TEEKAY CORP (Form: 6-K, Received: 08/31/2011 16:46:14)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2011

Commission file number 1- 12874

TEEKAY CORPORATION

(Exact name of Registrant as specified in its charter)

4 ^th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ Form 40- F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes o No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes o No þ

TEEKAY CORPORATION AND SUBSIDIARIES

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

INDEX


	PAGE
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Unaudited Consolidated Statements of Loss for the three and six months ended June 30, 2011 and 2010		3

Unaudited Consolidated Balance Sheets as at June 30, 2011 and December 31, 2010		4

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010		5

Unaudited Consolidated Statement of Changes in Total Equity for the six months ended June 30, 2011		6

Unaudited Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2011 and 2010		7

Notes to the Unaudited Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures about Market Risk		35

PART II: OTHER INFORMATION		37

SIGNATURES		38

Exhibit 1.3

Page 2 of 38


ITEM 1		— FINANCIAL STATEMENTS

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF LOSS

(in thousands of U. S. dollars, except share and per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	$			$			$			$

REVENUES		484,922			552,229			972,946			1,125,104


OPERATING EXPENSES
Voyage expenses		51,889			66,367			97,015			138,917
Vessel operating expenses (note 15)		174,717			150,792			336,294			305,327
Time-charter hire expense		53,414			75,388			116,445			154,639
Depreciation and amortization		105,236			111,234			210,274			219,464
General and administrative (notes 9 and 15)		51,273			50,256			121,491			98,347
Loss on sale of vessels and equipment — net of write-downs of vessels and equipment ( note 7 )		5,812			22			9,405			782
Restructuring charges ( note 12 )		458			4,195			5,419			7,978

Total operating expenses		442,799			458,254			896,343			925,454


Income from vessel operations		42,123			93,975			76,603			199,650


OTHER ITEMS
Interest expense		(33,516	)		(33,926	)		(66,310	)		(66,078	)
Interest income		2,457			2,209			4,922			6,483
Realized and unrealized loss on non-designated derivative instruments (note 15)		(102,140	)		(219,225	)		(78,883	)		(307,072	)
Equity (loss) income from joint ventures		(6,053	)		(21,827	)		341			(24,493	)
Foreign exchange (loss) gain ( notes 8 and 15 )		(7,157	)		27,488			(27,497	)		56,514
Loss on notes repurchase (note 8)		—			(537	)		—			(12,645	)
Other income ( note 13 )		958			1,277			1,052			3,699

Net loss before income taxes		(103,328	)		(150,566	)		(89,772	)		(143,942	)
Income tax (expense) recovery (note 16)		(2,022	)		5,147			(2,833	)		12,454

Net loss		(105,350	)		(145,419	)		(92,605	)		(131,488	)
Less: Net loss (income) attributable to non-controlling interests		8,898			(7,729	)		(33,504	)		(35,662	)

Net loss attributable to stockholders of Teekay Corporation		(96,452	)		(153,148	)		(126,109	)		(167,150	)


Per common share of Teekay Corporation (note 17)
• Basic loss attributable to stockholders of Teekay Corporation		(1.36	)		(2.10	)		(1.77	)		(2.29	)
• Diluted loss attributable to stockholders of Teekay Corporation		(1.36	)		(2.10	)		(1.77	)		(2.29	)
• Cash dividends declared		0.3163			0.3163			0.6325			0.6325
Weighted average number of common shares outstanding (note 17)
• Basic		70,935,484			72,961,471			71,438,446			72,875,508
• Diluted		70,935,484			72,961,471			71,438,446			72,875,508

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 3 of 38

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except share and per share amounts)


	As at			As at
	June 30,			December 31,
	2011			2010
	$			$
ASSETS
Current
Cash and cash equivalents (note 8)		497,549			779,748
Restricted cash		94,626			86,559
Accounts receivable, including non-trade of $22,558 (2010 — $35,960)		267,112			244,879
Net investment in direct financing leases (note 5)		25,445			26,791
Prepaid expenses		119,366			94,282
Current portion of derivative assets (note 15)		40,281			27,215
Other assets		6,367			2,616
Assets held for sale		8,300			—

Total current assets		1,059,046			1,262,090


Restricted cash — non-current		493,970			489,712

Vessels and equipment (note 8)
At cost, less accumulated depreciation of $2,160,465 (2010 — $1,997,411)		5,715,875			5,692,812
Vessels under capital leases, at cost, less accumulated amortization of $189,089 (2010 — $172,113)		869,543			880,576
Advances on newbuilding contracts (note 10a)		345,445			197,987

Total vessels and equipment		6,930,863			6,771,375

Net investment in direct financing leases — non-current (note 5)		448,248			460,725
Marketable securities		20,302			21,380
Loans to joint ventures and joint venture partners, bearing interest between 4.4% to 8.0%		32,971			32,750
Derivative assets (note 15)		64,332			55,983
Deferred income tax asset ( note 16 )		14,920			17,001
Investment in joint ventures (note 10b)		217,584			207,633
Investment in term loans (note 4)		186,418			116,014
Other non-current assets		103,851			117,351
Intangible assets — net		146,471			155,893
Goodwill		203,191			203,191


Total assets		9,922,167			9,911,098


LIABILITIES AND EQUITY
Current
Accounts payable		53,620			44,990
Accrued liabilities		367,247			377,119
Current portion of derivative liabilities (note 15)		128,195			144,111
Current portion of long-term debt (note 8)		541,969			276,508
Current obligation under capital leases		271,940			267,382
Current portion of in-process revenue contracts		42,360			43,469
Loans from joint venture partners		14,500			59


Total current liabilities		1,419,831			1,153,638

Long-term debt, including amounts due to joint venture partners of $13,384 (2010 - $13,282) (note 8)		4,013,025			4,155,556
Long-term obligation under capital leases		471,072			470,752
Derivative liabilities (note 15)		334,704			387,124
Asset retirement obligation		24,591			23,018
In-process revenue contracts		132,012			152,637
Other long-term liabilities		191,391			194,640


Total liabilities		6,586,626			6,537,365

Commitments and contingencies (notes 5, 10 and 15)

Redeemable non-controlling interest (note 10d)		39,604			41,725

Equity
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 69,994,770 shares outstanding (2010 - 72,012,843); 74,229,217 shares issued (2010 - 73,749,793)) (note 9)		670,242			672,684
Retained earnings		1,028,684			1,313,934
Non-controlling interest		1,602,411			1,353,561
Accumulated other comprehensive loss (note 14)		(5,400	)		(8,171	)


Total equity		3,295,937			3,332,008


Total liabilities and equity		9,922,167			9,911,098

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 4 of 38

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)


	Six Months Ended June 30,
	2011			2010
	$			$
Cash and cash equivalents provided by (used for)

OPERATING ACTIVITIES
Net loss		(92,605	)		(131,488	)
Non-cash items:
Depreciation and amortization		210,274			219,464
Amortization of in-process revenue contracts		(21,734	)		(24,824	)
Loss on sale of vessels and equipment		311			261
Write-down of vessels and equipment		9,094			521
Loss on repurchase of notes		—			12,645
Equity (income) loss		(341	)		24,493
Income tax expense (recovery)		2,833			(12,454	)
Share-based compensation		13,974			8,110
Unrealized foreign exchange loss (gain)		37,023			(57,465	)
Unrealized (gain) loss on derivative instruments		(74,928	)		227,402
Other		(7,069	)		3,704
Change in operating assets and liabilities		(47,461	)		(25,983	)
Expenditures for drydocking		(22,172	)		(24,072	)


Net operating cash flow		7,199			220,314


FINANCING ACTIVITIES
Proceeds from issuance of long-term debt (note 8)		548,573			845,106
Debt issuance costs		(1,320	)		(12,538	)
Scheduled repayments of long-term debt		(123,450	)		(107,077	)
Prepayments of long-term debt		(341,783	)		(741,898	)
Repayments of capital lease obligations		(2,282	)		(1,759	)
Proceeds from loans from joint venture partner		14,500			591
Repayment of loans from joint venture partner		(59	)		(1,264	)
Increase in restricted cash		(4,353	)		(1,769	)
Net proceeds from issuance of Teekay LNG Partners L.P. units (note 6)		158,326			—
Net proceeds from issuance of Teekay Offshore Partners L.P. units ( note 6 )		—			94,491
Net proceeds from issuance of Teekay Tankers Ltd. shares ( note 6 )		107,234			103,036
Issuance of Common Stock upon exercise of stock options		5,171			2,437
Repurchase of Common Stock (note 9)		(83,660	)		—
Distribution from subsidiaries to non-controlling interests		(101,284	)		(73,736	)
Cash dividends paid		(46,472	)		(46,058	)


Net financing cash flow		129,141			59,562


INVESTING ACTIVITIES
Expenditures for vessels and equipment		(358,607	)		(92,428	)
Proceeds from sale of vessels and equipment		5,055			27,591
Investment in term loan (note 4)		(70,404	)		—
Investment in joint ventures		(6,544	)		(306	)
Advances to joint ventures and joint venture partners		(1,881	)		(4,868	)
Investment in direct financing lease assets		—			(4,199	)
Direct financing lease payments received		13,823			13,819
Other investing activities		19			(528	)


Net investing cash flow		(418,539	)		(60,919	)


(Decrease) increase in cash and cash equivalents		(282,199	)		218,957
Cash and cash equivalents, beginning of the period		779,748			422,510


Cash and cash equivalents, end of the period		497,549			641,467

Supplemental cash flow information (note 18)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 5 of 38

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. dollars)


	TOTAL EQUITY
	Thousands			Common						Accumulated
	of Shares			Stock and						Other
	of Common			Additional						Comprehensive			Non-
	Stock			Paid-in			Retained			Income			controlling
	Outstanding			Capital			Earnings			(Loss)			Interest			Total
	#			$			$			$			$			$
Balance as at December 31, 2010		72,013			672,684			1,313,934			(8,171	)		1,353,561			3,332,008


Net (loss) income								(126,109	)					30,983			(95,126	)
Other comprehensive income (loss):
Unrealized loss on marketable securities											(1,078	)					(1,078	)
Pension adjustments, net of taxes											192						192
Unrealized loss on qualifying cash flow hedging instruments (note 15)											5,989			2,105			8,094
Realized loss on qualifying cash flow hedging instruments (note 15)											(2,332	)		(797	)		(3,129	)

Comprehensive income (loss)														32,291			(91,047	)

Dividends declared								(46,475	)					(101,284	)		(147,759	)
Reinvested dividends		1			3												3
Exercise of stock options		479			5,171												5,171
Repurchase of Common Stock ( note 9 )		(2,498	)		(21,590	)		(62,070	)								(83,660	)
Employee stock option compensation (note 9)					13,974												13,974
Dilution gains on public offerings of Teekay Tankers and Teekay LNG (note 6)								44,247									44,247
Sale of 49% interest of OPCO to Teekay Offshore (note 6)								(94,843	)					94,843			—
Increase to non-controlling interest from share and unit issuances of subsidiaries and other														223,000			223,000

Balance as at June 30, 2011		69,995			670,242			1,028,684			(5,400	)		1,602,411			3,295,937

Page 6 of 38

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands of U.S. dollars)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	$			$			$			$

Net loss		(105,350	)		(145,419	)		(92,605	)		(131,488	)


Other comprehensive income (loss):
Unrealized loss on marketable securities		(2,546	)		(3,296	)		(1,078	)		(5,073	)
Pension adjustments, net of taxes		—			64			192			413
Unrealized gain (loss) on qualifying cash flow hedging instruments		2,596			(16,002	)		8,094			(19,942	)
Realized (gain) loss on qualifying cash flow hedging instruments		(2,144	)		884			(3,129	)		1,897

Other comprehensive income (loss)		(2,094	)		(18,350	)		4,079			(22,705	)

Comprehensive loss		(107,444	)		(163,769	)		(88,526	)		(154,193	)
Less: Comprehensive loss (income) attributable to non-controlling interests		8,719			(5,446	)		(34,811	)		(32,922	)

Comprehensive loss attributable to stockholders of Teekay Corporation		(98,725	)		(169,215	)		(123,337	)		(187,115	)

Page 7 of 38

TEEKAY CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, except share data)

1. Basis of Presentation

The unaudited interim consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (or GAAP ). They include the accounts of Teekay Corporation (or Teekay ), which is incorporated under the laws of the Republic of the Marshall Islands, and its wholly owned or controlled subsidiaries (collectively, the Company ). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2010, included in the Company’s Annual Report on Form 20-F. In the opinion of management, these unaudited financial statements reflect all adjustments, of a normal recurring nature, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, cash flows and changes in total equity for the interim periods presented. The results of operations for the three and six months ended June 30, 2011, are not necessarily indicative of those for a full fiscal year. Significant intercompany balances and transactions have been eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP 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. Given the current credit markets, it is possible that the amounts recorded as derivative assets and liabilities could vary by material amounts.

Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current period, relating to the reclassification of revenues of $7.3 million and $15.6 million for the three and six months ended June 30, 2010, respectively, from time-charter hire expense to revenues in the consolidated statements of income (loss).

2. Adoption of New Accounting Policies

In January 2011, the Company adopted an amendment to Financial Accounting Standards Board (or FASB ) Accounting Standards Codification (or ASC ) 605, Revenue Recognition, that provides for a new methodology for establishing the fair value for a deliverable in a multiple-element arrangement. When vendor specific objective or third-party evidence for deliverables in a multiple-element arrangement cannot be determined, the Company will be required to develop a best estimate of the selling price of separate deliverables and to allocate the arrangement consideration using the relative selling price method. The adoption of this amendment did not have an impact on the Company’s consolidated financial statements.

3. Segment Reporting

The following tables present results for the Company’s four segments for the three and six months ended June 30, 2011 and 2010.


	Shuttle
	Tanker and				Liquefied		Conventional
	FSO		FPSO		Gas		Tanker
Three Months ended June 30, 2011	Segment		Segment		Segment		Segment			Total

Revenues		148,647		102,658		68,002		165,615			484,922
Voyage expenses		26,351		—		3,778		21,760			51,889
Vessel operating expenses		50,558		61,509		13,145		49,505			174,717
Time-charter hire expense		18,751		—		—		34,663			53,414
Depreciation and amortization		32,125		23,215		16,196		33,700			105,236
General and administrative ⁽²⁾		12,982		13,494		4,133		20,664			51,273
Loss on sale of vessels and equipment, net of write-downs of vessels and equipment		—		—		—		5,812			5,812
Restructuring charges		117		—		42		299			458

Income (loss) from vessel operations		7,763		4,440		30,708		(788	)		42,123


Segment assets		1,918,171		1,321,619		2,894,240		2,807,620			8,941,650

Page 8 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)


	Shuttle
	Tanker and					Liquefied		Conventional
	FSO			FPSO		Gas		Tanker
Three Months ended June 30, 2010	Segment			Segment		Segment		Segment		Total

Revenues ⁽¹⁾		167,502			124,223		60,797		199,707		552,229
Voyage expenses		35,761			—		122		30,484		66,367
Vessel operating expenses		41,494			50,433		11,356		47,509		150,792
Time charter hire expense		23,433			—		—		51,955		75,388
Depreciation and amortization		33,456			23,754		15,885		38,139		111,234
General and administrative ⁽²⁾		14,145			4,521		5,558		26,032		50,256
(Gain) loss on sale of vessels and equipment, net of write-downs vessels and equipment		(736	)		—		—		758		22
Restructuring charges		349			—		195		3,651		4,195

Income from vessel operations		19,600			45,515		27,681		1,179		93,975


Segment assets		1,709,084			1,177,321		2,860,598		2,797,403		8,544,406


	Shuttle
	Tanker and				Liquefied		Conventional
	FSO		FPSO		Gas		Tanker
Six Months ended June 30, 2011	Segment		Segment		Segment		Segment			Total

Revenues		299,859		207,276		132,635		333,176			972,946
Voyage expenses		45,680		—		3,827		47,508			97,015
Vessel operating expenses		101,392		117,011		24,222		93,669			336,294
Time-charter hire expense		38,378		—		—		78,067			116,445
Depreciation and amortization		62,744		46,946		31,052		69,532			210,274
General and administrative ⁽²⁾		31,288		28,217		10,738		51,248			121,491
Loss on sale of vessels and equipment, net of write-downs of vessels and equipment		171		—		—		9,234			9,405
Restructuring charges		4,037		—		171		1,211			5,419

Income (loss) from vessel operations		16,169		15,102		62,625		(17,293	)		76,603


	Shuttle
	Tanker and					Liquefied		Conventional
	FSO			FPSO		Gas		Tanker
Six Months ended June 30, 2010	Segment			Segment		Segment		Segment		Total

Revenues ⁽¹⁾		323,450			256,221		123,331		422,102		1,125,104
Voyage expenses		65,064			—		95		73,758		138,917
Vessel operating expenses		84,815			98,398		22,726		99,388		305,327
Time charter hire expense		48,471			—		—		106,168		154,639
Depreciation and amortization		64,014			47,502		31,412		76,536		219,464
General and administrative ⁽²⁾		26,290			13,347		10,329		48,381		98,347
(Gain) loss on sale of vessels and equipment, net of write-downs vessels and equipment		(736	)		—		—		1,518		782
Restructuring charges		674			—		314		6,990		7,978

Income from vessel operations		34,858			96,974		58,455		9,363		199,650


(1)		FPSO segment includes $29.2 million and $59.2 million in non-recurring revenue for the three and six months ended June 30, 2010, respectively, related to operations in previous years as a result of executing a contract amendment in March 2010.

(2)		Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

Page 9 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

A reconciliation of total segment assets to amounts presented in the accompanying consolidated balance sheets is as follows:


	June 30,		December 31,
	2011		2010
	$		$
Total assets of all segments		8,941,650		8,673,337
Cash		497,549		779,748
Accounts receivable and other assets		482,968		458,013

Consolidated total assets		9,922,167		9,911,098

4. Investment in Term Loans

In February 2011, Teekay loaned $70 million to an unrelated ship-owner of a 2011-built Very Large Crude Carrier (or VLCC ). The loan bears interest at 9% per annum and is payable quarterly. The loan is repayable in full in February 2014. However, it may be repaid prior to maturity at the option of the borrower. The loan is collateralized by a first priority mortgage on a 2011-built VLCC, together with other related collateral.

5. Vessel Charters

In addition to the Company’s minimum charter hire payments to be paid and received under the Head Leases and Subleases for the Tangguh LNG Carriers, which are described in Note 9 to the audited consolidated financial statements included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2010, the additional minimum estimated charter hire payments in the next five fiscal years, as at June 30, 2011, for the Company’s vessels chartered-in and vessels chartered-out were as follows:


	Remainder
	of 2011		2012		2013		2014		2015
	(in millions of U.S. dollars)

Charters-in — operating leases		89.5		111.0		66.6		23.0		16.0
Charters-in — capital leases ⁽¹⁾		154.4		79.2		96.8		52.1		24.0

		243.9		190.2		163.4		75.1		40.0


Charters-out — operating leases ⁽²⁾		596.0		955.2		772.0		869.2		888.2
Charters-out — direct financing leases		34.3		62.4		49.5		48.1		47.1

		630.3		1,017.6		821.5		917.3		935.3


(1)		As at June 30, 2011 and December 31, 2010, the Company had $571.1 million and $559.8 million, respectively, of restricted cash, which including any interest earned on such amounts, is restricted to being used for charter hire payments of certain vessels chartered-in under capital leases. The Company also maintains restricted cash deposits relating to certain term loans, which totaled $14.4 million and $12.3 million as at June 30, 2011 and December 31, 2010, respectively.

(2)		The minimum scheduled future charter hire payments for vessels chartered out should not be construed to reflect total charter hire revenues for any of the periods. In addition, minimum scheduled future revenues have been reduced by estimated offhire time for period maintenance. The amounts may vary given unscheduled future events such as the timing of vessel maintenance.

6. Financing Transactions

In February 2011, Teekay’s subsidiary, Teekay Tankers Ltd. (or Teekay Tankers ) completed a public offering of 9.9 million shares of its Class A Common Stock (including 1.3 million shares issued upon the exercise of the underwriters’ overallotment option) at a price of $11.33 per share, for gross proceeds of approximately $112.1 million. As a result, Teekay’s ownership of Teekay Tankers was reduced to 26.0%. Teekay maintains voting control of Teekay Tankers through its ownership of shares of Teekay Tankers’ Class A and Class B common stock and continues to consolidate this subsidiary. As a result of the offering, the Company recorded an increase to retained earnings of $5.7 million, which represents the Company’s dilution gain from the issuance of shares in Teekay Tankers during the six months ended June 30, 2011.

In March 2011, Teekay sold its remaining 49% interest in Teekay Offshore Operating L.P. (or OPCO ) to Teekay’s subsidiary, Teekay Offshore Partners L.P. (or Teekay Offshore ), for a total purchase price of $386.3 million comprised of $175 million in cash (less $15 million in distributions made by OPCO to Teekay between December 31, 2010 and the date of acquisition) and 7.6 million newly issued Teekay Offshore common units. The sale increased Teekay Offshore’s ownership in OPCO from 51% to 100%. Teekay’s ownership in Teekay Offshore increased to 36.9% (including the Company’s 2% general partner interest). Consequently, the Company recognized a decrease to retained earnings and an increase in non-controlling interest of $94.8 million as the Company accounts for changes in its ownership interest in controlled subsidiaries as equity transactions.

Page 10 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

In April 2011, Teekay’s subsidiary, Teekay LNG Partners L.P. (or Teekay LNG ) completed a public offering of 4.3 million common units (including 0.6 million common units issued upon the partial exercise of the underwriters’ overallotment option) at a price of $38.88 per unit, for gross proceeds (including the general partner’s proportionate capital contribution) of approximately $168.7 million. As a result, Teekay’s ownership of Teekay LNG was reduced to 43.6% (including the Company’s 2% general partner interest). Teekay maintains control of Teekay LNG by virtue of its control of the general partner and continues to consolidate the subsidiary. As a result of the offering, the Company recorded an increase to retained earnings of $38.6 million, which represents the Company’s dilution gain from the issuance of shares in Teekay LNG during the six months ended June 30, 2011.

7. Vessel Sale and Write-down

a) Vessel Sale

In March 2011, the Company sold a 1988-built floating storage and offtake (or FSO ) unit. The FSO unit was part of the Company’s shuttle tanker and FSO segment. The Company realized a loss of $0.2 million from the sale of the FSO unit.

b) Vessel Write-down

The Company’s consolidated statements of loss for the three and six months ended June 30, 2011, include a $5.6 million and $9.1 million write-down, respectively, for impairment of a 1993-built Aframax tanker to its estimated fair value of $8.3 million, as the vessel carrying value exceeded the estimated fair value. In the three months ended June 30, 2011, the above vessel was reclassified to assets held for sale. The fair value of the tanker was based on its estimated sales price. The write-down is included within the Company’s conventional tanker segment.

8. Long-Term Debt


	June 30, 2011		December 31, 2010
	$		$
Revolving Credit Facilities		1,776,029		1,697,237
Senior Notes (8.875%) due July 15, 2011		16,201		16,201
Senior Notes (8.5%) due January 15, 2020		446,689		446,559
Norwegian Kroner-denominated Bonds due November 2013		111,373		103,061
U.S. Dollar-denominated Term Loans due through 2021		1,793,758		1,782,423
Euro-denominated Term Loans due through 2023		397,560		373,301
U.S. Dollar-denominated Unsecured Demand Loans due to Joint Venture Partners		13,384		13,282

Total		4,554,994		4,432,064
Less current portion		541,969		276,508

Long-term portion		4,013,025		4,155,556

As of June 30, 2011, the Company had 15 long-term revolving credit facilities (or the Revolvers ) available, which, as at such date, provided for aggregate borrowings of up to $3.2 billion, of which $1.4 billion was undrawn. Interest payments are based on LIBOR plus margins; at June 30, 2011 and December 31, 2010, the margins ranged between 0.45% and 3.25%. At June 30, 2011 and December 31, 2010, the three-month LIBOR was 0.25% and 0.30%, respectively. The total amount available under the Revolvers reduces by $135.1 million (remainder of 2011), $353.2 million (2012), $760.2 million (2013), $791.8 million (2014), $226.4 million (2015) and $930.4 million (thereafter). The Revolvers are collateralized by first-priority mortgages granted on 64 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all outstanding amounts.

In January 2010, the Company completed a public offering of senior unsecured notes due January 15, 2020 (or the 8.5% Notes ) with a principal amount of $450 million. The 8.5% Notes were sold at a price equal to 99.181% of par and the discount is accreted using the effective interest rate of 8.625% per year. The Company capitalized issuance costs of $9.4 million, which is recorded in other non-current assets in the consolidated balance sheet and is amortized to interest expense over the term of the senior unsecured notes. The 8.5% Notes and the 8.875% senior unsecured notes due July 15, 2011 (or the 8.875% Notes ) rank equally in right of payment with all of Teekay’s existing and future senior unsecured debt and senior to any future subordinated debt of Teekay. The 8.5% Notes and 8.875% Notes are not guaranteed by any of Teekay’s subsidiaries and effectively rank behind all existing and future secured debt of Teekay and other liabilities of its subsidiaries. In 2010, the Company repurchased a principal amount of $160.5 million of the 8.875% Notes, using a portion of the proceeds from the 8.5% Notes offering, and recognized a loss on repurchase of $12.6 million. Subsequent to June 30, 2011, the balance of the remaining 8.875% Senior Notes were repaid when due.

Page 11 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The Company may redeem the 8.5% Notes in whole or in part at any time before their maturity date at a redemption price equal to the greater of (i) 100% of the principal amount of the 8.5% Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 8.5% Notes to be redeemed (excluding accrued interest) discounted to the redemption date on a semi-annual basis, at the treasury yield plus 50 basis points, plus accrued and unpaid interest to the redemption date. In addition, at any time or from time to time prior to January 15, 2013, the Company may redeem up to 35% of the aggregate principal amount of the 8.5% Notes issued under the indenture with the net cash proceeds of one or more qualified equity offerings at a redemption price equal to 108.5% of the principal amount of the 8.5% Notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date, provided certain conditions are met. No such redemptions have been made as at June 30, 2011.

In November 2010, Teekay Offshore issued NOK 600 million of senior unsecured bonds that mature in November 2013 in the Norwegian bond market. Teekay Offshore capitalized issuance costs of $1.3 million, which is recorded in other non-current assets in the consolidated balance sheet and is amortized over the term of the senior unsecured bonds. The bonds are listed on the Oslo Stock Exchange. Interest payments on the senior unsecured bonds are based on NIBOR plus a margin of 4.75%. Teekay Offshore has entered into a cross currency swap arrangement to swap the interest payments from NIBOR into LIBOR and principal from Norwegian Kroner to U.S. dollars. The LIBOR rate receivable from the interest rate swap is capped at 3.5% (see Note 15).

As of June 30, 2011, the Company had 14 U.S. Dollar-denominated term loans outstanding, which totaled $1.8 billion (December 31, 2010 — $1.8 billion). Certain of the term loans with a total outstanding principal balance of $395.0 million as at June 30, 2011 (December 31, 2010 — $417.4 million) bear interest at a weighted-average fixed rate of 5.3% (December 31, 2010 — 5.3%). Interest payments on the remaining term loans are based on LIBOR plus a margin. At June 30, 2011 and December 31, 2010, the margins ranged between 0.3% and 3.25%. At June 30, 2011 and December 31, 2010, the three-month LIBOR was 0.25% and 0.30%, respectively. The term loan payments are made in quarterly or semi-annual payments commencing three or six months after delivery of each newbuilding vessel financed thereby, and 13 of the term loans have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 27 (December 31, 2010 — 28) of the Company’s vessels, together with certain other security. In addition, at June 30, 2011, all but $102.2 million (December 31, 2010 — $122.5 million) of the outstanding term loans were guaranteed by Teekay or its subsidiaries.

The Company has two Euro-denominated term loans outstanding, which, as at June 30, 2011, totaled 274.1 million Euros ($397.6 million) (December 31, 2010 — 278.9 million Euros ($373.3 million)). The Company repays the loans with funds generated by two Euro-denominated long-term time-charter contracts. Interest payments on the loans are based on EURIBOR plus a margin. At June 30, 2011 and December 31, 2010, the margins ranged between 0.6% and 0.66% and the one-month EURIBOR at June 30, 2011, was 1.33% (December 31, 2010 — 0.78%). The Euro-denominated term loans reduce in monthly payments with varying maturities through 2023 and are collateralized by first-priority mortgages on two of the Company’s vessels, together with certain other security, and are guaranteed by a subsidiary of Teekay.

Both Euro-denominated term loans are revalued at the end of each period using the then prevailing Euro/U.S. Dollar exchange rate. Due in part to this revaluation which is unrealized, the Company recognized a foreign exchange loss of $7.2 million (2010 — $27.5 million gain) and $27.5 million (2010 — $56.5 million gain) during the three and six months ended June 30, 2011 respectively.

The Company has two U.S. Dollar-denominated loans outstanding owing to two joint venture partners, which, as at June 30, 2011, totaled $13.4 million (2010 — one loan totaling $13.8 million), including accrued interest. Interest payments on the loan, which are based on a fixed interest rate of 4.84%, commenced in February 2008. This loan is repayable on demand no earlier than February 27, 2027.

The weighted-average effective interest rate on the Company’s long-term aggregate debt as at June 30, 2011 was 2.3% (December 31, 2010 — 2.3%). This rate does not include the effect of the Company’s interest rate swap agreements (see Note 15).

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. Certain loan agreements require that a minimum level of free cash be maintained and as at June 30, 2011 and December 31, 2010, this amount was $100.0 million. Certain of the loan agreements also require that the Company maintain an aggregate level of free liquidity and undrawn revolving credit lines with at least six months to maturity of at least 7.5% of total debt. As at June 30, 2011, this amount was $251.5 million (December 31, 2010 — $236.5 million).

The aggregate annual long-term debt principal repayments required to be made by the Company subsequent to June 30, 2011, are $170.5 million (remainder of 2011), $533.2 million (2012), $532.2 million (2013), $920.9 million (2014), $258.5 million (2015) and $2.1 billion (thereafter).

As at June 30, 2011, the Company was in compliance with all covenants in the credit facilities and long-term debt.

9. Capital Stock

The authorized capital stock of Teekay at June 30, 2011 and December 31, 2010, was 25 million shares of Preferred Stock, with a par value of $1 per share, and 725 million shares of Common Stock, with a par value of $0.001 per share. During the six months ended June 30, 2011, the Company issued 0.5 million shares of Common Stock upon the exercise of stock options, and repurchased 2.5 million shares. As at June 30, 2011, Teekay had 74,229,217 shares of Common Stock issued (December 31, 2010 — 73,749,793) and no shares of Preferred Stock issued. As at June 30, 2011, Teekay had 69,994,770 shares of Common Stock outstanding (December 31, 2010 — 72,012,843).

During 2008, Teekay announced that its Board of Directors had authorized the repurchase of up to $200 million of shares of its Common Stock in the open market, subject to cancellation upon approval by the Board of Directors. As at June 30, 2011, Teekay had repurchased approximately 3.7 million shares of Common Stock for $123.8 million pursuant to such authorization. The total remaining shares authorized for repurchase at June 30, 2011, was $76.2 million.

Page 12 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

During March 2011, the Company granted 91,431 stock options with an exercise price of $34.93 per share, 358,180 restricted stock units with a fair value of $12.5 million, 73,349 performance shares with a fair value of $3.7 million and 29,663 shares of restricted stock with a fair value of $1.0 million to certain of the Company’s employees and directors. Each stock option has a ten-year term and vests equally over three years from the grant date. Each restricted stock unit and performance share is equal in value to one share of the Company’s common stock plus reinvested dividends from the grant date to the vesting date. The restricted stock units vest equally over three years from the grant date and the performance shares vest three years from the grant date. Upon vesting, the value of the restricted stock units and performance shares are paid to each grantee in the form of shares. The number of performance share units that vest will range from zero to three times the original number granted, based on certain performance and market conditions.

The weighted-average grant-date fair value of stock options granted during March 2011 was $11.27 per option. The fair value of each stock option granted was estimated on grant date using the Black-Scholes option pricing model. The following weighted-average assumptions were used in computing the fair value of the stock options granted: expected volatility of 53.6%; expected life of four years; dividend yield of 3.8%; risk-free interest rate of 2.1%; and estimated forfeiture rate of 11%. The expected life of the stock options granted was estimated using the historical exercise behavior of employees. The expected volatility was generally based on historical volatility as calculated using historical data during the five years prior to the grant date.

In March 2011, the Company incurred a one-time $11.0 million increase to the pension plan benefits of Bjorn Moller, who retired from his position as the Company’s President and Chief Executive Officer on April 1, 2011. The additional pension benefit was in recognition of Mr. Moller’s service to the Company. In addition, the Company recognized a compensation expense of approximately $4.7 million which relates to the portion of Mr. Moller’s outstanding stock-based compensation grants that had not yet vested on the date of his retirement. The total compensation expense related to Mr. Moller’s retirement of $15.7 million was recorded in general and administrative expense in the consolidated statements of loss for the six months ended June 30, 2011.

10. Commitments and Contingencies

a) Vessels Under Construction

As at June 30, 2011, the Company was committed to the construction of two liquefied petroleum gas (or LPG ) carriers, five shuttle tankers, one floating, production, storage and offloading (or FPSO ) unit and the conversion of an existing Aframax tanker to an FPSO unit for the Tiro and Sidon fields for a total cost of approximately $1.9 billion, excluding capitalized interest. One shuttle tanker delivered in July 2011 and the other four shuttle tankers are scheduled for delivery in 2013. The two LPG carriers committed to construction are scheduled for delivery in 2011 and the FPSO units are scheduled to be delivered in 2012 and 2014, respectively. As at June 30, 2011, payments made towards these commitments totaled $337.9 million (excluding $29.5 million of capitalized interest and other miscellaneous construction costs), and long-term financing arrangements existed for $123.3 million of the unpaid cost of these vessels. As at June 30, 2011, the remaining payments required to be made under these newbuilding contracts were $440.8 million (remainder of 2011), $458.4 million (2012), $360.4 million (2013), and $313.1 million (2014).

b) Joint Ventures

The Company has a 33% interest in a joint venture that will charter four newbuilding 160,400-cubic meter liquefied natural gas (or LNG ) carriers for a period of 20 years to the Angola LNG Project, which is being developed by subsidiaries of Chevron Corporation, Sociedade Nacional de Combustiveis de Angola EP, BP Plc, Total S.A. and ENI SpA. Final award of the charter was made in December 2007. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in 2011. The other members of the joint venture are Mitsui & Co., Ltd. and NYK Bulkship (Europe) Ltd., which hold 34% and 33% interests in the joint venture, respectively. In connection with this award, the joint venture has entered into agreements with Samsung Heavy Industries Co. Ltd. to construct the four LNG carriers at a total cost of approximately $906.0 million (of which the Company’s 33% portion is $299.0 million), excluding capitalized interest. As at June 30, 2011, payments made towards these commitments by the joint venture company totaled $362.4 million (of which the Company’s 33% contribution was $119.6 million), excluding capitalized interest and other miscellaneous construction costs. As at June 30, 2011, the remaining payments required to be made under these contracts were $407.7 million (remainder of 2011) and $135.9 million (2012), of which the Company’s share is 33% of these amounts. In accordance with existing agreements, the Company is required to offer to its subsidiary Teekay LNG its 33% interest in these vessels and related charter contracts, no later than 180 days before the scheduled delivery dates of the vessels. Deliveries of the vessels are scheduled between August 2011 and January 2012. In February 2011, the Company offered to Teekay LNG its 33% ownership interest in these vessels and related charter contracts. The transaction was approved in March 2011 by the Board of Directors of Teekay LNG’s general partner and by its Conflicts Committee. The Company has also provided certain guarantees in relation to the performance of the joint venture company. The fair value of the guarantees were a liability of $1.8 million as at June 30, 2011 and December 31, 2010 and are included as part of other long-term liabilities in the Company’s consolidated balance sheets.

In September 2010, Teekay Tankers entered into a joint venture arrangement (the Joint Venture ) with Wah Kwong Maritime Transport Holdings Limited (or Wah Kwong ) to have a VLCC newbuilding constructed, managed and chartered to third parties. Teekay Tankers has a 50% economic interest in the Joint Venture, which is jointly controlled by Teekay Tankers and Wah Kwong. The VLCC has an estimated purchase price of approximately $98 million (of which the Company’s 50% portion is $49 million), excluding capitalized interest and other miscellaneous construction costs. The vessel is expected to deliver during the second quarter of 2013. As at June 30, 2011, the remaining payments required to be made under this newbuilding contract, including Wah Kwong’s 50% share, were $39.2 million (2012) and $39.2 million (2013). As of June 30, 2011, the Joint Venture did not have any financing arrangements for these expenditures. Teekay Tankers and Wah Kwong have each agreed to finance 50% of the costs to acquire the VLCC that are not financed with commercial bank financing. As of June 30, 2011, Teekay Tankers had advanced $9.8 million to the Joint Venture and the amount is recorded in loans to joint ventures and joint venture partners in the consolidated balance sheet. A third party has agreed to time-charter the vessel following its delivery for a term of five years at a daily rate and has also agreed to pay the Joint Venture 50% of any additional amounts if the daily rate of any sub-charter earned by the third party exceeds a certain threshold.

Page 13 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

c) Legal Proceedings and Claims

The Company may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. The Company believes that any adverse outcome of existing claims, individually or in the aggregate, would not have a material effect on its financial position, results of operations or cash flows, when taking into account its insurance coverage and indemnifications from charterers.

d) Redeemable Non-Controlling Interest

During February 2010, an unrelated party contributed a shuttle tanker with a value of $35.0 million to a subsidiary of Teekay Offshore for a 33% equity interest in the subsidiary. The non-controlling interest owner of Teekay Offshore’s 67% owned subsidiary holds a put option which, if exercised, would obligate Teekay Offshore to purchase the non-controlling interest owner’s 33% share in the entity for cash in accordance with a defined formula. The redeemable non-controlling interest is subject to remeasurement if the formulaic redemption amount exceeds the carrying value. No remeasurement was required as at June 30, 2011.

e) Other

The Company enters into indemnification agreements with certain officers and directors. In addition, the Company enters into other indemnification agreements in the ordinary course of business. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains what it believes is appropriate liability insurance that reduces its exposure and enables the Company to recover future amounts paid up to the maximum amount of the insurance coverage, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

11. Financial Instruments

a) Fair Value Measurements

For a description of how the Company estimates fair value, refer to Note 11 to the audited consolidated financial statements in the Company’s Annual Report on Form 20-F for the year ended December 31, 2010. The estimated fair value of the Company’s financial instruments and other non-financial assets and categorization using the fair value hierarchy for those financial instruments that are measured at fair value on a recurring basis is as follows:


		June 30, 2011						December 31, 2010
		Carrying			Fair			Carrying			Fair
	Fair Value	Amount			Value			Amount			Value
	Hierarchy	Asset (Liability)			Asset (Liability)			Asset (Liability)			Asset (Liability)
	Level ⁽¹⁾	$			$			$			$

Cash and cash equivalents, restricted cash, and marketable securities	Level 1		1,106,447			1,106,447			1,377,399			1,377,399
Investment in term loans and interest receivable (note 4)			189,286			191,561			117,825			120,837
Loans to joint ventures and joint venture partners			32,971			32,971			32,750			32,750
Loans from joint venture partners			(14,500	)		(14,500	)		(59	)		(59	)
Long-term debt			(4,554,994	)		(4,311,430	)		(4,432,064	)		(4,192,646	)
Derivative instruments (note 15)
Interest rate swap agreements ⁽²⁾	Level 2		(489,645	)		(489,645	)		(557,991	)		(557,991	)
Interest rate swap agreements ⁽²⁾	Level 2		72,059			72,059			66,869			66,869
Cross currency swap agreement	Level 2		13,668			13,668			4,233			4,233
Foreign currency contracts	Level 2		23,452			23,452			11,375			11,375
Foinaven embedded derivative	Level 2		(3,722	)		(3,722	)		(3,500	)		(3,500	)


(1)		The fair value hierarchy level is only applicable to each financial instrument on the consolidated balance sheets that are recorded at fair value on a recurring basis.

(2)		The fair value of the Company’s interest rate swap agreements at June 30, 2011 includes $25.9 million (December 31, 2010 — $31.0 million) of net accrued interest which is recorded in accrued liabilities on the consolidated balance sheet.

Other than certain items disclosed in Note 7(b) to these consolidated financial statements, there are no other non-financial assets or non-financial liabilities carried at fair value at June 30, 2011.

Page 14 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

b) Financing Receivables

The following table contains a summary of the Company’s financing receivables by type of borrower and the method by which the Company monitors the credit quality of its financing receivables on a quarterly basis.

June 30,

December 31,

Credit Quality

2011

2010

Class of Financing Receivable

Indicator

Grade

Direct financing leases

Payment activity

Performing

473,693

487,516

Other loan receivables

Investment in term loans and interest receivable

Collateral

Performing

189,286

117,825

Loans to joint ventures — current and long-term

Other internal metrics

Performing

34,153

33,932

Long-term receivable included in other assets

Payment activity

Performing

596

410

697,728

639,683

12. Restructuring Charges

During the three and six months ended June 30, 2011, the Company incurred $0.5 million and $5.4 million of restructuring costs, respectively. The restructuring costs primarily relate to the sale of an FSO unit, Karratha Spirit , and the termination of the time-charter for the Basker Spirit . The Company committed to terminate the employment of certain seafarers of the two vessels. At June 30, 2011 and December 31, 2010, $nil and $0.1 million, respectively, of restructuring liabilities were recorded in accrued liabilities on the consolidated balance sheets.

13. Other Income


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011			2010
	$		$		$			$
Volatile organic compound emission plant lease income		769		1,135		1,672			2,565
Miscellaneous (loss) income		189		142		(620	)		1,134

Other income		958		1,277		1,052			3,699

14. Accumulated Other Comprehensive Loss

As at June 30, 2011 and December 31, 2010, the Company’s accumulated other comprehensive loss consisted of the following components:


	June 30,			December 31,
	2011			2010
	$			$
Unrealized gain on qualifying cash flow hedging instruments		5,964			2,307
Pension adjustments, net of tax recoveries		(17,359	)		(17,551	)
Unrealized gain on marketable securities		5,995			7,073

		(5,400	)		(8,171	)

15. Derivative Instruments and Hedging Activities

The Company uses derivatives to manage certain risks in accordance with its overall risk management policies.

Foreign Exchange Risk

The Company economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. Certain of these foreign currency forward contracts are designated, for accounting purposes, as cash flow hedges of forecasted foreign currency expenditures.

As at June 30, 2011, the Company was committed to the following foreign currency forward contracts:

Page 15 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)


					Fair Value / Carrying Amount
	Contract Amount				of Asset / (Liability)				Expected Maturity
	In Foreign		Average						Remainder of
	Currency		Forward		Hedge		Non-Hedge		2011		2012
	(millions)		Rate ⁽¹⁾		(in millions of U.S. Dollars)
Norwegian Kroner		705.2		6.29	$	7.8	$	9.4	$	59.8	$	52.3
Euro		33.0		0.75		—		3.6		24.8		19.3
Canadian Dollar		23.6		1.01		1.0		0.1		8.8		14.5
British Pounds		31.6		0.64		0.5		1.1		25.5		23.5

					$	9.3	$	14.2	$	118.9	$	109.6


(1)		Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.

The Company incurs interest expense on its Norwegian Kroner-denominated bonds. The Company entered into a cross currency swap agreement to economically hedge the foreign exchange risk on the principal and interest. As at June 30, 2011, the Company was committed to one cross currency swap with the notional amounts of NOK 600 million and $98.5 million, which exchanges a receipt of floating interest based on NIBOR plus a margin of 4.75% with a payment of floating interest based on LIBOR plus a margin of 5.04%. In addition, the cross currency swap locks in the transfer of principal to $98.5 million upon maturity in exchange for NOK 600 million. The fair values of the cross currency swap agreement as at June 30, 2011 and December 31, 2010 were $13.7 million and $4.2 million, respectively. The Company has not designated the cross currency swap as a cash flow hedge for accounting purposes.

Interest Rate Risk

The Company enters into interest rate swap agreements which exchange a receipt of floating interest for a payment of fixed interest to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. In addition, the Company holds interest rate swaps which exchange a payment of floating rate interest for a receipt of fixed interest in order to reduce the Company’s exposure to the variability of interest income on its restricted cash deposits. The Company has not designated its interest rate swap agreements as cash flow hedges for accounting purposes.

As at June 30, 2011, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt, restricted cash deposits and EURIBOR-based debt, whereby certain of the Company’s floating-rate debt and restricted cash deposits were swapped with fixed-rate obligations or fixed-rate deposits:


				Fair Value /			Weighted-
				Carrying Amount			Average		Fixed
		Principal		of Asset /			Remaining		Interest
	Interest	Amount		(Liability)			Term		Rate
	Rate Index	$		$			(Years)		(%) ⁽¹⁾
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps ⁽²⁾	LIBOR		429,638		(63,073	)		25.6		4.9
U.S. Dollar-denominated interest rate swaps	LIBOR		3,391,108		(385,874	)		8.8		4.1
U.S. Dollar-denominated interest rate swaps ⁽³⁾	LIBOR		100,000		(19,891	)		20.0		5.5
LIBOR-Based Restricted Cash Deposit:
U.S. Dollar-denominated interest rate swaps ⁽²⁾	LIBOR		470,673		72,059			25.6		4.8
EURIBOR-Based Debt:
Euro-denominated interest rate swaps ^{(4) (5)}	EURIBOR		397,560		(20,807	)		13.0		3.8


(1)		Excludes the margins the Company pays on its variable-rate debt, which as of June 30, 2011 ranged from 0.30% to 3.25%.

(2)		Principal amount reduces quarterly.

(3)		Includes an interest rate swap of $100.0 million that commences in September 2011.

(4)		Principal amount reduces monthly to 70.1 million Euros ($101.7 million) by the maturity dates of the swap agreements.

(5)		Principal amount is the U.S. Dollar equivalent of 274.1 million Euros.

Spot Tanker Market Risk

In order to reduce variability in revenues from fluctuations in certain spot tanker market rates, from time to time the Company has entered into forward freight agreements (or FFAs ). FFAs involve contracts to move a theoretical volume of freight at fixed-rates, thus attempting to reduce the Company’s exposure to spot tanker market rates. There were no FFAs as at June 30, 2011 and December 31, 2010. The Company has not designated FFA contracts as cash flow hedges for accounting purposes. Net gains and losses from FFAs are recorded within realized and unrealized gain (loss) on non-designated derivative instruments in the consolidated statements of loss.

Page 16 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

Commodity Price Risk

The Company enters into bunker fuel swap contracts relating to a portion of its bunker fuel expenditures. As at June 30, 2011 and December 31, 2010, the Company had no bunker fuel swap contract commitments. Net gains and losses from bunker fuel swap contracts are recorded within realized and unrealized gain (loss) on non-designated derivative instruments in the consolidated statements of loss.

Tabular Disclosure

The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s consolidated balance sheets.


	Current							Current
	Portion of							Portion of
	Derivative		Derivative		Accrued			Derivative			Derivative
	Assets		Assets		Liabilities			Liabilities			Liabilities
As at June 30, 2011:
Derivatives designated as a cash flow hedge:
Foreign currency contracts		7,988		1,304		—			—			—
Derivatives not designated as a cash flow hedge:
Foreign currency contracts		12,253		2,143		—			(185	)		(50	)
Interest rate swaps		16,967		50,561		(26,121	)		(124,288	)		(334,654	)
Cross currency swap agreement		3,073		10,324		271			—			—
Foinaven embedded derivative		—		—		—			(3,722	)		—

		40,281		64,332		(25,850	)		(128,195	)		(334,704	)

As at December 31, 2010:
Derivatives designated as a cash flow hedge:
Foreign currency contracts		3,437		1,546		—			(652	)		—
Derivatives not designated as a cash flow hedge:
Foreign currency contracts		4,988		3,172		—			(1,050	)		(66	)
Interest rate swap agreements		16,759		45,524		(31,174	)		(135,171	)		(387,058	)
Cross currency swap agreement		2,031		2,003		199			—			—
Foinaven embedded derivative		—		3,738		—			(7,238	)		—

		27,215		55,983		(30,975	)		(144,111	)		(387,124	)

For the periods indicated, the following table presents the effective portion of gains (losses) on foreign currency forward contracts designated and qualifying as cash flow hedges that were (1) recognized in other comprehensive (loss) income, (2) recorded in accumulated other comprehensive income (or AOCI) during the term of the hedging relationship and reclassified to earnings, and (3) recognized in the ineffective portion of gains (losses) on derivative instruments designated and qualifying as cash flow hedges.


Three Months Ended June 30, 2011								Three Months Ended June 30, 2010
Balance								Balance
Sheet								Sheet
(AOCI)		Statement of Income (Loss)						(AOCI)			Statement of Income (Loss)
Effective		Effective		Ineffective				Effective			Effective			Ineffective
Portion		Portion		Portion				Portion			Portion			Portion

	2,596		431		(171	)	Vessel operating expenses		(16,002	)		(177	)		(1,433	)	Vessel operating expenses
	—		1,713		121		General and administrative expenses		—			(707	)		(844	)	General and administrative expenses

	2,596		2,144		(50	)			(16,002	)		(884	)		(2,277	)


Six Months Ended June 30, 2011							Six Months Ended June 30, 2010
Balance							Balance
Sheet							Sheet
(AOCI)	Statement of Income (Loss)						(AOCI)			Statement of Income (Loss)
Effective	Effective		Ineffective				Effective			Effective			Ineffective
Portion	Portion		Portion				Portion			Portion			Portion

8,094		583		(351	)	Vessel operating expenses		(19,942	)		(551	)		(3,515	)	Vessel operating expenses
—		2,547		216		General and administrative expenses		—			(1,346	)		(1,736	)	General and administrative expenses

8,094		3,130		(135	)			(19,942	)		(1,897	)		(5,251	)

Page 17 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

Realized and unrealized (losses) gains from derivative instruments that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (losses) gains on non-designated derivatives in the consolidated statements of income (loss). The effect of the (loss) gain on derivatives not designated as hedging instruments in the statements of income (loss) are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	$			$			$			$
Realized (losses) gains relating to:
Interest rate swap agreements		(32,692	)		(40,634	)		(66,689	)		(79,220	)
Interest rate swap agreement amendments		—			—			(92,672	)		—
Foreign currency forward contracts		3,558			(1,022	)		4,883			(1,345	)
Forward freight agreements and bunker fuel swap contracts		(7	)		(2,207	)		42			(4,356	)

		(29,141	)		(43,863	)		(154,436	)		(84,921	)

Unrealized (losses) gains relating to:
Interest rate swap agreements		(73,331	)		(164,032	)		68,527			(209,838	)
Foreign currency forward contracts		540			(8,836	)		7,248			(12,053	)
Forward freight agreements and bunker fuel swap contracts		7			(4,118	)		—			(973	)
Foinaven embedded derivative		(215	)		1,624			(222	)		713

		(72,999	)		(175,362	)		75,553			(222,151	)


Total realized and unrealized losses on non-designated derivative instruments		(102,140	)		(219,225	)		(78,883	)		(307,072	)

Realized and unrealized gains (losses) of the cross currency swap are recognized in earnings and reported in foreign exchange gain (loss) in the consolidated statements of income (loss). For the three months ended June 30, 2011, an unrealized gain of $3.1 million and a realized gain of $0.8 million have been recognized in the consolidated statements of income (loss). For the six months ended June 30, 2011, an unrealized gain of $9.4 million and a realized gain of $1.4 million have been recognized in the consolidated statements of income (loss).

In January and February 2011, the Company paid $92.7 million to the counterparties of five interest rate swap agreements, with notional amounts totaling $665.1 million, in consideration for amending the terms of such agreements to reduce the weighted average fixed interest rate from 5.1% to 2.5%. The amount paid was reflected in the Company’s 2011 consolidated financial statements as at March 31, 2011 as a realized loss on non-designated derivative instruments and a reduction in the outstanding liability of the interest rate swaps, which are accounted for at fair value.

As at June 30, 2011, the Company’s accumulated other comprehensive loss included $6.0 million of unrealized gains on foreign currency forward contracts designated as cash flow hedges. As at June 30, 2011, the Company estimated, based on then current foreign exchange rates, that it would reclassify approximately $5.0 million of net gains on foreign currency forward contracts from accumulated other comprehensive loss to earnings during the next 12 months.

The Company is exposed to credit loss to the extent the fair value represents an asset in the event of non-performance by the counterparties to the foreign currency forward contracts, and cross currency and interest rate swap agreements; however, the Company does not anticipate non-performance by any of the counterparties. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transaction.

16. Income Tax (Expense) Recovery

The components of the provision for income tax (expense) recovery are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	$			$			$			$
Current		273			(7,662	)		(122	)		(9,449	)
Deferred		(2,295	)		12,809			(2,711	)		21,903

Income tax (expense) recovery		(2,022	)		5,147			(2,833	)		12,454

The following is a roll-forward of the Company’s unrecognized tax benefits, recorded in other long-term liabilities, from January 1, 2011 to June 30, 2011:


Balance of unrecognized tax benefits as at January 1, 2011	$	45,302
Increase for positions taken in prior years		1,175
Increase for positions related to the current period		2,386
Decrease related to statute of limitations		(6,213	)

Balance of unrecognized tax benefits as at June 30, 2011	$	42,650

The majority of the net increase for positions for the six months ended June 30, 2011 relates to potential tax on freight income.

Page 18 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The Company does not presently anticipate such uncertain tax positions will significantly increase or decrease in the next 12 months; however, actual developments could differ from those currently expected.

17. Loss Per Share


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	$			$			$			$

Net loss attributable to stockholders’ of Teekay Corporation		(96,452	)		(153,148	)		(126,109	)		(167,150	)


Weighted average number of common stock and common stock equivalents		70,935,484			72,961,471			71,438,446			72,875,508


Loss per common share:
- Basic		(1.36	)		(2.10	)		(1.77	)		(2.29	)
- Diluted		(1.36	)		(2.10	)		(1.77	)		(2.29	)

The anti-dilutive effect attributable to outstanding stock-based awards is excluded from the calculation of diluted (loss) earnings per common share. For the three and six months ended June 30, 2011, the anti-dilutive effect attributable to outstanding stock-based awards was 5.8 million shares. For the three and six months ended June 30, 2010, the anti-dilutive effect attributable to outstanding stock-based awards was 6.5 million shares.

18. Supplemental Cash Flow Information

In February 2010, an unrelated party contributed a shuttle tanker with a value of $35.0 million to a subsidiary of the Company in exchange for a 33% equity interest in the subsidiary as described in Note 10(d) to these unaudited consolidated financial statements. This contribution has been treated as a non-cash transaction in the Company’s consolidated statement of cash flows for the six months ended June 30, 2010.

19. Accounting Pronouncements Not Yet Adopted

In May 2011, the FASB issued amendments to FASB ASC 820, Fair Value Measurement, which clarify or change the application of existing fair value measurements, including; that the highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity’s holding are not permitted in a fair value measurement. These amendments are effective for the Company on January 1, 2012. The Company is currently assessing the potential impacts, if any, of these amendments on its consolidated financial statements.

20. Subsequent Events

In July 2011, Teekay Offshore issued 0.7 million common units to an institutional investor in a private placement for net proceeds, including its general partner’s 2% proportionate capital contribution, of $20.4 million. The common units were subsequently registered under a registration statement filed and declared effective by the Securities and Exchange Commission. Teekay Offshore currently has 63.5 million common units outstanding.

On August 30, 2011, the first of four LNG carriers servicing the Angola LNG Project was delivered and commenced its 20 year fixed-rate charter. Concurrently, Teekay LNG acquired our 33% ownership interest in this vessel and related charter contract for a total equity purchase price of approximately $19 million (net of assumed debt of $65 million).

Page 19 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
JUNE 30, 2011
PART I — FINANCIAL INFORMATION


ITEM 2 —		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and accompanying notes contained in “Item 1 — Financial Statements” of this Report on Form 6-K and with our audited consolidated financial statements contained in “Item 18 — Financial Statements” and Management’s Discussion and Analysis of Financial Condition and Results of Operations in “Item 5 — Operating and Financial Review and Prospects” of our Annual Report on Form 20-F for the year ended December 31, 2010.

References to Teekay mean Teekay Corporation, which is incorporated under the laws of the Republic of the Marshall Islands. References to the Company mean Teekay together with its wholly owned or controlled subsidiaries.

SIGNIFICANT DEVELOPMENTS IN 2011

Public Offering by Teekay Tankers

During February 2011, our publicly traded subsidiary Teekay Tankers Ltd. (NYSE: TNK) (or Teekay Tankers ) completed a public offering of 9.9 million shares of its Class A Common Stock (including 1.3 million shares issued upon the exercise of the underwriters’ overallotment option) at a price of $11.33 per share, for gross proceeds of approximately $112.1 million. Teekay Tankers used the net offering proceeds to repay a portion of its outstanding debt under its revolving credit facility. As a result of the transaction, our ownership of Teekay Tankers was reduced to 26.0%. We maintain voting control of Teekay Tankers through our ownership of shares of Class A and Class B Common Stock and will continue to consolidate this subsidiary.

First Priority Ship Mortgage Loan

In February 2011, we made a $70 million loan to a third party ship-owner. The loan bears interest at an interest rate of 9% per annum and has a fixed term of three years, repayable in full on maturity and is collateralized by a first-priority mortgage on one 2011-built Very Large Crude Carrier (or VLCC ).

Sale of Remaining Interest in OPCO to Teekay Offshore

In March 2011, we sold our remaining 49% interest in Teekay Offshore Operating L.P. (or OPCO ), a subsidiary of our publicly traded subsidiary Teekay Offshore Partners L.P. (NYSE: TOO) (or Teekay Offshore ), to Teekay Offshore for a combination of $175 million in cash (less $15 million in distributions made by OPCO to us between December 31, 2010 and the date of acquisition) and 7.6 million newly issued Teekay Offshore common units issued to us in a private placement. In addition, Teekay Offshore issued to its general partner a sufficient general partner interest in order for it to maintain its 2% general partner interest. The sale increased Teekay Offshore’s ownership of OPCO from 51% to 100%. As a result of the transaction, our ownership of Teekay Offshore was increased to 36.9% (including our 2% general partner interest). We maintain control of Teekay Offshore by virtue of our control of the general partner and will continue to consolidate this subsidiary.

Public Offering by Teekay LNG

In April 2011, our publicly traded subsidiary Teekay LNG Partners L.P. (NYSE: TGP) (or Teekay LNG ) completed a public offering of 4.3 million common units (including 0.6 million common units issued upon the partial exercise of the underwriters’ overallotment option) at a price of $38.88 per unit, for gross proceeds (including the general partner’s proportionate capital contribution) of approximately $168.7 million. Teekay LNG expects to use the net offering proceeds to fund the equity purchase price of its acquisition from Teekay of a 33% interest in four newbuilding LNG carriers. These four liquefied natural gas (or LNG ) carriers will commence operations under time-charter to the Angola LNG Project (discussed below) upon each vessel’s respective delivery, scheduled between August 2011 and early 2012. Pending delivery of the vessels, all interim and remaining net proceeds from the offering will be used to repay amounts outstanding on one of Teekay LNG’s revolving credit facilities. As a result of the public offering, our ownership of Teekay LNG was reduced to 43.6% (including our 2% general partner interest). We maintain control of Teekay LNG by virtue of our control of the general partner and will continue to consolidate this subsidiary.

Recent Offshore Business Developments

We recently entered into a joint venture agreement with Odebrecht Oil & Gas S.A. (or Odebrecht ) to jointly pursue floating, production, storage and offloading (or FPSO ) projects in Brazil. We are currently working with Odebrecht on potential project opportunities and have signed an agreement with Odebrecht to be a 50% partner in the Tiro Sidon FPSO project. Odebrecht is a well-established Brazil-based company that operates globally in the engineering and construction, petrochemical, bio-energy, energy, oil and gas, real estate and environmental engineering sectors.

In June 2011, we entered into a new long-term contract with a subsidiary of BG Group plc (or BG ) to provide shuttle tanker services in Brazil. Under the terms of the contract with BG, we will provide four Suezmax newbuilding shuttle tankers to be constructed by Samsung Heavy Industries (or Samsung ) in South Korea. As at June 30, 2011, payments made towards these commitments totaled $44.6 million and the remaining payments required to be made under these newbuilding contracts were $78.1 million (2012) and $323.3 million (2013). Upon delivery in mid- to late-2013, the vessels will commence operations under 10-year time-charters. The contract with BG also includes certain extension options and vessel purchase options.

In addition, we entered into an agreement with BG Norge Limited (or BG Norge ) to provide an FPSO unit for the Knarr oil and gas field located in the North Sea. Under the terms of the contract, we will provide a newly-built FPSO unit to be constructed by Samsung in South Korea for an estimated fully built-up project cost of approximately $1 billion. The FPSO unit, which will have a maximum design production capacity of 63,000 barrels per day, is scheduled to deliver during the second quarter of 2014, at which time it will commence operations under its charter contract with BG Norge for a firm period of either six or ten years plus extension options for a total period of up to 20 years. Under the terms of the agreement, BG Norge has until the end of 2012 to decide on the firm period of the charter contract.

Page 20 of 38

In July 2011, our publicly traded subsidiary Teekay Offshore issued 0.7 million common units to an institutional investor in a private placement for net proceeds of $20.4 million, including its general partner’s $0.4 million proportionate capital contribution. Teekay Offshore used the proceeds from the issuance of common units to partially fund the acquisition of the four BG newbuilding shuttle tankers.

OTHER SIGNIFICANT PROJECTS

Angola LNG Project

We have a 33% interest in a joint venture that will charter four newbuilding 160,400-cubic meter LNG carriers for a period of 20 years to the Angola LNG Project, which is being developed by subsidiaries of Chevron Corporation, Sociedade Nacional de Combustiveis de Angola EP, BP Plc, Total S.A., and Eni SpA. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in 2011. Mitsui & Co., Ltd. and NYK Bulkship (Europe) Ltd. have 34% and 33% interests in the joint venture, respectively. In accordance with existing agreements, we were required to offer to sell to Teekay LNG our 33% interest in these vessels and related charter contracts at our fully built-up cost, no later than 180 days before the scheduled delivery dates of the vessels. Deliveries of the vessels are scheduled between late August 2011 and January 2012. In February 2011, we offered to sell to Teekay LNG our 33% ownership interest in these vessels and related charter contracts. In March 2011, the transaction was approved by the Board of Directors of Teekay LNG’s general partner and by its Conflicts Committee. Please read Item 1 — Financial Statements: Note 10(b) — Commitments and Contingencies — Joint Ventures.

RESULTS OF OPERATIONS

We use a variety of financial and operational terms and concepts when analyzing our results of operations. In addition, you should consider certain factors when evaluating our historical financial performance and assessing our future prospects. These items can be found in Item 5 - “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2010.

In accordance with generally accepted accounting principles in the United States (or GAAP ), we report gross revenues in our income statements and include voyage expenses among our operating expenses. However, ship-owners base economic decisions regarding the deployment of their vessels upon anticipated time-charter equivalent (or TCE ) rates and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. This is because under time-charter contracts and FPSO service contracts the customer usually pays the voyage expenses, while under voyage charters and contracts of affreightment the ship-owner usually pays the voyage expenses, which typically are added to the hire rate at an approximate cost. Accordingly, the discussion of revenue below focuses on net revenues and TCE rates of our four reportable segments where applicable.

We manage our business and analyze and report our results of operations on the basis of four reportable segments: the shuttle tanker and FSO segment, the FPSO segment, the liquefied gas segment, and the conventional tanker segment. In order to provide investors with additional information about our conventional tanker segment, we have divided this operating segment into the fixed-rate tanker sub-segment and the spot tanker sub-segment. Please read Item 1 — Financial Statements: Note 3 — Segment Reporting.

Shuttle Tanker and FSO Segment

Our shuttle tanker and floating storage and offtake (or FSO ) segment (which includes our Teekay Navion Shuttle Tankers and Offshore business unit) includes our shuttle tankers and FSO units. We use these vessels to provide transportation and storage services to oil companies operating offshore oil field installations, primarily in the North Sea and Brazil. Our shuttle tankers in this segment service the conventional spot market from time to time.

The following table presents our shuttle tanker and FSO segment’s operating results and compares its net revenues (which is a non-GAAP financial measure) to revenues, the most directly comparable GAAP financial measure.


(in thousands of U.S. dollars, except	Three Months Ended								Six Months Ended
calendar-ship-days	June 30,					%			June 30,					%
and percentages)	2011		2010			Change			2011		2010			Change

Revenues		148,647		167,502			(11.3	)		299,859		323,450			(7.3	)
Voyage expenses		26,351		35,761			(26.3	)		45,680		65,064			(29.8	)

Net revenues		122,296		131,741			(7.2	)		254,179		258,386			(1.6	)
Vessel operating expenses		50,558		41,494			21.8			101,392		84,815			19.5
Time-charter hire expense		18,751		23,433			(20.0	)		38,378		48,471			(20.8	)
Depreciation and amortization		32,125		33,456			(4.0	)		62,744		64,014			(2.0	)
General and administrative ⁽¹⁾		12,982		14,145			(8.2	)		31,288		26,290			19.0
Loss (gain) on sale of vessels and equipment, net of write-downs of vessels and equipment		—		(736	)		(100.0	)		171		(736	)		(123.2	)
Restructuring charges		117		349			(66.6	)		4,037		674			499.0

Income from vessel operations		7,763		19,600			(60.4	)		16,169		34,858			(53.6	)


Calendar-Ship-Days
Owned Vessels		3,226		2,669			20.9			6,114		5,550			10.2
Chartered-in Vessels		493		624			(21.0	)		1,034		1,300			(20.5	)

Total		3,719		3,293			12.9			7,148		6,850			4.4


(1)		Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the shuttle tanker and FSO segment based on estimated use of corporate resources. For further discussion, please read “Other Operating Results — General and Administrative Expenses.”

Page 21 of 38

The average fleet size of our shuttle tanker and FSO segment (including vessels chartered-in), as measured by calendar-ship-days, increased for the three months and six months ended June 30, 2011, compared to the same periods last year, due to an increase in owned shuttle tankers with the delivery of three newbuilding shuttle tankers, the Amundsen Spirit, the Nansen Spirit (or the 2010 Newbuilding Shuttle Tanker Acquisitions ) and the Peary Spirit in July 2010, October 2010 and June 2011, respectively. This increase in shuttle tankers was partially offset by the sale of the FSO unit Karratha Spirit in March 2011. As at June 30, 2011, the shuttle tanker and FSO segment had five shuttle tankers under construction, of which one shuttle was delivered in July 2011. The remaining four vessels are scheduled for delivery in 2013. Please read Item 1 — Financial Statements: Note 10(a) — Commitments and Contingencies — Vessels Under Construction.

Net Revenues. Net revenues decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

decreases of $10.1 million and $16.1 million for the three and six months ended June 30, 2011, respectively, due to fewer revenue days for our shuttle tankers due to declining oil productions at mature oil fields in the North Sea and a decrease in revenue days from the spot conventional tanker market from decreased demand for conventional crude transportation;

•

decreases of $3.0 million and $3.9 million for the three and six months ended June 30, 2011, respectively, due to the redelivery of one vessel in March 2011 as it completed its time-charter agreement;

•

decreases of $3.8 million and $4.2 million for the three and six months ended June 30, 2011, respectively, due to lower revenues related to the sale of the Karratha Spirit ;

•

decreases of $1.4 million and $4.2 million for the three and six months ended June 30, 2011, respectively, due to a lower charter rate on the Navion Saga in accordance with the charter contract that took effect in the second quarter of 2010 and a one-time reimbursement from customers for certain crewing costs during the three months ended March 31, 2010;

•

decreases of $1.4 million and $2.6 million for the three and six months ended June 30, 2011, respectively, due to an increase in the number of offhire days resulting from more scheduled drydockings in the time-chartered fleet;

•

decreases of $1.7 million for the three and six months ended June 30, 2011, respectively, due to voyage expenses incurred in connection with the repositioning voyage for the newbuilding shuttle tanker, the Peary Spirit; and

•

net decreases and increases of $1.6 million and $1.1 million for the three and six months ended June 30, 2011, respectively, due to an increase in revenues from entering into new contracts during 2010 and an increase in rates as provided in certain bareboat and time-charter contracts, partially offset by a decrease in rates from shuttle tankers operating in the conventional tanker market;

partially offset by

•

increases of $10.4 million and $20.9 million for the three and six months ended June 30, 2011, respectively, due to the 2010 Newbuilding Shuttle Tanker Acquisitions; and

•

increases of $3.3 million and $5.2 million for the three and six months ended June 30, 2011, respectively, due to an increase in reimbursable bunker costs as provided for in new contracts during 2010.

Vessel Operating Expenses. Vessel operating expenses increased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

increases of $3.3 million and $6.8 million for the three and six months ended June 30, 2011, respectively, due to the 2010 Newbuilding Shuttle Tanker Acquisitions;

•

increases of $3.7 million and $4.8 million for the three and six months ended June 30, 2011, respectively, in crew and manning costs as compared to the same periods last year resulting primarily from planned increases in wages; and

•

increases of $2.6 million and $5.9 million for the three and six months ended June 30, 2011, respectively, due to an increase in the number of vessels drydocked, and costs related to services and spares. Certain repair and maintenance items are more efficient to complete while a vessel is in drydock. Consequently, repair and maintenance costs will typically increase in periods when there is a higher number of vessels drydocked;

partially offset by

•

a decrease of $0.8 million for the six months ended June 30, 2011 relating to the settlement of a claim from a customer in 2010; and

•

decreases of $0.6 million and $1.4 million, respectively, for the three and six months ended June 30, 2011, relating to the net realized and unrealized changes in fair value of our foreign currency forward contracts that are or have been designated as hedges for accounting purposes.

Page 22 of 38

Time-Charter Hire Expense. Time-charter hire expense decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

decreases of $3.7 million and $9.0 million for the three and six months ended June 30, 2011, respectively, due to the redelivery of two chartered-in vessels to their owners in February 2010 and November 2010 upon the expiration of their time-charter-in contracts;

•

a decrease of $2.3 million for the six months ended June 30, 2011 due to the acquisition of one previously in-chartered vessel in February 2010; and

•

a decrease of $2.0 million for the three months ended June 30, 2011, due to decreased spot in-chartering of vessels and utilizing owned fleet capacity;

partially offset by

•

increases of $0.3 million and $0.5 million, respectively, for the three and six months ended June 30, 2011, due to increases in rates on certain contracts in the in-chartered fleet; and

•

increases of $0.1 million and $0.6 million, respectively, for the three and six months ended June 30, 2011, due to less offhire in the in-chartered fleet.

Restructuring Charges. Restructuring charges for the six months ended June 30, 2011 primarily relate to the sale of an FSO unit, the Karratha Spirit , and the termination of the time-charter-out contract relating to one of our shuttle tankers, the Basker Spirit.

FPSO Segment

Our FPSO segment (which includes our Teekay Petrojarl business unit) includes our FPSO units and other vessels used to service our FPSO contracts. We use these units and vessels to provide transportation, production, processing and storage services to oil companies operating offshore oil field installations. These services are typically provided under long-term fixed-rate time-charter contracts, contracts of affreightment or FPSO service contracts. Historically, the utilization of FPSO units and other vessels in the North Sea is higher in the winter months, as favorable weather conditions in the summer months provide opportunities for repairs and maintenance to our offshore oil platforms, which generally reduce oil production.

The following table presents our FPSO segment’s operating results:


(in thousands of U.S. dollars,	Three Months Ended							Six Months Ended
except calendar-ship-days	June 30,							June 30,
and percentages)	2011		2010		% Change			2011		2010		% Change

Revenues		102,658		124,223		(17.4	)		207,276		256,221		(19.1	)
Vessel operating expenses		61,509		50,433		22.0			117,011		98,398		18.9
Depreciation and amortization		23,215		23,754		(2.3	)		46,946		47,502		(1.2	)
General and administrative ⁽¹⁾		13,494		4,521		198.5			28,217		13,347		111.4

Income from vessel operations		4,440		45,515		(90.2	)		15,102		96,974		(84.4	)


Calendar-Ship-Days Owned Vessels		728		728		—			1,448		1,448		—


(1)		Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the FPSO segment based on estimated use of corporate resources. For further discussion, please read “Other Operating Results — General and Administrative Expenses.”

Revenues. Revenues decreased for the three and six months ended June 30, 2011 compared to the same periods last year, primarily due to:

•

decreases of $29.2 million and $59.2 million for the three and six months ended June 30, 2011, respectively, for one-time payments received in 2010 under the amended operating contract for our Petrojarl Foinaven FPSO unit related to operations in previous years and recognized in those 2010 periods;

partially offset by

•

increases of $2.8 million and $6.2 million for the three and six months ended June 30, 2011, respectively, due to increased daily rates on the Cidade de Rio das Ostras FPSO unit (the Rio das Ostras );

•

an increase of $3.9 million for the six months ended June 30, 2011, primarily due to a one-time accrual in the three months ended March 31, 2011 relating to an agreed adjustment to revenue for services previously rendered to the charterer of the Rio das Ostras ;

•

an increase of $1.8 million for the three and six months ended June 30, 2011, due to increased daily rates on the Petrojarl Varg FPSO unit (the Varg) ; and

•

increases of $1.5 million and $1.7 million for the three and six months ended June 30, 2011, respectively, due to the weakening of the U.S. Dollar against the Norwegian Kroner compared to the same periods last year.

As part of our acquisition of Teekay Petrojarl ASA (or Teekay Petrojarl ), we assumed certain FPSO service contracts that had terms that were less favorable than prevailing market terms at the time of acquisition. The related contract value liability, which was initially recognized on the date of acquisition, is being amortized to revenue over the remaining firm period of the current FPSO contracts on a weighted basis, based on the projected revenue to be earned under the contracts. The amount of amortization relating to these contracts included in revenue for the three and six months ended June 30, 2011 was $10.8 million (2010 — $11.2 million) and $21.6 million (2010 — $24.3 million), respectively. The decreases for the three and six months ended June 30, 2011, compared to the same periods in 2010, were due to increases in the amortization periods resulting from operating contract amendments and changes to expected contract durations for two of our FPSO units.

Page 23 of 38

Vessel Operating Expenses. Vessel operating expenses increased during the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

increases of $1.4 million and $2.8 million for the three and six months ended June 30, 2011, respectively, due to planned crewing and manning wage increases;

•

increases of $1.3 million and $3.4 million for the three and six months ended June 30, 2011, respectively, due to increased repairs on the Rio das Ostras while on yard stay;

•

increases of $2.5 million and $3.0 million for the three and six months ended June 30, 2011, respectively, due to the weakening of the U.S. Dollar against the Norwegian Kroner compared to the same periods last year;

•

an increase of $2.6 million for the three and six months ended June 30, 2011, due to inspections and repairs on the Petrojarl I FPSO unit;

•

an increase of $0.4 million and $1.8 million for the three and six months ended June 30, 2011, respectively, due to higher repairs and maintenance costs associated with the Apollo Spirit , an FSO unit used to service the Petrojarl Banff FPSO unit; and

•

an increase of $0.7 million for the three and six months ended June 30, 2011, relating to crew training costs for the Tiro Sidon FPSO project.

Liquefied Gas Segment

Our liquefied gas segment (which includes our Teekay Gas Services business unit) consists of LNG and liquefied petroleum gas (or LPG ) carriers subject to long-term, fixed-rate time-charter contracts. The following table presents our liquefied gas segment’s operating results and compares its net revenues (which is a non-GAAP financial measure) to revenues, the most directly comparable GAAP financial measure.


	Three Months Ended							Six Months Ended
(in thousands of U.S. dollars, except	June 30,				%			June 30,				%
calendar-ship-days and percentages)	2011		2010		Change			2011		2010		Change

Revenues		68,002		60,797		11.9			132,635		123,331		7.5
Voyage expenses		3,778		122		2,996.7			3,827		95		3,928.4

Net revenues		64,224		60,675		5.8			128,808		123,236		4.5
Vessel operating expenses		13,145		11,356		15.8			24,222		22,726		6.6
Depreciation and amortization		16,196		15,885		2.0			31,052		31,412		(1.1	)
General and administrative ⁽¹⁾		4,133		5,558		(25.6	)		10,738		10,329		4.0
Restructuring charges		42		195		(78.2	)		171		314		(45.5	)

Income from vessel operations		30,708		27,681		10.9			62,625		58,455		7.1


Calendar-Ship-Days
Owned Vessels and Vessels under Direct Financing Lease		1,198		1,274		(6.0	)		2,368		2,534		(6.6	)


(1)		Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the liquefied gas segment based on estimated use of corporate resources. For further discussion, please read “Other Operating Results — General and Administrative Expenses.”

The decrease in the average fleet size of our liquefied gas segment, as measured by calendar-ship-days, was primarily due to the sale of the Dania Spirit LPG carrier in November 2010, partially offset by the delivery of an LPG carrier, the Norgas Unikum , in June 2011. At June 30, 2011, we had one LPG carrier and one multi-gas carriers under construction, which are scheduled for delivery in 2011. In addition, we have a 33% interest in four LNG carriers under construction that are scheduled for delivery between August 2011 and January 2012, and will be accounted for under the equity basis. Upon delivery, all of these vessels will commence operation under long-term, fixed-rate time-charters. Please read Item 1 — Financial Statements: Note 10(a) — Commitments and Contingencies — Vessels Under Construction and Note 10(b) — Commitments and Contingencies — Joint Ventures.

During the six months ended June 30, 2010, the LNG carrier Arctic Spirit was offhire for a total of 181 days, of which approximately 22 days related to scheduled drydockings, with the remainder being due to the lack of a charter contract. The Arctic Spirit commenced a short-term fixed-rate contract during the second quarter of 2011, including two one year options to extend at the charterer’s option.

Net Revenues. Net revenues increased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

increases of $2.3 million and $5.4 million for the three and six months ended June 30, 2011, respectively, due to the increased time-charter rates earned by the Polar Spirit and the Arctic Spirit being offhire during the six months ended June 30, 2010, as discussed above; and

•

an increase of $2.4 million for the three and six months ended June 30, 2011, due to the effect on our Euro-denominated revenues from the strengthening of the Euro against the U.S. Dollar compared to the same periods last year;

Page 24 of 38

partially offset by

•

decreases of $1.1 million and $2.3 million for the three and six months ended June 30, 2011, respectively, due to the sale of the Dania Spirit LPG carrier.

Vessel Operating Expenses . Vessel operating expenses increased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

increases of $1.7 million and $1.9 million for the three and six months ended June 30, 2011, respectively, due to timing of services and maintenance and an increase in manning levels for certain of our LNG carriers;

•

increases of $0.6 million and $0.8 million for the three and six months ended June 30, 2011, respectively, due to repairs and maintenance on the Tangguh Hiri during the second quarter of 2011; and

•

an increase of $0.3 million for the three and six months ended June 30, 2011, due to an insurance claim adjustment in the second quarter of 2011 relating to the Madrid Spirit;

partially offset by

•

decreases of $0.8 million and $1.6 million for the three and six months ended June 30, 2011, respectively, due to the sale of the Dania Spirit .

Conventional Tanker Segment

Our conventional tanker segment consists of conventional crude oil and product tankers that (i) are subject to long-term, fixed-rate time-charter contracts (which have an original term of one year or more), (ii) operate in the spot tanker market, or (iii) are subject to time-charters or contracts of affreightment that are priced on a spot-market basis or are short-term, fixed-rate contracts (which have an original term of less than one year).

a) Fixed-Rate Tanker Sub-Segment

Our fixed-rate tanker sub-segment, a subset of our conventional tanker segment (which includes our Teekay Tankers Services business unit), includes conventional crude oil and product tankers on fixed-rate time charters with an original duration of more than one year. In addition, we have a 50% interest in a VLCC under construction that is scheduled for delivery in 2013, which will be accounted for under the equity basis. Upon delivery, this vessel will commence operation under a time-charter for a term of five years. Please read Item 1 — Financial Statements: Note 10(b) — Commitments and Contingencies — Joint Ventures.

The following table presents our fixed-rate tanker sub-segment’s operating results and compares its net revenues (which is a non-GAAP financial measure) to revenues, the most directly comparable GAAP financial measure.


	Three Months Ended								Six Months Ended
(in thousands of U.S. dollars, except	June 30,					%			June 30,				%
calendar-ship-days and percentages)	2011			2010		Change			2011		2010		Change

Revenues		90,523			95,139		(4.9	)		178,510		189,171		(5.6	)
Voyage expenses		835			1,381		(39.5	)		1,996		2,077		(3.9	)

Net revenues		89,688			93,758		(4.3	)		176,514		187,094		(5.7	)
Vessel operating expenses		29,344			31,000		(5.3	)		55,187		56,997		(3.2	)
Time-charter hire expense		9,214			14,064		(34.5	)		16,609		29,203		(43.1	)
Depreciation and amortization		19,428			19,367		0.3			41,337		39,184		5.5
General and administrative ⁽¹⁾		10,383			8,872		17.0			26,009		17,851		45.7
(Gain) loss on sale of vessels and equipment, net of write-downs of vessels and equipment		(133	)		401		(133.2	)		—		1,166		(100.0	)
Restructuring charges		(19	)		5		(474.4	)		1,060		111		855.0

Income from vessel operations		21,471			20,049		7.1			36,312		42,582		(14.7	)


Calendar-Ship-Days
Owned Vessels		2,913			2,990		(2.6	)		5,852		5,856		(0.1	)
Chartered-in Vessels		497			688		(27.8	)		902		1,399		(35.6	)

Total		3,410			3,678		(7.3	)		6,754		7,255		(6.9	)


(1)		Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the fixed-rate tanker sub-segment based on estimated use of corporate resources. For further discussion, please read “Other Operating Results — General and Administrative Expenses.”

Page 25 of 38

The average fleet size of our fixed-rate tanker sub-segment (including vessels chartered-in), as measured by calendar-ship-days, decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

the transfer of two Aframax tankers, on a net basis, to the spot tanker sub-segment in 2010 and early 2011 upon commencement of charters, which have an original term of less than one year;

•

the sale of one product tanker in August 2010;

•

the transfer of one in-chartered VLCC to the spot tanker sub-segment in February 2011; and

•

an overall decrease in the number of in-chartered vessels days due to vessel redeliveries;

partially offset by

•

the transfer of one Suezmax tanker from the spot tanker sub-segment in April 2010.

The collective impact from the above noted fleet changes are referred to below as the Net Fleet Reductions .

The Aframax transfers, discussed above, consist of the transfer of five owned vessels from the spot tanker sub-segment, and the transfer of three owned vessels and four in-chartered vessels to the spot tanker sub-segment. These transactions resulted in a decrease to the fixed tanker sub-segment’s net revenues, time-charter hire expense, vessel operating expenses, and depreciation and amortization.

Net Revenues. Net revenues decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

decreases of $9.6 million and $20.0 million for the three and six months ended June 30, 2011, respectively, from the Net Fleet Reductions;

partially offset by

•

increases of $4.4 million and $7.9 million for the three and six months ended June 30, 2011, respectively, resulting from interest income from our investment in term loans, as discussed below; and

•

increases of $0.6 million and $1.0 million for the three and six months ended June 30, 2011, respectively, due to adjustments to the daily charter rates based on inflation and increases from rising interest rates in accordance with the time-charter contracts for five Suezmax tankers (however, under the terms of these capital leases, we had corresponding increases in our lease payments, which are reflected as increases to interest expense; therefore, these and future similar interest rate adjustments do not affect our cash flow or net income (loss)).

We earned interest income of $4.4 million and $7.9 million, respectively, for the three and six months ended June 30, 2011 from our investment in three term loans which totaled $186 million as at June 30, 2011 and which are collateralized by first priority mortgages on three VLCCs.

Vessel Operating Expenses. Vessel operating expenses decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

decreases of $2.5 million and $5.0 million for the three and six months ended June 30, 2011, respectively, from the Net Fleet Reductions;

partially offset by

•

an increase of $2.2 million for the six months ended June 30, 2011 relating to higher crewing costs and timing of repairs and maintenance costs.

Time-Charter Hire Expense. Time-charter hire expense decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to the transfer of an in-chartered VLCC to the spot tanker sub-segment and a decrease in the number of in-chartered vessel days as vessels were redelivered to their owners upon expiration of in-charter contracts.

Depreciation and Amortization. Depreciation and amortization expense increased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

increases of $0.5 million and $0.9 million for the three and six months ended June 30, 2011, respectively, due to the Net Fleet Reductions; and

•

increases of $0.3 million and $0.8 million for the three and six months ended June 30, 2011, respectively, due to an increase in capitalized drydocking expenditures incurred during the second half of 2011.

b) Spot Tanker Sub-Segment

Our spot tanker sub-segment, a subset of our conventional tanker segment (which includes our Teekay Tankers Services business unit), consists of conventional crude oil tankers and product carriers operating on the spot tanker market or subject to time-charters or contracts of affreightment that are priced on a spot-market basis or are short-term, fixed-rate contracts. We consider contracts that have an original term of less than one year in duration to be short-term. Our conventional Aframax, Suezmax, and large and medium product tankers are among the vessels included in the spot tanker sub-segment.

Page 26 of 38

Our spot tanker market operations contribute to the volatility of our revenues, cash flow from operations and net income (loss). 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, spot tanker markets historically have exhibited seasonal variations in charter rates. Spot tanker 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 following table presents our spot tanker sub-segment’s operating results and compares its net revenues (which is a non-GAAP financial measure) to revenues, the most directly comparable GAAP financial measure:


(in thousands of U.S. dollars, except	Three Months Ended									Six Months Ended
calendar-ship-days	June 30,									June 30,
and percentages)	2011			2010			% Change			2011			2010			% Change
Revenues		75,092			104,568			(28.2	)		154,666			232,931			(33.6	)
Voyage expenses		20,925			29,103			(28.1	)		45,512			71,681			(36.5	)

Net revenues		54,167			75,465			(28.2	)		109,154			161,250			(32.3	)
Vessel operating expenses		20,161			16,509			22.1			38,482			42,391			(9.2	)
Time-charter hire expense		25,449			37,891			(32.8	)		61,458			76,965			(20.1	)
Depreciation and amortization		14,272			18,772			(24.0	)		28,195			37,352			(24.5	)
General and administrative ⁽¹⁾		10,281			17,160			(40.1	)		25,239			30,530			(17.3	)
Loss on sale of vessels and equipment, net of write-downs of vessels and equipment		5,945			357			1,565.3			9,234			352			2,523.3
Restructuring charges		318			3,646			(91.3	)		151			6,879			(97.8	)

Loss from vessel operations		(22,259	)		(18,870	)		18.0			(53,605	)		(33,219	)		61.4


Calendar-Ship-Days
Owned Vessels		2,001			2,113			(5.3	)		3,922			4,400			(10.9	)
Chartered-in Vessels		1,436			1,422			1.0			3,081			2,859			7.8

Total		3,437			3,535			(2.8	)		7,003			7,259			(3.5	)


(1)		Includes direct general and administrative expenses and indirect general and administrative expenses allocated to the spot tanker sub-segment based on estimated use of corporate resources. For further discussion, please read “Other Operating Results — General and Administrative Expenses.”

The average size of our spot tanker fleet (including vessels chartered-in), as measured by calendar-ship-days, decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

the sale of two Aframax tankers in April 2010 and August 2010; and

•

the transfer of one Suezmax tanker to the fixed-rate tanker sub-segment in April 2010;

partially offset by

•

the transfer of one in-chartered VLCC from the fixed-rate tanker sub-segment in February 2011; and

•

the transfer of two Aframax tankers, on a net basis, from the fixed-rate tanker sub-segment in 2010 and early 2011.

The collective impact from the above noted fleet changes are referred to below as the Net Spot Fleet Reductions .

Tanker Market and TCE Rates

Crude tanker freight rates weakened during the second quarter and into the third quarter of 2011 due to a combination of tanker supply growth, geopolitical factors, and seasonal factors. The tanker market continues to be negatively affected by an oversupply of vessels relative to demand, which is dragging down tanker rates. In addition, the loss of Libyan crude oil production due to political unrest had a negative impact on Aframax rates in the Mediterranean while North Sea production was impacted by a series of unplanned oilfield shutdowns. Tanker rates were further affected by seasonal refinery maintenance programs and the onset of summer oilfield maintenance in the North Sea.

The world tanker fleet grew by a net 13.8 million deadweight tonnes ( mdwt ), or 3.1%, in the first half of 2011 compared to a net increase of 10.6 mdwt, or 2.5%, in the same period last year. A combination of weak spot tanker freight rates and relatively high demolition prices have led to 7.3 mdwt of tanker removals through the first half of 2011, which has helped dampen tanker fleet growth. With increasing customer discrimination toward older double hull tankers on the rise, we expect this level of scrapping to persist through the second half of the year. In addition, new tanker ordering has remained virtually non-existent, with only 3.5 mdwt ordered since the start of the year. If this level of ordering continues for the rest of the year, it will be the lowest annual level of new tanker orders since 1985.

Page 27 of 38

The International Energy Agency ( IEA ) is forecasting global oil demand of 89.5 million barrels per day ( mb/d ) in 2011, an increase of 1.2 mb/d from 2010 levels. The IEA also recently released its outlook for 2012 in which it calls for global oil demand growth of 1.5 mb/d, which is primarily driven by expected continued demand growth in China.

The following table outlines the TCE rates earned by the vessels in our spot tanker sub-segment for the three and six months ended June 30, 2011 and 2010, and excludes the realized results of synthetic time-charters (or STCs ) and forward freight agreements (or FFAs ), which we enter into at times as hedges against a portion of our exposure to spot tanker market rates.


	Three Months Ended
	June 30, 2011							June 30, 2010
	Net					TCE		Net					TCE
	Revenues			Revenue		Rate		Revenues			Revenue		Rate
Vessel Type	($000’s)			Days		$		($000’s)			Days		$

Spot Fleet ⁽¹⁾
Suezmax Tankers		20,526			1,182		17,363		37,066			1,218		30,439
Aframax Tankers		26,688			1,710		15,608		32,300			1,787		18,075
Large/Medium Product Tankers/VLCC		7,287			494		14,758		7,233			511		14,154

Other ⁽²⁾		(334	)						(1,134	)


Totals		54,167			3,386		15,997		75,465			3,516		21,464


	Six Months Ended
	June 30, 2011						June 30, 2010
	Net				TCE		Net					TCE
	Revenues		Revenue		Rate		Revenues			Revenue		Rate
Vessel Type	($000’s)		Days		$		($000’s)			Days		$

Spot Fleet ⁽¹⁾
Suezmax Tankers		43,083		2,397		17,972		74,881			2,455		30,505
Aframax Tankers		51,072		3,537		14,440		74,492			3,981		18,712
Large/Medium Product Tankers/VLCC		14,839		993		14,947		14,355			1,006		14,265

Other ⁽²⁾		160						(2,478	)


Totals		109,154		6,927		15,758		161,250			7,442		21,668


(1)		Spot fleet includes short-term time-charters and fixed-rate contracts of affreightment less than one year.

(2)		Includes the cost of spot in-charter vessels servicing fixed-rate contract of affreightment cargoes, the amortization of in-process revenue contracts and the cost of fuel while offhire.

Average spot tanker TCE rates decreased for the three and six months ended June 30, 2011, compared to the same periods last year. The TCE rates generally reflect continued weak global oil demand caused by the global economic slowdown. Partially in response to this global economic slowdown, we reduced our exposure to the spot tanker market through the sale of certain vessels that were trading on the spot market, entered into fixed-rate time charters for certain tankers that were previously trading in the spot market, and re-delivered in-chartered vessels. This shift away from our spot tanker employment to fixed-rate employment provided increased cash flow stability through a volatile spot tanker market.

Net Revenues. Net revenues decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to decreases of $18.5 million and $40.9 million, respectively, from decreases in our average spot tanker TCE rates due to the relative weakening of the spot tanker market. The remainder of the decrease was due to the Net Spot Fleet Reductions.

Vessel Operating Expenses. Vessel operating expenses increased for the three months ended June 30, 2011, and decreased for the six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

an increase in operating expenses of $4.4 million relating to higher crew and manning costs for the three months ended June 30, 2011, compared to the same period in 2010, resulting primarily from planned increases in wages;

partially offset by

•

decreases of $1.8 million and $4.0 million for the three and six months ended June 30, 2011, respectively, from the Net Spot Fleet Reductions.

Time-Charter Hire Expense. Time-charter hire expense decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to a decrease in the in-charter contract hire rates and redeliveries of previously chartered-in vessels upon expiration of their in-charter contracts.

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Depreciation and Amortization. Depreciation and amortization expense decreased for the three and six months ended June 30, 2011, compared to the same periods last year, primarily due to:

•

decreases of $2.2 million $4.4 million for the three and six months ended June 30, 2011, respectively, from a decrease of amortization of certain intangible contracts which were fully amortized in 2010;

•

decreases of $2.1 million and $4.1 million for the three and six months ended June 30, 2011, respectively, resulting from the Net Spot Fleet Reductions; and

•

net decreases of $0.5 million and $1.0 million for the three and six months ended June 30, 2011, respectively, resulting from a decrease in amortization of capitalized vessels and equipment costs, partially offset by an increase in amortization of capitalized drydocking expenditures.

Loss on Sale of Vessels and Equipment, Net of Write-downs of Vessels and Equipment. Loss on sale of vessels and equipment for the three and six months ended June 30, 2011, relates primarily to a write-down of a 1993-built Aframax tanker to its estimated fair value, as the vessel carrying value exceeded the estimated fair value, by $5.0 million and $8.3 million for the three and six months ended June 30, 2011, respectively.

Restructuring Charges. Restructuring charges for the three and six months ended June 30, 2011 primarily relate to costs incurred for certain vessel crew changes.

Other Operating Results

The following table compares our other operating results for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended									Six Months Ended
(in thousands of U.S. dollars, except	June 30,									June 30,
percentages)	2011			2010			% Change			2011			2010			% Change

General and administrative		(51,273	)		(50,256	)		2.0			(121,491	)		(98,347	)		23.5
Interest expense		(33,516	)		(33,926	)		(1.2	)		(66,310	)		(66,078	)		0.4
Interest income		2,457			2,209			11.2			4,922			6,483			(24.1	)
Realized and unrealized losses on non-designated derivative instruments		(102,140	)		(219,225	)		(53.4	)		(78,883	)		(307,072	)		(74.3	)
Equity (loss) income from joint ventures		(6,053	)		(21,827	)		(72.3	)		341			(24,493	)		(101.4	)
Foreign exchange (loss) gain		(7,157	)		27,488			(126.0	)		(27,497	)		56,514			(148.7	)
Loss on notes repurchase		—			(537	)		(100.0	)		—			(12,645	)		(100.0	)
Other income		958			1,277			(25.0	)		1,052			3,699			(71.6	)
Income tax (expense) recovery		(2,022	)		5,147			(139.3	)		(2,833	)		12,454			(122.7	)

General and Administrative. General and administrative expenses increased to $51.3 million and $121.5 million, respectively, for the three and six months ended June 30, 2011, from $50.3 million and $98.3 million, respectively, for the same periods last year, primarily due to:

•

an increase of $15.1 million in salaries and benefits for the six months ended June 30, 2011, due primarily to a one-time pension expense related to the retirement of our former President and Chief Executive Officer on March 31, 2011, and an increase in the number of shore-based employees;

•

an increase of $9.6 million in equity-based compensation for management for the six months ended June 30, 2011, primarily due to the accelerated timing of accounting recognition of certain stock awards as a result of certain management employees meeting retirement eligibility criteria; and

•

an increase of $0.8 million from higher personnel expenses for the three and six months ended June 30, 2011 associated with corporate education and training, employee relocation and hiring costs and from timing of other corporate expenses, which included increased business development activity compared to the same periods in 2010.

Interest Income. Interest income increased by $0.3 million and decreased by $1.6 million for the three months and six months ended June 30, 2011, respectively, compared to the same periods last year, primarily due to lower interest income earned on our cash account balances and a scheduled capital lease repayment on one of our LNG carriers which was funded from restricted cash deposits that earn interest.

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Realized and unrealized losses on non-designated derivative instruments . Realized and unrealized (losses) gains related to derivative instruments that are not designated as hedges for accounting purposes are included as a separate line item in the consolidated statements of income (loss). The realized (losses) gains relate to the amounts we actually received or paid to settle such derivative instruments and the unrealized (losses) gains relate to the change in fair value of such derivative instruments. For the three and six months ended June 30, 2011 and 2010, such realized and unrealized (losses) gains on non-designated derivative instruments were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands of U.S. Dollars)	2011			2010			2011			2010

Realized (losses) gains relating to:
Interest rate swap agreements		(32,692	)		(40,634	)		(66,689	)		(79,220	)
Interest rate swap agreement amendments		—			—			(92,672	)		—
Foreign currency forward contracts		3,558			(1,022	)		4,883			(1,345	)
Forward freight agreements and bunker fuel swap contracts		(7	)		(2,207	)		42			(4,356	)

		(29,141	)		(43,863	)		(154,436	)		(84,921	)


Unrealized (losses) gains relating to:
Interest rate swap agreements		(73,331	)		(164,032	)		68,527			(209,838	)
Foreign currency forward contracts		540			(8,836	)		7,248			(12,053	)
Forward freight agreements, bunker fuel swap contracts and other		(208	)		(2,494	)		(222	)		(260	)

		(72,999	)		(175,362	)		75,553			(222,151	)

Total realized and unrealized losses on non-designated derivative instruments		(102,140	)		(219,225	)		(78,883	)		(307,072	)

The change in fair value of financial instruments resulted in a loss of $102.1 million and $78.9 million for the three and six months ended June 30, 2011, respectively, compared to a loss of $219.2 million and $307.1 million for the same periods last year. The unrealized losses on interest rate swaps for the three months ended June 30, 2011 were primarily due to decreases in forward interest rates.

All of our interest rate swap agreements and our swaption agreement were marked to market with all changes in the fair value of these instruments recorded in “Realized and unrealized (loss) gain on non-designated derivative instruments” in the Consolidated Statement of Loss. Please read — Financial Statements: Note 15 — Derivative Instruments and Hedging Activities.

Foreign Exchange (Loss) Gain. The changes in foreign exchange (loss) for the three and six months ended June 30, 2011, compared to the same periods last year were primarily attributable to the revaluation of our Euro-denominated term loans at the end of each period for financial reporting purposes, and substantially all of the gains or losses are unrealized. Gains reflect a stronger U.S. Dollar against the Euro on the date of revaluation. Losses reflect a weaker U.S. Dollar against the Euro on the date of revaluation. Currently, our Euro-denominated revenues generally approximate our Euro-denominated operating expenses and our Euro-denominated interest and principal repayments.

Equity Income (Loss) from Joint Ventures. Our equity (loss) income from joint ventures was a loss of $6.0 million and an income of $0.3 million, respectively, for the three and six months ended June 30, 2011, compared to a loss of $21.8 million and $24.5 million, respectively, for the same periods last year. The income or loss was primarily comprised of our share of the earnings (loss) from the Angola LNG Project, and from the Exmar and RasGas 3 Joint Ventures. For the three and six months ended June 30, 2011, $12.4 million and $8.2 million, respectively, of the equity income relates to our share of unrealized losses on interest rate swaps, compared to unrealized losses on interest rate swaps of $24.6 million and $30.7 million, respectively, included in equity income (loss) for the same periods last year.

Income Tax (Expense) Recovery. The increases to income tax expense for the three and six months ended June 30, 2011, compared to the same periods last year were primarily due to an increase in deferred income tax expense relating to unrealized foreign exchange translation gains.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Cash Needs

Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities, proceeds from the sale of vessels, and capital raised through financing transactions by our subsidiaries. Our short-term liquidity requirements are for the payment of operating expenses, debt servicing costs, dividends, scheduled repayments of long-term debt, as well as funding our working capital requirements. As at June 30, 2011, our total cash and cash equivalents totaled $497.5 million, compared to $779.7 million as at December 31, 2010. As at June 30, 2011, our total liquidity, including cash and undrawn credit facilities was $1.9 billion, compared to $2.4 billion as at December 31, 2010.

Our spot tanker market operations contribute to the volatility of our net operating cash flow. 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, spot tanker markets historically have exhibited seasonal variations in charter rates. Spot tanker 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.

As at June 30, 2011, we had $542.0 million of scheduled debt repayments coming due within the next 12 months, of which we are currently in the process of completing a refinancing of $219.9 million of such debt. There is no assurance we will finalize negotiations to refinance this debt. In addition, as at June 30, 2011 we had $271.9 million of capital lease obligations coming due within the next 12 months. We may be required to purchase five of our Suezmax tankers, currently on capital lease arrangements, at the lessor’s discretion. We have assumed the lessor will not exercise their option to have us repurchase the vessels until the end of the respective lease terms. We anticipate that we will purchase these tankers by assuming the outstanding financing obligations that relate to them. Please read Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations: Contractual Obligations and Contingencies. However, we may be required to obtain separate debt or equity financing to complete the purchases if the lenders do not consent to our assuming the financing obligations, and such financing may not be available at favorable terms. We believe that our existing cash and cash equivalents and undrawn long-term borrowings, in addition to other sources of cash such as cash from operations, will be sufficient to meet our existing liquidity needs for at least the next 12 months.

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Our operations are capital intensive. We finance the purchase of our vessels primarily through a combination of borrowings from commercial banks or our joint venture partners, the issuance of equity securities and publicly traded debt instruments and cash generated from operations. In addition, we may use sale and lease-back arrangements as a source of long-term liquidity. Occasionally, we use our revolving credit facilities to temporarily finance capital expenditures until longer-term financing is obtained, at which time we typically use all or a portion of the proceeds from the longer-term financings to prepay outstanding amounts under the revolving credit facilities. As of June 30, 2011, pre-arranged debt facilities were in place or are expected to be obtained for substantially all of our then remaining capital commitments relating to our portion of newbuildings then on order. Our pre-arranged newbuilding debt facilities are in addition to our undrawn credit facilities. We continue to consider strategic opportunities, including the acquisition of additional vessels and expansion into new markets. We may choose to pursue such opportunities through internal growth, joint ventures or business acquisitions. We intend to finance any future acquisitions through various sources of capital, including internally generated cash flow, existing credit facilities, additional debt borrowings, or the issuance of additional debt or equity securities or any combination thereof.

As at June 30, 2011, our revolving credit facilities provided for borrowings of up to $3.2 billion, of which $1.4 billion was undrawn. The amount available under these revolving credit facilities reduces by $135.1 million (remainder of 2011), $353.2 million (2012), $760.2 million (2013), $791.8 million (2014), $226.4 million (2015) and $930.4 million (thereafter). The revolving credit facilities are collateralized by first-priority mortgages granted on 64 of our vessels, together with other related security, and are guaranteed by Teekay or our subsidiaries.

Our outstanding term loans reduce in monthly, quarterly or semi-annual payments with varying maturities through 2023. Some of the term loans also have bullet or balloon repayments at maturity and are collateralized by first-priority mortgages granted on 29 of our vessels, together with other related security, and are generally guaranteed by Teekay or our subsidiaries. Our unsecured 8.875% Senior Notes, amounting to $16.2 million at June 30, 2011, were repaid on July 15, 2011.

Among other matters, our long-term debt agreements generally provide for the maintenance of certain vessel market value-to-loan ratios and minimum consolidated financial covenants and prepayment privileges, in some cases with penalties. Certain of the loan agreements require that we maintain a minimum level of free cash and as at June 30, 2011, this amount was $100.0 million. Certain of the loan agreements also require that we maintain an aggregate level of free liquidity and undrawn revolving credit lines (with at least six months to maturity) of at least 7.5% of total debt and as at June 30, 2011, this amount was $251.5 million. We were in compliance with all of our loan covenants at June 30, 2011.

We conduct our funding and treasury activities within corporate policies designed to minimize borrowing costs and maximize investment returns while maintaining the safety of the funds and appropriate levels of liquidity for our purposes. We hold cash and cash equivalents primarily in U.S. Dollars, with some balances held in Australian Dollars, British Pounds, Canadian Dollars, Euros, Japanese Yen, Norwegian Kroner and Singapore Dollars.

We are exposed to market risk from foreign currency fluctuations and changes in interest rates, spot tanker market rates for vessels and bunker fuel prices. We use forward foreign currency contracts, cross currency and interest rate swaps, forward freight agreements and bunker fuel swap contracts to manage currency, interest rate, spot tanker rates and bunker fuel price risks. With the exception of some of our forward freight agreements, we do not use these financial instruments for trading or speculative purposes. Please read Item 3 — Quantitative and Qualitative Disclosures About Market Risk.

Cash Flows

The following table summarizes our cash and cash equivalents provided by (used for) operating, financing and investing activities for the years presented:


	Six Months ended June 30,
(in thousands of U.S. Dollars)	2011			2010
Net operating cash flows		7,199			220,314
Net financing cash flows		129,141			59,562
Net investing cash flows		(418,539	)		(60,919	)

Operating Cash Flows

Our net cash flow from operating activities fluctuates primarily as a result of changes in tanker utilization and TCE rates, changes in interest rates, fluctuations in working capital balances, the timing and amount of drydocking expenditures, repairs and maintenance activities, vessel additions and dispositions, and foreign currency rates. Our exposure to the spot tanker market historically has contributed significantly to fluctuations in operating cash flows as a result of highly cyclical spot tanker rates.

Net cash flow from operating activities decreased to a net cash inflow of $7.2 million for the six months ended June 30, 2011, from a net cash inflow $220.3 million for the six months ended June 30, 2010. The net cash flow from operating activities in the six months ended June 30, 2011 decreased due to increases in working capital related to our vessel operations, restructuring charges in our shuttle tanker and FSO segment and a decrease from our spot tanker sub-segment due to a reduction in the size of our spot tanker sub-segment fleet and a reduction in the average TCE rate earned by these vessels during the six months ended June 30, 2011 compared to the same period last year. The restructuring charges were related to the sale of an FSO unit, the Karratha Spirit , and the termination of the time-charter-out contract for a shuttle tanker, the Basker Spirit. The net cash flow from operating activities in the six months ended June 30, 2011 also includes payments totaling $92.7 million to the counterparties of five interest rate swap agreements in consideration for amending the terms of such agreements to reduce the weighted average fixed interest rate from 5.1% to 2.5%. In the six month period ended June 30, 2010, our net cash flow from operating activities included $59.2 million in a one-time payment we received related to the Petrojarl Foinaven FPSO contract amendment.

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The results of our four reportable segments are explained in further detail in “ — Results of Operations”.

Financing Cash Flows

In October 2010, we announced that management intended to commence repurchasing shares under our $200 million share repurchase program. Shares will be repurchased in the open market at times and prices considered appropriate by us. The timing of any purchases and the exact number of shares to be purchased will be dependent on market conditions. During the six months ended June 30, 2011, we repurchased 2.5 million shares of our common stock for $83.7 million, at an average cost of $33.50 per share, pursuant to the share repurchase program. The total remaining share repurchase authorization at June 30, 2011, was $76.2 million. Please read Item 1 — Financial Statements: Note 9 — Capital Stock.

During the six months ended June 30, 2011, our net proceeds from long-term debt net of debt issuance costs were $547.3 million and our repayments and prepayments of long-term debt were $465.2 million.

In February 2011, Teekay Tankers completed a public offering of 9.9 million shares of its Class A Common Stock (including 1.3 million shares issued upon the exercise of the underwriters’ overallotment option) at a price of $11.33 per share, for gross proceeds of approximately $112.1 million. Please read Item 1 — Financial Statements: Note 6 — Financing Transactions.

In April 2011, Teekay LNG completed a public offering of 4.3 million common units (including 0.6 million common units issued upon the partial exercise of the underwriters’ overallotment option) at a price of $38.88 per unit, for gross proceeds (including the general partner’s proportionate capital contribution) of approximately $168.7 million. Please read Item 1 — Financial Statements: Note 6 — Financing Transactions.

Dividends paid during the six months ended June 30, 2011, were $46.5 million, or $0.6325 per share. Subject to financial results and declaration by the Board of Directors, we currently intend to continue to declare and pay a regular quarterly dividend in such amount per share on our common stock. We have paid a quarterly dividend since 1995.

Distributions from subsidiaries to non-controlling interests during the six months ended June 30, 2011, were $101.3 million.

Investing Cash Flows

During the six months ended June 30, 2011, we:

•

incurred capital expenditures for vessels and equipment of $358.6 million, primarily for capitalized vessel modifications and shipyard construction installment payments on our newbuilding shuttle tankers and the installment payments and conversion costs of our FPSO units under construction/conversion;

•

invested in a term loan for $70.0 million that bears interest at an interest rate of 9% per annum and has a fixed term of three years, repayable in full on maturity and is collateralized by a first priority mortgage on a 2011-built VLCC; and

•

received net proceeds of $5.1 million from the sale of a 1988-built FSO unit.

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

The following table summarizes our long-term contractual obligations as at June 30, 2011:


			Remainder of
In millions of U.S. Dollars	Total		2011		2012 and 2013		2014 and 2015		Beyond 2015

U.S. Dollar-Denominated Obligations:
Long-term debt ⁽¹⁾		4,157.5		163.3		834.0		1,161.7		1,998.5
Chartered-in vessels (operating leases)		324.7		89.5		177.6		39.0		18.6
Commitments under capital leases ⁽²⁾		204.5		48.4		128.0		28.1		—
Commitments under capital leases ⁽³⁾		1,013.1		12.0		48.0		48.0		905.1
Commitments under operating leases ⁽⁴⁾		445.4		12.5		50.2		50.2		332.5
Newbuilding installments/conversions ^{(5) (6)}		1,791.3		575.3		902.9		313.1		—
Asset retirement obligation		24.6		—		—		—		24.6

Total U.S. Dollar-denominated obligations		7,961.1		901.0		2,140.7		1,640.1		3,279.3


Euro-Denominated Obligations: ⁽⁷⁾
Long-term debt ⁽⁸⁾		397.6		7.2		231.4		17.7		141.3
Commitments under capital leases ^{(2) (9)}		94.0		94.0		—		—		—

Total Euro-denominated obligations		491.6		101.2		231.4		17.7		141.3


Total		8,452.7		1,002.2		2,372.1		1,657.8		3,420.6

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(1)		Excludes expected interest payments of $81.7 million (remainder of 2011), $172.9 million (2012 and 2013), $132.6 million (2014 and 2015) and $243.6 million (beyond 2015). Expected interest payments are based on the existing interest rates (fixed-rate loans) and LIBOR plus margins that ranged up to 3.25% at June 30, 2011 (variable-rate loans). The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our floating-rate debt.

(2)		Includes, in addition to lease payments, amounts we are required to pay to purchase certain leased vessels at the end of the lease terms. We are obligated to purchase five of our existing Suezmax tankers at the lessor’s discretion. We have assumed the counter-party will not exercise their option to have us repurchase the vessels until the end of the respective lease terms. The purchase price will be based on the unamortized portion of the vessel construction financing costs for the vessels, which are included in the table above. We expect to satisfy the purchase price by assuming the existing vessel financing, although we may be required to obtain separate debt or equity financing to complete the purchases if the lenders do not consent to our assuming the financing obligations.

(3)		Existing restricted cash deposits of $476.4 million, together with the interest earned on the deposits, are expected to be sufficient to repay the remaining amounts we currently owe under the lease arrangements.

(4)		We have corresponding leases whereby we are the lessor and expect to receive approximately $404.7 million for these leases from 2011 to 2029. As at June 30, 2011, we had received $105.7 million of lease receipts.

(5)		Represents remaining construction costs (excluding capitalized interest and miscellaneous construction costs) for two FPSO units, one LPG carrier, one multi-gas carrier and five shuttle tankers as of June 30, 2011. Please read Item 1 — Financial Statements: Note 10(a) — Commitments and Contingencies — Vessels Under Construction.

(6)		We have a 33% interest in a joint venture that has entered into agreements for the construction of four LNG carriers and a 50% interest in a joint venture that has entered into an agreement for the construction of a VLCC. As at June 30, 2011, the remaining commitments on these vessels, excluding capitalized interest and other miscellaneous construction costs, totaled $622.0 million of which our share is $218.6 million which is included in the table above. Please read Item 1 — Financial Statements: Note 10(b) — Commitments and Contingencies — Joint Ventures.

(7)		Euro-denominated obligations are presented in U.S. Dollars and have been converted using the prevailing exchange rate as at June 30, 2011.

(8)		Excludes expected interest payments of $3.8 million (remainder of 2011), $8.6 million (2012 and 2013), $5.9 million (2014 and 2015) and $14.5 million (beyond 2015). Expected interest payments are based on EURIBOR at June 30, 2011, plus margins that ranged up to 0.66%, as well as the prevailing U.S. Dollar/Euro exchange rate as of June 30, 2011. The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our floating-rate debt.

(9)		Existing restricted cash deposits of $91.7 million, together with the interest earned on these deposits, are expected to equal the remaining amounts we owe under the lease arrangement, including our obligation to purchase the vessel at the end of the lease term.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in accordance with GAAP, which require us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties, are discussed in this section and Item 5 — “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2010.

FORWARD-LOOKING STATEMENTS

This Report on Form 6-K contains certain forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and our operations, performance and financial condition, including, in particular, statements regarding:

•

our future growth prospects;

•

our ability to competitively pursue new FPSO projects;

•

tanker market fundamentals, including the balance of supply and demand in the tanker market and spot tanker charter rates;

•

the expected return on our investment in first priority ship mortgage loans;

•

the sufficiency of working capital for short-term liquidity requirements;

•

future capital expenditure commitments and the financing requirements for such commitments;

•

delivery dates of and financing for newbuildings, and the commencement of service of newbuildings under long-term time-charter contracts;

Page 33 of 38

•

potential newbuilding order cancellations;

•

the expected timing and costs of upgrades to any vessels;

•

our ability to pay dividends on our common stock;

•

the future valuation of goodwill;

•

our compliance with covenants under our credit facilities;

•

the outcome of our negotiations to refinance $219.9 million of debt;

•

our hedging activities relating to foreign currency exchange and interest rate risks;

•

our expectation regarding uncertain tax positions;

•

the adequacy of restricted cash deposits to fund capital lease obligations;

•

the effectiveness of our risk management policies and procedures and the ability of the counter-parties to our derivative contracts to fulfill their contractual obligations;

•

the condition of financial and economic markets, including interest rate volatility and the availability and cost of capital; and

•

the growth of global oil demand.

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 our control. 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 oil from offshore oil fields; changes in the demand for offshore oil transportation, processing and storage services; changes in demand for LNG and LPG; greater or less than anticipated levels of vessel newbuilding orders or greater or less than anticipated rates of vessel scrapping; changes in trading patterns; changes in volumes of oil produced under the Foinaven contract and the related price of oil; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; potential inability to implement our growth strategy; competitive factors in the markets in which we operate; potential for early termination of long-term contracts and our potential inability to renew or replace long-term contracts; loss of any customer, time-charter or vessel; shipyard production or vessel delivery delays; our potential inability to raise financing to fund our existing newbuilding commitments or to purchase additional vessels; our exposure to foreign currency exchange, interest rate and tanker spot market rate fluctuations; conditions in the public equity markets; and other factors detailed from time to time in our periodic reports filed with the SEC, including our Annual Report on Form 20-F for the year ended December 31, 2010. We do not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

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TEEKAY CORPORATION AND SUBSIDIARIES
JUNE 30, 2011
PART I — FINANCIAL INFORMATION


ITEM 3 —		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from foreign currency fluctuations and changes in interest rates, bunker fuel prices and spot tanker market rates for vessels. We use foreign currency forward contracts, cross currency and interest rate swaps, bunker fuel swap contracts and forward freight agreements to manage currency, interest rate, bunker fuel price and spot tanker market rate risks but do not use these financial instruments for trading or speculative purposes, except as noted below under Spot Tanker Market Rate Risk. Please read Item 1 — Financial Statements: Note 15 — Derivative Instruments and Hedging Activities.

Foreign Currency Fluctuation Risk

Our primary economic environment is the international shipping market. Transactions in this market generally utilize the U.S. Dollar. Consequently, a substantial majority of our revenues and most of our operating costs are in U.S. Dollars. We incur certain voyage expenses, vessel operating expenses, drydocking and overhead costs in foreign currencies, the most significant of which are the Australian Dollar, British Pound, Canadian Dollar, Euro, Norwegian Kroner and Singapore Dollar. There is a risk that currency fluctuations will have a negative effect on the value of cash flows.

We reduce our exposure by entering into foreign currency forward contracts. In most cases, we hedge a substantial majority of our net foreign currency exposure for the following 12 months. We generally do not hedge our net foreign currency exposure beyond three years forward.

As at June 30, 2011, we had the following foreign currency forward contracts:


	Expected Maturity Date
	Remainder of
	2011		2012		Total		Total
	Contract		Contract		Contract		Fair value
	Amount ⁽¹⁾		Amount ⁽¹⁾		Amount ⁽¹⁾		Asset ⁽¹⁾
Norwegian Kroner:	$	59.8	$	52.3	$	112.1	$	17.2
Average contractual exchange rate ⁽²⁾		6.20		6.38		6.29
Euro:	$	24.8	$	19.3	$	44.1	$	3.6
Average contractual exchange rate ⁽²⁾		0.75		0.75		0.75
Canadian Dollar:	$	8.8	$	14.5	$	23.3	$	1.1
Average contractual exchange rate ⁽²⁾		1.03		1.00		1.01
British Pounds:	$	25.5	$	23.5	$	49.0	$	1.6
Average contractual exchange rate ⁽²⁾		0.65		0.64		0.64


(1)		Contract amounts and fair value amounts in millions of U.S. Dollars.

(2)		Average contractual exchange rate represents the contractual amount of foreign currency one U.S. Dollar will buy.

Although the majority of our transactions, assets and liabilities are denominated in U.S. Dollars, certain of our subsidiaries have foreign currency-denominated liabilities. There is a risk that currency fluctuations will have a negative effect on the value of our cash flows. We have not entered into any forward contracts to protect against the translation risk of our foreign currency-denominated liabilities. As at June 30, 2011, we had Euro-denominated term loans of 274.1 million Euros ($397.6 million) included in long-term debt and Norwegian Kroner-denominated deferred income taxes of approximately 55.3 million Norwegian Kroner ($10.3 million). We receive Euro-denominated revenue from certain of our time-charters. These Euro cash receipts generally are sufficient to pay the principal and interest payments on our Euro-denominated term loans. Consequently, we have not entered into any foreign currency forward contracts with respect to our Euro-denominated term loans, although there is no assurance that our net exposure to fluctuations in the Euro will not increase in the future.

Interest Rate Risk

We are exposed to the impact of interest rate changes primarily through our borrowings that require us to make interest payments based on LIBOR or EURIBOR. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to repay our debt. We use interest rate swaps to reduce our exposure to market risk from changes in interest rates. Generally our approach is to hedge a substantial majority of floating-rate debt associated with our vessels that are operating on long-term fixed-rate contracts. We manage the rest of our debt based on our outlook for interest rates and other factors.

In order to minimize counterparty risk, we only enter into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transaction. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

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The table below provides information about our financial instruments at June 30, 2011, which are sensitive to changes in interest rates, including our debt and capital lease obligations and interest rate swaps. For long-term debt and capital lease obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by expected contractual maturity dates.


																						Fair
	Expected Maturity Date																					Value
	Balance																					Asset /
	of 2011			2012			2013			2014			2015			Thereafter			Total			(Liability)			Rate ⁽¹⁾
	(in millions of U.S. dollars, except percentages)
Long-Term Debt:
Variable Rate ($U.S.) ⁽²⁾		124.8			265.3			480.0			868.1			205.0			1,343.0			3,286.2			(2,939.7	)		1.2	%
Variable Rate (Euro) ^{(3) (4)}		7.2			223.6			7.9			8.5			9.2			141.2			397.6			(371.2	)		1.9	%

Fixed-Rate Debt ($U.S.)		38.4			44.4			44.3			44.3			44.3			655.5			871.2			(1,000.5	)		7.0	%
Average Interest Rate		6.8	%		5.2	%		5.2	%		5.2	%		5.2	%		7.5	%		7.0	%

Capital Lease Obligations ^{(5) (6)}
Fixed-Rate ($U.S.) ⁽⁷⁾		42.1			45.1			66.1			27.4			—			—			180.7			(180.7	)		7.4	%
Average Interest Rate ⁽⁸⁾		4.8	%		6.8	%		9.3	%		8.1	%		—			—			7.4	%

Interest Rate Swaps:
Contract Amount ($U.S.) ^{(6) (9) (10)}		72.6			276.3			181.0			96.4			68.5			2,796.3			3,491.1			(405.8	)		4.1	%
Average Fixed Pay Rate ⁽²⁾		3.4	%		3.0	%		2.7	%		4.6	%		4.6	%		6.3	%		4.1	%
Contract Amount (Euro) ^{(4) (9)}		8.4			222.4			7.9			8.5			9.2			141.2			397.6			(20.8	)		3.8	%
Average Fixed Pay Rate ⁽³⁾		3.8	%		3.8	%		3.7	%		3.7	%		3.7	%		3.8	%		3.8	%


(1)		Rate refers to the weighted-average effective interest rate for our long-term debt and capital lease obligations, including the margin we pay on our floating-rate, which as of June 30, 2011, ranged from 0.3% to 3.25%. The average interest rate for our capital lease obligations is the weighted-average interest rate implicit in our lease obligations at the inception of the leases.

(2)		Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR. The average fixed pay rate for our interest rate swaps excludes the margin we pay on our floating-rate debt.

(3)		Interest payments on Euro-denominated debt and interest rate swaps are based on EURIBOR.

(4)		Euro-denominated amounts have been converted to U.S. Dollars using the prevailing exchange rate as of June 30, 2011.

(5)		Excludes capital lease obligations (present value of minimum lease payments) of 64.8 million Euros ($94.0 million) on one of our existing LNG carriers with a weighted-average fixed interest rate of 5.8%. Under the terms of this fixed-rate lease obligation, we are required to have on deposit, subject to a weighted-average fixed interest rate of 5.1%, an amount of cash that, together with the interest earned thereon, will fully fund the amount owing under the capital lease obligation, including a vessel purchase obligation. As at June 30, 2011, the amount on deposit was 63.2 million Euros ($91.7 million). Consequently, we are not subject to interest rate risk from these obligations or deposits.

(6)		Under the terms of the capital leases for the RasGas II LNG Carriers (see “Item 18 — Financial Statements: Note 10 — Capital Lease Obligations and Restricted Cash” of our Annual Report on Form 20-F for the year ended December 31, 2010), we are required to have on deposit, subject to a variable rate of interest, an amount of cash that, together with interest earned on the deposit, will equal the remaining amounts owing under the variable-rate leases. The deposits, which as at June 30, 2011 totaled $476.4 million, and the lease obligations, which as at June 30, 2011 totaled $471.1 million, have been swapped for fixed-rate deposits and fixed-rate obligations. Consequently, we are not subject to interest rate risk from these obligations and deposits and, therefore, the lease obligations, cash deposits and related interest rate swaps have been excluded from the table above. As at June 30, 2011, the contract amount, fair value and fixed interest rates of these interest rate swaps related to the RasGas II LNG Carriers capital lease obligations and restricted cash deposits were $429.6 million and $470.7 million, ($63.1) million and $72.1 million, and 4.9% and 4.8%, respectively.

(7)		The amount of capital lease obligations represents the present value of minimum lease payments together with our purchase obligation, as applicable.

(8)		The average interest rate is the weighted-average interest rate implicit in the capital lease obligations at the inception of the leases.

(9)		The average variable receive rate for our interest rate swaps is set monthly at the 1-month LIBOR or EURIBOR, quarterly at the 3-month LIBOR or semi-annually at the 6-month LIBOR.

(10)		Includes an interest rate swap of $100.0 million that commences in September 2011.

Commodity Price Risk

From time to time we use bunker fuel swap contracts as economic hedges to protect against changes in forecasted bunker fuel costs for certain vessels being time-chartered-out and for vessels servicing certain contracts of affreightment. As at June 30, 2011, we had no bunker fuel swap commitments.

Spot Tanker Market Rate Risk

We use forward freight agreements (or FFA s) as economic hedges to protect against changes in spot tanker market rates earned by some of our vessels in our spot tanker segment. FFAs involve contracts to move a theoretical volume of freight at fixed-rates. As at June 30, 2011, 2011, we have no FFAs.

Page 36 of 38

TEEKAY CORPORATION AND SUBSIDIARIES
JUNE 30, 2011

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings

None

Item 1A — Risk Factors

In addition to the other information set forth in this Report on Form 6-K, you should carefully consider the risk factors discussed in Part I, “Item 3. Key Information—Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2010, which could materially affect our business, financial condition or results of operations.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 — Defaults Upon Senior Securities

None

Item 4 — Removed and Reserved

Item 5 — Other Information

The Company’s 2011 Annual Meeting of Shareholders was held on June 10, 2011. The following persons were elected directors for a term of three years by the votes set forth opposite their names:

Votes Against or

Shares which

Broker

Terms Expiring in 2014

Votes For

Withheld

Abstained

Non-Votes

Thomas Kuo-Yuen Hsu

53,262,007

7,346,963

N/A

Axel Karlshoej

53,395,867

7,213,103

N/A

Bjorn Moller

53,398,564

7,210,406

N/A

Peter Evensen

60,357,731

251,239

N/A

The terms of Directors Dr. Ian D. Blackburne, C. Sean Day, Peter S. Janson, Eileen A. Mercier and Tore I. Sandvold continued after the meeting.

Item 6 — Exhibits

Exhibit 1.3 — Amended and Restated Bylaws of Teekay Corporation

THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS OF THE COMPANY.

•		REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 33-97746) FILED WITH THE SEC ON OCTOBER 4, 1995;

•		REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-42434) FILED WITH THE SEC ON JULY 28, 2000;

•		REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-119564) FILED WITH THE SEC ON OCTOBER 6, 2004;

•		REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-147683) FILED WITH THE SEC ON NOVEMBER 28, 2007; AND

•		REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-166523) FILED WITH THE SEC ON MAY 5, 2010.

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SIGNATURES

Pursuant to the requirements 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.

Page 38 of 38

Exhibit 1.3

TEEKAY SHIPPING CORPORATION

AMENDED AND RESTATED BYLAWS
DATED JUNE 1, 2006

1.00 OFFICES

The registered office of the Corporation shall be at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960. The Corporation may also have an office or offices at such other places within or outside the Marshall Islands as the Board of Directors may from time to time designate or the business of the Corporation may require.

2.00 SHAREHOLDERS

2.01 Annual Meeting. The annual meeting of shareholders shall be held on such day, and at such time and place within or outside the Marshall Islands as the Board of Directors may from time to time determine, for the purpose of electing Directors and transacting such other business as may properly be brought before the meeting. Only such business shall be conducted at an annual meeting of shareholders as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder or shareholders of the Corporation holding of record in the aggregate not less than 15% of the shares having the right to vote at the meeting on such matter, or by a person who holds such shares through a nominee or “street name” holder of record of such stock and can demonstrate to the Corporation such indirect ownership of, and such person’s right to vote, such shares. For business to be properly brought before an annual meeting by such shareholder or shareholders, the shareholder or shareholders must have given timely notice thereof in writing to the Secretary. To be timely, a shareholder’s or shareholders’ notice must be delivered to or mailed and received at the principal office of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided that in the event that less than 70 days’ notice of the date of the meeting is given to the shareholders, notice by the shareholder or shareholders to be timely must be so received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting was mailed. A shareholder’s or shareholders’ notice to the Secretary shall set forth (a) as to each matter the shareholder or shareholders propose to bring before the annual meeting, a brief description of the business proposed to be brought before the annual meeting, the language of the proposal, if appropriate, and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation’s books, of the shareholder or shareholders proposing such business, (c) a representation that the shareholder or shareholders hold in the aggregate not less than 15% of the shares having the right to vote at the meeting on such matter and a statement of the class and number of shares of the Corporation which are owned of record and beneficially by the shareholder or shareholders, (d) any material interest of the shareholder or shareholders in such business, (e) a representation that the shareholder or shareholders intend to appear in person or by proxy at the meeting to present the business specified in the notice and (f) in the case of a person who holds shares through a nominee or “street name” holder of record, evidence establishing the person’s indirect ownership of the shares and right to vote the shares on the matter proposed at the annual meeting.

As used in these Bylaws, shares “beneficially owned” shall mean all shares which a person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the U.S. Securities Exchange Act of 1934 , as amended. If a shareholder is entitled to vote only for a specific class or category of Directors at an annual or special meeting of shareholders, the shareholder’s right to nominate a person for election as a Director at the meeting shall be limited to such class or category of Directors.

Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.01. The Board of Directors or the Chairman of the meeting shall, if the facts warrant, determine (i) that a proposal does not constitute proper business to be transacted at the meeting, or (ii) that business was not properly brought before the meeting in accordance with the provisions of this Section 2.01, and, if it is so determined, in either case, any such business shall not be transacted. The procedures set forth in this Section 2.01 for business to be properly brought before an annual meeting by a shareholder or shareholders are in addition to, and not in lieu of, provisions of applicable law, rules and regulations.

2.02 Special Meetings. Special meetings of shareholders, unless otherwise prescribed by law, may be called for any purpose at any time only by order of the Board of Directors. Such meetings shall be held at such place, date and time as may be designated in the notice thereof. No business may be conducted at the special meeting other than such business as may be properly brought before the meeting and no matter shall be properly brought before a special meeting of shareholders unless the matter shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. If the Chairman of the special meeting determines that business was not properly brought before the special meeting, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

2.03 Notice of Meetings. Notice of every meeting of shareholders (other than any meeting the giving of notice of which is otherwise prescribed by law) stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally or sent by courier service, mail, telex, cable or facsimile at least fifteen but not more than sixty days before such meeting, to each shareholder of record entitled to vote thereat and to each shareholder of record who, by reason of any action proposed at such meeting would be entitled to have his or her shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect. Notice of a special meeting shall state the purpose of the proposed special meeting and the business transacted at any special meeting shall be limited accordingly. If mailed, notice shall be deemed to have been given when deposited in the mail, directed to the shareholder at his or her address as the same appears on the record of shareholders of the Corporation or at such address as to which the shareholder has given notice to the Secretary. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conduct of any voting thereat, the lack of notice to him or her. Accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any shareholder shall not invalidate the proceedings of that meeting.

Whether or not a quorum shall be present, any meeting of shareholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and when a meeting is adjourned to another time or place, it shall not be necessary, unless the meeting was adjourned for lack of a quorum or unless the Board fixes a new record date for the adjourned meeting, to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At such adjourned meeting, any business may be transacted that might have been transacted on the original date of the meeting. The Board of Directors may postpone any meeting of stockholders or cancel any special meeting of stockholders by public announcement or disclosure prior to the time scheduled for the meeting

2.04 Quorum and Voting. Except as otherwise expressly provided by law or by the Articles of Incorporation, a majority of shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders; provided that at any meeting of shareholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a different number of shares of such class shall be required by law, by the Articles of Incorporation or by these Bylaws. If less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present. Notwithstanding the foregoing, if a meeting of shareholders is adjourned for lack of quorum on two successive occasions, at the next and any subsequent adjournment of the meeting there must be present either in person or by proxy shareholders of record holding at least forty-percent (40%) of the issued and outstanding shares and entitled to vote at such meeting in order to constitute a quorum.

If a quorum is present, and except as otherwise expressly provided by law, by the Articles of Incorporation or by these Bylaws, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders. At any meeting of shareholders, each shareholder entitled to vote thereat shall be entitled to one vote for each such share, and may so vote either in person or by proxy appointed by instrument in writing (including facsimile), signed by the shareholder or the shareholder’s attorney-in-fact. Except as otherwise expressly provided by law, every proxy is revocable at the pleasure of the shareholder executing it. Voting shall be by show of hands, unless a poll or written ballot is directed by the Chairman. Any action required or permitted to be taken at a meeting may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

2.05 Right to Vote and Fixing of Record Date. The Board of Directors may fix a time not more than sixty days nor less than fifteen days prior to the date of any meeting of shareholders, or more than sixty days prior to the last day on which the consent or dissent of shareholders may be expressed for any purpose without a meeting, as the time as of which shareholders entitled to notice of and to vote at such meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who were holders of record of voting shares at such time, and no others, shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be.

The Board of Directors may fix a time not exceeding sixty days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the shareholders entitled to receive any such dividend, distribution or allotment or for the purpose of such other action.

With respect to holders of registered shares entitled to vote at the meeting, such shareholders shall present thereat proof of identity satisfactory to the secretary of the meeting.

If a holder of registered shares desires to vote by proxy, such proxy nominee shall present proof of identity satisfactory to the secretary of the meeting. No proxy shall be valid after the expiration of eleven months from the date of its execution unless the shareholder executing it shall have specified therein a longer time during which it is to continue in force.

2.06 Attendance by Directors, Conduct of Meetings, etc. The Directors, the officers, the auditors and the solicitors of the Corporation shall be entitled to attend at any meeting of shareholders but no such person shall be counted in the quorum or be entitled to vote at any meeting of shareholders unless such person shall be a member or proxyholder entitled to vote thereat.

The Chairman of the Board or, in the absence of the Chairman of the Board, the President of the Corporation, shall call all meetings of the shareholders to order and shall act as chairman of such meetings. In the absence of the Chairman of the Board and the President, the members of the Board of Directors who are present shall elect a chairman of the meeting.

The Secretary of the Corporation shall act as secretary of all meetings of the shareholders. In the absence of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting.

3.00 BOARD OF DIRECTORS

3.01 Numbers. Subject to and in accordance with the provisions of Section 50 of the Marshall Islands Business Corporation Act (“ MIBCA” ), the number of Directors constituting the entire Board shall be not less than 3 and shall be not more than 11. Subject to such limitations, such number shall be fixed by resolution of the Board and such number shall be increased or decreased from time to time by vote of a majority of the entire Board. No decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director.

3.02 How Elected; Classification. Prior to such time as the Corporation has a classified Board of Directors in accordance with the following provisions hereof, the Directors of the Corporation shall be elected at the annual meeting of shareholders. At the first annual meeting of shareholders (the “ First Election Meeting ”) at which the shareholders of the Corporation approve thereof, the Board shall be divided into three classes. Each class shall be as nearly equal in number as possible and no class shall include fewer than three Directors. Subject to the foregoing and to the MIBCA, the Board of Directors may assign the Directors to the classes in any manner. At the First Election Meeting, the number of Directors constituting the entire Board shall be elected in such three classes: the first class to be composed of three (or more, if applicable) Directors who shall be elected to hold office for a term expiring at the close of the first annual meeting of shareholders following the First Election Meeting; the second class to be composed of three (or more, if applicable) Directors who shall be elected to hold office for a term expiring at the close of the second annual meeting of shareholders following the First Election Meeting; and the third class to be composed of three (or more, if applicable) Directors who shall be elected to hold office for a term expiring at the close of the third annual meeting of shareholders following the First Election Meeting.

At each annual meeting of shareholders of the Corporation following the First Election Meeting (each a “ Subsequent Election Meeting ”), three (or more, if applicable) Directors to replace those whose terms expire shall be elected to hold office for a term expiring at the close of the third annual meeting of shareholders following the particular Subsequent Election Meeting. Notwithstanding the foregoing, each Director shall be elected to serve until his or her successor shall have been duly elected and qualified, except in the event of his or her death, resignation, removal or the earlier termination of his or her term of office. A Director whose term of office expires shall be eligible for re-election.

3.03 Procedure for Nomination. Only persons who are nominated in accordance with the procedures set forth in this Section 3.03 shall be eligible for election as Directors by the shareholders. Nominations of persons for election to the Board of Directors may be made at an annual meeting of shareholders by or at the direction of the Board of Directors or by a shareholder or shareholders of the Corporation holding of record in the aggregate not less than 15% of the shares having the right to vote for the election of Directors at the meeting, or by a person who holds such shares through a nominee or “street name” holder of record of such shares and can demonstrate to the Corporation such indirect ownership of, and such person’s right to vote, such shares, who complies or comply with the notice procedure set forth in this Section 3.03. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder’s or shareholders’ notice shall be delivered to or mailed and received at the principal office of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided that in the event less than 70 days’ notice of the date of the meeting is given to shareholders, notice by the shareholder or shareholders to be timely must be so received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting was mailed. Such shareholder’s or shareholders’ notice shall set forth (a) as to each person whom the shareholder or shareholders propose to nominate for election as a Director, (i) the name, age, business and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation that are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the U.S. Securities Exchange Act of 1934 , as amended (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the shareholder or shareholders giving the notice (i) the name and address, as they appear on the Corporation’s books, of such shareholder or shareholders, (ii) a representation that the shareholder or shareholders hold in the aggregate not less than 15% of the shares having the right to vote for the election of Directors at the meeting and statement of the class and number of shares of the Corporation that are owned of record and beneficially by such shareholder or shareholders, (iii) a representation that the shareholder or shareholders intend to appear in person or by proxy at the meeting to make the nomination specified in the notice, and (iv) in the case of a person who holds shares through a nominee or “street name” holder of record, evidence establishing the person’s indirect ownership of the shares and right to vote the shares. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary that information required to be set forth in a shareholder’s or shareholders’ notice of nomination. The Board of Directors or the Chairman of the meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and, if it is so determined, the defective nomination shall be disregarded. The procedures set forth in this Section 3.03 for nomination for the election of Directors by shareholders are in addition to, and not in limitation of, any procedures now in effect or hereafter adopted by or at the direction of the Board of Directors or any committee thereof.

3.04 Newly Created Directorships and Vacancies. Newly created Directorships resulting from an increase in the number of Directors and vacancies occurring in the Board for any reason, including the failure of the shareholders to elect the entire Board at any election of Directors, may be filled only by a vote of a majority of the Directors then in office, although less than a quorum exists. A Director elected to fill a vacancy (other than a vacancy resulting from an increase in the number of Directors) becomes a member of the same class as his or her predecessor.

3.05 Removal of Directors and Resignations.

Any or all of the Directors may be removed for cause by vote of a majority of Directors constituting the entire Board of Directors, or by the affirmative vote of holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all the outstanding shares of the Corporation entitled to vote generally in the election of Directors, considered for this purpose as a single class. Notwithstanding the previous sentence, whenever any Director shall have been elected by the holders of any class of stock of the Corporation voting separately as a class under the provisions of the Articles of Incorporation, such Director may be removed and the vacancy filled only by the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of that class of stock voting separately as a class.

Any Director may resign at any time by giving written notice to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein the acceptance of such resignation shall not be necessary to make it effective.

Except as otherwise provided by the MIBCA, no act or proceeding of the Directors is invalid by reason only of there being less than the designated number of Directors in office.

3.06 Organization. At each meeting of the Board of Directors, the President or, in the absence of the President, a chairman chosen by a majority of the Directors present shall preside, and the Secretary of the Corporation or, in the absence of the Secretary, a person appointed by the chairman of the meeting shall act as secretary. The Board of Directors may adopt such rules as they shall deem proper, not inconsistent with law or with these Bylaws, for the conduct of their meetings and the management of the affairs of the Corporation. At all meetings of the Board of Directors, business shall be transacted in such order as the Board may determine.

3.07 Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place as may be determined by resolution of the Board of Directors and no notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting.

3.08 Special Meetings. Special meetings of the Board of Directors may, unless otherwise prescribed by law, be called from time to time by the President, or any officer of the Corporation who is also a Director. The President or the Secretary shall call a special meeting of the Board upon written request directed to either of them by any two Directors stating the time, place and purpose of such special meeting. Special meetings of the Board shall be held on such date, and at such time and place, as may be designated in the notice thereof by the officer calling the meeting.

3.09 Notice of Special Meetings. Notice of the date, time and place of each special meeting of the Board of Directors shall be given to each Director at least forty-eight hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four hours prior to such meeting. For the purpose of this section, notice shall be deemed to be duly given to a Director if given to him or her personally (including by telephone) or if such notice be delivered to such Director by courier service, mail, telegraph, cable, telex, or facsimile, to his or her last known address. Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conduct of any voting thereat, the lack of notice to him or her.

3.10 Annual Meetings. An annual meeting of the Board of Directors shall be held in each year after the adjournment of the annual shareholders meeting and on the same day. If a quorum of the Directors is not present on the day appointed for the annual meeting, the meeting shall be adjourned to some convenient day.

3.11 Participation by Conference Telephone. The Board of Directors or any committee thereof may participate in a meeting of such board or committee by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting.

3.12 Quorum. Except as otherwise provided by the MIBCA, a majority of the Directors at the time in office, present in person or by proxy given to another Director or conference telephone, shall constitute a quorum for the transaction of business.

3.13 Voting. The vote of the majority of the Directors, present in person or by proxy given to another Director or conference telephone, at a meeting of the Board or a committee thereof at which a quorum is present shall be the act of the Board or the committee, as the case may be. Any action required or permitted to be taken at a meeting may be taken without a meeting if all members of the Board or the committee consent thereto in writing.

3.14 Compensation. The Board may from time to time, in its discretion, fix the amounts which shall be payable to members of the Board of Directors for attendance at the meetings of the Board or of any committee and for services rendered to the Corporation.

4.00 COMMITTEES

4.01 Standing Committees. In accordance with, and to the extent required by, applicable legal, regulatory and stock exchange listing requirements (the “ Requirements ”), the Board of Directors shall have the following standing committees: (a) an Audit Committee, (b) a Compensation and Human Resources Committee, and (c) a Nominating and Governance Committee (the “ Standing Committees ”), and such other committees as may be required from time to time by the Requirements. The Compensation and Nominating and Governance Committees shall be composed of at least a majority of “Independent Directors” within the meaning of the Requirements applicable to such committees, and the Audit Committee shall be composed entirely of Independent Directors. Each Standing Committee shall consist of such minimum number of Directors as may be mandated by the Requirements and shall have a written charter, which shall be approved by the Board and state the purpose and authority of such committee. Standing Committee charters shall be reviewed not less frequently than annually to reflect the activities of the respective committees, changes in applicable Requirements, and other relevant considerations, and proposed revisions to such charters shall be approved by the Board. The Nominating and Governance Committee shall be responsible, after taking into account the desires of individual Board members, for making recommendations to the Board with respect to the assignment of Directors to the Standing Committees. After reviewing the Nominating and Governance Committee’s recommendations, the Board shall be responsible for appointing committee members and designating committee chairs on an annual basis. The Nominating and Governance Committee shall annually review committee assignments with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various Directors, subject in any case with the applicable Requirements.

4.02 Executive Committee. The Board of Directors may, by resolution adopted by a majority vote of the entire Board, designate two or more of the members of the Board to constitute an Executive Committee. The Executive Committee shall have and may exercise, so far as may be permitted by law, and to the extent provided in said resolution and these Bylaws, all of the powers of the Board in the management of the affairs and property of the Corporation and the exercise of its corporate powers, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it; but the Executive Committee shall not have power to fill vacancies in the Board, or to change the membership of, or to fill vacancies in, the Executive Committee, or any other committee or to amend or repeal Bylaws or adopt new Bylaws, to submit to shareholders any action requiring their authorization, or to fix Directors’ compensation for serving on the Board or on the Executive Committee or any other committee, or to amend or repeal any resolutions of the Board which by their terms shall not be so amendable or repealable. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee with or without cause. The Executive Committee may hold meetings and make rules for the conduct of its business as it shall from time to time deem necessary. A majority of the members of the Executive Committee shall constitute a quorum. All action of the Executive Committee shall be reported to the Board at its meeting next succeeding such action.

4.03 Other Committees. The Board of Directors may, in its discretion, by resolution adopted by a majority vote of the entire Board, appoint other committees composed of two or more Directors which shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing them. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies, and to discharge any such committee with or without cause. Each committee shall keep a record of its proceedings and report the same to the Board when required. No committee shall have the power to fill vacancies in the Board, or to change the membership of or to fill vacancies in, the Executive Committee or any other committee, or to amend or repeal Bylaws or adopt new Bylaws, to submit to shareholders any action requiring their authorization, or to fix Directors’ compensation for sitting on the Board or the Executive Committee or any other committee, or to amend or repeal any resolution of the Board which by its terms shall not be amendable or repealable. Each committee may hold meetings and make rules for the conduct of its business as it shall from time to time deem necessary.

5.00 OFFICERS

5.01 Number and Designations; Term of Office and Tenure; Removal; Salaries. The Board of Directors shall elect a President, Secretary and Treasurer and such other officers as it may deem necessary. Officers may be of any nationality and need not be residents of the Marshall Islands.

The officers may be elected by the Board of Directors at any annual, regular or special meeting of the Board of Directors. Unless an officer is elected by the Board of Directors for a specific term stated in the Board resolution electing such officer, each officer shall hold office until his or her successor shall have been duly elected and qualified, except in the event of the earlier termination of his or her term of office, through death, resignation, replacement, removal or otherwise.

Any officer may be removed by the Board of Directors at any time with or without cause. Any vacancy in an office may be filled for the unexpired portion of the term of such office by the Board of Directors at any regular or special meeting.

The salaries of officers and any other compensation paid to them shall be fixed from time to time by Compensation and Human Resources Committee of the Board of Directors.

5.02 President. The President shall be the chief executive officer of the Corporation and shall have the general management of the affairs of the Corporation together with the powers and duties usually incident to the office of President, except as specifically limited by appropriate resolution of the Board of Directors, and shall have such other powers and perform such other duties as may be assigned to him or her by the Board of Directors.

5.03 Secretary. The Secretary shall act as Secretary of all meetings of the shareholders and of the Board of Directors at which he or she is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records and the corporate seal of the Corporation, shall be empowered (together with the other officers of the Corporation) to affix the corporate seal to those documents, the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same, and shall exercise the powers and perform such other duties as may be assigned to him or her by the Board of Directors or the President.

5.04 Treasurer. The Treasurer shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board of Directors may designate, shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall have supervision over the accounts of all receipts and disbursements of the Corporation, shall, whenever required by the Board, render or cause to be rendered financial statements of the Corporation, shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform such other duties as may be assigned to him or her by the Board of Directors or President.

5.05 Other Officers. Officers other than those treated in sections 5.02 through 5.04 of these Bylaws shall exercise such powers and perform such duties as may be assigned to them by the Board of Directors or the President.

5.06 Attorneys-in-Fact. The Board of Directors shall have the power to appoint attorneys-in-fact for the corporation with such powers (including the power of substitution) as the Board of Directors shall deem appropriate.

5.07 Bond. The Board of Directors shall have power to the extent permitted by law, to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his or her duties in such form and with such surety or sureties as the Board of Directors may deem advisable.

6.00 CERTIFICATES FOR SHARES

6.01 Form and Issuance. The shares of the Corporation shall be represented by certificates in form meeting the requirements of law and approved by the Board of Directors , unless the Board provides, by resolution, that some or all shares of any or all classes or series of stock shall be uncertificated. Certificates shall be signed by (a) the President or any Vice-President, and (b) by the Secretary or an Assistant Secretary or the Treasurer. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employees. In case of any officer who has signed or whose facsimile signature had been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer at the date of issue.

6.02 Transfers. The Board of Directors shall have power and authority to make such rules and regulations as they may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporation’s stock. The transfer of shares issued to bearer shall be by delivery of the certificate or certificates representing such shares.

6.03 Share Register. The Corporation shall maintain a share register to be kept on file in any office of the Corporation or any office of a registrar or transfer agent.

6.04 Lost or Destroyed Certificates. No certificates for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of the loss, theft or destruction and upon indemnification of the Corporation and its agents to such extent and in such manner as the Board of Directors may require. Without limiting the foregoing, when authorizing such issue of a new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

7.00 DIVIDENDS

7.01 Declaration and Form. Dividends may be declared in conformity with law by, and at the discretion of, the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, stock or other property of the Corporation.

7.02 Record Date. The Board of Directors may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the stockholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.

8.00 MISCELLANEOUS PROVISIONS

8.01 Fiscal Year. The fiscal year of the Corporation shall begin on January 1st of each year and shall end on the last day of December following.

8.02 Checks and Notes. All checks and drafts on the Corporation’s bank accounts and all bills of exchange and promissory notes and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors.

8.03 Corporate Seal. The corporate seal shall have inscribed therein the name of the Corporation and such other information as the Board of Directors may from time to time determine. In lieu of such corporate seal, when so authorized by the Board of Directors or a duly empowered committee thereof, a facsimile thereof may be impressed or affixed or reproduced.

8.04 Contracts. Except as otherwise provided by law or in these Bylaws or as otherwise directed by the Board of Directors, any duly elected officer of the Corporation shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto if the Secretary of the Corporation is unavailable to do so. Without limiting the powers granted by the foregoing sentence, the Board may also authorize by resolution any officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board may be general or confined to specific instances.

8.05 Loans. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board. When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. Such authority may be general or confined to specific instances.

8.06 Waivers of Notice. Whenever any notice whatever is required to be given by law, by the Articles of Incorporation or by these Bylaws to any person or persons, a waiver thereof in writing or by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

9.00 AMENDMENTS

9.01 By The Shareholders. These Bylaws may be amended, added to, altered or repealed, or new Bylaws may be adopted, at any meeting of shareholders of the Corporation by the affirmative vote of the holders of a majority of the stock present and voting at such meeting, provided notice that an amendment is to be considered and acted upon is inserted in the notice or waiver of notice of said meeting.

9.02 By The Directors. These Bylaws may be amended, added to, altered, or repealed, or new Bylaws may be adopted, at any regular or special meeting of the Board of Directors by the affirmative vote of a majority of the entire Board, subject, however, to the power of the shareholders to alter, amend or repeal any Bylaw so adopted.

10.00 INDEMNIFICATION

10.01 Right to Indemnification. Each person who was or is made a party to or is otherwise involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “ proceeding ”), by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation or that, being or having been such a Director or officer or an employee of the Corporation, he or she is or was serving at the request of the Corporation as a Director, officer, partner, manager, trustee, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “ indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as such a Director, officer, partner, manager, trustee, employee or agent or in any other capacity while serving as such a Director, officer, partner, manager, trustee, employee or agent, shall be indemnified and held harmless by the Corporation to the full extent permitted by the MIBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys’ fees, judgments, fines and ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, partner, manager, trustee, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided , however , that except as provided in subsection 10.02 hereof with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized or ratified by the Board of Directors. The right to indemnification conferred in this subsection 10.01 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an “ advancement of expenses ”); provided , however , that if the MIBCA requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “ undertaking ”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this subsection 10.1 or otherwise.

10.02 Right of Indemnitee to Bring Suit. If a claim under subsection 10.01 hereof is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. The indemnitee shall be presumed to be entitled to indemnification under this Section upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking, if any is required, has been tendered to the Corporation), and thereafter the Corporation shall have the burden of proof to overcome the presumption that the indemnitee is not so entitled. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled.

10.03 Non-exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any stature, agreement, vote of stockholders or disinterested Directors, provisions of the Articles of Incorporation or Bylaws of the Corporation, or otherwise.

10.04 Insurance, Contracts and Funding. The Corporation may maintain insurance, at its expense, to protect itself and any Director or officer of the Corporation or any Director, officer, partner, manager, trustee, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise serving in such capacity at the request of the Corporation against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the MIBCA. The Corporation without further stockholder approval, may enter into contracts with any Director, officer, employee or agent in furtherance of the provisions of this Section and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Section.

10.05 Indemnification of Employee and Agents of the Corporation. The Corporation may, by action of the Board of Directors, grant rights to indemnification and advancement of expenses to employees or agents or groups of employees or agents of the Corporation with the same scope and effect as the provisions of this Section with respect to the indemnification and advancement of expenses of Directors and officers of the Corporation; provided , however , that an undertaking in respect of an advancement of expenses shall be made by an employee or agent only if required by the Board.

10.06 Survival. Any repeal or modification of the foregoing indemnification provisions shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. The contract rights conferred by this Section 10 may not be modified retroactively without the consent of such Director or officer.

10.07 Severability. If this Section 10 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each indemnitee as to costs, charges and expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Section 10 that shall not have been invalidated and to the fullest extent permitted by applicable law.

10.08 Subrogation. In the event of payment of indemnification to an indemnitee, the Corporation shall be subrogated to the extent of such payment to any right of recovery such indemnitee may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery.

10.09 No Duplication of Payments. The Corporation shall not be liable under this Section 10 to make any payment in connection with any claim made against an indemnitee to the extent such person has otherwise received payment (under any insurance policy, bylaw, agreement or otherwise) of the amounts otherwise payable as indemnity hereunder.

TEEKAY CORPORATION

Date: August 31, 2011

/s/ Vincent Lok

Vincent Lok

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)