For the quarter ended September 30, 2006, Time Charter Equivalent(1) revenues increased by 31% to $254.8 million from $194.8 million in the third quarter of 2005. TCE revenue performance was the result of strong rates across the Company's VLCC, Aframax, Panamax and Handysize Product Carrier fleets. EBITDA(1) for the third quarter was $135.6 million compared with $135.4 million in the third quarter of 2005. Net income for the quarter ended September 30, 2006 was $90.8 million, or $2.29 per diluted share, compared with $72.1 million, or $1.82 per diluted share, for the third quarter of 2005. The current quarter benefited from gains on vessel sales and sale of securities of $15.8 million or $0.39 per diluted share, compared with $22.4 million, or $0.46 per diluted share, in the same period a year ago. In addition, the current quarter reflects the impact of a $27.0 million, or $0.68 per diluted share, increase in the reserve related to the U.S. Department of Justice investigation as more fully described later in this press release.
For the first nine months ended September 30, 2006, the Company reported a 9% increase in TCE revenues to $751.2 million from $690.5 million in the comparable period of 2005. EBITDA for the first nine months of 2006 decreased to $424.8 million from $535.1 million in the first nine months of 2005 and included the above mentioned increase in the reserve. Net income for the nine month period ended September 30, 2006 was $279.4 million, or $7.06 per diluted share, compared with $351.1 million or $8.89 per diluted share in the comparable 2005 period. The first nine months of 2006 benefited from gains on vessel sales and sale of securities of $21.1 million, or $0.44 per diluted share, compared with $60.7 million, or $1.31 per diluted share, in the comparable period of 2005. In addition, the first nine months of 2006 reflects the impact of a $27.0 million, or $0.68 per diluted share, increase in the reserve related to the U.S. Department of Justice investigation, compared with $4.0 million, or $0.10 per diluted share, in the comparable period of 2005.(1) See Appendix 1 for a reconciliation of TCE revenues to shipping revenues and Appendix 2 for a reconciliation of EBITDA to net income.
Morten Arntzen, President and Chief Executive Officer, stated, Third quarter TCE revenues were largely the result of a strong spot rate environment in both the crude and product transportation sectors and additions to our product carrier fleet. The increase in operating income before gains and special charges reflects the benefits from OSG's diverse fleet and chartering strategy.'' Arntzen continued, Our objective to achieve a market leadership position in the U.S. Flag sector will be realized upon the completion of the Maritrans acquisition. This is another example of our ongoing efforts to transform OSG which began nearly three years ago. Our shareholders will continue to benefit from OSG's leadership position, fleet diversification and spot/time-charter mix that will ensure competitive returns not only in a strong rate environment but throughout all market cycles.''TCE revenues in the third quarter of 2006 for the International Crude Tanker segment were $175.9 million, an increase of 42% quarter-over-quarter, principally due to increases in the daily TCE rates earned on all classes of the segment's vessels. The higher daily rates were partially offset by a decrease in revenue days for VLCCs as a result of increased drydocking and repair days and the sale of three older Aframax tankers. TCE revenues for the International Product Carriers segment increased 25% to $55.0 million from $44.2 million in the year earlier period, principally as a result of an increase in the average TCE rates earned by the Handysize and Panamax Product Carriers, partially offset by an increase in drydocking and repair days. U.S. segment TCE revenues decreased 7% quarter-over-quarter to $19.0 million from $20.4 million in the same period a year ago, principally due to the sale of two crude oil tankers in the fourth quarter of 2005.
Income from vessel operations was $88.9 million in the third quarter of 2006, compared with $82.9 million in the same period a year earlier. For the quarter ended September 30, 2006, total ship operating expenses increased $56.6 million to $176.9 million from $120.3 million in the corresponding quarter in 2005, of which $27.0 million relates to the reserve taken for the U.S. Department of Justice investigation. As a result of the Company expanding its fleet in a capital-efficient manner through sale and leaseback arrangements and time and bareboat charters-in, time and bareboat charter hire expenses increased quarter-over-quarter. Vessel expenses increased quarter-over-quarter principally due to higher crew costs. General and administrative expenses increased principally due to an increase in compensation associated with additional personnel and the change in recognition of targeted cash incentive compensation from an annual to a quarterly basis, expenses incurred in connection with the U.S. Department of Justice investigation and increases in legal, accounting and consulting services.