UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

|ý                                       | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|--------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended June 30, 2004
|OR                                     
|o                                       | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-31920

K-SEA TRANSPORTATION PARTNERS L.P.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 20-0194477                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer
Identification No.)

3245 Richmond Terrace
Staten Island, New York 10303(Address of principal executive offices and zip code)

(718) 720-9306(Registrant's telephone number, including area code)

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

|Title of each class |  | Name of each exchange on which registered
|------------------- |  | -----------------------------------------
|Common Units        |  | New York Stock Exchange                  

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

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 ý    No o

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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The registrant's Common Units were not publicly traded as of the last business day of the registrant's most recently completed second quarter. The aggregate
market value of the registrant's Common Units held by non-affiliates of the registrant, as of September 24, 2004, based on the reported closing price of such units on the New York
Stock Exchange on such date, was approximately $124,832,631.

At
September 27, 2004, 4,165,000 Common Units and 4,165,000 Subordinated Units were outstanding.

Documents
Incorporated by Reference: None



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K-SEA TRANSPORTATION PARTNERS L.P.
2004 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

|         |                |    |                                                                                                                   | PAGE
|-------- | -------------- | -- | ----------------------------------------------------------------------------------------------------------------- | ----
|PART I   |                | 3 
|         | ITEMS 1 and 2. |    | BUSINESS and PROPERTIES                                                                                           |     
|         | ITEM 3.        |    | LEGAL PROCEEDINGS.                                                                                                |     
|         | ITEM 4.        |    | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                                              |     
|PART II  |                | 22
|         | ITEM 5.        |    | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |     
|         | ITEM 6.        |    | SELECTED FINANCIAL DATA                                                                                           |     
|         | ITEM 7.        |    | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                            |     
|         | ITEM 7A.       |    | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                                                       |     
|         | ITEM 8.        |    | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                                                      |     
|         | ITEM 9.        |    | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.                             |     
|         | ITEM 9A.       |    | CONTROLS AND PROCEDURES                                                                                           |     
|         | ITEM 9B.       |    | OTHER INFORMATION                                                                                                 |     
|PART III |                | 56
|         | ITEM 10.       |    | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                                                               |     
|         | ITEM 11.       |    | EXECUTIVE COMPENSATION.                                                                                           |     
|         | ITEM 12.       |    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY HOLDER MATTERS                |     
|         | ITEM 13.       |    | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                    |     
|         | ITEM 14.       |    | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                            |     
|PART IV  |                | 71
|         | ITEM 15.       |    | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                                                                       |     

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FORWARD-LOOKING STATEMENTS

Statements included in this report that are not historical facts (including statements concerning plans and objectives of management for future operations or
economic performance, or assumptions related thereto) are forward-looking statements. In addition, we may from time to time make other oral or written statements that are also forward-looking
statements.

Forward-looking
statements appear in a number of places in this report and include statements with respect to, among other things:



These
forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future events and therefore involve a number
of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking
statements. Please read "Risk Factors" in Item 7 of this report for a list of important factors that could cause our actual results of operations or our actual financial condition to differ.

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PART I

ITEMS 1 and 2.    BUSINESS and PROPERTIES

Our Partnership

We are a leading provider of refined petroleum product marine transportation, distribution and logistics services in the northeastern United States. Our fleet of
34 tank barges, 2 tankers and 19 tugboats serves a wide range of customers, including major oil companies, oil traders and refiners. With over 2.4 million barrels of capacity, we believe
we own and operate the third-largest ocean-going tank barge fleet in the United States as measured by barrel-carrying capacity.

For
the fiscal year ended June 30, 2004, our fleet transported approximately 100 million barrels of refined petroleum products for our customers, including BP,
ChevronTexaco, ConocoPhillips and ExxonMobil. Our six largest customers in fiscal 2004 have been doing business with us for over 11 years on average. We do not assume ownership of any of the
products we transport. During fiscal 2004, we derived approximately 74% of our revenue from longer-term contracts that are generally for periods of one year or more.

We
have a high-quality, well-maintained fleet. Approximately 68% of our current barrel-carrying capacity is double-hulled and, after the phase-out of
two single-hull tank barges on December 31, 2004, approximately 74% of our barrel-carrying capacity will be double-hulled. Furthermore, after December 31, 2004, we will be
permitted to continue to operate our remaining single-hull tank vessels until January 1, 2015 in compliance with the Oil Pollution Act of 1990, or OPA 90, which mandates the
phase-out of all single-hull tank vessels transporting petroleum and petroleum products in U.S. waters. All of our vessels operate under the U.S. flag, and all but three are
qualified to transport cargo
between U.S. ports under the Jones Act, the federal statutes that restrict foreign owners from operating in the U.S. maritime transportation industry.

Our
primary business objective is to increase distributable cash flow per unit by executing the following strategies:



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Our
principal executive office is located at 3245 Richmond Terrace, Staten Island, New York 10303, and our telephone number at that address is (718) 920-9306.

We
were formed to own and operate the refined petroleum product marine transportation, distribution and logistics business conducted by K-Sea Transportation LLC (along with
its subsidiaries, "K-Sea LLC"). On January 14, 2004, K-Sea LLC contributed assets and liabilities constituting its business to us in connection with our initial public
offering of common units representing limited partner interests. In exchange for these assets and liabilities, K-Sea LLC received 665,000 common units and 4,165,000 subordinated units
representing limited partner interests in us. Our general partner received a 2% general partner interest and certain incentive distribution rights. We subsequently redeemed the 665,000 common units
held by K-Sea LLC.

Industry Overview

Introduction

Tank vessels, which include tank barges and tankers, are a critical link in the refined petroleum product distribution chain. Tank vessels transport gasoline,
diesel fuel, heating oil, asphalt and other products from refineries and storage facilities to a variety of destinations, including other refineries, distribution terminals, power plants and ships.
According to a June 2004 study by the Association of Oil Pipe Lines, 27.5% of all domestic refined petroleum product transportation was by water in 2002, making waterborne transportation the
most used mode of transportation for refined petroleum products after pipelines.

Among
the laws governing the domestic tank vessel industry is the Jones Act. Under the Jones Act, marine transportation between points in the United States, generally known as U.S.
coastwise trade, is limited to U.S.-flag vessels that were built in the United States and are owned, manned and operated by U.S. citizens. All of our vessels operate under the U.S. flag,
and all but three are qualified to transport cargo between U.S. ports under the Jones Act.

The
supply of domestic tank vessels is expected to decrease as a result of OPA 90, which mandates the phase-out of all single-hull tank vessels transporting
petroleum and petroleum products in U.S. waters at varying times by January 1, 2015.

The
demand for domestic tank vessels is driven primarily by U.S. demand for refined petroleum products, which can be categorized as either clean oil products or black oil products. Clean
oil products include motor gasoline, diesel fuel, heating oil, jet fuel and kerosene. Black oil products, which are what remains after clean oil products have been separated from crude oil, include
residual fuel oil in the refining process, asphalt, petrochemical feedstocks and bunker fuel. The demand for clean oil

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products
is impacted by vehicle usage, air travel and prevailing weather conditions, while demand for black oil products varies depending on the type of product transported and other factors, such as
oil refinery requirements and turnarounds, asphalt use, the use of residual fuel oil by electric utilities and bunker fuel consumption.

Transportation of Refined Petroleum Products

Tank vessels are used frequently to continue the transportation of refined petroleum products along the distribution chain after these products have first been
transported by another method of transportation, such as a pipeline. Many areas along the East Coast have access to refined petroleum products only by using marine transportation as the last link in
their distribution chain. In addition, tank vessel transportation is generally a more cost-effective and energy-efficient means of transporting bulk commodities such as refined petroleum
products than transportation by rail car or truck. The carrying capacity of a 100,000 barrel tank barge is the equivalent of approximately 162 average-size rail tank cars and approximately
439 average-size tractor trailer tank trucks.

Types of Tank Vessels

The domestic tank vessel fleet consists of tankers, which have internal propulsion systems, and tank barges, which do not have propulsion systems and are instead
pushed or towed by a tugboat. Tank barges generally move at slower speeds than comparably sized tankers, but are less expensive to build and operate. Although tank barge configuration varies, the bow
and stern of most tank barges are square or sloped, with the stern of many tank barges having a notch of varying depth to permit pushing by a tug. While a larger tank vessel may be able to carry more
cargo, some voyages require a tank vessel to go through a lock, bridge opening or narrow waterway, which limit the size of vessels that may be used. In addition, some loading and discharge facilities
have physical limitations that prevent larger tank vessels from loading or discharging their cargo. Tank barges are often able to navigate the shallower waters of the inland waterway system and the
waters along the coast. Tankers, however, are often confined to the deeper waters offshore due to their size.

Tank
vessels can be categorized by:



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Tank
vessels can also be categorized into the following fleets based on the primary waterway system typically navigated by the vessel:



Tugboats

Tugboats are equipped to push, pull or tow tank barges alongside. The amount of horsepower required to handle a barge depends on a number of factors, including
the size of the barge, the amount of product loaded, weather conditions and the waterways navigated. A typical tug is manned by six people: a captain, a mate, an engineer, an assistant engineer and
two deckhands. These individuals perform the duties and tasks required to operate the tug, such as standing navigational watches, maintaining and repairing machinery, rigging and
line-handling, and painting and other routine maintenance. A standard work schedule for a tugboat crew is 14 days on, 14 days off. While on duty, the crew members generally
work two six-hour shifts each day.

Integrated Tug-Barge Units

Tugboats can also be integrated into a barge utilizing a notching system that connects the two vessels. An integrated tug-barge unit, or ITB, has
certain advantages over other tug-barge combinations, including higher speed and better maneuverability. In addition, an ITB can operate in certain sea and weather conditions in which
conventional tug-barge combinations cannot.

Our Customers

We provide marine transportation services primarily to major oil companies, oil traders and refiners in the northeastern United States and the Gulf of Mexico. We
monitor the supply and distribution patterns of our actual and prospective customers and focus our efforts on providing services that are responsive to the current and future needs of these customers.

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The
following chart sets forth our major customers and the number of years each of them has been a customer.

K-Sea Transportation Partners L.P.  Major Customers

Major Customers

Years as
CustomerBP

31ChevronTexaco

15ConocoPhillips

9ExxonMobil

8Rio Energy

6TransMontaigne

4


Our
two largest customers in fiscal 2004 based on gross revenue were ExxonMobil and Rio Energy, each of which accounted for more than 10% of our fiscal 2004 consolidated revenue. See
note 9 to the consolidated financial statements in Item 8 of this report.

Our Vessels

Tank Vessel Fleet

At June 30, 2004, our fleet consisted of the following tank vessels:

K-Sea Transportation Partners L.P. Tank Vessel Fleet

|Vessel(1)          |                 | Year Built |      | Capacity
(barrels) |         | Gross Tons |        | OPA 90 Phase-Out
|------------------ | --------------- | ---------- | ---- | ------------------ | ------- | ---------- | ------ | ----------------
|Double-Hull Barges |                 |            |      |                    |         |            |        |                 
|                   | DBL 151         |            | 1981 |                    | 150,000 |            | 8,710  |                 
|                   | DBL 152         |            | 1982 |                    | 150,000 |            | 8,710  |                 
|                   | DBL 155(2)      |            | 2004 |                    | 165,882 |            | 12,152 |                 
|                   | DBL 140         |            | 2000 |                    | 140,000 |            | 10,303 |                 
|                   | DBL 134(3)      |            | 1994 |                    | 134,000 |            | 9,514  |                 
|                   | DBL 105(4)      |            | 2004 |                    | 105,000 |            | 11,438 |                 
|                   | DBL 101         |            | 2002 |                    | 102,000 |            | 6,774  |                 
|                   | DBL 102         |            | 2004 |                    | 102,000 |            | 6,774  |                 
|                   | Casablanca(5)   |            | 1987 |                    | 89,293  |            | 5,736  |                 
|                   | Lemon Creek(5)  |            | 1987 |                    | 89,293  |            | 5,736  |                 
|                   | Spring Creek(5) |            | 1987 |                    | 89,293  |            | 5,736  |                 
|                   | DBL 81          |            | 2003 |                    | 82,000  |            | 5,667  |                 
|                   | DBL 82          |            | 2003 |                    | 82,000  |            | 5,667  |                 
|                   | DBL 70          |            | 1972 |                    | 73,024  |            | 5,248  |                 
|                   | DBL 31          |            | 1999 |                    | 30,000  |            | 2,146  |                 
|                   | DBL 32          |            | 1999 |                    | 30,000  |            | 2,146  |                 
|                   | DBL 2202        |            | 1962 |                    | 22,000  |            | 1,830  |                 
|                   |                 |            |      |                    |         |            |        |                 
|                   |                 | Subtotal   |      |                    |         | 1,635,785  |        | 114,287         
|                   |                 |            |      |                    |         |            |        |                 

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|Single-Hull Tankers |                 |                      |      |  |        |           |       |        
|------------------- | --------------- | -------------------- | ---- |  | ------ | --------- | ----- | -------
|                    | Great Lakes     |                      | 1963 |  | 38,000 |           | 2,813 |        
|                    | Great Gull      |                      | 1969 |  | 30,000 |           | 1,729 |        
|                    |                 |                      |      |  |        |           |       |        
|                    |                 | Subtotal             |      |  |        | 68,000    |       | 4,542  
|                    |                 |                      |      |  |        |           |       |        
|Single-Hull Barges  |                 |                      |      |  |        |           |       |        
|                    | KTC 90(6)       |                      | 1967 |  | 97,200 |           | 6,409 |        
|                    | KTC 96(6)       |                      | 1969 |  | 95,580 |           | 6,278 |        
|                    | KTC 80          |                      | 1981 |  | 82,878 |           | 4,576 |        
|                    | KTC 71          |                      | 1975 |  | 81,759 |           | 4,719 |        
|                    | KTC 60          |                      | 1980 |  | 61,638 |           | 3,824 |        
|                    | KTC 55          |                      | 1972 |  | 53,012 |           | 3,113 |        
|                    | Essex           |                      | 1967 |  | 35,160 |           | 2,307 |        
|                    | DBL 3201        |                      | 1968 |  | 31,000 |           | 2,033 |        
|                    | Wallabout Bay   |                      | 1986 |  | 28,330 |           | 1,687 |        
|                    | Newark Bay      |                      | 1969 |  | 27,390 |           | 1,595 |        
|                    | Trader II       |                      | 1949 |  | 20,475 |           | 1,194 |        
|                    | KTC 20          |                      | 1980 |  | 20,000 |           | 1,065 |        
|                    | American 21     |                      | 1968 |  | 19,500 |           | 1,262 |        
|                    | Oyster Bay      |                      | 1951 |  | 19,370 |           | 1,278 |        
|                    | E 10            |                      | 1960 |  | 18,790 |           | 1,077 |        
|                    | Josiah Bartlett |                      | 1955 |  | 14,000 |           | 1,287 |        
|                    |                 |                      |      |  |        |           |       |        
|                    |                 | Subtotal             |      |  |        | 706,082   |       | 43,704 
|                    |                 |                      |      |  |        |           |       |        
|                    |                 | Total Existing Fleet |      |  |        | 2,409,867 |       | 162,533
|                    |                 |                      |      |  |        |           |       |        

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We
spent $5.7 million during the first quarter of fiscal 2005 in connection with the retrofitting of the DBL 155 to a double-hull tank vessel, which was completed and
the vessel redelivered to us in early September 2004. We also signed an agreement with a shipyard in early September 2004 to construct a new 100,000 barrel barge, which we expect to be
delivered during the summer of 2005.

Tugboat Fleet

We view our tugboats as a cost center and, therefore, seek to maintain the proper balance between the number of tugboats and the number of tank barges in our
fleet. This balance is influenced by a variety of factors, including the condition of the vessels in our fleet, the mix of our coastwise business and our local business and the level of
longer-term contracts versus shorter-term business. We are also able to maintain a proper balance between tugboats and tank barges by analyzing the historical trading patterns
of our customers and the nature of their cargoes. While a tank barge is unloading, we often dispatch its tugboat to perform other work.

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At
June 30, 2004, we operated the following tugboats:

K-Sea Transportation Partners L.P. Tugboat Fleet

Name

Year Built

Horsepower

DimensionsRebel

1975

7200

150' x 46' x 22'Yankee

1976

7200

150' x 46' x 22'Irish Sea

1969

5750

135' x 34'9" x 18'Volunteer

1982

4800

120' x 38' x 18'Viking

1972

4300

132'6" x 34' x 18'3"Lincoln Sea

2000

8000

123.3' x 40' x 22'Beaufort Sea

1971

4300

113' x 32'3" x 15'6"Tasman Sea

1976

3900

123'6" x 34' x 16'4"Adriatic Sea

1978

3900

126' x 34' x 14'6"Kara Sea

1974

3520

111' x 32' x 13'8"Coral Sea

1973

3280

111' x 32' x 13'8"Java Sea

1981

3000

118'6" x 34' x 14'5"Baltic Sea

1973

3000

101' x 30' x 13'1"Bering Sea

1975

2250

105' x 29' x 13'3"Maryland

1962

2180

110' x 28' x 13'7"Houma

1970

1950

89'11" x 29' x 11'Odin

1982

1860

72' x 27'6" x 11'8"Taurus

1979

1860

78'6" x 25' x 11'7"Falcon

1978

1800

80' x 25' x 11'5"


Integrated Tug-Barge Units

We currently operate ten ITBs. At December 31, 2004, following the phase-out of two single-hull barges, ITBs will represent
approximately 53% of the barrel-carrying capacity of our tank barge fleet.

Bunkering

For over 30 years, we have specialized in the shipside delivery of fuel, known as bunkering, for the major and independent bunker suppliers in New York
Harbor. Demand for bunkering services is driven primarily by the number of ship arrivals in New York Harbor. A ship's time in port generally is limited, and the cost of delaying sailing due to
bunkering or other activities can be significant. Therefore, we continually strive to improve the level of service and on-time deliveries we provide to our customers.    All
nine of our bunker delivery tank barges are equipped with advanced, whole load sampling devices to provide the supplier and receiver a representative sample. Our bunker delivery tank barges are also
equipped with extended booms for hose handling ease alongside ships, remote pump engine shut-offs, spill rails, spill containment equipment and supplies, VHF and UHF radio communication
and fendering.

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Preventative Maintenance

We have a computerized preventative maintenance program that tracks U.S. Coast Guard and American Bureau of Shipping inspection schedules and establishes a system
for the reporting and handling of routine maintenance and repair.

Vessel
captains submit monthly inspection reports, which are used to note conditions that may require maintenance or repair. Vessel superintendents are responsible for reviewing these
reports, inspecting identified discrepancies, assigning a priority classification and generating work orders. Work orders establish job type, assign personnel responsible for the task and record
target start and completion dates. Vessel superintendents inspect repairs completed by the crew, supervise outside contractors as needed and conduct quarterly inspections following the same criteria
as the captains. Drills and training exercises are conducted in conjunction with these inspections, which are typically more comprehensive in scope. In addition, an operations duty officer is
available on a 24-hour basis to handle any operational issues. The operations duty officer is prepared to respond on scene whenever required and is trained in technical repair issues,
spill control and emergency response.

The
American Bureau of Shipping and the U.S. Coast Guard establish drydocking schedules. Typically, we drydock our vessels twice every five years. Prior to sending a vessel to a
shipyard, we develop comprehensive work lists to ensure all required maintenance is completed. Repair facilities bid on these work lists, and jobs are awarded based on price and time to complete.
Vessels then report to a cleaning facility to prepare for shipyard. Once the vessel is gas-freed, a certified marine chemist issues paperwork certifying that no dangerous vapors are
present. The vessel proceeds to the shipyard where the vessel superintendent and certain crewmembers assist in performing the maintenance and repair work. The planned maintenance period is considered
complete when all work has been tested to the satisfaction of American Bureau of Shipping or U.S. Coast Guard inspectors or both.

Safety

General

We are committed to operating our vessels in a manner that protects the safety and health of our employees, the general public and the environment. Our primary
goal is to minimize the number of safety- and health-related accidents on our vessels and our property. Our primary concerns are to avoid personal injuries and to reduce occupational health hazards.
We want to prevent accidents that may cause damage to our personnel, equipment or the environment such as fire, collisions, petroleum spills and groundings of our vessels. In addition, we are
committed to reduce overall emissions and waste generation and to the safe management of associated cargo residues and cleaning wastes.

Our
policy is to follow all laws and regulations as required, and we are actively participating with government, trade organizations and the public in creating responsible laws,
regulations and standards to safeguard the workplace, the community and the environment. Our Operations Department is responsible for coordinating all facets of our health and safety program and
identifies areas that may require special emphasis, including new initiatives that evolve within the industry. Our Human Resources Department is responsible for all training, whether conducted
in-house or at a training facility. Supervisors are responsible for carrying out and monitoring compliance for all of the safety and health policies on their vessels.

Tank Barge Characteristics

To protect the environment, today's tank barge hulls are required not only to be leak-proof into the body of water in which they float but also to be
vapor-tight to prevent the release of any fumes or vapors into the atmosphere. Our tank barges that carry light products such as gasoline or naphtha have alarms that indicate when the tank is full
(95% of capacity) and when it is overfull (98% of capacity).

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Each
tank barge also has a vapor recovery system that connects the cargo tanks to the shore terminal via pipe and hose to return to the plant the vapors generated while loading.

All
nine of our bunker delivery tank barges are equipped with advanced, whole load sampling devices to provide the supplier and receiver a representative sample. Our bunker delivery tank
barges are also equipped with extended booms for hose handling ease alongside ships, remote pump engine shut-offs, spill rails, spill containment equipment and supplies, VHF and UHF radio
communication and fendering.

Safety Management Systems

We belong to and adhere to the recommendations of the American Waterways Operators ("AWO") Responsible Carrier Program. The program is designed as a framework for
continuously improving the industry's and member companies' safety performance. The program complements and builds upon existing government regulations, requiring company safety and training standards
that in many instances exceed those required by federal law or regulation.

Developed
over four years ago by the AWO, the Responsible Carrier Program incorporates best industry practices in three primary areas:



The
Responsible Carriers Program has been recognized by many groups, including the U.S. Coast Guard and shipper organizations. We are periodically audited by an AWO-certified
auditor to verify compliance. We were last audited in early 2004, and our Responsible Carrier Program certificate remains in effect until
March 2007.

We
are also certified to the standards of the International Safety Management, or ISM, system. The ISM standards were promulgated by the International Maritime Organization, or IMO,
several years ago and have been adopted through treaty by many IMO member countries, including the United States. Although ISM is not required for coastal tug and barge operations, we have determined
that an integrated safety management system including the ISM and Responsible Carriers Program standards promotes safer operations and provides us with necessary operational flexibility as we continue
to grow.

Ship Management, Crewing and Employees

We maintain an experienced and highly qualified work force of shore-based and seagoing personnel. As of June 30, 2004, we employed 419 persons, comprising
61 shore staff and 358 fleet personnel. Our tug and tanker captains are non-union management supervisors. Effective July 1, 2004, we entered into a new four-year
collective bargaining agreement with our maritime union covering all our seagoing personnel, or approximately 76% of our workforce. The new agreement provides for wage increases totaling 15% over its
term. Similar to the previous collective bargaining agreement, we are required to make contributions to pension and other welfare programs that we manage. No unfunded pension liability exists under
any of these programs. Our vessel employees are paid on a daily or hourly basis and typically work 14 days on and 14 days off. Our shore-based personnel are generally salaried and are
located at our headquarters in Staten Island, New York. We believe that our relations with our employees are satisfactory.

Our
shore staff provides worldwide support for all aspects of our fleet and business operations, including sales and scheduling, crewing and human resources functions, engineering,
compliance and technical management, financial and insurance services, and information technology. A staff of

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dispatchers
and schedulers maintain a 24-hour duty rotation to monitor communications and to coordinate fleet operations with our customers and terminals. Communication with our vessels is
accomplished by various methods, including wireless data links, cellular telephone, VHF, UHF and HF radio.

Our
crews regularly inspect each vessel, both at sea and in port, and perform most of the ordinary course maintenance. Our procedures call for a member of our shore-based staff to
inspect each vessel at least once each fiscal quarter, making specific notations and recommendations regarding the overall condition of the vessel, maintenance, safety and crew welfare. In addition,
approximately 10% of our fleet is inspected annually by independent consultants. All of the vessels that are on bareboat charters to third parties are managed and operated by the customer.

Classification, Inspection and Certification

In accordance with standard industry practice, all of our coastwise vessels have been certified as being "in class" by the American Bureau of Shipping. The
American Bureau of Shipping is one of several internationally recognized classification societies that inspect vessels at regularly scheduled intervals to ensure compliance with American Bureau of
Shipping classification rules and some applicable federal safety regulations. Most insurance underwriters require an "in class" certification by a classification society before they will extend
coverage to any vessel. The classification society certifies that the
pertinent vessel has been built and maintained in accordance with the rules of the society and complies with applicable rules and regulations of the country of registry of such vessel and the
international conventions of which that country is a member. Inspections are conducted on the pertinent vessel by a surveyor of the classification society in three surveys of varying frequency and
thoroughness: annual surveys each year, an intermediate survey every two to three years and a special survey every four to five years. As part of the intermediate survey, a vessel may be required to
be drydocked every 24 to 30 months for inspection of its underwater parts and for any necessary repair work related to such inspection.

Our
vessels are also inspected at periodic intervals by the U.S. Coast Guard to ensure compliance with safety regulations determined by the U.S. Department of Transportation. All of our
tank vessels carry Certificates of Inspection issued by the U.S. Coast Guard. All of our tugs participate in the U.S. Coast Guard's un-inspected towing vessel inspection program.

Our
vessels and shoreside operations are also inspected and audited periodically by our customers, in some cases as a precondition to chartering our vessels. We maintain all necessary
approvals required for our vessels to operate in their normal trades. We believe that the high quality of our tonnage, our crews and our shoreside staff are advantages when competing against other
vessel operators for long-term business.

Insurance Program

We believe that our insurance coverage is adequate to protect against the accident-related risks involved in the conduct of our business and risks of liability
for environmental damage and pollution, consistent with industry practice. Nevertheless, we cannot provide assurance that all risks are adequately insured against, that any particular claims will be
paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. K-Sea General Partner GP LLC, the general partner of our general
partner, maintains a key man insurance policy on Mr. Timothy J. Casey, its President and Chief Executive Officer.

Our
hull and machinery insurance covers risks of actual or constructive loss from collision, towers liabilities, fire, grounding and engine breakdown up to an agreed value per vessel.
Our war-risks insurance covers risks of confiscation, seizure, capture, vandalism, sabotage and other war-related risks.

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While
some tanker owners and operators obtain loss-of-hire insurance covering the loss of revenue during extended tanker off-hire periods, we, along with several
tanker operators, do not have this type of coverage. We believe that, given our diversified marine transportation operations and high utilization rate, this type of coverage is not economical and is
of limited value to us. However, we evaluate the need for such coverage on an ongoing basis taking into account insurance market conditions and the employment of our vessels.

Our
protection and indemnity insurance covers third-party liabilities and other related expenses from, among other things, injury or death of crew, passengers and other third parties,
claims arising from collisions, damage to cargo, damage to third-party property, asbestos exposure and pollution arising from oil or other substances. Our current protection and indemnity insurance
coverage for pollution is $1 billion per incident and is provided by West of England Ship Owners Insurance Services Ltd., a mutual insurance association. West of England is a member of
the International Group of protection and indemnity mutual assurance associations. The 13 protection and indemnity associations that comprise the International Group insure approximately 90% of the
world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Each protection and indemnity association has capped its exposure to this pooling
agreement at approximately $4.3 billion per non-pollution incident. As a member of West of England, we are subject to calls payable to the associations based on our claim records,
as well as the claim records of all other members of the individual associations and members of West of England.

We
are not currently the subject of any claims alleging exposure to asbestos or second-hand smoke, although such claims have been brought in the past and may be brought in
the future. Our predecessor company, EW Transportation LLC (formerly K-Sea Transportation LLC), has contractually agreed to retain any such liabilities that occurred prior to our initial
public offering in January 2004, will indemnify us for up to $10 million of such liabilities for a period of ten years, and will make available to us the benefit of certain indemnities
it received in connection with the purchase of certain vessels. If, notwithstanding the foregoing, we are ultimately obligated to pay any asbestos-related or similar claims for any reason, we believe
we or EW Transportation LLC would have adequate insurance coverage for periods after March 1986 to pay such claims. However, EW Transportation LLC and its predecessors may not have insurance
coverage prior to March 1986. If we were subject to claims related to that period, including claims from current or former employees, EW Transportation LLC may not have insurance to pay the
liabilities, if any, that could be imposed on us. If we had to pay claims solely out of our own funds, it could have a material adverse effect on our financial condition. Furthermore, any claims
covered by insurance would be subject to deductibles, and because it is possible that a large number of claims could be brought, the aggregate amount of these deductibles could be material.

We
may not be able to obtain insurance coverage in the future to cover all risks inherent in our business, and insurance, if available, may be at rates that we do not consider to be
commercially reasonable. In addition, as more single-hull vessels are retired from active service, insurers may be less willing to insure, and customers less willing to hire,
single-hull vessels.

Competition

The Jones Act restricts U.S. point-to-point maritime shipping to vessels built in the United States, owned and operated by U.S. citizens
and manned by U.S. crews. In our market areas, our primary direct competitors are the operators of U.S.-flag ocean-going tank barges and U.S.-flag refined petroleum product
tankers, including the captive fleets of major oil companies. The domestic tank vessel industry is highly competitive.

In
the voyage and short-term charter market, our vessels compete with all other vessels of a size and type required by a charterer that can be available at the date
specified. In the voyage market,

13

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competition
is based primarily on price and availability, although charterers have become more selective with respect to the quality of vessels they hire, with particular emphasis on factors such as
age, double hulls and the reliability and quality of operations. Increasingly, major charterers are demonstrating a preference for modern vessels based on concerns about the environmental risks
associated with older vessels. Consequently, we believe that owners of large modern fleets have been able to gain a competitive advantage over owners of older fleets.

U.S.-flag
tank vessels also compete with petroleum product pipelines and are affected by the level of imports on foreign flag products carriers. The Colonial Pipeline system,
which originates in Texas and terminates at New York Harbor, the Plantation Pipeline, which originates in Louisiana and terminates in Washington D.C., and smaller regional pipelines between
Philadelphia and New York, carry refined petroleum products to the major storage and distribution facilities that we currently serve. We believe that high capital costs, tariff regulation and
environmental considerations make it unlikely that a new refined product pipeline system will be built in our market areas in the near future. It is possible, however, that new pipeline segments,
including pipeline segments that connect with existing pipeline systems, could be built or that existing pipelines could be converted to carry refined petroleum products. Either of these occurrences
could have an adverse effect on our ability to compete in particular locations.

Regulation

Our operations are subject to significant federal, state and local regulation, the principal provisions of which are described below.

Environmental

General.Government regulation significantly affects the ownership and operation of our tank vessels. Our tank vessels are
subject to international conventions, federal, state and local laws and regulations relating to safety and health and environmental protection, including the generation, storage, handling, emission,
transportation, and discharge of hazardous and non-hazardous materials. Although we believe that we are in substantial compliance with applicable environmental laws and regulations, we
cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our tank vessels. The recent trend in environmental
legislation is toward stricter requirements, and this trend will likely continue. In addition, a future serious marine incident occurring in U.S. waters, or internationally, that results in
significant oil pollution or causes significant environmental impact could result in additional legislation or regulation that could affect our profitability.

Various
governmental and quasi-governmental agencies require us to obtain permits, licenses and certificates for the operation of our tank vessels. While we believe that we are in
substantial compliance with applicable environmental laws and regulations and have all permits, licenses and certificates necessary for the conduct of our operations, frequently changing and
increasingly stricter requirements, future non-compliance or failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend operation
of one or more of our tank vessels.

We
maintain operating standards for all our tank vessels that emphasize operational safety, quality maintenance, continuous training of our crews and officers, care for the environment
and compliance with U.S. regulations. Our tank 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 (U.S. Coast Guard, harbor master or equivalent), classification societies, flag state administration and charterers, particularly
terminal operators and oil companies.

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Finally,
we manage our exposure to losses from potential discharges of pollutants through the use of well maintained and well managed facilities, well maintained and well equipped
vessels and safety and environmental programs, including a maritime compliance program and our insurance program. Moreover, we believe we will be able to accommodate reasonably foreseeable
environmental regulatory changes. However, the risks of substantial costs, liabilities, and penalties are inherent in marine operations. As a result, there can be no assurance that any new regulations
or requirements or any discharge of pollutants by us will not have a material adverse effect on us.

The Oil Pollution Act of 1990.The Oil Pollution Act of 1990, or OPA 90, affects all vessels trading in U.S. waters including
the exclusive economic zone extending 200 miles seaward. OPA 90 sets forth various technical and operating requirements for tank vessels operating in U.S. waters. Existing single-hull,
double-sided and double-bottomed tank vessels are to be phased out of service between 1995 and 2015 based on their tonnage and age. Under the phase-out schedule, two of our
single-hull tank barges will be precluded from transporting petroleum products in the United States as of January 1, 2005 and the remaining 16 single-hull tank vessels
will be precluded from such activity as of January 1, 2015.

Under
OPA 90, owners or operators of tankers operating in U.S. waters must file vessel spill response plans with the U.S. Coast Guard and operate in compliance with the plans. These
vessel response plans must, among other things:



Our
vessel response plans have been approved by the U.S. Coast Guard, and all of our tankermen have been trained to comply with these guidelines. In addition, we conduct regular
oil-spill response drills in accordance with the guidelines set out in OPA 90. We believe that all of our tank vessels are in substantial compliance with OPA 90.

The
U.S. Coast Guard also issued new regulations under OPA 90 effective October 17, 2002 that require the installation by October 17, 2007 of tank level or pressure
monitoring (TLPM) devices on all single-hull tank vessels carrying oil or oil residue. We currently anticipate that the installation of these systems will be less expensive for coastwise
vessels already fitted with cargo monitoring systems than for inland barges that are typically unmanned and do not have electrical systems installed. Since no TLPM devices currently exist, we cannot
project their cost at this time. We currently do not anticipate that compliance with these regulations will cause us to accelerate the phase-out of our single-hull barges.

Environmental Spill and Release Liability.OPA 90 and various state laws substantially increased over historic levels the
statutory liability of owners and operators of vessels for the discharge or substantial threat of a discharge of oil and the resulting damages, both regarding the limits of liability and the scope of
damages. OPA 90 imposes joint and several strict liability on responsible parties, including owners, operators and bareboat charterers, for all oil spill and containment and clean-up costs
and other damages arising from spills attributable to their vessels. A complete defense is available only when the responsible party establishes that it exercised due care and took precautions against
foreseeable acts or omissions of third parties and when the spill is caused solely by an act of God, act of war (including civil war and insurrection) or a third party other than an employee or agent
or party in a contractual relationship with the responsible party. These limited defenses may be lost if the responsible party fails to report the incident or reasonably cooperate with the appropriate
authorities or refuses to comply with an order concerning clean-up activities. Even if the spill is caused solely by a

15

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third
party, the owner or operator must pay removal costs and damage claims and then seek reimbursement from the third party or the trust fund established under OPA 90. Finally, in certain
circumstances involving oil spills from tank vessels, OPA 90 and other environmental laws may impose criminal liability on personnel and/or the corporate entity.

OPA
90 limits the liability of each responsible party for a tank vessel to the greater of $1,200 per gross registered ton or $10 million per discharge. This limit does not apply
where, among other things, the spill is caused by gross negligence or willful misconduct of, or a violation of an applicable federal safety, construction or operating regulation by, a responsible
party or its agent or employee or any person acting in a contractual relationship with a responsible party. In addition to removal costs, OPA 90 provides for recovery of damages, including:



OPA
90 expanded the pre-existing financial responsibility requirements for tank vessels operating in U.S. waters and requires owners and operators of tank vessels to
establish and maintain with the U.S. Coast Guard evidence of their financial responsibility sufficient to meet their potential liabilities imposed by OPA 90. Under the regulations, we may provide
evidence of insurance, a surety bond, a guarantee, letter of credit, qualification as a self-insurer or other evidence of financial responsibility. We have qualified as a
self-insurer under the regulations and have received certificates of financial responsibility from the U.S. Coast Guard for all of our tank vessels subject to this requirement.

OPA
90 expressly provides that individual states are entitled to enforce their own pollution liability laws, even if inconsistent with or imposing greater liability than OPA 90. There is
no uniform liability scheme among the states. Some states have OPA 90-like schemes for limiting liability to various amounts, some rely on common law fault-based remedies and others impose
strict and/or unlimited liability on an owner or operator. Virtually all coastal states have enacted their own pollution prevention, liability and response laws, whether statutory or through court
decisions, with many providing for some form of unlimited liability. We believe that the liability provisions of OPA 90 and similar state laws have greatly expanded potential liability in the event of
an oil spill, even where we are not at fault. Some states have also established their own requirements for financial responsibility. However, in March 2000, the U.S. Supreme Court decided
United States v. Locke. In that case, INTERTANKO challenged tank vessel regulations brought by the State of Washington. The Court struck down several regulations and remanded the case for review of
additional regulations. The Court held that the regulation of maritime commerce is generally a federal responsibility because of the need for national and international uniformity. As a result of this
ruling, at least two states have repealed regulations concerning the operation, manning, construction or design of tank vessels.

Parties
affected by oil pollution may pursue relief from the Oil Spill Liability Trust Fund, absent full recovery by them against a responsible party. Responsible parties may seek
contribution from the fund for costs incurred that exceeded the liability limits of OPA 90. The responsible party would need to establish that it is entitled to both a statutory defense against
liability and to a statutory limitation of liability to obtain contribution from the fund. If we are deemed a responsible party for an oil pollution

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incident
and are ineligible for contribution from the fund, the costs of responding to an oil pollution incident could have a material adverse effect on our results of operations, financial condition
and cash flows. We presently maintain oil pollution liability insurance in an amount in excess of that required by OPA 90. Through our protection and indemnity club, West of England Ship Owners
Insurance Services Ltd., our current coverage for oil pollution is $1 billion per incident. It is possible, however, that our liability for an oil pollution incident may be in excess of
the insurance coverage we maintain.

We
are also subject to potential liability arising under the U.S. Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of
hazardous substances, whether on land or at sea. Specifically, CERCLA provides for liability of owners and operators of tankers for cleanup and removal of hazardous substances and provides for
additional penalties in connection with environmental damage. Liability under CERCLA for releases of hazardous substances from vessels is limited to the greater of $300 per gross ton or
$5 million per incident unless attributable to willful misconduct or neglect, a violation of applicable standards or rules, or upon failure to provide reasonable cooperation and assistance.
CERCLA liability for releases from facilities other than vessels is generally unlimited.

We
are required to show proof of insurance, surety bond, self insurance or other evidence of financial responsibility to pay damages under OPA 90 and CERCLA in the amount of $1,500 per
gross ton for vessels, consisting of the sum of the OPA 90 liability limit of $1,200 per gross ton or $10 million per discharge and the CERCLA liability limit of $300 per gross ton or
$5 million per discharge. We have satisfied these requirements and obtained a U.S. Coast Guard Certificate of Financial Responsibility. OPA 90 and CERCLA each preserve the right to recover
damages under other existing laws, including maritime tort law.

Water.The Federal Water Pollution Control Act or the Clean Water Act (CWA) imposes restrictions and strict controls on the
discharge of pollutants into navigable waters, and such discharges generally require permits. The CWA provides for civil, criminal and administrative penalties for any unauthorized discharges and
imposes substantial liability for the costs of removal, remediation and damages. State laws for the control of water pollution also provide varying civil, criminal and administrative penalties and
liabilities in the case of a discharge of petroleum, its derivatives, hazardous substances, wastes and pollutants into state waters. In addition, the Coastal Zone Management Act authorizes state
implementation and development of programs of management measures for non-point source pollution to restore and protect coastal waters.

Solid Waste.Our operations occasionally generate and require the transportation, treatment and disposal of both hazardous
and non-hazardous solid wastes that are subject to the requirements of the federal Resource Conservation and Recovery Act, or RCRA, and comparable state and local requirements. In
August 1998, the EPA added four petroleum refining wastes to the list of RCRA hazardous wastes. In addition, in the course of our tank vessel operations, we engage contractors to remove and
dispose of waste material, including tank residue. In the event that such waste is found to be "hazardous" under either RCRA or the CWA, and is disposed of in violation of applicable law, we could be
found jointly and severally liable for the cleanup costs and any resulting damages. Finally, the EPA does not currently classify "used oil" as "hazardous waste," provided certain recycling standards
are met. However, some states in which we operate have classified "used oil" as "hazardous" under state laws patterned after RCRA. The cost of managing wastes generated by tank vessel operations has
increased in recent years under stricter state and federal standards. Additionally, from time to time we arrange for the disposal of hazardous waste or hazardous substances at offsite disposal
facilities. If such materials are improperly disposed of by third parties, we could be liable for clean up costs under CERCLA or the equivalent state laws. We use only certified haulers for this work.

EW
Transportation Corp. (formerly K-Sea Transportation Corp., a predecessor company) has received a notice that it is a potentially responsible party, or PRP, in a proceeding
for the cleanup of

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hazardous
substances at a site in Port Arthur, Texas, where cleaning was performed on two of our barges in 1996 and 1997. This proceeding involves numerous waste generators and waste transportation
and disposal companies and seeks to allocate or recover costs associated with site investigation and cleanup. We believe our share of liability, if any, will be immaterial to our financial position,
results of operations and cash flows given our limited dealings with the site. Estimates of the degree of remediation of a particular site and the method and ultimate cost of remediation require a
number of assumptions and are inherently difficult to make. It is also possible that technological, regulatory or enforcement developments, the results of environmental studies and the inability of
other PRPs to contribute to settlements of such liability could require us to incur some costs, the amount of which is not possible to estimate. These costs, if any, would be subject to insurance and
certain indemnifications. For more information, please read "Certain Relationships and Related TransactionsOmnibus AgreementIndemnification" in Item 13 of this report.

Air Emissions.The federal Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990 (CAA), requires
the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes
when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our tank barges are equipped with vapor control systems that satisfy these requirements. In
addition, the EPA issued final rules regarding emissions standards for various classes of marine diesel engines. While these rules are currently limited to new engines beginning with the 2004 model
year, the EPA has noted that it may revisit the application of emissions standards to rebuilt or remanufactured engines if the industry does not take steps to introduce new pollution control
technologies. Adoption of such standards could require modifications to some existing marine diesel engines and may require substantial expenditures.

The
CAA also requires states to draft State Implementation Plans (SIPs) designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial
areas. Where states fail to present approvable SIPs or SIP revisions by certain statutory deadlines, the federal government is required to draft a Federal Implementation Plan. Several SIPs regulate
emissions resulting from barge loading and degassing operations by requiring the installation of vapor control equipment. As stated above, our tank barges are already equipped with vapor control
systems that satisfy these requirements. Although a risk exists that new regulations could require significant capital expenditures and otherwise increase our costs, we believe, based upon the
regulations that have been proposed to date, that no material capital expenditures beyond those currently contemplated and no material increase in costs are likely to be required.

Coastwise Laws

A substantial portion of our operations are conducted in the U.S. domestic trade, which is governed by the coastwise laws of the United States. The U.S. coastwise
laws reserve marine transportation between points in the United States, including harbor tug services, to vessels built in and documented under the laws of the United States (U.S.-flag)
and owned and manned by U.S. citizens. Generally, an entity is deemed a U.S. citizen for these purposes so long as:



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Because
we could lose the privilege of operating our vessels in the U.S. coastwise trade if non-U.S. citizens were to own or control in excess of 25.0% of our outstanding
interests, our limited partnership agreement restricts foreign ownership and control of our common and subordinated units to not more than 15.0% of our outstanding interests.

There
have been repeated efforts aimed at repeal or significant change of the Jones Act. Although we believe it is unlikely that the Jones Act will be substantially modified or repealed,
there can be no assurance that Congress will not substantially modify or repeal such laws. Such changes could have a material adverse effect on our operations and financial condition.

Other

Our vessels are subject to the jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs Service and the U.S. Maritime
Administration, as well as subject to rules of private industry organizations such as the American Bureau of Shipping. These agencies and organizations establish safety standards and are authorized to
investigate vessels and accidents and to recommend improved maritime safety standards. Moreover, to ensure compliance with applicable safety regulations, the U.S. Coast Guard is authorized to inspect
vessels at will.

Occupational Health Regulations

Our shoreside facilities are subject to occupational safety and health regulations issued by the U.S. Occupational Safety and Health Administration, or OSHA, and
comparable state programs. These regulations currently require us to maintain a workplace free of recognized hazards, observe safety and health regulations, maintain records, and keep employees
informed of safety and health practices and duties. Our vessel operations are also subject to occupational safety and health regulations issued by the U.S. Coast Guard and, to an extent, OSHA. These
regulations currently require us to perform monitoring, medical testing and recordkeeping with respect to mariners engaged in the handling of the various cargoes transported by our chemical and
petroleum product carriers.

Vessel Condition

Our vessels are subject to periodic inspection and survey by, and drydocking and maintenance requirements of, the U.S. Coast Guard and/or the American Bureau of
Shipping. We believe we are currently in compliance in all material respects with the environmental and other laws and regulations, including health and safety requirements, to which our operations
are subject. We are unaware of any pending or threatened litigation or other judicial, administrative or arbitration proceedings against us occasioned by any alleged non-compliance with
such laws or regulations. The risks of substantial costs, liabilities and penalties are, however, inherent in marine operations, and there can be no assurance that significant costs, liabilities or
penalties will not be incurred by or imposed on us in the future.

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Seasonality

Tank vessel services are significantly affected by demand for refined petroleum products. This demand is seasonal and often dependent on weather conditions.
Movements of certain clean oil products, such as motor fuels, generally increase during the summer driving season. Movements of certain black oil products and distillates, such as heating oil,
generally increase during the winter months, while movements of asphalt products generally increase in the spring through fall months. Unseasonably cold winters result in significantly higher demand
for heating oil in the northeastern United States, which is a significant market for our tank barge services. The summer driving season can increase demand for automobile fuel and, accordingly, the
demand for our services. A decline in demand for, and level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel
capacity and charter rates to decline, which would decrease our revenues and profitability.

Properties

We lease pier facilities and approximately 7,000 square feet of office space for our principal executive office in Staten Island, New York. The lease expires in
April 2009; however, we have the option to renew it for two additional ten-year periods. We also own and use a 2,100 square-foot modular facility for additional office
space.

SEC Reporting

We file annual, quarterly and current reports, along with any related amendments and supplements thereto, with the SEC. From time to time, we may also file
registration statements pertaining to equity or debt offerings. You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC
20549. You may obtain information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.govthat contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC.

We
also provide electronic access to our periodic and current reports on our website,www.k-sea.com, free of charge. These
reports are available on our website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. Information on our website or any other website is
not incorporated by reference into this report and does not constitute a part of this report.

ITEM 3.    LEGAL PROCEEDINGS.

We are a party to various suits in the ordinary course of business for monetary relief arising principally from personal injuries, collision or other casualty and
to claims arising under vessel charters. All of these personal injury, collision and casualty claims against us are fully covered by insurance, subject to deductibles ranging from $10,000 to $100,000
in amount. We provide on a current basis for amounts we expect to pay. Although the outcome of any individual claim or action cannot be predicted with certainty, we believe that any adverse outcome,
individually or in the aggregate, would be substantially mitigated by applicable insurance or indemnification from previous owners of our assets, and would not have a material adverse effect on our
financial position, results of operations or cash flows.

EW
Transportation LLC and its predecessors have been named, together with a large number of other companies, as a co-defendant in 39 civil actions by various parties,
including former employees, alleging unspecified damages from past exposure to asbestos and second-hand smoke aboard some of

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the
vessels that it contributed to us in connection with our initial public offering. EW Transportation LLC and its predecessors were dismissed from 37 of these lawsuits in the first half of 2003 for
an aggregate sum of approximately $46,000, have settled another case for $1,000 which is pending dismissal, and are in the process of settling the other case. We may be subject to litigation in the
future from these plaintiffs and others alleging exposure to asbestos due to alleged failure to properly encapsulate or remove friable asbestos on our vessels, as well as for exposure to
second-hand smoke and other matters. For a related discussion of insurance coverage, please read "Business and PropertiesInsurance Program" in Items 1 and 2 of this
report.

On
May 27, 2003, the United States of America filed suit against EW Transportation Corp. and EW Holding Corp. in the District Court of Rhode Island seeking for the National
Pollution Funds Center (NPFC) to recover under subrogation rights amounts paid by the NPFC to certain claimants in connection with an oil spill by an EW Holding vessel in 1996, and to recover
contractor costs and administrative costs incurred by the NPFC. The total claims made are approximately $5.9 million. However, in addition to defenses EW Transportation and EW Holding may have
against the claims, EW Transportation and EW Holding believe that any amounts payable under this claim will be fully covered by insurance or indemnified against by the prior owners of EW Holding.

One
of our predecessors has also received notice that it is a potentially responsible party in a proceeding for the cleanup of hazardous substances at a site in Port Arthur, Texas. For
more information, please read "Business and PropertiesRegulationEnvironmentalSolid Waste" in Items 1 and 2 of this report.

Our
predecessors have agreed to indemnify us for certain liabilities. For more information, please read "Certain Relationships and Related TransactionsOmnibus
AgreementIndemnification" in Item 13 of this report.

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

No matters were submitted to a vote of security holders during the quarter ended June 30, 2004.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SECURITY HOLDER
                  MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price of Common Units, Distributions and Related Unitholder Matters

Our common units were listed on the New York Stock Exchange under the symbol "KSP" beginning on January 9, 2004. Prior to January 9, 2004, our
equity securities were not publicly traded. As of September 27, 2004, there were 4,165,000 outstanding common units, representing an aggregate 49% limited partner interest in us. As of
September 27, 2004, there were 13 holders of record of our common units, representing approximately 5,000 beneficial owners. The following table sets forth, for the periods indicated, the high
and low sales prices per common unit, as reported on the New York Stock Exchange, and the amount of cash distributions declared per common unit:

Price RangeCash
Distribution(1)High

Low2004 Fiscal YearFourth Quarter Ended June 30, 2004

$
28.95

$
24.11

$
0.525Third Quarter Ended March 31, 2004(2)

$
29.64

$
23.50

$
0.430


---

The
aggregate amount of distributions declared in respect of the 2004 fiscal year on common units, the general partner interests, and subordinated units totaled $8.1 million.

Initial Public Offering

On January 14, 2004, we completed our initial public offering of 3,625,000 common units at a price of $23.50 per unit, pursuant to a Registration Statement
on Form S-1 (Registration No. 333-107084) that we filed initially in July 2003 and which the SEC declared effective on January 8, 2004. The managing
underwriter was Lehman Brothers Inc. On January 21, 2004, we sold an additional 540,000 common units to the underwriters in connection with the exercise of their
over-allotment option. Total gross proceeds from these sales were $97.9 million, before offering costs and underwriting fees of $11.8 million. In January 2004 and in
connection with our initial public offering, we redeemed the 665,000 common units held by K-Sea LLC at a cost of $14.6 million. After the initial public offering and related
redemption, 4,165,000 common units and 4,165,000 subordinated units were outstanding. The proceeds retained by us relating to the sale of the common units totaled $83.3 million, which were used
to repay $73.9 million in K-Sea LLC's outstanding term and revolving credit debt, including prepayment fees and make-whole amounts, and to pay $5.9 million in
underwriting fees and $3.4 million in professional fees and other offering expenses. The proceeds we received from the

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offering
and the use of those proceeds are summarized as follows (in thousands, except unit and per unit amounts):

Proceeds received:Sale of 4,165,000 common units at $23.50 per unit

$
97,877Less amounts paid for redemption of 665,000 common units
from K-Sea LLC


(14,592
)$
83,285Use of proceeds:Repayment of term and revolving credit debt


73,941Underwriting fees


5,939Professional fees and other offering expenses


3,405$
83,285


Cash Distribution Policy

Within 45 days after the end of each quarter, we will distribute all of our available cash from operating surplus to unitholders of record on the
applicable record date. Our available cash from operating surplus consists generally of all cash on hand at the end of the fiscal quarter, plus all cash on hand resulting from working capital
borrowings made after the end of the quarter up to the date of determination of available cash, less the amount of cash that our general partner determines is necessary or appropriate to, among
others:



Our
ability to distribute available cash is contractually restricted by the terms of our Title XI debt and our other credit facilities, which require us to maintain certain financial
ratios and generally prohibit distributions to unitholders if the distribution would cause an event of default, or an event of default is existing, under our Title XI debt or a credit facility. Please
read "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesTitle XI Borrowings" and "Credit
Agreement" in Item 7 of this report.

Subordination Period

During the subordination period, the common units have the right to receive distributions of available cash from operating surplus in an amount equal to the
minimum quarterly distribution of $0.50 per quarter, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of
available cash from operating surplus may be made on the subordinated units. Upon expiration of the subordination period, each outstanding subordinated unit will convert into one common unit and will
participate pro rata with the other common units in distributions of available cash.

23

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Definition of Subordination Period.The subordination period will extend until the first day of any quarter, beginning after
December 31, 2008, that each of the following tests are met:



Adjusted
operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net increases in working capital borrowings and net
drawdowns of reserves of cash generated in prior periods.

Early Conversion of Subordinated Units.Before the end of the subordination period, 50% of the subordinated units, or up to
2,082,500 subordinated units, may convert into common units on a one-for-one basis immediately after the distribution of available cash to the partners in respect of any
quarter ending on or after:



The
early conversions will occur if at the end of the applicable quarter each of the following occurs:



However,
the second early conversion of the subordinated units may not occur until at least one year following the first early conversion of the subordinated units.

Incentive Distribution Rights

Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after
the minimum quarterly distribution and certain target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights
separately from its general partner interest, subject to restrictions in the partnership agreement.

If
for any quarter, we have distributed available cash from operating surplus a) to the common and subordinated unitholders an amount equal to the minimum quarterly distribution,
and b) on the common units an amount necessary to eliminate any cumulative arrearages in payment of the minimum

24

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quarterly
distribution, then we will distribute any additional available cash from operating surplus for that quarter among the unitholders and our general partner in the following manner:



The
percentage interests set forth above for our general partner include its 2% general partner interest and assume the general partner has not transferred the incentive distribution
rights.

ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth selected historical financial and operating data of K-Sea Transportation Partners L.P. and its predecessors. On
January 14, 2004, K-Sea LLC contributed assets and liabilities constituting its business to us in connection with our initial public offering of common units. Therefore, the
historical financial and operating data presented below are for K-Sea LLC for all periods prior to January 14, 2004. The following table should be read in conjunction with the
consolidated financial statements, including the notes thereto, in Item 8 of this report, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this
report.

|                                                   |          | Years Ended June 30, |        
|-------------------------------------------------- | -------- | -------------------- | -------
|
|Income Statement Data:                             |          |                      |        
|Voyage revenue                                     |          | $                    | 93,899 
|Bareboat charter and other revenue                 |          |                      | 1,900  
|                                                   |          |                      |        
|Total revenues                                     |          |                      | 95,799 
|Voyage expenses                                    |          |                      | 16,339 
|Vessel operating expenses                          |          |                      | 38,809 
|General and administrative expenses                |          |                      | 8,149  
|Depreciation and amortization                      |          |                      | 18,643 
|Net loss (gain) on sale of vessels                 |          |                      | 255    
|                                                   |          |                      |        
|Total operating expenses                           |          |                      | 82,195 
|                                                   |          |                      |        
|Operating income                                   |          |                      | 13,604 
|Interest expense (income), net                     |          |                      | 6,370  
|Net loss (gain) on reduction of debt(1)            |          |                      | 3,158  
|Other (income) expense, net                        |          |                      | (253   
|                                                   |          |                      |        
|Income before provision (benefit) for income taxes |          |                      | 4,329  
|Provision (benefit) for income taxes(2)            |          |                      | (16,845
|                                                   |          |                      |        
|Net income                                         |          | $                    | 21,174 
|                                                   |          |                      |        
|Net income per unitbasic                          |          | $                    | 2.26   
|                                                   | diluted |                      | $      
|                                                   |          |                      |        

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|Balance Sheet Data (at year end):                               |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|--------------------------------------------------------------- | -------------------- | ----------- | ------- | ------- | ------ | ------- | ------- | ----- | ------- | ------- | ----- | ------- | ------ | ------ | ------- | ------
|Vessels and equipment, net                                      |                      | $           | 193,646 |         | $      | 145,520 |         | $     | 115,304 |         | $     | 121,542 |        | $      | 121,899 |       
|Total assets                                                    |                      |             | 228,144 |         |        | 178,328 |         |       | 184,730 |         |       | 136,462 |        |        | 134,621 |       
|Total debt                                                      |                      |             | 78,817  |         |        | 114,003 |         |       | 125,076 |         |       | 85,019  |        |        | 93,567  |       
|Members'equity/partners' capital                                |                      |             | 135,698 |         |        | 41,290  |         |       | 36,267  |         |       | 29,753  |        |        | 19,528  |       
|Cash Flow Data:                                                 |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|Net cash provided by (used in):                                 |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|                                                                | Operating activities |             | $       | 17,825  |        | $       | 13,235  |       | $       | 16,417  |       | $       | 13,870 |        | $       | 3,720 
|                                                                | Investing activities |             |         | (59,167 | )      |         | (240    | )     |         | (52,291 | )     |         | (3,752 | )      |         | (1,081
|                                                                | Financing activities |             |         | 41,695  |        |         | (12,984 | )     |         | 34,689  |       |         | (8,956 | )      |         | (2,905
|Other Financial Data:                                           |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|Capital expenditures(3):                                        |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|                                                                |                      | Maintenance |         | $       | 7,957  |         | $       | 8,389 |         | $       | 7,405 |         | $      | 10,591 |         | $     
|                                                                |                      | Expansion   |         |         | 52,747 |         |         | 7,814 |         |         | 6,682 |         |        | 1,101  |         |       
|                                                                |                      |             |         |         |        |         |         |       |         |         |      
|                                                                |                      |             | Total   |         | $      | 60,704  |         | $     | 16,203  |         | $     | 14,087  |        | $      | 11,692  |       
|                                                                |                      |             |         |         |        |         |         |       |         |         |      
|Construction of tank vessels                                    |                      | $           | 16,512  |         | $      | 18,703  |         | $     | 12,994  |         | $     | 1,991   |        |        |        |       
|                                                                |                      |             |         |         |        |         |         |       |         |         |      
|Distributions declared per common unit in respect of the period |                      | $           | 0.955   |         |        |         |         |       |         |         |       |         |        |        |         |       
|Operating Data:                                                 |                      |             |         |         |        |         |         |       |         |         |       |         |        |        |         |       
|Number of tank barges (at period end)                           |                      |             | 34      |         |        | 35      |         |       | 34      |         |       | 35      |        |        | 36      |       
|Number of tankers (at period end)                               |                      |             | 2       |         |        | 3       |         |       | 3       |         |       | 5       |        |        | 6       |       
|Number of tugboats (at period end)                              |                      |             | 19      |         |        | 18      |         |       | 17      |         |       | 16      |        |        | 16      |       
|Total barrel-carrying capacity (in thousands at period end)     |                      |             | 2,410   |         |        | 2,309   |         |       | 2,079   |         |       | 2,164   |        |        | 2,192   |       
|Net utilization(4)                                              |                      |             | 86      | %       |        | 87      | %       |       | 81      | %       |       | 84      | %      |        | 80      | %     
|Average daily rate(5)                                           |                      | $           | 8,095   |         | $      | 7,468   |         | $     | 7,482   |         | $     | 7,208   |        | $      | 6,209   |       

---

26

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27

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

The
following is a discussion of the historical consolidated financial condition and results of operations of K-Sea Transportation Partners L.P. and, prior to our
January 14, 2004 initial public offering, of our predecessor company, K-Sea Transportation LLC, and should be read in conjunction with our historical consolidated financial
statements and notes thereto included elsewhere in this report.

GENERAL

We are a leading provider of refined petroleum product marine transportation, distribution and logistics services in the northeastern United States. Our fleet of
34 tank barges, 2 tankers and 19 tugboats serves a wide range of customers, including major oil companies, oil traders and refiners. With over 2.4 million barrels of capacity, we believe we own
and operate the third-largest ocean-going tank barge fleet in the United States as measured by barrel-carrying capacity.

Demand
for our services is driven primarily by demand for refined petroleum products in the East Coast and Gulf of Mexico regions of the United States. In fiscal 2002 demand for our
services was negatively impacted by a reduction in local movements of refined petroleum products resulting from the warmest winter on record in the northeastern United States, the temporary shutdown
of New York Harbor and reduced demand for jet fuel caused by the September 11, 2001 terrorist attacks, and reduced economic activity caused by the recession in the U.S. economy. We believe
results of operations for fiscal 2003 and 2004 reflect more normal operating conditions.

We
generate revenue by charging customers for the transportation and distribution of their products utilizing our tank vessels and tugboats. These logistics services are generally
provided under the following four basic types of contractual relationships:



In
addition, a variation of a voyage charter is known as a "consecutive voyage charter." Under this arrangement, consecutive voyages are performed for a specified period of time.

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The
table below illustrates the primary distinctions among these types of contracts:

|                             |  | Time Charter                                                |  | Contract of
Affreightment |  | Voyage
Charter(1)     |  | Bareboat
Charter 
|---------------------------- |  | ----------------------------------------------------------- |  | ------------------------- |  | --------------------- |  | -----------------
|Typical contract length      |  | One year or more                                            |  | One year or more          |  | Single voyage         |  | Two years or more
|Rate basis                   |  | Daily                                                       |  | Per barrel                |  | Varies                |  | Daily            
|Voyage expenses(2)           |  | Customer pays                                               |  | We pay                    |  | We pay                |  | Customer pays    
|Vessel operating expenses(2) |  | We pay                                                      |  | We pay                    |  | We pay                |  | We pay           
|Idle time                    |  | Customer pays as long as vessel is available for operations |  | Customer does not pay     |  | Customer does not pay |  | Customer pays    

---

For contracts of affreightment and voyage charters, revenue is recognized based upon the relative transit time in each period, with expenses
recognized as incurred. Although contracts of affreightment and certain contracts for voyage charters may be effective for a period in excess of one year, revenue is recognized over the transit time
of individual voyages, which are generally less than ten days in
duration. For time charters and bareboat charters, revenue is recognized ratably over the contract period, with expenses recognized as incurred.

One
of the principal distinctions among these types of contracts is whether the vessel operator or the customer pays for voyage expenses, which include fuel, port charges, pilot fees,
tank cleaning costs and canal tolls. Some voyage expenses are fixed, and the remainder can be estimated. If we, as the vessel operator, pay the voyage expenses, we typically pass these expenses on to
our customers by charging higher rates under the contract or re-billing such expenses to them. As a result, although voyage revenue from different types of contracts may vary, the net
revenue that remains after subtracting voyage expenses, which we call net voyage revenue, is comparable across the different types of contracts. Therefore, we principally use net voyage revenue,
rather than voyage revenue, when comparing performance between different periods. Since net voyage revenue is a non-GAAP measurement, it is reconciled to the nearest GAAP measurement,
voyage revenue, under "Results of Operations" below.

29

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SIGNIFICANT EVENTS DURING FISCAL YEAR 2004

Initial Public Offering

On January 14, 2004, we completed our initial public offering of 3,625,000 common units at a price of $23.50 per unit. On January 21, 2004, we sold
an additional 540,000 common units to the underwriters in connection with the exercise of their over-allotment option. Total gross proceeds from these sales were $97.9 million,
before offering costs and underwriting fees of $11.8 million. In January 2004 and in connection with our initial public offering, we redeemed the 665,000 common units held by
K-Sea LLC at a cost of $14.6 million. After the initial public offering and related redemption, 4,165,000 common units and 4,165,000 subordinated units were outstanding. The
proceeds retained by us relating to the sale of the common units totaled $83.3 million, which were used to repay $73.9 million in K-Sea LLC's outstanding term and revolving
credit debt, including prepayment fees and make-whole amounts, and to pay $5.9 million in underwriting fees and $3.4 million in professional fees and other offering expenses.

Vessel Acquisition and Construction

On January 29, 2004, we acquired a 140,000-barrel capacity double-hull tank barge and an 8,000 horsepower tugboat, both built in
2000. The purchase price of $34.1 million was financed using available cash and $25.0 million in borrowings under a new term loan. We also signed a new multi-year contract
with the sellers to transport petroleum products in the northeastern United States.

During
fiscal 2004, we also completed the rebuilding of the DBL 105 for petroleum transportation. This vessel, along with a tugboat, was purchased in fiscal 2003. The double-hulling
project for the DBL 155 was also completed, and the vessel redelivered to us in early September 2004. Both of the above vessels began working immediately on long-term contracts with
customers. Capital expenditures for these vessels, along with certain other tugboat re-powering and coupling projects, totaled $25.8 million during fiscal 2004.

30

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DEFINITIONS

In order to understand our discussion of our results of operations, it is important to understand the meaning of the following terms used in our analysis and the
factors that influence our results of operations:



31

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32

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RESULTS OF OPERATIONS

The following table summarizes our results of operations for the periods presented (dollars in thousands, except average daily rates):

|                                     |                   | For the Years Ended June 30,                       |                                   
|------------------------------------ | ----------------- | -------------------------------------------------- | ----------------------------------
|
|Voyage revenue                       |                   | $                                                  | 93,899                            
|Voyage expenses                      |                   |                                                    | 16,339                            
|                                     |                   |                                                    |                                   
|                                     |                   | Net voyage revenue                                 |                                   
|Bareboat charter and other revenue   |                   |                                                    | 1,900                             
|Vessel operating expenses            |                   |                                                    | 38,809                            
|                                     |                   | % of net voyage revenue                            |                                   
|General and administrative expenses  |                   |                                                    | 8,149                             
|                                     |                   | % of net voyage revenue                            |                                   
|Depreciation and amortization        |                   |                                                    | 18,643                            
|Net loss (gain) on sale of vessels   |                   |                                                    | 255                               
|                                     |                   |                                                    |                                   
|                                     |                   | Operating income                                   |                                   
|                                     |                   | % of net voyage revenue                            |                                   
|Interest expense, net                |                   |                                                    | 6,370                             
|Net loss (gain) on reduction of debt |                   |                                                    | 3,158                             
|Other (income) expense, net          |                   |                                                    | (253                              
|                                     |                   |                                                    |                                   
|                                     |                   | Income before provision (benefit) for income taxes |                                   
|Provision (benefit) for income taxes |                   |                                                    | (16,845                           
|                                     |                   |                                                    |                                   
|                                     |                   | Net income                                         |                                   
|                                     |                   |                                                    |                                   
|Net voyage revenue by trade          |                   |                                                    |                                   
|                                     | Coastwise         |                                                    |                                   
|                                     |                   | Total tank vessel days                             |                                   
|                                     |                   | Days worked                                        |                                   
|                                     |                   | Scheduled drydocking days                          |                                   
|                                     |                   | Net utilization                                    |                                   
|                                     |                   | Average daily rate                                 |                                   
|                                     |                   |                                                    | Total coastwise net voyage revenue
|                                     | Local             |                                                    |                                   
|                                     |                   | Total tank vessel days                             |                                   
|                                     |                   | Days worked                                        |                                   
|                                     |                   | Scheduled drydocking days                          |                                   
|                                     |                   | Net utilization                                    |                                   
|                                     |                   | Average daily rate                                 |                                   
|                                     |                   |                                                    | Total local net voyage revenue    
|                                     | Tank vessel fleet |                                                    |                                   
|                                     |                   | Total tank vessel days                             |                                   
|                                     |                   | Days worked                                        |                                   
|                                     |                   | Scheduled drydocking days                          |                                   
|                                     |                   | Net utilization                                    |                                   
|                                     |                   | Average daily rate                                 |                                   
|                                     |                   |                                                    | Total fleet net voyage revenue    

33

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Fiscal Year Ended June 30, 2004 Compared to the Fiscal Year Ended June 30, 2003

Net Voyage Revenue

Voyage revenue was $93.9 million for the fiscal year ended June 30, 2004, an increase of $10.0 million, or 12%, as compared to voyage revenue
of $83.9 million for the fiscal year ended June 30, 2003. Voyage expenses were $16.3 million for the fiscal year ended June 30, 2004, an increase of $2.1 million, or
15%, as compared to voyage expenses of $14.2 million for the fiscal year ended June 30, 2003.

Net
voyage revenue was $77.6 million for the fiscal year ended June 30, 2004, an increase of $7.8 million, or 11%, as compared to net voyage revenue of
$69.8 million for the fiscal year ended June 30, 2003. Our coastwise trade net voyage revenue increased by approximately $6.7 million. This increase is primarily due to the
addition of two new vessels, the DBL 82 and DBL 102, which were delivered in June 2003 and January 2004, respectively, the acquisition of the DBL 140 in January 2004, and the
delivery, after modification, of the DBL 105 in May 2004. These vessel additions were partially offset by the phase-out, as required under OPA 90, of the single-hull
vessels KTC 115 and KTC 135. Coastwise vessel utilization decreased from 90% in fiscal 2003 to 88% in fiscal 2004 due to an increase in scheduled drydocking days. Coastwise average daily rates
increased 4%, to $10,230 from $9,844 in fiscal 2003; these average daily rates benefited from the addition of larger vessels, including the DBL 140 and DBL 105 described above.

Net
voyage revenue in our local trade increased by $1.1 million, or 5%, in fiscal 2004 compared to fiscal 2003. Net utilization in our local trade improved to 84% in fiscal 2004
from 83% in fiscal 2003. Average daily rates in our local trade improved 11% to $5,400 per day for fiscal 2004 from $4,878 per day for the prior year, reflecting higher rates for
short-term work with a customer in the northeastern United States, and by higher bunkering rates.

Bareboat Charter and Other Revenue

Bareboat charter and other revenue was $1.9 million in fiscal 2004, a decrease of $1.9 million, or 50%, as compared to $3.8 million in fiscal
2003. Fiscal 2003 included $1.2 million in revenue recorded from chartering out a chartered-in barge. Also, two vessels were returned from bareboat charter in fiscal 2004 for
operation by us, reducing bareboat charter revenue by $0.6 million compared to fiscal 2003.

Vessel Operating Expenses

Vessel operating expenses were $38.8 million for the fiscal year ended June 30, 2004, an increase of $2.5 million, or 7%, as compared to
vessel operating expenses of $36.3 million for fiscal 2003. Vessel
operating expenses as a percentage of net voyage revenue decreased to 50.0% for fiscal 2004 from 52.0% for fiscal 2003. Vessel labor and related costs increased $2.2 million as a result of a
scheduled contractual wage increase for our unionized employees and a higher average number of vessel employees due to the operation of two additional tugboats, which were purchased in May 2003
and January 2004. Operation of these additional tugboats also resulted in increased insurance, routine maintenance and other operating costs. Fiscal 2003 costs were increased by
$0.9 million in charter costs in connection with the bareboat charter revenue discussed above.

Depreciation and Amortization

Depreciation and amortization was $18.6 million for the fiscal year ended June 30, 2004, an increase of $2.3 million, or 14%, as compared to
$16.3 million recorded in fiscal 2003. New vessel additions, net of retirements, added $2.0 million in depreciation, while amortization of drydocking expenditures increased
$0.3 million. Drydocking expenditures are amortized over 36 months.

34

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General and Administrative Expenses

General and administrative expenses were $8.1 million for fiscal 2004, an increase of $1.1 million, or 16%, as compared to general and
administrative expenses of $7.0 million for fiscal 2003. This increase resulted primarily from additional professional fees, insurance and other costs of $0.6 million incurred in
connection with being a public company which were not incurred in the prior year. As a percentage of net voyage revenue, general and administrative expenses increased to 10.5% in fiscal 2004 from
10.1% in fiscal 2003.

Interest Expense, Net

Interest expense, net was $6.4 million in fiscal 2004, a decrease of $2.4 million, or 28%, as compared to $8.8 million in fiscal 2003. This
decrease resulted from the significant repayment of debt using the proceeds of our initial public offering in January 2004. Additionally, a portion of both the pre- and
post-IPO debt expense resulted from debt bearing interest at a floating rate tied to 30-day LIBOR, which averaged 1.1% for fiscal 2004 compared to 1.5% for fiscal 2003.

Loss on Reduction of Debt

In connection with the initial public offering, $73.9 million in predecessor company debt was repaid. Included in this amount was $6.1 million in
prepayment and make-whole amounts, of which $3.3 million had previously been accrued by our predecessor as supplemental interest that would have been payable upon maturity of
certain of these loans, resulting in a loss on prepayment of $2.8 million. In addition, $0.2 million in deferred financing costs related to the debt was also written off. In the fourth
quarter of fiscal 2004, an additional $0.2 million was paid as a final adjustment to the make-whole payment.

Provision (Benefit) For Income Taxes

For fiscal 2004, our effective tax rate was 16.5%, exclusive of the benefit discussed in the following paragraph, as compared to 6.4% in fiscal 2003. The periods
prior to our initial public offering on January 14, 2004 relate to our predecessor. Our effective tax rate comprises the New York City Unincorporated Business Tax on our operating partnership,
plus federal, state and local corporate income taxes on the taxable income of the operating partnership's corporate subsidiary.

Certain
net assets contributed to us were transferred by our predecessor's C Corporation subsidiaries. These net assets had tax bases that were lower than their carrying values for
financial reporting purposes, which resulted in deferred tax liabilities relating to these temporary differences. Upon transfer to us, the future reversal of these differences will be subject to our
effective tax rate, which is significantly lower than the effective tax rate of our predecessor's C Corporation subsidiaries. The effect of the change in tax rates applicable to these differences is
reflected as a deferred tax benefit of $17.6 million in fiscal 2004.

Net Income

Net income was $21.2 million for fiscal 2004, an increase of $16.2 million compared to $5.0 million in fiscal 2003. This increase resulted
from the $17.6 million deferred tax benefit discussed in the preceding paragraph, the increased net voyage revenue of $7.8 million, and the decrease in interest expense, net of
$2.4 million, offset by the $3.2 million loss on reduction of debt, increased operating expenses of $2.5 million, increased depreciation and amortization of $2.3 million,
increased general and administrative expenses of $1.1 million, and the decrease in bareboat charter and other revenue of $1.9 million.

35

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Fiscal Year Ended June 30, 2003 Compared to the Fiscal Year Ended June 30, 2002

Net Voyage Revenue

Voyage revenue was $83.9 million for the fiscal year ended June 30, 2003, an increase of $8.2 million, or 11%, as compared to voyage revenue
of $75.7 million for the fiscal year ended June 30, 2002. Voyage expenses were $14.2 million for the fiscal year ended June 30, 2003, an increase of $2.8 million, or
25%, as compared to voyage expenses of $11.4 million for the fiscal year ended June 30, 2002.

Net
voyage revenue was $69.8 million for the fiscal year ended June 30, 2003, an increase of $5.5 million, or 9%, as compared to net voyage revenue of
$64.3 million for the fiscal year ended June 30, 2002. In our coastwise trade, which contributed $1.9 million of this increase, net utilization improved to 90% for the fiscal year
ended June 30, 2003, as compared to 87% for the fiscal year ended June 30, 2002. The improved utilization resulted primarily from a decrease in scheduled drydocking days compared to
fiscal 2002. In addition, more normal winter conditions in fiscal 2003, compared to the record warm winter in fiscal 2002, increased demand for our services. Coastwise net voyage revenue increased by
approximately $2.7 million from the operation of two new vessels, net of the loss of revenue from the phase-out of the KTC 115 in December 2002. An additional
$0.5 million in coastwise net voyage revenue resulted from a full period of operations of a tank vessel that had been acquired in September 2001. Average daily rates in our coastwise
trade decreased 6% in fiscal 2003, to $9,844, from $10,400 in fiscal 2002, due to the start-up period for a new tank barge as it entered our fleet and lower rates for one of our large tank
vessels that came off of a long-term charter.

Net
voyage revenue in our local trade for fiscal 2003 increased by $3.6 million, or 20%. Net utilization in our local trade improved to 83% in fiscal 2003 from 75% in fiscal 2002.
This improved utilization resulted in part from fewer scheduled drydocking days in the fiscal 2003 than in the prior year. Average daily rates in our local trade improved 12% to $4,878 per day for
fiscal 2003 from $4,373 per day for the prior year. Stronger demand for home heating oil resulting from the more normal winter and an increase in jet fuel movements associated in part with hostilities
in the Middle East also contributed to these improvements.

Bareboat Charter and Other Revenue

Bareboat charter and other revenue was $3.8 million in fiscal 2003, an increase of $0.4 million, or 12%, as compared to $3.4 million in
fiscal 2002. The revenue for the fiscal year ended June 30, 2003 increased by $1.0 million due to revenue generated from chartering out a chartered-in barge, as well as an
increase of $0.5 million in tug and other revenue; this was offset by a reduction in bareboat charter revenue of $1.2 million due primarily to the sale of a tank vessel which had been
chartered out during the fiscal year ended June 30, 2002.

Vessel Operating Expenses

Vessel operating expenses were $36.3 million for the fiscal year ended June 30, 2003, an increase of $3.6 million, or 11%, as compared to
vessel operating expenses of $32.7 million for fiscal 2002. Vessel operating expenses as a percentage of net voyage revenue increased from 50.8% for fiscal 2002 to 52.0% for fiscal 2003. Vessel
labor and related costs increased $0.3 million as a result of a scheduled contractual wage increase for our unionized employees, and a higher average number of vessel employees due to the
operation of a new tank vessel, the DBL 101, prior to the phase-out of the KTC 115. Additionally, outside towing expense increased by $2.1 million in fiscal 2003 due to a greater
number of our tugboats in drydock and the need for an additional tug for the new barge. Vessel operating expenses increased by $0.9 million in fiscal 2003 as a result of increases in insurance
premiums, deductibles paid and retained claims.

36

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Depreciation and Amortization

Depreciation and amortization was $16.3 million for the fiscal year ended June 30, 2003, an increase of $1.5 million, or 10%, as compared to
depreciation and amortization of $14.8 million for the fiscal year ended June 30, 2002. Of this increase, $1.7 million resulted from amortization of drydocking expenditures
incurred after June 30, 2002.

General and Administrative Expenses

General and administrative expenses were $7.0 million for fiscal 2003, an increase of $0.6 million, or 9%, as compared to general and administrative
expenses of $6.4 million for fiscal 2002. The overall increase was due primarily to increased compensation for our shoreside staff and for additional employees in our information technology
department to implement a planned technology upgrade. As a percentage of net voyage revenue, general and administrative expenses increased to 10.1% for fiscal 2003 from 9.9% for fiscal 2002.

Interest Expense, Net

Net interest expense was $8.8 million in fiscal 2003, an increase of $1.3 million, or 17%, as compared to net interest expense of
$7.5 million in fiscal 2002. This increase resulted primarily from an increase of $2.4 million of interest on our Title XI bonds, which were issued in June 2002. This was offset
by decreased interest expense on our term loans resulting from lower average balances due to principal repayments made during fiscal 2003. Additionally, a portion of this debt bears interest at a
floating rate tied to 30-day LIBOR. This floating rate averaged 5.1% for fiscal 2003 compared to 5.9% for fiscal 2002.

Provision (Benefit) For Income Taxes

Our effective tax rate in fiscal 2003 was 6.4%, as compared to 7.8% in fiscal 2002. This decrease resulted primarily resulted from a decrease in the estimated
percentage of our consolidated pretax income attributable to our corporate subsidiaries. As a limited liability company, our predecessor, K-Sea LLC, was treated as a partnership for income
tax purposes.

Net Income

Net income was $5.0 million for fiscal 2003, a decrease of $1.5 million, or 23%, as compared to net income of $6.5 million for fiscal 2002.
This reduction resulted primarily from a $1.5 million increase in depreciation and amortization, a $3.6 million increase in vessel operating expenses, a $0.6 million increase in
general and administrative expenses and a $1.3 million increase in net interest expense, partially offset by a $5.5 million increase in net voyage revenue.

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LIQUIDITY AND CAPITAL RESOURCES

Operating Cash Flows.Net cash provided by operating activities was $17.8 million in fiscal 2004, $13.2 million
in fiscal 2003 and $16.4 million in fiscal 2002. The increase of $4.6 million in fiscal 2004, compared to fiscal 2003, resulted primarily from increased net voyage revenue, partially
offset by increases in vessel operating and general and administrative expenses. The improved revenue in fiscal 2004 also resulted in an increase in accounts receivable, which provided an offsetting
reduction in cash provided by operating activities. The decrease of $3.2 million in fiscal 2003, compared to fiscal 2002, resulted primarily from fluctuations in working capital balances.
Accounts receivable increased as of June 30, 2003, compared to June 30, 2002, due to revenue increases.

Investing Cash Flows.Net cash used in investing activities totaled $59.2 million in fiscal 2004, $0.2 million
in fiscal 2003 and $52.3 million in fiscal 2002. The primary elements of these activities were vessel acquisitions, construction of new vessels and retrofitting of existing ones, and the
investment and drawdown of Title XI escrow funds. We spent $34.1 million, $3.5 million and $6.0 million on vessel acquisitions in fiscal 2004, 2003 and 2002, respectively.
Construction expenditures for our tank vessel newbuilding program and rebuilding projects totaled $26.5 million in fiscal 2004, $18.7 million in fiscal 2003 and $13.0 million in
fiscal 2002. Other capital expenditures of $9.5 million in fiscal 2004, $5.2 million in fiscal 2003 and $0.9 million in fiscal 2002 related primarily to re-powering
of, and installation of coupling systems on, certain tugboats. Capital expenditures made in the normal course of business are generally financed by cash from operations and, where necessary,
borrowings under our revolving credit agreement.

In
fiscal 2002, we invested the net proceeds of $39.1 million from our Title XI borrowings in short-term U.S. government obligations. These proceeds were held in
escrow and then drawn down by us upon delivery of the four tank barges being financed and used to repay construction period borrowings made under our revolving credit agreement. We made
$10.7 million and $26.8 million of such drawdowns from our Title XI escrow account in fiscal 2004 and fiscal 2003, respectively. The fourth and final tank vessel in this newbuilding
program was delivered in January 2004. The final $1.5 million of escrow funds were left on deposit and are available to the Maritime Administration of the U.S. Department of
Administration ("MARAD") in connection with the restructuring of our financial agreement for the Title XI bonds at the time of our initial public offering. For more information, please read
"Title XI Borrowings" below.

Additionally,
in fiscal 2002, we sold four tank vessels for proceeds of $6.8 million.

Financing Cash Flows.Net cash provided by financing activities was $41.7 million in fiscal 2004, compared to
$13.0 million of net cash used in financing activities in fiscal 2003 and $34.7 million of net cash provided by financing activities in fiscal 2002. During fiscal 2004, we completed our
initial public offering and used the gross proceeds thereof to pay down term loans and credit line borrowings, including prepayment costs, that had been contributed to us by our predecessor, to pay
underwriting fees, professional fees and other offering expenses, and to redeem the 665,000 common units received by our predecessor in connection with the transfer of net assets to us concurrent with
the initial public offering. Also in fiscal 2004, we entered into $36.0 million of new term loans to finance the purchase of the DBL 140/Lincoln Sea and the DBL 105 rebuilding project. Finally,
we paid $3.7 million in distributions to partners.

In
fiscal 2003, we repaid $9.8 million of term loans and $2.0 million of credit line borrowings and paid $1.5 million in financing costs, primarily attributable to
our initial public offering. In fiscal 2002, we received proceeds from the issuance of Title XI bonds of $39.1 million, repaid term loans of $15.1 million, increased our credit line
borrowings by $10.5 million and issued long-term debt of $4.0 million.

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Oil Pollution Act of 1990.Tank vessels are subject to the requirements of OPA 90. OPA 90 mandates that all
single-hull tank vessels operating in U.S. waters be removed from petroleum and petroleum product transportation services at various times through 2014, and provides a schedule for the
phase-out of the single-hull vessels based on their age and size. We presently own and operate two single-hull vessels, the KTC 90 and KTC 96, which are scheduled
for phase-out on December 31, 2004. We have retrofitted a third single-hull vessel, renamed the DBL 155, to a double-hull vessel which was redelivered to us
in early September 2004. To replace the operating capacity of the two vessels phasing out on December 31, 2004, and two other vessels which phased out in December 2002 and
April 2004, we entered into a contract with Bollinger Gretna, L.L.C. in March 2001 for the construction of four double-hull tank barges to be built over three years. The
aggregate cost of these four vessels, which have all been delivered, was approximately $46.2 million, including financing and other costs and certain special equipment. Delivery of the first
tank barge occurred in July 2002, the second in February 2003, the third in June 2003, and the fourth in January 2004. These new tank barges were coupled with tugboats we
own, using an articulated connection system, to create integrated tug-barge units that provide increased operating efficiency and enhanced safety and reliability. We financed the purchase
of the four new tank vessels through the issuance of Title XI bonds described below under "Title XI Borrowings". After phase-out of the two single-hull tank barges
on December 31, 2004, approximately 74% of the barrel-carrying capacity of our tank vessel fleet will be double-hulled in compliance with OPA 90, and the remainder will be in compliance with
OPA 90 until the end of 2014.

Ongoing Capital Expenditures.Marine transportation of refined petroleum products is a capital intensive business, requiring
significant investment to maintain an efficient fleet and to stay in regulatory compliance. We estimate that, over the next five years, we will spend an average of approximately $8.8 million
per year to drydock and maintain our tank vessels' operating capacity. We expect such expenditures to approximate $7.5 million in fiscal 2005. In addition, we anticipate that we will spend
$0.5 million annually for other, general capital expenditures. Periodically, we also make expenditures to acquire or construct additional tank vessel capacity and/or to upgrade our overall
fleet efficiency. For a further discussion of maintenance and expansion capital expenditures, please read footnote 3 to the table in "Selected Financial Data" in Item 6 of this report. The following
table summarizes total maintenance capital expenditures, including drydocking expenditures, and expansion capital expenditures for the periods presented (in thousands):

|                                                               |                            | Years Ended June 30,
|-------------------------------------------------------------- | -------------------------- | --------------------
|
|Maintenance capital expenditures                               |                            | $                   
|Expansion capital expenditures (including vessel acquisitions) |                            |                     
|                                                               |                            |                     
|                                                               | Total capital expenditures |                     
|                                                               |                            |                     
|Construction of tank vessels                                   |                            | $                   
|                                                               |                            |                     

We
incurred approximately $5.7 million during the first quarter of fiscal 2005 to complete the retrofitting of the DBL 155 to a double-hull tank vessel. The vessel was
redelivered to us in early September 2004. The total cost was partially financed using the proceeds of a new $9.1 million term loan as discussed under "Other Term Loans"
below. We also signed an agreement with a shipyard in early September 2004 to construct a new 100,000 barrel tank barge which we expect to be delivered during the summer of 2005. The contract
cost, after addition of certain special equipment and integration with an existing tugboat, is expected to be in the range of $13.0 to14.0 million. This newbuilding will be financed using our
existing credit lines.

Additionally,
we intend to retire or retrofit 16 single-hull tank vessels, which will represent approximately 26% of our barrel-carrying capacity as of January 1, 2005
after the phase-out of two

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single-hull
tank vessels. We estimate that the current cost to replace the 26% of our operating capacity represented by those tank vessels with newbuildings would range from
$43.0 million to $50.0 million. This capacity can also be replaced over the next 10 years by acquiring existing double-hull tank vessels as opportunities arise or by
retrofitting our existing vessels. We are currently evaluating the most cost-effective means to replace this capacity.

Liquidity Needs.Our primary short-term liquidity needs are to fund general working capital requirements and
drydocking expenditures while our long-term liquidity needs are primarily associated with expansion and other maintenance capital expenditures. Expansion capital expenditures are primarily
for the purchase of vessels, while maintenance capital expenditures include drydocking expenditures and the cost of replacing tank vessel operating capacity. Our primary sources of funds for our
short-term liquidity needs are cash flows from operations and borrowings under our credit agreement, while our long-term sources of funds will be from cash from operations,
long-term bank borrowings and other debt or equity financings.

We
believe that cash flows from operations and borrowings under our credit agreement, described under "Credit Agreement" below, will be sufficient to meet our
short-term liquidity needs for the foreseeable future.

Title XI Borrowings.To provide permanent financing for the four tank vessels built under our recently completed newbuilding
program, we applied for and received from the Maritime Administration of the U.S. Department of Transportation, or MARAD, a guarantee of obligations for mortgage financing pursuant to Title XI of the
Merchant Marine Act of 1936. Under this program, the long-term financing for these four new tank vessels is guaranteed by the full faith and credit of the United States of America, which
is collateralized by the tank vessels being constructed and certain other agreements. The guarantee amount of $40.4 million is equal to 87.5% of the MARAD-approved cost of construction of the
four tank vessels, which includes qualifying financing costs. We refer to our obligations relating to this financing as our "Title XI borrowings".

On
June 7, 2002, we privately placed $40.4 million of bonds ("Title XI bonds"), which were guaranteed by MARAD. The proceeds of $39.1 million, net of certain closing
fees, were deposited in an escrow account with the U.S. Department of the Treasury and were invested in U.S. government obligations. The bonds were issued in four series and bear interest at a
weighted average fixed rate of 6.2% per year. Each series is repayable over 25 years beginning six months after the delivery date of the related tank vessel.

On
July 26, 2002, February 5, 2003, June 27, 2003 and January 16, 2004, the delivery dates of the four vessels, we drew down the portion of the escrow account
relating to the particular vessel. Principal repayment of these bonds, excluding interest, totaled $0.2 million in fiscal 2003, $1.2 million in fiscal 2004 and will increase to
$1.6 million annually until the debt is repaid.

In
connection with our initial public offering, the agreements with MARAD governing the Title XI borrowing guarantees were restructured. The Title XI bonds continue to be secured by a
first priority security interest, subject to permitted liens, on the four Title XI vessels. In addition, throughout the term of the Title XI bonds, we will cause additional funds in the aggregate sum
of $8.0 million to be made available to the U.S. Secretary of Transportation (the "Secretary") in the form of one or more letters of credit and/or additional cash deposits ($1.5 million
minimum cash deposit) to the escrow account that we will continue to maintain pursuant to the terms of the Title XI agreements. We are obligated under the financial agreement with MARAD to escrow on a
monthly basis one-sixth of the next semi-annual debt service payment due for each series of the Title XI bonds, which deposits are used to make such semi-annual
payments. We have also granted MARAD first priority security interests in additional vessels having an orderly liquidation value of approximately $10.0 million.

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The
restructured financial agreements relating to the Title XI bonds enable us to make distributions of our available cash in accordance with the terms of our partnership agreement,
except under any of the following circumstances, in which case distributions would require the written consent of the Secretary:



The
restructured Title XI financial agreements also contain various covenants that generally prohibit us, without the Secretary's written consent, from engaging in any of the following
activities:



In
addition, unless (a) we maintain a consolidated fixed charge coverage ratio (as defined in the financial agreements) of at least 3.0 to 1.0, (b) after giving effect to a
transaction or transactions, our consolidated net worth exceeds our consolidated long-term debt, and (c) after giving effect to a transaction or transactions, our consolidated net
worth is at least initially $90.0 million (or in
any fiscal year after our 2004 fiscal year, is at least 90% of our consolidated net worth as of the last day of the immediately preceding fiscal year but shall not be lower than $90.0 million),
we will not be allowed, without the Secretary's written consent, to:



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Credit Agreement.In connection with the closing of our initial public offering, we entered into a three-year
$47.0 million credit agreement with KeyBank N.A. ("KeyBank") and The CIT Group/Equipment Financing, Inc. The credit agreement comprises a $10.0 million senior secured revolving
working capital facility, a $30.0 million senior secured revolving acquisition facility, and a $7.0 million senior secured standby letter of credit facility.

The
working capital facility is used for any purpose in the ordinary course of business, including ongoing working capital needs, documentary letters of credit, and distributions.
Amounts borrowed and repaid under the working capital facility may be re-borrowed. We are required to reduce all working capital borrowings to zero for a period of at least 15 consecutive
days once each year. As of June 30, 2004, no borrowings were outstanding under the working capital facility.

The
acquisition facility is used to finance acquisitions, including the acquisition of additional vessels. Interest under the acquisition facility is payable monthly for 18 months
after each borrowing. After the expiration of the 18 months, or upon the earlier expiration of the new credit agreement, we must either repay the entire outstanding principal amount or exercise
an option to refinance the then outstanding borrowings over 60 months based on a 10-year amortization schedule, with a balloon payment for any unpaid amount due at the end of such
term. We cannot exercise this option if there is
an event of default existing under any facility. As of June 30, 2004, there were $4.4 million in borrowings outstanding under the acquisition facility.

We
have utilized $6.5 million of the standby letter of credit facility in connection with the additional security granted to MARAD pursuant to the restructuring of the financial
agreements governing our Title XI borrowings. For more information, please read "Title XI Borrowings" above.

Our
obligations under the credit agreement are secured by a first priority security interest, subject to permitted liens, on certain vessels having an orderly liquidation value of at
least $71.0 million. We have assigned to the lenders all proceeds from charters, hires, and contracts of affreightment, as well as the proceeds of any insurance payments, with respect to the
pledged vessels. In addition, the credit agreement is guaranteed by all subsidiaries that own, operate, have on charter or receive any hires on any of the pledged vessels.

We
may prepay all loans under the working capital facility at any time without premium or penalty, other than customary LIBOR breakage costs. Prepayment of the acquisition facility or
refinancing of letters of credit would, however, carry customary prepayment fees.

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Indebtedness
under the facilities bears interest at a rate equal to the greater of KeyBank's prime rate or the federal funds effective rate plus 0.5%, or LIBOR plus 2.50%. We incur
quarterly commitment fees based on the unused amount of the credit facilities.

We
are required to use 100% of the net proceeds of certain vessel sales outside the ordinary course of business exceeding specified levels and 100% of the net proceeds from certain
insurance, litigation awards or other material recovery events to repay borrowings under the credit agreement, subject to permitted reinvestments and replacements.

Under
the terms of the credit agreement, we will be prevented from declaring distributions if any event of default, as defined, occurs or would result from such declaration. Events of
default include, among others:



The
credit agreement also requires us to adhere to certain financial covenants and limits the ability of our operating partnership and certain of its subsidiaries to, among other things:



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Other Term Loans.To finance the acquisition of the 140,000-barrel capacity double-hull tank barge
and the 8,000 horsepower tugboat described above in "Significant Events During Fiscal Year 2004Vessel Acquisition and Construction", we entered into a seven-year,
$25.0 million term loan. Our obligations under this agreement are secured by a first priority security interest in the two vessels. We have assigned to the lender all proceeds from charters,
hires, and contracts of affreightment, as well as the proceeds of any insurance payments, with respect to the pledged vessels. The loan is repayable in monthly installments of $139,155, plus interest
at an annual rate of 30-day LIBOR plus 2.95%, with a balloon payment of the remaining principal balance at maturity in 2011.

To
finance the rebuilding of the DBL 105 and the retrofitting of the DBL 155, we entered into an agreement with a financial institution in May 2004 to provide $20.0 million
of term loans to permanently finance these vessels upon completion of the respective projects. Upon delivery of the DBL 105 in May 2004, we borrowed $10.9 million under this agreement,
which is collateralized by the tank barge and a tugboat. We have assigned to the lender all proceeds from charters, hires, and contracts of affreightment, as well as the proceeds of any insurance
payments, with respect to the pledged vessels. The loan is repayable in monthly installments of $64,876, plus interest at an annual rate of 30-day LIBOR plus 2.40%, with a balloon payment
of the remaining principal balance at maturity in 2011. A similar term loan of $9.1 million was entered into upon redelivery of the DBL 155 in early September 2004.

Under
the terms of these term loan agreements, we are prevented from declaring distributions if any event of default, as defined, occurs or would result from such declaration. Events of
default under these agreements are substantially identical to those under the credit agreement described above under "Credit Agreement".

The
term loans also require us to adhere to certain financial covenants and limit the ability of our operating partnership and certain of its subsidiaries to, among other things:



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Contractual Obligations and Contingencies.Our contractual obligations at June 30, 2004 consisted of the following (in
thousands):

Payments Due by Period

|                            |  | Total |        | Less than
1 Year |   | 2-3 Years |  | 4-5 Years |        | After 5
Years
|--------------------------- |  | ----- | ------ | ---------------- | - | --------- |  | --------- | ------ | -------------
|Long-term debt obligations  |  | $     | 78,817 |                  | $ | 4,066     |  | $         | 12,532 |              
|Operating lease obligations |  |       | 1,933  |                  |   | 400       |  |           | 800    |              
|Purchase obligations(1)     |  |       | 5,060  |                  |   | 5,060     |  |           |       |              
|                            |  |       |        |                  |   |           |  |           |        |              
|                            |  | $     | 85,810 |                  | $ | 9,526     |  | $         | 13,332 |              
|                            |  |       |        |                  |   |           |  |           |        |              

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The
executive officers of K-Sea General Partner GP LLC have entered into employment agreements with K-Sea Transportation Inc., our indirect wholly owned
corporate subsidiary. Each of the employment agreements has an initial term of one year that will be automatically extended for successive one-year terms unless either party gives
30 days written notice prior to the end of the term that such party desires not to renew the employment agreement. The employment agreements currently provide for an aggregate base annual
salary of $685,000. In addition, each employee will be eligible to receive an annual bonus award based upon our consolidated financial performance. If the employee's employment is terminated without
cause or if the employee resigns for good reason, the employee will be entitled to severance in an amount equal to the greater of (a) the product of 1.3125 (1.75 multiplied by .75) multiplied
by the employee's base salary at the time of termination or resignation and (b) the product of 1.75 multiplied by the remaining term of the employee's non-competition provisions
multiplied by the employee's base salary at the time of termination or resignation.

We
are a party to various suits in the ordinary course of business for monetary relief arising principally from personal injuries, collision or other casualty and to claims arising under
vessel charters. All of these personal injury, collision and casualty claims against us are fully covered by insurance, subject to deductibles ranging from $10,000 to $100,000 in amount. We accrue on
a current basis for estimated deductibles we expect to pay.

EW
Transportation LLC and its predecessors have been named, together with a large number of other companies, as a co-defendant in 39 civil actions by various parties alleging
unspecified damages from past exposure to asbestos and second-hand smoke aboard some of the vessels that were contributed to us in connection with our initial public offering. EW
Transportation LLC and its predecessors were dismissed from 37 of these lawsuits in the first half of 2003 for an aggregate sum of approximately $46,000, have settled another case for $1,000 which is
pending dismissal, and are in the process of settling the other case. We may be subject to litigation in the future involving these plaintiffs and others alleging exposure to asbestos due to alleged
failure to properly encapsulate friable asbestos or remove friable asbestos on our vessels, as well as for exposure to second-hand smoke and other
matters.

Inflation

During the last three years, inflation has had a relatively minor effect on our financial results. Our contracts generally contain escalation clauses whereby
certain cost increases, including labor and fuel, can be passed through to our customers.

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Related Party Transactions

We lease our office and pier facilities from, and charter certain vessels to, affiliates of an employee. Additionally, we utilize one of these affiliates for tank
cleaning services. Please read note 7 to the consolidated financial statements included in Item 8 of this report.

K-Sea
Investors L.P. and its controlled affiliates have agreed to indemnify us for claims associated with certain retained liabilities. For more information regarding the
indemnification obligations and other related party transactions, please read "Certain Relationships and Related Transactions" in Item 13 of this report.

Seasonality

We operate our tank vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter rates. Movements of clean oil
products, such as motor fuels, generally increase during the summer driving season. Movements of black oil products and distillates, such as heating oil, generally increase during the winter months,
while movements of asphalt products generally increase in the spring through fall months. Unseasonably cold winters result in significantly higher demand for heating oil in the northeastern United
States, which is a significant market for our tank barge services. The summer driving season can increase demand for automobile fuel and, accordingly, the demand for our services. A decline in demand
for, and level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel capacity and charter rates to decline, which
would decrease our revenues and profitability.

CRITICAL ACCOUNTING POLICIES

The accounting treatment of a particular transaction is dictated by GAAP and, in certain circumstances, requires us to make estimates, judgments and assumptions
that we believe are reasonable based upon information available. We base our estimates, judgments and assumptions on historical experience and known facts that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions and conditions. We believe that, of our significant accounting policies discussed in note 3 to our
consolidated financial statements, the following may involve a higher degree of judgment.

Revenue Recognition

We earn revenue under contracts of affreightment, voyage charters, time charters and bareboat charters. For contracts of affreightment and voyage charters,
revenue is recognized based upon the relative transit time in each period, with expenses recognized as incurred. Although contracts of affreightment and certain contracts for voyage charters may be
effective for a period in excess of one year, revenue is recognized over the transit time of individual voyages, which are generally less than ten days in duration. For time charters and bareboat
charters, revenue is recognized ratably over the contract period, with expenses recognized as incurred. Estimated losses on contracts of affreightment and charters are accrued when such losses become
evident.

Depreciation

Vessels and equipment are recorded at cost, including capitalized interest where appropriate, and depreciated using the straight-line method over the
estimated useful lives of the individual assets as follows: tank vesselsfive to twenty-five years; tugboatstwenty years; and pier and office
equipmentfive years. For single-hull tank vessels, these useful lives are limited to the remaining period of operation prior to mandatory retirement as required by OPA 90.
Also included in vessels are drydocking expenditures that are capitalized and amortized over three years. Major renewals and

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betterments
of assets are capitalized and depreciated over the remaining useful lives of the assets. Maintenance and repairs that do not improve or extend the useful lives of the assets are expensed.
To date, our experience confirms that these policies are reasonable, although there may be events or changes in circumstances in the future that indicate the recovery of the carrying amount of a
vessel might not be possible. Examples of events or changes in circumstances that could indicate that the recoverability of a vessel's carrying amount should be assessed might include a change in
regulations such as OPA 90, or continued operating losses, or projections thereof, associated with a vessel or vessels. If events or changes in circumstances as set forth above indicate that a
vessel's carrying amount may not be recoverable, we would then be required to estimate the undiscounted future cash flows expected to result from the use of the vessel and its eventual disposition. If
the sum of the undiscounted expected future cash flows is less than the carrying amount of the vessel, we would recognize an impairment loss to the extent the carrying value exceeds its fair value by
appraisal. Our assumptions and estimates would include, but not be limited to, the estimated fair market value of the assets and their estimated future cash flows, which are based on additional
assumptions such as asset utilization, length of service of the asset and estimated salvage values. Although we believe our assumptions and estimates are reasonable, deviations from the assumptions
and estimates could produce a materially different result.

Amortization of Drydocking Expenditures

Drydocking expenditures are capitalized and amortized over three years. Drydocking of vessels is required by both the U.S. Coast Guard and by the applicable
classification society, which in our case is the American Bureau of Shipping. Such drydocking activities include, but are not limited to, the inspection, refurbishment and replacement of steel, engine
components, tailshafts, mooring equipment and other parts of the vessel. Amortization of drydocking expenditures is included in depreciation and amortization expense.

Accounts Receivable

We extend credit to our customers in the normal course of business. We regularly review our accounts, estimate the amount of uncollectible receivables each
period, and establish an allowance for uncollectible amounts. The amount of the allowance is based on the age of unpaid amounts, information about the current financial strength of customers, and
other relevant information. Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known. Historically, credit risk with respect to our trade
receivables has generally been considered minimal because of the financial strength of our customers.

Deferred Income Taxes

We provide deferred taxes for the tax effects of differences between the financial reporting and tax bases of assets and liabilities at enacted tax rates in
effect in the jurisdictions where we operate for the years in which the differences are expected to reverse. A valuation allowance is provided, if necessary, for deferred tax assets that are not
expected to be realized.

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RISK FACTORS

In addition to the other information set forth elsewhere in this report, you should carefully consider the following factors when evaluating K-Sea
Transportation Partners L.P:

We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and
expenses, including payments to our general partner.

We
may not have sufficient available cash each quarter to pay the minimum quarterly distribution. The amount of cash we can distribute on our common units principally depends upon the
amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:



Additionally,
the actual amount of cash we have available for distribution depends on other factors such as:



The
amount of cash we have available for distribution depends primarily on our cash flow, including cash flow from operations and working capital borrowings, and not solely on
profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record losses and may not make cash distributions during periods
when we record net income.

Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or
repealed.

We
are subject to the Jones Act and other federal laws that restrict maritime transportation between points in the United States to vessels built and registered in the United States and
owned and manned by U.S. citizens. We are responsible for monitoring the ownership of our common units and other partnership interests. If we do not comply with these restrictions, we would be
prohibited from operating our vessels in U.S. coastwise trade, and under certain circumstances we would be deemed to have undertaken an unapproved foreign transfer, resulting in severe penalties,
including permanent loss of U.S. coastwise trading rights for our vessels, fines or forfeiture of the vessels. For information about
the Jones Act and other maritime laws, please read "RegulationCoastwise Laws" in Items 1 and 2 of this report.

During
the past several years, interest groups have lobbied Congress to repeal the Jones Act to facilitate foreign flag competition for trades and cargoes currently reserved for
U.S.-flag vessels under

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the
Jones Act and cargo preference laws. We believe that continued efforts will be made to modify or repeal the Jones Act and cargo preference laws currently benefiting U.S.-flag vessels.
If these efforts are successful, it could result in increased competition, which could reduce our revenues and cash available for distribution.

We must make substantial expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution.

We
must make substantial capital expenditures, including drydocking expenses and the replacement or retrofitting of our single-hull vessels under OPA 90, to maintain the
operating capacity of our fleet. We currently expect to spend approximately $9.3 million per year on drydocking and other expenditures to maintain the operating capacity of our fleet.

Prior
to January 1, 2015, we intend to retire or retrofit 16 single-hull vessels, which will represent approximately 26% of our barrel-carrying capacity after giving
effect to the phase-out of two single-hull tank barges on December 31, 2004. We estimate that the current cost to replace the 26% of our operating capacity of those tank
vessels with newbuildings and retrofits ranges from $43.0 million to $50.0 million. At the time we make these expenditures, the actual cost could be higher due to inflation and other
factors.

In calculating our available cash from operating surplus each quarter, we are required to deduct estimated maintenance capital expenditures, which may result in less cash
available for distribution to unitholders than if actual maintenance capital expenditures were deducted.

Our
partnership agreement requires us to deduct estimated maintenance capital expenditures from operating surplus each quarter, as opposed to actual maintenance capital expenditures, in
order to reduce disparities in operating surplus caused by fluctuating maintenance capital expenditures, such as drydocking. Because of the substantial capital expenditures we intend to make by
January 1, 2015, our annual estimated maintenance capital expenditures for purposes of calculating operating surplus also includes $1.0 million to reduce the fluctuation in operating
surplus that would otherwise be caused by the required expenditures. The amount of estimated maintenance capital expenditures we deduct from
operating surplus is subject to review and change by the board of directors of K-Sea General Partner GP LLC, with the concurrence of the conflicts committee of such board. In years when
estimated maintenance capital expenditures are higher than actual maintenance capital expenditures, as we expect will be the case in some years until we actually make expenditures for the OPA 90
replacements and retrofitting, the amount of cash available for distribution to unitholders will be lower than if actual maintenance capital expenditures were deducted from operating surplus.

Capital expenditures and other costs necessary to operate and maintain a vessel vary depending on the age of the vessel and changes in governmental regulations, safety or other
equipment standards.

Capital
expenditures and other costs necessary to operate and maintain a vessel increase with the age of the vessel. In addition, changes in governmental regulations, safety or other
equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customer requirements or competition, may require us to make additional
expenditures. For example, we may be required to make significant expenditures for alterations or the addition of new equipment to satisfy requirements of the U.S. Coast Guard and the American Bureau
of Shipping. In addition, we may be required to take our vessels out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such
equipment. In the future, market conditions may not justify these expenditures or enable us to operate our older vessels profitably during the remainder of their economic lives.

In
order to fund these capital expenditures, we will either incur borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets for
future offerings may

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be
limited by our financial condition at the time as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are
beyond our control. Our failure to obtain the funds for necessary future capital expenditures would limit our ability to continue to operate some of our vessels and could have a material adverse
effect on our business and on our ability to make distributions to unitholders.

A decline in demand for, and level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel
capacity and charter rates to decline, which would decrease our revenues and profitability.

The
demand for tank vessel capacity is influenced by the demand for refined petroleum products and other factors including:



Any
of these factors could adversely affect the demand for tank vessel capacity and charter rates. Any decrease in demand for tank vessel capacity or decrease in charter rates could adversely affect
our business, financial condition and results of operations.

In
addition, we operate our tank vessels in the East Coast and Gulf Coast regions, markets that have historically exhibited seasonal variations in demand and, as a result, in charter
rates. Movements of certain clean oil products, such as motor fuels, generally increase during the summer driving season. Movements of black oil products and certain clean oil products, such as
heating oil, generally increase during the winter months, while movements of asphalt products generally increase in the spring through fall months. Unseasonably mild winters, such as the winter of
2001, result in significantly lower demand for heating oil in the northeastern United States, which is a significant market for our tank barge services. In addition, unpredictable weather patterns and
variations in oil reserves disrupt vessel scheduling. Seasonality could materially affect our business, financial condition and results of operations in the future.

Marine transportation is an inherently risky business.

Our vessels and their cargoes are at risk of being damaged or lost because of events such as:



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All
of these hazards can result in death or injury to persons, loss of property, environmental damages, delays or rerouting. If one of our vessels were involved in an accident, with the potential risk
of environmental contamination, the resulting media coverage could have a material adverse effect on our business, financial condition and results of operations. Please read "Legal Proceedings" in
Item 3 of this report.

Our insurance may not be adequate to cover our losses.

We may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on our operations. For example, a
catastrophic oil spill or other disaster could exceed our insurance coverage. In addition, EW Transportation LLC and its predecessors may not have insurance coverage prior to March 1986. If we
were subject to claims related to that period, including claims from current or former employees, EW Transportation LLC may not have insurance to pay the
liabilities, if any, that could be imposed on us. If we had to pay claims solely out of our own funds, it could have a material adverse effect on our financial condition. Furthermore, any claims
covered by insurance would be subject to deductibles, and since it is possible that a large number of claims could be brought, the aggregate amount of these deductibles could be material.

We
may not be able to procure adequate insurance coverage at commercially reasonable rates in the future, and some claims may not be paid. In the past, stricter environmental regulations
have led to higher costs for insurance covering environmental damage or pollution, and new regulations could lead to similar increases or even make this type of insurance unavailable. In addition, our
insurance may be voidable by the insurers as a result of certain actions of ours.

We rely on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could adversely affect our business and operating
results.

Our
customers consist primarily of major oil companies, oil traders and refineries. The portion of our revenues attributable to any single customer changes over time, depending on the
level of relevant activity by the customer, our ability to meet the customer's needs and other factors, many of which are beyond our control. Two customers accounted for 28% and 14%, respectively, of
our consolidated revenues for fiscal 2004. If we were to lose any of these customers or if any of these customers significantly reduced its use of our services, our business and operating results
could be adversely affected.

Because we obtain some of our insurance through protection and indemnity associations, we also may be subject to calls, or premiums, in amounts based not only on our own claim
records, but also the claim records of all other members of the protection and indemnity associations.

We
may be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations
through which we receive insurance coverage for tort liability, including pollution-related liability. Our payment of these calls could result in significant expenses to us, which could reduce our
profits or cause losses. Moreover, the protection and indemnity clubs and other insurance providers reserve the right to make changes in insurance coverage with little or no advance notice.

We may not be able to renew time charters, consecutive voyage charters, contracts of affreightment and bareboat charters when they expire.

We
received approximately 74% of our revenue from time charters, consecutive voyage charters, contracts of affreightment and bareboat charters during fiscal 2004. These arrangements,
which are generally for periods of one year or more, may not be renewed, or if renewed, may not be renewed at

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similar
rates. If we are unable to obtain new charters at rates equivalent to those received under the old charters, our profitability may be adversely affected.

Voyage charters may not be available at rates that will allow us to operate our vessels profitably.

During
fiscal 2004, we derived approximately 26%of our revenue from single voyage charters. Voyage charter rates fluctuate significantly
based on tank vessel availability, the demand for refined petroleum products and other factors. Increased dependence on the voyage charter market by us could result in a lower utilization of our
vessels and decreased profitability. Future voyage charters may not be available at rates that will allow us to operate our vessels profitably.

Our purchase of existing vessels carries risks associated with the quality of those vessels.

Our
fleet renewal and expansion strategy includes the acquisition of existing vessels as well as the ordering of newbuildings. Unlike newbuildings, existing vessels typically do not
carry warranties with respect to their condition. While we generally inspect any existing vessel prior to purchase, such an inspection would normally not provide us with as much knowledge of its
condition as we would possess if the vessel had been built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predict and may be more
substantial than for vessels we have operated since they were built. These costs could decrease our profits and reduce our liquidity.

We are subject to complex laws and regulations, including environmental regulations, that can adversely affect the cost, manner or feasibility of doing
business.

Increasingly
stringent federal, state and local laws and regulations governing worker health and safety and the manning, construction and operation of vessels significantly affect our
operations. Many aspects of the marine industry are subject to extensive governmental regulation by the U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs Service and the
U.S. Maritime Administration, and to regulation by private industry organizations such as the American Bureau of Shipping. The U.S. Coast Guard and the National Transportation Safety Board set safety
standards and are authorized to investigate vessel accidents and recommend improved safety standards. The U.S. Coast Guard is authorized to inspect vessels at will.

Our
operations are also subject to federal, state, local and international laws and regulations that control the discharge of pollutants into the environment or otherwise relate to
environmental protection. Compliance with such laws, regulations and standards may require installation of costly equipment or operational changes. Failure to comply with applicable laws and
regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Some environmental laws often impose strict liability for
remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA 90, owners, operators and
bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. Additionally, an oil spill
could result in significant liability, including fines, penalties, criminal liability and costs for natural resource damages. The potential for these releases could increase as we increase our fleet
capacity. Most states bordering on a navigable waterway have enacted legislation providing for potentially unlimited liability for the discharge of pollutants within their waters.

Terrorist attacks have resulted in increased costs and have disrupted our business. Continued hostilities in the Middle East or other sustained military campaigns may adversely
impact our results of operations.

After
the terrorist attacks of September 11, 2001, New York Harbor was shut down temporarily, resulting in the suspension of our local operations in the New York City area for
four days and the loss of revenue related to these operations. The long-term impact that terrorist attacks and the threat of terrorist attacks may have on the petroleum industry in
general, and on us in particular, is not known

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at
this time. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect our operations in unpredictable ways, including disruptions of petroleum
supplies and markets, and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror.

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

We depend upon unionized labor for the provision of our services. Any work stoppages or labor disturbances could disrupt our business.

All
of our seagoing personnel other than tug and tanker captains, or approximately 76% of our workforce, are employed under a contract with a division of the International Longshoreman's
Association that expires on June 30, 2008. Any work stoppages or other labor disturbances could have a material adverse effect on our business, financial condition and results of operations.

Increased competition in the domestic tank vessel industry could result in reduced profitability and loss of market share for us.

Contracts
for our vessels are generally awarded on a competitive basis, and competition in the markets we serve is intense. The most important factors determining whether a contract will
be awarded include:



Some
of our competitors may have greater financial resources and larger operating staffs than we do. As a result, they may be able to make vessels available more quickly and efficiently,
transition to double-hull barges from single-hull barges more rapidly, and withstand the effects of declines in charter rates for a longer period of time. They may also be
better able to weather a downturn in the oil and gas industry. As a result, we could lose customers and market share to these competitors.

We
also face competition from refined petroleum product pipelines. Long-haul transportation of refined petroleum products is generally less costly by pipeline than by tank
vessel. The construction of new pipeline segments to carry petroleum products into our markets, including pipeline segments that connect with existing pipeline systems, and the conversion of existing
non-refined petroleum product pipelines, could adversely affect our ability to compete in particular locations.

Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws.

Some
of our employees are covered by provisions of the Jones Act and general maritime law. These laws typically operate to make liability limits established by state workers'
compensation laws inapplicable to these employees and to permit these employees and their representatives to pursue actions against employers for job-related injuries in federal courts.
Because we are not generally

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protected
by the limits imposed by state workers' compensation statutes, we may have greater exposure for claims made by these employees.

We may not be able to grow or effectively manage our growth.

A principal focus of our strategy is to continue to grow by expanding our business in the East Coast and Gulf Coast regions and, possibly, to expand into other
geographic markets. Our future growth will depend upon a number of factors, some of which we can control and some of which we cannot. These factors include our ability to:



A
deficiency in any of these factors would adversely affect our ability to achieve anticipated levels of cash flows or realize other anticipated benefits. In addition, competition from
other buyers could reduce our acquisition opportunities or cause us to pay a higher price than we might otherwise pay.

We depend on key personnel for the success of our business.

We depend on the services of our senior management team and other key personnel. In particular, our success depends on the continued efforts of Mr. Timothy
J. Casey, the President and Chief Executive Officer of K-Sea General Partner GP LLC, and other key employees. The loss of the services of any key employee could have a material adverse
effect on our business, financial condition and results of operations. We may not be able to locate or employ on acceptable terms qualified replacements for senior management or key employees if their
services were no longer available.

Due to our lack of asset diversification, adverse developments in our marine transportation business would reduce our ability to make distributions to our
unitholders.

We
rely exclusively on the revenues generated from our marine transportation business. Due to our lack of asset diversification, an adverse development in this business would have a
significantly greater impact on our business, financial condition and results of operations than if we maintained more diverse assets.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our Title XI bonds bear interest at fixed interest rates ranging from 6.17% to 6.26%. Our revolving credit agreement and our outstanding term loans bear interest
at a floating rate based on LIBOR, which will subject us to increases or decreases in interest expense resulting from movements in that rate. Based on an aggregate $39.8 million of floating
rate debt outstanding as of June 30, 2004, the impact of a 1% increase in interest rates would result in an increase in interest expense, and a corresponding decrease in income before income
taxes, of approximately $0.4 million annually.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements set forth on pages F-1 to F-21 of this report are incorporated herein by reference.

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2004 to provide reasonable assurance that information required
to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's
rules and forms.

There
has been no change in our internal controls over financial reporting that occurred during the three months ended June 30, 2004 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

K-Sea General Partner GP LLC, as the general partner of K-Sea General Partner L.P., our general partner, manages our operations and
activities. Our general partner is not elected by our unitholders and is not subject to re-election on a regular basis. Unitholders are not entitled to elect the directors of
K-Sea General Partner GP LLC or directly or indirectly participate in our management or operation.

Because
we are a limited partnership, the listing standards of the New York Stock Exchange do not require K-Sea General Partner GP LLC to have a majority of independent
directors or a nominating/corporate governance or compensation committee.

Set
forth below is information concerning the directors and executive officers of K-Sea General Partner GP LLC as of September 27, 2004. Executive officers and
directors are elected for one-year terms.

Name

Age

Position with K-Sea General Partner GP LLCJames J. Dowling

58

Chairman of the BoardTimothy J. Casey

44

President, Chief Executive Officer and DirectorAnthony S. Abbate

64

DirectorBarry J. Alperin

64

DirectorBrian P. Friedman

48

DirectorFrank Salerno

45

DirectorJohn J. Nicola

50

Chief Financial OfficerThomas M. Sullivan

45

Vice President, OperationsRichard P. Falcinelli

44

Vice President, Administration and Secretary


James J. Dowlinghas served as our Chairman of the Board since July 2003, has served as Chairman of the Board of EW Transportation
LLC (formerly K-Sea Transportation LLC) since January 2002 and has served as a director of EW Transportation LLC since its formation in April 1999. Mr. Dowling has
been a Senior Advisor of Jefferies Capital Partners, a private investment firm, since January 2002. Jefferies Capital Partners is the manager of Furman Selz Investors II L.P. and its affiliated
entities.

Timothy J. Caseyhas served as our President, Chief Executive Officer and Director since July 2003. Mr. Casey has served as
President, Chief Executive Officer and Director of EW Transportation LLC
since April 1999. Mr. Casey is also a board member for American Waterways Operators and The Seamen's Church Institute.

Anthony S. Abbatehas served as a Director since February 2004. Mr. Abbate is President and Chief Executive Officer of
Interchange Financial Services Corporation, a bank holding company, and has held that position since 1981.

Barry J. Alperinhas served as a Director since February 2004. Mr. Alperin is a business consultant who retired from
Hasbro Inc. in 1996 after 11 years in various senior executive positions, including Vice Chairman and Director. Mr. Alperin is currently on the board of Henry Schein, Inc.,
K'NEX Industries, Inc. and The Hain Celestial Group Inc.

Brian P. Friedmanhas served as a director since July 2003. Mr. Friedman has been the managing member of Jefferies Capital
Partners, a private investment firm, and affiliated entities since 1997. Mr. Friedman also serves as Chairman of the Executive Committee of Jefferies & Company, Inc.
Mr. Friedman serves as a director of Telex Communications, Inc., a manufacturer of audio and wireless communications equipment, and various private companies in which Jefferies Capital
Partners or its affiliates have an interest.

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Frank Salernohas served as a Director since February 2004. From mid-1999 until his retirement in February 2004,
Mr. Salerno was Managing Director and Chief Operating Officer of Merrill Lynch Investment AdvisorsAmericas Institutional Division, an investment advisory company.

John J. Nicolahas served as our Chief Financial Officer since July 2003, and has served as Chief Financial Officer of EW
Transportation LLC since July 2000. Mr. Nicola was employed from November 1993 to July 2000 by Maersk Sealand, a container shipping company, in various senior financial
management roles, including Chief Financial Officer of Maersk's East Coast and Gulf terminal operating subsidiary. Mr. Nicola is a Certified Public Accountant and a member of the American
Institute of Certified Public Accountants.

Thomas M. Sullivanhas served as our Vice President of Operations since July 2003. Mr. Sullivan served as Vice President of
Operations for EW Transportation LLC since April 1999. Mr. Sullivan also served as Vessel Supervisor for EW Transportation LLC's predecessor from March 1995 until
April 1999.

Richard P. Falcinellihas served as our Vice President of Administration and Secretary since July 2003. Mr. Falcinelli has
served as Vice President of Administration and Secretary of EW Transportation LLC since April 1999.

Meetings and Committees of the Board of Directors

K-Sea General Partner GP LLC's board of directors held two meetings between January 14, 2004, the date of our initial public offering, and
June 30, 2004. Each director attended both meetings.

Audit Committee

K-Sea General Partner GP LLC has a standing audit committee comprising Messrs. Abbate, Alperin (Chairman) and Salerno. The board of directors
of K-Sea General Partner GP LLC has determined that all members of the audit committee are independent within the meaning of the listing standards of the New York Stock Exchange. In
addition, the board of directors has determined that Mr. Abbate is an audit committee financial expert within the meaning of the regulations of the Securities and Exchange Commission.

The
primary responsibilities of the audit committee are to assist the board of directors of K-Sea General Partner GP LLC in overseeing (1) the integrity of our
financial statements, (2) our independent auditor's qualifications, independence, and performance, (3) the effectiveness of our internal controls and procedures and our internal audit
function, and (4) our compliance with legal and regulatory requirements. The audit committee has the sole authority to appoint, retain and terminate our independent auditor, which reports
directly to the audit committee.

The
audit committee has established procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters
and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

Compensation Committee

K-Sea General Partner GP LLC has a standing compensation committee comprising Messrs Alperin, Dowling and Friedman. The compensation committee, among
other tasks, determines and approves the chief executive officer's compensation, makes recommendations to the board with respect to other executive officer compensation, and reviews from time to time
the compensation and benefits of non-employee directors.

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Director Independence

The board of directors of K-Sea General Partner GP LLC has determined that Messrs. Abbate, Alperin and Salerno are independent within the
meaning of the listing standards for general independence of the New York Stock Exchange. Under the listing standards, the audit committee is required to be composed solely of directors who are
independent. The standards for audit committee membership include additional requirements under rules of the SEC.

The
listing standards relating to general independence consist of both a requirement for a board determination that the director has no material relationship with the listed company and
a listing of several specific relationships that preclude independence. To assist it in making determinations of independence, the board has adopted categorical standards as permitted under the
listing standards. Although the board considers all relevant facts and circumstances in assessing whether a director is independent, relationships falling within the categorical standards are not
required to be disclosed or separately discussed in this report in connection with the board's independence determinations. A relationship falls within the categorical standards adopted by the board
if it:



None
of the independent directors had relationships relevant to an independence determination that were outside the scope of the board's categorical standards.

Code of Business Conduct and Ethics

The board of directors of K-Sea General Partner GP LLC has adopted a code of business conduct and ethics for all employees, including our principal
executive officer and principal financial and accounting officer. If any amendments are made to the code or if K-Sea General Partner GP LLC grants any waiver, including any implicit
waiver, from a provision of the code to any of our executive officers, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Corporate Governance Guidelines

The board of directors of K-Sea General Partner GP LLC has also adopted corporate governance guidelines in accordance with the rules of the New York
Stock Exchange.

Availability of Corporate Governance Documents

Copies of the board committee charters, code of business conduct and ethics and corporate governance guidelines will be available, without charge, on our website
atwww.k-sea.comand in print upon written request to the Secretary, K-Sea General Partner GP LLC, 3245 Richmond Terrace, Staten
Island, NY 10303.

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Executive Sessions of the Board of Directors

Messrs. Abbate, Alperin, Dowling, Friedman and Salerno, who are non-management directors of K-Sea General Partner GP LLC, meet at
regularly scheduled executive sessions without management. These meetings are chaired on a rotating basis by the chairmen of the audit committee and compensation committee. Persons wishing to
communicate with our non-management directors may do so by writing to them at K-Sea General Partner GP LLC, c/o Board of Directors, 3245 Richmond Terrace, Staten Island, New
York 10303.

Messrs. Abbate,
Alperin, and Salerno, who are independent non-management directors of K-Sea General Partner GP LLC, meet at least annually in executive
sessions without management and the other directors. Mr. Abbate serves as the presiding director at those executive sessions.    Persons wishing to communicate with our independent
non-management directors may do so by writing to them at K-Sea General Partner GP LLC, c/o Board of Directors, 3245 Richmond Terrace, Staten Island, New York 10303.

Payments to our General Partner

K-Sea General Partner GP LLC pays no additional remuneration to its employees for serving as directors. In addition, neither Mr. Dowling nor
Mr. Friedman receive any remuneration for serving as directors. On February 23, 2004, the board of directors of K-Sea General Partner GP LLC granted each of its outside
directors (Messrs. Abbate, Alperin and Salerno) 3,000 phantom units and associated distribution equivalent right ("DERs") under the K-Sea Transportation Partners L.P.
Long-Term Incentive Plan. The phantom units vest in four equal annual installments beginning on February 23, 2005.

K-Sea
General Partner LP does not receive any management fee or other compensation in connection with its management of us; however, K-Sea General Partner LP or
its affiliates who perform services for us and/or our subsidiaries are reimbursed at cost for all expenses incurred on our behalf which are necessary or appropriate to the conduct of our business.
These costs have totaled approximately $17,000 since our initial public offering in January 2004.

Compliance with Section 16(a) of the Securities Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Officers, directors and greater than 10% unitholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms.

Based
solely on our review of the copies of such forms we received, or representations from certain reporting persons that no Form 4s were required for those persons, we believe
that during the fiscal year ending June 30, 2004, all of our officers, directors, and greater than 10% beneficial owners complied on a timely basis with all applicable filing requirements under
Section 16(a) of the Securities Exchange Act of 1934, except that our general partner failed to timely file a Form 3.

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ITEM 11.    EXECUTIVE COMPENSATION.

The following table sets forth the annual salary, bonus and all other compensation awards and payouts made to our President and Chief Executive Officer, and our
three other executive officers, during fiscal 2004:

Summary Compensation Table(1)

|Name and Principal Position                                        |  | Fiscal Year |  | Salary |         | Bonus(2) |   | All Other
Compensation(3)
|------------------------------------------------------------------ |  | ----------- |  | ------ | ------- | -------- | - | -------------------------
|Timothy J. Casey
President and Chief Executive Officer             |  | 2004        |  | $      | 233,077 |          | $ | 151,500                  
|John J. Nicola
Chief Financial Officer                             |  | 2004        |  | $      | 149,038 |          | $ | 61,500                   
|Thomas M. Sullivan
Vice President, Operations                      |  | 2004        |  | $      | 149,038 |          | $ | 60,000                   
|Richard P. Falcinelli
Vice President, Administration and Secretary |  | 2004        |  | $      | 149,038 |          | $ | 60,000                   

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Unit Option Awards

No unit options were awarded during fiscal 2004.

Employment Agreements

The executive officers of K-Sea General Partner GP LLC, including Timothy J. Casey, John J. Nicola, Thomas M. Sullivan and Richard P. Falcinelli, have
entered into employment agreements with K-Sea Transportation Inc., our indirect wholly owned corporate subsidiary. The following is a summary of the material provisions of those
employment agreements, copies of which have been previously filed as exhibits. All of these employment agreements are substantially similar, with certain exceptions as set forth below.

The
employment agreements contemplate that each employee will serve as an officer of K-Sea General Partner GP LLC and other affiliates. Each of the employment agreements has
an initial term of one year, but will automatically be extended for successive one-year terms unless either party gives 30-days written notice prior to the end of the term to
the other party that such party desires not to renew the employment agreement.

The
employment agreements provide for a base annual salary of $235,000 for Mr. Casey and $150,000 for each of Messrs. Nicola, Falcinelli and Sullivan. In addition, each
employee is eligible to receive an annual bonus award based upon the financial performance of us and our subsidiaries. The board of directors of K-Sea General Partner GP LLC will determine
the amount of any bonus award

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and
may issue additional awards to each employee in the amounts and at the times it so determines. Further, each employee is entitled to an automobile and certain other benefits.

If
the employee's employment is terminated without cause (as defined in the employment agreements) or if the employee resigns for good reason (all as defined in the employment
agreement), the employee will be entitled to severance in an amount equal to the greater of (a) the product of 1.3125 (1.75 multiplied by .75) multiplied by the employee's base salary at the
time of termination or resignation and (b) the product of 1.75 multiplied by the remaining term of the employee's non-competition provisions multiplied by the employee's base salary
at the time of termination or resignation. In addition, K-Sea Transportation Inc. will pay on behalf of each employee the premiums necessary to provide coverage continuation rights
under certain insurance policies for a one-year period after termination or resignation.

The
employment agreements also provide for a non-competition period that will continue for two years after the termination of the employee's employment, except that the
non-competition period may terminate earlier as determined by the board of directors of K-Sea General Partner GP LLC if (a) the employee is terminated other than for
cause and (b) such termination does not occur within 30 days after a "change in control", as defined therein. During the non-competition period, the employee is generally
prohibited from engaging in any business that competes with us or our affiliates in areas in which we conduct business as of the date of termination and from soliciting or inducing any of our
employees to terminate their employment with us or accept employment with anyone else or interfere in a similar manner with our business.

Long-Term Incentive Plan

K-Sea General Partner GP LLC has adopted the K-Sea Transportation Partners L.P. Long-Term Incentive Plan for directors and
employees of K-Sea General Partner GP LLC and its affiliates, including K-Sea Operating Partnership L.P. and K-Sea Transportation Inc. The
long-term incentive plan permits the grant of awards covering an aggregate of 440,000 common units in the form of unit options and restricted units. The plan is administered by the
compensation committee of the board of directors of K-Sea General Partner GP LLC, and will continue in effect until the earlier of the date determined by the board of directors of
K-Sea General Partner GP LLC or the date common units are no longer available for the payment of awards under the plan.

K-Sea
General Partner GP LLC's board of directors or its compensation committee at its discretion are able to terminate, suspend or discontinue the long-term
incentive plan at any time with respect to any units for which a grant has not yet been made. K-Sea General Partner GP LLC's board of directors or its compensation committee also have the
right to alter or amend the long-term incentive plan or any part thereof from time to time, including increasing the number of units that may be granted subject to unitholder approval as
required by the exchange upon which the common units are listed at that time. However, no change in any outstanding grant may be made that would materially impair the rights of the participant without
the consent of the participant.

Restricted Units.A restricted unit is a "phantom" unit that entitles the grantee to receive a common unit upon the vesting
of the phantom unit or, in the discretion of the compensation committee, cash equivalent to the fair market value of a common unit. The compensation committee may determine to make grants under the
plan to employees and directors containing such terms as the compensation committee shall determine under the plan, including the period over which restricted units granted to employees and directors
will vest. The compensation committee will be able to base its vesting determination upon the achievement of specified performance objectives. In addition, subject to additional or contrary provisions
in a unit award agreement, the restricted units will vest upon a change in control of K-Sea Transportation Partners L.P. or our general partner.

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If
a grantee's employment or membership on the board of directors terminates for any reason, the grantee's restricted units will be automatically forfeited unless, and to the extent, the
compensation committee provides otherwise or unless otherwise provided in a written employment agreement between the grantee and K-Sea General Partner GP LLC or its affiliates. Common
units to be delivered upon the vesting of restricted units may be common units acquired by the general partner of our general partner in the open market, common units already owned by the general
partner of our general partner, common units acquired by the general partner of our general partner directly from us or any other person or any combination of the foregoing, as determined by the
compensation committee at its discretion. K-Sea General Partner GP LLC will be entitled to reimbursement by us for the cost incurred in acquiring common units. Thus, the cost of the
restricted units will be borne by us. If we issue new common units upon vesting of the restricted units, the total number of common units outstanding will increase. The compensation committee, in its
discretion, may grant tandem DERs with respect to restricted units, which entitle the recipient to receive an amount in cash equal to, and at the same time as, the cash distributions made by the
Partnership with respect to a common unit during the period such restricted unit is outstanding.

We
intend the issuance of the common units upon vesting of the restricted units under the plan to serve as a means of incentive compensation for superior performance and not primarily as
an opportunity to participate in the equity appreciation of the common units. Therefore, plan participants will not pay any consideration for the common units they receive, and we will receive no
remuneration for the units.

Unit Options.The long-term incentive plan will permit the grant of options covering common units. The
compensation committee will be able to make grants under the plan to employees and directors containing such terms as the committee determines. Unit options will not have an exercise price that is
less than the fair market value of the units on the date of grant. In general, unit options granted will become exercisable over a period determined by the compensation committee. In addition, the
unit options will become exercisable upon a change in control of K-Sea Transportation Partners L.P. or K-Sea Operating Partnership L.P. or upon the achievement of specified
performance objectives. Unless otherwise provided in an award agreement, unit options may be exercised only by the participant during his lifetime or by the person to whom the participant's right will
pass by will or the laws of descent and distribution.

If
a grantee's employment or membership on the board of directors terminates for any reason, the grantee's unvested options will be automatically forfeited unless, and to the extent, the
compensation committee provides otherwise or unless otherwise provided in a written employment agreement between the grantee and K-Sea General Partner GP LLC or its affiliates. Upon
exercise of a unit option, K-Sea General Partner GP LLC will acquire common units in the open market or directly from us or any other person or use common units that it already owns, or
any combination of the foregoing, as determined by the compensation committee in its discretion. K-Sea General Partner GP LLC will be entitled to reimbursement by us for the difference
between the cost incurred in acquiring these common units and the proceeds received from an optionee at the time of exercise. Thus, the cost of the unit options will be borne by us. If we issue new
common units upon exercise of the unit options, the total number of common units outstanding will increase, and the general partner of our general partner will pay us the proceeds it receives from the
optionee upon exercise of the unit option. The unit option plan has been designed to furnish additional compensation to employees and directors and to align their economic interests with those of
common unitholders.

Unit Purchase Plan

We have a unit purchase plan for employees of our general partner and its affiliates. The number of common units initially available for purchase under this plan
is 200,000. The unit purchase plan is intended to serve as a means of encouraging participants to invest in common units and to encourage

62

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participants
to devote their best efforts to the business of the partnership. Our general partner pays the brokerage commissions, transfer taxes and other costs and expenses of the plan. All common
units acquired under the plan will be subject to a one-year holding period from the date of purchase. If a participant sells or otherwise disposes of his common units during this
one-year holding period, the participant will thereafter be precluded from participating in the unit purchase plan until the first unit purchase period following the first anniversary of
the date of the pledge, transfer, sale or other distribution of common units. The plan is administered by the compensation committee of the board of directors of K-Sea General Partner GP
LLC. The plan may be terminated at any time by the compensation committee and will automatically terminate when all of the available common units under the plan have been purchased. The plan may be
amended from time to time by the compensation committee.

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ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY HOLDER MATTERS

A diagram depicting our current organizational structure is presented below.

GRAPHIC

64

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The
following table sets forth the beneficial ownership of units of K-Sea Transportation Partners L.P. by beneficial owners of 5% or more of such units by each director and
executive officer of K-Sea General Partner GP LLC and by all directors and executive officers as a group.

|Name of Beneficial Owners                                   |  | Common Units |  | Percentage of
Common Units |  | Subordinated
Units |  | Percentage of
Subordinated Units |   | Percentage of
Total Common and Subordinated Units |  
|----------------------------------------------------------- |  | ------------ |  | -------------------------- |  | ------------------ |  | -------------------------------- | - | ------------------------------------------------- | -
|K-Sea Investors, LP (1)                                     |  |             |  |                           |  | 4,165,000          |  | 100.0                            | % | 50.0                                              | %
|EW Transportation LLC (2)                                   |  |             |  |                           |  | 4,165,000          |  | 100.0                            | % | 50.0                                              | %
|EW Holding Corp. (3)                                        |  |             |  |                           |  | 1,181,818          |  | 28.4                             | % | 14.2                                              | %
|EW Transportation Corp.                                     |  |             |  |                           |  | 454,545            |  | 10.9                             | % | 5.5                                               | %
|James J. Dowling (1)                                        |  | 3,000        |  |                           |  |                   |  |                                 |   |                                                  |  
|Timothy J. Casey                                            |  | 1,000        |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Anthony S. Abbate                                           |  | 2,000        |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Barry J. Alperin                                            |  | 3,000        |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Frank Salerno                                               |  |             |  | *                          |  |                   |  |                                 |   | *                                                 |  
|John J. Nicola                                              |  | 8,500        |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Thomas M. Sullivan                                          |  | 600          |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Richard P. Falcinelli                                       |  | 1,200        |  | *                          |  |                   |  |                                 |   | *                                                 |  
|Brian P. Friedman (4)                                       |  | 10,800       |  | *                          |  | 4,165,000          |  | 100.0                            | % | 50.1                                              | %
|All directors and executive officers as a group (9 persons) |  | 30,100       |  | *                          |  | 4,165,000          |  | 100.0                            | % | 50.4                                              | %

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65

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The
following table sets forth the economic interest in, and the beneficial ownership of equity interests of, EW Transportation LLC:

Name of Beneficial Owner

Economic Interest

Equity InterestK-Sea Investors L.P.

91.0
%
98.3
%Park Avenue Transportation Inc. (1)

91.0
%
98.3
%James J. Dowling (2)



Timothy J. Casey

5.0
%
*Anthony S. Abbate



*Barry J. Alperin



*Frank Salerno



*John J. Nicola

1.0
%
*Thomas M. Sullivan

1.0
%
*Richard P. Falcinelli

1.0
%
*Brian P. Friedman (1)

91.0
%
98.3
%All directors and executive officers of K-Sea General Partner GP LLC as a group (9 persons)

99.0
%
98.3
%


---

The
following table sets forth the economic interest in, and the beneficial ownership of equity interests of, K-Sea General Partner GP LLC:

Name of Beneficial Owner

Economic Interest/
Equity InterestK-Sea Investors L.P.

90.0%Park Avenue Transportation Inc. (1)

90.0%James J. Dowling (2)

Timothy J. Casey

5.5%Anthony S. Abbate

Barry J. Alperin

Frank Salerno

John J. Nicola

1.3%Thomas M. Sullivan

1.3%Richard P. Falcinelli

1.3%Brian P. Friedman (1)

90.0%All directors and executive officers of K-Sea General Partner GP LLC as a group (9 persons)

99.4%


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Equity Compensation Plan Information

The following table sets forth in tabular format a summary of our equity plan information:

|Plan Category                                              |  | Number of securities
to be issued upon exercise of outstanding options, warrants and rights (a) |  | Weighted-average
exercise price of outstanding options, warrants and rights (b)(1) |  | Number of securities
remaining available for future issuance under
equity compensation plans
(excluding securities (c)
reflected in column (a))
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders (2) |  | 0                                                                                               |  | N/A                                                                                |  | 431,000(3)                                                                                                                                     
|Equity compensation plans not approved by security holders |  | N/A                                                                                             |  | N/A                                                                                |  | N/A                                                                                                                                            
|Total                                                      |  | 0                                                                                               |  | N/A                                                                                |  | 431,000                                                                                                                                        

---

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Distributions and Payments to Our General Partner and Its Affiliates

We generally distribute 98% of our available cash to our unitholders, including EW Transportation LLC, EW Holding Corp. and EW Transportation Corp. in their
capacity as holders of an aggregate of 4,165,000 subordinated units, and the remaining 2% of our available cash to our general partner. If distributions exceed the $0.50 per unit minimum quarterly
distribution and other higher target levels, our general partner is entitled to increasing percentages of the distributions, up to 50% of the distributions above the highest target level. We refer to
the rights to the increasing distributions as "incentive distribution rights." Please read "Market For Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity
SecuritiesIncentive Distribution Rights" in Item 5 of this report. Assuming we pay the $0.50 per unit minimum quarterly distribution on all of our outstanding units, our general partner
would receive an annual distribution of $340,000 on its 2% general partner interest, and affiliates of our general partner receive an annual distribution of approximately $8,330,000 on their
subordinated units.

Our
general partner and its affiliates do not receive a management fee or other compensation for the management of our partnership. Our general partner and its affiliates are entitled to
be reimbursed, however, for all direct and indirect expenses incurred on our behalf. Our general partner has sole discretion in determining the amount of these expenses. From January 14, 2004,
the date of our initial public offering, to June 30, 2004, these reimbursed expenses totaled approximately $17,000.

If
our general partner withdraws or is removed, its general partner interest and its incentive distribution rights will either be sold to the new general partner for cash or converted
into common units, in each case for an amount equal to the fair market value of those interests.

Upon
our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their particular capital account balances.

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Agreements Governing the Initial Public Offering Transactions

We, our general partner, K-Sea General Partner L.P., our operating partnership and other parties entered into various documents and agreements that
effected transactions, including the vesting of assets in, and the assumption of liabilities by, us and our subsidiaries, and the application of the proceeds of our initial public offering. These
agreements were not the result of arm's length negotiations, and we cannot assure you that they, or any of the transactions that they provide for, were effected on terms as favorable to the parties to
these agreements as could have been obtained from unaffiliated third parties. All of the transaction expenses incurred in connection with these transactions, including the expenses associated with
vesting assets into our subsidiaries, were paid from the proceeds of the initial public offering.

Omnibus Agreement

At the closing of our initial public offering, we entered into an omnibus agreement with K-Sea Investors L.P., EW Transportation LLC, EW Acquisition
Corp., EW Holding Corp., EW Transportation Corp., our general partner, K-Sea General Partner GP LLC, K-Sea OLP GP LLC and our operating partnership.

Noncompetition

Under the omnibus agreement, K-Sea Investors L.P. agreed, and caused its controlled affiliates to agree, not to engage, either directly or indirectly,
in the business of providing refined petroleum product marine transportation, distribution and logistics services in the United States to the extent such business generates qualifying income for
federal income tax purposes. The restriction does not apply to the assets which were retained by K-Sea Investors L.P. and its controlled affiliates at the closing of our initial public
offering. Except as provided above, K-Sea Investors L.P. and its controlled affiliates are not prohibited from engaging in activities in which they compete directly or indirectly with us.
Jefferies Capital Partners, and the funds it manages, are not prohibited from owning assets or engaging in businesses that compete directly or indirectly with us.

Indemnification

Under the omnibus agreement, EW Transportation LLC, EW Acquisition Corp., EW Holding Corp., EW Transportation Corp. and K-Sea Investors L.P. have
jointly and severally indemnified us after the closing for a period of five years against certain environmental and toxic tort liabilities and for a period of ten years against certain other toxic
tort liabilities associated with the operation of the assets before the closing. Liabilities resulting from changes in law after the closing of our initial public offering are excluded from the
environmental indemnity. We have agreed to indemnify EW Transportation LLC, EW Acquisition Corp., EW Holding Corp., EW Transportation Corp. and K-Sea Investors L.P. for events and
conditions associated with the operation of our assets that occur on or after the closing of this offering to the extent EW Transportation LLC, EW Acquisition Corp., EW Holding Corp., EW
Transportation Corp. and K-Sea Investors L.P. are not required to indemnify us. There is an aggregate cap of $10 million on the amount of indemnity coverage provided by EW
Transportation LLC, EW Acquisition Corp., EW Holding Corp., EW Transportation Corp. and K-Sea Investors L.P. for the environmental and toxic tort liabilities.

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EW
Transportation LLC, EW Acquisition Corp., EW Holding Corp., EW Transportation Corp. and K-Sea Investors L.P. have also agreed to indemnify us for liabilities related to:



Amendments

The omnibus agreement may not be amended without the prior approval of the conflicts committee if the proposed amendment will, in the reasonable discretion of our
general partner, adversely affect holders of our common units.

Properties

We lease our office and pier facilities from, and charter certain vessels to, affiliates of an employee. Additionally, we utilize one of these affiliates for tank
cleaning services. Please read note 7 to the consolidated financial statements included in Item 8 of this report.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees for services rendered by PricewaterhouseCoopers LLP during fiscal 2004. Because we were formed in July 2003, no amounts
are shown for fiscal 2003.

Year Ended
June 30, 2004Audit fees (1)

$
657,721Audit-related fees (2)


23,770Tax fees (3)


314,828All other fees


Total

$
996,319


---

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The
audit committee has considered whether the provision of the non-audit services described above is compatible with maintaining the independence of PricewaterhouseCoopers
LLP and determined that the provision of such services was compatible with maintaining such independence.

Audit Committee Policies and Procedures for Pre-approval of Audit and Non-Audit Services

Consistent with SEC policies regarding auditor independence, the audit committee is responsible for preapproving all audit and non-audit services
performed by the independent auditor. In addition to its approval of the audit engagement, the audit committee takes action at least annually to authorize the performance by the independent auditor of
several specific types of services within the categories of audit-related services and tax services. Audit-related services include assurance and related services that are reasonably related to the
performance of the audit or review of the financial
statements. Authorized tax services include compliance-related services such as services involving tax filings, as well as consulting services such as tax planning, transaction analysis and opinions.
Services are subject to pre-approval of the specific engagement if they are outside the specific types of services included in the periodic approvals covering service categories or if they
are in excess of specified fee limitations. The audit committee may delegate pre-approval authority to subcommittees. During 2004, no pre-approval requirements were waived.

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PART IV.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1)Financial Statements.

See
"Index to Financial Statements" set forth on page F-1.

(a)(2)Financial Statement Schedules.

None.

(a)(3)Exhibits.

|Exhibit
Number |  |   |  | Description                                                                                                                                                                                                                                                                                        
|-------------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1*           |  |  |  | Certificate of Limited Partnership of K-Sea Transportation Partners L.P. (incorporated by reference to Exhibit 3.1 to the Partnership's Registration Statement on Form S-1 (Registration No. 107084), as amended (the "Registration Statement"),
originally filed on July 16, 2003).               
|3.2*           |  |  |  | Second Amended and Restated Agreement of Limited Partnership of K-Sea Transportation Partners L.P. (including specimen unit certificate for the common units) (incorporated by reference to Exhibit 3.2 to the Partnership's Quarterly Report on Form 10-Q
for the period ended December 31, 2003).
|3.3*           |  |  |  | Certificate of Limited Partnership of K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 3.3 to the Registration Statement).                                                                                                                                                   
|3.4*           |  |  |  | Amended and Restated Agreement of Limited Partnership of K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 3.4 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                    
|3.5*           |  |  |  | Certificate of Limited Partnership of K-Sea General Partner L.P. (incorporated by reference to Exhibit 3.5 to the Registration Statement).                                                                                                                                                         
|3.6*           |  |  |  | First Amended and Restated Agreement of Limited Partnership of K-Sea General Partner L.P. (incorporated by reference to Exhibit 3.6 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                    
|3.7*           |  |  |  | Certificate of Formation of K-Sea General Partner GP LLC (incorporated by reference to Exhibit 3.7 to the Registration Statement).                                                                                                                                                                 
|3.8*           |  |  |  | First Amended and Restated Limited Liability Company Agreement of K-Sea General Partner GP LLC (incorporated by reference to Exhibit 3.8 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                               
|4.1*           |  |  |  | Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations among K-Sea Transportation LLC, EW Holding Corp. and JPMorgan Chase Bank dated as of June 7, 2002 (incorporated by reference to Exhibit 4.1.1 to the
Registration Statement).                           
|               |  |   |  |                                                                                                                                                                                                                                                                                                    

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|4.2*    |  |  |  | Supplemental Indenture No. 1, dated as of January 14, 2004, to the Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations among JPMorgan Chase Bank, EW Holding Corp., K-Sea Transition 4 Corp., K-Sea LP4, L.P.,
K-Sea Transportation LLC, K-Sea LP1, L.P., K-Sea LP2, L.P., K-Sea Transportation Partners L.P. and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.1.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended
December 31, 2003).
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1.1* |  |  |  | Participation and Loan and Security Agreement, dated as of January 14, 2004, by and between K-Sea Operating Partnership L.P., KeyBank N.A. and The CIT Group/Equipment Financing, Inc. (incorporated by reference to Exhibit 10.1 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                    
|10.1.2  |  |  |  | Amendment No. 1 to Participation and Loan and Security Agreement among The CIT Group/Equipment Financing, Inc., Keybank N.A. and K-Sea Operating Partnership L.P., dated as of January 29, 2004.                                                                                                                                                                                                                                                                                                                                 
|10.1.3  |  |  |  | Amendment No. 2 to Participation and Loan and Security Agreement among The CIT Group/Equipment Financing, Inc., Keybank N.A. and K-Sea Operating Partnership L.P., dated as of August 11, 2004, effective as of January 14,
2004.                                                                                                                                                                                                                                                                                                
|10.2*   |  |  |  | Contribution, Conveyance and Assumption Agreement, dated as of January 14, 2004, among K-Sea Investors L.P., K-Sea Transportation LLC, EW Holding Corp., K-Sea Transportation Corp., K-Sea Transportation Partners L.P. and K-Sea Operating Partnership
L.P. (incorporated by reference to Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                              
|10.3*   |  |  |  | Omnibus Agreement, dated as of January 14, 2004, among K-Sea Investors L.P., K-Sea Acquisition Corp., New EW Holding Corp., New K-Sea Transportation Corp., K-Sea General Partner L.P., K-Sea General Partner GP LLC, K-Sea Transportation Partners L.P.,
K-Sea OLP GP, LLC and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 10.3 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                          
|10.4.1* |  |  |  | Commitment to Guarantee Obligations by The United States of America Accepted by K-Sea Transportation LLC and EW Holding Corp., Shipowners, dated June 7, 2002 (incorporated by reference to Exhibit 10.4.1 to the Registration Statement).                                                                                                                                                                                                                                                                                       
|10.4.2* |  |  |  | Amendment No. 1 to Commitment to Guarantee Obligations, dated as of January 14, 2004, made and entered by the United States of America and accepted by K-Sea Transportation Partners L.P. and K-Sea Operating Partnership L.P. (incorporated by reference
to Exhibit 10.4.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                          
|10.5*   |  |  |  | Amended and Restated Security Agreement, dated as of January 14, 2004, among K-Sea Transportation Partners L.P., K-Sea Operating Partnership L.P., and the United States of America (incorporated by reference to Exhibit 10.5 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|10.6*   |  |  |  | Restated Title XI Reserve Fund and Financial Agreement, dated as of January 14, 2004, among K-Sea Transportation Partners L.P., K-Sea Operating Partnership L.P., K-Sea Transportation Inc. and The United States of America (incorporated by reference to
Exhibit 10.6 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).
|------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7*   |  |  |  | K-Sea Transportation Partners L.P. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.7 to the Partnership's Quarterly Report on Form 10-Q for the period ended March 31, 2004).                                                                                                                                                                    
|10.8*   |  |  |  | K-Sea Transportation Partners L.P. Employee Unit Purchase Plan (incorporated by reference to Exhibit 4.2 to the Partnership's Registration Statement on Form S-8 (Registration No. 333-117251) filed on July 9, 2004).                                                                                                                                             
|10.9*  |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Timothy J. Casey (incorporated by reference to Exhibit 10.9 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                                  
|10.10* |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and John J. Nicola (incorporated by reference to Exhibit 10.10 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                                   
|10.11* |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Richard P. Falcinelli (incorporated by reference to Exhibit 10.11 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                            
|10.12* |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Thomas M. Sullivan (incorporated by reference to Exhibit 10.12 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                               
|10.13* |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and James J. Dowling (incorporated by reference to Exhibit 10.13 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                  
|10.14* |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Timothy J. Casey (incorporated by reference to Exhibit 10.14 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                  
|10.15* |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and John J. Nicola (incorporated by reference to Exhibit 10.15 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                    
|10.16* |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Richard P. Falcinelli (incorporated by reference to Exhibit 10.16 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                             
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                    

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|10.17*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Thomas M. Sullivan (incorporated by reference to Exhibit 10.17 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).
|-------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Brian P. Friedman (incorporated by reference to Exhibit 10.18 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003). 
|10.19*   |  |  |  | Contract of Sale dated January 29, 2004 between Wells Fargo Bank Northwest, National Association, ICX Corporation and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.1 to the Partnership's Current Report on Form 8-K dated
January 29, 2004 and filed on February 3, 2004).                            
|10.20.1* |  |  |  | Loan and Security Agreement dated as of January 29, 2004 by and between The CIT Group/Equipment Financing, Inc. and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.2 to the Partnership's Current Report on Form 8-K dated
January 29, 2004 and filed on February 3, 2004).                              
|10.20.2  |  |  |  | Amendment No. 1 to Loan and Security Agreement by and between The CIT Group/Equipment Financing, Inc. and K-Sea Operating Partnership L.P., dated as of August 11, 2004, effective as of January 29, 2004.                                                                                                                         
|10.21.1  |  |  |  | Loan Agreement dated as of May 28, 2004 by and between K-Sea Operating Partnership L.P. and Citizens Leasing Corporation.                                                                                                                                                                                                          
|10.21.2  |  |  |  | Amendment No. 1 to Loan Agreement by and between K-Sea Operating Partnership L.P. and Citizens Leasing Corporation, dated as of August 18, 2004, effective as of May 28, 2004.                                                                                                                                                     
|21.1*    |  |  |  | List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registration Statement).                                                                                                                                                                                                                                    
|23.1     |  |  |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                             
|31.1     |  |  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                
|31.2     |  |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                
|32.1     |  |  |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                 
|32.2     |  |  |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                 

---

74

---





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.

| |  | K-SEA TRANSPORTATION PARTNERS L.P.                           
| |  | -------------------------------------------------------------
| |  | By: K-SEA GENERAL PARTNER L.P.,
    its General Partner.     
| |  | By: K-SEA GENERAL PARTNER GP LLC,
        its General Partner
| |  | By:                                                          

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

|Signature                             |  | Title                                                                            |  | Date              
|------------------------------------- |  | -------------------------------------------------------------------------------- |  | ------------------
|                                      |  |                                                                                  |  |                   
|/s/TIMOTHY J. CASEYTimothy J. Casey   |  | President and Chief Executive
Officer and Director (Principal
Executive Officer) |  | September 27, 2004
|/s/JAMES J. DOWLINGJames J. Dowling   |  | Chairman of the Board and Director                                               |  | September 27, 2004
|/s/JOHN J. NICOLAJohn J. Nicola       |  | Chief Financial Officer (Principal
Financial and Accounting Officer)             |  | September 27, 2004
|/s/ANTHONY S. ABBATEAnthony S. Abbate |  | Director                                                                         |  | September 27, 2004
|/s/BARRY J. ALPERINBarry J. Alperin   |  | Director                                                                         |  | September 27, 2004
|/s/BRIAN P. FRIEDMANBrian P. Friedman |  | Director                                                                         |  | September 27, 2004
|/s/FRANK SALERNOFrank Salerno         |  | Director                                                                         |  | September 27, 2004

75

---





INDEX TO CONSOLIDATED STATEMENTS

|                                                                                                                     |  | Page
|-------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm                                                              |  | F-2 
|Consolidated Balance Sheets as of June 30, 2004 and 2003                                                             |  | F-3 
|Consolidated Statements of Operations for the fiscal years ended
June 30, 2004, 2003 and 2002                        |  | F-4 
|Consolidated Statements of Partners' Capital/Members' Equity for the fiscal years ended June 30, 2004, 2003 and 2002 |  | F-5 
|Consolidated Statements of Cash Flows for the fiscal years ended
June 30, 2004, 2003 and 2002                        |  | F-6 
|Notes to Consolidated Financial Statements                                                                           |  | F-8 

F-1

---





Report of Independent Registered Public Accounting Firm

To
the General Partner and Unitholders of K-Sea Transportation Partners L.P.:

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, partners' capital / members' equity, and of cash flows present fairly,
in all material respects, the financial position of K-Sea Transportation Partners L.P. and its subsidiaries at June 30, 2004 and 2003, and the results of their operations and their
cash flows for each of the three years in the period ended June 30, 2004 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements 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, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/
PRICEWATERHOUSECOOPERS LLP
New York, New York

August 5,
2004

F-2

---





K-SEA TRANSPORTATION PARTNERS L.P. (Note 1)  Successor to K-Sea Transportation LLC (Predecessor)  CONSOLIDATED BALANCE SHEETS  (in thousands)

|                                                                      |                                                | June 30,                                               
|--------------------------------------------------------------------- | ---------------------------------------------- | -------------------------------------------------------
|
|Assets                                                                |                                                |                                                        
|Current Assets                                                        |                                                |                                                        
|                                                                      | Cash and cash equivalents                      |                                                        
|                                                                      | Title XI escrow account                        |                                                        
|                                                                      | Accounts receivable, net                       |                                                        
|                                                                      | Deferred taxes                                 |                                                        
|                                                                      | Prepaid expenses and other current assets      |                                                        
|                                                                      |                                                |                                                        
|                                                                      |                                                | Total current assets                                   
|Vessels and equipment, net                                            |                                                |                                                        
|Construction in progress                                              |                                                |                                                        
|Title XI escrow account                                               |                                                |                                                        
|Deferred financing costs, net                                         |                                                |                                                        
|Other assets                                                          |                                                |                                                        
|                                                                      |                                                |                                                        
|                                                                      |                                                | Total assets                                           
|                                                                      |                                                |                                                        
|Liabilities and Partners' Capital/Members' Equity Current Liabilities |                                                |                                                        
|                                                                      | Credit line borrowings                         |                                                        
|                                                                      | Current portion of long-term debt              |                                                        
|                                                                      | Accounts payable                               |                                                        
|                                                                      | Accrued expenses and other current liabilities |                                                        
|                                                                      |                                                |                                                        
|                                                                      |                                                | Total current liabilities                              
|Title XI bonds                                                        |                                                |                                                        
|Term loans                                                            |                                                |                                                        
|Credit line borrowings                                                |                                                |                                                        
|Subordinated notes payable                                            |                                                |                                                        
|Deferred taxes                                                        |                                                |                                                        
|                                                                      |                                                |                                                        
|                                                                      |                                                | Total liabilities                                      
|Commitments and contingencies                                         |                                                |                                                        
|Partners' Capital/Members' Equity                                     |                                                |                                                        
|                                                                      |                                                |                                                        
|                                                                      |                                                | Total liabilities and partners' capital/members' equity
|                                                                      |                                                |                                                        

See
accompanying notes to consolidated financial statements.

F-3

---





K-SEA TRANSPORTATION PARTNERS L.P. (Note 1)  Successor to K-Sea Transportation LLC (Predecessor)  CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per unit amounts)

|                                                  |                                                    | For the Years Ended June 30, |        
|------------------------------------------------- | -------------------------------------------------- | ---------------------------- | -------
|
|Voyage revenue                                    |                                                    | $                            | 93,899 
|Bareboat charter and other revenue                |                                                    |                              | 1,900  
|                                                  |                                                    |                              |        
|                                                  | Total revenues                                     |                              |        
|                                                  |                                                    |                              |        
|Voyage expenses                                   |                                                    |                              | 16,339 
|Vessel operating expenses                         |                                                    |                              | 38,809 
|General and administrative expenses               |                                                    |                              | 8,149  
|Depreciation and amortization                     |                                                    |                              | 18,643 
|Net loss (gain) on sale of vessels                |                                                    |                              | 255    
|                                                  |                                                    |                              |        
|                                                  | Total operating expenses                           |                              |        
|                                                  |                                                    |                              |        
|                                                  | Operating income                                   |                              |        
|Interest expense, net                             |                                                    |                              | 6,370  
|Net loss (gain) on reduction of debt              |                                                    |                              | 3,158  
|Other (income) expense, net                       |                                                    |                              | (253   
|                                                  |                                                    |                              |        
|                                                  | Income before provision (benefit) for income taxes |                              |        
|Provision (benefit) for income taxes              |                                                    |                              | (16,845
|                                                  |                                                    |                              |        
|                                                  | Net income                                         |                              | $      
|                                                  |                                                    |                              |        
|General partner's interest in net income (note 3) |                                                    | $                            | 6,629  
|Limited partners' interest:                       |                                                    |                              |        
|                                                  | Net income                                         |                              | $      
|                                                  | Net income per unitbasic                          |                              | $      
|                                                  | diluted                                           |                              | $      
|                                                  | Weighted average units outstandingbasic           |                              |        
|                                                  | diluted                                           |                              |        

See
accompanying notes to consolidated financial statements.

F-4

---





K-SEA TRANSPORTATION PARTNERS L.P. (Note 1)  Successor to K-Sea Transportation LLC (Predecessor)  CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL/MEMBERS' EQUITY  (in thousands)

|                                                                                        |  |   |         | PARTNERS' CAPITAL |       |   |  
|--------------------------------------------------------------------------------------- |  | - | ------- | ----------------- | ----- | - | -
|
|
|
|
|
|Balance of Members' Equity at July 1, 2001                                              |  | $ | 29,753  |                   |       |   |  
|Collection on notes receivable from members, net of interest accrued                    |  |   | 40      |                   |       |   |  
|Net income                                                                              |  |   | 6,474   |                   |       |   |  
|                                                                                        |  |   |         |                   |       |   |  
|Balance of Members' Equity at June 30, 2002                                             |  |   | 36,267  |                   |       |   |  
|Members' contributions                                                                  |  |   | 123     |                   |       |   |  
|Less notes receivable on members' contributions                                         |  |   | (123    | )                 |       |   |  
|Collection on notes receivable from members, net of interest accrued                    |  |   | 51      |                   |       |   |  
|Net income                                                                              |  |   | 4,972   |                   |       |   |  
|                                                                                        |  |   |         |                   |       |   |  
|Balance of Members' Equity at June 30, 2003                                             |  |   | 41,290  |                   |       |   |  
|Collection on notes receivable from members, net of interest accrued                    |  |   | 46      |                   |       |   |  
|Net income for the period July 1, 2003 to January 13, 2004                              |  |   | 1,776   |                   |       |   |  
|                                                                                        |  |   |         |                   |       |   |  
|Balance at January 13, 2004                                                             |  |   | 43,112  |                   |       |   |  
|Adjustment to reflect net liabilities not contributed to the Partnership                |  |   | 5,334   |                   |       |   |  
|Book value of net assets contributed to the Partnership                                 |  |   | (48,446 | )                 | 665   |   | $
|Proceeds from initial public offering of common units, net of offering costs of $11,776 |  |   |         |                   | 4,165 |   |  
|Redemption of common units, net of offering costs of $1,035                             |  |   |         |                   | (665  | ) |  
|Distributions to partners                                                               |  |   |         |                   |       |   |  
|Net income for the period January 14, 2004 to June 30, 2004                             |  |   |         |                   |       |   |  
|                                                                                        |  |   |         |                   |       |   |  
|Balance of Partners' Capital at June 30, 2004                                           |  | $ |        |                   | 4,165 |   | $
|                                                                                        |  |   |         |                   |       |   |  

See accompanying notes to consolidated financial statements.

F-5

---





K-SEA TRANSPORTATION PARTNERS L.P. (Note 1)  Successor to K-Sea Transportation LLC (Predecessor)  CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)

|                                      |                                                                                   | For the Years Ended June 30                         |                                          
|------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities: |                                                                                   |                                                     |                                          
|                                      | Net income                                                                        |                                                     | $                                        
|                                      | Adjustments to reconcile net income to net cash provided by operating activities: |                                                     |                                          
|                                      | Depreciation and amortization                                                     |                                                     |                                          
|                                      | Payment of drydocking expenditures                                                |                                                     |                                          
|                                      | Provision for doubtful accounts                                                   |                                                     |                                          
|                                      | Deferred income taxes                                                             |                                                     |                                          
|                                      | Net loss (gain) on disposal of vessels                                            |                                                     |                                          
|                                      | Accrued supplemental interest                                                     |                                                     |                                          
|                                      | Net loss (gain) on reduction of debt                                              |                                                     |                                          
|                                      | Other                                                                             |                                                     |                                          
|                                      | Changes in operating working capital:                                             |                                                     |                                          
|                                      |                                                                                   | Accounts receivable                                 |                                          
|                                      |                                                                                   | Prepaid expenses and other current assets           |                                          
|                                      |                                                                                   | Accounts payable                                    |                                          
|                                      |                                                                                   | Accrued expenses and other current liabilities      |                                          
|                                      |                                                                                   | Other assets                                        |                                          
|                                      |                                                                                   |                                                     |                                          
|                                      |                                                                                   |                                                     | Net cash provided by operating activities
|                                      |                                                                                   |                                                     |                                          
|Cash flows from investing activities: |                                                                                   |                                                     |                                          
|                                      | Vessel acquisitions                                                               |                                                     |                                          
|                                      | Construction of tank vessels                                                      |                                                     |                                          
|                                      | Other capital expenditures                                                        |                                                     |                                          
|                                      | Investment of Title XI escrow funds                                               |                                                     |                                          
|                                      | Drawdowns of Title XI escrow funds                                                |                                                     |                                          
|                                      | Proceeds on sale of vessels                                                       |                                                     |                                          
|                                      | Other                                                                             |                                                     |                                          
|                                      |                                                                                   |                                                     |                                          
|                                      |                                                                                   | Net cash used in investing activities               |                                          
|                                      |                                                                                   |                                                     |                                          
|Cash flows from financing activities: |                                                                                   |                                                     |                                          
|                                      | (Decrease) increase in credit line borrowings                                     |                                                     |                                          
|                                      | Gross proceeds from issuance of common units                                      |                                                     |                                          
|                                      | Redemption of common units held by predecessor                                    |                                                     |                                          
|                                      | Proceeds from Title XI bonds                                                      |                                                     |                                          
|                                      | Proceeds from issuance of long-term debt                                          |                                                     |                                          
|                                      | Payment of term loans                                                             |                                                     |                                          
|                                      | Financing costs paidequity offerings                                             |                                                     |                                          
|                                      | Financing costs paiddebt issuance                                                |                                                     |                                          
|                                      | Book overdrafts                                                                   |                                                     |                                          
|                                      | Prepayment costs on long-term debt                                                |                                                     |                                          
|                                      | Collection on members' notes receivable                                           |                                                     |                                          
|                                      | Distributions to partners                                                         |                                                     |                                          
|                                      |                                                                                   |                                                     |                                          
|                                      |                                                                                   | Net cash provided by (used in) financing activities |                                          
|                                      |                                                                                   |                                                     |                                          
|Cash and cash equivalents:            |                                                                                   |                                                     |                                          
|                                      | Net increase (decrease)                                                           |                                                     |                                          
|                                      | Balance at beginning of year                                                      |                                                     |                                          
|                                      |                                                                                   |                                                     |                                          
|                                      |                                                                                   | Balance at end of year                              |                                          
|                                      |                                                                                   |                                                     |                                          

See accompanying notes to consolidated financial statements.

F-6

---





K-SEA TRANSPORTATION PARTNERS L.P. (Note 1)  Successor to K-Sea Transportation LLC (Predecessor)  CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)

|                                                                        |                                                 | For the Years Ended June 30,        
|----------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------
|
|Supplemental disclosure of cash flow information:                       |                                                 |                                     
|                                                                        | Cash paid during the year for:                  |                                     
|                                                                        |                                                 | Interest, net of amounts capitalized
|                                                                        |                                                 |                                     
|                                                                        |                                                 | Income taxes                        
|                                                                        |                                                 |                                     
|Supplemental disclosure of non-cash investing and financing activities: |                                                 |                                     
|                                                                        | Notes receivable from members for contributions |                                     
|                                                                        |                                                 |                                     

See
accompanying notes to consolidated financial statements.

F-7

---





K-SEA TRANSPORTATION PARTNERS L.P.  Successor to K-Sea Transportation LLC (Predecessor)  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (dollars in thousands, except unit and per unit amounts)

Note 1:    Basis of Presentation

On July 8, 2003, K-Sea Transportation Partners L.P. (the "Partnership") was formed to own and operate the refined petroleum product marine
transportation, distribution and logistics business conducted by K-Sea Transportation LLC ("K-Sea LLC") and its subsidiaries K-Sea Acquisition Corp., EW Holding
Corp. and K-Sea Transportation Corp. (collectively, the "Predecessor"). K-Sea LLC and its predecessor companies have since 1959 engaged in the transportation of refined
petroleum products in the northeastern United States and Gulf of Mexico.    On January 14, 2004, the Predecessor contributed assets and liabilities constituting the business of the
Predecessor to the Partnership in connection with the initial public offering of common units representing limited partner interests in the Partnership (the "common units"). In exchange for these
assets and liabilities, the Predecessor received 665,000 common units and 4,165,000 subordinated units representing limited partner interests in the Partnership. The Partnership's general partner
received a 2% general partner interest and certain incentive distribution rights in the Partnership. Incentive distribution rights represent the right to receive an increasing percentage of cash
distributions after the minimum quarterly distribution, any cumulative arrearages on common units, and certain target distribution levels, have been achieved. The Partnership is required to distribute
all of its available cash from operating surplus, as defined in the partnership agreement. The target distribution levels entitle the general partner to receive 15% of quarterly cash distributions in
excess of $0.55 per unit until all unitholders have received $0.625 per unit, 25% of quarterly cash distributions in excess of $0.625 per unit until all unitholders have received $0.75 per unit, and
50% of quarterly cash distributions in excess of $0.75 per unit.

The
transfer to the Partnership of the assets and liabilities constituting the business of the Predecessor represented a reorganization of entities under common control and was recorded
at historical cost. The net assets transferred were $5,334 greater than the net assets of the Predecessor due to the retention by the Predecessor of certain net liabilities. The consolidated financial
statements included herein are for the Predecessor for all periods prior to January 14, 2004.

Note 2:    Initial Public Offering

On January 14, 2004, the Partnership completed its initial public offering of 3,625,000 common units at a price of $23.50 per unit. On January 21,
2004, the Partnership sold an additional 540,000 common units to the underwriters in connection with the exercise of their over-allotment option. Total gross proceeds from these sales were
$97,877, before offering costs and underwriting fees of $11,776. Concurrent with these sales, the Partnership redeemed the 665,000 common units held by K-Sea LLC (see note 1) at a
cost of $14,592. After the initial public offering and related redemption, there were 4,165,000 common units and 4,165,000 subordinated units outstanding. As described in the partnership agreement,
during the subordination period the subordinated units are not entitled to receive any distributions until the common units have received their minimum quarterly distribution plus any arrearages from
prior quarters. The subordination period will end once the Partnership meets certain financial tests described in the partnership agreement, but it generally cannot end before December 31,
2008. When the subordination period ends, all subordinated units will convert into common units on a one-for-one basis, and the common units will no longer be entitled to
arrearages.    If the Partnership meets certain financial tests described in the partnership agreement, 25% of the subordinated units can convert into common units on or after
December 31, 2006, and an additional 25% can convert into common units on or after December 31, 2007.

F-8

---



The
proceeds retained by the Partnership relating to the sale of the common units totaled $83,285. These proceeds were used to repay $73,941 in outstanding term and revolving credit
debt, including prepayment fees and make-whole amounts, and to pay $5,939 in underwriting fees and $3,405 in professional fees and other offering expenses. The proceeds received by the
Partnership from the offering and the use of those proceeds are summarized as follows:

Proceeds received:Sale of 4,165,000 common units at $23.50 per unit

$
97,877Less amounts paid for redemption of 665,000 common units from K-Sea LLC (Note 1)


(14,592
)$
83,285Use of proceeds:Repayment of term and revolving credit debt


73,941Underwriting fees


5,939Professional fees and other offering expenses


3,405$
83,285


Presented
below is supplemental information with respect to the interest of the limited partners in net income and net income per unit of the Partnership from January 14, 2004,
the date of the initial public offering, through June 30, 2004:

Interest in net income

$
12,769Interest in net income per unit (basic and diluted)

$
1.53Weighted average units outstandingbasic


8,330diluted


8,337


Note 3:    Summary of Significant Accounting Policies

Basis of Consolidation.These consolidated financial statements are for the Partnership and its wholly owned subsidiaries
K-Sea Operating Partnership L.P. and K-Sea Transportation Inc. For all periods prior to January 14, 2004, the business was operated by the Predecessor, and
therefore the consolidated financial statements are for the Predecessor (see note 1) for those periods. All material inter-company transactions and balances have been eliminated in
consolidation.

Cash and Cash Equivalents.Cash equivalents include time deposits with maturities of three months or less when purchased and
cash on deposit at a financial institution pursuant to a line of credit agreement. Under the credit agreement in effect prior to the closing of the initial public offering, customer cash receipts were
deposited in a lockbox bank account and transferred to the financial institution to reduce credit line borrowings and cash transfers in excess of borrowings were remitted to the Predecessor. Under the
credit agreement in effect subsequent to the initial public offering, lockbox receipts are retained by the Partnership.

F-9

---



Vessels and Equipment.Vessels and equipment are recorded at cost, including capitalized interest where appropriate, and
depreciated using the straight-line method over the estimated useful lives of the individual assets as follows: tank vesselsfive to twenty-five years;
tugboatstwenty years; and pier and office equipmentfive years. For single-hull tank vessels, such useful lives are limited to the remaining period of operation prior to
mandatory retirement as required by the Oil Pollution Act of 1990 ("OPA 90"). Two single-hull tank vessels must be retired or retrofitted by December 31, 2004, and 16 additional
single-hull tank vessels must be retired or retrofitted by December 31, 2014; the useful lives of these assets have been limited to these respective periods.

Included
in vessels and equipment are drydocking expenditures that are capitalized and amortized over three years. Drydocking of vessels is required both by the United States Coast Guard
and by the applicable classification society, which in the Partnership's case is the American Bureau of Shipping. Such drydocking activities include, but are not limited to, the inspection,
refurbishment and replacement of steel, engine components, tailshafts, mooring equipment and other parts of the vessel.

Major
renewals and betterments of assets are capitalized and depreciated over the remaining useful lives of the assets. Maintenance and repairs that do not improve or extend the useful
lives of the assets are expensed.

The
Partnership assesses impairment on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts. An impairment loss would be recognized to the extent the carrying value exceeds fair value by appraisal.

When
property items are retired, sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts with any gain or loss on the dispositions
included in income. Assets to be disposed of are reported at the lower of their carrying amounts or fair values, less the estimated costs of disposal.

Fuel Supplies.Fuel used to operate the Partnership's vessels, and on hand at the end of the period, is recorded at cost.
Such amounts totaled $1,170 and $901 as of June 30, 2004 and 2003, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets.

Deferred Financing Costs.Direct costs associated with obtaining long-term financing are deferred and amortized
over the terms of the related financings. Deferred financing costs are stated net of accumulated amortization which, at June 30, 2004 and 2003, amounted to $675 and $1,110, respectively.

Revenue Recognition.The Partnership earns revenue under contracts of affreightment, voyage charters, time charters and
bareboat charters. For contracts of affreightment and voyage charters, revenue is recognized based upon the relative transit time in each period, with expenses recognized as incurred. Although
contracts of affreightment and certain contracts for voyage charters may be effective for a period in excess of one year, revenue is recognized over the transit time of individual voyages, which are
generally less than ten days in duration. For time charters and bareboat charters, revenue is recognized ratably over the contract period, with expenses recognized as incurred. Estimated losses on
contracts of affreightment and charters are accrued when such losses become evident.

F-10

---



Use of Estimates.The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, and revenues and expenses during the reporting period. The most significant estimates relate to depreciation of the vessels, liabilities incurred from workers' compensation, commercial and
other claims, the allowance for doubtful accounts and deferred income taxes. Actual results could differ from these estimates.

Concentrations of Credit Risk.Financial instruments which potentially subject the Partnership to concentrations of credit
risk are primarily cash and cash equivalents and trade accounts receivable. The Partnership maintains its cash and cash equivalents on deposit at a financial institution in amounts that, at times, may
exceed insurable limits.

With
respect to accounts receivable, the Partnership extends credit based upon an evaluation of a customer's financial condition and generally does not require collateral. The
Partnership maintains an allowance for doubtful accounts for potential losses, totaling $571 and $476 at June 30, 2004 and 2003, respectively, and does not believe it is exposed to
concentrations of credit risk that are likely to have a material adverse effect on its financial position, results of operations or cash flows. For the fiscal years ended June 30, 2004, 2003
and 2002, the Partnership's allowance for doubtful amounts was impacted by
additional charges of $100, $81, and $109, and write-offs of $5, $8 and $570, respectively.

Income Taxes.The Partnership's effective tax rate comprises the New York City Unincorporated Business Tax on its operating
partnership, plus federal, state and local corporate income taxes on the taxable income of the operating partnership's corporate subsidiary. Prior to the initial public offering, K-Sea LLC
was a limited liability company and treated as a partnership for income tax purposes. Accordingly, it was not responsible for federal, state and local income taxes, as its profits and losses were
passed directly to its members for inclusion in their income tax returns. K-Sea LLC was subject to the New York City Unincorporated Business Tax, and its subsidiaries were C Corporations
that were subject to federal, state and local income taxes.

Deferred
taxes represent the tax effects of differences between the financial reporting and tax bases of the Partnership's and Predecessor's assets and liabilities, as applicable, at
enacted tax rates in effect for the years in which the differences are expected to reverse. The recoverability of deferred tax assets is evaluated and a valuation allowance established when it is more
likely than not that some portion or all of the deferred tax assets will not be realized.

Unit-Based Compensation.During 2004 the general partner of the general partner of the Partnership adopted a
long-term incentive plan that permits the granting of awards to directors and employees that cover 440,000 common units in the form of unit options and phantom units. The phantom units
entitle the grantee to receive, upon vesting, common units or, at the option of the Partnership, cash in lieu of common units based on the market value of the common units on the date the phantom
units vest. In 2004, 9,000 phantom units were granted and were outstanding at June 30, 2004. The Partnership recognizes compensation cost for the phantom units under the intrinsic value method
based on the market value of the common units over the vesting period. This amount is

F-11

---



adjusted
for changes in the market value of the common units from the grant date to the vesting date. Such compensation expense was not material for fiscal 2004.

Net Income per Unit.Basic net income per unit is determined by dividing net income, after deducting the amount of net income
allocated to the general partner interest from its issuance date of January 14, 2004, as described below, by the weighted average number of units outstanding during the period. Diluted net
income per unit is calculated in the same manner as basic net income per unit, except that the weighted average number of outstanding units is increased to include the dilutive effect of outstanding
unit options or phantom units. For periods prior to January 14, 2004, such units are equal to the common and subordinated units received by the Predecessor in exchange for the net assets
contributed to the Partnership, or 4,830,000 units.

The
supplemental information presented in note 2 above is determined using net income and net income per unit, calculated on the basis described above, for the period from
January 14, 2004, the date of the exchange of net assets for units and the completion of the initial public offering, to June 30, 2004.

As
required by Emerging Issues Task Force Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings
per Share" ("EITF 03-6"), which is effective for periods beginning after March 31, 2004, the general partner's interest in net income is calculated as if all net income for the year
was distributed according to the terms of the partnership agreement, regardless of whether those earnings would or could be distributed. The partnership agreement does not provide for the distribution
of net income; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter after establishment of
cash reserves. Unlike available cash, net income is affected by non-cash items, such as deferred tax benefits.

As
described in note 1 above, the general partner's incentive distribution rights entitle it to receive an increasing percentage of distributions when the quarterly cash
distribution exceeds $0.55 per unit. For purposes of EITF 03-6, the Partnership must treat net income as if it were distributable. Therefore, since net income exceeded $0.55 per unit in
the third quarter of fiscal 2004 due to recognition in that quarter of a deferred tax benefit of $17,561, the assumed distribution of all net income, pursuant to EITF 03-6, results in use
of the increasing percentages to calculate the general partner's interest in net income for the quarter ended March 31, 2004. Notwithstanding the foregoing, the deferred tax benefit is not
included in the calculation of available cash under the partnership agreement and, therefore, the general partner did not and will not receive any incentive distributions of available cash as a result
of such deferred tax benefit.

F-12

---



Note 4:    Vessels and Equipment and Construction in Progress

At June 30, 2004 and 2003, vessels and equipment and construction in progress comprised the following:

2004

2003Vessels

$
251,295

$
189,606Pier and office equipment


2,189


1,082253,484


190,688Less accumulated depreciation and amortization


(59,838
)

(45,168
)Vessels and equipment, net

$
193,646

$
145,520Construction in progress

$
7,722

$
2,723


Depreciation
and amortization of vessels and equipment for the fiscal years ended June 30, 2004, 2003 and 2002 was $18,256, $16,006 and $14,246, respectively. Such depreciation
and amortization includes amortization of drydocking expenditures for the fiscal years ended June 30, 2004, 2003 and 2002 of $7,421, $7,158 and $5,770, respectively.

On
January 29, 2004, the Partnership acquired a 140,000 barrel capacity double-hull tank barge and an 8,000 horsepower tugboat, both built in 2000. The purchase price
of $34,120 was financed using available cash and $25,048 in borrowings under a new term loan. The Partnership also signed a new multi-year contract with the sellers to transport petroleum
products in the northeastern United States. The portion of the purchase price in excess of the fair value of the vessels, as determined by appraisal, was allocated to the related contract and is
included in other assets. Such amount is being amortized over the contract period.

During
fiscal 2004, the Partnership also completed the rebuilding of the DBL 105 for petroleum transportation. This vessel, along with a tugboat, was purchased in fiscal 2003 for $3,539,
funded by credit line borrowings. The double-hulling project for the DBL 155 was also continued during fiscal 2004; construction in progress at June 30, 2004 includes $7,722 relating to this
project. Capital expenditures for these two vessels, along with certain other tugboat re-powering and coupling projects, totaled $25,772 million during fiscal 2004.

In
March 2001, K-Sea Transportation Corp. and Bollinger Gretna, L.L.C. signed a contract for the construction of four double-hull tank vessels to be built
over three years. The aggregate cost of these four vessels was $46,193, including financing and other fees and certain special equipment. Delivery of the first vessel occurred in July 2002, the
second in February 2003, the third in June 2003, and the fourth vessel in January 2004.

During
fiscal 2002, two other vessels were also purchased for $6,013, which was funded from the proceeds of a $4,040 term loan and credit line borrowings.

Note 5:    Financing

In connection with the Partnership's initial public offering of common units, as described in note 2, all of the Predecessor's debt, exclusive of $12,950
in subordinated notes, was contributed to the

F-13

---



Partnership.
The contributed short-term and long-term debt (excluding the Title XI bonds, as described below) aggregated $73,941, and was repaid using proceeds of the offering.
Such repayments included $6,041 in prepayment and make-whole amounts, of which $3,274 had previously been accrued by the Predecessor as supplemental interest which would have been payable
upon maturity of certain of these loans, resulting in a loss on prepayment of $2,767. In addition, $240 in deferred financing costs related to the contributed debt was also written off. In the fourth
quarter of fiscal 2004, an additional $151 was paid as a final adjustment to the make-whole payment. Immediately after the closing of the offering, the Partnership's outstanding
long-term debt included only the Title XI bonds.

Concurrent
with the closing of the offering, the Partnership also entered into a new, three-year $47,000 credit agreement, which comprises a $10,000 senior secured revolving
working capital facility, a $30,000 senior secured revolving acquisition facility, and a $7,000 senior secured standby letter of credit facility. Borrowings under the working capital and acquisition
facilities bear interest, at the option of the Partnership, at a rate equal to (a) the greater of the prime rate and the federal funds rate plus 0.50%, or (b) 30-day LIBOR
plus 2.50%. The Partnership also incurs commitment fees, payable quarterly, of 0.25% of the aggregate unused amount of the working capital and acquisition facilities. The credit agreement is
collateralized by vessels having an orderly liquidation value of at least $71,000. As of June 30, 2004, the Partnership had drawn down $4,400 of the acquisition facility to finance construction
in progress. Borrowings under this facility are due in 18 months, or upon the earlier expiration of the credit agreement, at which time they must either be repaid or converted to a
five-year term loan. As of June 30, 2004, $10,000 of the working capital facility and $25,600 of the acquisition facility were available for additional borrowings. As of
June 30, 2003, $8,525 was outstanding under the Predecessor's previous revolving credit facility, bearing interest at 30-day LIBOR plus 2.95%.

On
June 7, 2002, the Predecessor issued bonds aggregating $40,441, in four series, through a private placement for the purpose of providing long-term financing for the
construction of the four new double-hull tank vessels described in note 4. The bonds are guaranteed by the Maritime Administration of the U.S. Department of Transportation ("MARAD")
pursuant to Title XI of the Merchant Marine Act of 1936 (the "Title XI bonds"). The guarantee agreements required the net bond proceeds of $39,115, net of $1,326 of guarantee fees paid directly to
MARAD, to be held in a restricted account (the "Title XI escrow account") maintained at the U.S. Department of Treasury for subsequent drawdown, by series, as each vessel was delivered and accepted.
The Title XI escrow account was substantially drawn down upon delivery of the final vessel in January 2004. Each series is payable over 25 years from the delivery date of the related
vessel. The guarantee is collateralized by, among other things, the newbuild vessels. While on deposit, funds in the Title XI escrow account were invested in short-term government
obligations. The portion of the escrow account due to be drawn down as a result of capital expenditures paid, which was related to vessels to be delivered within one year, was classified as a current
asset.

In
connection with the initial public offering, the agreements with MARAD governing the Title XI borrowings were restructured. The Partnership is required to make available to MARAD
additional collateral in the form of (a) a total of $8,000 in additional funds in the form of escrowed cash (with a minimum of $1,519) and standby letters of credit, and (b) additional
vessels having an orderly liquidation value of at least $10,000. As of June 30, 2004, the Partnership had escrowed with MARAD $1,519 in cash and $6,485 in standby letters of credit, and has
pledged the additional vessels. In

F-14

---



addition,
the Partnership is obligated each month to place in escrow with MARAD one-sixth of the next semi-annual debt service payment due for each series of the Title XI
bonds, which deposits are used to make such semi-annual payments.

At
June 30, 2004 and 2003, Title XI bonds outstanding comprised the following:

2004

2003Bond payable in semi-annual principal installments of $218 through July 2027, with interest at 6.17%

$
10,251

$
10,687Bond payable in semi-annual principal installments of $193 through February 2028, with interest at 6.20%


9,247


9,632Bond payable in semi-annual principal installments of $188 through June 2028, with interest at 6.23%


9,001


9,376Bond payable in semi-annual principal installments of $211 through January 2029, with interest at 6.26%


10,528


10,52839,027


40,223Less current portion


1,618


1,197$
37,409

$
39,026


In
connection with the acquisition of the 140,000 barrel integrated tug-barge unit described in note 4, the Partnership entered into a
seven-year, $25,048 term loan. The loan is collateralized by the integrated tug-barge unit.

In
May 2004, the Partnership also entered into an agreement with a financial institution for $20,000 of loans to provide term financing for the DBL 105 and DBL 155 upon completion
of their respective rebuilding and retrofitting projects. Upon delivery of the DBL 105 in May 2004, the Partnership borrowed $10,899 under this agreement, which is collateralized by the tank
vessel and a tugboat.

Term
loans outstanding at June 30, 2004 and 2003 were as follows:

2004

2003Term loan payable in monthly principal installments of $139, with a balloon payment of $13,498 due at maturity in 2011. Interest on the unpaid principal at 30-day LIBOR plus 2.95% is payable monthly

$
24,491

$
Term loan payable in monthly principal installments of $65, with a balloon payment of $5,514 due in 2011. Interest on the unpaid principal is payable monthly at 30-day LIBOR plus 2.40%


10,899


Predecessor's term loans, bearing interest at a weighted average rate of 8.3%, and maturing over the period from 2004 to 2014. Balance included $3,805 of accrued supplemental interest payable upon maturity of certain of
these loans. These loans were repaid concurrently with the initial public offering.





47,805Subtotal


35,390


47,805Less current portion


2,448


12,472Total

$
32,942

$
35,333


F-15

---





At June 30, 2003, the Predecessor also owed $17,450 in subordinated notes payable, as follows: a) $12,950 to the former owners of EW Holding Corp.,
bearing interest at 10% per annum payable quarterly and due December 31, 2004, which notes were retained by the Predecessor and not contributed to the Partnership; and b) $4,500 in
subordinated notes issued in connection with a December 1999 purchase of vessels, bearing interest at 8.5% per annum payable semi-annually, and due December 21, 2005, which
note was repaid concurrently with the initial public offering.

The
weighted average interest rate on the Title XI bonds and term loans, including Predecessor debt subsequently repaid, was 5.2% and 7.5% at June 30, 2004 and 2003, respectively,
which debt is subject to prepayment fees. The agreements governing the $47,000 credit facility, the Title XI bonds and the term loans contain restrictive covenants that, among others,
(a) prohibit distributions under defined events of default, (b) restrict investments and sales of assets, and (c) require the Partnership to adhere to certain financial covenants,
including defined ratios of fixed charge coverage and funded debt to EBITDA (earnings before interest, taxes, depreciation and amortization, as defined), and a minimum balance of partners' capital.

Interest
expense, net of amounts capitalized, and interest income, were as follows:

For the Years Ended June 30,2004

2003

2002Interest costs incurred

$
7,205

$
9,953

$
8,146Less interest capitalized


672


656


488Interest expense


6,533


9,297


7,658Interest income


(163
)

(489
)

(139
)Interest expense, net

$
6,370

$
8,808

$
7,519


Interest
payable totaled $972 and $1,048 as of June 30, 2004 and 2003, respectively, and is included in accrued expenses and other current liabilities in the consolidated balance
sheets. At June 30, 2004 and 2003, accounts payable included book overdrafts of $0 and $898, respectively, representing outstanding checks.

As
of June 30, 2004, maturities of long-term debt for each of the next five years were as follows:

2005

$
4,0662006


8,4662007


4,0662008


4,0662009


4,066


F-16

---



Note 6: Income Taxes

The components of the provision (benefit) for income taxes for the fiscal years ended June 30, 2004, 2003 and 2002 are as follows:

2004

2003

2002Current:Federal

$


$


$
State and local





17


14


17


14Deferred:Federal


(16,582
)

162


334State and local


(263
)

161


201(16,845
)

323


535Provision (benefit) for income taxes

$
(16,845
)
$
340

$
549


Certain
net assets contributed to the Partnership were transferred by the K-Sea LLC's C Corporation subsidiaries. These net assets had tax bases that were lower than their
carrying values for financial reporting purposes, which resulted in deferred tax liabilities relating to these temporary differences. Upon transfer to the Partnership, the future reversal of these
differences will be subject to the Partnership's effective tax rate, which is significantly lower than the effective tax rate of the K-Sea LLC's C Corporation subsidiaries. The effect of
the change in tax rates applicable to these differences is reflected as a deferred tax benefit of $17,561 for the year ended June 30, 2004.

A
reconciliation of income tax expense, as computed using the federal statutory income tax rate of 34%, to the Partnership and Predecessor provisions (benefits) for income taxes for the
fiscal years ended June 30, 2004, 2003 and 2002 is as follows:

2004

2003

2002Tax at federal statutory rate of 34%

$
1,472

$
1,806

$
2,388Entities not subject to federal income taxes


(1,081
)

(1,736
)

(2,012
)State and local income taxes, net of federal benefit


296


102


142Reduction in deferred taxes resulting from change in tax rates upon transfer of net assets to the Partnership


(17,561
)




Other


29


168


31Total

$
(16,845
)
$
340

$
549


F-17

---



Significant
components of deferred income tax liabilities and assets as of June 30, 2004 and 2003 are as follows:

2004

2003Deferred tax liabilities:Book basis of vessels and equipment in excess of tax basis

$
2,737

$
20,516Pension costs


24


340Total deferred tax liabilities

$
2,761

$
20,856Deferred tax assets:Allowance for doubtful accounts

$
15

$
178Accrued supplemental interest





53Accrued expenses


25


367Alternative minimum tax carry-forward





1,466Net operating loss carry-forwards


84


5,784Other, net





102Total deferred tax assets

$
124

$
7,950


The
Partnership had temporary differences at June 30, 2004 primarily related to the excess of the book basis of vessels and equipment over the related tax basis in the amount of
$86,886. This amount will result in taxable income, in the years these differences reverse, that will be included in the overall allocation of taxable income to the unitholders of the Partnership.

Note 7: Commitments and Contingencies

The Partnership leases its office and pier facilities from an affiliate of an employee under an agreement which extends through April 2009. Terms of the
agreement provide for annual rental payments of $352 through April 2004, which increased as of May 1, 2004 to $400 annually through April 2009. Rent expense was $360 for the
fiscal year ended June 30, 2004, and was $352 for each of the fiscal years ended June 30, 2003 and 2002. In addition, the Partnership is responsible for real estate taxes, insurance and
all other costs associated with occupying the property.

Included
in total revenues are time charter and bareboat charter revenues of $9,751, $8,996 and $14,859 for the fiscal years ended June 30, 2004, 2003 and 2002, respectively. Such
revenues include $778, $1,455, and $1,470 for the fiscal years ended June 30, 2004, 2003 and 2002, respectively, related to vessels chartered to an affiliate of an employee. The Partnership
also utilizes such affiliate for tank cleaning services which amounted to $2,916, $1,664 and $1,589 for the years ended June 30, 2004, 2003 and 2002, respectively. The Partnership's time
charters and bareboat charters extend over various periods which expire between 2005 and 2009.

F-18

---



At
June 30, 2004, minimum contractually agreed future revenue under time and bareboat charters was as follows:

2005

$
13,1362006


7,9972007


3652008


3662009


304Total

$
22,168


The
Partnership has entered into employment agreements with its executive officers. Each of the employment agreements has an initial term of one year that is automatically extended for
successive one-year terms unless either party gives 30-days written notice prior to the end of the term that such party desires not to renew the employment agreement. The
employment agreements provide for annual base salaries aggregating approximately $685,000. In addition, each employee is eligible to receive an annual bonus award based upon the consolidated financial
performance of the Partnership. If the employee's employment is terminated without cause or if the employee resigns for good reason, the employee will be entitled to severance in an amount equal to
the greater of (a) the product of 1.3125 (1.75 multiplied by .75) multiplied by the employee's base salary at the time of termination or resignation and (b) the product of 1.75
multiplied by the remaining term of the employee's non-competition provisions multiplied by the employee's base salary at the time of termination or resignation.

The
Partnership is the subject of various claims and lawsuits in the ordinary course of business for monetary relief arising principally from personal injuries, collisions and other
casualties. Although the outcome of any individual claim or action cannot be predicted with certainty, the Partnership believes that any adverse outcome, individually or in the aggregate, would be
substantially mitigated by applicable insurance or indemnification from previous owners of the Partnership's assets, and would not have a material adverse effect on the Partnership's financial
position, results of operations or cash flows.

The
Partnership is also subject to deductibles with respect to its insurance coverage that range from $25 to $100 per incident and provides on a current basis for estimated payments
thereunder.

EW
Transportation Corp., a predecessor to the Partnership, has recently come under audit with respect to the New York State Petroleum Business Tax ("PBT"), which is a tax on vessel fuel
consumed while operating in New York State territorial waters. Because the boundaries of these waters have not been defined, EW Transportation Corp. has not been able to reasonably estimate the tax.
This matter is expected to be resolved as a result of the audit, which will establish a basis for future payment of the tax by the Partnership. In accordance with the agreements entered into in
connection with the initial public offering, any liability resulting from the PBT prior to January 14, 2004 (the date of the initial public offering) is a retained liability of the Predecessor.

F-19

---



Note 8: Retirement Plans

The Partnership has a money purchase pension plan, and also a defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code.
These plans cover all eligible employees. Under the terms of the money purchase pension plan, the Partnership contributes five percent of each eligible employee's annual compensation, as defined in
the plan document. The 401(k) plan provides that eligible employees may make contributions, subject to Internal Revenue Code limitations, and the Partnership will match the first two percent of
employee compensation contributed, subject to a maximum amount. For the money purchase plan, expenses totaled $836, $862 and $802 for the fiscal years ended June 30, 2004, 2003 and 2002,
respectively. For the 401(k) plan, expenses totaled $402, $286 and $271 for the fiscal years ended June 30, 2004, 2003 and 2002, respectively. Accrued expenses for the money purchase plan
totaled $871 and $908 as of June 30, 2004 and 2003, respectively, and are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Note 9: Major Customers

Two customers accounted for 28% and 14% of consolidated revenues for the fiscal year ended June 30, 2004, three customers accounted for 15%, 13% and 11% of
consolidated revenues for the fiscal year ended June 30, 2003, and two customers accounted for 17% and 14% of consolidated revenues for the fiscal year ended June 30, 2002.

Note 10: Fair Value of Financial Instruments

As of June 30, 2004, the fair value of long-term debt was approximately $79,909 based on the borrowing rates currently available to the
Partnership for bank loans with similar terms and average
maturities. The fair value of the Partnership's other financial instruments approximated their cost bases as such instruments are short-term in nature or were recently negotiated.

Note 11: Quarterly Results of Operations (Unaudited)

The following summarizes certain quarterly results of operations:

|                                         |         | Three Months Ended
|---------------------------------------- | ------- | ------------------
|
|
|Fiscal 2004                              |         |                   
|Total revenues                           |         | $                 
|Operating income                         |         | $                 
|Net income                               |         | $                 
|General partners' interest in net income |         | $                 
|Limited partners' interest in net income |         | $                 
|Net income per limited partner unit:     |         |                   
|                                         | Basic   |                   
|                                         | Diluted |                   

F-20

---



|                                                |         | Three Months Ended |       
|----------------------------------------------- | ------- | ------------------ | ------
|
|
|Fiscal 2003                                     |         |                    |       
|Total revenues                                  |         | $                  | 20,284
|Operating income                                |         | $                  | 2,998 
|Net income (loss)                               |         | $                  | 794   
|Limited partners' interest in net income (loss) |         | $                  | 794   
|Net income (loss) per limited partner unit:     |         |                    |       
|                                                | Basic   |                    | $     
|                                                | Diluted |                    | $     

F-21

---



EXHIBIT INDEX

|Exhibit
Number |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1*           |  |  |  | Certificate of Limited Partnership of K-Sea Transportation Partners L.P. (incorporated by reference to Exhibit 3.1 to the Partnership's Registration Statement on Form S-1 (Registration No. 107084), as amended (the "Registration Statement"),
originally filed on July 16, 2003).                                                                                                                                                                                                                                             
|3.2*           |  |  |  | Second Amended and Restated Agreement of Limited Partnership of K-Sea Transportation Partners L.P. (including specimen unit certificate for the common units) (incorporated by reference to Exhibit 3.2 to the Partnership's Quarterly Report on Form 10-Q
for the period ended December 31, 2003).                                                                                                                                                                                                                              
|3.3*           |  |  |  | Certificate of Limited Partnership of K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 3.3 to the Registration Statement).                                                                                                                                                                                                                                                                                                                                                                                 
|3.4*           |  |  |  | Amended and Restated Agreement of Limited Partnership of K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 3.4 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                                                                                                                  
|3.5*           |  |  |  | Certificate of Limited Partnership of K-Sea General Partner L.P. (incorporated by reference to Exhibit 3.5 to the Registration Statement).                                                                                                                                                                                                                                                                                                                                                                                       
|3.6*           |  |  |  | First Amended and Restated Agreement of Limited Partnership of K-Sea General Partner L.P. (incorporated by reference to Exhibit 3.6 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                                                                                                                  
|3.7*           |  |  |  | Certificate of Formation of K-Sea General Partner GP LLC (incorporated by reference to Exhibit 3.7 to the Registration Statement).                                                                                                                                                                                                                                                                                                                                                                                               
|3.8*           |  |  |  | First Amended and Restated Limited Liability Company Agreement of K-Sea General Partner GP LLC (incorporated by reference to Exhibit 3.8 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                                                                                                             
|4.1*           |  |  |  | Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations among K-Sea Transportation LLC, EW Holding Corp. and JPMorgan Chase Bank dated as of June 7, 2002 (incorporated by reference to Exhibit 4.1.1 to the
Registration Statement).                                                                                                                                                                                                                                                         
|4.2*           |  |  |  | Supplemental Indenture No. 1, dated as of January 14, 2004, to the Trust Indenture relating to United States Government Guaranteed Ship Financing Obligations among JPMorgan Chase Bank, EW Holding Corp., K-Sea Transition 4 Corp., K-Sea LP4, L.P.,
K-Sea Transportation LLC, K-Sea LP1, L.P., K-Sea LP2, L.P., K-Sea Transportation Partners L.P. and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.1.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended
December 31, 2003).
|10.1.1*        |  |  |  | Participation and Loan and Security Agreement, dated as of January 14, 2004, by and between K-Sea Operating Partnership L.P., KeyBank N.A. and The CIT Group/Equipment Financing, Inc. (incorporated by reference to Exhibit 10.1 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                                                                                                    
|10.1.2         |  |  |  | Amendment No. 1 to Participation and Loan and Security Agreement among The CIT Group/Equipment Financing, Inc., Keybank N.A. and K-Sea Operating Partnership L.P., dated as of January 29, 2004.                                                                                                                                                                                                                                                                                                                                 
|               |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---



|10.1.3  |  |  |  | Amendment No. 2 to Participation and Loan and Security Agreement among The CIT Group/Equipment Financing, Inc., Keybank N.A. and K-Sea Operating Partnership L.P., dated as of August 11, 2004, effective as of January 14,
2004.                                                                                                                                                                                                                      
|------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2*   |  |  |  | Contribution, Conveyance and Assumption Agreement, dated as of January 14, 2004, among K-Sea Investors L.P., K-Sea Transportation LLC, EW Holding Corp., K-Sea Transportation Corp., K-Sea Transportation Partners L.P. and K-Sea Operating Partnership
L.P. (incorporated by reference to Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                    
|10.3*   |  |  |  | Omnibus Agreement, dated as of January 14, 2004, among K-Sea Investors L.P., K-Sea Acquisition Corp., New EW Holding Corp., New K-Sea Transportation Corp., K-Sea General Partner L.P., K-Sea General Partner GP LLC, K-Sea Transportation Partners L.P.,
K-Sea OLP GP, LLC and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 10.3 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).
|10.4.1* |  |  |  | Commitment to Guarantee Obligations by The United States of America Accepted by K-Sea Transportation LLC and EW Holding Corp., Shipowners, dated June 7, 2002 (incorporated by reference to Exhibit 10.4.1 to the Registration Statement).                                                                                                                                                                                                             
|10.4.2* |  |  |  | Amendment No. 1 to Commitment to Guarantee Obligations, dated as of January 14, 2004, made and entered by the United States of America and accepted by K-Sea Transportation Partners L.P. and K-Sea Operating Partnership L.P. (incorporated by reference
to Exhibit 10.4.2 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                
|10.5*   |  |  |  | Amended and Restated Security Agreement, dated as of January 14, 2004, among K-Sea Transportation Partners L.P., K-Sea Operating Partnership L.P., and the United States of America (incorporated by reference to Exhibit 10.5 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                                                             
|10.6*   |  |  |  | Restated Title XI Reserve Fund and Financial Agreement, dated as of January 14, 2004, among K-Sea Transportation Partners L.P., K-Sea Operating Partnership L.P., K-Sea Transportation Inc. and The United States of America (incorporated by reference to
Exhibit 10.6 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).                                                                                    
|10.7*   |  |  |  | K-Sea Transportation Partners L.P. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.7 to the Partnership's Quarterly Report on Form 10-Q for the period ended March 31, 2004).                                                                                                                                                                                                                                                        
|10.8*   |  |  |  | K-Sea Transportation Partners L.P. Employee Unit Purchase Plan (incorporated by reference to Exhibit 4.2 to the Partnership's Registration Statement on Form S-8 (Registration No. 333-117251) filed on July 9, 2004).                                                                                                                                                                                                                                 
|10.9*  |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Timothy J. Casey (incorporated by reference to Exhibit 10.9 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                                                                                                                      
|10.10* |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and John J. Nicola (incorporated by reference to Exhibit 10.10 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|10.11*  |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Richard P. Falcinelli (incorporated by reference to Exhibit 10.11 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                               
|-------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12*  |  |  |  | Employment Agreement, dated as of January 14, 2004, between K-Sea Transportation Inc. and Thomas M. Sullivan (incorporated by reference to Exhibit 10.12 to the Partnership's Quarterly Report on Form 10-Q for the period ended December 31,
2003).                                                                                  
|10.13*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and James J. Dowling (incorporated by reference to Exhibit 10.13 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).     
|10.14*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Timothy J. Casey (incorporated by reference to Exhibit 10.14 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).     
|10.15*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and John J. Nicola (incorporated by reference to Exhibit 10.15 to the Partnership's
Quarterly Report on Form 10-Q for the period ended December 31, 2003).       
|10.16*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Richard P. Falcinelli (incorporated by reference to Exhibit 10.16 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).
|10.17*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Thomas M. Sullivan (incorporated by reference to Exhibit 10.17 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).   
|10.18*  |  |  |  | Indemnification Agreement, dated as of January 8, 2004, by and among K-Sea General Partner GP LLC, K-Sea General Partner GP L.P., K-Sea Transportation Partners L.P. and Brian P. Friedman (incorporated by reference to Exhibit 10.18 to the
Partnership's Quarterly Report on Form 10-Q for the period ended December 31, 2003).    
|10.19*   |  |  |  | Contract of Sale dated January 29, 2004 between Wells Fargo Bank Northwest, National Association, ICX Corporation and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.1 to the Partnership's Current Report on Form 8-K dated
January 29, 2004 and filed on February 3, 2004).                               
|10.20.1* |  |  |  | Loan and Security Agreement dated as of January 29, 2004 by and between The CIT Group/Equipment Financing, Inc. and K-Sea Operating Partnership L.P. (incorporated by reference to Exhibit 4.2 to the Partnership's Current Report on Form 8-K dated
January 29, 2004 and filed on February 3, 2004).                                 
|10.20.2  |  |  |  | Amendment No. 1 to Loan and Security Agreement by and between The CIT Group/Equipment Financing, Inc. and K-Sea Operating Partnership L.P., dated as of August 11, 2004, effective as of January 29, 2004.                                                                                                                            
|10.21.1  |  |  |  | Loan Agreement dated as of May 28, 2004 by and between K-Sea Operating Partnership L.P. and Citizens Leasing Corporation.                                                                                                                                                                                                             
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                       

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|10.21.2 |  |  |  | Amendment No. 1 to Loan Agreement by and between K-Sea Operating Partnership L.P. and Citizens Leasing Corporation, dated as of August 18, 2004, effective as of May 28, 2004.
|------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21.1*   |  |  |  | List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registration Statement).                                                                               
|23.1    |  |  |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                        
|31.1    |  |  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                           
|31.2    |  |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                           
|32.1    |  |  |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                            
|32.2    |  |  |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                            

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