UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Quintana Maritime Limited

(Exact name of registrant as specified in its charter)

Republic of the Marshall Islands		98-0453513
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

(address of principal executive offices)

(Registrant’s telephone number, including area code)

     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 þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o       Accelerated filer o       Non-accelerated filer þ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ

     The number of shares of the Company’s common stock, $0.01 par value, outstanding at April 30, 2006 was 23,846,742.

 

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3. Quantitative and Qualitative Disclosures about Market Risk			24
Item 4. Controls and Procedures			25
PART II. OTHER INFORMATION			27
Item 1. Legal Proceedings			27
Item 6. Exhibits			28
SIGNATURES			30
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Quintana Maritime Limited
Consolidated Balance Sheets
(All amounts expressed in U.S. Dollars)

						December 31,
		March 31, 2006				2005
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents			3,546,592				4,258,809
Inventories			1,174,576				378,488
Due from charterers, net			472,713				1,244,123
Other receivables			651,120				479,735
Prepaid expenses and other current assets			889,356				866,562
Total current assets			6,734,357				7,227,717
Non-current assets:
Vessels, net of accumulated depreciation of $17,210,225 and $11,309,344			440,573,988				446,474,869
Other fixed assets, net of accumulated depreciation of $94,115 and $58,739			407,887				384,247
Deferred financing costs, net of accumulated amortization of $126,389 and $63,194			1,895,846				1,959,041
Deferred time charter premium, net of accumulated amortization of $967,593 and $439,815			8,532,407				9,060,185
Deferred dry docking costs, net of accumulated amortization of $399,808 and $279,865			799,613				919,556
Total non-current assets			452,209,741				458,797,898
Total assets			458,944,098				466,025,615
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable			1,976,487				1,473,592
Sundry liabilities and accruals			3,245,284				3,412,759
Deferred income			1,503,338				1,715,910
Total current liabilities			6,725,109				6,602,261
Long Term Debt			202,000,000				210,000,000
Shareholders’ equity:
Common stock at $0.01 par value — 100,000,000 shares authorized, 23,846,742 shares outstanding			238,468				238,468
Additional paid-in capital			254,732,530				254,732,530
Deferred stock-based compensation			(4,751,823	)			(5,187,200	)
Accumulated deficit			(186	)			(360,444	)
Total shareholders’ equity			250,218,989				249,423,354
Total liabilities and shareholders’ equity			458,944,098				466,025,615

The accompanying notes are an integral part of these consolidated financial statements.

Quintana Maritime Limited
Consolidated Statement of Operations
(All amounts expressed in U.S. Dollars)

		Three Months Ended				Three Months Ended
		March 31, 2006				March 31, 2005
		(unaudited)
Revenues:
Time charter voyage revenue			20,911,288				—
Revenue from charter operation			1,632,857				—
Commissions			(966,030	)			—
Net revenue			21,578,115				—
Expenses:
Vessel operating expenses			3,771,331				—
Voyage expenses			1,508,130				—
General and administrative expenses			2,036,881				156,866
Depreciation and amortization			6,056,200				—
Total expenses			13,372,542				156,866
Operating profit/(loss)			8,205,573				(156,866	)
Other expenses:
Interest expense			(2,771,341	)			—
Interest income			39,231				—
Finance costs			(63,195	)			—
Foreign exchange losses and other, net			(42,194	)			—
Total other expenses			(2,837,499	)			—
Net income/(Loss)			5,368,074				(156,866	)
Earnings/(Loss) per common share
Basic			0.23				(0.02	)
Diluted			0.23				(0.02	)
Weighted average shares outstanding
Basic			23,387,742				6,319,492
Diluted			23,846,742				6,319,492

The accompanying notes are an integral part of these consolidated financial statements.

Quintana Maritime Limited
Consolidated Statement of Cash Flows
(All amounts expressed in U.S. Dollars)

						Three
		Three Months				Months
		Ended March 31,				Ended March
		2006				31, 2005
		(unaudited)
Cash flows from operating activities:
Net income/ (loss)			5,368,074				(156,866	)
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
Depreciation and amortization			6,056,200				—
Amortization of deferred finance and legal costs			63,195				—
Amortization of time charter fair value			527,778				—
Amortization of deferred stock based compensation			435,377				—
Decrease in provision for bad debt			(19,935	)			—
Changes in assets and liabilities:
Increase in inventories			(796,088	)			—
Decrease in due from charterer, net			791,345				—
Increase in other receivables			(171,385	)			(18,761	)
Increase in prepaid expenses and other current assets			(22,794	)			—
Increase in accounts payable			502,895				57,158
Increase/(decrease) in sundry liabilities and accruals			(167,475	)			56,985
Decrease in deferred income			(212,572	)			—
Other			—				41,200
Net cash (used in) / from operating activities			12,354,615				(20,284	)
Cash flows from investing activities:
Advances for vessel deposit			—				(28,760,314	)
Purchases of property, plant and equipment			(59,016	)			(98,616	)
Net cash used in investing activities			(59,016	)			(28,858,930	)
Cash flows from financing activities:
Repayment of long-term debt			(8,000,000	)			—
Paid-in capital and common stock			—				29,587,000
Dividends paid			(5,007,816	)			—
Net cash from / (used in) financing activities			(13,007,816	)			29,587,000
Net increase/ (decrease) in cash and cash equivalents			(712,217	)			707,786
Cash and cash equivalents at beginning of period			4,258,809				—
Cash and cash equivalents at end of the period			3,546,592				707,786
Supplemental disclosure of cash flow information:
Cash paid during the period for interest			3,184,148				—
Deferred stock-based compensation			4,751,823				—

The accompanying notes are an integral part of these consolidated financial statements.

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

1. Basis of Presentation and General Information

The Company

     The accompanying unaudited consolidated financial statements include the accounts of Quintana Maritime Limited and its wholly owned subsidiaries (collectively, the “Company”). The Company is engaged in the marine transportation of dry-bulk cargoes through the ownership and operation of dry-bulk vessels.

     The Company is a holding company incorporated on January 13, 2005, under the Laws of the Republic of the Marshall Islands. The Company was formed by affiliates of each of Corbin J. Robertson Jr., First Reserve Corporation (“FRC”) and American Metals & Coal International, Inc. (“AMCI”). On July 20, 2005, the Company completed its initial public offering.

     The Company’s vessels are primarily available for charter on a time-charter basis. A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily or monthly hire rate. In time charters, operating costs—which include crewing costs, repairs and maintenance, stores, and lubricants—are typically paid by the owner of the vessel and specified voyage costs such as fuel, canal and port charges are paid by the charterer.

     The Company is the sole owner of all of the outstanding shares of the following subsidiaries, each of which was formed in the Marshall Islands for the purpose of owning a vessel in the Company’s fleet:

Deadweight

Tonnage (in

Delivery

Company

Vessel

Agreement Date

metric tons)

Built

Date

Fearless Shipco LLC

Fearless I

February 18, 2005

73,427

1997

April 11,2005

King Coal Shipco LLC

King Coal

February 25, 2005

72,873

1997

April 12,2005

Coal Glory Shipco LLC

Coal Glory

March 21, 2005

73,670

1995

April 13,2005

Iron Man Shipco LLC

Iron Man

March 15, 2005

72,861

1997

May 6, 2005

Coal Age Shipco LLC

Coal Age

March 15, 2005

72,861

1997

May 4, 2005

Barbara Shipco LLC

Barbara

March 24, 2005

73,390

1997

July 20, 2005

Coal Pride Shipco LLC

Coal Pride

March 29, 2005

72,600

1999

August 16, 2005

Linda Leah Shipco LLC

Linda Leah

March 24, 2005

73,390

1997

August 22, 2005

Iron Beauty Shipco LLC

Iron Beauty

September 2, 2005

165,500

2001

October 18, 2005

Kirmar Shipco LLC

Kirmar

September 2, 2005

165,500

2001

November 11, 2005

     The operations of the vessels are managed by our wholly owned subsidiary, Quintana Management LLC, which initially subcontracted the technical management of five vessels to Blossom Maritime Corporation, a third-party technical management company. By October 2005, the Company had taken over technical management of all its vessels.

     In December 2005, the Company formed a wholly owned subsidiary, Quintana Logistics LLC, to engage in limited chartering activities, including entry into contracts of affreightment. Under a contract of affreightment, the Company 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 the Company would be permitted either to use a free vessel that it owned or to charter in a third-party vessel. During the three months ended March 31, 2006, Quintana Logistics engaged in limited chartering activities.

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies

Basis of presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have been included in the statements. Interim results are not necessarily indicative of results that may be expected for the year ended December 31, 2006. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s periodic filings with the Securities and Exchange Commission (“SEC”), including those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Please see Note 2 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2005 for additional information regarding our significant accounting policies.

Earnings/(loss) per share

Earnings/(losses) per share has been calculated by dividing the net income/(loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. Restricted shares issued under the Company’s 2005 Stock Incentive Plan are included in shares outstanding for purposes of computing diluted earnings per share. The Company had no other dilutive securities for the three months ended March 31, 2006.

     The Company calculates the number of shares outstanding for the calculation of basic earnings per share and diluted earnings per share as follows:

		March 31, 2006				March 31, 2006
Weighted average common shares outstanding, basic			23,387,742				6,319,492
Weighted average restricted stock awards			459,000				—
Weighted average common shares outstanding, diluted			23,846,742				6,319,492

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

3. Deferred Charges

     The deferred charges shown in the accompanying consolidated balance sheet for the three months ended March 31, 2006 are analyzed as follows:

										Time Charter
		Finance Costs				Drydocking				Fair Value
		(in thousands)
December 31, 2005		$	1,959			$	920			$	9,060
Amortization			63				120				528
March 31, 2006		$	1,896			$	800			$	8,532

     Iron Beauty was acquired with a time charter attached that was at an above-market rate. As described in Note 2 to the Company’s consolidated financial statements for the year ended December 31, 2005, the Company allocates a portion of the purchase price in these circumstances to a deferred asset. When Iron Beauty was purchased, the present value of the time charter was determined to be $9.5 million, and this amount was allocated to the appropriate deferred asset. This results in a daily rate of approximately $30,600 as recognized revenue. For cash flow purposes, the company will continue to receive $36,500 per day less commissions.

4. Prepaid Expenses and Other Current Assets

     The prepaid expenses and other current assets shown in the accompanying consolidated balance sheet for the three months ended March 31, 2006 are analyzed as follows:

		Three Months Ended
Prepaid Expenses and Other Current Assets		March 31, 2006
		(in thousands)
Insurance		$	492
Other prepaid expenses			397
Total		$	889

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

5. Sundry Liabilities and Accruals

     The sundry liabilities and accruals shown in the accompanying consolidated balance sheet for the three months ended March 31, 2006 are analyzed as follows:

		Three Months Ended
Sundry Liabilities and Accruals		March 31, 2006
		(in thousands)
Interest expense		$	1,890
Other sundry liabilities and accruals		$	1,355
Total		$	3,245

6. Long-Term Debt

Revolving Credit Facility

     The Company entered into a secured, 8-year, $250 million revolving credit facility on October 4, 2005. Indebtedness under the revolving credit facility bears interest at a rate equal to LIBOR + 0.975%. The Company may expand the limit on the facility by up to $50 million, for an aggregate limit of $300 million. The Company incurs a commitment fee on the unused portion of the revolving credit facility at a rate of 0.375% per annum. The Company may borrow under the facility to refinance the term-loan facility and to fund acquisitions of vessels. In addition, the facility provides for a $20-million sub-limit for borrowings for working-capital purposes and general corporate requirements. Up to $25 million of the facility will be available for issuance of stand-by letters of credit. The Company may not incur any additional indebtedness under the facility if the amount of outstanding loans and letters of credit exceeds 65% of the fair market value of the vessels serving as collateral. The Company is generally not permitted to pay dividends in excess of 65% of its free cash flow. The Company’s obligations under the revolving credit facility are secured by a first-priority assignment of the Company’s earnings related to its vessels. The credit agreement also contains financial covenants requiring the Company to maintain a ratio of total debt to total capitalization (each as defined in the credit agreement) of no more than 0.65 to 1.00; minimum liquidity on the last day of each quarter of $525,000 per vessel; a ratio of EBITDA to cash interest expense (each as defined in the credit agreement) of no less than 2.00 to 1.00 on a trailing four-quarter basis; the fair market value of collateral of at least 135% of outstanding loans and letter of credit; and consolidated net worth (as defined in the credit agreement) of at least 80% of $248 million. As of March 31, 2006, $202.0 million was outstanding under the revolving credit facility at an average interest rate of 5.33%. As of March 31, 2006, the Company was in compliance with all of its covenants under the facility.

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

7. Related Party Transactions

     The balance of trade payables as of March 31, 2006 shown in the accompanying consolidated financial statements includes $47,917 related to expenses, including salaries of Company management, office rent, and related expenses, paid for by Quintana Maritime Investors LLC and Quintana Minerals Corporation, on behalf of the Company. On October 31, 2005, the Company and Quintana Minerals Corporation entered into a service agreement, whereby Quintana Minerals agreed to provide certain administrative services to the Company at cost, and the Company agreed to reimburse Quintana Minerals for the expenses incurred by Quintana Minerals in providing those services.

     Affiliates of Mr. Robertson, the Chairman of the Board of the Company, and First Reserve Corporation, whose affiliate owns approximately 12.9% of our common stock, have the right in certain circumstances to require us to register their shares of common stock in connection with a public offering and sale. In addition, in connection with other registered offerings by us, affiliates of Mr. Robertson, First Reserve and certain other stockholders will have the ability to exercise certain piggyback registration rights with respect to their shares.

     In the first quarter of 2006, Quintana Logistics carried a cargo shipped by an affiliate of Alpha Natural Resources, Inc., which generated revenues of approximately $1.6 million during the quarter. In addition, Quintana Logistics paid or will pay a brokerage fee of 2.5%, or approximately $47,000, to AMCI International, Inc. Hans J. Mende, a director of the Company, serves as Chairman of the Board of Alpha Natural Resources, Inc. and is the President and controlling stockholder of AMCI International, Inc.

8. Commitments and Contingent Liabilities

     In February 2005, the Company entered into a three-year, non-cancellable operating lease for its office space in Greece. In December 2005, the Company amended the lease to add additional office space and shorten the term of the lease by one month. Rental expense for the three months ended March 31, 2006 was $69,196. Future rental commitments are payable as follows as of March 31, 2006:

		Amount
		(in thousands)
April 1, 2006 to March 31, 2007		$	202
April 1, 2007 to November 30, 2008			140
Total		$	342

     The Company has not been involved in any legal proceedings which may have, or have had a significant effect on its business, financial position, results of operations or liquidity, nor is the Company aware of any proceedings that are pending or threatened which may have a significant effect on its business, financial position, results of operations or liquidity. From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business, principally disputes with charterers, personal injury and property casualty claims.

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

8. Commitments and Contingent Liabilities (continued)

The Company expects that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

9. Cash Dividend

     On March 15, 2006, the Company paid a cash dividend of $0.21 per common share to shareholders of record on March 10, 2006, for a total payment of $5.0 million.

10. Stock Incentive Plan

     The Company did not issue any equity-based awards under its 2005 Stock Incentive Plan during the three months ended March 31, 2006.

     Outstanding Restricted Stock

     Restricted stock outstanding as of March 31, 2006 includes the following:

									Weighted
		Number of							Average Fair
		Shares							Value Per Share
Outstanding at December 31, 2005			558,750							$	10.39
Granted			—								—
Vested			99,750							$	10.39
Canceled or expired			—								—
Outstanding at March 31, 2006			459,000							$	10.39

     The total expense related to the restricted-stock awards is calculated by multiplying the number of shares awarded by the average high and low sales price of the Company’s common stock on the grant date, which we consider to be its fair market value. The Company amortizes the expense over the total vesting period of the awards on a straight-line basis.

     Total compensation cost charged against income was $435,377 for the restricted stock for the three months ended March 31, 2006. Total unamortized compensation cost relating to the restricted stock at March 31, 2006 was $5.04 million. The total compensation cost related to unvested awards not yet recognized is expected to be recognized over a weighted-average period of approximately 3 years.

11. Subsequent Events

•

On May 3, 2006, the Company entered into separate sale and purchase contracts (each such contract an “MOA” and collectively, the “MOAs”) with affiliates of Metrobulk Holding S.A. (“Metrobulk”), an unaffiliated third party, to purchase (the “Acquisition”) three Panamax drybulk carriers and fourteen Kamsarmax drybulk carriers (the “Acquisition Fleet”). The Company will purchase the Acquisition Fleet from affiliates of Metrobulk (each such affiliate of Metrobulk a “Seller,” and collectively, the “Sellers”), for the aggregate cash

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

11.

Subsequent Events (continued)

			purchase price of $735 million. When delivered, these vessels will have an aggregate cargo-carrying capacity of approximately 1,380,789 dwt. The three Panamax vessels were constructed in 2004. Five of the Kamsarmax vessels were built in 2005 or 2006. The nine remaining Kamsarmax vessels are under construction and are expected to be delivered between July 2006 and June 2007. Assuming delivery of these vessels to the Company on the currently anticipated schedule, the Company’s fleet would have a combined cargo-carrying capacity of 2,296,861 dwt and a dwt weighted average age of 4.0 years in June 2007.
			With respect to the purchase of the eight secondhand vessels, the relevant Sellers are the registered owners of such vessels. In the case of six of the nine newbuilding vessels, the relevant Sellers are not in privity with such shipbuilder, Tsuneishi Shipbuilding Co., Ltd. of Japan (“Tsuneishi”), and in the case of the remaining three vessels, the relevant Sellers are not themselves in direct privity with the shipbuilder but their intermediaries are. The relevant Sellers of the newbuildings have executed separate sale and purchase agreements with companies who are, directly or indirectly, the counterparty to Tsuneishi in the relevant shipbuilding contract.
			All of the vessels in the Acquisition Fleet are, or upon delivery will be, subject to time charter agreements with Bunge S.A. of Geneva, an affiliate of Bunge Limited, or Bunge, a multinational agribusiness company. Sixteen of the vessels in the Acquisition Fleet are, or at the time of delivery will be, subject to one master time charter with Bunge expiring at the end of 2010, subject to earlier termination if the parties cannot agree on the determination of annual rates within contractually agreed ranges. Fourteen of these sixteen vessels are now subject to the one master time charter, and the two other vessels (Bulk Two and Bulk Four) are currently under separate charters but will become subject to the one master time charter following the termination of their current charters. One of the vessels in the Acquisition Fleet, Bulk Three, is subject to a separate time charter with Bunge which expires in August 2009.
			The Company has agreed to pay Fortis Bank N.V./S.A. a fee of $5.0 million in connection with the arrangement of the Acquisition. The fee will be payable in eight equal installments of $625,000, each such installment to be due and payable on the delivery of each of the eight secondhand vessels to be acquired in the Acquisition.
	•		On May 9, 2006, the Company declared a cash dividend of $0.21 per common share. The dividend will be payable on May 30, 2006 to shareholders of record on May 22, 2006.
	•		On May 9, 2006, the Company approved the issuance of 301,500 shares of restricted stock to employees and directors, vesting in February 2010.
	•		On May 9, 2006, the Company held its 2006 Annual Meeting of Stockholders in Athens. At that meeting, all seven of the Company’s existing directors as well as Peter Costalas were elected to serve as directors until the Company’s 2007 Annual Meeting. In addition, the stockholders of the Company ratified the selection of Deloitte. Hadjipavlou, Sofianos & Combanis, S.A. as the Company’s independent auditors for the year ending December 31, 2006.
	•		On May 10, 2006, the Company signed a mandate letter and a letter of summary terms and conditions (together, the “Commitment Letter”) for the establishment of an 8.25-year $735 million senior revolving credit facility (the “Credit Facility”) with Fortis Bank N.V. / S.A. Athens Branch (“Fortis”) , who will serve as the facility agent. The Commitment Letter is conditioned upon, among other things, the execution of definitive documentation (“Facility Documentation”) relating to the Credit Facility on or before June 30, 2006. We intend to use the net proceeds of the Credit Facility, together with Placement and the exercise of the Warrants and available funds, to purchase the new vessels in the Acquisition and to pay outstanding amounts under our existing revolving credit facility.
			Loans under the proposed new revolving credit facility may be used to finance part of the acquisition cost of the newbuildings and secondhand vessels in the Acquisition and to refinance debt outstanding under our existing revolving credit facility that we incurred to finance or refinance ship purchases.
	•		On May 11, 2006, the Company sold, in a private placement, 2,045,542 units consisting of 2,045,542 shares of 12% Mandatorily Convertible Preferred Stock that have a liquidation preference $93.75 per share and 8,182,168 Class A Warrants with an exercise price of $8.00 per share. Each Unit sold in the private placement consists of one share of preferred stock and four warrants. The preferred stock is cumulative and has no voting rights, except as provided in the statement of designations of the preferred stock or by the laws of the Republic of the Marshall Islands. Holders of the preferred stock shall generally be entitled to receive cash dividends at the per annum rate of

Quintana Maritime Limited
Notes to the consolidated financial statements
(Unaudited)
(All amounts expressed in U.S. Dollars)

11.

Subsequent Events (continued)

12% of the liquidation preference of $93.75 per share. Dividends on the preferred stock are cumulative and will be payable in cash quarterly on February 28, May 30, August 31 and November 30 of each year, commencing on August 31, 2006 for the initial period beginning on the date of issuance, at an annual rate of 12.0% of the liquidation preference of $93.75 per share of the Preferred Stock, when, as and if declared by the Company’s board of directors out of legally available funds. The conversion of the preferred Stock and the exercisability of the warrants are subject to approval by the common shareholders. The sale of the units resulted in gross proceeds of approximately $191 million to the Company, $41.2 million of which none attributable to investments by our founders and management.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and the notes thereto included elsewhere in this filing as well as in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005.

     This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provided for under these sections. These statements may include words such as “believe,” “estimate,” “project,” “intend,” “expect,” “plan,” “anticipate,” and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward looking statements reflect management’s current expectations and observations with respect to future events and financial performance. Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The principal factors that affect our financial position, results of operations and cash flows include, charter market rates, which have recently increased to historic highs, and periods of charter hire, vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars, depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels’ estimated useful lives, and financing costs related to our indebtedness. Our actual results may differ materially from those anticipated in these forward looking statements as a result of certain factors which could include the following: (1) changes in demand in the dry-bulk market, including changes in production of, or demand for, commodities and bulk cargoes, generally or in particular regions; (2) greater than anticipated levels of dry-bulk-vessel newbuilding orders or lower than anticipated rates of dry-bulk-vessel scrapping; (3) changes in rules and regulations applicable to the dry-bulk industry, including legislation adopted by international bodies or organizations such as the International Maritime Organization and the European Union or by individual countries; (4) actions taken by regulatory authorities; (5) changes in trading patterns significantly affecting overall dry-bulk tonnage requirements; (6) changes in the typical seasonal variations in dry-bulk charter rates; (7) changes in the cost of other modes of bulk commodity transportation; (8) changes in general domestic and international political conditions; (9) changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking costs); (10) and other factors listed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2005, our Current Report on Form 8-K filed with the SEC on May 12, 2006 and our Registration Statement on Form S-1 filed with the Securities and Exchange Commission. We disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Executive Overview

     We are an international provider of dry-bulk marine transportation services that was incorporated in the Marshall Islands on January 13, 2005 and began operations in April 2005. Prior to the completion of our initial public offering, we financed the acquisition of our fleet through capital contributions by affiliates of each of Corbin J. Robertson, Jr., First Reserve Corporation and American Metals & Coal International and through borrowings. In July 2005, we completed our initial public offering and used the net proceeds from that offering to repay all our debt outstanding under our term-loan facility immediately prior to the closing of the offering and to fund a portion of the purchase price of the remaining vessels in our initial fleet of eight vessels. In October 2005, we entered into a $250-million revolving credit facility, and we drew down amounts under that facility to pay down amounts outstanding under the term-loan facility and terminate that facility, as well as to finance a portion of the acquisition price of the two Capesize vessels delivered in the fourth quarter. We currently own and operate a fleet of eight Panamax vessels and two Capesize vessels, all of which we acquired during 2005.

Results of Operations

     We began operations in the second quarter of 2005 and therefore cannot present a meaningful comparison of our results of operations for the three-month period ended March 31, 2006 with the corresponding period in the prior year. Where we have results relating to the first quarter of 2005, we have compared them with the results from the first quarter of 2006.

Charters

     We generate revenues by charging customers for the transportation of dry-bulk cargo using our vessels. All our vessels are currently employed under time charters to well-established and reputable charterers. We may employ vessels under spot-market charters in the future. A time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially all of the voyage expenses, including port and canal charges and the cost of bunkers, but the vessel owner pays the vessel operating expenses. Under a spot-market charter, the vessel owner pays both the voyage expenses (less specified amounts covered by the voyage charterer) and the vessel operating expenses. Vessels operating in the spot-charter market generate revenues that are less predictable than time charter revenues but may enable us to capture increased profit margins during periods of improvements in dry-bulk rates. However, we will be exposed to the risk of declining dry-bulk rates when operating in the spot market, which may have a materially adverse impact on our financial performance. We believe that the important measures for analyzing future trends in our results of operations consist of the following:

		Three Months Ended
		March 31, 2006
		(In US Dollars per day, unless otherwise stated)
		PANAMAX				CAPESIZE				TOTAL
		2006				2006				2006
Average number of vessels			8				2				10
Total ownership days			720				180				900
Operating days under fixed rate time charter			626				180				806
Operating days under variable rate time charter			90				—				90
Utilization			99.4	%			100.0	%			99.5	%
Time charter equivalent per ship per day – fixed rate tc			21,818				35,047				24,773
Time charter equivalent per ship per day - variable rate tc			16,432				—				16,432
Net daily revenue per ship per day			20,106				33,538				22,792
Vessel operating expenses per ship per day			(4,186	)			(4,208	)			(4,190	)

•		Average number of vessels This is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.
•		Ownership days We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.

•		Operating days We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to planned dry docking repairs or any other, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
•		Fleet utilization We calculate fleet utilization by dividing the number of our operating days during a period by the number of our Ownership days during the period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
•		TCE per ship per day We define TCE (time-charter equivalent) per ship per day rate as our voyage and time charter revenues less voyage expenses during a period divided by the number of our operating days during the period, which is consistent with industry standards. TCE rate is a shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts.
•		Net daily revenue We define net daily revenue as the daily TCE rate net of commissions but including idle time.
•		Vessel operating expenses per ship per day This include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. We define as our total operating costs divided by the ownership days.

     Nine of our ten vessels were employed under time-charter contracts throughout the three-month period ended March 31, 2006. As of March 31, 2006, those charters have remaining terms of between 1 month and 49 months. We believe that these long-term charters provide better stability of earnings and consequently increase our cash flow visibility to our shareholders.

     Upon her delivery in November 2005, Kirmar traded on a trip-out basis for 60 days, which we consider equivalent to a short-term time charter. In February 2006, we entered into a time charter with respect to Kirmar for a minimum period of 12 months and a maximum period of 18 months at a gross daily rate of $26,250 per day.

Logistics Operations

     In December 2005, the Company formed a wholly owned subsidiary, Quintana Logistics LLC, to engage in limited chartering activities, including entry into contracts of affreightment. Under a contract of affreightment, Quintana 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 would be permitted either to use a free vessel that it owned or to charter in a third-party vessel. During the three months ended March 31, 2006, Quintana Logistics entered into limited chartering activities, which resulted in a small profit during the period.

Net Revenues

     Net revenues for the three months ended March 31, 2006 were $21.6 million after brokerage commissions of $1.0 million. During the quarter, $19.9 million of our revenues was earned from time charters, $1.1 million of our revenues were earned from the Kirmar voyage charter described above, and $1.6 million was earned from our Quintana Logistics operations. We had no revenues during the corresponding period in 2005 because we did not own any vessels and did not conduct operations during that period.

Commissions and Other Voyage Expenses

     When we employ our vessels on spot market voyage charters we will incur expenses that include port and canal charges and bunker expenses. We expect that port and canal charges and bunker expenses will represent a relatively small portion of our vessels’ overall expenses because we expect the majority of our vessels to continue to be employed under time charters that require the charterer to bear all of those expenses. As is common in the dry-bulk shipping industry, we pay commissions ranging from 0% to 6.25% of the total daily charter hire rate of each charter to unaffiliated ship brokers associated with the charterers, depending on the number of brokers involved with arranging the charter. For the quarter ended March 31, 2006, our commissions totaled $1.0 million. We incurred voyage expenses for the quarter ended March 31, 2006 of $1.5 million attributable to our Quintana Logistics operations. We did not pay any commissions or voyage expenses during the corresponding period in 2005 because we did not conduct operations during that period.

Vessel Operating Expenses

     For the three months ended March 31, 2006, our vessel operating expenses were $3.8 million, or an average of $4,190 per ship per day. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Our total vessel operating expenses will increase with the enlargement of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for insurance, may also cause these expenses to increase. We did not incur any vessel operating expenses during the corresponding period in 2005 because we did not conduct operations during that period.

General and Administrative Expenses

     For the three months ended March 31, 2006, we incurred $ 2.0 million of general and administrative expenses, an increase of approximately $1.9 million over the corresponding period in 2005. Our general and administrative expenses include the salaries and other related costs of the executive officers and other employees, our office rents, legal and auditing costs, regulatory compliance costs, other miscellaneous office expenses, long-term compensation costs, and corporate overhead. Our general and administrative expenses for the first quarter of 2006 were comparatively higher than those in the corresponding period in 2005 because the Company had not yet commenced operations in the first quarter of 2005. In the future, we expect general and administrative expenses to be affected by any enlargement of our fleet, additions to our staff, and costs associated with being a public company.

Depreciation

     We depreciate our vessels based on a straight line basis over the expected useful life of each vessel, which is 25 years from the date of their initial delivery from the shipyard. Depreciation is based on the cost of the vessel less its estimated residual value, which is estimated at $220 per lightweight ton, at the date of the vessel’s acquisition, which we believe is common in the dry-bulk shipping industry. Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life is adjusted to end at the date such regulations become effective. For the three months ended March 31, 2006, we recorded $5.9 million of vessel depreciation charges. We expect depreciation to remain stable on a period-by-period basis assuming that we do not acquire additional vessels, which would cause depreciation charges to increase. We did not incur any depreciation during the corresponding period in 2005 because we did not own any depreciable assets in that period.

Time Charter Value Amortization

     Iron Beauty was acquired with an existing time charter at an above-the-market rate. We deduct the fair value of the time charter from the purchase price of the vessel and allocates it to a deferred asset which is amortized over the remaining period of the time charter as a reduction to hire revenue. This results in a daily rate of approximately $30,600 as recognized revenue. For cash flow purposes the company will continue to receive $36,500 per day less commissions. For the three months ended March 31, 2006, we recorded $0.5 million of time charter amortization charges. If we acquire additional vessels in the future that have above-market time charters attached to them, our

time-charter-value amortization is likely to increase. We did not amortize any amounts during the corresponding period in 2005 because we did not operate any vessels and therefore were not party to any time charters.

Drydocking

     We capitalize the total costs associated with a drydocking and amortize these costs on a straightline basis through the date of the next drydocking, which is typically 30 to 60 months. Regulations or incidents may change the estimated dates of the next drydocking for our vessels. For the three months ended March 31. 2006, amortization expense related to drydocking totaled $0.1 million. We did not amortize any drydocking expense during the corresponding period in 2005 because we did not own any vessels subject to drydocking expense during that period.

Inflation

     Inflation does not have significant impact on vessel operating or other expenses for vessels under time charter. We may bear the risk of rising fuel prices if we enter into spot-market charters or other contracts under which we bear voyage expenses. We do not consider inflation to be a significant risk to costs in the current and foreseeable future economic environment. However, should the world economy be affected by inflationary pressures this could result in increased operating and financing costs.

Liquidity and Capital Resources

     For the three months ended March 31, 2006, we financed our capital requirements primarily from cash from operations. As of March 31, 2006, our cash balance was approximately $3.6 million. We estimate that our cash flow from our charters will be sufficient to fund our working capital requirements for the next twelve months.

     We intend to fund our future acquisition-related capital requirements principally through borrowings under our revolving credit facility or equity issuances and to repay all or a portion of such borrowings from time to time with a combination of the net proceeds of equity issuances and cash from operations. We believe that funds will be available from these sources to support our growth strategy, which involves the acquisition of additional vessels. Depending on market conditions in the dry-bulk shipping industry and acquisition opportunities that may arise, we may be required to obtain additional debt or equity financing. We believe our ratio of net debt to total capitalization of 44.2% at March 31, 2006 will provide us with flexibility in financing acquisitions.

Revolving Credit Facility

     General. We and our subsidiaries entered into a $250,000,000 secured revolving credit facility, dated as of October 4, 2005. We are generally permitted to borrow under the facility to refinance the term-loan facility, to fund acquisitions of vessels, to pay certain dividends, and to fund working-capital requirements. In October 2005, we applied borrowings under the revolving credit facility to repay the term-loan facility described above and to finance the acquisition of Iron Beauty, and in November 2005, we applied borrowings under the facility to finance the acquisition of Kirmar. As of March 31, 2006, $202.0 million was outstanding under the facility.

     Fees and Interest. We paid an underwriting and structuring fee in connection with our entry into the revolving credit facility, and we pay annual agency and security fees. We also incur a commitment fee on the unused portion of the revolving credit facility at a rate of 0.375% per annum.

     Indebtedness under the revolving credit facility bears interest at a rate equal to LIBOR + 0.975%. See Item 3 for a description of interim rate locks entered into during the first quarter.

     Term and Facility Limit. The revolving credit facility has a term of eight years and thus matures in October 2013. The facility has a limit of $250 million, which we may expand by an additional $50 million for a total of $300 million on identical terms. In addition, the facility provides for a $20-million sub-limit for borrowings for working-capital purposes and general corporate requirements. Up to $25 million of the facility will be available for issuance of stand-by letters of credit.

     We may generally borrow up to the facility limits, but we may not incur any additional indebtedness under the facility if the amount of outstanding loans and letters of credit exceeds 65% of the fair market value of the vessels serving as collateral.

     Prepayments. We may voluntarily prepay indebtedness under the facility at any time in minimum principal amounts of $2.0 million and in multiples of $1.0 million. We may reborrow any amounts that we prepay.

     We are required to mandatorily repay indebtedness upon any sale of any vessel out of the net sale proceeds received and upon any loss of any vessel upon the earlier of (i) 120 days of such loss and (ii) receipt of insurance proceeds related to the loss. In addition, the total commitments under the facility will be reduced annually beginning in October 2010. When those reductions occur, we will be required to make payments to the extent the total amount outstanding under the facility on the reduction date exceeds the reduced commitment. We must also prepay any borrowings used to fund the deposit for a vessel to be acquired if the contract to buy that vessel is terminated.

     Guaranty; Security. Our obligations under the facility are guaranteed by our subsidiaries. In addition, our obligations under the facility are secured by a first-priority security interest of the equity of those subsidiaries, a first-priority mortgage on our vessels, and a first-priority assignment of our earnings related to our vessels, including time-charter revenues and insurance proceeds. Our bank accounts that hold our vessel-related earnings are pledged to our lenders. In addition, any obligations under foreign-currency or interest-rate swaps or similar arrangements relating to our obligations under the credit facility will be secured by second-priority interests on the collateral described above.

     Conditions. When we borrow additional amounts under the facility, we are required to execute customary documentation relating to the facility, including security documents, to satisfy certain customary conditions precedent and to comply with terms and conditions included in the loan documents.

     Financial Covenants. The credit agreement also contains financial covenants requiring us to maintain:

	•		a ratio of total debt to total capitalization (each as defined in the credit agreement) of no more than 0.65 to 1.00;
	•		minimum liquidity (including available borrowing capacity under the facility) on the last day of each quarter of $525,000 per vessel;
	•		a ratio of EBITDA to cash interest expense (each as defined in the credit agreement) of no less than 2.00 to 1.00 on a trailing four-quarter basis;
	•		the fair market value of collateral of at least 135% of outstanding loans and letter of credit; and
	•		consolidated net worth (as defined in the credit agreement) of at least 80% of $248.0 million.

     Restrictive Covenants. The credit facility contains customary restrictive covenants.

     We are generally not permitted to pay dividends in excess of 65% of our free cash flow. In addition, we may not pay any dividends if the value of the collateral securing the credit facility is less than 135% of the amount of loans and letters of credit outstanding under the facility.

     The credit agreement contains customary definitions of events of default, including nonpayment of principal or interest, breach of covenants or material inaccuracy of representations, default under other material indebtedness, bankruptcy, and change of control.

Proposed New Revolving Credit Facility

     General. On May 10, 2006, the Company signed a mandate letter and a letter of summary terms and conditions (together, the “Commitment Letter”) for the establishment of an 8.25-year $735 million senior revolving credit facility (the “Credit Facility”) with Fortis Bank N.V. / S.A. Athens Branch (“Fortis”) , who will serve as the facility agent. The Commitment Letter is conditioned upon, among other things, the execution of definitive

documentation (“Facility Documentation”) relating to the Credit Facility on or before June 30, 2006. We intend to use the net proceeds of the Credit Facility, together with Placement and the exercise of the Warrants and available funds, to purchase the new vessels in the acquisition described below in “Recent Developments” and to pay outstanding amounts under our existing revolving credit facility.

     Loans under the proposed new revolving credit facility may be used to finance part of the acquisition cost of the newbuildings and secondhand vessels in the Acquisition and to refinance debt outstanding under our existing revolving credit facility that we incurred to finance or refinance ship purchases.

     Fees. We will be required to pay an arrangement fee and an underwriting fee upon execution of the facility agreement. We will be required to pay an annual commitment fee on the undrawn portion of the facility and an annual agency fee.

     Interest. We expect interest on amounts drawn will be payable at a rate equal to (x) a margin of 0.85% per annum until December 31, 2010 and 1.10% thereafter over (y) LIBOR for interest periods of 1, 3, 6, 9 or 12 months or, if agreed by the agent, such longer periods as the agent may agree.

     We will be permitted to enter into hedging arrangements with respect to the amount outstanding under the proposed new revolving credit facility.

     Term. We expect the proposed new revolving credit facility to have a term of 8.25 years from its execution but in any event will expire not later than September 30, 2014. Principal outstanding will be amortizable in 32 quarterly installments beginning on a date four months from the delivery of “Bulk Eleven,” a newbuilding expected to be delivered in October 2006, but in no event later than December 31, 2006. We expect installment 1 will be in the amount of $10.0 million, installments 2 through 5 will be in the amount of $11.75 million each, installments 6-17 will be in the amount of $13.25 million each and installments 18-32 will be in the amount of $15.0 million each. The balance of $294.0 million will be paid in one lump sum not later than the final maturity date.

     Facility Limit. We expect we will be permitted to borrow up to a maximum of $735 million, but in any event not more than 75% of the fair market value of the collateral vessels.

     Prepayments. We expect we may voluntarily prepay indebtedness under the secured revolving credit facility at any time, without premium, in minimum principal amounts of $1.0 million and in multiples thereof.

     We will be required permanently to reduce the maximum available committed amount upon sale, total loss or other disposition of any collateral vessel, in an amount equal to (x) the then maximum available committed amount, multiplied by (y) a fraction, the numerator of which is the appraised value of such collateral vessel and the denominator of which is the aggregate of the appraised values of all collateral vessels, and upon a violation of the collateral maintenance test (as described below), in an amount sufficient to cure any such violation.

     We also will be required permanently to reduce the maximum available committed amount in case the acquisition of any of the new vessels is not concluded by July 31, 2007, in an amount equal to (x) the then maximum available committed amount, multiplied by (y) a fraction, the numerator of which is the acquisition coast of such new vessel and the denominator of which is the aggregate of acquisition costs of all collateral vessels.

     Security. We expect our obligations under the proposed new revolving credit facility will be secured by a first priority cross-collateralized security interest in each of the vessels in our Existing Fleet and the Acquisition Fleet, and a first priority security interest in all earnings and insurances related to such vessels. We expect all charter revenues and proceeds will be required to be deposited first in operating and retention accounts maintained with the security trustee and subject to first priority pledges. In addition, each of our subsidiaries will be co-borrowers under the proposed new revolving credit facility. We may grant additional security from time to time in the future.

     Conditions. We expect our ability to borrow amounts under the proposed new revolving credit facility will be subject to the usual and customary for a transaction of this type, including but not limited to:

	•		Satisfactory valuations of the collateral vessels by two independent sale and purchase brokers appointed by the Agent.
	•		On or before the signing of the Facility Agreement, Quintana Maritime shall have raised not less than $137 million through the issuance of the new equity securities.
	•		On or before the drawdown related to the last six of the new vessels, Quintana Maritime shall have raised not less than approximately $33 million through the issuance of new equity securities.

     Financial Covenants. We expect the proposed new revolving credit facility will contain financial covenants requiring us, among other things, to ensure that:

	•		Collateral Maintenance. Until December 31, 2010, the aggregate Fair Market Value of the collateral vessels shall be no less than 115% of the aggregate outstanding amount under the new revolving credit facility and 125% thereafter.
	•		Minimum Liquidity. Minimum Liquidity (including available undrawn credit line) to be at all times equal to $550,000 per vessel, such amount to increase to $741,000 per vessel through eight equal quarterly increases of $23,875 per vessel, beginning in March 31, 2009.
	•		Interest Coverage. The ratio of EBITDA (calculated on a trailing twelve month basis) over the last twelve months to interest expense shall be no less than 2.00 to 1.00.
	•		Leverage. Total Debt over Total Assets, adjusted for the Fair Market Value of the collateral vessels shall not exceed the level of 75%.
	•		Solvency Test: Minimum Market Adjusted Net Worth shall be $200 million.

     Restrictive Covenants. We expect the proposed new revolving credit facility will also contain general covenants that will require us to maintain adequate insurance coverage and to maintain our properties, vessels and time charters. The proposed new revolving credit facility also will limit us and our subsidiaries from, among other things, incurring indebtedness, making capital expenditures or investments, payments, dividends, entering into mergers, acquisitions (other than vessel acquisitions) and divestitures or in engaging in transactions with affiliates.

     We expect that the proposed new revolving credit facility will prohibit us from paying dividends or distributions, if an event of default has occurred and is continuing or would occur as a result of the payment of such dividends or distributions. A default in any of the financial covenants referred to above will be required to be cured before we will be allowed to pay any dividends.

     Events of Default. We expect the proposed new revolving credit facility will include customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, a material inaccuracy of representations and warranties, a material adverse change, a cross-default to other indebtedness and non-compliance with security documents, a bankruptcy and insolvency event or a change of control.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

The following table sets forth our expected contractual obligations and their maturity dates as of March 31, 2006.

						One to				Three				More
		Within One				Three				Years to				Than Five
		Year				Years				Five Years				Years				Total
		(in thousands)
Revolving credit facility			—				—			$	21,877			$	180,123			$	202,000
Office lease(1)		$	202			$	140				—				—				342
Total		$	202			$	140			$	21,877			$	180,123			$	202,342

(1)

Represents the U.S. Dollar equivalent of lease payments in Euros as calculated in accordance with the rate of $1.20 to €1.00 as of March 31, 2006. Such rate was $1.28 to €1.00 as of May 11, 2006. Our office lease has a two-year term.

     Following the balance sheet date, we entered into various memoranda of agreement with affiliates of Metrobulk, pursuant to which we agreed to purchase 17 vessels for aggregate consideration of $735 million. We expect to be obligated to pay thereunder an aggregate of $648.9 million within one year of March 31, 2006, an aggregate of $86.1 million one to three years thereafter and total contractual obligations thereunder of $735 million. See “Notes to Financial Statement, Note 11 (Subsequent Events). In addition, we have received a commitment letter from Fortis Bank N.A./S.A. with respect to an 8.25-year $735 million revolving credit facility, the proceeds of which would be used to purchase such new vessels and to pay outstanding amounts under our existing revolving credit facility. See “Managements Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Proposed New Revolving Credit Facility.” After giving effect to entry into the new proposed revolving credit facility, such use of proceeds, the expected delivery and payment dates of the vessels in the Acquisition and the amortization schedule under the proposed new revolving credit facility, we expect to be obligated to pay in respect of our proposed new revolving credit facility $21.8 million within one year of March 31, 2006, $101.5 million one to three years thereafter, $287.8 million three to five years thereafter, $324.0 million more than five years thereafter and total contractual obligations of $735 million.

Critical Accounting Policies

     Information regarding the Company’s Critical Accounting Policies is included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Risks Related to our Business

	•		Because we are a new company with a limited operating history, we may be less successful in implementing our business strategy than a more seasoned company.
	•		We cannot assure you that our board of directors will declare dividends.
	•		Our earnings may be adversely affected if we do not successfully employ our vessels on medium- or long-term time charters or take advantage of favorable opportunities in the spot market.
	•		We may have difficulty properly managing our planned growth through acquisitions of additional vessels.
	•		We cannot assure you that we will be able to borrow further amounts under our revolving credit facility, which we may need to fund the acquisition of additional vessels.
	•		Restrictive covenants in our revolving credit facility impose, and any future debt facilities will impose, financial and other restrictions on us.
	•		Servicing future indebtedness would limit funds available for other purposes, such as the payment of dividends.
	•		Unless we set aside reserves for vessel replacement, at the end of a vessel’s useful life our revenue will decline, which would adversely affect our cash flows and income.
	•		Purchasing and operating secondhand vessels may result in increased operating costs and reduced fleet utilization.
	•		When our time charters end, we may not be able to replace them promptly or with profitable ones.
	•		Charterers may default on time charters that provide for above-market rates.

	•		Contracts of affreightment may result in losses.
	•		The international dry-bulk shipping industry is highly competitive, and we may not be able to compete successfully for charters with new entrants or established companies with greater resources.
	•		We may be unable to retain key management personnel and other employees in the shipping industry, which may negatively impact the effectiveness of our management and results of operations.
	•		Risks associated with operating oceangoing vessels could negatively affect our business and reputation, which could adversely affect our revenues and stock price.
	•		The operation of dry-bulk carriers has certain unique operational risks.
	•		Our vessels may suffer damage and we may face unexpected costs, which could adversely affect our cash flow and financial condition.
	•		The shipping industry has inherent operational risks that may not be adequately covered by our insurance.
	•		If we acquire additional dry-bulk carriers and those vessels are not delivered on time or are delivered with significant defects, our earnings and financial condition could suffer.
	•		The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.
	•		We may earn United States source income that is subject to tax, thereby reducing our earnings.
	•		U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. holders.
	•		The enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for a preferential rate of federal income taxation.
	•		Because we expect to generate all of our revenues in U.S. dollars but may incur a portion of our expenses in other currencies, exchange rate fluctuations could hurt our results of operations.
	•		We depend upon a limited number of customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.
	•		We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments.
	•		As we expand our business, we may need to improve our operating and financial systems and will need to recruit suitable employees and crew for our vessels.
	•		The international dry-bulk shipping sector is extremely cyclical and volatile; these factors may lead to reductions and volatility in our charter hire rates, vessel values and results of operations.
	•		Charter hire rates in the dry-bulk sector are above historical averages and future growth will depend on continued economic growth in the world economy that exceeds the capacity of the growing world fleet’s ability to match it.
	•		We may not be able to draw down the full amount under our revolving credit facility if the market value of our vessels declines.
	•		We may breach some of the covenants under our revolving credit facility if the market price of our vessels, which are above historical averages, declines.
	•		Our substantial operations outside the United States expose us to political, governmental and economic instability, which could harm our operations.
	•		Seasonal fluctuations in industry demand could adversely affect our operating results and the amount of available cash with which we can pay dividends.
	•		We are subject to regulation and liability under environmental laws that could require significant expenditures and affect our cash flow and net income.
	•		We are subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
	•		Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow.
	•		Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.
	•		Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
	•		An economic slowdown in Asia could have a material adverse effect on our business, financial position and results of operations.
	•		World events could affect our results of operations and financial condition.

Recent Developments

     On May 3, 2006, we entered into separate sale and purchase contracts (each such contract an “MOA” and collectively, the “MOAs”) with affiliates of Metrobulk Holding S.A. (“Metrobulk”), an unaffiliated third party to purchase (the “Acquisition”) three Panamax drybulk carriers and fourteen Kamsarmax drybulk carriers (the “Acquisition Fleet”). We will purchase the Acquisition Fleet from affiliates of Metrobulk (each such affiliate of Metrobulk a “Seller,” and collectively, the “Sellers”), for the aggregate cash purchase price of $735 million. The acquisition will be funded with approximately $191 million of proceeds from a private placement, as described below, led by Dahlman Rose & Co. and completed on May 11, 2006, and the balance with a proposed new credit facility, as described below, led by Fortis Bank. The Acquisition was mediated and advised by Fortis Bank.

     The Acquisition Fleet includes three 76,000-dwt 2004-built Panamaxes of 76,000 dwt and fourteen 83,000-dwt Kamsarmax bulkers, six of which were built between February 2005 and May 2006, and the remaining eight to be delivered from the yard between July 2006 and May 2007, making Quintana the youngest U.S.-listed fleet. All the vessels are sister ships built at Tsuneishi, a Japanese shipyard. Kamsarmaxes are a Panamax sub-class that have more capacity than typical Panamax designs, but retain the ability to trade wherever smaller Panamaxes trade and can therefore transit the Panama Canal. All the vessels are on long-term time charter to Bunge S.A., a wholly owned subsidiary of Bunge Limited (NYSE:BG), a large agribusiness company. Sixteen of the vessels are currently on charter, or will be upon delivery, fixed until the end of 2010 under an agreement that provides for variable charter hire within floor and ceiling rates. The remaining vessel is on charter with Bunge until August 2009 at a fixed rate.

     We expect to finance the Acquisition with a combination of proceeds from a private placement equity offering, as described below, and debt from the proposed new $735 million revolving credit facility, as described below, which also would be used to refinance existing debt.

     On May 11, 2006, we sold, in a private placement, 2,045,542 units (the “Units”) consisting of 2,045,542 shares of 12% Mandatorily Convertible Preferred Stock and 8,182,168 Class A Warrants to institutional investors and certain other accredited investors. Each unit consists of one share of 12% Mandatorily Convertible Preferred Stock and four Class A Warrants to purchase an equal number of shares of Common Stock. Each share of Preferred Stock is mandatorily convertible into 12.5 shares of Common Stock upon the approval of the existing common shareholders. The Warrants entitle holders to purchase an additional share of Common Stock at $8.00 per share at any time upon the approval of the shareholders . We will be required to redeem the Warrants if the issuance of the Common Stock underlying the Preferred Stock and Warrants is not approved by the our common shareholders within three years of the closing of the private placement. The sale of the Units at a price of $93.75 per unit resulted in gross proceeds to us of approximately $191 million.

     Dividends on the Preferred Stock are cumulative and will be payable in cash quarterly on February 28, May 30, August 31 and November 30 of each year, commencing on August 31, 2006 for the initial period beginning on the date of issuance, at an annual rate of 12% of the liquidation preference of $93.75 per share of the Preferred Stock, when, as and if declared by our board of directors out of legally available funds.

     On May 10, 2006, we signed a mandate letter and a letter of summary terms and conditions (together, the “Commitment Letter”) for the establishment of an 8.25-year $735 million senior revolving credit facility (the “Credit Facility”) with Fortis Bank N.V. / S.A. Athens Branch (“Fortis”) , who will serve as the facility agent. The Commitment Letter is conditioned upon, among other things, the execution of definitive documentation (“Facility Documentation”) relating to the Credit Facility on or before June 30, 2006. We intend to use the net proceeds of the Credit Facility, together with the net proceeds from the offering of the Units and the exercise of the Warrants and available funds, to purchase the Acquisition Fleet and to pay outstanding amounts under our existing revolving credit facility.

     For further information regarding these recent developments, please see Items 1.01, 3.02, 3.03, 5.03 and 8.01 of our Current Report on Form 8-K dated May 12, 2006 filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rates

     As of March 31, 2006, our revolving credit facility accrued interest at LIBOR plus 0.975%. Our revolving credit facility permits us to fix LIBOR, effectively converting our floating-rate obligations into fixed-rate obligations.

     In the course of the first quarter, we locked LIBOR on the specified borrowings at the indicated rates and expiry dates:

Amount of Borrowings		LIBOR lock
(in millions)		rate				Expiry Date
$103.0		4.29%				April 7, 2006
$62.0		4.35%				April 18, 2006
$37.0		4.82875%				April 28, 2006

     Subsequent to the end of the period, we locked LIBOR on the specified borrowings at the indicated rates and expiry dates:

Amount of Borrowings		LIBOR lock
(in millions)		rate				Expiry Date
$103.0		4.90125%				May 18, 2006
$62.0		4.90125%				May 18, 2006
$37.0		4.97%				May 18, 2006

     We may have sensitivity to interest rate changes with respect to future debt facilities. See “Managements’ Discussion and Analysis of Financial Conditions and Results of Operations — Proposed New Revolving Credit Facility” for a description of the floating rate of interest to be borne under our proposed new revolving credit facility.

Currency and Exchange Rates

     We expect to generate all of our revenue in U.S. Dollars. The majority of our operating expenses and the entirety of our management expenses are in U.S. Dollars but we expect to incur up to approximately 20% of our operating expenses in currencies other than U.S. Dollars. This difference could lead to fluctuations in net income due to changes in the value of the U.S. Dollar relative to other currencies. We do not intend to use financial derivatives to mitigate the risk of exchange rate fluctuations.

Item 4. Controls and Procedures

     We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, summarized and processed within time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report (the “Evaluation Date”), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the

effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon this evaluation, our chief executive officer and our chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

     During the last fiscal quarter, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     We have not been involved in any legal proceedings which may have, or have had a significant effect on our business, financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

Legal Proceedings Related to Mr. Molaris

     A private individual has filed a complaint with the public prosecutor for the Athens Magistrates Court against Mr. Molaris and four others relating to allegations that, while Mr. Molaris was employed by Stelmar Shipping Ltd., they conspired to defraud the individual of a brokerage fee of €1.2 million purportedly owed by a shipyard in connection with the repair of a vessel of Stelmar. Mr. Molaris believes the complaint is without merit and is vigorously contesting these allegations. The prosecutor has referred the matter to a Greek judge for further investigation. The judge will determine whether the claim has sufficient merit to forward the matter on to a court for adjudication. We have been advised that an independent committee of the board of directors of Stelmar has conducted an inquiry into these allegations and found no evidence to support them.

Item 2. Changes in Securities and Use of Proceeds

     On May 11, 2006, the Company sold, in a private placement, 2,045,542 units (the “Units”) consisting of 2,045,542 shares of 12% Mandatorily Convertible Preferred Stock that have a liquidation preference $93.75 per share and 8,182,168 Class A Warrants. The placement closed on May 11, 2006. The Preferred Stock and Warrants will not be separately transferable until the earliest to occur of 180 days after the date of issuance, the effective date of the registration statement referred to above under Item 1.01, under the section captioned “Registration Right Agreement” or such earlier date as Dahlman Rose & Co. LLC may determine.

     The Company offered and sold the Preferred Stock and Warrants only to institutional “accredited investors,” as such term is defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act of 1933, as amended (the “Securities Act”), and certain “accredited investors,” as such term is defined in Rule 501(a), who are officers or directors of the Company. The Placement was exempt from the registration requirements of the Securities Act.

     None of the Units sold in the Placement, the shares of Preferred Stock and Warrants, making up the Units, nor the shares of Common Stock issuable upon conversion of the Preferred Stock or exercise of the Warrants, have been registered under the Securities Act. The Company has agreed to use commercially reasonable efforts to have a registration statement for the resale of the securities sold in the Placement and the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants be declared effective within 120 days after the date of the closing of the Placement, subject to extension to 180 days under certain circumstances.

     The gross proceeds of the sale of the Units are approximately $191 million to the Company, before fees and expenses. If the Warrants become exercisable and are all exercised, the Company would receive a gross exercise price of approximately $65.46 million, before fees and expenses. The net proceeds from the sale of the Units and the exercise of the Warrants are estimated to be approximately $248.4 million in the aggregate, after deducting the placement agents’ fees but before deducting expenses. The Company intends to use the net proceeds of the Placement and the exercise of the Warrants, together with a proposed revolving credit facility (as described in Item 8.01 of our Current Report on Form 8-K dated May 12, 2006 filed with the SEC) and available funds, to purchase the new vessels in the Acquisition and to pay outstanding amounts under our existing revolving credit facility.

     In connection with the Placement described in Item 3.02 of our Current Report on Form 8-K dated May 12, 2006 filed with the SEC and pursuant to Section 35(5) of the Business Corporation Act of the Republic of the

Marshall Islands (the “BCA”), we have amended our Articles of Incorporation by the filing under the BCA of a Statement of Designations setting forth the terms of the 2,045,542 shares of Preferred Stock.

     Each Unit sold in the Placement consists of one share of Preferred Stock and four Warrants. The Preferred Stock is cumulative and has no voting rights, except as provided in the Statement of Designations of the Preferred Stock or by the laws of the Republic of the Marshall Islands. Holders of the Preferred Stock shall generally be entitled to receive cash dividends at the per annum rate of 12% of the liquidation preference of $93.75 per share. Dividends on the Preferred Stock are cumulative and will be payable in cash quarterly on February 28, May 30, August 31 and November 30 of each year, commencing on August 31, 2006 for the initial period beginning on the date of issuance, at an annual rate of 12.0% of the liquidation preference of $93.75 per share of the Preferred Stock, when, as and if declared by the Company’s board of directors out of legally available funds.

     The conversion of the Preferred Stock and the exercisability of the Warrants are subject to approval by the common shareholders. We have undertaken to call by December 31, 2006 a special meeting of the holders of our Common Stock to consider a proposal to approve the conversion. If the shareholders approve the conversion, the Preferred Stock will convert automatically into shares of Common Stock at a conversion rate is 12.5 shares of Common Stock per share of Preferred Stock (subject to adjustment from time to time, the “Conversion Rate”) and each Warrant will entitle holders to purchase a share of Common Stock at $8.00 per share (subject to adjustments under certain circumstances to prevent dilution) at any time within three years from the closing. The Warrants will expire on May 11, 2009. If the holders of Common Stock do not approve the conversion, we will be required to redeem the Warrants at a cash redemption price of $0.50 per Warrant.

     The Statement of Designations governing the Preferred Stock provides that, if the holders of Preferred Stock are not offered value at least equivalent to that received by the holders of Common Stock in certain specified transactions (including certain offers to purchase Common Stock; mergers; share exchanges; consolidations or recapitalizations; and a sale of substantially all the assets), the holders of Preferred Stock will have the right to cause us to repurchase their shares of Preferred Stock at the applicable repurchase price, which is equal to the greater of (x) $93.75 and (y) the price per share of Common Stock offered or paid, as the case may be, to the holders of our Common Stock multiplied by the then Conversion Rate.

     For further information on the description of the Preferred Stock, see Item 3.02 of our Current Report on Form 8-K dated May 12, 2006 filed with the SEC.

Item 6. Exhibits

Exhibit
No.				Description
3.1*		—		Amended and Restated Articles of Incorporation
3.2*		—		Amended and Restated By-laws
4.1*		—		Form of Share Certificate
10.1*		—		Agreement Related to Credit Facility
10.2*		—		First Supplemental Agreement to US$262,456,000 Credit Facility
10.3*		—		Second Supplemental Agreement to US$262,456,000 Credit Facility
10.4*		—		Registration Rights Agreement
10.5*		—		2005 Stock Incentive Plan
10.6		—		Form of Phantom Stock Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed November 3, 2005)
10.7		—		Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed November 3, 2005)
10.8		—		Revolving Credit Facility (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 6, 2005)
10.9		—		Services Agreement between Quintana Maritime Limited and Quintana Minerals Corporation, dated as of October 31, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 3, 2005)
31.1**		—		Certification pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 by Chief Executive Officer.
31.2**		—		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.

Exhibit No.				Description
32.1***		—		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
32.2***		—		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.

SIGNATURES

     Pursuant to the requirements 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, on the 15th day of May 2006.

		QUINTANA MARITIME LIMITED
		By:		/s/ Stamatis Molaris
				Stamatis Molaris
				Chief Executive Officer, President and Director
				(Principal Executive Officer)
				/s/ Paul J. Cornell
				Paul J. Cornell
				Chief Financial Officer
				(Principal Financial Officer; Principal Accounting Officer)

EXHIBIT INDEX

Exhibit
No.				Description
3.1*		—		Amended and Restated Articles of Incorporation
3.2*		—		Amended and Restated By-laws
4.1*		—		Form of Share Certificate
10.1*		—		Agreement Related to Credit Facility
10.2*		—		First Supplemental Agreement to US$262,456,000 Credit Facility
10.3*		—		Second Supplemental Agreement to US$262,456,000 Credit Facility
10.4*		—		Registration Rights Agreement
10.5*		—		2005 Stock Incentive Plan
10.6		—		Form of Phantom Stock Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed November 3, 2005)
10.7		—		Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed November 3, 2005)
10.8		—		Revolving Credit Facility (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 6, 2005)
10.9		—		Services Agreement between Quintana Maritime Limited and Quintana Minerals Corporation, dated as of October 31, 2005 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 3, 2005)
31.1**		—		Certification pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 by Chief Executive Officer.
31.2**		—		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
32.1***		—		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
32.2***		—		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.