Quintana Maritime LTD (QMAR)

Plan of Operations

As of February 25, 2008, all of our 29 operating vessels were employed under fixed-rate time charters of varying durations to well-established and reputable charterers. Under our fixed-rate time charters, the charterer is obligated to pay us charter hire at a fixed daily rate and to bear all voyage expenses, including the cost of bunkers and canal and port charges. During 2007, one vessel, Barbara, was fixed on a variable-rate time charter, in which the charter hire is tied to prevailing spot rates and also operated on a spot charter for a short period of time. Under all these charters, we remain responsible for paying the vessels’ operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessels, and paying brokers’ commissions on gross charter hire rates. When a charter expires, we assess market conditions in the industry and determine whether to seek to re-employ the vessel under a long-term time charter, a short-term time charter, or in the spot voyage market. For more information about our time charters, please read “—Time Charters.”

We commercially manage our fleet through a wholly owned subsidiary, Quintana Management LLC, which arranges the charters for our vessels and the management of our relationships with charterers, and the purchase and sale of vessels into and out of our fleet. We also oversee technical management of all our vessels. Technical management services include arranging for and managing crews, maintenance, drydocking, repairs, insurance, ensuring regulatory and classification society compliance, appointing supervisors and technical consultants and providing technical support. In October 2005, we obtained our final International Safety Management Code (“ISM Code”) certification, which is valid for five years.

We employ our vessels primarily on time charters to provide predictable cash flows, but we also consider trading some vessels in the spot market if we determine that market conditions are appropriate. As of February 25, 2008, all of our 29 operating vessels were employed on fixed-rate time charters.

In addition to acquisitions we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings. We incurred total drydocking expenses of approximately $5.4 million in 2007, $5.0 million in 2006 and $1.2 million in 2005. The period in which drydocking of a vessel is due is typically every 30 to 60 months. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Drydocking.” The drydocking process requires us to reposition these vessels from a discharge port to shipyard facilities and upon completion of the dry dock, from the shipyard facilities to a designated point of redelivery. The dry docking and repositioning periods will reduce our operating days, and related earnings, during the period by an estimated 25 days per drydocked vessel. We fund drydocking costs out of cash from operations.

In December 2005, the Company formed a wholly owned subsidiary, Quintana Logistics LLC, or Quintana Logistics, to engage in limited chartering activities, including entry into contracts of affreightment. Under a contract of affreightment, Quintana Logistics would agree to ship a specified amount of cargo at a specified rate per ton between designated ports over a particular period of time. Contracts of affreightment generally do not specify particular vessels, so Quintana Logistics would be permitted either to use a free vessel that it owned or to charter in a third-party vessel. Quintana Logistics conducted limited operations during 2006 and no operations during 2007.

Plan of Operations

All of our vessels are employed under fixed-rate or variable-rate time charters of varying durations to well-established and reputable charterers. Under our fixed-rate time charters, the charterer is obligated to pay us charter hire at a fixed daily rate and to bear all voyage expenses, including the cost of bunkers and canal and port charges. One vessel, Barbara, is fixed on a variable-rate time charter, in which the charter hire is tied to prevailing spot rates. Under all these charters, we remain responsible for paying the vessels’ operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessels, and paying brokers’ commissions on gross charter hire rates. When a charter expires, we assess market conditions in the industry and determine whether to seek to re-employ the vessel under a long-term time charter, a short-term time charter, or in the spot voyage market. For more information about our time charters, please read “—Time Charters.”

We commercially manage our fleet through a wholly owned subsidiary, Quintana Management LLC, which arranges the charters for our vessels and the management of our relationships with charterers, and the purchase and sale of vessels into and out of our fleet. We also oversee technical management of all our vessels. Technical management services include arranging for and managing crews, maintenance, drydocking, repairs, insurance, ensuring regulatory and classification society compliance, appointing supervisors and technical consultants and providing technical support. In October 2005, we obtained our final International Safety Management Code (“ISM Code”) certification, which is valid for five years.

We intend to continue to increase the size of our fleet through selective acquisitions of additional secondhand or newbuilding dry bulk vessels or through whole or partial fleet acquisitions that complement our

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Table of Contents

Index to Financial Statements

business strategy. We believe that the experience of our management team in locating and acquiring suitable vessels and fleets will assist us in this process.

We employ our vessels primarily on time charters to provide predictable cash flows and, to a lesser extent, in the spot market to take advantage of market opportunities. As of February 28, 2007, 24 of our 25 existing vessels are employed on fixed-rate time charters, and one of our vessels is on a time charter whose rates are determined with reference to prevailing spot rates.

In addition to acquisitions we may undertake in future periods, we will incur additional capital expenditures due to special surveys and drydockings. We incurred total drydocking expenses of approximately $5.0 million in 2006 and $1.2 million in 2005. The period in which drydocking of a vessel is due is typically every 30 to 60 months. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Drydocking.” The drydocking process requires us to reposition these vessels from a discharge port to shipyard facilities, which will reduce our operating days, and related earnings, during the period by an estimated 25 days per drydocked vessel. We fund drydocking costs out of cash from operations.

In December 2005, the Company formed a wholly owned subsidiary, Quintana Logistics LLC, or Quintana Logistics, to engage in limited chartering activities, including entry into contracts of affreightment. Under a contract of affreightment, Quintana Logistics would agree to ship a specified amount of cargo at a specified rate per ton between designated ports over a particular period of time. Contracts of affreightment generally do not specify particular vessels, so Quintana Logistics would be permitted either to use a free vessel that it owned or to charter in a third-party vessel. Quintana Logistics conducted limited operations during 2006.

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Table of Contents

Index to Financial Statements