A watercraft with a propulsion engine includes at least one hull having an underside. A dual exhaust system includes a first exhaust conduit defining a first exhaust flow path leading to the underside (e.g., a step in a planing surface on the underside) and a second exhaust conduit defining a second exhaust flow path to atmosphere. One embodiment is self proportioning. In another embodiment, an onboard proportioning system varies first and second proportions of the exhaust flowing through respective ones of the first and second exhaust conduits according to exhaust back pressure. First and second valve mechanisms selectively restrict the first and second exhaust flow paths under computer or manual control according to pressure sensed by a back-pressure-sensing component in order to thereby direct the exhaust in desired proportions for enhanced operating characteristics and reduced thermal signature.