Demand for product carriers and barges continues to be strong as a result of rising consumption of refined petroleum products in the United States. The Energy Information Administration of the U.S. Department of Energy (EIA) projects that demand for refined petroleum products in the United States will increase between 2006 and 2015 at a compounded annual growth rate of 1.1%. Waterborne transportation is the second largest component in the distribution system for refined petroleum products.

The major coastal refineries in the United States continue to implement plans for capacity expansions, which are expected to be online by 2010, to increase the output of those refineries by over one million barrels per day. As this output increases, the demand for both pipeline and waterborne transportation will increase.

Demand for Jones Act product carriers and barges continues to grow as a result of the retirement of vessels caused by the requirements of OPA 90 and the leading integrated oil companies and independent oil refineries are increasingly entering into longer-term charters to ensure they have adequate shipping capacity.

According to the EIA, incremental expansions at Gulf Coast refineries are expected to increase production capacity by approximately 1.6 million barrels per day (bpd) by 2016, from their production capacity of approximately 8.1 million bpd in 2006. This represents an overall increase in daily Gulf Coast refining capacity of approximately 20%. According to Wilson Gillette, approximately 30% of all petroleum products refined in the United States in 2006 were transported by water.

Of the 18 U.S. flag vessels in the Company’s initial fleet, 16 operate in the Jones Act trade and two product carriers operate in the international market and participate in the Maritime Security Program. These two product carriers are not eligible to operate in the Jones Act trade because they were not built in the United States.

The majority of the Company’s initial fleet is double-hulled in terms of barrel-carrying capacity and meets the requirements of OPA 90. In connection with this offering OSG will contribute to the Company, without any further obligation to OSG, the membership interests in subsidiaries that have entered into bareboat charters for four Jones Act product carriers to be constructed by Aker Philadelphia Shipyard, Inc. (APSI), a subsidiary of Aker, and scheduled for delivery between late 2007 and early 2009, and subsidiaries that have entered into shipbuilding contracts with Bender for the construction of two tugs.

Under the bareboat charters, the Company is required to pay charter hire on a \\\\\\\"hell-or-high-water\\\\\\\" basis. In addition, the Company will be responsible for the cost of all operating costs, including the cost of repairs, maintenance, drydocking, spares, stores, hull and machinery insurance, war risk insurance and protection and indemnity insurance coverage for each vessel for the benefit of the owner and its lenders.

For the vessels that the Company is committed to bareboat charter, it has the right to extend the initial five or seven year terms of the bareboat charters an unlimited number of times for periods of one, three or five years upon 12 months\\\\\\\' advance notice, provided, however, that the Company’s right to a one-year extension may only be exercised once.

Depreciation and amortization increased by $6.6 million to $11 million for the three months ended March 31, 2007 from $4.4 million for the three months ended March 31, 2006.

Interest expense on third party obligations increased marginally by $107,000 to $1.2 million for the three months ended March 31, 2007, from $1 million for the three months ended March 31, 2006.