TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)
(Information as at June 30, 2003 and for the Three and Six-Month Periods
Ended June 30, 2003 and 2002 is unaudited)

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)
(Information as at June 30, 2003 and for the Three and Six-Month Periods
Ended June 30, 2003 and 2002 is unaudited)

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)
(Information as at June 30, 2003 and for the Three and Six-Month Periods
Ended June 30, 2003 and 2002 is unaudited)

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)
(Information as at June 30, 2003 and for the Three and Six-Month Periods
Ended June 30, 2003 and 2002 is unaudited)

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)
(Information as at June 30, 2003 and for the Three and Six-Month Periods
Ended June 30, 2003 and 2002 is unaudited)

_____________________________
   (See Notes 5 and 7)

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 2003
PART I – FINANCIAL INFORMATION

RESULTS OF OPERATIONS

General

Teekay is a leading provider of international crude oil and petroleum product transportation services to major oil companies, major oil traders and government agencies worldwide. As at June 30, 2003, the Company’s fleet consisted of 151 vessels (including 43 vessels time-chartered in, 15 newbuildings on order, and 4 vessels owned by joint ventures), for a total cargo-carrying capacity of approximately 15.6 million deadweight tonnes.

The Company’s net voyage revenues are derived from:

The Company’s fleet is divided into two main segments, the spot market segment and the fixed-rate contract segment.

The Company’s spot market segment consists of conventional crude oil tankers, oil/bulk/ore carriers (“OBOs”), and product carriers operating on the spot market or subject to time charters or COAs priced on a spot-market basis or short-term fixed-rate contracts. The Company considers contracts that have an original term of less than three years in duration to be short-term. All of the Company’s very large crude carrier (“VLCC”) fleet and Suezmax conventional tanker fleet and substantially all of the Company’s conventional Aframax, large product and small product tanker fleets are among the vessels included in the spot market segment. Net voyage revenues earned by the vessels in the spot market segment accounted for approximately 63% and 70% of the Company’s net voyage revenues for the three- and six-month periods ended June 30, 2003 as compared to 73% for both of the same periods last year. The Company’s dependence on the spot market, which is within industry norms, contributes to the volatility of the Company’s revenues, cash flow from operations, and net income. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets have historically exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling.

The Company’s fixed-rate contract segment includes the Company’s shuttle tanker operations (Navion and Ugland Nordic Shipping (“UNS”), floating storage and off-take (“FSO”) vessels, a liquid petroleum gas (“LPG”) carrier, and certain conventional crude oil and product tankers on long-term fixed-rate time-charter contracts or COAs. Net voyage revenues earned by the vessels in this segment accounted for approximately 37% and 30% of the Company’s net voyage revenues for the three- and six-month periods ended June 30, 2003. The Company’s shuttle tanker operations provide services to oil companies, primarily in the North Sea, under long-term fixed-rate COAs or time-charter agreements. Historically, the utilization of shuttle tankers in the North Sea is higher in the winter months as favourable weather conditions in the summer months provide opportunities for repairs and maintenance to the offshore oil platforms, which generally reduces oil production. The Company currently has six newbuilding vessels on order in its fixed-rate contract segment, with a shuttle tanker scheduled to deliver in the third quarter of 2003 and five conventional crude oil tankers (three Suezmax and two Aframax tankers) expected to deliver in the fourth quarter of 2003 and early 2004. The five conventional crude oil tankers will be employed on 12-year contracts with ConocoPhillips when delivered.

Acquisition of Navion ASA

In April 2003, Teekay completed its acquisition of 100% of the issued and outstanding shares of Navion for approximately $774.2 million in cash, including transaction costs of approximately $7 million. The Company made a deposit of $76.0 million towards the purchase price on December 16, 2002. The remaining portion of the purchase price was paid on closing. The Company funded its acquisition of Navion by borrowing under a $500 million 364-day facility (subsequently replaced by a $550 million revolving credit facility), together with available cash, and borrowings under other existing revolving credit facilities. Navion’s results of operation have been consolidated with the Company’s results commencing April 1, 2003.

Navion, based in Stavanger, Norway, operates primarily in the shuttle tanker and the conventional crude oil and product tanker markets. Its modern shuttle tanker fleet, which as of June 30, 2003, consisted of eight owned and 12 chartered-in vessels (excluding four vessels chartered-in from the Company’s shuttle tanker subsidiary UNS), provides logistical services to the Norwegian state-owned oil company, Statoil ASA, and other oil companies in the North Sea under fixed-rate, long-term contracts of affreightment. Navion’s modern, chartered-in, conventional tanker fleet, which as of June 30, 2003, consisted of 12 crude oil tankers and 13 product tankers, operates primarily in the Atlantic region, providing services to Statoil and other oil companies. In addition, Navion owns two FSO vessels currently trading as conventional crude oil tankers in the Atlantic region, and one LPG carrier on long-term charter to Statoil. Through Navion Chartering AS, an entity owned jointly with Statoil, Navion has a first right of refusal on Statoil’s oil transportation requirements at the prevailing market rate until December 31, 2007. In addition to tanker operations, Navion also constructs, installs, operates and leases equipment that reduces volatile organic compound emissions during loading, transportation and storage of oil and oil products.

Navion provides the Company with a leadership position in the attractive shuttle tanker COA market segment. Management believes this acquisition will provide the Company with new growth opportunities and enhanced earnings and cash flow stability due to the fixed-rate, long-term nature of Navion’s shuttle tanker contracts.

For the quarter ended June 30, 2003, Navion contributed $28.8 million, or $0.71 per share, in net income, with $13.0 million, or $0.32 per share, attributable to Navion’s shuttle tanker business and $15.8 million, or $0.39 per share, attributable to Navion’s conventional tanker business.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments, and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application. For a further description of the Company’s material accounting policies, see Note 1 to the Company’s consolidated financial statements for the year ended December 31, 2002 included in the Company’s Annual Report on Form 20-F filed with the SEC.

Revenue Recognition

The Company generates a majority of its revenues from voyage charters. Within the shipping industry, the two methods used to account for voyage revenues and expenses are the percentage of completion and the completed voyage methods. For each method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. Most shipping companies, including the Company, use the percentage of completion method.

In applying the percentage of completion method, management believes that in most cases the discharge-to-discharge basis of calculating voyages more accurately reflects voyage results than the load-to-load basis. At the time of cargo discharge, the Company generally has information about the next load port and expected discharge port, whereas at the time of loading the Company normally is less certain what the next load port will be.

Vessel Lives and Impairment

The carrying value of each of the Company’s vessels represents its original cost at the time of delivery or purchase less depreciation calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard. In the shipping industry, the use of a 25-year vessel life has become the prevailing standard. However, the actual life of a vessel may be different from the 25-year life, with a shorter life potentially resulting in an impairment loss. Regulations of the International Maritime Organization (“IMO”) that became effective in April 2001 require the accelerated phase-out of certain single-hull vessels.

On June 4, 2003, the European Union (“EU”) Parliament passed legislation that will accelerate the phase-out of single-hull tankers between now and 2010, ban the carriage of heavy oils on single-hull tankers in European waters, and impose a Condition Assessment Scheme (“CAS”) for single-hull tankers older than 15 years. The regulations are expected to be effective September 1, 2003 in European waters. Following the EU’s lead, in July 2003 the IMO agreed to accelerate the phase-out of Category I tankers (tankers built prior to 1982) by 2005. None of the single-hull tankers the Company operates are Category I tankers. In addition, the IMO is considering an accelerated phase-out for the world’s remaining single hull tankers — known as Categories II and III — but deferred its decision on this issue until its next meeting in December 2003. The IMO has indicated that it will also consider at that meeting a global ban on the carriage of heavy oils on single-hull tankers and the application of CAS to single-hull tankers over 15-years old.

If the EU regulations are adopted by the IMO, management believes that they could result in an impairment loss and higher depreciation expense for the Company related to a reduction of the estimated useful life of its single-hull vessels for accounting purposes. However, management believes that these regulations could also result in a tightening of the world tanker supply and a reallocation of affected tonnage. This could result in firmer tanker market conditions and increased tanker freight rates for modern vessels. The Company has not determined the impact, if any, that the adoption of these regulations will have on the Company’s results of operation or financial position.

The carrying values of the Company’s vessels may not represent their fair market value at any point in time since the market prices of secondhand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. Both charter rates and newbuilding costs tend to be cyclical in nature. The Company reviews vessels and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparing their carrying amount to future undiscounted cash flows that the assets are expected to generate over the useful remaining life. If vessels and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair market value.

Goodwill

The Company adopted Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets” and as a result has discontinued amortization of goodwill effective January 1, 2002. Goodwill and other intangible assets with indefinite lives are tested for impairment annually or whenever an impairment indicator arises. An impairment test requires the Company to make estimates of future cash flows. If events or circumstances change, including reductions in anticipated cash flows generated by operations, goodwill could become impaired and result in a charge to earnings.

Results of Operations

Bulk shipping industry freight rates are commonly measured at the net voyage revenue level in terms of “time-charter equivalent” (“TCE”) rates, defined as voyage revenues less voyage expenses (excluding commissions), divided by voyage ship-days for the round-trip voyage. Voyage revenues and voyage expenses are a function of the type of charter, either spot charter or time-charter, and port, canal and fuel costs depending on the trade route upon which a vessel is sailing, in addition to being a function of the level of shipping freight rates. For this reason, shipowners base economic decisions regarding the deployment of their vessels upon anticipated TCE rates, and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. Therefore, the discussion of revenue below focuses on net voyage revenues and TCE rates of the Company’s two reportable segments. See Item 1 — Notes to Consolidated Financial Statements: Note 12 – Segment Reporting.

Spot Market Segment

TCE rates for the vessels in the Company’s spot market segment primarily depend on oil production and consumption levels, the number of vessels scrapped, the number of newbuildings delivered and charterers’ preference for modern tankers. As a result of the Company’s dependence on the tanker spot market, any fluctuations in TCE rates will impact the Company’s revenues and earnings.

The average size of the Company’s spot market fleet increased 33.8% and 16.3%, respectively, for the three- and six-month periods ended June 30, 2003, compared to the same periods last year, primarily due to the acquisition of Navion, and the delivery of two in-chartered newbuildings (an Aframax tanker delivered in April 2003 and a VLCC delivered in June 2003). This increase was partially offset by the disposal of four older tankers during the six-month period ended June 30, 2003.

Average TCE rates during the second quarter of 2003 were strong, although they declined from higher levels during the previous quarter. The decline in rates was largely driven by decreased oil consumption, reduced oil supplies from long-haul sources (as long-haul oil transportation from the Middle East was replaced by shorter-haul oil supplies, mainly from Venezuela) and the easing of tensions in the Middle East. A reduction in Iraqi crude exports was partially offset by an increase in production from other OPEC members. The Company’s average TCE rate for the vessels in its spot market segment decreased to $26,761 for the three-month period ended June 30, 2003, from $28,181 for the previous quarter, but increased from $14,500 for the quarter ended June 30, 2002.

Net voyage revenues for the spot market segment increased 135.8% to $222.2 million and 103.4% to $395.7 million, respectively, for the three- and six-month periods ended June 30, 2003, from $94.2 million and $194.5 million for the same periods last year. These increases were primarily due to the increases in average fleet size and average TCE rates from the same periods last year.

Vessel operating expenses, which include crewing, repairs and maintenance, insurance, stores and lubes, and communication expenses, decreased 0.6% to $32.4 million but increased 0.6% to $64.0 million, respectively, for the three- and six-month periods ended June 30, 2003, from $32.6 million and $63.7 million in the same periods last year. The increase in vessel operating expenses of the spot market segment attributable to the Navion acquisition was substantially offset by a reduction in costs due to the previously mentioned vessel dispositions.

Time-charter hire expense increased 276.6% to $50.8 million and 143.2% to $63.7 million, respectively, for the three- and six-month periods ended June 30, 2003, from $13.5 million and $26.2 million for the same periods last year. The increases were due primarily to the acquisition of Navion, which as of June 30, 2003 had 26 time-chartered-in vessels. The average number of vessels time-chartered-in by the Company, excluding the O/B/Os, was 31 in the period ended June 30, 2003 compared to 5 from the same period last year.

Depreciation and amortization expense increased 7.3% to $27.8 million and 7.0% to $54.7 million, respectively, for the three- and six-month periods ended June 30, 2003, from $25.9 million and $51.1 million for the same periods last year. The increase in depreciation and amortization for the three-month period ended June 30, 2003 attributable to the Navion acquisition was substantially offset by a reduction from the previously mentioned vessel dispositions that took place during the six-month period ended June 30, 2003. The overall increases for such three- and six-month periods were mainly due to increases in drydock amortization, which totaled $5.8 million and $11.1 million, respectively, for the three- and six-month periods ended June 30, 2003, compared to $4.4 million and $8.1 million for the same periods last year. The increases in drydock amortization were primarily due to increased drydock costs and required drydockings for older vessels.

Fixed-Rate Contract Segment

The average size of the Company’s fixed-rate contract segment increased 141.1% and 76.4%, respectively, for the three- and six-month periods ended June 30, 2003, compared to the same periods last year, primarily due to the acquisition of Navion as well as the addition of one shuttle tanker during the fourth quarter of 2002 and two shuttle tankers during first quarter of 2003.

Net voyage revenues increased 267.8% to $130.9 million and 138.3% to $170.3 million, respectively, for the three- and six-month periods ended June 30, 2003, from $35.6 million and $71.5 million for the same periods last year due primarily to the increase in fleet size.

Vessel operating expenses increased 130.3% to $23.1 million and 76.1% to $34.1 million, respectively, for the three- and six month periods ended June 30, 2003, from $10.0 million and $19.4 million for the same periods last year primarily due to the increase in fleet size. Other less significant reasons for the increases in vessel operating expenses were higher repair, maintenance and crewing costs, and the weakening of the U.S. Dollar.

Time-charter hire expense increased to $42.7 million for the three- and six-months periods ended June 30, 2003, from $nil for the same periods last year. The Company did not have any chartered-in shuttle tankers prior to the acquisition of Navion. As at June 30, 2003, the Company had 12 chartered-in shuttle tankers.

Depreciation and amortization expense increased 102.6% to $22.0 million and 57.5% to 34.2 million, respectively, for the three- and six-month periods ended June 30, 2003, from $10.8 million and $21.7 million for the same periods last year. The increases were mainly due to increased vessel cost amortization as a result of the increases in fleet size and the amortization of the estimated fair market value of the COAs the Company acquired as part of the Navion acquisition.

Other Operating Results

General and administrative expenses increased 52.9% to $21.9 million and 28.6% to $36.6 million, respectively, for the three- and six-month periods ended June 30, 2003, from $14.3 million and $28.5 million for the same periods last year. These increases were primarily the result of the acquisition of Navion and a one-time cost of $1.4 million relating to the consolidation of two of the Company’s offices in Australia.

Interest expense increased 49.9% to $21.7 million and 23.7% to $36.1 million, respectively, for the three- and six-month periods ended June 30, 2003, from $14.5 million and $29.2 million for the same periods last year. The increase reflects the additional debt required for the purchase of Navion.

Interest income increased 28.6% to $1.3 million and 19.0% to $2.1 million, respectively, in the three and six-month periods ended June 30, 2003, from $1.0 million and $1.8 million in the same periods last year. This increase was primarily due to interest earned on higher cash balances due to the acquisition of Navion.

In connection with sales and proposed sales of vessels, the Company incurred write-downs of vessel values of $3.8 million and $30.6 million, respectively, for the three- and six-month periods ended June 30, 2003. There was no write-down on vessel values for the same periods last year. See Item 1 — Notes to Consolidated Financial Statements: Note 11 – Write-Down of Vessels.

Other loss for the three and six-month periods ended June 30, 2003 was $11.3 million and $20.9 million, respectively, and was primarily comprised of income taxes, equity income from 50%-owned joint ventures, dividend income from Nordic American Tanker Shipping Ltd. (“NAT”), gain on disposition of available-for-sale securities, partially offset by the write-down of available-for-sale securities, loss on disposition of fixed assets, foreign exchange loss and minority interest expense. Other loss of $5.1 million and $8.3 million for the three- and six-month periods ended June 30, 2002, was comprised primarily of income taxes, loss on disposition of available-for-sale securities, minority interest expense, partially offset by equity income from 50%-owned joint ventures, dividend income from NAT, and foreign exchange gains.

As a result of the foregoing factors, net income was $96.9 million and $150.5 million, respectively, for the three- and six-month periods ended June 30, 2003, compared to $3.9 million and $19.6 million for the same periods last year.

LIQUIDITY AND CAPITAL RESOURCES

As at June 30, 2003, the Company’s total cash and cash equivalents was $293.2 million, compared to $284.6 million at December 31, 2002. The Company’s total liquidity, including cash, short-term marketable securities and undrawn long-term borrowings, was $715.1 million as at June 30, 2003, up from $525.3 million as at December 31, 2002. The increase in liquidity was mainly the result of net proceeds from the Equity Units used to pre-pay a portion of the outstanding balance of the Company’s Revolvers and the net cash flow from operating activities generated during the first six months of 2003, partially offset by cash used for capital expenditures (including the purchase of Navion), debt repayments, and payment of dividends. In the Company’s opinion, working capital is sufficient for the Company’s present requirements.

Net cash flow from operating activities increased to $274.5 million in the six-month period ended June 30, 2003, from $112.0 million in the same period last year, mainly reflecting the significant increase in the Company’s average spot market segment TCE rates and in the Company's fleet size.

Scheduled debt repayments were $37.2 million during the six-month period ended June 30, 2003, compared to $25.9 million during the same period last year. Debt prepayments were $945.0 million during the six-month period ended June 30, 2003. There was no debt prepayment made during the same period last year.

As at June 30, 2003, the Company’s total debt was $1,655.4 million, compared to $1,130.8 million as at December 31, 2002. As at June 30, 2003, the Company’s Revolvers provided for borrowings of up to $971.9 million, of which $421.9 million was undrawn. The amount available under the Revolvers reduces semi-annually, with final balloon reductions in 2006 and 2008. The Company’s 8.32% First Preferred Ship Mortgage Notes are due February 1, 2008 and are subject to a sinking fund which will retire $45.0 million principal amount of the 8.32% Notes on February 1 of each year, commencing 2004. The Company’s Equity Units and unsecured 8.875% Senior Notes are due May 18, 2006 and July 15, 2011, respectively. The Company’s outstanding term loans reduce in quarterly or semi-annual payments with varying maturities through 2011.

Among other matters, the Company’s long-term debt agreements generally provide for maintenance of certain vessel market value-to-loan ratios and minimum consolidated financial covenants, prepayment privileges (in some cases with penalties), and restrictions against the incurrence of new investments by the individual subsidiaries without prior lender consent. The amount of Restricted Payments, as defined, that the Company can make, including dividends and purchases of its own capital stock, was limited to $504.1 million as of June 30, 2003. Certain of the loan agreements require that a minimum level of free cash be maintained. As at June 30, 2003, this amount was $124.1 million.

Dividends declared during the six months ended June 30, 2003 were $17.1 million, or 43.0 cents per share.

During the three months ended June 30, 2003, the Company incurred capital expenditures for vessels and equipment of $115.7 million. These capital expenditures primarily represented the installment payments on the Company’s newbuildings. Cash expenditures for drydocking increased slightly to $13.8 million for the six-month period ended June 30, 2003, from $13.5 million during the same period last year.

As at June 30, 2003, the Company was committed to the construction of one shuttle, three Suezmax and 10 Aframax tankers. See Item 1 — Notes to Consolidated Financial Statements: Note 7 – Commitments and Contingencies.

The Company is also committed to a capital lease on an Aframax tanker that is currently under construction and is expected to deliver in the fourth quarter of 2003. The lease will require minimum payments of $66.9 million (including a purchase obligation payment) over the 15-year term of the lease.

The following table summarizes the Company’s long-term contractual obligations as at June 30, 2003 (in millions of U.S. dollars).

The Company and certain subsidiaries of the Company have guaranteed their share of the outstanding mortgage debt in four 50%-owned joint venture companies. See Item 1 — Notes to Consolidated Financial Statements: Note 7 – Commitments and Contingencies.

In February 2003, the Company completed its offering of Equity Units for gross proceeds of $143.75 million. See Item 1 — Notes to Consolidated Financial Statements: Note 5 – Long-Term Debt.

As part of its growth strategy, the Company will continue to consider strategic opportunities, including the acquisition of additional vessels and expansion into new markets. The Company may choose to pursue such opportunities through internal growth, joint ventures, or business acquisitions. The Company intends to finance any future acquisitions through various sources of capital, including internally-generated cash flow, existing credit facilities, additional debt borrowings, and the issuance of additional shares of capital stock.

FORWARD-LOOKING STATEMENTS

This Report on Form 6-K for the quarterly period ended June 30, 2003 contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company’s operations, performance and financial condition, including, in particular, statements regarding: TCE rates; future capital expenditures; delivery dates of newbuildings; the impact on the Company’s operations and business of the Navion acquisition; utilization of the Company’s fleet; the effect of changes in applicable regulations on the tanker market, tanker rates and the Company; and the Company’s growth strategy and measures to implement such strategy. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe”, “anticipate”, “expect”, “estimate”, “project”, “will be”, “will continue”, “will likely result”, or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to: changes in production of or demand for oil and petroleum products, either generally or in particular regions; changes in the offshore production of oil; the cyclical nature of the tanker industry and its dependence on oil markets; the supply of tankers available to meet the demand for transportation of petroleum products; changes in trading patterns significantly impacting overall tanker tonnage requirements; changes in typical seasonal variations in tanker charter rates; the Company’s dependence on spot oil voyages; competitive factors in the markets in which the Company operates; environmental and other regulation, including without limitation, the imposition of freight taxes and income taxes; the Company’s potential inability to achieve and manage growth; risks associated with operations outside the United States, including political instability; the Company’s potential inability to successfully integrate and operate Navion, the potential inability of the Company to generate internal cash flow and obtain additional debt or equity financing to fund capital expenditures or Company expansion; and other factors detailed from time to time in the Company’s periodic reports, including its Form 20-F for the year ended December 31, 2002, filed with the U.S. Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
JUNE 30, 2003
PART I – FINANCIAL INFORMATION

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from foreign currency fluctuations, changes in interest rates, and bunker fuel prices. The Company uses forward currency contracts, interest rate swap agreements, and bunker fuel swap contracts to manage currency, interest rate, and bunker fuel price risks, but does not use these financial instruments for trading or speculative purposes. See Item 1 — Notes to Consolidated Financial Statements: Note 10 — Derivative Instruments and Hedging Activities.

The following table sets forth the magnitude of these foreign exchange forward contracts, interest rate swap agreements, and bunker fuel swap contracts: