U.S. Shipping Partners L.P. Reports Second Quarter 2007 Financial Results

Market Wire, August, 2007

U.S. Shipping Partners L.P. (NYSE: USS) (the "Partnership") today reported its financial results for its second quarter ended June 30, 2007.

Three Months Ended June 30, 2007

The Partnership's net income for the quarter was $2.4 million compared to $3.0 million for the quarter ended June 30, 2006. Operating income was $6.2 million for the second quarter of 2007 compared to $5.2 million in the same period in 2006. Net income per basic and diluted limited partnership unit for the 2007 second quarter was $0.13 compared to $0.21 for the 2006 second quarter.

Revenues for the quarter ended June 30, 2007 increased $7.8 million to $45.6 million from $37.8 million for the same quarter of 2006. The increase was due primarily to an increase in time charter equivalent rates of approximately 8% and an increase in the number of days worked, which together contributed an additional $4.9 million of revenues. Also, the addition of the Sea Venture, which was placed in service in June 2006, contributed an additional $2.9 million in revenues during the quarter ended June 30, 2007 over the revenues it contributed for the second quarter of 2006. The increase in revenues was partially offset by increases in vessel operating expenses of $3.0 million, depreciation and amortization expense of $1.9 million and voyage expenses of $0.9 million. The addition of the Sea Venture and the ATB Freeport, our new articulated tug barge, accounted for additional vessel operating expenses of $1.0 million and $0.9 million, respectively, while increases in crew wages and benefits contributed an additional $0.6 million and increases in maintenance and repairs also contributed an additional $0.6 million. Vessel operating expenses for the ATB Freeport were incurred in connection with the completion of construction and testing of the vessel during the second quarter of 2007; because the ATB Freeport was not placed in service until the third quarter of 2007, the Partnership received no revenues from the vessel during the second quarter of 2007. Of the increase in depreciation and amortization expense, $0.7 million is attributable to the addition of the Sea Venture and $1.2 million is attributable to additional amortization of drydock expenditures, which correspond with the timing of scheduled drydocks. The addition of the Sea Venture increased voyage expenses by $0.6 million and increases in port charges increased voyage expenses by $0.3 million.

General and administrative expenses increased by $1.1 million in the quarter ended June 30, 2007 compared to the quarter ended June 30, 2006, due primarily to an increase in personnel and professional fees. These planned year-over-year increases in personnel and the use of professional firms were incurred primarily to manage the growth of the Partnership, including the construction of the tankers and the articulated tug barges ("ATBs"). Additionally, interest expense increased by $4.8 million for the quarter due to increased borrowings and higher interest rates. This increase in interest expense was partially offset by an increase in interest income on the Partnership's restricted cash accounts of $2.4 million. The restricted cash accounts consist of two escrow accounts which were established as part of the Partnership's 2006 debt and equity financings to fund the construction of three new ATBs and the Partnership's remaining committed equity contributions to the joint venture entered into by the Partnership in 2006 to construct new product tankers (the "Joint Venture"). Interest income will decrease as funds in these escrow accounts are used to fund the construction of the three new ATBs and the Partnership's equity contributions to the Joint Venture. The Partnership also recorded $0.9 million of gains on derivative financial instruments during the second quarter of 2007. Of this amount, approximately $0.7 million was earned by the Joint Venture.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") increased by $3.4 million to $15.7 million for the quarter ended June 30, 2007 from $12.4 million for the comparable period in 2006. The increase was primarily due to the increase in revenues of $7.8 million offset by increases in vessel operating expenses, voyage expenses and general and administrative expenses of $3.0 million, $0.9 million and $1.1 million, respectively. Additionally, a gain on derivative financial instruments of $0.9 million offset by an increase in the minority interest in the income of the Joint Venture of $0.4 million further increased EBITDA by $0.5 million. EBITDA is a non-GAAP measure explained in greater detail below under "Use of Non-GAAP Financial Information."

Six Months Ended June 30, 2007

The Partnership's net income for the six months ended June 30, 2007 was $8.2 million compared to $7.2 million for the six months ended June 30, 2006. Operating income (excluding a $3.5 million contract settlement paid to the Partnership) was $13.1 million for the first six months of 2007 compared to $10.8 million in the same period in 2006. Net income per basic and diluted limited partnership unit for the six months ended June 30, 2007 was $0.44, compared to $0.51 for the six months ended June 30, 2006. The financial results for 2007 were impacted favorably by the contract settlement discussed above of $3.5 million included in "Other Income" during the period, or $0.19 per basic and diluted limited partnership unit.