In recent years, leading tanker owners have been consolidating at an unprecedented rate. The ten largest tanker companies (by dwt) currently control approximately 26% of the international tanker fleet, compared with 18% in 1997. These companies are seeking to exploit the commercial and operational advantages of a larger fleet, either by increasing their own capacity or by placing their vessels in commercial pools. Due to their large size, commercial pools offer participants more opportunities to enter into complex charters, including contracts of affreightment, and to minimize unloaded backhauls and non-earning days through scheduling efficiencies than if vessel owners were to operate a vessel outside of a pool.

The growth in tanker demand seen in recent years has been driven by increases in oil consumption, import dependency and voyage hauls. There has been a worldwide increase in oil consumption. Since the early 1980s, when the 1979 to 1980 hike in oil prices and the ensuing worldwide economic recession caused the market to contract, global oil consumption has enjoyed sustained growth, driven primarily by demand for transportation fuels. In the last two years, however, demand has accelerated and in 2004 increased by 3.4%. The International Energy Agency, or IEA, expects world demand to grow by 2.0% in 2005.

The demand for crude is growing substantially faster than supply in the major consuming regions. Crude consumption transported by sea (rather than crude produced domestically) rose to 55% in 2004, compared with a low of 38% in 1985. Whereas Chinese demand has increased by an average of 8.4% each year since 1999, its domestic oil output rose by an average of only 1.6%. Similarly, in North America, which accounts for over a quarter of world demand, oil consumption has grown by 1.2% per year since 1999, while annual production has risen by only 0.1% per year. This growing import dependency is further accelerated by the progressive run-down of commercial oil stocks, as oil majors have sought to minimize inventory costs.

The Company will acquire the seven vessels in its fleet from subsidiaries of OSG in exchange for cash and shares of the Company’s common stock, at which time the Company will charter these vessels back to subsidiaries of OSG. OSG, one of the world's largest bulk-shipping companies, owns and operates a modern fleet of 93 vessels (including the seven vessels that comprise the Company’s fleet) that have a combined carrying capacity of 12.2 million dwt. OSG's fleet consists of both internationally flagged and U.S. flagged vessels that transport crude oil, petroleum products and dry bulk commodities.

The Company’s strategy is to charter its vessels primarily pursuant to multi-year time charters to take advantage of the stable cash flow associated with long-term time charters. In addition, the Company’s time charter arrangements include a profit sharing component that gives the Company’s opportunity to earn additional hire when vessel earnings exceed the basic hire amounts set forth in the charters.

In a pooling arrangement, the net revenues generated by all of the vessels in a pool are aggregated and distributed to pool members pursuant to a pre-arranged weighting system that recognizes each vessel's earnings capacity based on its cargo capacity, speed and consumption, and actual on-hire performance.

The Company has agreed to time charter its tankers to subsidiaries of OSG for terms of five to six and one-half years. Each time charter may be renewed by the charterer on one or more successive occasions for periods of one, two or three years, up to an aggregate of five, six or eight years, depending on the vessel. If a time charter is renewed, the charter terms providing for profit sharing will remain in effect and the charterer, at the time of exercise, will have the option to select a basic charter rate that is equal to 5% above the published one-, two- or three-year time charter rate (corresponding to the extension length) for the vessel's class, as decided by a shipbrokers panel, or the basic hire rate set forth in the applicable charter. The shipbrokers panel, which the Company calls the Broker Panel, will be The Association of Shipbrokers and Agents Tanker Broker Panel or another panel of brokers mutually acceptable to the Company and the charterer.

Vessel expenses increased by $1.4 million to $8.7 million for the first six months of 2005 from $7.2 million for the same period in 2004.

Depreciation and amortization increased by $332.0 million to $9.0 million for the first six months of 2005 from $8.7 million for the same period in 2004.

Interest expense decreased by $1.1 million to $3.0 million for the first six months in 2005 from $4.1 million for the same period in 2004.