          
|                                           |  | 2004                              
|                                          
|Basic
earnings per share:                  |  |                                   
|Weighted
average common shares outstanding |  | 85,712                            
|                                          
|Diluted
earnings per share:                |  |                                   
|Weighted
average common shares outstanding |  | 85,712                            
|Options                                    |  | 127                               
|                                          
|Weighted
average common sharesdiluted     |  | 85,839                            
|                                          
|Basic
earnings per common share:           |  |                                   
|Net
income per common share                |  | $ 2.87                            
|                                          
|Diluted
earnings per common share:         |  |                                   
|Net
income per common share                |  | $ 2.86                            
|                                          
|                                          

The 2.875% Convertible Notes were not dilutive
at December 31, 2004 as the average price of OMIs stock was less than the
conversion price of the notes (see Note 4), in accordance with EITF 04-18. Each
holder of a convertible note will receive either common stock or cash for the conversion
value in excess of such principal amount. The initial conversion ratio is 32.5355
shares of our common stock per $1,000 principal amount of notes, which is equivalent
to an initial conversion price of approximately $30.74 per share.

The effect of the assumed conversion of
the 7% Convertible Note due 2004 of 47,258 shares in 2003 and 137,033 shares in
2002 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 per share.

Note 3Joint Venture

Alliance Chartering LLC (Alliance)
began operating in May 1998 and is owned 50% by OMI. Alliance is a marketing alliance
we operate in conjunction with Frontline Ltd., another large Suezmax tanker owner
and operator. Alliance operates through Frontlines offices in Oslo, Norway
and through our offices in Stamford, Connecticut. There was no initial investment
required for this joint venture to operate. Alliance employs objective criteria
when it selects a vessel for a particular charter. The Oslo office commences trading
at the time of its opening and transfers trading to our Stamford office later in
the day. Alliance does not have any revenues or costs nor does it have any cost
or revenue sharing arrangements. Any costs and revenues associated with each vessel
are recorded by the operator of the vessel. Alliance was formed for the purpose
of providing owners of Suezmax vessels such as OMI, Frontline Ltd. and several smaller
owners marketing advantages; primarily because of the overall size and quality of
the fleet, we gain greater access to market information and are able to improve
our vessel utilization.









63

---

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

Note 4Long-Term Debt and Credit
Arrangements



Long-term debt consists of the following:





|                                                                          |  | December
  31,
|------------------------------------------------------------------------- |  | --------------
|                                                                         
|                                                                          |  | 2004          
|                                                                         
|Term
loans under bank mortgage agreements at a margin plus variable rates |  |               
|based
on the London Interbank Offering Rate (LIBOR)(1),(2)              |  | $410,436      
|Reducing revolving
facilities under bank mortgage agreements at a margin  |  |               
|plus
variable rates based on LIBOR(1),(2)                                 |  | 80,000        
|7.625% Unsecured
Senior Notes due December 2013                           |  | 200,000       
|2.875 % Unsecured Convertible
Senior Notes due December 2024              |  | 250,000       
|7% Convertible
Notes due February 2004                                    |  |              
|                                                                         
|Total                                                                     |  | 940,436       
|Less current
portion of long-term debt:                                   |  |               
|Scheduled
amortization payments of debt                                   |  | 33,200        
|                                                                         
|Long-term
debt                                                            |  | $907,236      
|                                                                         
|                                                                         





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

The weighted average effective interest rates
for debt outstanding at December 31, 2004 and 2003 were 4.71% and 3.92%, respectively.
Such rates take into consideration related interest rate swaps.

As of December 31, 2004, 100% of the net
book value or $1,487,598,000 of the Companys vessels (representing 40 vessels)
was pledged as collateral under certain debt agreements.

Term Loans

OMI Corporation has entered into a number
of term loans to finance the building or acquisition of vessels. All of the term
loans are secured by vessels and require periodic payments of both principal and
interest. The following table summarizes the term loans:





|      |  |                  |               |                         |  | Amount Outstanding
|----- |  | ---------------- | ------------- | ----------------------- |  | ------------------
|      |  | Principal Amount | Maturity Date | as of December 31, 2004
|     
|      |  | $ 142,000        |               | November 2014           |  | $142,000          
|      |  | 70,800           | (1)           | August 2012             |  | 20,482            
|      |  | 64,800           |               | July 2011               |  | 55,230            
|      |  | 50,400           |               | July 2012               |  | 48,709            
|      |  | 44,000           |               | December 2008           |  | 29,050            
|      |  | 40,000           |               | October 2009            |  | 29,200            
|      |  | 34,475           |               | August 2011             |  | 31,815            
|      |  | 34,300           |               | August 2011             |  | 31,050            
|      |  | 24,000           |               | April 2009              |  | 22,900            
|     
|Total |  |                  |               |                         |  | $410,436          
|     
|     



|   
|---
|(1)







64

---

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

Note 4Long-Term Debt and Credit
Arrangements (continued)



Reducing Revolving
Credit Facilities

OMI Corporation has two reducing revolving
    credit facilities secured by vessels. On November 23, 2004, we amended and restated our
    $245,000,000 facility with an original due date of March 2010 with a ten
    year $375,000,000 secured reducing revolving credit facility (the $375
    Facility).
    A portion of the $375 Facility was used to repay in full a $250,000,000 bridge
    loan, which was used to finance the initial payments for 13 vessels acquired
    in July and August 2004. Borrowings under the $375 Facility bear interest
    at LIBOR plus a margin of 0.80%. The scheduled reductions of the available
    amount under the $375 Facility are further reduced upon  the disposal of
    a vessel pledged as collateral. As of December 31, 2004, the undrawn  amount
    under the $375 Facility was $295,000,000 and outstanding borrowings were
     $80,000,000. In February 2005, we paid $60,000,000.

OMI Corporation has another secured reducing
revolving facility which matures on July 27, 2006 ($348 Facility). Borrowings
under the $348 Facility bear interest at LIBOR plus an applicable margin. The applicable
margin varies from 1.375% per annum up to 1.875% per annum depending on the ratio
of our funded debt to our consolidated operating income plus depreciation, amortization
and other non-cash charges (excluding any gains or losses on vessel sales, any writedown
amounts or any impairment reserves) determined on a trailing four quarter basis.
The scheduled reductions of the available amount under the $348 Facility are further
reduced upon the disposal of a vessel pledged as collateral. In January 2005, the
Facility was reduced by $21,800,000 for the disposal of two vessels. As of December
31, 2004, the undrawn amount under the $348 Facility was $180,836,000 and there
were no outstanding borrowings.

7.625% Unsecured Senior Notes Due 2013

On November 26, 2003, we issued $200,000,000
of 7.625% Senior Notes (the Notes) due December 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.

2.875% Convertible Notes Due 2024

On December 7, 2004, we issued $250,000,000
of convertible notes due 2024. The notes are senior unsecured obligations of OMI
Corporation and bear interest at the rate of 2.875% per annum. Interest on the notes
is payable on June 1 and December 1 each year beginning June 1, 2005.

The initial conversion ratio is 32.5355
shares of our common stock per $1,000 principal amount of notes, which is equivalent
to an initial conversion price of approximately $30.74 per share or 46.5% above
our stock price of $20.98 on December 7, 2004.

The 2.875% convertible notes may be converted
prior to maturity under the following circumstances:





| |  | during any fiscal quarter commencing
  after December 31, 2004, if the closing sale price of our common stock for at least
  20 trading days in the 30 trading-day period ending on the last trading day of the
  proceeding fiscal quarter exceeds 130% of the conversion price on that 30th trading
  day; or
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







65

---

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

Note 4Long-Term Debt and Credit
Arrangements (continued)









| |  | subject to certain exceptions, during
  the five business-day period after any five consecutive trading-day period in which
  the trading price per note for each day of that period was less than 98% of the
  product of the closing sale price of our common stock and the conversion rate then
  in effect; or
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                                                                                                                                                                                   
| |  | if we have called the note for redemption;
  or                                                                                                                                                                                                                                                                   
|  |  |                                                                                                                                                                                                                                                                                                                   
| |  | upon the occurrence of certain specified
  corporate transactions.                                                                                                                                                                                                                                                

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

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

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

In association with the issuance of the
Convertible Senior Notes, we incurred approximately $8.5 million in underwriting
costs and professional fees. These fees were deferred and included in Other assets
on the accompanying Consolidated Balance Sheet at December 31, 2004 and are being
amortized to interest expense until December 1, 2011, which represents the earliest
date holders may require us to redeem the notes.

If the market price exceeds the conversion
price, we are required to use the treasury stock method in calculating diluted earnings
per share for the number of shares to be issued for the excess value. If the market
price of the Companys common stock is less than the conversion price, the
notes will not be included in the calculation of the Companys diluted EPS.
At December 31, 2004, the share price was below the conversion price.

The net proceeds from the issuance of notes
were used to purchase 4.8 million treasury shares for approximately $100 million
and to repay outstanding debt.

Convertible Notes Due 2004

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

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 the repurchasing of our stock. As of December 31, 2004, we were in compliance
with all covenants.









66

---

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

Note 4Long-Term Debt and Credit
Arrangements (continued)



Maturities

Aggregate maturities of debt during the
next five years from December 31, 2004, are as follows:





|2005       |  | $ 33,200
|---------- |  | --------
|2006       |  | 33,003  
|2007       |  | 32,282  
|2008       |  | 55,865  
|2009       |  | 44,073  
|Thereafter |  | 742,013 
|          
|Total      |  | $940,436
|          
|          

Interest Paid

During the years ended December 31, 2004,
2003 and 2002, cash paid for interest, net of amounts capitalized, totaled approximately
$27,993,000, $22,396,000 and $24,472,000, respectively.

Note 5Derivatives and Hedging Activities

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). During the year ended December 31, 2004, 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 were designated
and qualify as cash flow hedges. Additionally, the Company entered into forward
freight agreements (FFAs). FFAs involve contracts to provide
a fixed number of theoretical voyages at fixed rates. We have taken short positions
in FFA contracts, which reduce a portion of the Companys exposure to the spot
charter market by creating synthetic time charters. We have also from time to time
taken long positions, which have increased our exposure to the spot market. As of
December 31, 2004, the FFA contracts were considered to be speculative and gains
and losses were recorded in the Consolidated Statement of Income.

Interest-Rate Swaps and Future Rate Agreements (FRAs)

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, 2004, we had various interest rate swaps/FRAs
aggregating $192,208,000 (which includes a notional amount of $62,400,000 for an
interest rate swap that commences in 2006) on various debt tranches within a range
of 2.9% to 4.86% expiring from October 2005 to August 2012. 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, 2004, the Company has recorded a liability of $1,702,000 and an asset of $1,517,000
related to the fair market value of these hedges and a corresponding charge of $185,000
to Other comprehensive income.









67

---

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

Note 5Derivatives and Hedging Activities
(continued)



The changes in the notional amounts
were as follows:





|                                                 |  | December
  31,
|------------------------------------------------ |  | --------------
|                                                
|                                                 |  | 2004          
|                                                
|Notional
principal amount, beginning of the year |  | $ 275,390     
|Increase of
notional amounts                     |  | 112,377       
|Reductions of notional amounts                   |  | (195,559)     
|                                                
|Notional
principal amount, end of year           |  | $ 192,208     
|                                                
|                                                

Interest expense pertaining to interest-rate swaps
for the years ended December 31, 2004, 2003, and 2002 was $3,363,000, $4,816,000
and $4,258,000, respectively. The amount that is expected to be reclassified from
Other comprehensive income to the Consolidated Statement of Income within the next
twelve months has been estimated to be approximately $3,727,000.

Forward Freight Agreements

At December 31, 2004, FFAs with aggregate
notional values of $1,538,000 extend to December 2005. The fair value of forward
freight agreements is the estimated amount that the Company would receive or pay
to terminate the agreements at the reporting date. The fair value of these
agreements was not significant at December 31, 2004.

From January 4, 2005 to March 10, 2005,
    the Company committed to forward freight agreements with an aggregate notional
    amount of $17,538,000. The forward freight agreements expire by December 2005.

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

Note 6Fair Value of Financial Instruments

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





|                                              |  | December
  31,
|--------------------------------------------- |  | --------------
|                                             
|                                              |  |               
|                                             
|                                              |  |               
|                                              |  |               
|                                             
|Cash
and cash equivalents(a)                  |  |               
|Derivatives:                                  |  |               
|Liability for interest-rate swaps
and FRAs(b) |  |               
|Asset for interest-rate
swaps and FRAs(b)     |  |               
|Total debt(c)                                 |  |               
|                                              |  |               
|                                             





|                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------
|The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
|                                                                                                                 
|(a)                                                                                                              
|                                                                                                                 
|(b)                                                                                                              
|                                                                                                                 
|(c)                                                                                                              









68

---

OMI CORPORATION AND SUBSIDIARIESNOTES 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 $60,914,000, $19,809,000 and $16,517,000
for the years ended December 31, 2004, 2003 and 2002, respectively. Leases are for
vessels (charter hire expense) and office space.

The future minimum lease payments required
by year, under operating leases subsequent to December 31, 2004, are as follows:





|2005       |  | $ 20,115
|---------- |  | --------
|2006       |  | 19,254  
|2007       |  | 9,554   
|2008       |  | 9,657   
|2009       |  | 9,632   
|Thereafter |  | 4,665   
|          
|Total      |  | $ 72,877
|          
|          

In February 2005, OMI agreed to time charter in
for a seven year period two new Suezmax vessels scheduled for delivery in June and
September of 2005. The vessels will enter the Gemini Pool when delivered. OMI has
options to extend the term of the time charters and to acquire the vessels.

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, 2004, the balance
in escrow was $2,000,000 ($1,000,000 in Current restricted cash and $1,000,000 in
Non-current restricted cash, included in Other Assets and Deferred Charges).

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 and excluding broker commissions)
to be received subsequent to December 31, 2004 on these time charters are as follows:





|2005       |  | $ 82,516
|---------- |  | --------
|2006       |  | 57,289  
|2007       |  | 38,884  
|2008       |  | 27,082  
|2009       |  | 14,071  
|Thereafter |  | 5,012   
|          
|Total      |  | $224,854
|          
|          

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

The Company 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.  Based on the results of our
evaluation, 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.   These vessels were considered to be impaired as of December
31, 2003, as their net book values were greater than the undiscounted projected
cash flow. During 2004,







69

---

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

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



both
vessels were disposed of and a gain on sale was recorded and included in (Gain)
loss on disposal of vessels-net in the Consolidated Statements of Income.

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 would have increased the annual depreciation expense
beginning in 2004 by $686,000 until June 2007 and $95,000 from June 2007 to August
2015. The single hull vessels were sold in 2004 (see Note 11).

Note 10Acquisitions of Vessels

The following table summarizes the acquisitions
of vessels delivered during the years ended December 31, 2004 and December 31, 2003:





|2004:      |           |               |       |        |         |           |             |          | 
|---------- | --------- | ------------- | ----- | ------ | ------- | --------- | ----------- | -------- | 
|           |           |               |       | Year   | Type of |           | Capitalized
|Vessel     | Delivered |               | Built | Vessel |         | Cost(1)  
|          
|LOIRE(2)   |           | February 2004 |       | 2004   |         | Handysize |             | $ 29,256 | 
|GARONNE(2) |           | April 2004    |       | 2004   |         | Handysize |             | 29,226   | 
|SAONE(2)   |           | July 2004     |       | 2004   |         | Handysize |             | 29,484   | 
|HORIZON    |           | July 2004     |       | 2004   |         | Handymax  |             | 39,469   | 
|ADAIR      |           | July 2004     |       | 2003   |         | Suezmax   |             | 70,632   | 
|ANGELICA   |           | July 2004     |       | 2004   |         | Suezmax   |             | 70,681   | 
|JANET      |           | July 2004     |       | 2004   |         | Suezmax   |             | 70,926   | 
|ARLENE     |           | August 2004   |       | 2003   |         | Suezmax   |             | 70,980   | 
|INGBORG    |           | August 2004   |       | 2003   |         | Suezmax   |             | 71,529   | 
|JEANETTE   |           | October 2004  |       | 2004   |         | Handymax  |             | 39,999   | 
|GANGES(2)  |           | October 2004  |       | 2004   |         | Handysize |             | 29,501   | 
|RUBY(3)    |           | December 2004 |       | 2004   |         | Handysize |             | 37,066   | 
|          
|Total      |           |               |       |        |         |           |             | $588,749 | 
|          
|           |           |               |       |        |         |           |             |          | 
|2003:      |           |               |       |        |         |           |             |          | 
|           |           |               |       | Year   | Type of |           | Capitalized
|Vessel     | Delivered |               | Built | Vessel |         | Cost(1)  
|          
|MOSELLE    |           | February 2003 |       | 2003   |         | Handymax  |             | $ 30,284 | 
|ROSETTA    |           | March 2003    |       | 2003   |         | Handymax  |             | 30,432   | 
|OTTAWA     |           | April 2003    |       | 2003   |         | Panamax   |             | 37,932   | 
|TAMAR      |           | July 2003     |       | 2003   |         | Panamax   |             | 38,079   | 
|HUDSON     |           | August 2003   |       | 2000   |         | Suezmax   |             | 49,406   | 
|POTOMAC    |           | August 2003   |       | 2000   |         | Suezmax   |             | 49,400   | 
|          
|Total      |           |               |       |        |         |           |             | $235,533 | 
|          
|          



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









70

---

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

Note 10Acquisitions of Vessels (continued)



Athenian and Arcadia Acquisitions

In June 2004, OMI entered into an agreement
     for the acquisition of four double hull Suezmax vessels (two built in 2003
    and two  in 2004), one product carrier built in July 2004 and seven product
    carriers under  construction (one of which was delivered in October 2004)
    at the same shipyard from  Athenian Sea Carriers, Ltd. (Athenian).
    The total contract cost was $585,000,000 ($520,650,000, excluding the vessel
    not delivered, explained in the next paragraph). As of December 31, 2004,
    there were six product carriers under construction. Two product carriers
    were delivered in 2005 and the remaining four are scheduled to be delivered
    in 2006. Approximately, $142,691,000 is payable to the shipyard for the remaining
    product carriers in 2005 and in 2006 (see Note 18).

The Company terminated one of the agreements
to acquire one 2003 built Suezmax vessel, from Athenian for a contract price of
$64,350,000, as delivery was not tendered in accordance with the requirements of
the agreement. The seller disputes the matter, which is now in arbitration (see
Note 18). OMI had paid 10% deposit or $6,350,000, which is being held in escrow.
This amount is included in the Consolidated Balance Sheet as Non-current restricted
cash.

During June 2004, OMI agreed with Arcadia
Ship Management (Arcadia) to purchase two 2003 built double hull Suezmax
vessels for an aggregate contract price of $141,200,000. Both of these vessels were
delivered in August 2004.

The 2004 acquisitions were paid with proceeds
from the issuance of common stock (see Note 17), draw downs from credit facilities,
temporary financing that was later replaced with long-term financing (see Note 4)
and cash from operations.

Note 11Disposal Of Vessels

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

In November 2004, our 1986 built single
hull Ultra Large Crude Carrier (ULCC) with a net book value of $16,514,000,
which was classified as Vessel held for sale in the current asset section of the
Consolidated Balance Sheet as of December 31, 2003, was disposed of. OMI agreed
to sell the ULCC vessel for conversion of the vessel for an offshore project for
approximately $20,047,000. The disposal of the vessel resulted in a gain on sale
of approximately $3,452,000, which was recorded to the Consolidated Statement of
Income for the year ended December 31, 2004.

During March, September and November 2003,
we disposed of five single hull product carriers built between 1984 and 1990 for
sales prices aggregating approximately $33,048,000, net of commissions. The disposal
of the vessels resulted in a net loss on sale of approximately $14,358,000, which
was recorded to the Consolidated Statements of Income for the year ended December
31, 2003.

During April 2002, we disposed of a 1988
built product carrier for a sales price of $9,100,000, net of commissions and recognized
a loss on sale of $302,000, which was recorded to the Consolidated Statement of
Income for the year ended December 31, 2002.

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.







71

---

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

Note 12Loss on Investment



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

Note 13Financial Information Relating
to Segments

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

Crude Oil Tanker Fleetincludes
vessels that normally carry crude oil and dirty products. The fleet
in all years presented include 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. The fleet in all years presented include three sizes of vessels, Panamax,
handymax and handysize vessels.









72

---

OMI CORPORATION AND SUBSIDIARIESNOTES 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, 2004:





|                                                            |  | For
  the Years Ended December 31,
|----------------------------------------------------------- |  | ----------------------------------
|                                                           
|                                                            |  | 2004                              
|                                                           
|Revenues:                                                   |  |                                   
|Crude
Oil Fleet                                             |  | $  427,336                        
|Product
Carrier Fleet                                       |  | 136,413                           
|                                                           
|Subtotal                                                    |  | 563,749                           
|Other                                                       |  | 925                               
|                                                           
|Total                                                       |  | $  564,674                        
|                                                           
|Time
Charter Equivalent Revenues:(1)                        |  |                                   
|Crude
Oil Fleet                                             |  | $  352,358                        
|Product
Carrier Fleet                                       |  | 131,208                           
|                                                           
|Total                                                       |  | $  483,566                        
|                                                           
|Operating
Income:(2)                                        |  |                                   
|Crude
Oil Fleet                                             |  | $  233,914                        
|Product
Carrier Fleet                                       |  | 60,514                            
|                                                           
|                                                            |  | 294,428                           
|General
and administrative expense not allocated to vessels |  | (17,309)                          
|Other                                                       |  | 5,262                             
|                                                           
|Total                                                       |  | $  282,381                        
|                                                           
|Identifiable
Assets-At End of Year:                         |  |                                   
|Crude
Oil Fleet                                             |  | $  844,262                        
|Product
Carrier Fleet                                       |  | 855,448                           
|                                                           
|                                                            |  | 1,699,710                         
|Cash
and cash equivalents                                   |  | 41,805                            
|Other                                                       |  | 29,491                            
|                                                           
|Total                                                       |  | $1,771,006                        
|                                                           
|Capital
Expenditures:                                       |  |                                   
|Crude
Oil Fleet                                             |  | $  272,868                        
|Product
Carrier Fleet                                       |  | 402,539                           
|Other                                                       |  | 232                               
|                                                           
|Total                                                       |  | $  675,639                        
|                                                           
|Depreciation
and Amortization:                              |  |                                   
|Crude
Oil Fleet                                             |  | $   28,676                        
|Product
Carrier Fleet                                       |  | 27,134                            
|Other                                                       |  | 362                               
|                                                           
|Total                                                       |  | $   56,172                        
|                                                           
|Interest
Expense:                                           |  |                                   
|Crude
Oil Fleet                                             |  | $    7,685                        
|Product
Carrier Fleet                                       |  | 6,005                             
|                                                           
|                                                            |  | 13,690                            
|Other(3)                                                    |  | 20,770                            
|                                                           
|Total                                                       |  | $   34,460                        
|                                                           
|                                                           







73

---

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

Note 13Financial Information Relating
to Segments (continued)





|(1)                                                                                    |  | The Company uses time charter
  equivalent revenue, which is voyage revenue less voyage expenses, as a measure of
  analyzing fluctuations in voyage revenue between financial periods and as a method
  of equating revenue generated from a voyage charter to time charter.
|-------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                       |  |                                                                                                                                                                                                                                                                              
|                                                                                      
|The following is a reconciliation of TCE revenue for the year ended December 31, 2004:





|                       |  |  |  | Crude Oil | Product  |              | 
|---------------------- |  |  |  | --------- | -------- | ------------ | 
|                       |  |  |  | Fleet     | Carriers | Consolidated
|                      
|Voyage
and TC Revenues |  |  |  | $427,336  |          | $136,413     | 
|Voyage
Expenses        |  |  |  | 74,978    |          | 5,205        | 
|                      
|TCE
Revenue            |  |  |  | $352,358  |          | $131,208     | 
|                      
|                      





|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 |  |  |  | $189,254  |          | $133,674     | 
|Voyage
Expenses        |  |  |  | 43,789    |          | 9,967        | 
|                      
|TCE
Revenue            |  |  |  | $145,465  |          | $123,707     | 
|                      
|                      





|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 |  |  |  | $ 94,406  |          | $107,024     | 
|Voyage
Expenses        |  |  |  | 27,915    |          | 10,047       | 
|                      
|TCE
Revenue            |  |  |  | $ 66,491  |          | $ 96,977     | 
|                      
|                      





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





|                                        |  | For
the Years Ended December 31,
|--------------------------------------- |  | --------------------------------
|                                       
|                                        |  | 2004                            
|                                       
|Gain
(loss) on disposal of vesselsnet: |  |                                 
|Crude
Oil Fleet                         |  | $  4,950                        
|Product
Carrier Fleet                   |  | (3,224)                         
|                                       
|Total                                   |  | $  1,726                        
|                                       
|                                       





|(3) |  | Other interest expense relates
to unsecured senior notes for the years ended December 31, 2004 and 2003, in addition
to interest on unsecured convertible notes due in 2024 and 2004 for the years ended
December 31, 2004, 2003 and 2002. | 
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

Revenues from major customers, defined as 10 percent
or more of consolidated revenue was as follows:





|                             |  | 2004     | 2003 | 2002   
|---------------------------- |  | -------- | ---- | -------
|                            
|Chartering
and Shipping S.A. |  | $ 67,327 |      | $34,305
|Chevron Transport Corp.      |  | $ 53,966 |      |       
|El
Paso Marine Company       |  |         |      | 43,254 
|                            
|Total                        |  | $121,293 |      | $77,559
|                            
|                            

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 15 percent of their annual salaries with the Company matching up to the first
six percent in 2004, 2003 and 2002. 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.









74

---

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

Note 14Savings Plan (continued)



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, 2004:





|                       |  |  |  | 2004 | 2003 | 2002
|---------------------- |  |  |  | ---- | ---- | ----
|                      
|401(k)
Plan            |  |  |  | $313 |      | $264
|Executive Savings Plan |  |  |  | 305  |      | 123 
|                      
|Total                  |  |  |  | $618 |      | $387
|                      
|                      

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 and restricted stock 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).

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 2004 or
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.

The following table summarizes activity
under the stock option plan and the weighted average exercise prices for the three
years ended December 31, 2004 (in whole numbers, except for Exercise Prices):





|                               | Number of   | Weighted Average
|------------------------------ | ----------- | ----------------
|                               | Options     | Exercise Price  
|                              
|Outstanding,
January 1, 2002   | 2,046,235   |                 
|Granted                        | 30,000      |                 
|Exercised                      |            |                 
|Forfeited                      |            |                 
|Expired                        | (30,000)    |                 
|                              
|Outstanding,
December 31, 2002 | 2,046,235   |                 
|Granted                        |            |                 
|Exercised                      | (1,381,168) |                 
|Forfeited                      |            |                 
|Expired                        |            |                 
|                              
|Outstanding,
December 31, 2003 | 665,067     |                 
|Granted                        |            |                 
|Exercised                      | (480,067)   |                 
|Forfeited                      |            |                 
|Expired                        |            |                 
|                              
|Outstanding,
December 31, 2004 | 185,000     |                 
|                              
|                              









75

---

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

Note 15Stock Option Plan (continued)



The following table summarizes information about stock options outstanding
as of December 31, 2004 (in whole numbers, except for Exercise Prices and Contractual
life in years):





|                |  |  |  | Options Outstanding | Options Outstanding
|--------------- |  |  |  | ------------------- | -------------------
|               
|                |  |  |  | December 31, 2004   | Weighted           
|Range of        |  |  |  | Number of           | Average            
|Exercise Prices |  |  |  | Options             | Exercise Price     
|               
|$ 1.50
 3.93   |  |  |  | 40,000              |                    
|4.63
 4.9375   |  |  |  | 45,000              |                    
|5.125           |  |  |  | 40,000              |                    
|6.67            |  |  |  | 60,000              |                    
|               
|Total           |  |  |  | 185,000             |                    
|               
|               

As of December 31, 2003, there were 659,650 options
exercisable at a weighted average price of $5.05. As of December 31, 2002, there
were 1,982,276 options exercisable at a weighted average price of $4.48. Proceeds
received from the exercise of the options are credited to the capital accounts.

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, 2004, December 31, 2003 and December 31, 2002.

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.









76

---

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

Note 17Stockholders Equity
(continued)



Common Stock

On June 29, 2004, OMI issued 12,204,000
shares of common stock pursuant to underwriting agreements for the offer and sale
of common stock of the Company under the Companys shelf Registration Statement
on Form S-3, filed on May 13, 2003.

The net proceeds of the 12,204,000 shares
sold by OMI after the related underwriting discount and offering expenses were approximately
$137,695,000. All of the net proceeds were used as partial payment on the Athenian
acquisition in July 2004 for the purchase of vessels and vessels under construction
(see Note 10).

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) were used for general corporate purposes,
which included working capital, capital expenditures and the acquisition of vessels.

During August 2003, OMI issued 2,000,000
shares of OMI common stock at $6.00 per share as partial payment on two 2000 built
Suezmax tankers.

OMI issued 11,073 shares at $2.89 to one
director in lieu of his annual fee of $32,000 in 2002.

Restricted Stock

The Company has granted an aggregate of
1,706,237 shares of restricted stock to certain of its employees, executive officers
and directors under the 2001 Restricted Stock Plan and the 2003 Stock Incentive
Plan, and 110,391 shares have been forfeited. The market value at issuance of the
1,595,846 remaining restricted shares was approximately $11,652,000. Restricted
stock awards granted in July 2001, April 2002, September 2003, May 2004, June 2004
and December 2004 were recorded as unearned compensation as a separate component
of stockholders equity. The Company is amortizing unearned compensation over
the applicable vesting periods. During the years ended December 31, 2004, 2003 and
2002, the Company recognized $2,212,000, $1,290,000 and $1,033,000, respectively,
of compensation expense related to restricted stock.

In May, June and December 2004, OMI awarded
and issued 287,923 shares of restricted stock to employees, executive officers and
directors for a total value at the respective dates of grant of approximately $3,718,000.
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. 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 is being amortized to expense over the appropriate restriction
period.

Acquisition and Retirement of Treasury Stock

During 2004, the Company repurchased
    7,890,000 common shares for an aggregate of $141,405,000 under a share repurchase
    program approved by the Board of Directors. The Company also received 110,391
    restricted shares, which were forfeited in 2004. In September 2004, the Company
    retired all treasury shares and resolved to retire all future common stock
    repurchases and forfeitures immediately.

On December 14, 2004, the Board of Directors
    established new authority for the Company to repurchase from time to time
of up to 4,250,000 shares of common stock. In the first quarter of 2005 (through March 14, 2005), the Company has purchased 101,000 shares for an aggregate of $1,788,000.

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







77

---

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

Note 17Stockholders Equity
(continued)



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

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

During 2004, the Board of Directors declared
quarterly dividends aggregating $0.22 per share to shareholders of record at designated
dates aggregating $18,622,000 (the fourth quarter dividend of $5,994,000 declared
in November 2004 and paid on January 11, 2005). On February 10, 2005, the Board
of Directors of OMI approved an increase in our quarterly dividend from $0.07 per
share to $0.08 per share and declared the $0.08 per share dividend to shareholders
of record on March 22, 2005 which will be paid on April 12, 2005.

Note 18Commitments and Contingencies

Contracts Relating to Vessels

At December 31, 2004, we had commitments
to take delivery of 10 product carriers. The contract costs for the 10 vessels aggregated
$354,160,000. As of December 31, 2004, $113,901,000 in payments have been made on
these contracts, $108,197,000 of which were paid in 2004. On January 4, 2005 and
March 1, 2005, two product carriers, the LAUREN and the BRAZOS, both with original
contract costs of $38,700,000 each were delivered and began a short-term time charter
upon delivery from the shipyard. The vessels were purchased with cash and are unencumbered.
Three of the remaining vessels will be delivered in 2005 and five in 2006. Two of
the vessels to be delivered in 2005 will begin five year time charters upon delivery.





|Year                     |  |  |  | Payments
|------------------------ |  |  |  | --------
|                        
|2005                     |  |  |  | $135,844
|2006                     |  |  |  | 104,415 
|                        
|Total Remaining Payments |  |  |  | $240,259
|                        





|Note:
  2005 payments include payment of $18,676,000 in January 2005 for the delivery of
  the LAUREN and $21,461,000 in March 2005 for the delivery of the BRAZOS. | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 







78

---

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

Note 18Commitments and Contingencies
(continued)



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 Company was
responsible due to the actions of crew on the vessel, which were not known by personnel
at the Companys offices and were against Company policy. Sentencing was in
August 2004, and the Company paid a $4,200,000 fine and commenced serving a probationary
period of three years. The amount of the anticipated fine and related expenses,
aggregating $6,000,000 was expensed in 2003. Any amounts received under insurance
policies will be recognized when received. The Company has filed claims with insurers
with respect to the fine and costs.

Athenian Arbitration

The Company terminated an agreement to
acquire one of the Suezmax vessels it was to acquire in August 2004 from Athenian
Sea Carriers Ltd., as delivery was not tendered in accordance with the requirements
of the agreement. The seller disputes the matter, which is now in arbitration. If
the Company is correct, it will be entitled to certain additional expenses it incurred
and the increase in value, if any, of the vessel over the contract price. If the
Company loses, it would most likely lose the amount of its deposit, approximately
$6.4 million. This amount is included in the Consolidated Balance Sheets as Non-current
restricted cash.

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, the ultimate resolution of these matters
will not have a material adverse effect on the financial condition, results of operations
or cash flows of the Company. Management accrues an estimate of expense for any
matters that are considered probable of occurring based on the facts and circumstances.







79

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of OMI Corporation:

We have audited the accompanying consolidated
balance sheets of OMI Corporation and subsidiaries (the Company) as
of December 31, 2004 and 2003, 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, 2004. These financial statements
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial
statements present fairly, in all material respects, the financial position of OMI
Corporation and subsidiaries as of December 31, 2004 and 2003, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2004, in conformity with accounting principles generally accepted
in the United States of America.

We have also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States),
     the effectiveness of the Companys internal control over financial
     reporting  as of December 31, 2004, based on the criteria established in
     Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 14, 2005 expressed an unqualified opinion
on managements assessment of the effectiveness of the Companys internal
 control over financial reporting and an unqualified opinion on the effectiveness
 of the Companys internal control over financial reporting.

DELOITTE & TOUCHE LLP

New York, New York
  March 14, 2005







80

---

Item
8.SUPPLEMENTARY DATA

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





|                                      |  |  |  | 2004 Quarter Ended | 2003 Quarter Ended
|------------------------------------- |  |  |  | ------------------ | ------------------
|                                     
|                                      |  |  |  | March 31           | June 30           
|                                     
|Revenues(1)                           |  |  |  | $128,016           |                   
|Operating Income(2)                   |  |  |  | 64,071             |                   
|Net income                            |  |  |  | $ 56,409           |                   
|                                     
|Basic
Earnings Per Common Share:(3)   |  |  |  |                    |                   
|Net income                            |  |  |  | $   0.70           |                   
|                                     
|Weighted
average number of shares of  |  |  |  |                    |                   
|common
stock outstandingbasic        |  |  |  | 80,908             |                   
|                                     
|Diluted
Earnings Per Common Share:(3) |  |  |  |                    |                   
|Net income                            |  |  |  | $   0.70           |                   
|                                     
|Weighted
average number of shares of  |  |  |  |                    |                   
|common
stock outstandingdiluted      |  |  |  | 81,048             |                   
|                                     
|                                     



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

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

None.

Item 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and
Procedures

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

Changes in Internal Controls

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









81

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Managements Report on Internal Control over Financial Reporting

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

We assessed the effectiveness of the Companys
internal control over financial reporting as of December 31, 2004. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control  Integrated
Framework. Based on our assessment using those criteria, we concluded that our
internal control over financial reporting was effective as of December 31, 2004.

Our managements assessment of the
effectiveness of our internal control over financial reporting as of December 31,
2004 has been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report which appears on page 83 of this Form
10-K.







82

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of OMI Corporation:

We have audited managements assessment,
included in the accompanying Managements Report on Internal Control over Financial
Reporting, that OMI Corporation and subsidiaries (the Company) maintained
effective internal control over financial reporting as of December 31, 2004, based
on criteria established in Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on managements assessment
and an opinion on the effectiveness of the Companys internal control over
financial reporting based on our audit.

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

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

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

In our opinion, managements assessment
that the Company maintained effective internal control over financial reporting
as of December 31, 2004, is fairly stated, in all material respects, based on the
criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion,
the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2004, based on the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We have also audited, in accordance
    with the standards of the Public Company Accounting Oversight Board (United
    States), the consolidated financial statements as of and for the year ended
    December 31, 2004, of the Company and our report dated March 14, 2005 expressed
    an unqualified opinion on those financial statements.

DELOITTE & TOUCHE LLP

New York, New York
  March 14, 2005







83

---

Item
9B.OTHER INFORMATION

During the  first quarter of 2005 (to March
     14, 2005) we repurchased 101,000 shares of OMI
common stock at an average price of $17.68 per share.

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.

PART IV

Item 15.EXHIBITS, FINANCIAL STATEMENT
SCHEDULES

1.     Financial
Statements and Financial Statement Schedules

(a)     Financial
statements as indicated in the index are set forth on page 53.

(b)     Financial
Statement Schedules

None.

(c)     The index
to Exhibits is on page 85.







84

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EXHIBITS





|Number | Incorporated by Reference to |                                        | Description of Exhibit
|------ | ---------------------------- | -------------------------------------- | ----------------------
|      
|3(i)   |                              | Registration Statement on Form S-1     |                       
|       |                              | (No. 333-52771) Filed May 15, 1998     |                       
|3(ii)  |                              | Registration Statement on Form S-1     |                       
|       |                              | (No. 333-52771) Filed May 15, 1998     |                       
|4.1    |                              | Form 8A Filed December 14, 1998        |                       
|       |                              |                                        |                       
|4.2    |                              | Registration Statement on Form S-8     |                       
|       |                              | (No. 333-72458) Filed October 30,
2001 |                       
|4.3    |                              | Registration Statement on Form S-8     |                       
|       |                              | (No. 333-72456) Filed October 30,
2001 |                       
|4.4    |                              | Registration Statement on Form S-8     |                       
|       |                              | (No. 333-72460) Filed October 30,
2001 |                       
|10.1   |                              | Registration Statement on Form S-1     |                       
|       |                              | (No. 333-52771) Filed May 15, 1998     |                       
|10.2   |                              | Registration Statement on Form S-1     |                       
|       |                              | (No. 333-52771) Filed May 15, 1998     |                       
|10.3   |                              | Form S-8 Filed June 17, 1998           |                       
|       |                              |                                        |                       
|10.4   |                              | Form 10-Q Filed August 13, 2001        |                       
|       |                              |                                        |                       
|10.5   |                              | Form 10-Q Filed August 13, 2001        |                       
|10.6   |                              | Registration Statement on Form S-8     |                       
|       |                              | 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,
2004  |                       
|       |                              | 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,
2004  |                       
|       |                              | as adopted pursuant to section 302
of  |                       
|       |                              | THE SARBANES-OXLEY ACT OF 202.         |                       
|32.1   |                              | OMI Corporations certification
by the |                       
|       |                              | Chief Executive Officer on Form 10-K   |                       
|       |                              | for the year ending December 31,
2004  |                       
|       |                              | 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,
2004  |                       
|       |                              | pursuant to 18 U.S.C. Section 1350,
as |                       
|       |                              | adopted pursuant to section 906 of     |                       
|       |                              | THE SARBANES-OXLEY ACT OF 2002.        |                       





|   
|---
|(1)







85

---

SIGNATURES

Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.



| | OMI CORPORATION                                                                                       
| | ------------------------------------------------------------------------------------------------------
| |                                                                                                       
| | By: /s/ Craig H. Stevenson                                                                            
| |                                                                                                       
| | Craig H. Stevenson, Jr.,Chairman of the Board of Directors and
  Chief Executive OfficerMarch 15, 2005









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 15, 2005
|                            |  | (Principal Executive Officer)                |  |               
|Craig
H. Stevenson, Jr.     |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ ROBERT
BUGBEE           |  | President, Chief Operating Officer           |  | March 15, 2005
|                            |  | and Director                                 |  |               
|Robert
Bugbee               |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ MICHAEL
KLEBANOFF       |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|Michael
Klebanoff           |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ JAMES
N. HOOD           |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|James
N. Hood               |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ PHILIP
J. SHAPIRO       |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|Philip
J. Shapiro           |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ DONALD
C. TRAUSCHT      |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|Donald
C. Trauscht          |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ JAMES
D. WOODS          |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|James
D. Woods              |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ G. ALLEN
BROOKS         |  | Director                                     |  | March 15, 2005
|                            |  |                                              |  |               
|G.
Allen Brooks             |  |                                              |  |               
|                            |  |                                              |  |               
|/s/ KATHLEEN
C. HAINES      |  | Senior Vice President, Chief                 |  | March 15, 2005
|                            |  | Financial Officer, Treasurer and             |  |               
|Kathleen
C. Haines          |  | Chief Accounting Officer                     |  |               
|                            |  | (Principal Financial and Accounting Officer) |  |               
|                            |  |                                              |  |               
|                            |  |                                              |  |               
|                           







86

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