MARITRANS INC /DE/, 10-K, 1998-03-30

MARITRANS INC /DE/
10-K, 1998-03-30
WATER TRANSPORTATION

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K

(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the Fiscal Year Ended December 31, 1997
or
/ / Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition Period from _______ to _______

Commission File Number 1-9063
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MARITRANS INC.
(Exact name of registrant as specified in its charter)

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DELAWARE 51-0343903
(State or other jurisdiction of (I.R.S. Employer.
incorporation or organization) Identification No.)
ONE LOGAN SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (215) 864-1200

Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, Par Value $.01 Per Share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

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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
requirements for the past 90 days.
Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

As of March 23, 1998, the aggregate market value of the common stock held by
non-affiliates of the registrant was $138,427,799. As of March 23, 1998,
Maritrans Inc. had 12,102,977 shares of common stock outstanding.

Documents Incorporated By Reference

Part III incorporates information by reference from the registrant's Proxy
Statement for Annual Meeting of Stockholders to be held on May 19, 1998.

Exhibit Index is located on page 33.
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FORM 10-K

MARITRANS INC.
TABLE OF CONTENTS

PART I

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Page
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Item 1. Business ..................................................................... 1
Item 2. Properties ................................................................... 8
Item 3. Legal Proceedings ............................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders .......................... 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters .... 11
Item 6. Selected Financial Data ...................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................... 12
Item 8. Financial Statements and Supplemental Data ................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ................................................................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant ........................... 30
Item 11. Executive Compensation ....................................................... 31
Item 12. Security Ownership of Certain Beneficial Owners and Management ............... 31
Item 13. Certain Relationships and Related Transactions ............................... 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .............. 32
Signatures ............................................................................. 35
</TABLE>

In this Report the statements contained or incorporated by reference that
are not historical facts or statements of current condition are forward-looking
statements. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"forecasts," "will," or "anticipates," or the negative thereof or other
variations thereon or comparable terminology; or by discussion of strategy or
intentions. These forward-looking statements, such as statements regarding
present or anticipated utilization, certification of safety programs, future
revenues and customer relationships, capital expenditures, future financings,
and other statements regarding matters that are not historical facts, involve
predictions. Maritrans Inc.'s (the "Company") actual results, performance, or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Potential risks and uncertainties that
could affect the Company's actual results, performance, or achievements
include, but are not limited to, the factors outlined in this report and
general financial, economic, environmental and regulatory conditions affecting
the oil and marine transportation industry in general. Given these
uncertainties, current or prospective investors are cautioned not to place
undue reliance on any such foward-looking statements. Furthermore, the Company
disclaims any obligation or intent to update any such factors or
forward-looking statements to reflect future events or developments.

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PART I

Item 1. BUSINESS

General

Maritrans Inc. (the "Corporation" or the "Registrant"), together with its
predecessor, Maritrans Partners L.P. (the "Partnership"), herein called
"Maritrans," has historically served the petroleum and petroleum product
industry by using tugs, barges and marine terminal facilities to provide marine
transportation and terminalling services along the East and Gulf Coasts of the
United States. This year, Maritrans expanded its services by adding three oil
tankers to its fleet. Maritrans also began serving the Caribbean by acquiring
two tug/barge units based in Puerto Rico.

Structure

Current. The Corporation is a Delaware corporation whose common stock, par
value $.01 per share ("Common Stock"), is publicly traded. The Corporation
conducts most of its marine transportation business activities through
operating divisions of Maritrans Operating Partners L.P. (the "Operating
Partnership") and its managing general partner, Maritrans General Partner Inc.,
wholly owned subsidiaries of the Corporation. Most of the Corporation's
terminalling and distribution services are conducted through subsidiaries of
Maritrans Holdings Inc., a wholly owned subsidiary of the Corporation.

Historical. Founded in the 1850's and incorporated in 1928 under the name
Interstate Oil Transport Company, Maritrans' predecessor was one of the first
tank barge operators in the United States, with a fleet which increased in size
and capacity as United States consumption of petroleum products increased. On
December 31, 1980, Maritrans' predecessor operations and its tugboat and barge
affiliates were acquired by Sonat Inc. ("Sonat"). On April 14, 1987, the
Partnership acquired the tug and barge business and related assets from Sonat.
On March 31, 1993, the limited partners of the Partnership voted on a proposal
to convert the Partnership to corporate form (the "Conversion"). The proposal
was approved, and on April 1, 1993, Maritrans Inc., then a newly-formed
Delaware corporation, succeeded to all assets and liabilities of the
Partnership. The holders of general and limited partnership interests in the
Partnership and in the Operating Partnership were issued shares of Common Stock
representing substantially the same percentage equity interest in the
Corporation as they had in the Partnership, directly or indirectly, in exchange
for their partnership interest. Each previously held Unit of Limited
Partnership Interest in the Partnership was exchanged for one share of Common
Stock of the Corporation. For financial accounting purposes, the conversion to
corporate form has been treated as a reorganization of affiliated entities,
with the assets and liabilities recorded at their historical costs. In
addition, the Partnership recognized a net deferred income tax liability for
temporary differences in accordance with Statement of Financial Accounting
Standard ("FAS") No. 109, "Accounting for Income Taxes," which resulted in a
one-time charge to earnings of $16.6 million in the first quarter of 1993.

Overview. Since 1981, Maritrans and its predecessors have transported
annually over 200 million barrels of crude oil and refined petroleum products.
Based on its internal research regarding competition, Maritrans believes that
it is one of the largest United States marine transporters of petroleum and
petroleum products in the United States coastwise Jones Act trade (i.e. from
point-to-point within the United States), excluding affiliates of integrated
oil companies, and that it owns one of the largest domestic fleets of U.S. flag
oceangoing tank barges in terms of cargo-carrying capacity. This year,
Maritrans expanded its services by adding three product tankers to its fleet.
Maritrans also began serving the Caribbean by acquiring two tug/barge units
based in Puerto Rico.

Maritrans operates a fleet of oil tankers, tank barges and tugboats and
two terminal facilities. In 1997, Maritrans acquired three oil tankers that
have a total capacity of approximately 0.7 million barrels. Its largest barge
has a capacity of approximately 400,000 barrels, and its current operating
cargo fleet capacity aggregates approximately 4.9 million barrels. Aggregate
capacity at Maritrans' terminal facilities totals approximately 1.2 million
barrels at December 31, 1997.

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Demand for Maritrans' services is dependent primarily upon general demand
for petroleum and petroleum products in the geographic areas served by its
vessels. Management believes that United States petroleum consumption, and
particularly consumption in New England and Florida, are significant indicators
of demand for Maritrans' services. Increases in product consumption generally
increase demand for Maritrans' services; conversely, decreases in consumption
generally lessen demand for Maritrans' services.

Management further believes that the level of domestic consumption of
imported product is also significant to Maritrans' business. Imported petroleum
products generally can be shipped on foreign-flag vessels directly into United
States ports for storage, distribution and eventual consumption. These
shipments reduce the need for domestic marine transportation service providers
such as Maritrans to carry products from United States refineries to such
ports. While Maritrans does benefit somewhat from the increase in demand for
domestic redistribution services that results from the delivery of excess
product to terminals by foreign-flag vessels, the overall effect of refined
product imports on the demand for Maritrans' services is generally negative.

In 1997, Maritrans functionally organized into a matrix organization to
better allow resources to be focused on different tasks regardless of where
they are needed. This also allows for standards to be applied consistently
across the companies regardless of the operation or location. The main matrix
groups are operations, marketing and business services.

The Gulf of Mexico operations, headquartered in Tampa, Florida, provides
marine transportation services for petroleum products from refineries located
in Texas, Louisiana and Mississippi to distribution points along the Gulf and
Atlantic Coasts generally south of Cape Hatteras, North Carolina and
particularly into Florida. The East Coast operations, supported by a major
fleet center in Philadelphia, Pennsylvania, transports petroleum products from
East Coast refineries (primarily located in and near Philadelphia) and pipeline
terminals located in the New York Harbor area to distribution terminals
primarily located along the Eastern Seaboard between the Canadian Maritime
Provinces and Norfolk, Virginia and transports petroleum products between
refineries and distribution points along the Delaware River and in the
Chesapeake Bay. Maritrans also provides, as part of its East Coast operations,
lightering services for large tankers (a process of off-loading crude oil or
petroleum products from an inbound tanker into smaller tankers and/or barges,
thereby enabling the tanker to navigate draft-restricted rivers and ports to
discharge cargo at a refinery or storage and distribution terminal). As part of
its tanker acquisition, Maritrans also acquired two small tug/barge units and
an operations office in Yabucoa, Puerto Rico. These units transport petroleum
products largely within the island of Puerto Rico.

Sales and Marketing

Maritrans provides marine transportation, storage, and distribution
coordination services primarily to integrated oil companies, independent oil
companies, and petroleum distributors in the southern and eastern United
States. Maritrans relies primarily on direct sales efforts, minimizing its use
of chartering brokers. Maritrans monitors the supply and distribution patterns
of its actual and prospective customers and focuses its efforts on providing
services that are responsive to the current and future needs of these
customers.

Maritrans does business on a term contract basis, a spot market basis and,
to a minimal extent, on a product exchange basis. Maritrans strives to maintain
an appropriate mix of contracted business, based on current market conditions.

In light of the potential liabilities of oil companies and other shippers
of petroleum products under the Oil Pollution Act of 1990 ("OPA") and analogous
state laws, management believes that some shippers have begun to select
transporters in larger measure than in the past on the basis of a demonstrated
record of safe operations. Maritrans believes that the measures it has
implemented in the last seven years to promote higher quality operations and
its longstanding commitment to safe transportation of petroleum products
benefit its marketing efforts with these shippers.

In 1997, approximately 77 percent of Maritrans revenues were generated
from 10 customers. In 1997, contracts with Sun Oil Company, Marathon Oil and
Star Enterprise, accounted for approximately 24 percent, 15 percent, and 12
percent, respectively, of Maritrans revenue. During 1997, contracts were
renewed with some of Maritrans' larger customers. While several of these
contracts result in lower revenue per barrel transported,

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Maritrans has gained either higher vessel utilization or higher volume
commitments with those customers. There could be a material effect on Maritrans
if any of these customers were to cancel or terminate their various agreements
with Maritrans. Management believes that cancellation or termination of all its
business with any of its larger customers is unlikely.

Competition and Competitive Factors

Overview. The maritime petroleum transportation industry is highly
competitive. The Jones Act, a federal law, restricts United States
point-to-point maritime shipping to vessels built in the United States, owned
by U.S. citizens and manned by U.S. crews. In Maritrans' market areas, its
primary direct competitors are the operators of U.S. flag oceangoing barges and
U.S. flag tankers. In the Gulf market, management believes the primary
competitors are the fleets of both other independent petroleum transporters and
integrated oil companies. In the Eastern market, management believes that
Maritrans competes primarily with other independent oceangoing barge operators
and with the captive fleets of integrated oil companies and, in lightering
operations, competes with foreign-flag operators which lighter offshore. Some
of the integrated oil company fleets with which Maritrans competes are larger
than Maritrans' fleet. Additionally, in certain geographic areas and in certain
business activities, Maritrans competes with the operators of petroleum product
pipelines. Competitive factors which also affect Maritrans include the output
of United States refineries and the importation of refined petroleum products.

The primary competition for Maritrans' marine terminals is proprietary
storage capacity of integrated oil companies, merchant refiners, and
independent marine terminal operators.

U.S. Flag Barges and Tankers. Maritrans' most direct competitors are the
other operators of U.S. flag oceangoing barges and tankers. Because of the
restrictions imposed by the Jones Act, there is a finite number of vessels that
are currently eligible to engage in U.S. maritime petroleum transport. The
number of vessels eligible to engage in Jones Act trade has declined
significantly over the past several years. The gradual implementation of
regulations requiring significant capital modifications and in some cases loss
of vessel capacity, as well as a decrease in the number of new vessels
constructed since 1982, have been the major causes of this decline. Competition
in the industry is based upon price and service (including vessel availability)
and is intense.

Maritrans is engaged in several different market activities. A significant
portion of its revenues in 1997 was generated in the coastal transportation of
petroleum products from refineries or pipeline terminals in the Gulf of Mexico
to ports which are not served by pipelines. Management believes that the
optimal vessel size suited to serve these ports is between 20,000 deadweight
tons ("DWT") (approximately 160,000 barrels) and 40,000 DWT (approximately
320,000 barrels). Maritrans currently operates seven barges in this size range
in this market, which comprises a significant number of the vessels able to
compete in this market. The relatively large size of Maritrans' fleet generally
provides greater flexibility in meeting customers' needs.

Maritrans competes with operators of generally smaller vessels in its
Eastern transportation activities. In this activity Maritrans is competing
primarily with other barge operators. This is a diverse market allowing a
broader size range of vessels to participate than in the Gulf of Mexico.

Management believes that, based on the Corporations' fleet size,
maintenance and training programs, and spill record, Maritrans' independent
competitors do not provide the same level of service, quality performance, or
attention to safe operations as Maritrans.

General Agreement on Trade in Services ("GATS") and North American Free
Trade Agreement ("NAFTA").

The possible inclusion of maritime services within the scope of the GATS
and the NAFTA was the subject of discussion in the Uruguay Round of GATS
negotiations and NAFTA negotiations. Maritime services were not included in
GATS until at least the year 2000. If maritime services were deemed to include
cabotage (vessel trade or marine transportation between two points within the
same country) and were included in any multi-national trade agreements, the
result would be to open the Jones Act trade (i.e., transportation of maritime
cargo between U.S. ports in which Maritrans and other U.S. vessel owners
operate) to foreign-flag vessels which would operate at lower costs. While
cabotage will not be included in the GATS and the NAFTA in the immediate

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future, the possibility exists that cabotage could be included in the GATS,
NAFTA or other international trade agreements in the future. In the meantime,
Maritrans and the maritime industry will continue to resist vigorously the
inclusion of cabotage in the GATS, NAFTA and any other international trade
agreements.

Refined Product Pipelines. Existing refined product pipelines generally
are the lowest incremental cost method for the long-haul movement of petroleum
and refined petroleum products. Other than the Colonial Pipeline system, which
originates in Texas and terminates at New York Harbor, the Plantation Pipeline,
which originates in Louisiana and terminates in Washington D.C., and smaller
regional pipelines between Philadelphia and New York, there are no pipelines
carrying refined petroleum products to the major storage and distribution
facilities currently served by Maritrans. While the Colonial Pipeline system
reduces the amount of refined product transported into the New York area by
ship, it provides an origination point for Maritrans' business of transporting
such products from New York Harbor to New England ports. Management believes
that high capital costs, tariff regulation and environmental considerations
make it unlikely that a new refined product pipeline system which would have a
material adverse effect on Maritrans' business will be built in its market
areas in the near future. It is possible, however, that new pipeline segments
(including pipeline segments that connect with existing pipeline systems) could
be built or that existing pipelines could be converted to carry refined
petroleum products, either of which could have a competitive effect on
Maritrans in particular locations.

Imported Refined Petroleum Products. A significant factor affecting the
level of Maritrans' business operations is the level of refined petroleum
product imports, particularly in Florida and New England. Imported refined
petroleum products may be transported on foreign-flag vessels, which are
generally less costly to operate than U.S. flag vessels. To the extent that
there is an increase in the importation of refined petroleum products to any of
the markets served by Maritrans, there could be a decrease in the demand for
the transportation of refined products from United States refineries, which
would likely have an adverse impact upon Maritrans. One possible outcome of the
Clean Air Act Amendments of 1990 could be the importing of more refined product
from outside the United States in order to avoid the expense of upgrading
United States refineries to comply with such Act. In this case, while there
would still be a need for marine petroleum transportation, the demand would
decrease, thereby possibly materially adversely affecting the coastwise
business of Maritrans and its competitors.

Delaware River Channel Deepening. Legislation approved by the United
States Congress in 1992 authorizes the U.S. Army Corps of Engineers to deepen
the channel of the Delaware River between the river's mouth and Philadelphia
from forty to forty-five feet. If further legislation appropriating the funds
for this project should become law and this project is implemented and used by
vessels calling on the Delaware Valley refineries, it would have a material
adverse effect on Maritrans' lightering business which currently transports
crude oil which is off-loaded from deeply laden tankers from the mouth of the
Delaware Bay up the Delaware River to the Delaware Valley refineries.

Employees and Employee Relations

At December 31, 1997, Maritrans and its subsidiaries employed a total of
587 persons. Of these employees, 86 are employed at the Philadelphia,
Pennsylvania headquarters of the Corporation or at the Philadelphia and Tampa
fleet centers, 366 are seagoing employees who work aboard the tugs and barges,
122 are seagoing employees who work aboard the tank ships, and 13 are employed
in Maritrans' terminal facilities. Maritrans and its predecessors have had
collective bargaining agreements with the Seafarers' International Union of
North America, Atlantic, Gulf and Inland District, AFL-CIO ("SIU"), and with
American Maritime Officers ("AMO"), formerly District 2 Marine Engineers
Beneficial Association, Associated Maritime Officers, AFL-CIO, for
approximately 40 years. Approximately one-half of the total number of seagoing
employees employed are supervisors and, hence, as part of management, are not
represented by maritime unions. The collective bargaining agreement with the
SIU covers approximately 218 employees and expires on May 31, 1999. The
collective bargaining agreement with the AMO covers approximately 77 employees
and expires on October 8, 2007. None of the shore-based employees are covered
by any collective bargaining agreement.

Management believes that the seagoing supervisory and non-supervisory
personnel contribute significantly to responsive customer service. Maritrans
maintains a policy of seeking to promote from within, where possible, and
generally seeks to draw from its union and non-union personnel to fill
supervisory and other management positions as vacancies occur. Management
believes that its operational audit program (performed by Tidewater

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School of Navigation, Inc.) and training program are essential to insure that
its employees are knowledgeable and highly skilled in the performance of their
duties as well as in their preparedness for any unforeseen emergency situations
that may arise. Consequently, various training sessions and additional skill
improvement seminars are held throughout the year.

Regulation

Marine Transportation -- General. The Interstate Commerce Act exempts from
economic regulation the water transportation of petroleum cargos in bulk.
Accordingly, Maritrans' transportation rates, which are negotiated with its
customers, are not subject to special rate regulation under the provisions of
such act or otherwise. The operation of tank ships, tugboats and barges is
subject to regulation under various federal laws and international conventions,
as interpreted and implemented by the United States Coast Guard, as well as
certain state and local laws. Tank ships, tugboats and barges are required to
meet construction and repair standards established by the American Bureau of
Shipping, a private organization, and/or the United States Coast Guard and to
meet operational and safety standards presently established by the United
States Coast Guard. Maritrans' seagoing supervisory personnel are licensed by
the United States Coast Guard. Seamen and tankermen are certificated by the
United States Coast Guard.

Jones Act. The Jones Act, a federal law, restricts maritime transportation
between United States points to vessels built and registered in the United
States and owned by United States citizens. The entities in the Maritrans
organizational structure engaged in maritime transportation between United
States points are subject to the provisions of the law. Therefore, it is the
responsibility of Maritrans to monitor ownership of these entities and take any
remedial action necessary to insure that no violation of the Jones Act
ownership restrictions occurs. In addition, the Jones Act requires that all
United States flag vessels be manned by United States citizens, which
requirement significantly increases the labor and certain other operating costs
of United States flag vessel operations compared to foreign-flag vessel
operations. Foreign-flag seamen generally receive lower wages and benefits than
those received by United States citizen seamen. In addition, a significant
number of foreign governments subsidize, at least to some extent, the wages
and/or benefits received by the seamen of those nations. Furthermore, certain
of these foreign governments subsidize those nations' shipyards, resulting in
lower shipyard costs both for new vessels and repairs than those paid by United
States-flag vessel owners such as Maritrans to United States shipyards.
Finally, the United States Coast Guard and American Bureau of Shipping maintain
the most stringent regime of vessel inspection in the world, which tends to
result in higher regulatory compliance costs for United States-flag operators
than those paid by owners of vessels registered under foreign flags of
convenience. Because Maritrans transports petroleum and petroleum products
between United States ports, most of its business depends upon the Jones Act
remaining in effect. There have been various unsuccessful attempts in the past
by foreign governments and companies to gain access to the Jones Act trade, as
well as by interests within the United States to limit or do away with the
Jones Act. Legislation to this effect was introduced in the last session of
Congress. Management expects that efforts of this type will continue.

Environmental Matters

Maritrans' operations present potential environmental risks, primarily
through the marine transportation or storage of petroleum. Maritrans is
committed to protecting the environment and complying with applicable
environmental laws and regulations. Maritrans, as well as its competitors, is
subject to regulation under federal, state and local environmental laws which
have the effect of increasing the costs and potential liabilities arising out
of its operations.

Marine Storage Terminal Regulation. Maritrans marine terminal subsidiaries
are subject to various federal, state and local environmental laws and
regulations, particularly with respect to air quality, the handling of
materials removed from the tanks of vessels which are cleaned, and any spillage
of petroleum products on or adjoining marine terminal premises. Management
believes that this regulatory scheme will become progressively stricter in the
future, resulting in greater capital expenditures by Maritrans for
environmentally related equipment. Also, there are significant fines and
penalties for any violations of this scheme. Management intends to reflect any
such additional expenditures, to the extent possible, in the rates which are
charged to customers from time to time for services.

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Oil Pollution Legislation. Many of the states in which Maritrans does
business have enacted laws providing for strict, unlimited liability for vessel
owners in the event of an oil spill. In addition, certain states have enacted
or are considering legislation or regulations involving at least some of the
following provisions: tank- vessel-free zones, contingency planning, state
inspection of vessels, additional operating, maintenance and safety
requirements, and state financial responsibility requirements. As a result of
this legislation and regulation, Maritrans has limited its carriage of
persistent oils, primarily crude and #6 oil, to or through portions of several
of these states. Persistent oils are those which continue to exist longer in
the water when spilled than do more highly refined products, such as gasoline,
thus making them more difficult to clean up.

In August 1990, OPA became law. OPA substantially changes the liability
exposure of owners and operators of vessels, oil terminals and pipelines from
that imposed under prior law. Under OPA, each responsible party for a vessel or
facility from which oil is discharged will be jointly, strictly and severally
liable for all oil spill containment and clean-up costs and certain other
damages arising from the discharge. These other damages are defined broadly to
include (i) natural resource damage (recoverable only by government entities),
(ii) real and personal property damage, (iii) net loss of taxes, royalties,
rents, fees and other lost revenues (recoverable only by government entities),
(iv) lost profits or impairment of earning capacity due to property or natural
resource damage, and (v) net cost of public services necessitated by a spill
response, such as protection from fire, safety or health hazards.

The owner or operator of a vessel from which oil is discharged will be
liable under OPA unless it can be demonstrated that the spill was caused solely
by an act of God, an act of war, or the act or omission of a third party
unrelated by contract to the responsible party. Even if the spill is caused
solely by a third party, the owner or operator must pay all removal cost and
damage claims and then seek reimbursement from the third party or the trust
fund established under OPA.

OPA establishes a federal limit of liability of the greater of $1,200 per
gross ton or $10 million per tank vessel. A vessel owner's liability is not
limited, however, if the spill results from a violation of federal safety,
construction or operating regulations. In addition, OPA does not preclude
states from adopting their own liability laws. Numerous states in which
Maritrans operates have adopted legislation imposing unlimited strict liability
for vessel owners and operators. Management believes that the liability
provisions of OPA and similar state laws have greatly expanded Maritrans'
potential liability in the event of an oil spill, even where Maritrans is not
at fault.

OPA requires all vessels to maintain a certificate of financial
responsibility for oil pollution in an amount equal to the greater of $1,200
per gross ton per vessel, or $10 million per vessel in conformance with U.S.
Coast Guard regulations. Additional financial responsibility in the amount of
$300 per gross ton is required under U.S. Coast Guard regulations under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"),
the federal Superfund law. Owners of more than one tank vessel, such as
Maritrans, however, are only required to demonstrate financial responsibility
in an amount sufficient to cover the vessel having the greatest maximum
liability (approximately $40 million in Maritrans' case). Maritrans has
acquired such certificates through filing required financial information with
the U.S. Coast Guard.

OPA will require the retirement of, or retrofitting with double hulls, all
single-hulled petroleum tankers and barges operating in U.S. waters, including
most of Maritrans' existing barges. The first of Maritrans' affected barges
will have to be retired or retrofitted by 2003. However, most of Maritrans'
large oceangoing, single-hulled barges will be affected January 1, 2005.
Maritrans' barges under 5,000 gross registered tons are not scheduled for
retirement until 2015. The two single-hulled tankers purchased in 1997 are
affected in 2005 and 2006, respectively, at which time they will be required to
comply with OPA or be operated outside U.S. waters. Approximately 19 percent of
Maritrans' operating capacity has been qualified by the United States Coast
Guard as meeting the double-hull requirements and, therefore, is allowed to
continue operating without modification and without a legislatively determined
retirement date. If Maritrans were to replace its entire single-hulled oil-
carrying vessel capacity with newly built double hulls, the estimated cost
would be approximately $500 million, based on an estimated replacement cost of
$125 per barrel of capacity. This estimate could be higher as shipyard costs
increase.

During 1997, Maritrans announced plans for a pilot double-hull rebuild
project to convert one of its existing single-hulled 190,000-barrel class
barges to a double-hull design configuration. Recently Maritrans awarded

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a shipyard contract to carry out the double-hull rebuilding and coating of the
tanks for the barge to be used in the pilot project, the OCEAN 192, for a total
cost of approximately $10 million. The results of this initial rebuild project,
including subsequent performance of the vessel, will be evaluated in order to
determine whether Maritrans enters into a multi-vessel rebuilding program for
other single-hulled vessels of similar size. Maritrans believes that eight of
its additional barges may be suitable candidates for the double-hull design and
related construction methodology of the pilot project. If Maritrans were to
double-hull these nine vessels, it would represent approximately 40 percent of
Maritrans' operating capacity.

In 1996, Maritrans filed suit against the United States government under
the Fifth Amendment to the U.S. Constitution for "taking" 37 of Maritrans' tank
barges without just compensation by passage of OPA. See "Item 3--Legal
Proceedings."

OPA further required all tank vessel operators to submit, by February 18,
1993, for federal approval, detailed vessel oil spill contingency plans setting
forth their capacity to respond to a worst case spill situation. Maritrans
filed its plans prior to that deadline. Several states have similar contingency
or response plan requirements. Because of the large number of ports served by
Maritrans, the cost of compliance may be substantial, and, while Maritrans is
presently in compliance, there is no assurance that Maritrans will be able to
remain in compliance with all the federal requirements or those of one or more
states.

OPA is expected to have a continuing adverse effect on the entire U.S. oil
and petroleum marine transportation industry, including Maritrans. The effects
on the industry could include, among others, (i) increased requirements for
capital expenditures, which the independent marine transporters of petroleum
may not be able to finance, to fund the cost of double-hulled vessels, (ii)
increased maintenance, training, insurance and other operating costs, (iii)
civil penalties and liability, (iv) decreased operating revenues as a result of
a further reduction of volumes transported by vessels and (v) increased
difficulty in obtaining sufficient insurance, particularly oil pollution
coverage. These effects could adversely affect Maritrans' profitability and
liquidity.

The following table sets forth Maritrans' quantifiable cargo oil spill
record for the period January 1, 1993 through December 31, 1997:

<TABLE>
<CAPTION>
Gallons Spilled
No. of No. of No. of Per Million
Period Gals. Carried Spills Gals. Spilled Gals. Carried
- ------------------------- --------------- -------- --------------- ----------------
(000) (000)
<S> <C> <C> <C> <C>
1/1/1993 -- 12/31/1993* 10,433,000 2 .01 .001
1/1/1994 -- 12/31/1994 9,954,000 2 .02 .002
1/1/1995 -- 12/31/1995 9,450,000 1 16.80 1.780
1/1/1996 -- 12/31/1996 9,160,000 3 .08 .009
1/1/1997 -- 12/31/1997 10,136,000 1 .05 .005
</TABLE>

- ------------
* Results for 1993 exclude the product lost, mostly burned, in the collision of
Maritrans' barge, the OCEAN 255, with vessels owned by others off the coast
of Florida in August 1993. Management believes that Maritrans was not at
fault in this incident.

Maritrans believes that its spill ratio compares favorably with the other
independent, coastwise operators in the Jones Act trade.

Water Pollution Regulations. The Federal Water Pollution Control Act of
1972 ("FWPCA"), as amended by the Clean Water Act of 1977, imposes strict
prohibitions against the discharge of oil (and its derivatives) and hazardous
substances into navigable waters of the United States. FWPCA provides civil and
criminal penalties for any discharge of petroleum products in harmful
quantities and imposes substantial liability for the clean-up costs of removing
an oil spill. State laws for the control of water pollution also provide
varying civil and criminal penalties and clean-up cost liabilities in the case
of a release of petroleum or its derivatives into surface waters. In the course
of its vessel operations, Maritrans engages contractors, in addition to
Maritank Philadelphia Inc., to remove and dispose of waste material, including
tank residue. In the event that any of such waste is deemed "hazardous," as
defined in FWPCA or the Resource Conservation and Recovery Act, and is disposed
of in violation of applicable law, Maritrans could be jointly and severally
liable with the disposal contractor for

7
<PAGE>

the clean-up costs and any resulting damages. The United States Environmental
Protection Agency ("EPA") previously determined not to classify most common
types of "used oil" as a "hazardous waste," provided that certain recycling
standards are met. While it is unlikely that used oil will be classified as
hazardous, the management of used oil under EPA's proposed regulations will
increase the cost of disposing of or recycling used oil from Maritrans'
vessels. Some states in which Maritrans operates, however, have classified
"used oil" as hazardous. Maritrans has found it increasingly expensive to
manage the wastes generated in its operations.

Air Pollution Regulations. The 1990 amendments to the Clean Air Act give
the EPA and the states the authority to regulate emissions of volatile organic
compounds ("VOCs") and any other air pollutant from tank vessels in all ports
served by Maritrans and storage terminals. Several states with ports served by
Maritrans already have established regulations to require the installation of
vapor recovery equipment on petroleum-carrying vessels to reduce the emissions
of VOCs. Compliance with these federal and state regulations has required
material capital expenditures for the retrofitting of Maritrans' barges and has
increased operating costs. Similarly, various states require vapor recovery
equipment at storage terminals for the loading of petroleum into vessels and
tank trucks. Maritrans' terminal facilities are equipped with vapor recovery
capabilities for the loading of tank trucks. They do not currently load
petroleum into vessels and therefore have not acquired vapor recovery
capabilities for that activity. The EPA also has the authority to regulate
emissions from marine vessel engines; however, with the possible exception of
the use of low sulfur fuels, direct regulation of marine engine emissions is
not likely in the near future in ports served by Maritrans. However, it is
possible that the EPA and/or various state environmental agencies ultimately
may require that additional air pollution abatement equipment be installed in
tugboats or tank ships, including those owned by Maritrans. Such a requirement
could result in a material expenditure by Maritrans, which could have an
adverse effect on Maritrans' profitability if it is not able to recoup these
costs through increased charter rates. Also, the application of various air
quality rules in connection with the operation of Maritrans' facilities may
require significant additional expenditures which may not be recovered through
increased rates.

User Fees and Taxes. The Water Resources Development Act of 1986 permits
local non-federal entities to recover a portion of the costs of new port and
harbor improvements from vessel operators with vessels benefitting from such
improvements. Management does not believe that Maritrans' vessels currently
benefit from such improvements. However, there can be no assurance that such
entities will not seek to recover a portion of such costs from Maritrans.
Federal legislation has been enacted imposing user fees on vessel operators
such as Maritrans to help fund the United States Coast Guard's regulatory
activities. Other federal, state and local agencies or authorities could also
seek to impose additional user fees or taxes on vessel operators or their
vessels. The Coast Guard collects fees for vessel inspection and documentation,
licensing and tank vessel examinations. These fees have not been material to
Maritrans. There can be no assurance that additional user fees, which could
have a material adverse effect upon the financial condition and results of
operations of Maritrans, will not be imposed in the future.

Item 2. PROPERTIES

Vessels. The Corporation's subsidiaries owned, at December 31, 1997, a
fleet of 55 vessels, of which 3 are oil tankers, 29 are barges and 23 are
tugboats.

In the second half of 1997 Maritrans purchased a variety of marine assets,
which increased the size of its fleet. Maritrans acquired three oil tankers,
two tugboats and two barges. The acquired vessels were renamed and placed in
Maritrans' service immediately. The oil tankers consisted of two 230,000-barrel
petroleum tankers and one 260,000-barrel double-hull petroleum tanker. Under
the purchase agreement with Chevron U.S.A. Inc., Maritrans will acquire one
additional 260,000-barrel double-hull petroleum tanker in 1998. Maritrans also
purchased two 3800 hp tugs, along with a 64,165-bbl barge and a 72,693 bbl
barge.

The barge fleet consists of a variety of vessels falling within six
different barge classifications. The largest vessels in the fleet are the
twelve superbarges ranging in capacity from 188,065 to 400,000 barrels. The
oldest vessel in that class is the OCEAN 250 which was constructed in 1970,
while the largest vessel is the OCEAN 400, for which modifications were
completed as recently as 1990. For the most part, however, the bulk of the
superbarge fleet was constructed during the 1970's and early 1980's.

8
<PAGE>

The fleet's next ten largest barges range in capacity from 61,638 barrels
to 165,881 barrels and were constructed or substantially renovated between 1967
and 1981. The remainder of the barge fleet is comprised of three vessels
falling in the 50,000 barrel class, and four vessels in the 30,000 barrel
class. The majority of these vessels were constructed between 1961 and 1977.

The tugboat fleet is comprised of one 11,000 horsepower class vessel,
eleven 5,600 horsepower class vessels (two of which are chartered), five 4,000
horsepower class vessels, four 3,200 horsepower class vessels, three 2,200
horsepower class vessels, one pusher class vessel and one chartered 15,000
horsepower class vessel. The year of construction or substantial renovation of
these vessels ranges from 1962 to 1990 with the bulk of the tugboats having
been constructed sometime between 1967 and 1981.

Substantially all of the vessels in the fleet are subject to first
preferred ship mortgages. These mortgages require the Operating Partnership to
maintain the vessels at a high standard and to continue a life-extension
program for certain of its larger barges. At December 31, 1997, Maritrans is in
compliance with the Operating Partnership's mortgage covenants.

Marine Terminals. At December 31, 1997, Maritank Philadelphia Inc. ("MPI")
owns 35 acres on the west bank of the Schuylkill River in Philadelphia where
twelve storage tanks with a total capacity of 1,040,000 barrels, truck loading
racks, office space and related equipment used in MPI's marine terminal and
tank cleaning operations are located. In early 1993, Maritank Maryland Inc.
("MMI") acquired 25 acres on the Wicomico River in Salisbury, Maryland where
fourteen storage tanks with a total capacity of 170,000 barrels, truck loading
racks, office space and related equipment used in MMI's marine terminal
operations are located. In March 1997, MMI sold 20 acres in Baltimore, Maryland
with ten storage tanks with a total capacity of 530,000 barrels, truck loading
racks and related equipment.

Other Real Property. The Corporation's operations are headquartered in
Philadelphia, Pennsylvania, where it leases office space, expiring in 1998.
East Coast operations are located on the west bank of the Schuylkill River in
Philadelphia, Pennsylvania where the Operating Partnership owns approximately
six acres of improved land. In addition, the Operating Partnership also leases
a bulkhead of approximately 430 feet from the federal government for purposes
of mooring vessels adjacent to the owned land. This lease was renewed in 1993
and expires in 1998 and is expected to be renewed. The Operating Partnership
also leases four acres of Port Authority land in Tampa, Florida for use as its
Gulf fleet center. The lease expires in 2004, with three renewal options of ten
years each. Maritrans also leases a limited amount of office space in
Wilmington, Delaware for itself and its affiliated entities.

Item 3. LEGAL PROCEEDINGS

Maritrans is a party to routine, marine-related claims, lawsuits and labor
arbitrations arising in the ordinary course of its business. The claims made in
connection with Maritrans' marine operations are covered by marine insurance,
subject to applicable policy deductibles which are not material as to any type
of insurance coverage. Management believes, based on its current knowledge,
that such lawsuits and claims, even if the outcomes were to be adverse, would
not have a material adverse effect on Maritrans' financial condition.

Maritrans has been sued by 58 individuals alleging unspecified damages for
exposure to asbestos and, in at least 47 such cases, for exposure to tobacco
smoke. Although Maritrans believes these claims are without merit, it is
impossible at this time to express a definitive opinion on the final outcome of
any such suit. Management believes that any liability would not have a material
adverse effect as it would be adequately covered by applicable insurance.

During 1993, one of Maritrans' tug/barge units was involved in a collision
off the coast of Florida. Claims resulting from this incident have been covered
by insurance and remaining claims are expected to be covered by insurance. In
1993, Maritrans received insurance proceeds in excess of the barge's net book
value for the constructive total loss of the barge.

In 1996, Maritrans filed suit against the United States government under
the Fifth Amendment to the U.S. Constitution for "taking" 37 of Maritrans' tank
barges without just compensation. Maritrans asserts that the vessels were taken
with the passage of Section 4115 of OPA and that this taking was done in
contravention of the

9
<PAGE>

Fifth Amendment, which specifically prohibits the United States government from
taking private property for public use without just compensation. Maritrans is
seeking compensation based on the fact that Maritrans has been deprived of its
reasonable investment-backed expectation in the continued use of its barges by
Section 4115 of OPA, which prohibits all existing single-hull tank vessels from
operating in U.S. waters under a retirement schedule which began January 1,
1995, and ends on January 1, 2015. Under this OPA provision, Maritrans'
single-hull tank barges will be forced from service commencing on January 1,
2003, with a significant portion of the economic lives remaining, or be
required to be retrofitted.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Corporation's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the year ended December 31, 1997.

10
<PAGE>

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Market Information and Holders

Maritrans Inc. Common Shares trade on the New York Stock Exchange under
the symbol "TUG." The following table sets forth, for the periods indicated,
the high and low sales prices per share as reported by the New York Stock
Exchange.

QUARTERS ENDED IN 1997: HIGH LOW
- ------------------------- -------- -------
March 31, 1997 $ 7.125 $ 5.875
June 30, 1997 7.875 5.750
September 30, 1997 9.813 7.750
December 31, 1997 9.875 8.313

QUARTERS ENDED IN 1996: HIGH LOW
- ------------------------- -------- -------
March 31, 1996 $ 6.250 $ 5.000
June 30, 1996 6.250 5.125
September 30, 1996 7.000 5.875
December 31, 1996 6.500 6.000

As of January 31, 1998, the Registrant had 12,055,261 Common Shares
outstanding and approximately 1,004 stockholders of record.

Dividends

For the years ended December 31, 1997 and 1996, Maritrans Inc. paid the
following cash dividends to stockholders:

PAYMENTS IN 1997: PER SHARE
- --------------------------- -------------
March 12, 1997 $ .075
June 11, 1997 $ .075
September 10, 1997 $ .075
December 10, 1997 $ .090
------
Total $ .315
======

PAYMENTS IN 1996: PER SHARE
- --------------------------- -------------
March 13, 1996 $ .050
June 12, 1996 $ .075
September 11, 1996 $ .075
December 11, 1996 $ .075
------
Total $ .275
======

While dividend policy is determined at the discretion of the Board of
Directors of Maritrans Inc., management believes that it is likely Maritrans
will pay quarterly cash dividends during 1998.

11
<PAGE>

Item 6. SELECTED FINANCIAL DATA ($000 except per share amounts)

<TABLE>
<CAPTION>
MARITRANS INC.
----------------------------------------------------------------------------------
January 1 to December 31
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues ............................... $ 135,781 $ 126,994 $ 124,527 $ 124,846 $ 132,539
Operating income before depreciation and
amortization ......................... 38,339 30,249 30,738 34,250 24,509
Depreciation and amortization .......... 16,943 16,565 16,214 15,797 15,868
Operating income ....................... 21,396 13,684 14,524 18,453 8,641
Interest expense, net .................. 7,565 9,494 9,454 9,934 10,373
Income before income taxes ............. 18,157 8,379 8,120 10,355 5,186
Provision for income taxes ............. 6,696 3,130 3,139 3,823 16,975(1)
Net income (loss) ...................... 11,461 5,249 4,981 6,532 (11,789)(1)
Basic earnings per share ............... $ 0.95 $ 0.44 $ 0.41 $ 0.52 --
Diluted earnings per share ............. $ 0.94 $ 0.44 $ 0.41 $ 0.52 --
Pro forma (loss) per share ............. -- -- -- -- $ (.94)(1)
Cash dividends per share ............... $ 0.315 $ 0.275 $ 0.11 $ 0.02 --
CONSOLIDATED BALANCE SHEET DATA
(at period end):
Total assets ........................... $ 251,023 $ 235,221 $ 251,961 $ 257,609 $ 253,038
Long-term debt ......................... 75,365 79,123 104,337 113,008 110,556
Stockholders' equity ................... 90,795 82,594 79,875 81,173 74,874
</TABLE>

- ------------
(1) On April 1, 1993, Maritrans Partners L.P. converted from partnership to
corporate form, and Maritrans Inc. succeeded to all assets and liabilities
of Maritrans Partners L.P. In the first quarter of 1993 Maritrans Partners
L.P. recognized a net deferred income tax liability for temporary
differences in accordance with Statement of Financial Accounting Standard
No. 109, "Accounting for Income Taxes," which resulted in a one-time
charge to earnings of $16.6 million.

In this annual report the statements contained or incorporated by
reference that are not historical facts or statements of current condtion are
forward-looking statements. Such forward-looking statements may be identified
by, among other things, the use of forward-looking terminology such as
"believes," "expects," "forecasts," "will," or "anticipates," or the negative
thereof or other variations thereon or comparable terminology, or by discussion
of strategy or intentions. These forward-looking statements, such as statements
regarding present or anticipated utilization, certification of safety programs,
future revenues and customer relationships, capital expenditures, future
financings, and other statements regarding matters that are not historical
facts, involve predictions. The Company's actual results, performance, or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Potential risks and uncertainties that
could affect the Company's actual results, performance, or achievements
include, but are not limited to, the factors outlined in the Company's Form
10-K filed with the Securities Exchange Commission, and general financial,
economic, environmental and regulatory conditions affecting the oil and marine
transportation industry in general. Given these uncertainties, current or
prospective investors are cautioned not to place undue reliance on any such
forward-looking statements. Furthermore, the Company disclaims any obligation
or intent to update any such factors or forward-looking statements to reflect
future events or developments.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is a discussion of the consolidated financial condition and
results of operations of Maritrans Inc. (the "Corporation"), and, together with
its subsidiaries and its predecessor, Maritrans Partners L.P. (the
"Partnership"), herein called "Maritrans" or the "Company."

Overview

Historically, Maritrans has served the petroleum and petroleum product
distribution industry by using tugs, barges and marine terminal facilities to
provide marine transportation and terminalling services along the East

12
<PAGE>

and Gulf Coasts of the United States. Between 1993 and 1997, Maritrans has
transported at least 218 million barrels annually. The high was 248 million
barrels in 1993, and the low was 218 million barrels in 1996. Many factors
affect the number of barrels transported and will affect future results for
Maritrans, including its vessel and fleet size and average trip lengths, the
continuation of federal law restricting United States point-to-point maritime
shipping to U.S. vessels (the Jones Act), domestic oil consumption --
particularly in Florida and the northeastern U.S., environmental laws and
regulations, oil companies' operating and sourcing decisions, competition,
labor and training costs and liability insurance costs. Overall U.S. oil
consumption during 1993-1997 fluctuated between 17.2 million and 18.6 million
barrels a day.

Since 1990, Maritrans has taken steps to modify the mix of operating
characteristics of its fleet. Maritrans has increased its vessel capacity with
the placing in service of its two largest oceangoing, double-hulled petroleum
tank barges, the OCEAN 400 and MARITRANS 300, with capacities of approximately
400,000 and 300,000 barrels, respectively. In 1997, Maritrans made additional
modifications to its fleet by acquiring three oil tankers varying between
230,000 and 260,000 barrels of capacity. Maritrans will be acquiring an
additional 260,000-barrel oil tanker in 1998. Additionally, Maritrans has
announced a pilot project to rebuild one of its existing, single-hulled,
190,000-barrel class barges with a double-hull design configuration to comply
with the provisions of the Oil Pollution Act of 1990 ("OPA"). Should the
one-barge pilot project prove successful, the Company intends to apply the same
methodology to up to eight more of its existing large, oceangoing, single-hulled
barges. Over this period, Maritrans has also made reductions in owned capacity,
disposing of vessels which, due to their sizes and operating characteristics,
Maritrans considered excess to its long-term business needs.

Legislation

The enactment of OPA significantly increased the liability exposure of
marine transporters of petroleum in the event of an oil spill. In addition,
several states in which Maritrans operates have enacted legislation increasing
the liability for oil spills in their waters. Maritrans currently maintains oil
pollution liability insurance of $900 million on each of its vessels. There can
be no assurance that such insurance will be adequate to cover potential
liabilities in the event of a catastrophic spill, that additional premium costs
will be recoverable through increased vessel charter rates, or that such
insurance will continue to be available in satisfactory amounts.

Moreover, this legislation has increased other operating costs as
Maritrans has taken steps to minimize the risk of spills. Among such costs are
those for additional training, safety and contingency programs; these expenses
have not yet been and may never be fully recovered through increased vessel
charter rates. Additionally, management believes that the legislation has
effectively reduced the total volume of waterborne petroleum transportation as
shippers of petroleum have tried to limit their exposure to OPA liability. This
legislation has had a material adverse effect on Maritrans' operations,
financial performance and expectations.

OPA is expected to continue having negative effects on the entire U.S. oil
and marine petroleum transportation industry, including Maritrans. These
effects could include: (i) increased capital expenditures to cover the cost of
mandated double-hulled vessels -- expenditures that the independent marine
transporters of petroleum may not be able to finance, (ii) continued increased
maintenance, training, insurance and other operating costs, (iii) increased
liability and exposure to civil penalties, (iv) decreased operating revenues as
a result of further reductions in volumes transported on vessels and (v)
increased difficulty in obtaining sufficient insurance, particularly oil
pollution coverage. These effects could adversely affect Maritrans'
profitability and liquidity.

13
<PAGE>

During 1997, Maritrans announced plans for a pilot double-hull rebuild
project to convert one of its existing, single-hulled 190,000-barrel class
barges to a double-hull design configuration. Recently Maritrans awarded a
shipyard contract to carry out the double-hull rebuilding and coating of the
tanks for the barge to be used in the pilot project, the OCEAN 192, for a total
cost of approximately $10 million. The results of this initial rebuild project,
including subsequent performance of the vessel, will be evaluated in order to
determine whether Maritrans enters into a multi-vessel rebuilding program for
other single-hulled vessels of similar size. Maritrans believes that eight of
its additional barges may be suitable candidates for the double-hull design and
related construction methodology of the pilot project. If Maritrans were to
double-hull these nine vessels, it would represent approximately 40 percent of
Maritrans' operating capacity.

Results of Operations

Year Ended December 31, 1997 Compared With Year Ended December 31, 1996

Revenue for 1997 totalled $135.8 million compared with $127.0 million in
1996, an increase of $8.8 million or 6.9 percent. Barrels of cargo transported
increased by 23.2 million, from 218.1 million to 241.3 million or 10.6 percent.
Volumes in the comparable prior period were negatively impacted by the
shutdowns of refinery capacity in the Delaware Valley area during the first
part of 1996. The increase in volumes in 1997 is attributable to improvements
in Maritrans' shorter-haul route business as those refineries were placed back
in service. Several of the vessels that were reassigned to other geographic
areas last year have been moved back into Delaware Valley-based trades.
Utilization, as measured by revenue days divided by calendar days available,
totaled 82.2 percent for 1997 compared to 75.7 percent in 1996. During 1997,
contracts were renewed with some of Maritrans' larger customers. While a number
of these contracts will result in lower revenue per barrel transported,
Maritrans has gained either higher vessel utilization or higher volume
commitments with those customers, and decreased its exposure to the spot
market. The markets within which Maritrans operates continue to experience
severe price competition for oil transportation services, which is expected to
continue. Management believes, however, that the level of contractually
committed utilization will partially insulate Maritrans from these pressures.
Revenues from sources other than marine transportation decreased from 3.6
percent of total revenues in 1996 to 3.0 percent in 1997.

Operating expenses of $114.4 million increased by $1.1 million or 0.9
percent from $113.3 million in 1996. The increase was due to the addition of
two tug/barge units and three tankers in the fourth quarter, which increased
vessel operating costs. Prior to the fourth quarter, operating costs had
decreased primarily from earlier reductions in owned vessel capacity that
Maritrans considered excess to its long-term needs due to the equipment's size
and operating characteristics, and reduced general and administrative expenses.

Interest expense decreased by $1.9 million from $9.5 million in 1996 to
$7.6 million in 1997 due to lower levels of principal outstanding. Other income
in 1997 increased by $0.1 million from $4.2 million in 1996 to $4.3 million in
1997 due primarily to greater interest earned on short-term investments.

Net income for 1997 increased by $6.3 million to $11.5 million as a result
of the aforementioned increased revenues and other income more than offsetting
the increase in operating costs.

Year Ended December 31, 1996 Compared With Year Ended December 31, 1995

Revenues for 1996 were $127.0 million and were $124.5 million in 1995, an
increase of $2.5 million, or two percent. Barrels of cargo transported
decreased by 6.9 million barrels, from 225.0 million to 218.1 million, or three
percent. Curtailment of a portion of refinery throughput in the Delaware Valley
refineries in 1996 caused Maritrans to employ its vessel capacity in
alternative markets. This had the result of increasing average trip length,
which further resulted in higher average revenues per barrel transported, as
equipment formerly utilized in and around Delaware Valley refining and
terminalling locations was redeployed into the Gulf of Mexico, the Chesapeake
Bay, and into delivery locations in the Caribbean. The markets within which
Maritrans operates continue to experience severe price competition for oil
transportation services which is expected to continue. Revenue from sources
other than marine transportation decreased from 4.0 percent of total revenues
in 1995 to 3.6 percent in 1996.

14
<PAGE>

Operating expenses of $113.3 million for 1996 increased by $3.3 million,
or 3.0 percent from $110.0 million in 1995. The MARITRANS 300 unit, Maritrans'
second largest tug/barge unit, entered service in the fourth quarter of 1995
and was operational for the full year in 1996. The aforementioned increase in
trip length and rising fuel prices contributed to the increase in operating
expenses. General and administrative costs rose as a result of the increased
use of outside professional services, particularly for matters related to
business development and analysis.

Interest expense in 1996 was consistent with the prior year. Other income
in 1996 increased $1.1 million from $3.1 million in 1995 to $4.2 million in
1996 due primarily to the gain from disposals of vessels which, due to their
sizes and operating characteristics, were considered excess to Maritrans'
long-term business needs.

Net income for 1996 increased by $0.2 million to $5.2 million as the
result of the aforementioned increased revenues and other income more than
offsetting the increase in operating expenses.

Liquidity and Capital Resources

In 1997, existing cash and cash equivalents, augmented by operating
activities and financing transactions, were sufficient to fully meet debt
service obligations (including $10.2 million in required long-term debt
repayments), to meet loan agreement restrictions, to make capital acquisitions
and improvements, and to allow Maritrans to pay a dividend of $0.075 per common
share in each of the first three quarters and $0.09 per common share in the
last quarter. Maritrans believes that in 1998, funds provided by operating
activities, augmented by financing transactions and investing activities, will
be sufficient to finance operations, anticipated capital expenditures, lease
payments and required debt repayments. Dividend payments are expected to
continue quarterly in 1998.

In October 1997, Maritrans completed the acquisition of six vessels from
subsidiaries of Sun Company, Inc., ("Sun") for $30.9 million. In the
transaction Maritrans purchased two petroleum tankers and two tug and barge
units. Maritrans funded this acquisition with existing cash and cash
equivalents. On October 17, 1997, Maritrans entered into a revolving credit
facility for $33 million with Mellon Bank, N.A., which is collateralized by
mortgages on acquired tankers.

On October 10, 1997, Maritrans and Chevron U.S.A. Inc. ("Chevron")
executed agreements for Maritrans' purchase of two Chevron petroleum tankers
under certain conditions. The total cost to Maritrans is approximately $29.5
million. The Chevron vessels are 40,000 deadweight ton, double-hulled oil
tankers that comply with all International Maritime Organization ("IMO") and
OPA design criteria for future trading. The Company purchased the first vessel
on November 7, 1997, for $13 million and expects to purchase the second vessel
during 1998, if certain conditions are met. On November 6, 1997, Maritrans
borrowed $12 million from its revolving credit facility with Mellon Bank, N.A.
to complete the purchase of the first vessel. Maritrans expects to fund the
second Chevron vessel acquisition with a combination of its cash and the
revolving credit facility referred to above.

In addition to the vessel acquisitions previously mentioned, capital
expenditures in 1997 for improvements to its existing fleet of vessels and
marine terminals were approximately $4 million compared to $3 million in 1996.
Additionally, the Company advanced nearly $2 million (of an expected total cost
of approximately $10 million) to a shipyard to begin work on prefabrication of
a steel structure to be used in the Company's pilot project to rebuild and to
coat the tanks of its single-hulled barge, the OCEAN 192, as a double-hulled
barge. Total capital expenditure commitments at December 31, 1997, for the
second Chevron vessel mentioned above and the OCEAN 192 double-hulling project
totaled approximately $24 million.

On May 7, 1997, the Company announced a year's extension to its previously
announced stock buy-back plan to reacquire up to 1.8 million shares of its
common stock, depending on market conditions. This amount represented
approximately 15 percent of the 12.5 million shares outstanding at the
beginning of the program. Maritrans intends to hold the majority of the shares
as treasury stock, although some shares may be used for employee compensation
plans and/or other corporate purposes. As of December 31, 1996, the Company had
purchased 877,955 shares at a cost of approximately $5.1 million. No open
market purchases were made in 1997. Maritrans has financed and expects that
additional share purchases, if made, would be financed with internally
generated funds.

15
<PAGE>

Working Capital and Other Balance Sheet Changes

In 1997, working capital was generated by operating activities, equipment
sales, and proceeds under a revolving credit facility established in 1997.
Current liabilities increased primarily due to an increase in costs accrued in
advance of upcoming shipyard activities related to maintenance of vessels. The
ratio of current assets to current liabilities declined from 1.95:1 at December
31, 1996 to 1.27:1 at December 31, 1997. Maritrans utilized available working
capital to purchase marine vessels and equipment, repay scheduled long-term
debt obligations, and make dividend payments.

Debt Obligations and Borrowing Facility

At December 31, 1997, Maritrans had $85.1 million in total outstanding
debt, secured by mortgages on substantially all of the fixed assets of the
subsidiaries of the Corporation. The current portion of this debt at December
31, 1997, was $9.7 million. Maritrans has a $10 million working capital
facility, secured by receivables and inventories of a subsidiary, which expires
June 30, 1998, and which it expects to renew. This facility was not used in
1997. On October 17, 1997, Maritrans entered into a multi-year revolving credit
facility for amounts up to $33 million with Mellon Bank, N.A. This facility is
collateralized by mortgages on tankers acquired in 1997. Maritrans initially
borrowed $12 million under this facility on November 6, 1997, and had $6
million remaining outstanding at December 31, 1997.

At December 31, 1997 and 1996, total debt to total capitalization was 48
percent and 52 percent, respectively. For purposes of this calculation, total
capitalization consists of long-term debt, including those portions that are
current, and stockholders' equity.

Impact of Year 2000

Some of the Company's older computer programs were written using two
digits rather than four digits to define the applicable year. As a result,
those programs have time-sensitive software that recognize a date using "00" as
the year 1900 rather than the year 2000. If left unchanged, this could cause a
system failure or miscalculations causing disruptions in operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in normal similar business activities.

The Company completed an assessment of its computing systems within the
last few years and has begun rewriting software programs and replacing systems
to take advantage of newer technology. As a result of this initiative over the
past few years, the Company's operating systems will be Year 2000 compliant
upon completion of these upgrades, which are scheduled to occur by December 31,
1998. This date is prior to any anticipated impact on its operating systems.
The Company believes that with the conversions to new software, the Year 2000
issue will not pose significant operational problems for its computer systems.
However, if such conversions are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.
The total remaining cost of this initiative is approximately $0.6 million, of
which most is for the purchase of new software and which will be capitalized.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 conversions are based on management's best estimates,
which were derived utilizing certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to upgrade
all relevant operating systems, and similar uncertainties.

Earnings per Common Share

In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effect of outstanding stock options. Because of the Company's capital
structure, diluted earnings per share is very similar to the previously
reported earnings per share. Earnings per common share amounts for all periods
have been presented, and where appropriate, restated to conform to Statement
128 requirements.

16
<PAGE>

Impact of Recent Accounting Pronouncements

In June, 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income and Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information, both of which are
required to be adopted on January 1, 1998. Statement 130 requires financial
statement reporting of all non-owner related changes in equity for the periods
being presented. Statement 131 requires disclosure of revenue, earnings and
other financial information pertaining to business segments by which a company
is managed, as well as factors used by management to determine segments. The
Company believes adoption of Statement 130 will have no effect on its financial
reporting and is currently evaluating the requirements of Statement 131 to
determine the impact it will have on financial statement disclosures.

Item 8. FINANCIAL STATEMENTS & SUPPLEMENTAL DATA

Report of Independent Auditors

Stockholders and Board of Directors
Maritrans Inc.

We have audited the accompanying consolidated balance sheets of Maritrans Inc.
as of December 31, 1997 and 1996, and the related consolidated statements of
income, cash flows and stockholders' equity for each of the three years in the
period ended December 31, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14(A). These financial
statements and schedule are the responsibility of the management of Maritrans
Inc. Our responsibility is to express an opinion on these financial statements
and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Maritrans Inc. at
December 31, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

ERNST & YOUNG LLP

Philadelphia, Pennsylvania
January 23, 1998

17
<PAGE>

MARITRANS INC.
CONSOLIDATED BALANCE SHEETS

($000)

<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 13,312 $ 33,174
Trade accounts receivable (net of allowance for doubtful accounts of
$1,258 and $860, respectively) ....................................... 18,073 16,730
Other accounts receivable .............................................. 4,447 4,523
Inventories ............................................................ 5,066 5,823
Deferred income tax benefit ............................................ 3,491 2,234
Prepaid expenses ....................................................... 3,257 3,014
-------- --------
Total current assets .............................................. 47,646 65,498
Vessels, terminals and equipment ........................................ 329,032 280,231
Less accumulated depreciation .......................................... 132,316 117,741
-------- --------
Net vessels, terminals and equipment .............................. 196,716 162,490
Other ................................................................... 6,661 7,233
-------- --------
Total assets ...................................................... $251,023 $235,221
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year ............................................... $ 9,758 $ 10,213
Trade accounts payable ................................................. 2,390 3,016
Accrued interest ....................................................... 1,563 1,748
Accrued shipyard costs ................................................. 8,723 5,774
Accrued wages and benefits ............................................. 5,208 3,656
Other accrued liabilities .............................................. 9,825 9,128
-------- --------
Total current liabilities ......................................... 37,467 33,535
Long-term debt .......................................................... 75,365 79,123
Deferred shipyard costs ................................................. 13,085 8,661
Other liabilities ....................................................... 5,326 5,364
Deferred income taxes ................................................... 28,985 25,944
Stockholders' equity:
Preferred stock, $.01 par value, authorized 5,000,000 shares; none
issued ............................................................... -- --
Common stock, $.01 par value, authorized 30,000,000 shares;
issued: 1997 -- 12,996,157 shares; 1996 -- 12,837,867 shares ......... 130 128
Capital in excess of par value ......................................... 76,881 75,874
Retained earnings ...................................................... 20,049 12,372
Less: Cost of shares held in treasury
1997 -- 940,896 shares; 1996 -- 877,955 shares .................... (5,433) (5,067)
Unearned Compensation ................................................ (832) (713)
-------- --------
Total stockholders' equity ........................................ 90,795 82,594
-------- --------
Total liabilities and stockholders' equity ........................ $251,023 $235,221
======== ========
</TABLE>

See accompanying notes.

18
<PAGE>

MARITRANS INC.
CONSOLIDATED STATEMENTS OF INCOME

($000 except per share amounts)

<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues .................................................. $135,781 $126,994 $124,527
Costs and expenses:
Operation expense ........................................ 69,290 67,286 65,260
Maintenance expense ...................................... 19,699 20,289 19,879
General and administrative ............................... 8,453 9,170 8,650
Depreciation and amortization ............................ 16,943 16,565 16,214
-------- -------- --------
114,385 113,310 110,003
-------- -------- --------
Operating income .......................................... 21,396 13,684 14,524
Interest expense (net of capitalized interest of $0, $0 and
$955, respectively) ...................................... (7,565) (9,494) (9,454)
Other income, net ......................................... 4,326 4,189 3,050
-------- -------- --------
Income before income taxes ................................ 18,157 8,379 8,120
Income tax provision ...................................... 6,696 3,130 3,139
-------- -------- --------
Net income ................................................ $ 11,461 $ 5,249 $ 4,981
======== ======== ========
Basic earnings per share .................................. $ 0.95 $ 0.44 $ 0.41
Diluted earnings per share ................................ $ 0.94 $ 0.44 $ 0.41
</TABLE>

See accompanying notes.

19
<PAGE>

MARITRANS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents

($000)

<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 11,461 $ 5,249 $ 4,981
Adjustments to reconcile net income to net cash pro-
vided by (used in) operating activities:
Depreciation and amortization ............................... 16,943 16,565 16,214
Deferred income taxes ....................................... 1,729 340 2,560
Stock compensation .......................................... 381 347 --
Changes in receivables, inventories, and prepaid
expenses ................................................... (753) (3,810) 1,166
Changes in current liabilities other than debt .............. 3,387 2,067 1,403
Non-current changes, net .................................... 3,125 1,063 (532)
(Gain) loss on sale of equipment ............................ (2,049) (3,250) (24)
--------- --------- ---------
Total adjustments to net income ................................ 22,763 13,322 20,787
--------- --------- ---------
Net cash provided by (used in) operating activities ......... 34,224 18,571 25,768
Cash flows from investing activities:
Acquisition of investments held-to-maturity ................... -- (27,684) (28,064)
Maturity of investments held-to-maturity ...................... -- 35,228 28,520
Cash proceeds from sale of marine vessels, terminals
and equipment ............................................... 5,066 5,558 340
Purchase of marine vessels, terminals and equipment ........... (51,298) (2,983) (15,323)
--------- --------- ---------
Net cash provided by (used in) investing activities ......... (46,232) 10,119 (14,527)
Cash flows from financing activities:
Proceeds from stock option exercises .......................... 143 378 --
Payment of long-term debt ..................................... (10,213) (23,672) (7,654)
New borrowings under revolving credit facility ................ 12,000 -- --
Repayments of borrowings under revolving credit
facility .................................................... (6,000) -- --
Purchase of treasury stock .................................... -- -- (5,059)
Dividends declared and paid ................................... (3,784) (3,255) (1,319)
--------- --------- ---------
Net cash provided by (used in) financing activities ......... (7,854) (26,549) (14,032)
Net increase (decrease) in cash and cash equivalents ........... (19,862) 2,141 (2,791)
Cash and cash equivalents at beginning of year ................. 33,174 31,033 33,824
--------- --------- ---------
Cash and cash equivalents at end of year ....................... $ 13,312 $ 33,174 $ 31,033
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Interest paid .................................................. $ 7,661 $ 9,908 $ 10,353
Income taxes paid .............................................. $ 4,500 $ 1,050 $ 85
</TABLE>

See accompanying notes.

20
<PAGE>

MARITRANS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

($000)

<TABLE>
<CAPTION>
Common Capital in
Stock, $.01 excess of Retained Treasury Unearned
Par Value Par Value Earnings Stock Compensation Total
------------- ------------ ---------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ..... $125 $74,332 $ 6,716 -- -- $ 81,173
Net income January 1, 1995
to December 31, 1995 .......... 4,981 4,981
Cash dividends ($0.11 per
share of Common Stock)......... (1,319) (1,319)
Purchase of treasury stock ..... $(5,059) (5,059)
Stock incentives ............... 1 184 $ (86) 99
---- ------- -------- -------- ------ --------
Balance at December 31, 1995 ... 126 74,516 10,378 (5,059) (86) 79,875
Net income, January 1, 1996
to December 31, 1996 .......... 5,249 5,249
Cash dividends ($0.275 per
share of Common Stock)......... (3,255) (3,255)
Stock incentives ............... 2 1,358 (8) (627) 725
---- ------- -------- -------- ------ --------
Balance at December 31, 1996 ... 128 75,874 12,372 (5,067) (713) 82,594
Net income January 1, 1997
to December 31, 1997 .......... 11,461 11,461
Cash dividends ($0.315 per
share of Common Stock)......... (3,784) (3,784)
Stock incentives ............... 2 1,007 (366) (119) 524
---- ------- -------- -------- ------ --------
Balance at December 31, 1997 ... $130 $76,881 $ 20,049 $(5,433) $ (832) $ 90,795
==== ======= ======== ========= ====== ========
</TABLE>

See accompanying notes.

21
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

Maritrans Inc. owns Maritrans Operating Partners L.P. (the "Operating
Partnership"), Maritrans General Partner Inc., Maritrans Tankers Inc.,
Maritrans Barge Co., Maritrans Holdings Inc. and other Maritrans entities
(collectively, the "Company"). These subsidiaries, directly and indirectly, own
and operate oil tankers, tugboats, and oceangoing petroleum tank barges
principally used in the transportation of oil and related products along the
Gulf and Atlantic Coasts, and own and operate petroleum storage facilities on
the Atlantic Coast.

Principles of Consolidation

The consolidated financial statements include the accounts of Maritrans
Inc. and subsidiaries, all of which are wholly owned. All significant
intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Vessels, Terminals and Equipment

Equipment, which is carried at cost, is depreciated using the
straight-line method. Vessels are depreciated over a period of up to 30 years.
Certain electronic equipment is depreciated over periods of 7 to 10 years.
Petroleum storage tanks are depreciated over periods of up to 25 years. Other
equipment is depreciated over periods ranging from 2 to 20 years. Gains or
losses on dispositions of fixed assets are included in other income in the
accompanying consolidated statements of income.

The Oil Pollution Act requires all newly constructed petroleum tank
vessels engaged in marine transportation of oil and petroleum products in the
U.S. to be double-hulled and all such existing single-hulled vessels to be
retrofitted with double hulls or phased out of the industry beginning January
1, 1995. Because of the age and size of Maritrans' individual barges, the first
of its operating vessels will be required to be retired or retrofitted by
January 2003, and most of its large oceangoing, single-hulled vessels will be
similarly affected on January 1, 2005.

Maintenance and Repairs

Provision is made for the cost of upcoming major periodic overhauls of
vessels and equipment in advance of performing the related maintenance and
repairs. The current portion of this estimated cost is included in accrued
shipyard costs while the portion of this estimated cost not expected to be
incurred within one year is classified as long-term. Both the provisions for
major periodic overhauls as well as non-overhaul maintenance and repairs are
expensed as incurred.

Inventories

Inventories, consisting of materials, supplies and fuel, are carried at
specific cost which does not exceed net realizable value.

Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amount used for income tax purposes.

Significant Customers

During 1997, the Company derived revenues aggregating 50 percent of total
revenues from 3 customers, each one representing 10 percent or more of total
revenues. In 1996, revenues from 3 customers aggregated 42 percent of total
revenues and in 1995, revenues from 4 customers aggregated 54 percent of total
revenues. The

22
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

1. Organization and Significant Accounting Policies -- (Continued)

Company does not necessarily derive 10 percent or more of its total revenues
from the same group of customers each year. In 1997, approximately 77 percent
of the Company's revenues were generated by 10 customers. Credit is extended to
various companies in the petroleum industry in the normal course of business.
This concentration of credit risk within this industry may be affected by
changes in economic or other conditions and may, accordingly, affect overall
credit risk of the Company.

Related Parties

The Company obtained protection and indemnity insurance coverage from a
mutual insurance association, whose chairman is also the chairman of Maritrans
Inc. The related insurance expense was $2,536,000, $2,654,000 and $2,700,000
for the years ended December 31, 1997, 1996 and 1995, respectively.

In 1997, 1996 and 1995 the Company paid amounts for the lease of office
space and for legal services to a law firm, a partner of which serves on the
Company's Board of Directors.

1997 1996 1995
------ -------- -------
($000)
Lease of office space ......... $228 $277 $277
Legal services ................ 232 163 233
---- ---- ----
Total ......................... $460 $440 $510
==== ==== ====

Earnings per Common Share

Impact of Recent Accounting Pronouncements

2. Earnings per Common Share

The following data show the amounts used in computing earnings per share
(EPS) and the effect on income and the weighted average number of shares of
dilutive potential common stock.

<TABLE>
<CAPTION>
1997 1996 1995
---------- ------------- ---------
(thousands)
<S> <C> <C> <C>
Income available to common stockholders
used in basic EPS ..................... $11,461 $ 5,249 $ 4,981
Weighted average number of common
shares used in basic EPS .............. 12,003 11,828 12,150
Effect of dilutive securities:
Stock options ........................ 177 107 110
Weighted number of common shares and
dilutive potential common stock used in
diluted EPS ........................... 12,180 11,935 12,260

</TABLE>

23
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

3. Shareholder Rights Plan

In 1993, Maritrans Inc. adopted a Shareholder Rights Plan (the "Plan") in
connection with the conversion from partnership to corporate form. Under the
Plan, each share of Common Stock has attached thereto a Right (a "Right") which
entitles the registered holder to purchase from the Company one one-hundredth
of a share (a "Preferred Share Fraction") of Series A Junior Participating
Preferred Shares, par value $.01 per share, of the Company ("Preferred
Shares"), or a combination of securities and assets of equivalent value, at a
Purchase Price of $40, subject to adjustment. Each Preferred Share Fraction
carries voting and dividend rights that are intended to produce the equivalent
of one share of Common Stock. The Rights are not exercisable for a Preferred
Share Fraction until the earlier of (each, a "Distribution Date") (i) 10 days
following a public announcement that a person or group has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Common Stock or (ii) the close of business on a date
fixed by the Board of Directors following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20%
or more of the outstanding shares of Common Stock.

The Rights may be exercised for Common Stock if a "Flip-in" or "Flip-over"
event occurs. If a "Flip-in" event occurs and the Distribution Date has passed,
the holder of each Right, with the exeception of the acquiror, is entitled to
purchase $40 worth of Common Stock for $20. The Rights will no longer be
exercisable into Preferred Shares at that time. "Flip-in" events are events
relating to 20% stockholders, including without limitation, a person or group
acquiring 20% or more of the Common Stock, other than in a tender offer that,
in the view of the Board of Directors, provides fair value to all of the
Company's shareholders. If a "Flip-over" event occurs, the holder of each Right
is entitlted to purchase $40 worth of the acquiror's stock for $20. A
"Flip-over" event occurs if the Company is acquired or merged and no
outstanding shares remain or if 50% of the Company's assets or earning power is
sold or transferred. The Plan prohibits the Company from entering into this
sort of transaction unless the acquiror agrees to comply with the "Flip-over"
provisions of the Plan.

The Rights can be redeemed by the Company for $.01 per Right until up to
ten days after the public announcement that someone has acquired 20% or more of
the Company's Common Stock (unless the redemption period is extended by the
Board in its discretion). If the Rights are not redeemed or substituted by the
Company, they will expire on August 1, 2002.

4. Cash and Cash Equivalents

Cash and cash equivalents at December 31, 1997, and 1996 consisted of cash
and commercial paper, the carrying value of which approximates fair value. For
purposes of the consolidated financial statements, short-term highly liquid
debt instruments with original maturities of three months or less are
considered to be cash equivalents.

5. Stock Incentive Plans

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees and related Interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under FAS Statement No. 123, Accounting for Stock-Based
Compensation, requires use of option valuation models that were not developed
for use in valuing employee stock options. The effect of applying Statement No.
123's fair value method to the Company's stock-based awards results in pro
forma net income that is not materially different from amounts reported and
earnings per share that are the same as the amounts reported.

Maritrans Inc. has a stock incentive plan (the "Plan"), whereby
non-employee directors, officers and other key employees may be granted stock,
stock options and, in certain cases, receive cash under the Plan. Any
outstanding options granted under the Plan are exercisable at a price not less
than market value of the shares on the date of grant. Amendments were made to
the Plan and approved by the stockholders in 1997. The amendments included
increasing the aggregate number of shares available for issuance under the Plan
from 1,250,000 shares

24
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

to 1,750,000 shares. Additionally, the amendments provide for the automatic
grant of non-qualified stock options to non-employee directors, on a formulaic
biannual basis, of options to purchase shares equal to two multiplied by the
aggregate number of shares distributed to such non-employee director under the
Plan during the preceding calendar year. In 1997, there were 9,986 options and
5,963 shares issued to non-employee directors. Compensation expense equal to
the fair market value on the date of the grant to the directors is included in
general and administrative expense in the consolidated statement of income.

During 1997, there were 90,667 shares of restricted stock issued under the
Plan. The restrictions lapse over a five year period. The shares are subject to
forfeiture under certain circumstances. Unearned compensation, representing the
fair market value of the shares at the date of issuance, is amortized to
expense as the restrictions lapse. At December 31, 1997 and 1996, 744,252 and
230,467 remaining shares within the Plan were reserved for grant.

Information on stock options follows:

<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Exercise
Options Price Price
----------- -------------- -----------------
<S> <C> <C> <C>
Outstanding at 12/31/94 ......... 568,817 4.00-5.00 4.28
Granted ........................ 115,133 5.63-6.00 5.77
Exercised ...................... 11,331 4.00 4.00
Cancelled or forfeited ......... 52,976 4.00-5.00 4.59
Expired ........................ -- -- --
------- ----------- -----
Outstanding at 12/31/95 ......... 619,643 4.00-6.00 4.54
Granted ........................ 159,428 5.25-5.375 5.32
Exercised ...................... 96,911 4.00-5.375 4.10
Cancelled or forfeited ......... -- -- --
Expired ........................ -- -- --
------- ------------ -----
Outstanding at 12/31/96 ......... 682,160 4.00-6.00 4.79
Granted ........................ 76,939 5.875-7.937 7.33
Exercised ...................... 71,264 4.00-5.625 4.60
Cancelled or forfeited ......... 140,637 5.25-6.25 5.45
Expired ........................ -- -- --
------- ------------ -----
Outstanding at 12/31/97 ......... 547,198 4.00-7.937 5.01
------- ------------ -----
Exercisable
December 31, 1995 ............ 178,609 4.00-5.00 4.10
December 31, 1996 ............ 208,957 4.00-5.00 4.20
December 31, 1997 ............ 362,575 4.00-6.00 4.44
</TABLE>

Outstanding options are exercisable in installments over two to four years
and expire beginning in 2002.

6. Income Taxes
The income tax provision consists of:

1997 1996 1995
--------- --------- ---------
($000)
Current:
Federal ......... $4,553 $2,788 $ 576
State ........... 414 2 3
Deferred:
Federal ......... $1,753 $ 272 $2,391
State ........... (24) 68 169
------ ------ ------
$6,696 $3,130 $3,139
====== ====== ======

25
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

6. Income Taxes -- (Continued)

The differences between the federal income tax rate of 35 percent in 1997,
1996 and 1995, and the effective tax rates were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
($000)
<S> <C> <C> <C>
Statutory federal tax provision ............................... $6,355 $2,932 $2,842
State income taxes, net of federal income tax benefit ......... 253 46 112
Non-deductible items .......................................... 88 152 181
Other ......................................................... -- -- 4
------ ------ ------
$6,696 $3,130 $3,139
====== ====== ======

</TABLE>

Principal items comprising deferred income tax liabilities and assets as
of December 31, 1997 and 1996 are:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
($000)
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation ........................................ $38,293 $35,423
Prepaid expenses .................................... 1,660 1,828
------- -------
39,953 37,251
------- -------
Deferred tax assets:
Reserves and accruals ............................... 10,531 8,598
Net operating loss and credit carryforwards ......... 3,928 4,943
------- -------
14,459 13,541
------- -------
Net deferred tax liabilities ........................... $25,494 $23,710
======= =======

</TABLE>

At December 31, 1997, Maritrans Inc. has net operating loss carryforwards
of approximately $14.1 million for income tax reporting purposes which expire
in the year 2005 and thereafter. The Company has an Alternative Minimum Tax
credit of $6.0 million at December 31, 1997 which does not expire.
<PAGE>

7. Retirement Plans
Most of the shoreside employees and substantially all of the seagoing
supervisors participate in a qualified defined benefit retirement plan of
Maritrans Inc. Net periodic pension costs were determined under the projected
unit credit actuarial method. Pension benefits are primarily based on years of
service and begin to vest after two years. Employees who are members of unions
participating in Maritrans' collective bargaining agreements are not eligible
to participate in the qualified defined benefit retirement plan of Maritrans
Inc.
The weighted average discount rate, used to determine the actuarial
present value of the projected benefit obligation, and the expected long-term
rate of return on plan assets was 6.75 percent for all periods. The weighted
average assumed rate of compensation increase used to determine the actuarial
present value of the projected benefit obligation was 5 percent for all
periods.
Net periodic pension costs included the following components for the years
ended December 31:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Service cost of current period ........................ $ 1,440 $ 1,548 $ 1,581
Interest cost on projected benefit obligation ......... 1,451 1,365 1,237
Actual (gain) loss on plan assets ..................... (3,572) (2,031) (3,094)
Net (amortization) and deferral ....................... 1,787 423 1,745
-------- -------- --------
Net pension cost ...................................... $ 1,106 $ 1,305 $ 1,469
======== ======== ========
</TABLE>

26
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

7. Retirement Plans -- (Continued)

The following table sets forth the plan's funded status at December 31,
1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
($000)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation .............................. $ 19,091 $17,754
======== =======
Accumulated benefit obligation ......................... $ 19,991 $18,679
======== =======
Projected benefit obligation ........................... $ 24,044 $22,834
======== =======
Plan assets at fair value, primarily publicly traded stocks
and bonds ................................................ $ 27,256 $23,188
======== =======
Plan assets (greater) less than projected benefit obliga-
tion ..................................................... (3,212) (354)
Unrecognized net gain on plan's assets .................... 6,280 3,289
Net assets being amortized over 15 years .................. 803 1,006
-------- -------
Accrued pension cost recognized in the financial state-
ments .................................................... $ 3,871 $ 3,941
======== =======
</TABLE>

Substantially all of the shoreside employees and seagoing supervisors also
participate in a qualified defined contribution plan. Contributions under the
plan are determined annually by the Board of Directors of Maritrans Inc. The
cost of the plan was $779,000, $0 and $1,005,000 for the years ended December
31, 1997, 1996 and 1995, respectively.

Contributions to industry-wide, multi-employer seamen's pension plans,
which cover substantially all seagoing personnel covered under collective
bargaining agreements, were approximately $479,000, $474,000 and $480,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. These
contributions include funding for current service costs and amortization of
prior service costs of the various plans over periods of 30 to 40 years. The
pension trusts and union agreements provide that contributions be made at a
contractually determined rate per man-day worked. Maritrans Inc. and its
subsidiaries are not administrators of the multi-employer seamen's pension
plans.

8. Debt
At December 31, 1997, total outstanding debt of the subsidiaries of
Maritrans Inc. is $85.1 million, $75.4 million of which is long-term. At
December 31, 1996, total outstanding debt was $89.3 million, $79.1 million of
which was long-term. The debt is secured by mortgages on substantially all of
the fixed assets of those subsidiaries. At December 31, 1997, total outstanding
debt consists of several series -- $6.0 million maturing through 2000, $5.4
million maturing through 2002, $8.7 million maturing through 2005, and $65.0
million maturing through 2006. The weighted average interest rate on this
indebtedness is 8.83 percent. Terms of the indebtedness require the
subsidiaries to maintain their properties in a specific manner, maintain
specified insurance on their properties and business, and abide by other
covenants which are customary with respect to such borrowings. At December 31,
1996, the total outstanding debt consisted of several series -- $8.5 million
maturing through 1997, $6.6 million maturing through 1998, $9.2 million
maturing through 2005 and $65.0 million maturing from 1998 through 2006.
In 1997, Maritrans entered into a multi-year revolving credit facility for
amounts up to $33 million with Mellon Bank, N.A. This facility is
collateralized by mortgages on tankers acquired in 1997. Maritrans initially
borrowed $12 million under this facility on November 6, 1997, and had $6
million remaining outstanding at December 31, 1997.
The Operating Partnership has a $10 million working capital facility
secured by its receivables and inventories. There were no borrowings under this
facility during fiscal 1997.

27
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

8. Debt -- (Continued)

Based on the borrowing rates currently available for loans with similar
terms and maturities, the fair value of long term debt was $85.9 million and
$87.7 million at December 31, 1997 and 1996, respectively.
The maturity schedule for outstanding indebtedness under existing debt
agreements at December 31, 1997, is as follows:

($000)
---------
1998 ........................... $ 9,758
1999 ........................... 9,808
2000 ........................... 15,862
2001 ........................... 9,920
2002 ........................... 9,384
2003 -- 2007 ................... 30,391
-------
$85,123
=======

9. Commitments and Contingencies

Minimum future rental payments under noncancellable operating leases at
December 31, 1997, are as follows:

($000)
---------
1998 ........................... $ 1,995
1999 ........................... 1,854
2000 ........................... 2,012
2001 ........................... 2,012
2002 ........................... 2,012
2003 -- 2007 ................... 5,201
-------
$15,086
=======

The indenture governing the Operating Partnership's long-term debt permits
cash distributions by Maritrans Operating Partners L.P. to Maritrans Inc., so
long as no default exists under the indenture and provided that such
distributions do not exceed contractually prescribed amounts.

Total capital expenditure commitments at December 31, 1997, are
approximately $24 million.

In the ordinary course of its business, claims are filed against the
Company for alleged damages in connection with its operations. Management is of
the opinion that the ultimate outcome of such claims at December 31, 1997 will
not have a material adverse effect on the consolidated financial statements.

10. Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
($000, except per share amounts)
<S> <C> <C> <C> <C>
1997
- ----
Revenues ........................... $ 31,812 $ 31,472 $ 33,548 $ 38,949
Operating income ................... 5,172 4,955 6,086 5,183
Net income ......................... 1,891 2,999 3,905 2,666
Basic earnings per share ........... $ 0.16 $ 0.25 $ 0.33 $ 0.22
Diluted earnings per share ......... $ 0.16 $ 0.25 $ 0.32 $ 0.22
</TABLE>

28
<PAGE>

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS -- (Continued)

10. Quarterly Financial Data (Unaudited) -- (Continued)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
($000, except per share amounts)
<S> <C> <C> <C> <C>
1996
- ----
Revenues ........................... $ 31,586 $ 30,959 $ 31,831 $ 32,618
Operating income ................... 3,025 2,001 4,326 4,332
Net income ......................... 709 215 1,511 2,814
Basic earnings per share ........... $ 0.06 $ 0.02 $ 0.13 $ 0.23
Diluted earnings per share ......... $ 0.06 $ 0.02 $ 0.13 $ 0.23
</TABLE>

29
<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information with respect to directors of the Registrant, and information
with respect to compliance with Section 16(a) of the Securities Exchange Act of
1934, is incorporated herein by reference to the Corporation's definitive Proxy
Statement (the "Proxy Statement") to be filed with the Securities and Exchange
Commission (the "Commission") not later than 120 days after the close of the
year ended December 31, 1997, under the captions "Information Regarding
Nominees For Election As Directors And Regarding Continuing Directors" and
"Section 16(A) Beneficial Ownership Reporting Compliance."

The individuals listed below are directors and executive officers of
Maritrans Inc. or its subsidiaries.

<TABLE>
<CAPTION>
Name Age(1) Position
- --------------------------------------- -------- ---------------------------------------------------------------
<S> <C> <C>
Stephen A. Van Dyck (4)(5) ............ 54 Chairman of the Board of Directors and Chief Executive Officer
Dr. Robert E. Boni (2)(3)(4) .......... 70 Director
Dr. Craig E. Dorman (2)(3) ............ 57 Director
Robert J. Lichtenstein(4)(5) .......... 50 Director
Eric H. Schless(2)(4) ................. 43 Director
H. William Brown ...................... 59 Chief Financial Officer
Janice M. Smallacombe ................. 38 President, Maritrans Management Services Inc.
John J. Burns ......................... 45 President, Maritrans Operating Partners L.P.
Steven E. Welch ....................... 46 President, Maritrans Marketing Inc.
Walter T. Bromfield ................... 42 Treasurer and Controller
</TABLE>

- ------------
(1) As of March 1, 1998
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Finance Committee
(5) Member of the Nominating Committee

30
<PAGE>

Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of
the Company and its predecessor since April 1987. For the previous year, he was
a Senior Vice President -- Oil Services, of Sonat Inc. and Chairman of the
Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore
Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was
the President and a director of the Sonat Marine Group and Vice President of
Sonat Inc. Mr. Van Dyck is a member of the Board of Directors of Amerigas
Propane, Inc. Mr. Van Dyck is also the Chairman of the Board and a director of
the West of England Ship Owners Mutual Insurance Association (Luxembourg), a
mutual insurance association. He is a member of the Company's Finance
(Chairman) and Nominating Committees of the Board of Directors. See "Certain
Transactions" in the Proxy Statement.

Mr. Brown was named Chief Financial Officer of the Company in June 1997.
Previously, Mr. Brown was Chief Financial Officer of Conrail Inc., where he had
been employed since 1986. Mr. Brown is also a member of the Board of Directors
of XTRA Corporation.

Ms. Smallacombe is President of Maritrans Management Services Inc. and has
been continuously employed by the Company or its predecessors in various
capacities since 1982.

Mr. Burns is President of Maritrans Operating Partners L.P. and has been
continuously employed by the Company or its predecessors in various capacities
since 1975.

Mr. Welch is President of Maritrans Marketing Inc. and has been
continuously employed by the Company or its predecessors in various capacities
since 1977.

Mr. Bromfield is Treasurer and Controller of the Company, and has been
continously employed in various capacities by Maritrans or its predecessors
since 1981.

Items 11, 12 and 13.

The information required by Item 11, Executive Compensation, by Item 12,
Security Ownership of Certain Beneficial Owners and Management, and by Item 13,
Certain Relationships and Related Transactions, is incorporated herein by
reference to the Proxy Statement under the headings "Compensation of Directors
and Executive Officers", "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Transactions".

31
<PAGE>

PART IV

<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements

Report of Independent Auditors 17
Maritrans Inc. Consolidated Balance Sheets at December 31, 1997, and 1996. 18
Maritrans Inc. Consolidated Statements of Income for the years ended 19
December 31, 1997, 1996, and 1995.
Maritrans Inc. Consolidated Statements of Cash Flows for the years ended 20
December 31, 1997, 1996, and 1995.
Maritrans Inc. Consolidated Statements of Stockholders' Equity for the years 21
ended December 31, 1997, 1996 and 1995.
Notes to the Consolidated Financial Statements. 22
(2) Financial Statement Schedules
Schedule II Maritrans Inc. Valuation Account for the years ended December 31, 36
1997, 1996, and 1995.
All other schedules called for under Regulation S-X are not submitted because they are not
applicable, not required, or because the required information is not material, or is
included in the financial statements or notes thereto.
(b) Reports on Form 8-K
One report on Form 8-K was filed on October 28, 1997, pertaining to Maritrans Inc.'s
acquisition of six marine vessels from subsidiaries of Sun Company, Inc. The purchase
was completed by subsidiaries of Maritrans Inc.
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
Exhibit Index Page
- ----------------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
3.1# Certificate of Incorporation of the Registrant, as amended.
3.2# By Laws of the Registrant.
4.1 Certain instruments with respect to long-term debt of the Registrant or Maritrans
Operating Partners L.P., Maritrans Philadelphia Inc. or Maritrans Barge Company
which relate to debt that does not exceed 10 percent of the total assets of the Regis-
trant are omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K. Maritrans
hereby agrees to furnish supplementally to the Securities and Exchange Commission
a copy of each such instrument upon request.
10.1* Amended and Restated Agreement of Limited Partnership of Maritrans Operating
Partners L.P., dated as of April 14, 1987 (Exhibit 3.2).
10.2+ Certificate of Limited Partnership of Maritrans Operating Partners L.P., dated
January 29, 1987 (Exhibit 3.4).
10.3* Form of Maritrans Capital Corporation Note Purchase Agreement, dated as of March
15, 1987 (Exhibit 10.6).
10.3(a)* Indenture of Trust and Security Agreement, dated as of March 15, 1987 from
Maritrans Operating Partners L.P. and Maritrans Capital Corporation to The Wilm-
ington Trust Company (Exhibit 10.6(a)).
10.3(b)* Form of First Preferred Ship Mortgage, dated April 14, 1987 from Maritrans
Operating Partners L.P., mortgagor, to The Wilmington Trust Company, mortgagee
(Exhibit 10.6(b)).
10.3(c)* Guaranty Agreement by Maritrans Operating Partners L.P. regarding $35,000,000
Series A Notes Due April 1, 1997 and $80,000,000 Series B Notes Due April 1,
2007 of Maritrans Capital Corporation (Exhibit 10.6(c)).
10.3(d)= Second Supplemental Indenture of Trust and Security Agreement, dated as of
April 1, 1996 from Maritrans Operating Partners L.P. and Maritrans Capital Corpo-
ration to Wilmington Trust Company, as Trustee.
10.3(e)= Supplement To First Preferred Ship Mortgages, dated May 8, 1996 from Maritrans
Operating Partners L.P., Mortgagor, to Wilmington Trust Company, as Trustee,
Mortgagee.
10.4- Credit Agreement of October 17, 1997, by and among Maritrans Tankers Inc., Mari-
trans Inc., and Mellon Bank, N.A. for a revolving credit facility up to $33,000,000
(Exhibit 10.2).
10.4(a)- Guaranty (Suretyship) Agreement of October 17, 1997, by Maritrans Inc. regarding
up to $50,000,000 in principal amount of credit accomodations to Maritrans Tankers
Inc. by Mellon Bank, N.A. (Exhibit 10.1).
10.4(b)- Note of Maritrans Tankers Inc. to Mellon Bank, N.A., dated October 17, 1997
(Exhibit 10.3).
10.4(c)- First Preferred Ship Mortgage, dated October 17, 1997, by Maritrans Tankers Inc.,
mortgagor, to Mellon Bank, N.A., mortgagee, on the vessel ALLEGIANCE (Exhibit
10.4).
10.4(d)- First Preferred Ship Mortgage, dated October 17, 1997, by Maritrans Tankers Inc.,
mortgagor, to Mellon Bank, N.A., mortgagee, on the vessel PERSEVERANCE
(Exhibit 10.5).
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
Exhibit Index Page
- ------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
Executive Compensation Plans and Arrangements
10.5 Severance and Non-Competition Agreement, as amended and restated effective July
7, 1997, between Maritrans General Partner Inc. and John C. Newcomb.
10.6 Severance and Non-Competition Agreement, as amended and restated effective July
7, 1997, between Maritrans General Partner Inc. and John J. Burns.
10.7- Employment Agreement, dated October 5, 1993 between Maritrans General Partner
Inc. and Stephen A. Van Dyck (Exhibit 10.6).
10.8 Severance and Non-Competition Agreement, as amended and restated effective July
7, 1997, between Maritrans General Partner Inc. and Steven E. Welch.
10.9 Severance and Non-Competition Agreement, as amended and restated effective July
7, 1997, between Maritrans General Partner Inc. and Janice M. Smallacombe.
10.10- Profit Sharing and Savings Plan of Maritrans Inc. as amended and restated effective
November 1, 1993 (Exhibit 10.13).
10.11@ Executive Award Plan of Maritrans GP Inc. (Exhibit 10.31).
10.12@ Excess Benefit Plan of Maritrans GP Inc. as amended and restated effective January
1, 1988 (Exhibit 10.32).
10.13@ Retirement Plan of Maritrans GP Inc. as amended and restated effective January 1,
1989 (Exhibit 10.33).
10.14- Performance Unit Plan of Maritrans Inc. effective April 1, 1993 (Exhibit 10.17).
10.15& Executive Compensation Plan as amended and restated effective March 18, 1997.
21.1 Subsidiaries of Maritrans Inc.
23.1 Consent of Independent Auditors to incorporate by reference their report dated Janu-
ary 23, 1998, with respect to the consolidated financial statements and schedule of
Maritrans Inc. for the year ended December 31, 1997, into the Form S-8 Registra-
tion Statement No. 333-33765 dated August 15, 1997.
27 Financial Data Schedule
</TABLE>

* Incorporated by reference herein to the Exhibit number in parentheses filed
on March 24, 1988 with Amendment No. 1 to Maritrans Partners L. P. Form
10-K Annual Report, dated March 3, 1988, for the fiscal year ended December
31, 1987.

+ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Partners L. P. Form S-1 Registration Statement No. 33-11652
dated January 30, 1987 or Amendment No. 1 thereto dated March 20, 1987.

# Incorporated by reference herein to the Exhibit of the same number filed
with the Corporation's Post-Effective Amendment No. 1 to Form S-4
Registration Statement No. 33-57378 dated January 26, 1993.

& Incorporated by reference herein to Exhibit A of the Registrant's definitive
Proxy Statement filed on March 31, 1997.

@ Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Partners L. P. Annual Report on Form 10-K, dated March 29,
1993 for the fiscal year ended December 31, 1992.

- Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Inc. Annual Report on Form 10-K, dated March 30, 1994 for
the fiscal year ended December 31, 1993.

= Incorporated by reference herein to the Exhibit of the same number filed
with Maritrans Inc. Annual Report on Form 10-K, dated March 31, 1997 for
the fiscal year ended December 31, 1996.

- Incorporated by reference herein to the Exhibit number in parentheses filed
with Maritrans Inc. quarterly report on Form 10-Q, dated November 12, 1997
for the quarter ended September 30, 1997.

34
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

MARITRANS INC.
(Registrant)

By: /s/ Stephen A. Van Dyck
-------------------------------
Stephen A. Van Dyck
Chairman of the Board

Dated: March 27, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<S> <C> <C>
/s/ Stephen A. Van Dyck
By: --------------------------- Chairman of the Board Dated: March 27, 1998
Stephen A. Van Dyck and Chief Executive Officer
(Principal Executive Officer)

/s/ Dr. Robert E. Boni Director Dated: March 27, 1998
By: ---------------------------
Dr. Robert E. Boni

/s/ Dr. Craig E. Dorman Director Dated: March 27, 1998
By: ---------------------------
Dr. Craig E. Dorman

/s/ Robert J. Lichtenstein Director Dated: March 27, 1998
By: ---------------------------
Robert J. Lichtenstein

/s/ Eric Schless Director Dated: March 27, 1998
By: ---------------------------
Eric Schless

/s/ H. William Brown Chief Financial Officer Dated: March 27, 1998
By: --------------------------- (Principal Financial Officer)
H. William Brown

/s/ Walter T. Bromfield Treasurer and Controller Dated: March 27, 1998
By: --------------------------- (Principal Accounting Officer)
Walter T. Bromfield
</TABLE>

35
<PAGE>

MARITRANS INC.
SCHEDULE II -- VALUATION ACCOUNT

($000)

<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- ----------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
JANUARY 1 TO DECEMBER 31, 1995
Allowance for doubtful accounts ......... $ 453 $ 31 $ 27(a) $ 457
===== ==== ===== ======
JANUARY 1 TO DECEMBER 31, 1996
Allowance for doubtful accounts ......... $ 457 $403 $ -- $ 860
===== ==== ===== ======
JANUARY 1 TO DECEMBER 31, 1997
Allowance for doubtful accounts ......... $ 860 $410 $ 12(a) $1,258
===== ==== ===== ======
</TABLE>

- ------------
(a) Deductions are a result of write-offs of uncollectible accounts receivable
for which allowances were previously provided.

<PAGE>

SEVERANCE AND NON-COMPETITION AGREEMENT

Amended Agreement made as of the 7th day of July, 1997, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and John
C. Newcomb (the "Employee").

WHEREAS, the Employee is employed by the Company as its Vice President
and General Counsel;

WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");

WHEREAS, the Employee and Maritrans entered into a Severance and
Non-competition Agreement on April 4, 1996 to provide certain payments to the
Employee in the event that his employment were terminated, including as a result
of a Change of Control of Maritrans (the "Agreement");

WHEREAS, the Employee and the Company now wish to revise the Agreement;

and

WHEREAS, in consideration for the Employee agreeing not to compete with
the Company in the event the Employee's employment is terminated, the Company
agrees that the Employee shall receive the compensation set forth in this
Agreement as a cushion against the financial and career impact on the Employee
in the event the Employee's employment with the Company is terminated without
cause whether or not there is a Change of Control of Maritrans;

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:

<PAGE>

1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:

(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").

(b) "Base Compensation" shall mean the sum of the Employee=s base
salary, at the rate in effect on the Termination Date or at the time of a Change
of Control, if higher, the Employee's annual bonus as paid for the year prior to
the Termination Date and, if applicable, any payment received under the
Company's Performance Unit Plan in the year prior to the year in which the
Termination Date occurs, together with any and all salary reduction authorized
amounts under any of the Company's benefit plans or programs, but excluding any
amounts attributable to the exercise of stock options by the Employee under the
Company's Equity Compensation Plan.

(i) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise, securities of the Company; provided, however, that a Person shall not
be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for payment, purchase or
exchange;

<PAGE>

(ii) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including without limitation pursuant to
any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
any security under this subsection (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or

(iii) where voting securities are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subsection (ii) above) or disposing of any voting
securities of the Company; provided, however, that nothing in this subsection
(d) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.

(d) "Board" shall mean the board of directors of the Company.

(e) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole.

<PAGE>

(f) "Change of Control" shall be deemed to have taken place if (i) any
Person (except the Company or any employee benefit plan of the Company or of any
Affiliate, any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such employee benefit plan),
together with all Affiliates and Associates of such Person, shall become the
Beneficial Owner in the aggregate of 20% or more of the common stock of
Maritrans then outstanding); provided, however, that no "Change of Control"
shall be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the common
stock of the Company of the Common Stock of the Company then outstanding or to
solicit proxies, (ii) during any twenty-four month period, individuals who at
the beginning of such period constituted the board of directors of Maritrans
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the Maritrans' shareholders, of at least
seventy-five percent of the directors who were not directors at the beginning of
such period was approved by a vote of at least seventy-five percent of the
directors in office at the time of such election or nomination who were
directors at the beginning of such period, (iii) consummation by Maritrans of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the outstanding common
stock of Maritrans prior to such Business Combination do not, following such
Business Combination, beneficially own, directly or indirectly, more than 50% of
the then outstanding shares of common stock entitled to vote generally in the
election of directors of the corporation, business trust or other entity
resulting from or being the surviving entity in such Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the outstanding common stock or Maritrans, or (iv)
consummation of a complete liquidation or dissolution of Maritrans or sale or
other disposition of all or substantially all of the assets of Maritrans other
than to a corporation, business trust or other entity with respect to which,
following such sale or disposition, more than 50% of the then outstanding shares
of common stock entitled to vote generally in the election of directors, is then
owned beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the outstanding
common stock of Maritrans immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the outstanding common
stock immediately prior to such sale or disposition.

(g) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.

(h) "Person" shall mean any individual, firm, corporation, partnership
or other entity.

(i) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.

(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.

(k) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.

(l) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:

(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or

<PAGE>

(ii) initiated by the Employee upon one or more of the following
occurrences:

(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;

(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;

(C) any removal by the Company of the Employee from the employment
grade, compensation level or officer positions which the Employee holds as of
the effective date hereof except in connection with promotions to higher office;

(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the position
the Employee holds.

2. Notice of Termination. Any Termination of Employment shall be
communicated by a Notice of Termination to the other party hereto given in
accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific reasons for
the termination, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for termination of the Employee's employment, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).

<PAGE>

3. Severance Compensation upon Termination.

(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall continue to pay to the
Employee, upon the execution of a release substantially in the form being used
by the Company, prior to a Change of Control, for terminating executives, an
amount equal to one-half his Base Compensation, subject to customary employment
taxes and deductions, for six months following the Termination Date but all
other benefit coverages (except as specified by law or regulation), retirement
benefits and fringe benefit eligibility shall cease upon the Termination Date.

(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable, any payment under
subsection (a) above, a single sum in cash equal to one times the Employee's
Base Compensation.

(c) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.

<PAGE>

(d) As additional consideration for the non-competition and
non-solicitation covenants contained in Sections 12 and 13, (i) if payments are
made under subsection (a) above, an amount equal to his Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
his Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.

4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Employee
under any other plan, policy or program of the Company except that no payments
shall be due to the Employee under the Company's then severance pay plan for
employees.

5. Establishment of Trust. The Company may establish an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations hereunder. Funding of such trust fund shall be subject to the
Company's discretion, as set forth in the agreement pursuant to which the fund
will be established.

6. Enforcement.

(a) In the event that the Company shall fail or refuse to make payment
of any amounts due the Employee under Sections 3(b) and 4 hereof within the
respective time periods provided therein, the Company shall pay to the Employee,
in addition to the payment of any other sums provided in this Agreement,
interest, compounded daily, on any amount remaining unpaid from the date payment
is required under Section 3(b) and 4, as appropriate, until paid to the
Employee, at the rate from time to time announced by Mellon Bank (East) as its
"prime rate" plus 2%, each change in such rate to take effect on the effective
date of the change in such prime rate.

<PAGE>

(b) It is the intent of the parties that the Employee not be required
to incur any expenses associated with the enforcement of his rights under
Section 3(b) of this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.

7. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.

8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company
or any of its Subsidiaries or Affiliates and for which the Employee may qualify;
provided, however, that the Employee hereby waives the Employee's right to
receive any payments under any severance pay plan or similar program applicable
to other employees of the Company.

9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Employee or others.

<PAGE>

10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.

11. Certain Reduction of Payments.

(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and that it would be economically advantageous to the Employee to
reduce the Payment to avoid or reduce the taxation of excess parachute payments
under Section 4999 of the Code, the aggregate present value of amounts payable
or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be subject to the taxation under Section
4999 of the Code. For purposes of this Section 11, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.

<PAGE>

(b) All determinations to be made under this Section 11 shall be made
by Ernst & Young (or the Company's independent public accountant immediately
prior to the Change of Control if other than Ernst & Young (the "Accounting
Firm")), which firm shall provide its determinations and any supporting
calculations both to the Company and the Employee within 10 days of the
Termination Date. Any such determination by the Accounting Firm shall be binding
upon the Company and the Employee. The Employee shall in his sole discretion
determine which and how much of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section. Within five days after
the Employee's determination, the Company shall pay (or cause to be paid) or
distribute (or cause to be distributed) to or for the benefit of the Employee
such amounts as are then due to the Employee under this Agreement.

<PAGE>

(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Employee which the Employee shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by the Employee to the Company if and
to the extent such payment would not reduce the amount which is subject to
taxation under Section 4999 of the Code. In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee together with
interest at the Federal Rate.

(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.

12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.

<PAGE>

13. Non-Competition.

(a) During his employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during his employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during his
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.

<PAGE>

(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.

14. Equitable Relief.

(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that his experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) he has been advised by the Company
to consult his own legal counsel in respect of this Agreement, and (ii) that he
has had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with his counsel.

<PAGE>

(b) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Sections 12 or 13 hereof, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 12 or 13 hereof should ever be adjudicated to exceed the time,
geographic, service, or other limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service, or other limitations permitted by
applicable law.

(c) The Employee irrevocably and unconditionally (i) agrees that any
suit, action or other legal proceeding arising out of Section 12 or 13 hereof,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 17 hereof.

<PAGE>

(d) Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which he may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which he may be connected with as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.

15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects to continue employment, within 30 days after a non-renewal,
and, thereby, waive such payments in connection with the failure to renew, (ii)
after a Change of Control during the term of this Agreement, this Agreement
shall remain in effect until all of the obligations of the parties hereunder are
satisfied or have expired, and (iii) this Agreement shall terminate if, prior to
a Change of Control, the employment of the Employee with the Company or any of
its Subsidiaries, as the case may be, shall terminate for any reason, or the
Employee shall cease to be an Employee, except as provided in clause (i) or in
Section 3(b).

<PAGE>

16. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement. As used in this Agreement, the Company shall mean
the Company as hereinbefore defined and any such successor or successors to its
business and/or assets, jointly and severally.

17. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:

If to the Company, to:

Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary

If to the Employee, to:

John C. Newcomb
7725 St. Martin Lane
Philadelphia, PA 19118

<PAGE>

or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 16 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.

18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.

19. Contents of Agreement, Amendment and Assignment.

(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by a duly authorized officer. The provisions of
this Agreement may provide for payments to the Employee under certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof. It is the specific intention of the parties that
the provisions of this Agreement shall supersede any provisions to the contrary
in such plans, and such plans shall be deemed to have been amended to correspond
with this Agreement without further action by the Company or the Board.

(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.

<PAGE>

(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.

20. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.

21. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1(l)(ii) of this Agreement.

22. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.

23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.

<PAGE>

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

Attest: Maritrans General Partner Inc.

[Seal]

By
/s/ Arthur J. Volkle /s/ Walter T. Bromfield
- ----------------------- --------------------------------
Asst. Secretary Controller

/s/ Maureen Heaney /s/ John C. Newcomb
- ----------------------- --------------------------------
Witness John C. Newcomb

<PAGE>

SEVERANCE AND NON-COMPETITION AGREEMENT

Amended Agreement made as of the 7th day of July, 1997, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and John
J. Burns (the "Employee").

WHEREAS, the Employee is employed by the Company as its President-
Eastern Clean Division;

WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");

WHEREAS, the Employee and Maritrans entered into a Severance and
Non-competition Agreement on February 4, 1997 to provide certain payments to the
Employee in the event that his employment were terminated, including as a result
of a Change of Control of Maritrans (the "Agreement");

WHEREAS, the Employee and the Company now wish to revise the Agreement;
and

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:

<PAGE>

1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:

<PAGE>

(d) "Board" shall mean the board of directors of the Company.

<PAGE>

(g) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.

(h) "Person" shall mean any individual, firm, corporation, partnership
or other entity.

(i) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.

(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.

(k) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.

(l) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:

(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or

<PAGE>

(ii) initiated by the Employee upon one or more of the following
occurrences:

(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;

(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;

(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the position
the Employee holds; or

(E) a transfer of the Employee, without his express written consent, to
a location that is outside the metropolitan Philadelphia area (fifty miles
surrounding the Company's principal location as of the date hereof), or the
general area in which her principal place of business immediately preceding the
Change of Control may be located at such time if other than metropolitan
Philadelphia.

<PAGE>

3. Severance Compensation upon Termination.

(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall continue to pay to the
Employee, upon the execution of a release substantially in the form being used
by the Company, prior to a Change of Control, for terminating executives, an
amount equal to his Base Compensation, subject to customary employment taxes and
deductions, for 12 months following his Termination Date but all other benefit
coverages (except as specified by law or regulation), retirement benefits and
fringe benefit eligibility shall cease upon the Termination Date.

(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable any payment under
subsection (a) above, a single sum in cash equal to 1.99 times the Employee's
Base Compensation.

(c) In the event the Employee's Normal Retirement Date would occur
prior to 24 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) or (b) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator of
which shall be 730.

<PAGE>

6. Enforcement.

<PAGE>

11. Certain Reduction of Payments.

<PAGE>

13. Non-Competition.

<PAGE>

14. Equitable Relief.

<PAGE>

15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects, within 30 days after a non-renewal, to continue employment
and, thereby, waive such payments in connection with the failure to renew, (ii)
after a Change of Control during the term of this Agreement, this Agreement
shall remain in effect until all of the obligations of the parties hereunder are
satisfied or have expired, and (iii) this Agreement shall terminate if, prior to
a Change of Control, the employment of the Employee with the Company or any of
its Subsidiaries, as the case may be, shall terminate for any reason, or the
Employee shall cease to be an Employee, except as provided in clause (i) or in
Section 3(b).

<PAGE>

If to the Company, to:

Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary

If to the Employee, to:

John J. Burns
708 Carter Hill Drive
West Deptford, NJ 08066

18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.

<PAGE>

19. Contents of Agreement, Amendment and Assignment.

(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.

<PAGE>

23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

Attest: Maritrans General Partner Inc.

[Seal]

/s/ Arthur J. Volkle /s/ John C. Newcomb
- ----------------------- --------------------------------
Asst. Secretary Vice President

/s/ Deborah S. Burns /s/ John J. Burns
- ----------------------- --------------------------------
Witness John J. Burns

<PAGE>

SEVERANCE AND NON-COMPETITION AGREEMENT

Amended Agreement made as of the 7th day of July, 1997, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and
Steven E. Welch (the "Employee").

WHEREAS, the Employee is employed by the Company as its President-
Eastern Black Division;

WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");

WHEREAS, the Employee and Maritrans entered into a Severance and
Non-competition Agreement on March 5, 1997 to provide certain payments to the
Employee in the event that his employment were terminated, including as a result
of a Change of Control of Maritrans (the "Agreement");

WHEREAS, the Employee and the Company now wish to revise the Agreement;
and

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:

<PAGE>

1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:

(b) "Base Compensation" shall mean the sum of the Employee's base
salary, at the rate in effect on the Termination Date or at the time of a Change
of Control, if higher, the Employee's annual bonus as paid for the year prior to
the Termination Date and, if applicable, any payment received under the
Company's Performance Unit Plan in the year prior to the year in which the
Termination Date occurs, together with any and all salary reduction authorized
amounts under any of the Company's benefit plans or programs, but excluding any
amounts attributable to the exercise of stock options by the Employee under the
Company's Equity Compensation Plan.

<PAGE>

(d) "Board" shall mean the board of directors of the Company.

<PAGE>

(g) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.

(h) "Person" shall mean any individual, firm, corporation, partnership
or other entity.

(i) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.

(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.

(k) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.

(l) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:

<PAGE>

(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or

(ii) initiated by the Employee upon one or more of the following
occurrences:

(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;

(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;

(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the position
the Employee holds; or

(E) a transfer of the Employee, without his express written consent, to
a location that is outside the metropolitan Philadelphia area (fifty miles
surrounding the Company's principal location as of the date hereof), or the
general area in which his principal place of business immediately preceding the
Change of Control may be located at such time if other than metropolitan
Philadelphia.

<PAGE>

3. Severance Compensation upon Termination.

(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall continue to pay to the
Employee, upon the execution of a release substantially in the form being used
by the Company, prior to a Change of Control, for terminating executives, an
amount equal to his Base Compensation, subject to customary employment taxes and
deductions, for 12 months following his Termination Date but all other benefit
coverages (except as specified by law or regulation), retirement benefits and
fringe benefit eligibility shall cease upon the Termination Date.

(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable any payment under
subsection (a) above, a single sum in cash equal to 1.99 times the Employee's
Base Compensation.

<PAGE>

6. Enforcement.

<PAGE>

11. Certain Reduction of Payments.

<PAGE>

13. Non-Competition.

<PAGE>

14. Equitable Relief.

<PAGE>

(d) Employee agrees that he will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which she may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which she may be connected with
as an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use or permit his
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.

15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects, within 30 days after a non-renewal, to continue employment
and, thereby, waive such payments in connection with the failure to renew, (ii)
after a Change of Control during the term of this Agreement, this Agreement
shall remain in effect until all of the obligations of the parties hereunder are
satisfied or have expired, and (iii) this Agreement shall terminate if, prior to
a Change of Control, the employment of the Employee with the Company or any of
its Subsidiaries, as the case may be, shall terminate for any reason, or the
Employee shall cease to be an Employee, except as provided in clause (i) or in
Section 3(b).

<PAGE>

If to the Company, to:

Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary

If to the Employee, to:

Steven E. Welch
6 Papermill Road
Newtown Square, PA 19073

<PAGE>

18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.

19. Contents of Agreement, Amendment and Assignment.

(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.

<PAGE>

23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

Attest: Maritrans General Partner Inc.

[Seal]

/s/ Arthur J. Volkle /s/ John C. Newcomb
- ----------------------- --------------------------------
Asst. Secretary Vice President

/s/ Ramona A. Adkins /s/ Steven E. Welch
- ----------------------- --------------------------------
Witness Steven E. Welch

<PAGE>

SEVERANCE AND NON-COMPETITION AGREEMENT

Amended Agreement made as of the 7th day of July, 1997, between
Maritrans General Partner Inc., a Delaware corporation (the "Company"), and
Janice M. Smallacombe (the "Employee").

WHEREAS, the Employee is employed by the Company as its President-
Business Services Division;

WHEREAS, the Company is a subsidiary of Maritrans Inc., a publicly
traded corporation ("Maritrans");

WHEREAS, the Employee and Maritrans entered into a Severance and
Non-competition Agreement on April 24, 1996 to provide certain payments to the
Employee in the event that her employment were terminated, including as a result
of a Change of Control of Maritrans (the "Agreement");

WHEREAS, the Employee and the Company now wish to revise the Agreement;
and

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:

<PAGE>

1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:

<PAGE>

(d) "Board" shall mean the board of directors of the Company.

<PAGE>

(g) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Employee's 65th birthday.

(h) "Person" shall mean any individual, firm, corporation, partnership
or other entity.

(i) "Subsidiary" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.

(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.

(k) "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.

(l) "Termination following a Change of Control" shall mean a
Termination of Employment within two years after a Change of Control either:

(i) initiated by the Company for any reason other than (x) the
Employee's continuous illness, injury or incapacity for a period of six
consecutive months or (y) for "Cause;" or

<PAGE>

(ii) initiated by the Employee upon one or more of the following
occurrences:

(A) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;

(B) any significant reduction by the Company of the authority, duties
or responsibilities of the Employee;

(D) the requirement that the Employee undertake business travel to an
extent substantially greater than is reasonable and customary for the position
the Employee holds; or

(E) a transfer of the Employee, without her express written consent, to
a location that is outside the metropolitan Philadelphia area (fifty miles
surrounding the Company's principal location as of the date hereof), or the
general area in which her principal place of business immediately preceding the
Change of Control may be located at such time if other than metropolitan
Philadelphia.

<PAGE>

3. Severance Compensation upon Termination.

(a) In the event of the Employee's involuntary Termination of
Employment for reason other than Cause, the Company shall continue to pay to the
Employee, upon the execution of a release substantially in the form being used
by the Company, prior to a Change of Control, for terminating executives, an
amount equal to her Base Compensation, subject to customary employment taxes and
deductions, for 12 months following her Termination Date but all other benefit
coverages (except as specified by law or regulation), retirement benefits and
fringe benefit eligibility shall cease upon the Termination Date.

(b) Subject to the provisions of Section 11 hereof, in the event of the
Employee's Termination following a Change of Control or in the event that a
Change of Control occurs within six months after a Termination of Employment
requiring a payment under subsection (a), the Company shall pay to the Employee,
within 30 days after the Termination Date (or as soon as possible thereafter in
the event that the procedures set forth in Section 11(b) hereof cannot be
completed within 30 days or payments have already commenced under subsection (a)
above), and in lieu of, or reduced by, as applicable any payment under
subsection (a) above, a single sum in cash equal to 1.99 times the Employee's
Base Compensation.

<PAGE>

(d) As additional consideration for the non-competition and
non-solicitation covenants contained in Sections 12 and 13, (i) if payments are
made under subsection (a) above, an amount equal to her Base Compensation,
subject to customary employment taxes and deductions, for 12 months following
her Termination Date, or (ii) if payments are made under subsection (b) above, a
single cash payment, within 30 days after the effective date of the Termination
of Employment, equal to Employee's Base Compensation.

6. Enforcement.

<PAGE>

(b) It is the intent of the parties that the Employee not be required
to incur any expenses associated with the enforcement of her rights under
Section 3(b) of this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all expenses (including all attorneys' fees and legal
expenses) incurred by the Employee in enforcing any of the obligations of the
Company under this Agreement.

<PAGE>

11. Certain Reduction of Payments.

<PAGE>

(b) All determinations to be made under this Section 11 shall be made
by Ernst & Young (or the Company's independent public accountant immediately
prior to the Change of Control if other than Ernst & Young (the "Accounting
Firm")), which firm shall provide its determinations and any supporting
calculations both to the Company and the Employee within 10 days of the
Termination Date. Any such determination by the Accounting Firm shall be binding
upon the Company and the Employee. The Employee shall in her sole discretion
determine which and how much of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section. Within five days after
the Employee's determination, the Company shall pay (or cause to be paid) or
distribute (or cause to be distributed) to or for the benefit of the Employee
such amounts as are then due to the Employee under this Agreement.

<PAGE>

12. Confidential Information. The Employee recognizes and acknowledges
that, by reason of her employment by and service to the Company, she has had and
will continue to have access to confidential information of the Company and its
affiliates, including, without limitation, information and knowledge pertaining
to products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships between
the Company and its affiliates and other distributors, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset and covenants that she
will not, either during or after her employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Employee or except as may be required by
law.

<PAGE>

13. Non-Competition.

(a) During her employment by the Company and for a period of one year
thereafter, the Employee will not, unless acting with the prior written consent
of the Board, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
her name to be used in connection with, any business or enterprise engaged in a
geographic area in which the Company or any of its affiliates is operating
either during her employment by the Company or on the Termination Date, as
applicable, presently on the East Coast of the United States or at any port in
the Gulf of Mexico (whether or not such business is physically located within
those areas) (the "Geographic Area"), in any business that is a customer of,
competitive to, a business from which the Company or any of its affiliates
derive at least five percent of its respective gross revenues either during her
employment by the Company or on the Termination Date, as applicable. It is
recognized by the Employee that the business of the Company and its affiliates
and the Employee's connection therewith is or will be involved in activity
throughout the Geographic Area, and that more limited geographical limitations
on this non-competition covenant are therefore not appropriate. The Employee
also shall not, directly or indirectly, during such one-year period (a) solicit
or divert business from, or attempt to convert any client, account or customer
of the Company or any of its affiliates, whether existing at the date hereof or
acquired during Employee's employment nor (b) following Employee's employment,
solicit or attempt to hire any then employee of the Employer or of any of its
affiliates.

(b) The foregoing restriction shall not be construed to prohibit the
ownership by the Employee of less than one percent (1%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither the Employee nor any group of persons including
Employee in any way, either directly or indirectly, manages or exercises control
of any such corporation, guarantees any of its financial obligations, otherwise
takes any part in its business, other than exercising her rights as a
shareholder, or seeks to do any of the foregoing.

<PAGE>

14. Equitable Relief.

(a) Employee acknowledges that the restrictions contained in Sections
12 and 13 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates, that the Company would not have
entered into this Agreement in the absence of such restrictions, and that any
violation of any provision of those Sections will result in irreparable injury
to the Company. The Employee represents that her experience and capabilities are
such that the restrictions contained in Section 13 hereof will not prevent the
Employee from obtaining employment or otherwise earning a living at the same
general level of economic benefit as anticipated by this Agreement. The Employee
further represents and acknowledges that (i) she has been advised by the Company
to consult her own legal counsel in respect of this Agreement, and (ii) that she
has had full opportunity, prior to execution of this Agreement, to review
thoroughly this Agreement with her counsel.

<PAGE>

(d) Employee agrees that she will provide, and that the Company may
similarly provide, a copy of Sections 12 and 13 hereof to any business or
enterprise (i) which she may directly or indirectly own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing, control or control of, or (ii) with which she may be connected with
as an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which she may use or permit her
name to be used; provided, however, that this provision shall not apply in
respect of Section 3 hereof after expiration of the time period set forth
therein.

<PAGE>

15. Term of Agreement. The term of this Agreement shall be for two
years from the date hereof and shall be automatically renewed for successive
one-year periods unless the Company notifies the Employee in writing that this
Agreement will not be renewed at least sixty days prior to the end of the
current term; provided, however, that (i) a failure of the Company to renew at a
time when the Employee is employed by the Company shall constitute an
involuntary Termination of Employment entitling the Employee to terminate
employment from the Company and to the payments provided by Section 3(a) unless
the Employee elects, within 30 days after a non-renewal, to continue employment
and, thereby, waive such payments in connection with the failure to renew, (ii)
after a Change of Control during the term of this Agreement, this Agreement
shall remain in effect until all of the obligations of the parties hereunder are
satisfied or have expired, and (iii) this Agreement shall terminate if, prior to
a Change of Control, the employment of the Employee with the Company or any of
its Subsidiaries, as the case may be, shall terminate for any reason, or the
Employee shall cease to be an Employee, except as provided in clause (i) or in
Section 3(b).

<PAGE>

If to the Company, to:

Maritrans Inc.
2600 One Logan Square
Philadelphia, PA 19103
Attention: Corporate Secretary

If to the Employee, to:

Janice M. Smallacombe
2148 Andrea Drive
Bensalem, PA 19020

18. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.

<PAGE>

19. Contents of Agreement, Amendment and Assignment.

(b) Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.

<PAGE>

23. Termination of Agreement. This Agreement shall supersede and
replace the Agreement which shall hereafter be null and void and of no further
force and effect.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

Attest: Maritrans General Partner Inc.

[Seal]

/s/ Arthur J. Volkle /s/ John C. Newcomb
- ----------------------- --------------------------------
Asst. Secretary Vice President

/s/ Ramona A. Adkins /s/ Janice M. Smallacombe
- ----------------------- --------------------------------
Witness Janice M. Smallacombe

<PAGE>

Exhibit 21.1

MARITRANS INC.
SUBSIDIARIES OF MARITRANS INC.
As of December 31, 1997

Direct and indirect subsidiaries of Maritrans Inc. are:

Maritrans Operating Partners L.P.
Maritrans General Partner Inc.
Maritrans Holding Inc.
Maritrans Barge Co.
Maritrans Ocean Transport Inc.
Maritrans Capital Corp.
CCF Acquisition Corp.
Maritank Philadelphia Inc.
Inter-Cities Navigation (Texas) Corp.
Maritank Maryland Inc.
Interstate Towing (Texas) Co.
Maritrans Management Services Inc.
MOT Tankers I, Inc.
MOT Tankers II, Inc.
MOT Tankers III, Inc.
MOT Tankers IV, Inc.
Maritrans Marketing Inc.
Maritrans Puerto Rico Inc.
Maritrans Tankers Inc.
Maritrans Marine Management Co.

<PAGE>

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registation
Statement (Form S-8 No. 333-33765) pertaining to the Equity Compensation Plan of
Maritrans Inc. of our report dated January 23, 1998, with respect to the
consolidated financial statements and schedule of Maritrans Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1997.

/s/ Ernst & Young, LLP
-----------------------------
Ernst & Young, LLP

Philadelphia, Pennsylvania
March 24, 1998

<ARTICLE> 5
<CIK> 0000810113
<NAME> MARITRANS INC.
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,312
<SECURITIES> 0
<RECEIVABLES> 18,073
<ALLOWANCES> 1,258
<INVENTORY> 5,066
<CURRENT-ASSETS> 47,646
<PP&E> 329,032
<DEPRECIATION> 132,316
<TOTAL-ASSETS> 251,023
<CURRENT-LIABILITIES> 37,467
<BONDS> 75,365
<COMMON> 130
0
0
<OTHER-SE> 90,665
<TOTAL-LIABILITY-AND-EQUITY> 251,023
<SALES> 0
<TOTAL-REVENUES> 135,781
<CGS> 0
<TOTAL-COSTS> 114,385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,565
<INCOME-PRETAX> 18,157
<INCOME-TAX> 6,696
<INCOME-CONTINUING> 11,461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,461
<EPS-PRIMARY> .95
<EPS-DILUTED> .94

</TABLE>