QMAR Quintana Maritime Ltd (MM)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(All amounts expressed in U.S. dollars except as otherwise noted)

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 Quintana Maritime Limited, 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, 2007. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Quintana Maritime Limited’s periodic filings with the Securities and Exchange Commission (the “SEC”), including those included in the Quintana Maritime Limited’s Annual Report on Form 10-K for the year ended December 31, 2006.

The Company

The accompanying unaudited consolidated financial statements include the accounts of Quintana Maritime Limited and its subsidiaries (collectively, the “Company”).

Quintana Maritime Limited is a holding company incorporated on January 13, 2005, under the Laws of the Republic of the Marshall Islands. Through its subsidiaries, the Company is engaged in the marine transportation of dry bulk cargoes through the ownership and operation of dry bulk vessels.

The Company was formed by companies controlled by 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.

Except as otherwise noted, the Company is the sole owner of all of the outstanding shares of the following subsidiaries as of September 30, 2007, each of which was formed in the Marshall Islands for the purpose of owning a vessel in the Company’s fleet:

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The operations of all the Company’s vessels are managed by a wholly owned subsidiary, Quintana Management LLC.

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

In addition to the following policies, please see Note 2 of the Company’s consolidated financial statements included in our Form 10-K for the year ended December 31, 2006 for additional information regarding the Company’s significant accounting policies.

Sale-Leaseback Transaction

The Company may from time to time enter into sale-leaseback transactions with third parties. When the Company retains substantially all the use of these vessels, any profit or loss on the sale of these vessels is deferred and amortized over the lease term. If the sales price, net of sales costs, is less than the vessel’s undepreciated cost but the vessel’s fair value is more than its carrying amount, the indicated loss on the sale is deferred and amortized as charterhire expense over the lease term.

Dry-docking costs for vessels sold and leased back remain on the balance sheet and are amortized on a straight-line basis over the period through the next dry docking date. Future dry docking costs for the vessels will be deferred and amortized through the next dry-docking date or through the termination of the lease, whichever comes first. Lease payments are charged to expense on a straight-line basis over the lease term. Refer to Note 14 for further information.

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Variable Interest Entities

The Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 (R) “ Consolidation of Variable Interest Entities ” (“FIN 46R”) and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the consolidated financial statements in accordance with FIN 46R. As at September 30, 2007, there were three entities for the periods presented that were required to be included in the accompanying combined financial statements.

Consolidated Joint Ventures

As of September 30, 2007, the Company had entered into three joint venture agreements for the formation of joint venture ship-owning companies. Each of the joint ventures were formed to purchase a newbuilding capesize drybulk carrier (see “Note 10—Related Party Transactions” for further details). Christine Shipco LLC is owned 42.8% by the Company and 28.6% by each of Robertson Maritime Investors LLC (“RMI”), an affiliate of Corbin J. Robertson, Jr. and AMCIC Cape Holdings LLC (“AMCIC”), an affiliate of Hans J. Mende. Each of the other two joint ventures, Lillie Shipco LLC and Hope Shipco LLC is owned 50% by the Company and 50% by AMCIC.

Subsequent to the end of the period, the Company entered into four additional joint venture agreements with AMCIC on the same terms as described above. Each of the joint ventures was formed to purchase a newbuilding capesize drybulk carrier (see “Note 10—Related Party Transactions” for further details). Fritz Shipco LLC, Benthe Shipco LLC, Gayle Frances Shipco LLC, and Iron Lena Shipco LLC are each owned 50% by the Company and 50% by AMCIC.

The Company does not hold a majority voting interest in any of the joint ventures but has determined that each joint venture is a variable interest entity as defined under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“FIN46(R)”) and that the Company is, in each case, the primary beneficiary. As such, in accordance with FIN46(R), the Company consolidates the joint ventures. The joint venture partners’ share of the net income or loss of the joint ventures is presented separately in the accompanying consolidated income statements as minority interests. The partners’ share of net assets is presented separately in the accompanying consolidated balance sheets as minority interests.

The Company has issued performance guarantees on behalf of Lillie Shipco LLC and Hope Shipco LLC, which guarantee the performance of each joint venture’s obligations and responsibilities under the newbuilding contracts. In particular, the Company has guaranteed the payment of the contract price of the relevant vessels if the joint ventures are in default under the terms of the contract. The contract prices for the newbuildings are $80.6 million and $78.1 million respectively. The guarantees expire on delivery of the vessels to each joint venture. If the sellers of the vessels were to make demand under the guarantees, the Company would have recourse against AMCIC for breach of the agreement governing the rights and obligations of the joint venture partners.

The Company has pledged no assets as collateral for the joint ventures’ obligations.

Earnings Per Share

Earnings per share has been calculated by dividing the net income 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 and is computed using the treasury stock method. The following dilutive securities are included in shares outstanding for purposes of computing diluted earnings per share:

The Company had no other dilutive securities for the periods indicated.

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

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 was effective beginning in fiscal year 2007. Based on our expectation that the Company will continue not to be liable for income taxes in either the Marshall Islands or in the United States, the adoption of FIN 48 did not have a material impact on the Company’s consolidated financial condition and results of operations.

In September 2006, the FASB issued Staff Position (FSP) AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” FSP AUG AIR-1 addresses the accounting for planned major maintenance activities. Specifically, the FSP prohibits the practice of the accrue-in-advance method of accounting for planned major maintenance activities. FSP AUG AIR-1 is effective for fiscal years beginning after December 15, 2006. Because the Company does not use the accrue-in-advance method, the adoption of FSP AUG AIR-1 did not have a material impact on its results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which enhances existing guidance for measuring assets and liabilities at fair value. Previously, guidance for applying fair value was incorporated in several accounting pronouncements. The new statement provides a single definition of fair value, together with a framework for measuring it and requires additional disclosure about the use of fair value to measure assets and liabilities. While the statement does not require any new fair value measurements, it does change certain current practices. The statement is effective for the Company for the fiscal year starting January 1, 2008. The Company is currently evaluating the impact of the adoption of this standard but believes that its implementation is unlikely to have a material impact on the financial position of the Company.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). Under this statement, entities may voluntarily and irrevocably choose to measure certain financial assets and liabilities, on an instrument-by-instrument basis, at fair value. Subsequent changes for the elected instruments must be reported in earnings. The statement is effective for the Company for the fiscal year starting January 1, 2008. The Company’s adoption of SFAS No. 159 is not expected to have a material impact on the financial position of the Company.

United States Federal Income Taxation of the Company

The Company has made special tax elections in respect of each of our vessel-owning and operating subsidiaries, the effect of which is to disregard each of those subsidiaries as a taxable entity separate from the Company for United States federal income tax purposes. Therefore, for purposes of the discussion below, the income earned and assets held by those subsidiaries will be treated as earned and owned directly by the Company for United States federal income tax purposes.

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Unless exempt from U.S. federal income taxation under the rules discussed below, a non-U.S. corporation is subject to U.S. federal income taxation in respect of any income it earns that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance of services directly related to those uses, which the Company refers to as “shipping income,” to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which the Company refers to as “U.S.-source shipping income.”

Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. During the year ended December 31, 2006 and for the three and nine months ending September 30, 2007, the Company did not engage in transportation that produced income considered to be 100% from sources within the United States. Shipping income derived from sources outside the United States is not subject to U.S. federal income tax.

In the absence of exemption from tax under Section 883 of the Code (the “883 Exemption”), the Company’s U.S.-source shipping income would generally be subject to a 4% gross basis tax (i.e., a tax imposed without allowance for deductions). The Company qualified for the 883 Exemption for its 2005 and 2006 tax years. In addition, the Company believes that it will qualify for the 883 Exemption for its year ended December 31, 2007, and the Company expects to take this position for U.S. federal income tax return reporting purposes. However, there are circumstances, including some that are beyond the Company’s control, which could cause the Company to lose the benefit of the 883 Exemption and thereby become subject to U.S. federal income tax on its U.S.-source shipping income. For example, 5% stockholders could acquire and own 50% or more of the Company’s outstanding common stock. This would preclude the Company from being eligible for the 883 Exemption unless it can establish that among those 5% stockholders there are sufficient 5% stockholders that are qualified stockholders for purposes of Section 883 to preclude non-qualified 5% stockholders from owning 50% or more of such shares for more than half the number of days during the taxable year. Therefore, the Company can give no assurances regarding our qualification for this tax exemption.

Marshall Islands Tax Considerations

The Company is incorporated under the laws of the Republic of the Marshall Islands. Under current Marshall Islands law, the Company is not subject to tax on income or capital gains, and no Marshall Islands withholding tax is imposed on payments of dividends by the Company to its stockholders.

The Company took delivery of the remaining five Metrobulk vessels in the first nine months of 2007 ( Iron Knight, Iron Lindrew, Iron Miner, Iron Brooke, and Iron Manolis ), paying an aggregate of approximately $236.8 million upon delivery.

On January 22, 2007, the Company agreed to purchase a 1999-built, 170,162 dwt Capesize bulk carrier named Lowlands Beilun . The Company initially advanced $7.3 million on that date and paid the remaining balance of $65.7 million upon the delivery of the vessel on April 10, 2007.

The movement in vessels, net (in thousands) in the accompanying consolidated balance sheet at September 30, 2007 is analyzed as follows:

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As of September 30, 2007, the Company and its joint venture partners expect to have the following newbuilding installment commitments. These commitments reflect all eight of the capesize newbuildings, including one vessel to be wholly owned by the Company and seven vessels to be partially owned through joint ventures. All newbuildings are expected to be delivered by the end of 2010, but the installment schedule may vary depending on when the shipyards start construction and on the final delivery date of the vessels.

The movement in advances for acquisition of vessels / newbuildings (in thousands) in the accompanying consolidated balance sheet at September 30, 2007 is analyzed as follows:

In April 2007, the Company entered into an agreement with Cosmos World Maritime S.A., an affiliate of Itochu Corporation, for the purchase of a 180,000 dwt Capesize carrier to be constructed at Imabari Shipbuilding Co., Ltd. and scheduled to be delivered in 2008, for a purchase price of approximately $92 million. The vessel will be named Iron Endurance . On May 4, 2007, the Company paid the sellers $9.2 million under the contract utilizing cash on hand. Additionally, on October 31, 2007, the Company paid a further $9.2 million to the sellers as payment for the second installment under the contract. This installment was financed through cash on hand. The remaining 2 installments are due under the memorandum of agreement between November 2007 and delivery of the vessel, expected in the third quarter of 2008. The Company may fund the balance of the purchase price with a combination of cash on hand and borrowings under the revolving credit facility.

Additionally, in April and May 2007, the Company and its joint venture partners paid the first installments due under the newbuilding contracts of Christine Shipco LLC, Hope Shipco LLC, and Lillie Shipco LLC. In total, $42.6 million was advanced, out of which $15.7 million was paid by the Company. Refer to Note 9 for details of the financing of these installments.

The movements in deferred charges shown in the accompanying consolidated balance sheet at September 30, 2007 are analyzed as follows:

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Iron Beauty was acquired in October 2005 with a time charter attached of $36,500 per day less commissions. It was determined that this was an above-market rate. As described in Note 2 to the Company’s Consolidated Financial Statements for the year ended December 31, 2006, the Company, in these circumstances, allocates a portion of the amount paid for the vessel to the fair value of the above-market charter and shows this as 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 deferred assets. This is then amortized to revenue on a straight-line basis over the term of the time-charter, resulting in a daily time charter rate of approximately $30,600 as recognized revenue. For cash flow purposes, the Company will continue to receive $36,500 per day less commissions.

Accumulated deficit (in thousands) shown in the accompanying consolidated balance sheet as at September 30, 2007 is analyzed as follows:

The prepaid expenses shown in the accompanying consolidated balance sheets consist of the following:

The sundry liabilities and accruals shown in the accompanying consolidated balance sheets consist of the following:

The following table summarizes the Company’s long-term debt (in thousands):

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Revolving Credit Facility

On July 19, 2006, the Company entered into an 8.25 year, $735 million senior secured revolving credit facility. The Company has amended the facility, most recently on July 5, 2007. Following these amendments, which are described in Note 8 to the interim financial statements contained in the quarterly report on Form 10-Q for the period ended June 30, 2007, the maximum available amount under the facility is $735.2 million. This amount includes permission to borrow up to $55.2 million, which is equal to 60% of the purchase price of Iron Endurance , the newbuilding Capesize vessel to be purchased by the Company. Under the facility in effect as September 30, 2007 the following repayments of principal are required over the next five years:

The full amount borrowed under the facility will mature on September 30, 2014.

The Company’s obligations under the credit facility are secured by: (i) first priority cross-collateralized mortgages over the vessels securing the facility, which include the entire fleet other than those purchased in connection with joint ventures; (ii) first priority assignment of all insurances, operational accounts and earnings of the vessels financed with borrowings under the facility; (iii) first priority pledges over the operating accounts of the shipowning subsidiaries held with the agent, (iv) assignments of existing and future charters for the vessels, and (v) assignments of interest rate swaps. Borrowings under the revolving credit facility bear interest at the rate of LIBOR plus 0.85% per annum (until December 31, 2010) and LIBOR plus 1.10% per annum thereafter.

Effective July 1, 2006, the Company entered into an interest-rate swap with Fortis Bank (Nederland) N.V. (“Fortis”) that effectively fixes the interest payable on the borrowings under the facility at 5.985%, inclusive of margin due to the Company’s lenders. For further details, refer to Note 13 of these financial statements.

The material terms of the facility, other than those modified by amendments, are described in Note 8 to the financial statements contained in the Company’s annual report on Form 10-K for the year ended December 31, 2006.

Consolidated Joint Venture Credit Facilities

Christine Shipco LLC

On April 11, 2007, Christine Shipco LLC entered into a secured loan agreement with Royal Bank of Scotland for an amount equal to 70% of the pre-delivery installments, or $25.3 million, for the Capesize newbuilding, to be named Christine . Pre-delivery installments payable to the yard are expected to total approximately $36.2 million. As of September 30, 2007, $7.6 million had been drawn down under the facility.

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The loan is to be repaid in one installment on the earlier of the delivery date and August 31, 2010, but the loan may be prepaid in full or in part at any time. The delivery date is expected to be during the first quarter of 2010. Under the terms of the joint venture agreement and the loan agreement, Quintana Maritime Limited is not responsible for repayment of the pre-delivery financing. Christine Shipco LLC expects to refinance the loan upon delivery to borrow an amount equal to the sum of the pre-delivery financing outstanding at delivery and 70% of the delivery installment. The Company will be obliged to make capital contributions to Christine Shipco LLC to cover 50% of the principal and interest due upon refinancing of the facility.

The interest rate payable on the loan is the aggregate of (1) LIBOR, (2) the margin of 1.125% and (3) the mandatory cost, if any. The mandatory cost is an addition to the interest rate to compensate the lender for the costs of compliance with the Bank of England and European Central Bank requirements.

Under the loan facility, Christine Shipco LLC must ensure that the fair market value of the vessel, less the unpaid portion of the purchase price, is equal to at least 130% of the loan amount outstanding. In addition, the facility contains customary restrictive covenants and events of default, including nonpayment of principal or interest, breach of covenants or material misrepresentations, default under other material indebtedness, bankruptcy, and change of control. Christine Shipco LLC is not permitted to pay dividends without the prior written consent of the lender.

Lillie Shipco LLC and Hope Shipco LLC

On May 11, 2007, Lillie Shipco LLC and Hope Shipco LLC entered into separate secured loan agreements with Royal Bank of Scotland to finance amounts equal to 70% of the first pre-delivery installments due to the shipyard, or $11.3 million and $10.9 million, respectively. The loan facilities were drawn down in full upon payment of the first pre-delivery installments in May 2007.

Each of the loans is to be repaid in one installment on April 18, 2008, but each loan may be prepaid in full or in part at any time. Under the terms of the joint venture agreements governing Lillie Shipco LLC and Hope Shipco LLC, Quintana Maritime Limited will be responsible for repaying 50% of the outstanding balance of each loan at the repayment date.

The interest rate payable on each of the loans is the aggregate of (1) LIBOR, (2) the margin of 1.125% and (3) the mandatory cost, if any. The mandatory cost is an addition to the interest rate to compensate the lender for the costs of compliance with the Bank of England and European Central Bank requirements.

Under the loan facilities, each of Hope Shipco LLC and Lillie Shipco LLC must ensure that the fair market value of the vessel, less the unpaid portion of the purchase price, is equal to at least 115% of the loan amount outstanding. In addition, the facilities contain customary restrictive covenants and events of default, including nonpayment of principal or interest, breach of covenants or material misrepresentations, default under other material indebtedness, bankruptcy, and change of control. Neither Lillie Shipco LLC nor Hope Shipco LLC is permitted to pay dividends without the prior written consent of the lender.

Both Lillie Shipco LLC and Hope Shipco LLC expect to refinance the loans to cover the remaining pre-delivery installments.

Under the three joint-venture credit facilities as at September 30, 2007, the following repayments of principal payable by the joint ventures will be required over the next five years:

Trade payables as of September 30, 2007 and December 31, 2006 shown in the accompanying unaudited consolidated financial statements include $117,778 and $94,838, respectively, related to expenses, including salaries

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of Company management, office rent, and related expenses, paid for by 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. The bulk of the expenses reimbursed under this agreement relate to the compensation of the Company’s Chief Financial Officer, General Counsel, and Board of Directors. Quintana Minerals Corporation is controlled by Corbin J. Robertson, the Chairman of the board of directors of the Company (the “Board”) and significant stockholder in the Company. Total amounts reimbursed to Quintana Minerals Corporation were $0.8 million and $0.3 million for the three months ended September 30, 2007 and September 30, 2006, respectively, and $1.5 million and $1.0 million for the nine months ended September 30, 2007 and September 30, 2006, respectively.

An affiliate of Mr. Robertson, the Chairman of the Board, has the right in certain circumstances to require us to register its 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 and certain other stockholders will have the ability to exercise certain piggyback registration rights with respect to their shares.

Vessel Acquisitions by Joint Ventures

Imabari Vessel. On April 3, 2007, the Company entered into a limited liability company agreement, effective March 30, 2007, with Robertson Maritime Investors LLC (“RMI”), an affiliate of Corbin J. Robertson, Jr. and AMCIC Cape Holdings LLC (“AMCIC”), an affiliate of Hans J. Mende, a member of our Board, for the formation of Christine Shipco LLC, a joint venture to purchase a newbuilding capesize drybulk carrier. Messrs. Robertson, Mende and Molaris, our Chief Executive Officer, will, in addition to serving as members of our Board, serve as members of the board of directors of Christine Shipco LLC. Members of Mr. Robertson’s family, including Corbin J. Robertson, III (who is also a member of the Board), will also participate in the joint venture through RMI. Christine Shipco LLC executed an agreement with an affiliate of Itochu Corporation for the purchase of Christine , a 180,000 dwt Capesize carrier to be constructed at Imabari Shipbuilding Co., Ltd. and scheduled to be delivered in 2010 for a purchase price of $72.4 million. Christine Shipco LLC entered into a term loan agreement relating to the pre-delivery financing of Christine and utilized approximately $7.6 million of the loan facility, together with cash of $3.3 million to pay the first installment of $10.9 million. Under the terms of the LLC agreement governing Christine Shipco LLC, the Company has no obligations to make capital contributions to the joint venture until the delivery of the vessel in 2010, when the Company must fund the equity portion of the delivery installment, which is equal to 50% of the acquisition price of the vessel, or approximately $36.2 million. The Company expects to fund the equity portion of that installment with cash on hand. Christine Shipco LLC expects to refinance the existing loan agreement to cover the portion of the delivery installment not funded by the Company’s capital contribution. Subsequent to the delivery of the vessel, the Company will be obliged to pay its pro rata portion of the capital obligations of the joint venture (other than amounts due under the management agreement with the Company) under most circumstances. As a result, the Company owns a 42.8% interest in the joint venture, and RMI and AMCIC each own a 28.6% interest in the joint venture.

The Conflicts Committee of the Company’s Board, which is made up of three of the Company’s independent non-executive directors, has approved this agreement.

STX Vessels. On April 16, 2007, the Company entered into agreements with STX Shipbuilding Co., Ltd. for the construction of two 181,000 dwt newbuilding Capesize carriers for expected delivery in the fourth quarter of 2010 for an aggregate purchase price of approximately $159 million. The Company has nominated Hope Shipco LLC and Lillie Shipco LLC to purchase the respective vessels. The Company owns 50% of each of Hope Shipco LLC and Lillie Shipco LLC, and AMCIC, as described above, owns the other 50%. The sole purpose of each of Hope Shipco LLC and Lillie Shipco LLC is to purchase, own and operate the relevant Capesize vessel. Hope Shipco LLC and Lillie Shipco LLC entered into credit facilities to finance 70% of the first pre-delivery installment, and each of Hope Shipco LLC and Lillie Shipco LLC expects to refinance the facilities to cover up to 70% of the total purchase price of its respective Capesize vessel.

Each of Hope Shipco LLC and Lillie Shipco LLC is managed by a two-member board of directors consisting of Hans J. Mende and Stamatis Molaris, appointed by AMCIC and the Company, respectively. Mr. Mende serves as member of the Company’s Board, and Mr. Molaris serves as a director and the Company’s Chief Executive Officer and President. All decisions of the boards of directors will require unanimous approval.

Pursuant to each joint venture agreement for the STX vessels, the Company will be responsible for 50% of all vessel construction costs. The Company expects to fund these amounts with cash from operations and, if necessary, proceeds from alternative financing arrangements. Hope Shipco LLC and Lillie Shipco LLC funded the initial delivery installments with capital contributions by the Company and AMCIC and borrowings at the joint-venture level. Each joint venture will fund the balance of the vessel construction costs with cash contributions from the partners and borrowings at the joint-venture level.

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The Conflicts Committee of the Company’s Board, which is made up of three of the Company’s independent non-executive directors, approved the agreements governing the joint ventures subsequent to the third quarter of 2007.

KSC Vessels. On April 27, 2007, the Company executed agreements with Korea Shipyard Co., Ltd., a new Korean shipyard, for the construction of four 180,000 dwt newbuilding Capesize carriers for delivery in mid-2010 at a purchase price of approximately $77.7 million per vessel, or an aggregate purchase price of approximately $310.8 million. The Company expects to nominate Fritz Shipco LLC, Benthe Shipco LLC, Gayle Frances Shipco LLC, and Iron Lena Shipco LLC to purchase the respective vessels. The Company will own 50% of each of those companies, and AMCIC will own the other 50%.

Each of the joint ventures is expected to be managed by a two-member board of directors consisting of Hans J. Mende and Stamatis Molaris, each appointed by AMCIC and the Company, respectively. Mr. Mende serves as member of the Company’s Board, and Mr. Molaris serves as a director and the Company’s Chief Executive Officer and President. All decisions of the boards of directors will require unanimous approval.

Pursuant to each joint venture agreement with respect to the KSC vessels, the Company will be responsible for 50% of all vessel costs. The Company expects to fund these amounts with cash from operations and, if necessary, proceeds from alternative financing arrangements. Each joint venture will fund the balance of the vessel construction costs with cash contributions from AMCIC and borrowings at the joint-venture level.

The Conflicts Committee of the Company’s Board, which is made up of three of the Company’s independent non-executive directors, approved the agreements governing these four joint ventures subsequent to the third quarter of 2007.

Management Agreements

Quintana Management LLC expects to enter into a management agreement (each a “Management Agreement”) with each of the three existing joint ventures and the four proposed joint ventures pursuant to which the Company will be responsible for the supervision of construction prior to delivery of the vessels and technical management of the vessels subsequent to delivery. Pursuant to each Management Agreement, the Company expects to collect from its joint venture partners $60,000 per annum per vessel for supervising the construction of each of the vessels, starting from the effective date of the joint venture agreements until their respective delivery. Upon delivery, the Company will manage the vessels on behalf of each joint venture, and the joint ventures will pay the Company a management fee based on the Company’s budgeted management costs, subject to adjustment in certain circumstances.

Charters

Of the seven capesize vessels to be acquired by the joint ventures as described above, Christine, Hope, Lillie, and two of the KSC vessels will be chartered to EDF Trading, a wholly owned subsidiary of EDF, a major European utility, upon their delivery in 2010. The five-year charters will provide for charterhire to be paid at a floor rate, which averages $27,000, net, per vessel per day for each of the five vessels, with 50% profit sharing based on the monthly AV4 BCI time-charter rate as published by the Baltic Exchange. As of September 30, 2007, the remaining two vessels have not yet been chartered.

Legal Proceedings

The Company has not been involved in any legal proceedings that 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. 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.

Legal Proceedings Related to Mr. Molaris

A private individual filed a complaint with the public prosecutor of 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 Stelmar vessel.

Subsequent to the end of the period covered by this report, the competent Magistrates Judiciary Board has acquitted Mr. Molaris and the four other defendants of the relevant charges and consequently ruled that they should not face full trial.

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The Board’s ruling is subject to appeal by either the claimant or the prosecutor of the Court of Appeals, in the case of the claimant within 10 days from the date the ruling is served on it, and in the case of the prosecutor, within 30 days from the date of issuance. In the view of the criminal lawyers handling the case for Mr. Molaris, an appeal by the Athens Court of Appeals prosecutor is unlikely, given the fact that the prosecutor of the Athens Magistrate Court has opined in favor of the acquittal.

As of September 30, 2007, the Company had 55,113,766 shares of common stock outstanding, which does not include 1,189,150 shares of unvested restricted stock that have been issued but are subject to forfeiture, and 2,237,120 warrants (including 86,562 warrants held by the Company in connection with cashless exercises).

Exercise of Warrants

In connection with the Company’s private placement in May 2006, the Company issued 8,182,232 warrants, exercisable at a price of $8.00 per share and expiring on May 11, 2009.

In the three and nine months ended September 30, 2007, the Company received $1.8 million and $35.9 million in net proceeds from the exercise of 229,937 and 4,694,633 warrants, respectively. No warrants were exercised during the corresponding periods in 2006. During the three and nine months ended September 30, 2007, the Company issued 6,783 and 74,109 shares in connection with the cashless exercise of 12,350 and 160,671 warrants, respectively. As of September 30, 2007, 2,237,120 warrants remained outstanding.

The balance sheet line item “common stock to be issued for warrants exercised” represents net cash received for 188,400 warrants that were exercised prior to December 31, 2006 but for which the related shares were issued on January 5, 2007. These shares are not included in the number of shares outstanding in the Company’s balance sheet as of December 31, 2006.

Effective July 1, 2006, the Company entered into an interest-rate swap with Fortis Bank (Nederland) N.V. (“Fortis”) on variable notional amounts ranging from $295 million to approximately $702 million, based on expected principal outstanding under the Company’s revolving credit facility. Under the terms of the swap, the Company makes quarterly payments to Fortis based on the relevant notional amount at a fixed rate of 5.135%, and Fortis makes quarterly floating-rate payments at LIBOR + 0.85% per annum to the Company based on the same notional amount. The swap transaction effectively converts the Company’s contractual floating-rate interest obligation under its new revolving credit facility to a fixed rate of 5.985%, inclusive of margin due to its lenders. The swap is effective from July 1, 2006 to December 31, 2010. In addition, Fortis has the option to enter into an additional swap with the Company effective December 31, 2010 to June 30, 2014. Under the terms of the optional swap, the Company will make quarterly fixed-rate payments of 5.00% to Fortis based on a decreasing notional amount of $504 million, and Fortis will make quarterly floating-rate payments at LIBOR + 1.10% per annum to the Company based on the same notional amount.

During the three months and nine months ended September 30, 2007, Fortis paid the Company approximately $0.4 million and $1.1 million, respectively, net of amounts paid by the Company to Fortis and is included in “interest-rate swap loss” on its consolidated income statement. For the three and nine months ended September 30, 2006, Fortis paid the Company a total of $0.3 million. The Company marks to market the fair value of the interest-rate swap and related swaption (“the swap”) at the end of every period and reflects the resulting gain or loss in “interest-rate swap gain” on its consolidated income statement. During the three and nine months ended September 30, 2007, the mark-to-market adjustment resulted in unrealized non-cash losses of $14.5 million and $5.6 million, respectively. The fair value of the swap is reflected on the consolidated balance sheet under “interest swap loss” and at September 30, 2007, the fair value of the swap was a loss of $15.4 million.

In July 2007, the Company sold 7 Panamax vessels to 2 unaffiliated third parties. Coal Glory , Iron Man , and Linda Leah were sold to three Norwegian partnerships managed by Glitnir Marine Finance AS, and Coal Age , Fearless I , Barbara , and King Coal were sold to two German partnerships managed by KG Allgemeine Leasing GmbH & Co. The total sales price of the vessels, net of sales costs, was approximately $249.4 million, and all vessels were delivered to the buyers in July 2007. Simultaneous with the sale of the vessels, the Company entered into bareboat charter agreements to lease the vessels back for 8 years. The Company will continue to generate revenues from the time charters relating to the vessels, and these revenues will continue to be reported in time charter revenues.

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The bareboat charter agreements are accounted for as operating leases and the aggregate loss on the transaction of approximately $3.3 million was deferred and will be amortized over the eight-year lease period. During the 3 month period ended September 30, 2007, approximately $0.1 million of amortization charges has been included in charter hire expense on the accompanying consolidated income statement.

The Company’s future minimum lease payment expense under the bareboat charters is as follows:

The total lease payment expense for the three and nine month periods ended September 30, 2007 was approximately $6.2 million and is included in Charter hire expense in the accompanying consolidated income statement.

On March 16, 2007, the Company paid a cash dividend of $0.24 per common share to common stockholders of record on March 2, 2007, for a total payment of $13.4 million.

On May 31, 2007, the Company paid a cash dividend of $0.24 per common share to common stockholders of record on May 18, 2007, for a total payment of $13.4 million.

On August 31, 2007, the Company paid a cash dividend of $0.31 per common share to common stockholders of record on August 17, 2007, for a total payment of $17.5 million.

Prior to the Company’s initial public offering, the Quintana Maritime Limited 2005 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted by the Company and approved by its stockholders. The purpose of the Stock Incentive Plan is to provide the directors, employees, and consultants of the Company and its affiliates additional incentive and reward opportunities designed to enhance the profitable growth of the Company and its affiliates. The Stock Incentive Plan provides for the granting of stock options, restricted stock awards, performance awards, and phantom stock awards. Only restricted stock awards are outstanding as of September 30, 2007.

No awards were granted during the nine months ended September 30, 2007, and 45,550 shares were forfeited during that period, of which 6,625 shares were forfeited during the third quarter. As of September 30, 2007 there were 1,189,150 shares of unvested restricted stock outstanding, and 1,449,750 shares remained available for issuance under the plan.

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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 $1.0 million and $3.2 million for the three and nine months ended September 30, 2007, respectively, and $0.6 million and $1.6 million for the three and nine months ended September 30, 2006, respectively. Total unrecognized compensation cost relating to the restricted stock at September 30, 2007 was $9.8 million. The total compensation cost related to unvested awards not yet recognized is expected to be recognized over a weighted-average period of approximately 2.6 years as of September 30, 2007.

Strategic Review Process

On October 16, 2007 the Company announced that its Board of Directors has decided to evaluate strategic alternatives in order to enhance shareholder value. The Board has retained Citi and Dahlman Rose to advise it during its deliberations.

Joint Ventures

On November 8, 2007, the Company entered into four additional joint venture agreements with AMCIC. Each of the joint ventures was formed to purchase a newbuilding capesize drybulk carrier (see “Note 10—Related Party Transactions” for further details). Fritz Shipco LLC, Benthe Shipco LLC, Gayle Frances Shipco LLC, and Iron Lena Shipco LLC are each owned 50% by the Company and 50% by AMCIC.

Dividend

On November 2, 2007, the Company declared a dividend of $0.31 per share payable on November 23, 2007 to stockholders of record as of November 12, 2007.

Warrant Exercise

As of November 7, 2007, an additional 1,328,691 warrants had been exercised, resulting in net proceeds to the Company of approximately $10.1 million.