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<SEC-DOCUMENT>0000911971-04-000061.txt : 20041124
<SEC-HEADER>0000911971-04-000061.hdr.sgml : 20041124
<ACCEPTANCE-DATETIME>20041124095452
ACCESSION NUMBER:		0000911971-04-000061
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041124
DATE AS OF CHANGE:		20041124

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TEEKAY SHIPPING CORP
		CENTRAL INDEX KEY:			0000911971
		STANDARD INDUSTRIAL CLASSIFICATION:	DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			1T
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-12874
		FILM NUMBER:		041165414

	BUSINESS ADDRESS:	
		STREET 1:		TK HOUSE, BAYSIDE EXECUTIVE PARK
		STREET 2:		WEST BAY ST & BLAKE RD, PO BOX AP-59213
		CITY:			NASSAU BAHAMAS
		STATE:			C5
		ZIP:			00000
		BUSINESS PHONE:		8093228020

	MAIL ADDRESS:	
		STREET 1:		SUITE 2000,  BENTALL 5
		STREET 2:		550 BURRARD STREET
		CITY:			VANCOUVER
		STATE:			A1
		ZIP:			V6C 2K2

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VIKING STAR SHIPPING INC
		DATE OF NAME CHANGE:	19930914
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>form6k_093004.htm
<DESCRIPTION>FORM 6K FOR PERIOD ENDING SEPTEMBER 30, 2004
<TEXT>
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<HEAD>
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     <!-- Control Number: A0060                                                            -->
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     <!-- Client Name:    Teekay Shipping Corporation                                      -->
     <!-- Project Name:   6-K for the period ended June 30, 2004                      -->
     <!-- Firm Name:      Teekay Shipping Corporation                                      -->
     <TITLE>Form 6K for the period ended September 30, 2004</TITLE>
</HEAD>


<BODY>
<H1 ALIGN=CENTER>
<FONT FACE="Times New Roman, Times, Serif" SIZE=5>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</FONT></H1>

<H1 ALIGN=CENTER>
<FONT FACE="Times New Roman, Times, Serif" SIZE=3><u><B>WASHINGTON, D.C. 20549</B></u>
</FONT>
</H1>

<BR>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 6-K</FONT></H1>

<P ALIGN=CENTER>Report of Foreign Private Issuer</P>
<P ALIGN=CENTER>Pursuant to Rule 13a-16 or 15d-16 of<BR>
the Securities Exchange Act of 1934</P>

<hr width=15% size=1 noshade>

                      <P ALIGN=CENTER>For the quarterly period ended <U>September 30, 2004</U><BR>
<BR>
<FONT SIZE=2>Commission file number 1- 12874</FONT><BR>
<BR>
                                            <FONT SIZE=4><B>TEEKAY SHIPPING CORPORATION</B></FONT><BR>
                              (Exact name of Registrant as specified in its charter)<BR>
<BR>
                                                     TK House<BR>
                                              Bayside Executive Park<BR>
                                           West Bay Street &amp; Blake Road<BR>
                                        P.O. Box AP-59212, Nassau, Bahamas<BR>
                                      (Address of principal executive office)<BR></P>

<hr width=15% size=1 noshade>

<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.]</P>

<P ALIGN=CENTER>Form 20-F&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Form 40- F&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>

<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[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):<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>]</P>

<P ALIGN=CENTER>Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>

<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[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):<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>]</P>

<P ALIGN=CENTER>Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>

<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Indicate by check mark whether the registrant by furnishing the information contained in this Form is
also thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b) under the Securities Exchange Act of 1934.]</P>

<P ALIGN=CENTER>Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>

<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b):82-<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>]</P>
<BR>
<BR>
<BR>
<BR>
<BR>

<PAGE>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>REPORT ON FORM 6-K FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>INDEX </U></FONT></H1>

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<TABLE WIDTH=700 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=10% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART I:</FONT></TD>
<TD WIDTH=79% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FINANCIAL INFORMATION </FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>PAGE</U></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Item 1.</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Statements (Unaudited)</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="700">
<TR VALIGN=Bottom>
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="72%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
     Report of Independent Registered Public Accounting Firm</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Consolidated Statements of Income
                       </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for the three and nine months ended September 30, 2004 and 2003</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>4</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Consolidated Balance Sheets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as at September 30, 2004 and December 31, 2003</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>5</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Consolidated Statements of Cash Flows</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for the nine months ended September 30, 2004 and 2003</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>6</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Notes to the Consolidated Financial Statements</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>7</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Schedule A to the Consolidated Financial Statements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>23</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project" -->
<TABLE WIDTH=700 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=7% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Item 2.</FONT></TD>
<TD WIDTH=80% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Management's Discussion and Analysis of Financial Condition<BR>
and Results of Operations </FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3><BR>27&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Item 3.</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Quantitative
and Qualitative Disclosures about Market Risk</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>40&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>PART II:</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>OTHER INFORMATION</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>42&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>


<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SIGNATURES</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>43&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>
</TABLE>

<PAGE>
<BR>
<BR>
<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 1 -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FINANCIAL STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>To the Shareholders and Board of
Directors of <BR>
<B>Teekay Shipping Corporation </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We have reviewed the accompanying consolidated  balance sheet of Teekay Shipping  Corporation and  subsidiaries as of September
30, 2004, the related  consolidated  statements of income for the three and nine-month  periods ended September 30,
2004 and 2003, and the  consolidated  statements of cash flows for the nine-month  periods ended September 30, 2004
and 2003.  Our review also included  Schedule A as of September 30, 2004 and for the three and  nine-month  periods
ended  September 30, 2004 and 2003 listed in Index Item 1. These  consolidated  interim  financial  statements  and
schedule are the responsibility of the Company's management.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
We  conducted  our reviews in  accordance  with the  standards of the Public  Company  Accounting  Oversight  Board
(United States). A review of interim financial  information consists principally of applying analytical  procedures
to financial  data,  and making  inquiries of persons  responsible  for financial  and  accounting  matters.  It is
substantially  less in scope than an audit  conducted  in  accordance  with the  standards  of the  Public  Company
Accounting  Oversight Board (United States),  the objective of which is the expression of an opinion  regarding the
financial statements taken as a whole. Accordingly, we do not express such an opinion.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Based on our  reviews,  we are not aware of any  material  modifications  that  should be made to the  accompanying
consolidated  interim  financial  statements  and  schedule  referred  to above for them to be in  conformity  with
accounting principles generally accepted in the United States.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
We have  previously  audited,  in accordance  with the standards of the Public Company  Accounting  Oversight Board
(United  States),  the  consolidated  balance sheet of Teekay Shipping  Corporation and subsidiaries as of December
31, 2003, the related  consolidated  statements of income,  changes in stockholders'  equity and cash flows for the
year then ended,  and the related  schedule as of and for the year ended December 31, 2003 (not  presented  herein)
and in our report  dated  February  18, 2004  (except for Note 20(b) which is as of March 15, 2004) we expressed an
unqualified  opinion on those  consolidated  financial  statements and related schedule when considered in relation
to the  financial  statements  taken as a whole.  In our opinion,  the  information  set forth in the  accompanying
consolidated  balance sheet as of December 31, 2003, is fairly  stated,  in all material  respects,  in relation to
the  consolidated  balance  sheet from which it has been  derived.  Also,  in our opinion,  the  information  as of
December  31,  2003 set forth in  Schedule A referred  to above,  is fairly  stated,  in all  material  respects in
relation to the consolidated balance sheet and related schedule from which it has been derived.</FONT></P>

<BR>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
        <TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Vancouver, Canada,<BR>
        October 19, 2004</FONT></TD>
        <TD WIDTH=55% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>/s/ ERNST &amp; YOUNG LLP<BR>
        Chartered Accountants&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>
<BR>
<BR>

<PAGE>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A024></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A025></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONSOLIDATED
STATEMENTS OF INCOME <BR>
(in thousands of U.S. dollars, except share and per share amounts) </FONT></H1>

<PRE><B>
                                                                Three Months Ended               Nine Months Ended
                                                                   September 30,                   September 30,
                                                              2004             2003           2004            2003
                                                                $               $               $               $</B>
                                                       ---------------- --------------- --------------- --------------<B>
                                                                    (unaudited)                     (unaudited)</B>

<B>VOYAGE REVENUES</B>                                              520,612          380,544       1,549,685       1,125,047
- ------------------------------------------------------ ---------------- --------------- --------------- --------------

<B>OPERATING EXPENSES</B>
Voyage expenses                                              106,466          105,686         319,058         284,207
Vessel operating expenses                                     58,199           55,281         160,876         153,457
Time-charter hire expense                                    120,898           95,955         336,137         202,349
Depreciation and amortization                                 64,802           49,885         179,262         138,790
General and administrative                                    29,050           23,461          82,491          58,785
Vessel write-downs and (gain) loss on sale of
   vessels <I>(note 12)</I>                                         (53,512)           5,843         (54,565)         36,341
Restructuring charge <I>(note 12)</I>                                     -              657           1,002           1,969
- ------------------------------------------------------ ---------------- --------------- --------------- --------------
                                                             325,903          336,768       1,024,261         875,898
- ------------------------------------------------------ ---------------- --------------- --------------- --------------

<B>Income from vessel operations</B>                                194,709           43,776         525,424         249,149
- ------------------------------------------------------ ---------------- --------------- --------------- --------------

<B>OTHER ITEMS</B>
Interest expense                                             (35,225)         (21,827)        (87,460)        (57,913)
Interest income                                                5,900              799          12,038           2,932
Equity income from joint ventures                              2,535            1,357           7,659           3,753
Gain (loss) on sale of marketable securities <I>(note 5)</I>         90,070              (28)         93,175             142
Write-down of marketable securities                                -                -               -          (4,910)
Other - net <I>(note 13)</I>                                        (12,657)          (3,750)        (17,952)        (22,371)
- ------------------------------------------------------ ---------------- --------------- --------------- --------------
                                                              50,623          (23,449)          7,460         (78,367)
- ------------------------------------------------------ ---------------- --------------- --------------- --------------

<B>Net income</B>                                                   245,332           20,327        532,884          170,782
====================================================== ================ =============== =============== ==============

<B>Earnings per common share</B> <I>(note 16)</I>
     - Basic                                                   $2.94            $0.25           $6.46           $2.14
     - Diluted                                                 $2.77            $0.25           $6.12           $2.11
<B>Weighted average number of common shares</B>
     - Basic                                              83,317,200       80,085,404      82,516,723      79,741,480
     - Diluted                                            88,718,531       81,884,344      87,110,068      81,120,206
====================================================== ================ =============== =============== ==============
</PRE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The accompanying notes are an
integral part of the unaudited interim consolidated financial statements.</I> </FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A027></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A028></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONSOLIDATED BALANCE
SHEETS <BR>
(in thousands of U.S. dollars) </FONT></H1>


<PRE><B>
                                                                                          As at           As at
                                                                                      September 30,    December 31,
                                                                                          2004             2003
                                                                                            $                $</B>
                                                                                   ---------------- -----------------
<B>                                                                                       (unaudited)</B>
     <B>ASSETS</B>
     <B>Current</B>
     Cash and cash equivalents <I>(note 8)</I>                                                   308,034         292,284
     Restricted cash - current <I>(note 9)</I>                                                    76,361           2,672
     Accounts receivable                                                                  139,289         146,523
     Prepaid expenses and other assets                                                     66,337          39,054
     ----------------------------------------------------------------------------- ---------------- -----------------
     <B>Total current assets</B>                                                                 590,021         480,533
     ----------------------------------------------------------------------------- ---------------- -----------------
                                                                                                -          95,511
     Marketable securities <I>(note 5)</I>
     Restricted cash - long term <I>(note 9)</I>                                                 337,345               -

     <B>Vessels and equipment</B> <I>(note 8)</I>
     At cost, less accumulated depreciation of $1,046,245
         (December 31, 2003 -  $1,034,747)                                              2,915,913       2,386,642
     Vessels under capital leases, at cost, less accumulated
         depreciation of $6,985 (December 31, 2003 - $438)                                384,706          37,562
     Advances on newbuilding contracts <I>(note 11)</I>                                          240,317         150,656
     ----------------------------------------------------------------------------- ---------------- -----------------
     <B>Total vessels and equipment</B>                                                        3,540,936       2,574,860
     ----------------------------------------------------------------------------- ---------------- -----------------
     Net investment in direct financing leases                                             96,456          73,073
     Investment in joint ventures                                                          53,906          54,392
     Other assets                                                                          68,799          60,333
     Intangible assets - net <I>(note 6)</I>                                                     282,217         118,588
     Goodwill <I>(note 6)</I>                                                                    169,590         130,754
     ----------------------------------------------------------------------------- ---------------- -----------------

                                                                                        5,139,270       3,588,044
     ============================================================================= ================ =================


     <B>LIABILITIES AND STOCKHOLDERS' EQUITY</B>
     <B>Current</B>
     Accounts payable                                                                      41,790          51,817
     Accrued liabilities                                                                  113,083         119,594
     Current portion of long-term debt <I>(note 8)</I>                                           137,181         102,062
     Current obligation under capital leases <I>(note 9)</I>                                      62,214           1,159
     ----------------------------------------------------------------------------- ---------------- -----------------
     <B>Total current liabilities</B>                                                            354,268         274,632
     Long-term debt <I>(note 8)</I>                                                            2,091,983       1,498,044
     Obligation under capital leases <I>(note 9)</I>                                             355,912          35,493
     Other long-term liabilities                                                          245,798         112,726
     ----------------------------------------------------------------------------- ---------------- -----------------
     <B>Total liabilities</B>                                                                  3,047,961       1,920,895
     ----------------------------------------------------------------------------- ---------------- -----------------

     <B>Minority interest</B>                                                                     14,563          15,322

     <B>Stockholders' equity</B>
     Capital stock <I>(note 10)</I>                                                              531,408         492,653
     Retained earnings                                                                  1,597,629       1,095,650
     Accumulated other comprehensive income (loss)                                        (52,291)         63,524
     ----------------------------------------------------------------------------- ---------------- -----------------
     <B>Total stockholders' equity</B>                                                         2,076,746       1,651,827
     ----------------------------------------------------------------------------- ---------------- -----------------

                                                                                        5,139,270       3,588,044
     ============================================================================= ================ =================
</PRE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments
and contingencies <I>(note 11 and 15)</I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.</I> </FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A030></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A031></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
CONSOLIDATED STATEMENTS OF CASH FLOWS <BR>
(in thousands of U.S. dollars) </FONT></H1>

<PRE><B>
                                                                                  Nine Months Ended September 30,
                                                                                   2004                    2003
                                                                                     $                       $</B>
                                                                           ----------------------- -----------------------
<B>                                                                                            (unaudited)</B>
Cash and cash equivalents provided by (used for)

<B>OPERATING ACTIVITIES</B>
Net income                                                                         532,884                170,782
Non-cash items:
     Depreciation and amortization                                                 179,262                138,790
     Vessel write-downs and (gain) loss on sale of vessels                         (54,565)                36,341
     Gain on sale of marketable securities                                         (93,175)                  (142)
     Write-down of marketable securities                                                 -                  4,910
     Equity income (net of dividends received: September 30, 2004 -
          $9,005; September 30, 2003 - $5,657)                                       1,346                  1,904
     Income taxes                                                                   16,301                 23,186
     Other - net                                                                    (9,991)                (7,421)
Change in non-cash working capital items related to operating activities           (33,170)               (14,532)
Expenditures for drydocking                                                        (18,668)               (23,191)
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>Net operating cash flow</B>                                                            520,224                330,627
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>FINANCING ACTIVITIES</B>
Net proceeds from long-term debt                                                 1,469,670              1,679,297
Scheduled repayments of long-term debt                                             (86,376)               (49,114)
Prepayments of long-term debt                                                   (1,462,439)            (1,023,000)
Repayments of capital lease obligations                                             (2,861)                   (68)
(Increase) decrease in restricted cash                                              (1,969)                 8,012
Proceeds from issuance of Common Stock                                              38,645                 11,757
Cash dividends paid                                                                (30,862)               (25,678)
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>Net financing cash flow</B>                                                            (76,192)               601,206
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>INVESTING ACTIVITIES</B>
Expenditures for vessels and equipment                                            (465,227)              (227,070)
Proceeds from sale of vessels and equipment                                        220,917                 91,080
Proceeds from sale of marketable securities                                        135,357                  2,954
Purchase of marketable securities                                                        -                (37,291)
Purchase of Teekay Shipping Spain S.A., net of cash acquired of $11,191
   <I>(note 3)</I>                                                                       (286,854)                     -
Purchase of Navion AS <I>(note 4)</I>                                                           -               (704,734)
Proceeds from joint venture                                                              -                 25,500
Other                                                                              (32,475)               (30,946)
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>Net investing cash flow</B>                                                           (428,282)              (880,507)
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>Increase in cash and cash equivalents</B>                                               15,750                 51,326
Cash and cash equivalents, beginning of the period                                 292,284                284,625
- -------------------------------------------------------------------------- ----------------------- -----------------------

<B>Cash and cash equivalents, end of the period</B>                                       308,034                335,951
========================================================================== ======================= =======================
</PRE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>The
accompanying notes are an integral part of the unaudited interim consolidated financial statements.</I> </FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>1.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Basis
of Presentation</B> </FONT></TD>
</TR>
</TABLE>
<BR>
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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
accompanying unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States. They
include the accounts of Teekay Shipping Corporation (&#147;Teekay&#148;), which is
incorporated under the laws of the Republic of the Marshall Islands, and its wholly owned
or controlled subsidiaries (collectively, the &#147;Company&#148;). Certain information
and footnote disclosures required by generally accepted accounting principles for complete
annual financial statements have been omitted and, therefore, it is suggested that these
interim financial statements be read in conjunction with the Company&#146;s audited
financial statements for the year ended December 31, 2003. In the opinion of management,
these statements reflect all adjustments (consisting only of normal recurring accruals)
necessary to present fairly, in all material respects, the Company&#146;s consolidated
financial position, results of operations, and cash flows for the interim periods
presented. The results of operations for the three and nine-month periods ended September
30, 2004 are not necessarily indicative of those for a full fiscal year.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Certain
of the comparative figures have been reclassified to conform with the presentation adopted
in the current period.</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>2.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Segment Reporting</B> </FONT></TD>
</TR>
</TABLE>
<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company has three reportable segments: its spot tanker segment, its fixed-rate tanker
segment and its fixed-rate liquefied natural gas (&#147;LNG&#148;) segment. The
Company&#146;s spot tanker segment consists of conventional crude oil tankers, oil bulk
ore carriers, and product carriers operating in the spot market or subject to time
charters or contracts of affreightment priced on a spot-market basis or on short-term
fixed-rate contracts. The Company considers contracts that have an original term of less
than three years in duration to be short-term. The Company&#146;s fixed-rate tanker
segment consists of shuttle tankers, floating storage and offtake vessels, liquid
petroleum gas carriers and conventional crude oil and product tankers subject to long-term
fixed-rate time-charter contracts or contracts of affreightment. The Company&#146;s
fixed-rate LNG segment consists of LNG carriers subject to long-term fixed-rate
time-charter contracts. The Company had no LNG operations prior to the acquisition of
Naviera F. Tapias, S.A. (renamed Teekay Shipping Spain S.A.) on April 30, 2004 (see Note 3
&#150; Acquisition of Teekay Shipping Spain S.A.). Segment results are evaluated based on
income from vessel operations. The accounting policies applied to the reportable segments
are the same as those used in the preparation of the Company&#146;s annual audited consolidated financial
statements.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
following tables present results for these segments for the three and nine-month periods
ended September 30, 2004 and 2003.</FONT></TD>
</TR>
</TABLE>

<pre>         ----------------------------------------- ---------------- ---------------- ---------------- ----------------
<B>                                                        Spot          Fixed-Rate         Fixed-Rate
                                                       Tanker           Tanker             LNG
                                                       Segment          Segment          Segment          Total</B>
         Three-months ended September 30, 2004<B>            $               $                 $               $</B>
         ----------------------------------------- ---------------- ---------------- ---------------- ----------------

         Voyage revenues - external.............       326,287         177,000            17,325         520,612
         Voyage expenses........................        88,444          17,967                55         106,466
         Vessel operating expenses..............        23,457          31,635             3,107          58,199
         Time-charter hire expense..............        71,346          49,552                 -         120,898
         Depreciation and amortization..........        24,913          34,739             5,150          64,802
         General and administrative (1) ........        13,580          14,212             1,258          29,050
         Vessel write-downs/(gain) loss on
            sale of vessels.....................       (49,821)         (3,691)                -         (53,512)
                                                   ---------------- ---------------- ---------------- ----------------
         Income from vessel operations..........       154,368          32,586             7,755         194,709
                                                   ================ ================ ================ ================

         Voyage revenues - intersegment.......               -           1,158                 -           1,158
         Total assets at September 30, 2004.....     1,182,320       2,089,147         1,280,209       4,551,676
</PRE>
<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>

<pre>         ----------------------------------------- ---------------- ---------------- ---------------- ----------------
<B>                                                         Spot           Fixed-Rate       Fixed-Rate
                                                        Tanker            Tanker           LNG
                                                        Segment           Segment        Segment          Total</B>
         Three-months ended September 30, 2003<B>             $                $               $               $</B>
         ----------------------------------------- ---------------- ---------------- ---------------- ----------------
         Voyage revenues - external.............        240,852          139,692               -         380,544
         Voyage expenses........................         90,381           15,305               -         105,686
         Vessel operating expenses..............         31,793           23,488               -          55,281
         Time-charter hire expense..............         50,112           45,843               -          95,955
         Depreciation and amortization..........         27,004           22,881               -          49,885
         General and administrative (1) ........         14,489            8,972               -          23,461
         Vessel write-downs/(gain) loss on
            sale of vessels.....................          5,843                -               -           5,843
         Restructuring charge...................            350              307               -             657
                                                   ---------------- ----------------- --------------- ----------------
         Income from vessel operations..........         20,880           22,896               -          43,776
                                                   ================ ================= =============== ================

         Voyage revenues - intersegment.......                -            4,986               -           4,986

         ----------------------------------------- ---------------- ---------------- ---------------- ----------------
<B>                                                         Spot           Fixed-Rate       Fixed-Rate
                                                        Tanker            Tanker           LNG
                                                        Segment           Segment        Segment          Total</B>
         Nine-months ended September 30, 2004<B>              $                $               $               $</B>
         ----------------------------------------- ---------------- ---------------- ---------------- ----------------

         Voyage revenues - external.............        992,809          531,552          25,324       1,549,685
         Voyage expenses........................        263,920           54,968             170         319,058
         Vessel operating expenses..............         70,663           85,469           4,744         160,876
         Time-charter hire expense..............        191,271          144,866               -         336,137
         Depreciation and amortization..........         75,775           95,960           7,527         179,262
         General and administrative (1) ........         38,679           41,813           1,999          82,491
         Vessel write-downs/(gain) loss on
            sale of vessels.....................        (50,874)          (3,691)              -         (54,565)
         Restructuring charge...................          1,002                -               -           1,002
                                                   ----------------- ----------------- --------------- ----------------
         Income from vessel operations..........        402,373          112,167          10,884         525,424
                                                   ================= ================= =============== ================

         Voyage revenues - intersegment.......               -             3,449               -           3,449

         ----------------------------------------- ---------------- ---------------- ---------------- ----------------
<B>                                                         Spot           Fixed-Rate       Fixed-Rate
                                                        Tanker            Tanker           LNG
                                                        Segment           Segment        Segment          Total</B>
         Nine-months ended September 30, 2003<B>              $                $               $               $</B>
         ----------------------------------------- ---------------- ---------------- ---------------- ----------------

         Voyage revenues - external.............        796,935          328,112               -       1,125,047
         Voyage expenses........................        250,810           33,397               -         284,207
         Vessel operating expenses..............         95,821           57,636               -         153,457
         Time-charter hire expense..............        113,851           88,498               -         202,349
         Depreciation and amortization..........         81,671           57,119               -         138,790
         General and administrative (1).........         39,071           19,714               -          58,785
         Vessel write-downs/(gain) loss on
            sale of vessels.....................         36,341                -               -          36,341
         Restructuring charge...................            350            1,619               -           1,969
                                                   ---------------- ----------------- --------------- ----------------
         Income from vessel operations..........        179,020           70,129               -         249,149
                                                   ================ ================= =============== ================
         Voyage revenues - intersegment.........              -           18,850               -          18,850
</pre>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Includes direct and indirect general and administrative expenses. Indirect
               expenses are allocated to each segment based on estimated use of corporate
               resources. </FONT></TD>
               </TR>
               </TABLE>
               <BR>
<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
A
reconciliation of total segment assets to amounts presented in the consolidated balance
sheet is as follows:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE><B>                                                                                      As at               As at
                                                                                  September 30,       December 31,
                                                                                       2004               2003
                                                                                        $                   $</B>
                                                                               ------------------- ------------------
                                                                                  (unaudited)

         Total assets of all segments.......................................         4,551,676         2,942,704
         Cash, restricted cash and marketable securities....................           312,104           390,467
         Accounts receivable and other assets...............................           275,490           254,873
                                                                               ------------------- ------------------
         Consolidated total assets .........................................         5,139,270         3,588,044
                                                                               =================== ==================
</pre>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>3.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Acquisition of Teekay Shipping Spain S.A.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         On April 30, 2004,  the Company  acquired  100% of the issued and  outstanding  shares of Teekay  Shipping
         Spain S.A. for $298.2  million in cash,  plus the assumption of debt and remaining  newbuilding
         commitments.   Teekay  Shipping  Spain  is  engaged  in  the  marine
         transportation  of crude oil and LNG.  Management  believes the  acquisition of the Teekay  Shipping Spain
         business has provided the Company with a strategic  platform  from which to expand its presence in the LNG
         shipping  sector and  immediate  access to reputable LNG  operations.  The Company  anticipates  this will
         benefit it when  bidding  on future  LNG  projects.  These  benefits  contributed  to the  recognition  of
         goodwill.  In the  transaction,  Teekay also entered into an agreement  with an entity  controlled  by the
         former  controlling  shareholder  of Teekay  Shipping  Spain to establish a 50/50 joint  venture that will
         pursue new  business in the oil and gas  shipping  sectors  that relate only to the Spanish  market or are
         led by  Spanish  entities  or  entities  controlled  by a  Spanish  company.  See  Note 11 for  additional
         information  about  the  joint  venture.  The  acquisition  of  Teekay  Shipping  Spain  was  funded  by a
         combination of cash, cash generated from  operations,  and borrowings  under existing  credit  facilities.
         Teekay Shipping  Spain's results of operations have been  consolidated  with Teekay's  results  commencing
         May 1, 2004.<BR>
<BR>

         As at September 30, 2004, Teekay  Shipping  Spain's fleet  consisted of three LNG carriers  (including one  newbuilding  delivered in
         July 2004) and six  Suezmax  class crude oil  tankers.  All of these  vessels  operate  under  long-term,
         fixed-rate  time charters with major energy and utility  companies,  other than one Suezmax tanker that is
         on a  short-term  fixed-rate  time  charter.  The average  remaining  term for the  long-term  charters is
         approximately 20 years for the LNG carriers and  approximately 17 years for the Suezmax tankers,  subject,
         in certain  circumstances,  to  termination  and vessel  purchase  rights and  excluding  term  extensions
         exercisable  by the  charterer.  Teekay  Shipping  Spain has also  contracted to build an  additional  LNG
         carrier and three additional  Suezmaz tankers,  which are scheduled for delivery in the fourth quarter of 2004
         and the third  quarter of 2005,  respectively.  These  newbuildings  also will  operate  under  long-term,
         fixed-rate  time  charters with major energy and utility  companies.  The term of each of the charters for
         the LNG and Suezmax newbuilding is 20 years from delivery of the vessel.</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         The  following  table  summarizes  the fair value of the assets  acquired and  liabilities  assumed by the
         Company at April 30,  2004,  the date of the Teekay  Shipping  Spain  acquisition.  The  Company is in the
         process of finalizing  certain  elements of the purchase price allocation and,  therefore,  the allocation
         is subject to further refinement.</FONT></TD>
</TR>
</TABLE>

<PRE>
<B>                                                                                                          As at
                                                                                                      April 30, 2004
                                                                                                             $</B>
                                                                                                    ------------------
                                                                                                        <B>(unaudited)</B>
         <B>ASSETS</B>
         Cash, cash equivalents and short-term restricted cash                                             85,092
         Other current assets                                                                               7,415
         Vessels and equipment                                                                            821,939
         Restricted cash - long term                                                                      311,664
         Other assets - long-term                                                                          15,355
         Intangible assets subject to amortization:
            Time-charter contracts (weighted average useful life of 19.2 years)                           183,052
         Goodwill ($3.6 million fixed-rate tanker segment and $35.7 million
            fixed-rate LNG segment)                                                                        39,279
         ------------------------------------------------------------------------------------------ ------------------
         <B>Total assets acquired</B>                                                                          1,463,796
         ========================================================================================== ==================
         <B>LIABILITIES</B>
         Current liabilities                                                                               98,428
         Long-term debt                                                                                   668,733
         Obligations under capital leases                                                                 311,011
         Other long-term liabilities                                                                       87,439
         ------------------------------------------------------------------------------------------ ------------------
         <B>Total liabilities assumed</B>                                                                      1,165,611
         ========================================================================================== ==================
         <B>Net assets acquired (cash consideration)</B>                                                         298,185
         ========================================================================================== ==================
</PRE>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
following table shows comparative summarized consolidated pro forma financial information
for the Company for the nine-month periods ended September 30, 2004 and 2003, giving
effect to the acquisition of 100% of the outstanding shares in Teekay Shipping Spain as if
it had taken place on January 1 of each of the periods presented:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
<B>                                                                             Pro Forma              Pro Forma
                                                                         Nine Months Ended      Nine Months Ended
                                                                        September 30, 2004      September 30, 2003
                                                                                 $                      $</B>
                                                                       ---------------------- -----------------------
<B>                                                                            (unaudited)            (unaudited)</B>

         Voyage revenues............................................           1,590,403              1,185,833
         Net income (1).............................................             545,815                100,173
         Earnings per share
         - Basic....................................................                6.61                   1.26
         - Diluted..................................................                6.27                   1.23
         ------------------------------------------------------------- ---------------------- -----------------------
</PRE>

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          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
           The results of Teekay Shipping Spain for the nine months ended September 30, 2004 and 2003 included foreign
           exchange gains of $7.3 million and foreign exchange losses of $47.2 million, respectively.  Substantially all
           of these foreign exchange gains and losses were unrealized.</FONT></TD>
          </TR>
          </TABLE>
          <BR>

<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>4.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Acquisition of Navion AS</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
In
April 2003, Teekay completed its acquisition of 100% of the issued and outstanding shares
of Navion AS for approximately $774.2 million in cash, including transaction costs of
approximately $7.0 million. The Company made a deposit of $76.0 million towards the
purchase price on December 16, 2002. The remaining portion of the purchase price was paid
on closing. The Company funded its acquisition of Navion by borrowing under a $500 million
364-day facility (subsequently replaced by a $550 million revolving credit facility),
together with available cash and borrowings under other existing revolving credit
facilities. Navion&#146;s results of operations have been consolidated with Teekay&#146;s
results commencing April 1, 2003.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Navion,
based in Stavanger, Norway, operates primarily in the shuttle tanker and the conventional
crude oil and product tanker markets. Its modern shuttle tanker fleet, which as of
September 30, 2004, consisted of eight owned and 12 chartered-in vessels (excluding five
vessels chartered-in from the Company&#146;s shuttle tanker subsidiary Ugland Nordic
Shipping AS (&#147;UNS&#148;)), provides logistical services to the Norwegian state-owned
oil company, Statoil ASA, and other oil companies in the North Sea under fixed-rate,
long-term contracts of affreightment. Subsequent to the acquisition, the operations of UNS
and the shuttle tanker operations of Navion were combined into one business unit, Teekay
Navion Shuttle Tankers. The projected benefits resulting from the combined operations as
well as possible growth opportunities in the North Sea and elsewhere in the world resulted
in the recognition of goodwill. Navion&#146;s modern, chartered-in, conventional tanker
fleet, which as of September 30, 2004, consisted of 13 crude oil tankers and 16 product
tankers, operates primarily in the Atlantic region, providing services to Statoil and
other oil companies. In addition, Navion owns two floating storage and offtake vessels
currently trading as conventional crude oil tankers in the Atlantic region, one
chartered-in methanol carrier and one liquid petroleum gas carrier on long-term charter to
Statoil. Through Navion Chartering AS, an entity owned jointly with Statoil, Navion has a
first right of refusal on Statoil&#146;s oil transportation requirements at the prevailing
market rate until December 31, 2007. In addition to tanker operations, Navion also
constructs, installs, operates and leases equipment that reduces volatile organic compound
emissions during loading, transportation and storage of oil and oil products.</FONT></TD>
</TR>
</TABLE>
<BR>

<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
following table summarizes the fair value of the assets acquired and liabilities assumed
by the Company at April 1, 2003, the date of the Navion acquisition.</FONT></TD>
</TR>
</TABLE>

<PRE><B>                                                                                                         As at
                                                                                                     April 1, 2003
                                                                                                           $</B>
                                                                                                   ------------------
         <B>ASSETS</B>
         Current assets                                                                                    64,457
         Vessels and equipment                                                                            543,003
         Net investment in direct financing leases                                                         45,558
         Other assets - long-term                                                                           3,835
         Intangible assets subject to amortization:
            Contracts of affreightment (15-year sum-of-years declining balance and
            10.2 years weighted-average amortization period)                                              117,000
         Goodwill (fixed-rate tanker segment)                                                              40,033
         ------------------------------------------------------------------------- --------------- ------------------
         <B>Total assets acquired</B>                                                                            813,886
         ========================================================================= =============== ==================
         <B>LIABILITIES</B>
         Current liabilities                                                                               36,270
         Other long-term liabilities                                                                        3,463
         ------------------------------------------------------------------------- --------------- ------------------
         <B>Total liabilities assumed</B>                                                                         39,733
         ========================================================================= =============== ==================
         <B>Net assets acquired (cash consideration)</B>                                                         774,153
         ========================================================================= =============== ==================
</PRE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
following table shows summarized consolidated pro forma financial information for the
Company for the nine-month period ended September 30, 2003, and gives effect to the
acquisition of 100% of the outstanding shares in Navion as if it had taken place on
January 1, 2003:</FONT></TD>
</TR>
</TABLE>

<PRE><B>                                                                                                   Pro Forma
                                                                                               Nine Months Ended
                                                                                              September 30, 2003
                                                                                                       $</B>
                                                                                           --------------------------
                                                                                                  <B>(unaudited)</B>

         Voyage revenues.................................................................          1,353,480
         Net income......................................................................            216,821
         Earnings per share..............................................................
         - Basic.........................................................................               2.72
         - Diluted.......................................................................               2.67
         --------------------------------------------------------------------------------- --------------------------
</PRE>
<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>5.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Investments in Marketable Securities</B> </FONT></TD>
</TR>
</TABLE>

<pre><B>                                                                                     Gross           Approximate
                                                                                   Unrealized         Market and
                                                                    Cost             Gains         Carrying Values
                                                                      $                $                  $</B>
                                                               ---------------- ----------------- -------------------
         <B>September 30, 2004</B>
         Marketable securities..............................          -                -                  -
         <B>December 31, 2003</B>
         Marketable securities..............................        42,180           53,331             95,511
         ----------------------------------------------------- ---------------- ----------------- -------------------</pre>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
During
the nine-month period ended September 30, 2004, the Company sold its investments in
marketable securities for proceeds of $135.4 million which resulted in a gain on sale of
marketable securities of $93.2 million.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Marketable
securities at December 31, 2003 represent 5,812,000 shares in A/S Dampskibsselskabet TORM
and 351,221 shares in Nordic American Tanker Shipping Ltd.</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>6.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Goodwill and Intangible Assets</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
changes in the carrying amount of goodwill for the nine-month period ended September 30,
2004 for the Company&#146;s reporting segments, are as follows:</FONT></TD>
</TR>
</TABLE>

<PRE><B>                                                      Spot         Fixed-Rate   Fixed-Rate
                                                     Tanker         Tanker          LNG
                                                     Segment        Segment       Segment       Other         Total
                                                        $              $             $            $             $</B>
                                                  -------------- ------------- ------------ ------------- -----------
          Balance as of January 1, 2004..........          -        128,575             -        2,179       130,754
          Goodwill acquired <I>(note 3)</I>.............          -          3,648         35,631         137        39,416
          Goodwill impairment....................          -              -             -         (580)         (580)
                                                  -------------- ------------- ------------ ------------- -----------
          Balance as of September 30, 2004.......          -        132,223         35,631       1,736       169,590
                                                  ============== ============= ============ ============= ===========
</PRE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
As at September 30, 2004, intangible assets consisted of: </FONT></TD>
</TR>
</TABLE>

<PRE><B>                                                         Weighted-
                                                          Average         Gross                            Net
                                                        Amortization     Carrying      Accumulated       Carrying
                                                           Period         Amount       Amortization       Amount
                                                          (years)            $              $                $</B>
                                                     ------------------ ------------ ----------------- --------------
          Contracts of affreightment <I>(note 4)</I>......        10.2           124,250        (26,271)          97,979
          Time-charter contracts <I>(note 3)</I>..........        19.2           183,052         (4,773)         178,279
          Intellectual property....................         7.0             7,701         (1,742)           5,959
                                                     ------------------ ------------ ----------------- --------------
                                                           15.4           315,003        (32,786)         282,217
                                                     ================== ============ ================= ==============
</PRE>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Aggregate
amortization expense of intangible assets for the three and nine-month periods ended
September 30, 2004 was approximately $8.0 million ($4.0 million &#150; 2003) and $19.4
million ($8.2 million &#150; 2003), respectively.</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>7.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Cash Flows</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Cash
interest paid by the Company during the nine-month periods ended September 30, 2004 and
2003 approximated $106.8 million and $67.2 million, respectively.</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>8.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Long-Term Debt</B> </FONT></TD>
</TR>
</TABLE>
<pre><B>
                                                                                   September 30,     December 31,
                                                                                       2004              2003
                                                                                         $                $</B>
                                                                                  ---------------- -----------------
         Revolving Credit Facilities.............................................     662,215          430,000
         First Preferred Ship Mortgage Notes (8.32%) due February 1, 2006........      52,390          109,314
         Premium Equity Participating Security Units (7.25%) due May 18, 2006 ...     143,750          143,750
         Senior Notes (8.875%) due July 15, 2011 ................................     351,589          351,765
         USD denominated Term Loans due through 2029.............................     666,209          565,277
         EURO denominated Term Loans due through 2023............................     353,011                -
                                                                                  ---------------- -----------------
                                                                                    2,229,164        1,600,106
         Less current portion....................................................     137,181          102,062
                                                                                  ---------------- -----------------
                                                                                    2,091,983        1,498,044
                                                                                  ================ =================
</pre>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
As
at September 30, 2004, the Company had eight long-term revolving credit facilities (the
&#147;Revolvers&#148;) available, which, as at such date, provided for borrowings of up to
$1,228.9 million, of which $566.7 million was undrawn. The amount available under
the Revolvers reduces by $19.7 million (2004), $136.9 million (2005), $159.4 million (2006),
$123.9 million (2007), $449.8 million (2008) and $339.2 million (thereafter).  All of the
Revolvers are collateralized by first priority mortgages granted on 54 of the
Company&#146;s vessels, together with other related collateral, and include a guarantee
from Teekay for all amounts outstanding under the Revolvers.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
8.32% First Preferred Ship Mortgage Notes due February 1, 2006 (the &#147;8.32%
Notes&#148;) are collateralized by first preferred mortgages on three of the
Company&#146;s Aframax tankers, together with other related collateral, and are guaranteed
by three subsidiaries of Teekay that own the mortgaged vessels (the &#147;8.32% Notes
Guarantor Subsidiaries&#148;) to a maximum of 95% of the fair value of their net assets.
These guarantees are full and unconditional and joint and several. As at September 30,
2004, the fair value of these net assets approximated $106.1 million. The 8.32% Notes are
also subject to a sinking fund, which retires $45.0 million of the principal amount on
each February 1, commencing 2004.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Condensed
financial information regarding Teekay, the 8.32% Notes Guarantor Subsidiaries, and
non-guarantor subsidiaries of Teekay is set out in Schedule A of these unaudited interim consolidated
financial statements.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
7.25% Premium Equity Participating Security Units due May 18, 2006 (the &#147;Equity
Units&#148;) are unsecured and subordinated to all of the Company&#146;s senior debt. The
Equity Units are not guaranteed by any of the Company&#146;s subsidiaries and effectively
rank behind all existing and future secured debt. Each Equity Unit includes (a) a forward
contract that requires the holder to purchase for $25 a specified fraction of a share of
the Company&#146;s Common Stock on February 16, 2006 and (b) a $25 principal amount,
subordinated note due May 18, 2006. The forward contracts provide for contract adjustment
payments of 1.25% annually and the notes bear interest at 6.0% annually. Upon settlement
on February 16, 2006 of the $5.75 million forward contracts included in the Equity Units,
the Company will issue between 6,534,300 and 7,982,150 shares of its Common Stock
(depending on the average closing price of the Common Stock for the 20-trading day period
ending on the third trading day prior to February 16, 2006).</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company has several term loans outstanding, which, as at September 30, 2004, totaled
$666.2 million (USD denominated) and 284.5 million Euros ($353.0 million US dollars). The
Company has two long-term time-charter contracts that are denominated in Euros, the funds
from which will be used to repay the associated Euro denominated term loans. Interest
payments on the USD denominated term loans are based on LIBOR plus a margin. Interest
payments on the EURO denominated term loans are based on EURIBOR plus a margin. At
September 30, 2004, the margins ranged between 0.50% and 1.30%. The term loans reduce in
monthly, quarterly or semi-annual payments with varying maturities through 2029. All term
loans of the Company are collateralized by first preferred mortgages on the vessels to
which the loans relate, together with certain other collateral and guarantees from Teekay.
Certain term loans of UNS totaling $371.1 million and certain term loans of Teekay
Shipping Spain totaling $754.8 million are not guaranteed by Teekay.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Pursuant
to long-term debt agreements, the amount of Restricted Payments, as defined, that the
Company can make, including dividends and purchases of its own capital stock, was limited
as of September 30, 2004, to $717.8 million. Certain loan agreements require that a
minimum level of free cash be maintained. As at September 30, 2004, this amount was $100.0
million. Certain of the loan agreements also require that a minimum level of free
liquidity and undrawn revolving credit lines (excluding undrawn revolving credit lines
with less than 6 months to maturity) be maintained. As at September 30, 2004, this amount
was $198.5 million.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>9.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Capital Lease
Obligations and Restricted Cash </B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B><I>Capital Leases</I></B>
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<I>Aframax and Suezmax Tankers</I>. As at September 30, 2004, the Company was party to capital leases on one Aframax
tanker and three Suezmax tankers. Under the terms of the lease arrangements &#150; which include the Company&#146;s
contractual right to full operation of the vessels pursuant to bareboat charters &#150;
the Company is required to purchase these vessels at the end of their respective lease terms for a fixed
price. As at September 30, 2004, the remaining commitments under these capital leases,
including the purchase obligations, approximated $225.5 million (including imputed interest
of $51.5 million), repayable as follows:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
         <B><U>Year</U></B>                                                                                   <B><U>Commitment</U></B>
         2004.........................................................................       $  5.3 million
         2005.........................................................................         21.1 million
         2006.........................................................................        145.9 million
         2007.........................................................................          4.1 million
         2008.........................................................................          4.1 million
         Thereafter...................................................................         45.0 million
</PRE>
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<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<I>LNG Carriers</I>. As at September 30, 2004, the Company was a party to capital leases on two LNG
carriers (including one newbuilding on order), which are structured as &#147;Spanish tax
leases.&#148; Under the terms of the Spanish tax leases, the Company will purchase these
vessels at the end of their respective lease terms using restricted cash deposits
described below. As at September 30, 2004, the remaining commitments under the capital
lease for our existing LNG carrier, including the purchase obligation, approximated 213.1
million Euros ($264.4 million), including imputed interest of 16.3 million Euros ($20.3
million), repayable as follows:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
         <B><U>Year</U></B>                                                                      <B><U>Commitment</U></B>
         2004..................................................          56.0 million Euros ($69.5 million)
         2005..................................................          56.0 million Euros ($69.5 million)
         2006..................................................         101.1 million Euros ($125.4 million)
</PRE>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B><I>Restricted Cash</I></B>
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Under
the terms of the Spanish tax leases for the two LNG carriers, the Company is required to
have on deposit with financial institutions an amount of cash equal to the present value of the remaining amounts owing under the
leases, including the obligations to purchase the LNG carriers at the end of the lease periods.
As at September 30, 2004, this amount was $398.6 million. These cash deposits are restricted to being
used for capital lease payments and have been fully funded with term loans and a Spanish government
grant of $49.2 million. The interest rates earned on the deposits are the same as the interest rates implicit
in the lease agreements.  The Company is committed to placing an additional 40.0 million Euros ($49.6 million) on deposit when the Company takes
delivery of its LNG carrier newbuilding (financed under a capital lease) in the fourth
quarter of 2004. This LNG carrier will commence service under a 20-year fixed-rate
time-charter contract upon delivery.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company also maintains restricted cash deposits relating to certain term loans and other obligations.
As at September 30, 2004 and December 31, 2003, these amounts were $15.1 million and $2.7 million, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>10.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Capital Stock</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
authorized capital stock of Teekay at September 30, 2004 was 25,000,000 shares of
Preferred Stock, with a par value of $1 per share, and 725,000,000 shares of Common Stock,
with a par value of $0.001 per share. As at September 30, 2004, Teekay had 83,502,107
shares of Common Stock and no shares of Preferred Stock issued and outstanding. The
Company&#146;s Board of Directors authorized a two-for-one stock split relating to the
Teekay&#146;s common stock, which was effected in the form of a 100% stock dividend. All
stockholders of record on May 3, 2004 received one additional share of common stock for
each share held. The additional shares were distributed on or about May 17, 2004, the
effective date of the stock dividend. All earnings per share and share capital amounts
disclosed in these financial statements give effect to this stock split retroactively.</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
In
September 2003, the Company&#146;s 1995 Stock Option Plan was terminated with respect to
new grants and the Company&#146;s 2003 Equity Incentive Plan was adopted. As at September
30, 2004, the Company had reserved pursuant to its 1995 Stock Option Plan and 2003 Equity
Incentive Plan (collectively referred to as the &#147;Plans&#148;) 7,565,012 shares of
Common Stock for issuance upon exercise of options or equity awards granted or to be
granted. As at September 30, 2004, the number of options available for issuance under the
Plans was 1,955,640. As at September 30, 2004, options to purchase a total of 5,609,372
shares of Teekay&#146;s Common Stock were outstanding, of which 2,828,177 options were
then exercisable at prices ranging from $8.44 to $20.60 per share, with a weighted-average
exercise price of $15.55 per share. All outstanding options have exercise prices ranging
from $8.44 to $34.37 per share and a weighted-average exercise price of $19.63 per share.
All outstanding options expire between July 19, 2005 and April 4, 2014, ten years after
the date of each respective grant.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Under
Statement of Financial Accounting Standards No. 123 (&#147;SFAS 123&#148;),
&#147;Accounting for Stock-Based Compensation,&#148; as amended by Statement of Financial
Accounting Standards No. 148 (&#147;SFAS 148&#148;), &#147;Accounting for Stock-Based
Compensation-Transition and Disclosure,&#148; disclosures of stock-based compensation
arrangements with employees are required and companies are encouraged (but not required)
to record compensation costs associated with employee stock option awards, based on
estimated fair values at the grant dates. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB Opinion
No. 25 (&#147;APB 25&#148;) &#147;Accounting for Stock Issued to Employees.&#148; As the
exercise price of the Company&#146;s employee stock options equals the market price of
underlying stock on the date of grant, no compensation expense has been recognized under
APB 25. The following table illustrates the effect on net income and earnings per share
had the Company applied the fair value recognition provisions of SFAS 123 to stock-based
employee compensation.</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE><B>
                                                             Three Months Ended              Nine Months Ended
                                                               September 30,                   September 30,
                                                            2004            2003            2004            2003
                                                             $               $               $               $</B>
                                                     --------------- --------------- --------------- ---------------
         Net income - as reported..................       245,332          20,327         532,884           170,782
           Less: Total stock-based compensation
           expense.................................         2,084           2,060           6,294             6,185
                                                     --------------- --------------- --------------- ---------------
         Net income - pro forma....................       243,248          18,267         526,590           164,597
                                                     =============== =============== =============== ===============
         Basic earnings per common share:
           As reported.............................          2.94            0.25            6.46              2.14
           Pro forma...............................          2.92            0.23            6.38              2.06
         Diluted earnings per common share:
           As reported.............................          2.77            0.25            6.12              2.11
           Pro forma...............................          2.74            0.22            6.05              2.03
</PRE>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
For
the purpose of the above pro forma calculation, the fair value of each option granted was
estimated on the date of the grant using the Black-Scholes option pricing model. The
following weighted-average assumptions were used in computing the fair value of the
options granted: expected volatility of 35% in 2004 and 30% in 2003, expected life of five
years, dividend yield of 2.0% in 2004 and 3.0% in 2003, and risk-free interest rate of
2.7% in 2004 and 2.5% in 2003.</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<BR>
<BR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>11.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Commitments and Contingencies </B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
As
at September 30, 2004, the Company was committed to the construction of three Suezmax
tankers, seven Aframax tankers, three product tankers, and four LNG carriers scheduled for
delivery between October 2004 and March 2008, at a total cost of approximately $1,283.9
million, excluding capitalized interest. As at September 30, 2004, payments made towards
these commitments totaled $217.4 million, excluding $22.9 million of capitalized interest
and other miscellaneous construction costs. Long-term financing arrangements existed for
$1,005.9 million (including a capital lease for $192.0 million) of the unpaid cost of
these vessels. It is the Company&#146;s intention to finance the remaining unpaid amount
of $60.6 million through incremental debt or surplus cash balances, or a combination
thereof. As at September 30, 2004, the remaining payments required to be made under these
newbuilding contracts were: $241.0 million in 2004, $377.9 million in 2005, $255.9 million
in 2006, $141.0 million in 2007 and $50.7 million in 2008. Two of the Aframax tankers will
be subject to 10-year long-term charters to Skaugen PetroTrans Inc, a joint venture of the
Company, upon delivery in 2008.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Under
the terms of the joint venture agreement with an entity controlled by the former
controlling shareholder of Teekay Shipping Spain, Teekay will progressively contribute to
the joint venture company $50.0 million in share premium. In the event that Teekay has not
contributed the $50.0 million equity prior to April 30, 2007, it will be required to pay
the other partner an amount no more than $25.0 million calculated by a pre-determined
formula based on the occurrence of certain future events.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company has been awarded a contract by a consortium of major oil companies to construct
and install on five of its shuttle tankers volatile compound emissions plants, which
reduce emissions during cargo operations. These plants are leased to the consortium of
major oil companies. The construction and installation of these plants are expected to be
completed by the end of 2005 at a total cost of approximately $88.5 million. As at
September 30, 2004, the Company had made payments towards these commitments of
approximately $53.2 million. As at September 30, 2004, the remaining payments required to
be made towards these commitments were $14.2 million in 2004, and $21.1 million in 2005.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Teekay
and certain subsidiaries of Teekay have guaranteed their share of the outstanding mortgage
debt in five 50%-owned joint venture companies. As at September 30, 2004, Teekay and these
subsidiaries had guaranteed $124.9 million, or 50% of the total $249.8 million, in
outstanding mortgage debt of the joint venture companies. These joint venture companies
own an aggregate of five shuttle tankers.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
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 appropriate
liability insurance that limits the 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.</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>12.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Gain on Sale of
Vessels and Restructuring Charge </B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
During
the third quarter of 2004, the Company sold six Aframax tankers built between 1988 and
1990, one 1990&#145;s built very large crude carrier, and one 1980&#145;s built shuttle
tanker. The results for both the three and nine-month periods ended September 30, 2004
include gains on sale from these vessels totaling $52.8 million.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
During
December 2003, the Company sold and leased back three Aframax tankers which are accounted
for as vessel operating leases. The sale generated a $16.8 million deferred gain, which
has been included in other long-term liabilities and is being amortized over the 7-year
term of the leases. The amortization of this deferred gain for the three and nine-month
periods ended September 30, 2004 was $0.6 million and $1.8 million, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
During
the nine-month period ended September 30, 2004, the Company incurred $1.0 million of
restructuring costs associated with the closure of the Company&#146;s office in Oslo,
Norway. There were no restructuring costs in the three-month period ended September 30,
2004.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>13.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Other - Net </B></FONT></TD>
</TR>
</TABLE>

<pre><B>                                                              Three Months Ended             Nine Months Ended
                                                         September 30,  September 30,   September 30,   September 30,
                                                             2004           2003             2004           2003
                                                              $              $                $              $</B>
                                                        --------------- -------------- ------------- --------------
         Income tax expense...........................      (8,066)        (6,000)         (16,301)       (23,186)
         Dividend income..............................           3            692            5,679          2,891
         Miscellaneous................................      (4,594)         1,558           (7,330)        (2,076)
                                                        --------------- -------------- ------------- --------------
                                                           (12,657)        (3,750)         (17,952)       (22,371)
                                                        =============== ============== ============= ==============
</pre>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>14.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Comprehensive Income</B></FONT></TD>
</TR>
</TABLE>

<PRE><B>                                                              Three Months Ended             Nine Months Ended
                                                         September 30,  September 30,   September 30,   September 30,
                                                             2004           2003             2004           2003
                                                              $              $                $              $</B>
                                                        --------------- -------------- ------------- --------------
         Net income....................................    245,332         20,327          532,884        170,782
         Other comprehensive income:
            Unrealized gain (loss) on marketable
             securities................................    (12,020)        22,577           39,369         23,007
            Reclassification adjustment for (gain)
             loss on marketable securities included in
             net income................................    (91,153)            31          (92,588)         4,971
            Unrealized gain (loss) on derivative
             instruments...............................    (43,191)         6,644          (67,645)        (4,938)
            Reclassification adjustment for (gain)
             loss on derivative instruments............     (1,098)         2,441            5,048          2,078
                                                        --------------- -------------- ------------- --------------
         Comprehensive income..........................     97,871         52,020          417,069        195,900
                                                        =============== ============== ============= ==============
</PRE>
<BR>
<BR>
<BR>
<BR>
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>15.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Derivative
Instruments and Hedging Activities</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company uses derivatives only for hedging purposes. The following summarizes the
Company&#146;s risk strategies with respect to market risk from foreign currency
fluctuations, changes in interest rates, spot market rates for vessels, bunker fuel
prices, and the effect of these strategies on the Company&#146;s financial statements.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company hedges portions of its forecasted expenditures denominated in foreign currencies
with forward contracts. As at September 30, 2004, the Company was committed to foreign
exchange contracts for the forward purchase of approximately Norwegian Kroner 603.9
million, Canadian Dollars 31.5 million and Singapore Dollars 2.4 million and Euro 0.2
million for U.S. Dollars at an average rate of 7.4409 Norwegian Kroner per U.S. Dollar,
1.4427 Canadian Dollar per U.S. Dollar, 1.7191 Singapore Dollar per U.S. Dollar and 0.8090
Euro per U.S. Dollar, respectively. The foreign exchange forward contracts mature as
follows: $30.3 million in 2004, $69.3 million in 2005 and $5.0 million in 2006.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company hedges a portion of its bunker fuel expenditures with bunker fuel swap contracts.
As at September 30, 2004, the Company was committed to bunker fuel swap contracts totaling
17,400 metric tonnes, with a weighted-average price of $141.50 per tonne. The fuel swap
contracts expire between October 2004 and September 2005.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
As
at September 30, 2004, the Company was committed to the following interest rate swap
agreements related to its LIBOR and EURIBOR based debt, whereby certain of the
Company&#146;s floating-rate debt was swapped with fixed-rate obligations:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
<B>                                                                                          Weighted-
                                                               Interest                    Average       Fixed
                                                                 Rate       Principal     Remaining     Interest
                                                                Index        Amount         Term          Rate
                                                                                           (years)         (%) (5)</B>
                                                           -------------- -------------- ------------ --------------
         U.S. Dollar denominated interest rate swaps            LIBOR        600,000          1.1          2.7
         U.S. Dollar denominated interest rate swaps (1)        LIBOR        434,000          7.9          5.3
         U.S. Dollar denominated interest rate swaps (2)        LIBOR        329,837         21.6          6.7
         Euro denominated interest rate swaps (3) (4)          EURIBOR       353,011         20.0          5.9
         _______________________________________________
</PRE>

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<TR VALIGN=TOP>
<TD WIDTH=7%>&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Inception date of swaps is 2006 ($200.0 million) and 2007 ($234.0 million). </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=7%>&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Principal amounts reduce monthly to zero by the maturity dates of the swap
          agreements.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=7%>&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Principal amounts increases to 325.1 million Euros ($403.4 million) by December 2004, and then reduces monthly to 70.1 million Euros ($87.0
          million) by the maturity dates of the swap agreements.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=7%>&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Principal amount is the U.S. Dollar equivalent of 324.5 million Euros. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=7%>&nbsp;</TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Excludes the margin the Company pays on its variable-rate debt.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company hedges certain of its voyage revenues through the use of forward freight
agreements. Forward freight agreements involve contracts to provide a fixed number of
theoretical voyages at fixed rates, thus hedging a portion of the Company&#146;s exposure
to the spot charter market. As at September 30, 2004, the Company was committed to forward
freight agreements totaling 3.1 million metric tonnes with a notional principal amount of
$26.2 million. The forward freight agreements expire between October 2004 and September
2005.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
During
the three and nine-month periods ended September 30, 2004, the Company recognized a net
gain of $0.4 million (net loss $0.9 million &#150; 2003) and a net loss of $0.7 million
($1.0 million &#150; 2003), respectively, relating to the ineffective portion of its
interest rate swap agreements and foreign currency forward contracts. The ineffective
portion of these derivative instruments is presented as interest expense and other &#151;
net.</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>
<BR>
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The
Company is exposed to credit loss in the event of non-performance by the counter parties
to the interest rate swap agreements, foreign exchange forward contracts, and forward
freight agreements; however, the Company does not anticipate non-performance by any of the
counter parties.</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>16.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Earnings Per Share</B>
</FONT></TD>
</TR>
</TABLE><BR>

<pre><B>
                                                               Three Months Ended               Nine Months Ended
                                                          September 30,   September 30,   September 30,   September 30,
                                                               2004           2003            2004            2003
                                                                 $              $               $               $</B>
                                                         --------------- -------------- --------------- ---------------
         Net income available for common
           stockholders................................       245,332         20,327         532,884         170,782
                                                         --------------- -------------- --------------- ---------------

         Weighted average number of common
           shares......................................    83,317,200     80,085,404      82,516,723      79,741,480
         Dilutive effect of employee stock options.....     2,675,439      1,798,940       2,222,783       1,378,726
         Dilutive effect of Equity Units...............     2,725,892              -       2,370,562               -
                                                         --------------- -------------- --------------- ---------------
         Common stock and common stock
           equivalents.................................    88,718,531     81,884,344      87,110,068      81,120,206
                                                         =============== ============== =============== ===============

         Earnings per common share:
         - Basic.......................................         $2.94          $0.25           $6.46           $2.14
         - Diluted.....................................         $2.77          $0.25           $6.12           $2.11
</pre>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         For the three and nine-month  periods ended  September 30, 2003, the  anti-dilutive  effect of 3.3 million
         shares and 4.0 million shares,  respectively,  attributable to outstanding  stock options and Equity Units
         were excluded from the  calculations  of diluted  earnings per share.  All  outstanding  stock options and
         Equity Units were dilutive for the three and nine-month periods ended September 30, 2004.
</FONT></TD>
</TR>
</TABLE><BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>17.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Subsequent Events</B>
</FONT></TD>
</TR>
</TABLE><BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         a)&nbsp;&nbsp; The Company has entered into  agreements  to sell two Suezmax and four  Aframax
         tankers built between 1989 and 1993.  The Company  expects that the total  proceeds from the sale of these
         six vessels will be  approximately  $176.0  million.  These  vessels are scheduled to be delivered to the
         buyers  during the fourth  quarter,  at which time the Company  expects to record a gain of approximately
         $23.0 million relating to the sale of these vessels.
</FONT></TD>
</TR>
</TABLE><BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         b)&nbsp;&nbsp; In October 2004, the Company  entered into $500.0 million of interest rate swap  agreements  related to
         its LIBOR-based debt whereby certain of the Company&#146;s  floating-rate  debt will be swapped with fixed-rate
         obligations with a  weighted-average  interest rate of approximately  5.1% commencing between January 2006
         and January 2007, with $300.0 million  maturing in January 2016,  $100.0 million maturing in July 2016 and
         $200.0 million maturing in January 2017.
</FONT></TD>
</TR>
</TABLE><BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
         c)&nbsp;&nbsp; In November 2004, the Company announced that its Board of Directors has authorized the repurchase
         of up to 3.0 million shares of its common stock in the open market.
</FONT></TD>
</TR>
</TABLE><BR>


<BR>
<BR>
<BR>
<BR>
<BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS <BR>
(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)<BR>
(Information as at September 30, 2004 and for the Three and Nine-Month Periods<BR>
Ended September 30, 2004 and 2003 is unaudited) </FONT></H1>


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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
          <TD ALIGN=LEFT WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
           d)&nbsp;&nbsp; In November 2004, the Company announced that its wholly-owned subsidiary,
          Teekay LNG Partners L.P. (&#147;the Partnership&#148;), has filed a
          registration statement with the U.S. Securities and Exchange Commission for an
          initial public offering of its common units. The Partnership is a Marshall
          Islands partnership recently formed by the Company as part of its strategy to
          expand its operations in the LNG sector. Upon the closing of the offering,
          the Partnership will provide LNG and crude oil marine transportation
          services through a fleet of LNG carriers and Suezmax class crude oil tankers,
          primarily consisting of vessels the Company obtained through its acquisition of
          Teekay Shipping Spain. The initial public offering will include 5,500,000
          common units, representing an aggregate ownership of approximately 22
          percent of the Partnership. After the offering, the Company will own an
          approximate 78 percent interest in the Partnership, including its 2 percent
          general partner interest. The size of the offering will increase to a total of
          6,325,000 common units if the underwriters exercise their over-allotment option
          in full, which would reduce the Company&#146;s ownership interest from approximately
          78 percent to approximately 75 percent. Proceeds from the offering will be used to repay debt
          that the Partnership will owe to the Company and to pay offering expenses.
          Proceeds of any exercise of the over-allotment option will be used to repay debt
          under ship financing arrangements of the Partnership. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>18.</B></FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Recent Pronouncements</B>
</FONT></TD>
</TR>
</TABLE><BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
On
March 31, 2004, the Financial Accounting Standards Board published an Exposure Draft,
&#147;Share-Based Payment, an Amendment of FASB Statements No. 123 and 95.&#148; The
proposed change in accounting would replace the existing requirements under FAS 123 and
APB 25. Under the proposal, all forms of share-based payments to employees, including
employee stock options and employee stock purchase plans, would be treated the same as
other forms of compensation by recognizing the related cost in the statements of income.
This proposed Statement would eliminate the ability to account for stock-based
compensation transactions using APB 25 and generally would require instead that such
transactions be accounted for using a fair-value based method. The FASB has concluded that
a binomial model such as a lattice model is preferred over the Black-Scholes valuation
model in determining the fair value of an option at a grant date. The comment period for
the exposure draft ended on June 30, 2004. The Company is investigating what impact the
adoption of the exposure draft will have on its financial position and results of
operations.</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<BR>
<BR>

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<A NAME=A095></A>
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SCHEDULE A</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A096></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A097></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS <BR>
(in thousands of U.S. dollars)<BR>
(unaudited) </FONT></H1>

<PRE>
                                                               <B>Three Months Ended September 30, 2004</B>
                                           -------------------------------------------------------------------------------
<B>                                                             8.32% Notes                                      Teekay
                                                Teekay        Guarantor     Non-Guarantor                   Shipping Corp.
                                             Shipping Corp.  Subsidiaries   Subsidiaries   Eliminations   &amp; Subsidiaries
                                                   $             $                $             $                $</B>
                                           -------------------------------------------------------------------------------

Voyage revenues                                       -        14,382          520,669       (14,439)         520,612
Operating expenses                                2,655         3,765          333,922       (14,439)         325,903
                                           -------------------------------------------------------------------------------
   Income (loss) from vessel operations          (2,655)       10,617          186,747             -          194,709
Net interest expense                             (3,412)            -          (25,913)            -          (29,325)
Equity in net income of subsidiaries            242,037             -                -      (242,037)               -
Other income (loss)                               9,362            (2)          70,588             -           79,948
                                           -------------------------------------------------------------------------------
<B>Net income</B>                                      245,332        10,615          231,422      (242,037)         245,332
Retained earnings, beginning of the period    1,362,704        16,578        1,651,031    (1,667,609)       1,362,704
Dividends declared                              (10,407)            -                -             -          (10,407)
                                           -------------------------------------------------------------------------------
<B>Retained earnings, end of the period</B>          1,597,629        27,193        1,882,453    (1,909,646)       1,597,629
                                           ===============================================================================

                                                               <B>Three Months Ended September 30, 2003</B>
                                           -------------------------------------------------------------------------------
<B>                                                             8.32% Notes                                      Teekay
                                                Teekay        Guarantor     Non-Guarantor                   Shipping Corp.
                                             Shipping Corp.  Subsidiaries   Subsidiaries   Eliminations   &amp; Subsidiaries
                                                   $             $                $             $                $</B>
                                           -------------------------------------------------------------------------------

Voyage revenues                                       -        17,203          381,156       (17,815)         380,544
Operating expenses                                2,916         8,786          342,881       (17,815)         336,768
                                           -------------------------------------------------------------------------------
   Income (loss) from vessel operations          (2,916)        8,417           38,275             -           43,776
Net interest expense                            (16,063)            -           (4,965)            -          (21,028)
Equity in net income of subsidiaries             51,427             -                -       (51,427)               -
Other income (loss)                             (12,121)            -            9,700             -           (2,421)
                                           -------------------------------------------------------------------------------
<B>Net income</B>                                       20,327         8,417           43,010       (51,427)          20,327
Retained earnings (deficit), beginning of
      the period                              1,087,367       (11,617)       1,326,299    (1,314,682)       1,087,367
Dividends declared                               (8,588)            -                -             -           (8,588)
                                           -------------------------------------------------------------------------------
<B>Retained earnings (deficit), end of the
      period</B>                                  1,099,106        (3,200)       1,369,309     1,366,109        1,099,106
                                           ===============================================================================
</PRE>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
___________________<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(See Note 8)</FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SCHEDULE A</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS <BR>
(in thousands of U.S. dollars)<BR>
(unaudited) </FONT></H1>

<PRE>
                                                                <B>Nine Months Ended September 30, 2004</B>
                                           -------------------------------------------------------------------------------
<B>                                                             8.32% Notes                                      Teekay
                                                Teekay        Guarantor     Non-Guarantor                   Shipping Corp.
                                             Shipping Corp.  Subsidiaries   Subsidiaries   Eliminations   &amp; Subsidiaries
                                                   $             $                $             $                $</B>
                                           -------------------------------------------------------------------------------

Voyage revenues                                       -        47,687        1,549,742      (47,744)        1,549,685
Operating expenses                               10,399        16,055        1,045,551      (47,744)        1,024,261
                                           -------------------------------------------------------------------------------
      Income (loss) from vessel operations      (10,399)       31,632          504,191            -           525,424
Net interest expense                            (22,642)            -          (52,780)           -           (75,422)
Equity in net income of subsidiaries            560,656             -                -     (560,656)                -
Other (loss) income                               5,269            (2)          77,615                         82,882
                                           -------------------------------------------------------------------------------
<B>Net income</B>                                      532,884        31,630          529,026     (560,656)          532,884
Retained earnings, beginning of the period    1,095,650         5,107        1,343,883   (1,348,990)        1,095,650
Retained earnings adjustment (1)                      -        (9,544)           9,544            -                 -
Dividends declared                              (30,905)            -                -            -           (30,905)
                                           -------------------------------------------------------------------------------
<B>Retained earnings, end of the period</B>          1,597,629        27,193        1,882,453    1,909,646         1,597,629
                                           ===============================================================================
</PRE>
<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)&nbsp;&nbsp;&nbsp;
          During 2003 and the nine-month period ended September 30, 2004, the Company has
          repurchased $127.6 million of the 8.32% Notes. Consequently, four of the
          Company&#146;s guarantor subsidiaries were released from the guarantee of the
          8.32% Notes during the second quarter of 2004. </FONT></P>

<PRE>
                                                                <B>Nine Months Ended September 30, 2003</B>
                                           -------------------------------------------------------------------------------
                                           <B>                  8.32% Notes                                      Teekay
                                               Teekay        Guarantor    Non-Guarantor                  Shipping Corp.
                                            Shipping Corp.  Subsidiaries   Subsidiaries    Eliminations   &amp; Subsidiaries
                                                  $               $              $              $               $</B>
                                           -------------------------------------------------------------------------------

Voyage revenues                                       -        35,104        1,125,659       (35,716)       1,125,047
Operating expenses                                9,380        25,192          877,042       (35,716)         875,898
                                           -------------------------------------------------------------------------------
      Income (loss) from vessel operations       (9,380)        9,912          248,617             -          249,149
Net interest expense                            (40,790)            -          (14,191)            -          (54,981)
Equity in net income of subsidiaries            233,809             -                -      (233,809)               -
Other loss                                      (12,857)            -          (10,529)            -          (23,386)
                                           -------------------------------------------------------------------------------
<B>Net income</B>                                      170,782         9,912          223,897      (233,809)         170,782
Retained earnings (deficit), beginning of
      the period                                954,005       (13,112)       1,145,412    (1,132,300)         954,005
Dividends declared                              (25,681)            -                -             -          (25,681)
                                           -------------------------------------------------------------------------------
<B>Retained earnings (deficit), end of the
      period</B>                                  1,099,106        (3,200)       1,369,309    (1,366,109)       1,099,106
                                           ===============================================================================
</PRE>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
___________________<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(See Note 8)</FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Project" -->
<A NAME=A101></A>
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SCHEDULE A</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A102></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A103></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONDENSED CONSOLIDATED
BALANCE SHEETS <BR>
(in thousands of U.S. dollars)<BR>
(unaudited) </FONT></H1>

<PRE>
                                                                      <B>As at September 30, 2004</B>
                                          ---------------------------------------------------------------------------------
                                           <B>                  8.32% Notes                                      Teekay
                                               Teekay        Guarantor    Non-Guarantor                  Shipping Corp.
                                            Shipping Corp.  Subsidiaries   Subsidiaries    Eliminations   &amp; Subsidiaries
                                                  $               $              $              $               $</B>
                                          ---------------------------------------------------------------------------------
<B>ASSETS</B>
Cash and cash equivalents                            -               -         308,034               -           308,034
Other current assets                             5,535             177         421,275        (145,000)          281,987
                                          ---------------------------------------------------------------------------------
     Total current assets                        5,535             177         729,309        (145,000)          590,021
Vessels and equipment (net)                          -          88,251       3,540,936         (88,251)        3,540,936
Advances due from subsidiaries                 214,037               -               -        (214,037)                -
Investment in direct financing leases                -               -          96,456               -            96,456
Other assets (principally restricted
     cash and investments in subsidiaries)   2,472,140               -         399,514      (2,472,140)          399,514
Investment in joint ventures                         -               -          53,906               -            53,906
Intangible assets - net                              -               -         282,217               -           282,217
Goodwill                                             -               -         176,220               -           176,220
                                          ---------------------------------------------------------------------------------
                                             2,691,712          88,428       5,278,558      (2,919,428)        5,139,270
                                          =================================================================================
<B>LIABILITIES &amp; STOCKHOLDERS'  EQUITY</B>
Current liabilities                             12,647             769         485,852        (145,000)          354,268
Long-term debt and other long-term
     liabilities                               550,028               -       2,143,665               -         2,693,693
Due (from) to affiliates                             -         (85,462)        661,595        (576,133)                -
                                          ---------------------------------------------------------------------------------
     Total liabilities                         562,675         (84,693)      3,291,112        (721,133)        3,047,961
                                          ---------------------------------------------------------------------------------
Minority interest                                    -               -          14,563               -            14,563
Stockholders' Equity
Capital stock                                  531,408              11           5,955          (5,966)          531,408
Contributed capital                                  -         145,917         136,766        (282,683)                -
Retained earnings                            1,597,629          27,193       1,882,453      (1,909,646)        1,597,629
Accumulated other comprehensive income
     (loss)                                          -               -         (52,291)              -           (52,291)
                                          ---------------------------------------------------------------------------------
     Total stockholders' equity              2,129,037         173,121       1,972,883      (2,198,295)        2,076,746
                                          ---------------------------------------------------------------------------------
                                             2,691,712          88,428       5,278,558      (2,919,428)        5,139,270
                                          =================================================================================

                                                                       <B>As at December 31, 2003</B>
                                          ---------------------------------------------------------------------------------
                                           <B>                  8.32% Notes                                      Teekay
                                               Teekay        Guarantor    Non-Guarantor                  Shipping Corp.
                                            Shipping Corp.  Subsidiaries   Subsidiaries    Eliminations   &amp; Subsidiaries
                                                  $               $              $              $               $</B>
                                         ------------------ ------------ ----------------- --------------- ----------------
<B>ASSETS</B>                                                 -            -           292,284              -           292,284
Cash and cash equivalents
Other current assets                               1,429          344           282,476        (96,000)          188,249
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total current assets                          1,429          344           574,760        (96,000)          480,533
Vessels and equipment (net)                            -      242,182         2,332,678              -         2,574,860
Advances due from subsidiaries                   309,071            -                 -       (309,071)                -
Investment in direct financing leases                  -            -            73,073              -            73,073
Other assets (principally marketable
     securities and investments in
     subsidiaries)                             1,911,491            -           155,844     (1,911,491)          155,844
Investment in joint ventures                           -            -            54,392              -            54,392
Intangible assets - net                                -            -           118,588              -           118,588
Goodwill                                               -            -           130,754              -           130,754
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               2,221,991      242,526         3,440,089     (2,316,562)        3,588,044
                                         ================== ============ ================= =============== ================
<B>LIABILITIES &amp; STOCKHOLDERS'  EQUITY</B>
Current liabilities                               25,371        1,746           343,515        (96,000)          274,632
Long-term debt and other long-term
     liabilities                                 608,317            -         1,037,946              -         1,646,263
Due (from) to affiliates                               -     (133,657)          493,190       (359,533)                -
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total liabilities                           633,688     (131,911)        1,874,651       (455,533)        1,920,895
                                         ------------------ ------------ ----------------- --------------- ----------------
Minority Interest                                      -            -            15,322              -            15,322
Stockholders' Equity
Capital stock                                    492,653           23             5,943         (5,966)          492,653
Contributed capital                                    -      369,307           136,766       (506,073)                -
Retained earnings                              1,095,650        5,107         1,343,883     (1,348,990)        1,095,650
Accumulated other comprehensive loss                   -            -            63,524              -            63,524
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total stockholders' equity                1,588,303      374,437         1,550,116     (1,861,029)        1,651,827
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               2,221,991      242,526         3,440,089     (2,316,562)        3,588,044
                                         ================== ============ ================= =============== ================
</PRE>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
___________________<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(See Note 8)</FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>


<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Project" -->
<A NAME=A107></A>
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>SCHEDULE A </B></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A108></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<A NAME=A109></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS <BR>
(in thousands of U.S. dollars) </FONT></H1>

<PRE>
                                                                  <B>Nine Months Ended September 30, 2004</B>
                                              ----------------- ------------- --------------- ------------ ----------------
                                           <B>                      8.32% Notes                                      Teekay
                                                   Teekay        Guarantor    Non-Guarantor                  Shipping Corp.
                                                Shipping Corp.  Subsidiaries   Subsidiaries    Eliminations  &amp; Subsidiaries
                                                     $               $              $              $               $</B>
                                              ----------------- ------------- --------------- ------------ ----------------
Cash and cash equivalents provided by (used for)
<B>OPERATING ACTIVITIES</B>
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow from (used for)
     operating activities                           (45,893)        39,220          526,897           -          520,224
                                              ----------------- ------------- --------------- ------------ ----------------
<B>FINANCING ACTIVITIES</B>
Net proceeds from long-term debt                          -              -        1,469,670           -        1,469,670
Scheduled repayments of long-term debt              (59,924)             -          (29,452)          -          (86,376)
Prepayments of long-term debt                             -              -       (1,462,439)          -       (1,462,439)
Other                                               102,817        (39,028)         (60,836)          -            2,953
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow from (used for)
     financing activities                            45,893        (39,028)         (83,057)          -          (76,192)
                                              ----------------- ------------- --------------- ------------ ----------------

<B>INVESTING ACTIVITIES</B>
Expenditures for vessels and equipment                    -           (192)        (465,035)          -         (465,227)
Proceeds from sale of vessels and equipment               -              -          220,917           -          220,917
Purchase of Teekay Shipping Spain, S.A.                   -              -         (286,854)          -         (286,854)
Proceeds from sale of marketable securities               -              -          135,357           -          135,357
Other                                                     -              -          (32,475)          -          (32,475)
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow used for investing
     activities                                           -           (192)        (428,090)          -         (428,282)
                                              ----------------- ------------- --------------- ------------ ----------------
<B>Increase in cash and cash equivalents</B>                     -              -           15,750           -           15,750
Cash and cash equivalents, beginning of the
     period                                               -              -          292,284           -          292,284
                                              ----------------- ------------- --------------- ------------ ----------------
<B>Cash and cash equivalents, end of the period</B>              -              -          308,034           -          308,034
                                              ================= ============= =============== ============ ================

                                                                  <B>Nine Months Ended September 30, 2003</B>
                                              ----------------- ------------- --------------- ------------ ----------------
                                           <B>                      8.32% Notes                                      Teekay
                                                   Teekay        Guarantor    Non-Guarantor                  Shipping Corp.
                                                Shipping Corp.  Subsidiaries   Subsidiaries    Eliminations  &amp; Subsidiaries
                                                     $               $              $              $               $</B>
                                              ----------------- ------------- --------------- ------------ ----------------
Cash and cash equivalents provided by (used for)
<B>OPERATING ACTIVITIES</B>
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow from (used for)
     operating activities                           (52,434)        16,048          367,013           -          330,627
                                              ----------------- ------------- --------------- ------------ ----------------
<B>FINANCING ACTIVITIES</B>
Net proceeds from long-term debt                    138,509              -        1,540,788           -        1,679,297
Scheduled repayments of long-term debt                    -              -          (49,114)          -         (49,1114)
Prepayments of long-term debt                             -              -       (1,023,000)          -       (1,023,000)
Other                                               (86,075)       (15,702)          95,800           -           (5,977)
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow from (used for)
     financing activities                            52,434        (15,702)         564,474           -          601,206
                                              ----------------- ------------- --------------- ------------ ----------------

<B>INVESTING ACTIVITIES</B>
Expenditures for vessels and equipment                    -           (346)        (226,724)          -         (227,070)
Proceeds from sale of vessels and equipment               -              -         (704,734)          -         (704,734)
Purchase of Navion AS                                     -              -           91,080           -           91,080
Other                                                     -              -          (39,783)          -          (39,783)
                                              ----------------- ------------- --------------- ------------ ----------------
     Net cash flow used for investing
     activities                                           -           (346)        (880,161)          -         (880,507)
                                              ----------------- ------------- --------------- ------------ ----------------
<B>Increase in cash and cash equivalents</B>                     -              -           51,326           -           51,326
Cash and cash equivalents, beginning of the
     period                                               -              -          284,625           -          284,625
                                              ----------------- ------------- --------------- ------------ ----------------
<B>Cash and cash equivalents, end of the period</B>              -              -          335,951           -          335,951
                                              ================= ============= =============== ============ ================
</PRE>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
___________________<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(See Note 8)</FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project" -->
<A NAME=A001></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES<BR>
SEPTEMBER 30, 2004<BR>
PART I &#151; FINANCIAL INFORMATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 2 -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></H1>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>RESULTS OF OPERATIONS </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>General</B></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Teekay is one of the world&#146;s
leading providers of international crude oil and petroleum product transportation
services. We estimate that we transported more than 10 percent of the world&#146;s
seaborne oil in 2003. Through our recent acquisition of Naviera F. Tapias S.A. (renamed
Teekay Shipping Spain S.A.), we have also expanded into the liquefied natural gas (LNG) shipping sector. As
at September 30, 2004, our fleet (excluding vessels managed for third parties) consisted
of 161 vessels (including 17 newbuildings on order, 52 vessels time-chartered-in and five
vessels owned through joint ventures). Our conventional tankers provide for a total
cargo-carrying capacity of approximately 16.4 million deadweight tonnes <I>(mdwt)</I>, and our
LNG fleet capacity totals approximately 1.0 million cubic meters. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our voyage revenues are derived from: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Voyage or &#147;spot&#148;
charters, which are charters priced on a current, or &#147;spot,&#148; market rate;
</FONT></TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Time
charters, whereby vessels are chartered to customers for a fixed period of time at rates
that are generally fixed, but may contain a variable component; and </FONT></TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
Contracts of affreightment, where we carry an agreed quantity of cargo for a customer over
a specified trade route within a given period of time. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The table below illustrates the
primary distinctions among these types of charters and contracts: </FONT></P>

<PRE>
                                                                                                <U>Contract of</U>
                                          <U>Voyage Charter(1)</U>            <U>Time Charter</U>             <U>Affreightment</U>

Typical contract length...............    Single voyage             One year or more          One year or more

Hire rate (2) basis...................    Varies                    Daily                     Per barrel of cargo carried

Voyage expenses (3)...................    We pay                    Customer pays             We pay

Vessel operating expenses (3).........    We pay                    We pay                    We pay

Off-hire (4)..........................    Customer does not         Varies                    Customer does not
                                          pay                                                 pay</PRE>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
________________________<BR></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
     (1)&nbsp;&nbsp;&nbsp;&nbsp;Under a consecutive voyage charter, the customer pays for idle time. <BR>
     (2)&nbsp;&nbsp;&nbsp;&nbsp;&#147;Hire&#148; rate refers to the basic payment from the charterer for the use
        of the vessel. <BR>
     (3)&nbsp;&nbsp;&nbsp;&nbsp;Defined below under &#147;Important Financial and Operational
        Terms and Concepts.&#148; <BR>
     (4)&nbsp;&nbsp;&nbsp;&nbsp;&#147;Off-hire&#148; refers to the time a vessel is not available for service.</FONT></P>


<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Segments</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our fleet is divided into three main
segments, the spot tanker segment, the fixed-rate tanker segment and the fixed-rate LNG
segment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Spot Tanker Segment</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our spot tanker segment consists of
conventional crude oil tankers and product carriers operating on the spot market or
subject to time charters or contracts of affreightment priced on a spot-market basis or
short-term fixed-rate contracts. We consider contracts that have an original term of less
than three years in duration to be short-term. All of our very large crude carrier (VLCC)
fleet and substantially all of our conventional Aframax, large product and small product
tanker fleets are among the vessels included in the spot tanker segment. Our spot market
operations contribute to the volatility of our revenues, cash flow from operations and net
income. Historically, the tanker industry has been cyclical, experiencing volatility in
profitability and asset values resulting from changes in the supply of, and demand for,
vessel capacity. In addition, tanker spot markets historically have exhibited seasonal
variations in charter rates. Tanker spot markets are typically stronger in the winter
months as a result of increased oil consumption in the northern hemisphere and
unpredictable weather patterns that tend to disrupt vessel scheduling. During the third
quarter, we took delivery of two Aframax tanker newbuildings trading on the spot market,
and sold six older Aframax tankers and one VLCC. As at September 30, 2004, we had five
Aframax tankers on order in our spot tanker segment scheduled to be delivered between
January 2005 and March 2007, three large product tankers scheduled to be delivered between
August 2005 and December 2006, and one Suezmax tanker scheduled to be delivered in March
2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Fixed-Rate Tanker Segment</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our fixed-rate tanker segment
includes our shuttle tanker operations, floating storage and offtake (FSO) vessels, liquid
petroleum gas carriers, and conventional crude oil, methanol and product tankers on
long-term fixed-rate time-charter contracts or contracts of affreightment. Our shuttle
tanker business, which is operated through our subsidiaries Navion AS (or Navion) and
Ugland Nordic Shipping, (or UNS) provides services to oil companies, primarily in the
North Sea, under long-term fixed-rate contracts of affreightment or time-charter
agreements. Historically, the utilization of shuttle tankers 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 the offshore oil platforms, which generally
reduces oil production. During the third quarter, we sold one older shuttle tanker. As at
September 30, 2004, we had four newbuilding conventional crude oil Aframax tankers on
order in our fixed-rate tanker segment (including two acquired as part of our acquisition
of Teekay Shipping Spain, discussed below), which are scheduled to be delivered between
October 2004 and March 2008. Upon delivery, two of the Aframax tankers will commence
10-year long-term charters to our joint venture, Skaugen PetroTrans Inc. (SPT). In April
2004, we commenced a charter contract to provide Unocal Thailand with an FSO vessel (the
Pattani Spirit) for a minimum period of 10 years. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<A NAME=A110></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Fixed-Rate LNG Segment</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our fixed-rate LNG segment consists
of LNG carriers subject to long-term, fixed-rate time-charter contracts. The acquisition
of Teekay Shipping Spain on April 30, 2004 established our entry into the LNG shipping sector. Our fixed-rate LNG segment
includes three LNG carriers acquired as part of the Teekay Shipping Spain acquisition. Two
of the LNG carriers have been included from the date of the Teekay Shipping Spain
acquisition. We took delivery of one LNG carrier in July 2004, which commenced service
under a 25-year time-charter contract (with a charterer&#146;s option to extend an
additional five years). As at September 30, 2004, we had four newbuilding LNG carriers on
order. One newbuilding LNG carrier is expected to deliver in the fourth quarter of 2004,
when it will commence service under a 20-year time-charter contract (with a
charterer&#146;s option to extend an additional ten years). Three newbuilding LNG carriers
will commence service under long-term contracts with Ras Lafan Liquefied Natural Gas Co.
Limited (RasGas II), a joint venture company between ExxonMobil Corporation and Qatar
Petroleum upon delivery in the fourth quarter of 2006 and the first half of 2007. The
vessels will be time-chartered to RasGas II for a period of 20 years (with a
charterer&#146;s option to extend for periods up to an additional 15 years). These LNG
charter contracts are subject, in certain circumstances, to termination and vessel
purchase rights. </FONT></P>

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<A NAME=A111></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Acquisition of Teekay
Shipping Spain, S.A.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>On April 30, 2004, we acquired 100%
of the issued and outstanding shares of Teekay Shipping Spain, S.A. (formerly Naviera F.
Tapias, S.A.) for $298.2 million in cash and the assumption of existing debt. Please see
Item 1 &#151; Financial Statements: Note 3 &#150; Acquisition of Teekay Shipping Spain,
S.A. We believe the long-term, fixed-rate nature of Teekay Shipping Spain&#146;s charter
contracts will add stability to our cash flow and earnings throughout the tanker market
cycle. </FONT></P>

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<A NAME=A112></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Acquisition of Navion AS</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In April 2003, we acquired 100% of
the issued and outstanding shares of Navion for approximately $774.2 million in cash,
including transaction costs of approximately $7.0 million. Please see Item 1 &#151;
Financial Statements: Note 4 &#151; Acquisition of Navion AS. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Proposed Initial Public Offering by
Teekay LNG Partners L.P.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In November 2004, our wholly-owned
subsidiary, Teekay LNG Partners L.P. (Teekay LNG Partners), filed a registration statement
with the U.S. Securities and Exchange Commission for an initial public offering of its
common units. Teekay LNG Partners is a Marshall Islands partnership recently formed by us
as part of our strategy to expand our operations in the LNG sector. Upon the closing of
the offering, Teekay LNG Partners will provide LNG and crude oil marine transportation
services through a fleet of LNG carriers and Suezmaz class crude oil tankers, primarily
consisting of vessels we obtained through our acquisition of Teekay Shipping Spain. Please
see Item 1 &#150; Financial Statements: Note 17 &#150; Subsequent Events. </FONT></P>

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<A NAME=A114></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Important Financial and
Operational Terms and Concepts</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
use a variety of financial and operational terms and concepts when analyzing our
performance. These include the following: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voyage Revenues.</I></B> Voyage revenues primarily include revenues from voyage charters, time charters and
contracts of affreightment. Voyage revenues are affected by hire rates and the number of
calendar-ship-days a vessel operates. Voyage revenues are also affected by the mix of
business between time charters, voyage charters and contracts of affreightment. Hire rates
for voyage charters are more volatile, as they are typically tied to prevailing market
rates at the time of a voyage. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voyage Expenses.</I></B> Voyage expenses are all expenses unique to a particular voyage, including any
bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency
fees and commissions. Voyage expenses are typically paid by the customer under time
charters and by us under voyage charters and contracts of
affreightment. When we pay voyage expenses, we typically add them to our hire rates at an
approximate cost. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Net Voyage Revenues.</I></B> Net voyage revenues represent voyage revenues less voyage expenses.
Because the amount of voyage expenses we incur for a particular charter depends upon the
form of the charter, we use net voyage revenues to improve the comparability between
periods of reported revenues that are generated by the different forms of charters. We
principally use net voyage revenues, a non-GAAP financial measure, because it provides
more meaningful information to us than voyage revenues, the most directly comparable
financial measure under accounting principles generally accepted in the U.S. <I>(GAAP)</I>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Time Charter Equivalent (TCE) Rates.</I></B> Bulk shipping industry freight rates are commonly measured
in the shipping industry at the net voyage revenues level in terms of &#147;time-charter
equivalent&#148; <I>(or TCE)</I> rates, which represent net voyage revenues divided by
calendar-ship-days. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Vessel Operating Expenses.</I></B> We are responsible for vessel operating expenses, which include
crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income from Vessel Operations.</I></B> To assist us in evaluating our operations by segment, we sometimes
analyze our income from vessel operations for each segment, which represents the income we
receive from the segment after deducting operating expenses and depreciation and
amortization, but prior to the deduction of interest expenses, taxes, foreign currency and
interest rate swap gains or losses and other income and losses. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B><I>Drydocking.</I></B> We must periodically drydock each of our vessels for inspection, repairs and
          maintenance and any modifications to comply with industry certification or
          governmental requirements. Generally, we drydock each of our vessels every two
          and a half to five years, depending upon the type of vessel and its age. We
          capitalize a substantial portion of the costs we incur during drydocking and
          amortize those costs on a straight-line basis from the completion of a
          drydocking to the estimated completion of the next drydocking. We expense costs
          related to routine repairs and maintenance incurred during drydocking that do
          not improve or extend the useful lives of the assets. The number of drydockings
          undertaken in a given period, the size of the vessels and the nature of the work
          performed determine the level of drydocking expenditures. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Depreciation and Amortization.</I></B> Our depreciation and amortization expense typically consists of the
following three components: </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
charges related to the depreciation of the historical cost of our fleet (less an estimated
residual value) over the estimated useful lives of our vessels;
</FONT></TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
charges related to the amortization of drydocking expenditures over the estimated number
of years to the next scheduled drydocking; and
</FONT></TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
charges related to the amortization of the fair value of the time charters, contracts of
affreightment and intellectual property over the period over which the asset is expected
to contribute to the future cash flows of the Company.
</FONT></TD>
</TR>
</TABLE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Calendar-ship-days.</I></B> Calendar-ship-days are equal to the aggregate number of calendar days in a
          period that our vessels operate during that period. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Restricted Cash Deposits.</I></B> Under capital lease arrangements for two of our LNG carriers, we (a) borrow
under term loans and deposit the proceeds into restricted cash accounts and (b) enter into
capital leases, also referred to as bareboat charters, for the vessels. The restricted
cash deposits equal the present value of the remaining amounts we owe under the leases
arrangements, including our obligation to purchase the vessels at the end of the leases
terms. During vessel construction, we borrow under the term loans and make restricted cash
deposits that approximate the construction installment payments. We also maintain cash on deposit
relating to certain term loans and other obligations. Please see Item 1 &#150; Notes to
the Consolidated Financial Statements: Note 9 &#150; Capital Lease Obligations and
Restricted Cash. </FONT></P>

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<A NAME=A115></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Tanker Market Overview</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>During the third quarter of 2004,
spot tanker freight rates increased further from the already firm levels experienced in the
prior quarter. This was due primarily to increased oil production in response to global
oil demand growth, led by Asia and North America. Subsequent to the end of the quarter,
spot tanker rates have surged to their highest levels experienced in the last three decades due
to the cumulative effect of positive tanker market fundamentals. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Global oil demand, an underlying
driver of tanker demand, continued to be strong, averaging 81.9 million barrels per day
(mb/d) during the third quarter of 2004, a 0.7 mb/d rise from the previous quarter and 2.6
mb/d higher than the third quarter of 2003. Increased oil consumption in China and North
America, combined with higher oil-based electricity generation in Japan as a result of
safety-related nuclear reactor shutdowns, were among the key factors driving growth in
global oil demand. On November 10, 2004, the International Energy Agency's (IEA)
forecast for 2004 global oil demand was 82.4 mb/d, representing the highest level of annual
demand since the 1970&#145;s. The IEA is forecasting an increase in global demand
for 2005 of 1.4 mb/d, or 1.7%. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Global oil supply grew to 83.3 mb/d
in the third quarter of 2004, an increase of 1.0 mb/d over the prior quarter and 3.9 mb/d
higher than the third quarter of 2003. Continuing a recent trend, tanker tonne-mile demand
growth was further amplified as all of the increase in oil production was from long-haul
OPEC sources. OPEC production rose by 1.2 mb/d during the quarter, while non-OPEC
production declined slightly due to scheduled field maintenance in the North Sea and
hurricanes in the United States. At its September 15, 2004 meeting, OPEC (excluding Iraq)
raised its oil production quota by 1.0 mb/d to 27.0 mb/d, effective on November 1, 2004,
although actual current OPEC production remains above this level. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The size of the world tanker fleet
rose to 330.0 mdwt as of September 30, 2004, up 1.5% from the end of the previous quarter.
Deletions totaled 1.4 mdwt in the third quarter of 2004, down from 2.8 mdwt in the
previous quarter. Deliveries of tanker newbuildings during the third quarter of 2004
totaled 6.2 mdwt compared to the 6.6 mdwt in the previous quarter. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As of September 30, 2004, the world
tanker orderbook stood at 86.8 mdwt, or 26.3% of the world tanker fleet, the same
percentage as at the end of the previous quarter. </FONT></P>

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<A NAME=A116></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Results of Operations</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In accordance with GAAP, we report
gross voyage revenues in our income statements and include voyage expenses among our
operating expenses. However, shipowners base economic decisions regarding the deployment
of their vessels upon anticipated TCE rates, and industry analysts typically measure bulk
shipping freight rates in terms of TCE rates. This is because under time charter contracts
the customer usually pays the voyage expenses whereas under voyage charters and contracts
of affreightment the shipowner 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 voyage revenues (i.e. voyage revenues less voyage expenses) and TCE rates
of our three reportable segments where applicable. Please see Item 1 &#151; Financial
Statements: Note 2 &#150; Segment Reporting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The following tables compare our net
voyage revenues (which is a non-GAAP financial measure) by reportable segment for the
three and nine-month periods ended September 30, 2004, and September 30, 2003 to the most
directly comparable GAAP financial measure: </FONT></P>

<PRE>
- ------------------------ ------------------------------------------------- -------------------------------------------------
                                        <B>Three Months Ended                                Three Months Ended
                                        September 30, 2004                                September 30, 2003</B>
                         ------------------------------------------------- -------------------------------------------------
                             Spot     Fixed-Rate   Fixed-Rate                  Spot     Fixed-Rate   Fixed-Rate
                            Tanker      Tanker        LNG                     Tanker      Tanker       LNG
                            Segment     Segment     Segment      Total        Segment    Segment      Segment      Total
                           ($000's)    ($000's)    ($000's)     ($000's)     ($000's)    ($000's)     ($000's)    ($000's)
- ------------------------ ----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Voyage revenues........     326,287     177,000      17,325      520,612      240,852     139,692        -         380,544
Voyage expenses........      88,444      17,967          55      106,466       90,381      15,305        -         105,686
- ------------------------ ----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Net voyage revenues....     237,843     159,033      17,270      414,146      150,471     124,387        -         274,858
- ------------------------ ----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------

- ------------------------ ------------------------------------------------- -------------------------------------------------
                                        <B>Three Months Ended                                Three Months Ended
                                        September 30, 2004                                September 30, 2003</B>
                         ------------------------------------------------- -------------------------------------------------
                             Spot     Fixed-Rate   Fixed-Rate                  Spot     Fixed-Rate   Fixed-Rate
                            Tanker      Tanker        LNG                     Tanker      Tanker       LNG
                            Segment     Segment     Segment      Total        Segment    Segment      Segment      Total
                             (%)          (%)         (%)         (%)           (%)        (%)          (%)         (%)
- ------------------------ ----------- ------------ ----------- ------------ ----------- ----------- ------------ ------------
Voyage revenues........      62.7        34.0         3.3        100.0         63.3        36.7          -         100.0
Voyage expenses........      83.0        16.9         0.1        100.0         85.5        14.5          -         100.0
- ------------------------ ----------- ------------ ----------- ------------ ----------- ----------- ------------ ------------
Net voyage revenues....      57.4        38.4         4.2        100.0         54.7        45.3          -         100.0
- ------------------------ ----------- ------------ ----------- ------------ ----------- ----------- ------------ ------------

- ------------------------ ------------------------------------------------- -------------------------------------------------
                                        <B>Nine Months Ended                                 Nine Months Ended
                                        September 30, 2004                                September 30, 2003</B>
                         ------------------------------------------------- -------------------------------------------------
                             Spot     Fixed-Rate   Fixed-Rate                  Spot     Fixed-Rate   Fixed-Rate
                            Tanker      Tanker        LNG                     Tanker      Tanker       LNG
                            Segment     Segment     Segment      Total        Segment    Segment      Segment      Total
                           ($000's)    ($000's)    ($000's)     ($000's)     ($000's)    ($000's)     ($000's)    ($000's)
- ------------------------ ------------------------------------------------- -------------------------------------------------
Voyage revenues........     992,809     531,552      25,324    1,549,685      796,935     328,112        -       1,125,047
Voyage expenses........     263,920      54,968         170      319,058      250,810      33,397        -         284,207
- ------------------------ ------------------------------------------------- -------------------------------------------------
Net voyage revenues....     728,889     476,584      25,154    1,230,627      546,125     294,715        -         840,840
- ------------------------ ------------------------------------------------- -------------------------------------------------
</PRE>

<PRE>
- ------------------------ ------------------------------------------------- -------------------------------------------------
                                        <B>Nine Months Ended                                 Nine Months Ended
                                        September 30, 2004                                September 30, 2003</B>
                         ------------------------------------------------- -------------------------------------------------
                             Spot     Fixed-Rate   Fixed-Rate                  Spot     Fixed-Rate   Fixed-Rate
                            Tanker      Tanker        LNG                     Tanker      Tanker       LNG
                            Segment     Segment     Segment      Total        Segment    Segment      Segment      Total
                             (%)          (%)         (%)         (%)           (%)        (%)          (%)         (%)
- ------------------------ ----------- ------------ ----------- ------------ ----------- ----------- ------------ ------------
Voyage revenues........      64.1        34.3         1.6        100.0         70.8        29.2          -         100.0
Voyage expenses........      82.7        17.2         0.1        100.0         88.2        11.8          -         100.0
- ------------------------ ------------------------------------------------- -------------------------------------------------
Net voyage revenues....      59.2        38.8         2.0        100.0         64.9        35.1          -         100.0
- ------------------------ ------------------------------------------------- -------------------------------------------------
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The  following  tables  outline the TCE rates  earned by the  vessels in our spot tanker  segment for the three and
nine-month periods ended September 30, 2004, and September 30, 2003:</FONT></P>

<PRE>
- ------------------------------------------- -------------------------------------- -------------------------------------
                                                     <B>Three Months Ended                   Three Months Ended
                                                      September 30, 2004                   September 30, 2003</B>
                                            -------------------------------------- --------------------------------------
                                             Net Voyage                TCE per      Net Voyage               TCE per
                                              Revenues     Calendar    calendar-     Revenues    Calendar   calendar-
Vessel Type                                   ($000's)       Days     ship-day ($)   ($000's)      Days     ship-day ($)
- ------------------------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Very Large Crude Carriers.................     15,848          210      75,467         9,423          277     34,018
Suezmax Tankers...........................     28,282          620      45,616        15,323          644     23,793
Aframax Tankers...........................    168,640        5,426      31,080       100,328        5,477     18,318
Oil/Bulk/Ore Carriers (1).................        (23)           -           -         8,364          625     13,382
Large Product Tankers.....................     13,104          558      23,484         3,994          184     21,707
Small Product Tankers.....................     11,992          863      13,896         8,138          710     11,462
- ------------------------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Totals....................................    237,843        7,677      30,984       145,570        7,917     18,387
=========================================== ============ =========== ============= ============ ========== ==============

- ------------------------------------------- -------------------------------------- --------------------------------------
                                                      <B>Nine Months Ended                    Nine Months Ended
                                                      September 30, 2004                   September 30, 2003</B>
                                            -------------------------------------- --------------------------------------
                                             Net Voyage                TCE per      Net Voyage               TCE per
                                              Revenues     Calendar    calendar-     Revenues    Calendar   calendar-
Vessel Type                                   ($000's)       Days     ship-day ($)   ($000's)      Days     ship-day ($)
- ------------------------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Very Large Crude Carriers.................     50,205          756      66,409        24,073          543     44,333
Suezmax Tankers...........................     88,618        1,828      48,478        42,973        1,256     34,214
Aframax Tankers...........................    516,750       15,700      32,914       401,678       16,234     24,743
Oil/Bulk/Ore Carriers(1)..................      3,225          157      20,688        32,278        1,991     16,212
Large Product Tankers.....................     34,185        1,456      23,479        11,584          361     32,089
Small Product Tankers.....................     35,330        2,612      13,526        19,806        1,670     11,860
- ------------------------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Totals....................................    728,313       22,509      32,357       532,392       22,055     24,139
=========================================== ============ =========== ============= ============ ========== ==============
</PRE>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The oil/bulk/ore fleet&#146;s net voyage revenues exclude $4.9 million (three-month period ended
          September 30, 2003), $0.5 million (nine-month period ended September 30, 2004)
          and $13.7 million (nine-month period ended September 30, 2003) of net voyage
          revenues earned by the minority pool participants in the Panamax oil/bulk/ore
          pool that we operated prior to our disposition of all of our oil/bulk/ore
          carriers and the termination of the pool. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Our acquisition of Teekay Shipping
Spain was completed on April 30, 2004. Consequently, our 2004 financial results for our
segments only reflect Teekay Shipping Spain&#146;s results of operations commencing May 1,
2004. Our acquisition of Navion was completed during April 2003. Consequently, our 2003
financial results for our segments only reflect Navion&#146;s results of operations
commencing April 1, 2003. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Spot Tanker Segment</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>TCE rates for the vessels in our spot
tanker segment primarily depend on oil production and consumption levels, the number of
vessels scrapped, the number of newbuildings delivered and charterers&#146; preference for
modern tankers. As a result of our dependence on the tanker spot market, any fluctuations
in TCE rates will impact our revenues and earnings. Our average TCE rate for the vessels
in our spot tanker segment increased 68.5% and 34.0%, respectively, to $30,984 and $32,357
for the three and nine-month periods ended September 30, 2004, from $18,387 and $24,139
for the same periods last year. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The following table provides a summary
of the change in fleet size of our spot tanker segment by owned and chartered-in vessels:</FONT></P>

<PRE>--------------------------- -------------------------------------- --------------------------------------
                                      <B>Three Months Ended                      Nine Months Ended
                                         September 30,                          September 30,</B>
                            -------------------------------------- --------------------------------------
                               <B>2004         2003     Percentage      2004         2003     Percentage
                                                       Change                                Change</B>
                             (Calendar    (Calendar                 (Calendar    (Calendar
                               Days)        Days)        (%)          Days)        Days)       (%)
- --------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Owned Vessels                  4,170        5,344      (22.0)        12,489       16,334     (23.5)
Chartered-in Vessels           3,507        2,573       36.3         10,020        5,721      75.1
- --------------------------- ------------ ----------- ------------- ------------ ---------- --------------
Total                          7,677        7,917        3.0         22,509       22,055       2.1
=========================== ============ =========== ============= ============ ========== ==============</PRE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The average fleet size of our spot
tanker fleet (including vessels chartered-in) decreased 3.0% for the three-month period
ended September 30, 2004 from the same period last year, primarily due to the sale of a
number of older single-hull vessels during the last 12 months, partially offset by
newbuilding deliveries and additional chartered-in vessels. The average fleet size of our
spot tanker fleet (including vessels chartered-in) increased 2.1% for the nine-month
period ended September 30, 2004 from the same period last year, primarily due to the
acquisition of Navion, and an increase in the number of vessels chartered-in, partially
offset by the sale of older vessels in the fourth quarter of 2003 and the first nine
months of 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Net voyage revenues for the spot
tanker segment increased 58.1% and 33.5% to $237.8 million and $728.9 million,
respectively, for the three and nine-month periods ended September 30, 2004, from $150.5
million and $546.1 million for the same periods last year, primarily due to the
significant increase in spot tanker charter rates. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Vessel operating expenses, decreased
26.2% and 26.3% to $23.5 million and $70.7 million, respectively, for the three and
nine-month periods ended September 30, 2004, from $31.8 million and $95.8 million in the
same periods last year. The decreases in vessel operating expenses were mainly
attributable to the sale of the older vessels in the fourth quarter of 2003 and lower
repairs and maintenance activity, partially offset by the increase from newbuilding deliveries. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Time-charter hire expense increased
42.4% and 68.0% to $71.3 million and $191.3 million, respectively, for the three and
nine-month periods ended September 30, 2004, from $50.1 million and $113.9 million for the
same periods last year. The increases were due primarily to the sale and leaseback of
three Aframax vessels in December 2003 and an increase in the average number of other
chartered-in vessels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Depreciation and amortization expense
decreased 7.7% and 7.2% to $24.9 million and $75.8 million, respectively, for the three
and nine-month periods ended September 30, 2004, from $27.0 million and $81.7 million for
the same periods last year. The decreases in depreciation and amortization were primarily
attributable to the previously mentioned sale of older vessels. Drydock amortization was
$4.3 million and $13.2 million, respectively, for the three and nine-month periods ended
September 30, 2004, compared to $6.0 million and $17.1 million for the same periods last
year. The decreases in drydock amortization were primarily due to the previously mentioned
dispositions of older vessels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Write-downs and (gain) loss on sale
of vessels for the three and nine-month periods ended September 30, 2004 reflects gains of
$49.8 million and $50.9 million, respectively, which include gains on the sale of seven
older vessels, as well as amortization of a deferred gain on the sale and leaseback of the
three Aframax tankers in December 2003. The write-downs and (gain) loss on sale of vessels
for the three and nine-month periods ended September 30, 2003 reflect losses of $5.8
million and $36.3 million, respectively, which are primarily comprised of the writedown of
vessel values in connection with their dispositions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Restructuring charges of $1.0 million
were incurred for the nine-month period ended September 30, 2004 relating to the closure
of our Oslo office. We had no restructuring charges in the three-month period ended
September 30, 2004. Restructuring charges of $0.4 million were incurred in both the three
and nine-month periods ended September 30, 2003 relating to the closure of our Oslo
office. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<A NAME=A118></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Fixed-Rate Tanker Segment</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The average fleet size of our
fixed-rate tanker segment (including vessels chartered-in) increased 28.8% for the
three-month period ended September 30, 2004 compared to the same period last year,
primarily due to the delivery of five conventional tankers on charter to ConocoPhillips,
the acquisition of Teekay Shipping Spain, the delivery of three Suezmax shuttle tankers,
and one FSO unit, which occurred at various times between the latter half of 2003 and early 2004. The average fleet size of
our fixed rate tanker segment (including vessels chartered-in) increased 59.0% for the
nine-month period ended September 30, 2004, compared to the same period last year,
primarily due to the aforementioned reasons and the acquisition of Navion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Net voyage revenues increased 27.9%
and 61.7% to $159.0 million and $476.6 million, respectively, for the three and nine-month
periods ended September 30, 2004, from $124.4 million and $294.7 million for the same
periods last year, due primarily to the increases in fleet size. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Vessel operating expenses increased
34.7% and 48.3% to $31.6 million and $85.5 million, respectively, for the three and
nine-month periods ended September 30, 2004, from $23.5 million and $57.6 million for the
same periods last year, due primarily to the increase in fleet size as mentioned above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Time-charter hire expense increased
8.1% and 63.7% to $49.6 million and $144.9 million, respectively, for the three and
nine-month periods ended September 30, 2004, compared to $45.8 million and $88.5 million
for the same periods last year. We did not have any chartered-in tankers in the fixed-rate
tanker segment prior to the acquisition of Navion in April 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Depreciation and amortization expense
increased 51.8% and 68.0% to $34.7 million and $96.0 million, respectively, for the three
and nine-month periods ended September 30, 2004, from $22.9 million and $57.1 million for
the same periods last year. These increases were due primarily to the previously mentioned
increases in fleet size and the amortization of the fair value of the time-charter contracts
that were acquired as part of the Teekay Shipping Spain acquisition.  Depreciation and
amortization expense included amortization of contracts of affreightment and time charter
contracts of $6.2 million and $16.4 million, respectively, in the three and nine-month periods
ended September 30, 2004, compared to $3.8 million and $7.5 million for the same periods
last year.  Depreciation and amortization expense included amortization of drydocking costs
of $2.1 million and $5.1 million, respectively, in the three and nine-month periods ended
September 30, 2004, compared to $1.0 million and $2.9 million for the same periods last
year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>No restructuring charges were
incurred in the three and nine-month periods ended September 30, 2004. Restructuring
charges of $0.3 million and $1.6 million, respectively, were incurred in the three and
nine-month periods ended September 30, 2003 relating to the closure of our Melbourne
office. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Fixed-Rate LNG Segment</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The results of our fixed-rate LNG
segment reflect the operations of our three LNG carriers (including one newbuilding that
delivered in July 2004) acquired as part of the acquisition of Teekay
Shipping Spain from May 1, 2004. A fourth newbuilding is scheduled to be delivered in
December 2004, which will commence service under a 20-year charter contract upon delivery.
We had no LNG shipping operations prior to the Teekay Shipping Spain acquisition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Net voyage revenues totaled $17.3
million and $25.2 million, respectively for the three and nine-month periods ended
September 30, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Vessel operating expenses totaled
$3.1 million and $4.7 million, respectively, for the three and nine-month periods ended
September 30, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Depreciation and amortization was
$5.2 million and $7.5 million, respectively, for the three and nine-month periods ended
September 30, 2004, which includes $1.5 million and $2.2 million, respectively, of
amortization of time-charter contracts acquired as part of the Teekay Shipping Spain
acquisition. </FONT></P>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Other Operating Results</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>General and administrative expenses
increased 23.8% to $29.1 million and 40.3% to $82.5 million, respectively, for the three
and nine-month periods ended September 30, 2004, from $23.5 million and $58.8 million for
the same periods last year. The increase for the three-month period ended September 30,
2004 is attributed primarily to our acquisition of Teekay Shipping Spain and an increase
in the accrual for performance-based compensation to our shore based employees due to the Company's
strong financial performance in 2004. The increase for the nine-month period ended September
30, 2004 reflects our acquisitions of Teekay Shipping Spain and Navion, underaccrued
performance bonuses paid during the first quarter of 2004, which related to 2003 results,
certain severance-related costs, primarily for a senior executive of one of our subsidiary companies,
and an increase in the accrual for performance-based compensation for 2004 as discussed above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Interest expense increased 61.4% to
$35.2 million, and 51.0% to $87.5 million, respectively, for the three and nine-month
periods ended September 30, 2004, from $21.8 million and $57.9 million for the same
periods last year. The increases primarily reflect the additional debt resulting from the
purchase of Navion and Teekay Shipping Spain. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Interest income increased 638.4% and
310.6% to $5.9 million and $12.0 million, respectively, for the three and nine-month
periods ended September 30, 2004, from $0.8 million and $2.9 million in the same periods
last year. These increases were primarily due to cash and restricted cash we acquired as
part of our acquisition of Teekay Shipping Spain. Please see Item 1 &#150; Notes to the
Consolidated Financial Statements: Note 9 &#150; Capital Lease Obligations and Restricted
Cash. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Equity income from joint ventures was
$2.5 million and $7.7 million, respectively, for the three and nine-month periods ended
September 30, 2004, compared to $1.4 million and $3.8 million in the same periods last
year. These increases are primarily the result of our 50% investment in SPT made during
September 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Gain on sale of marketable securities
was $90.1 million and $93.2 million, respectively, for the three and nine-month periods
ended September 30, 2004. During the three-month period ended September 30, 2004, we sold
our remaining investment in A/S Dampskibsselskabet TORM <I>(Torm)</I>, which accounts for most of
the gain in 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Other loss for the three and
nine-month periods ended September 30, 2004 was $12.7 million and $18.0 million,
respectively, and was primarily comprised of income tax expense, minority interest expense
and foreign exchange loss, partially offset by dividend income and leasing income from our
volatile organic compound emissions equipment. Other loss of $3.8 million for the
three-month period ended September 30, 2003 was comprised primarily of income tax expense
and minority interest expense, partially offset by dividend income from Nordic American
Tanker Shipping Ltd. and foreign exchange gain. Other loss of $22.4 million for the
nine-month period ended September 30, 2003 was comprised primarily of income tax expense
and minority interest expense, partially offset by dividend income and leasing income from
our volatile organic compound emissions equipment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As a result of the foregoing factors,
net income was $245.3 million and $532.9 million, respectively, for the three and
nine-month periods ended September 30, 2004, compared to $20.3 million and $170.8 million
for the same periods last year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>LIQUIDITY AND CAPITAL
RESOURCES</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As at September 30, 2004, our total
cash and cash equivalents was $308.0 million, compared to $292.3 million as at December
31, 2003. Our total liquidity, including cash and undrawn long-term borrowings, was $874.7
million as at September 30, 2004, up from $774.8 million as at December 31, 2003. The
increase in liquidity was mainly the result of proceeds from the sale of our investment in
Torm, and the sale of eight older vessels during the quarter, as well as cash generated by
our operating activities, partially offset by our cash payment relating to the Teekay
Shipping Spain acquisition, debt repayments, cash used for capital expenditures, and
payment of dividends. In our opinion, working capital is sufficient for our present
requirements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Net cash flow from operating
activities increased to $520.2 million in the nine-month period ended September 30, 2004,
from $330.6 million in the same period last year, mainly reflecting the significant
increase in our average spot TCE rates and the increase in our fleet size. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Scheduled debt repayments were $86.4
million during the nine-month period ended September 30, 2004, compared to $49.1 million
during the same period last year. Debt prepayments were $1,462.4 million during the
nine-month period ended September 30, 2004, compared to $1,023.0 million during the same
period last year. Of our debt prepayments in the nine-month period ended September 30,
2004, $944.8 million resulted from our drawing down and subsequently prepaying under some
of our eight long-term revolving credit facilities (the Revolvers) in anticipation of the
closing of the Teekay Shipping Spain acquisition and for internal restructuring purposes.
In addition, a total of $505.7 million of cash generated from operations and from proceeds
of longer-term financings was used to prepay certain term loans and Revolvers, and $12.0
million was used to repurchase a portion of the 8.32% First Preferred Ship Mortgage Notes
(the 8.32% Notes). Occasionally we use our Revolvers 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 Revolvers. Please see Item 1 &#150; Notes to Consolidated Financial Statements:
Note 8 &#150; Long-Term Debt. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As at September 30, 2004, our total
debt was $2,229.2 million, compared to $1,600.1 million as at December 31, 2003. As at
September 30, 2004, our Revolvers provided for borrowings of up to $1,228.9 million, of
which $566.7 million was undrawn. The amount available under the Revolvers reduces by $19.7
million (2004), $136.9 million (2005), $159.4 million (2006), $123.9 million (2007),
$449.8 million (2008) and $339.2 million (thereafter).  All of the Revolvers are collateralized
by first priority mortgages granted on 54 of the Company's vessels, together with other
related collateral, and include a guarantee from Teekay for all amounts outstanding under the
Revolvers.  Our 8.32% Notes are due February
1, 2006 and are subject to a sinking fund which retires $45.0 million principal amount of
the 8.32% Notes on February 1 of each year. Our 7.25% Premium Equity Participating
Security Units (the Equity Units) are due May 18, 2006 and our unsecured 8.875% Senior
Notes are due July 15, 2011. Our outstanding term loans reduce in monthly, quarterly or
semi-annual payments with varying maturities through 2023. Please see Item 1 &#150; Notes
to Consolidated Financial Statements: Note 8 &#150; Long-Term Debt. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Among other matters, our long-term
debt agreements generally provide for maintenance of certain vessel market value-to-loan
ratios and minimum consolidated financial covenants, prepayment privileges (in some cases
with penalties), and restrictions against the incurrence of new investments by the
individual subsidiaries without prior lender consent. The amount of Restricted Payments,
as defined, that we can make, including dividends and purchases of our own capital stock,
was limited to $717.8 million as at September 30, 2004. Certain of the loan agreements
require that a minimum level of free cash be maintained. As at September 30, 2004, this
amount was $100.0 million. Certain of the loan agreements also require that a minimum
level of free liquidity and undrawn revolving credit lines (excluding undrawn revolving
credit lines with less than 6 months to maturity) be maintained. As at September 30, 2004,
this amount was $198.5 million. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Dividends declared during the
nine-months ended September 30, 2004 were $30.9 million, or $0.375 cents per share. In
October 2003, we increased our quarterly dividend from $0.1075 per share to $0.125 per
share. In October 2004, we increased our quarterly dividend from $0.125 per share to
$0.1375 per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In November 2004, we announced
that our Board of Directors has authorized the repurchase of up to 3.0 million shares of
our Common Stock in the open market. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In November 2004, our subsidiary
Teekay LNG Partners filed a registration statement with the Securities and Exchange
Commission for an initial public offering of its common units. Proceeds from the offering
will be used to repay debt the partnership will owe to us and to pay
offering expenses. Proceeds of any exercise of the over-allotment option will be used to
repay debt under ship financing arrangements of the partnership. Please see Item 1 &#150;
Notes to the Consolidated Financial Statements: Note 17 &#150; Subsequent Events. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>During the nine months ended
September 30, 2004, we incurred capital expenditures for vessels and equipment of $465.2
million. These capital expenditures primarily represented the installment payments on our
newbuildings.  As at September 30, 2004, we were committed to the construction of three
Suezmax tankers, seven Aframax tankers, three
product tankers, and four LNG carriers. Please see Item 1 &#151; Notes to the Consolidated
Financial Statements: Note 10 &#150; Commitments and Contingencies. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We are also committed to capital
leases on three Suezmax tankers, two LNG carriers (including one newbuilding on order) and
one Aframax tanker. Each capital lease requires us to purchase the vessel at the end of
its respective lease term. Please see Item 1 &#150; Notes to the Consolidated Financial
Statements: Note 9 &#150; Capital Lease Obligations and Restricted Cash. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The following table summarizes our
long-term contractual obligations as at September 30, 2004 (in millions of U.S. dollars). </FONT></P>

<PRE>
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
                                                 2004      2005      2006       2007      2008    There-      Total
                                                                                                  after
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Long-term debt                                   37.6     155.0     251.8       63.0     325.7   1,396.1    2,229.2
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Chartered-in vessels (operating leases)         107.7     352.7     286.4      192.9     117.0     273.5    1,330.2
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Commitment for chartered-in vessels
   (capital leases)                              74.8      90.6     271.3        4.1       4.1      45.0      489.9
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Newbuilding installments                        241.0     377.9     255.9      141.0      50.7         -    1,066.5
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Volatile organic compound emissions
   equipment                                     14.2      21.0         -          -         -         -       35.2
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
Total                                           475.3     997.2   1,065.4      401.0     497.5   1,714.6    5,151.0
- ------------------------------------------- ---------- --------- --------- ---------- --------- --------- ----------
</PRE>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We and certain of our subsidiaries have
guaranteed our share of the outstanding mortgage debt in five 50%-owned joint venture
companies. Please see Item 1 &#150; Notes to Consolidated Financial Statements: Note 11
&#150; Commitments and Contingencies. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>As part of our growth strategy, we
will 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, and the issuance of additional
shares of capital stock. </FONT></P>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Critical Accounting
Policies</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>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.
Following is a discussion of the accounting policies that involve a high degree of
judgment and the methods of their application. For a further description of our material
accounting policies, please see Note 1 to our consolidated financial statements for the
year ended December 31, 2003 included in our Annual Report on Form 20-F filed with the
SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<A NAME=A123></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Revenue Recognition</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We generate a majority of our
revenues from spot voyages and voyages servicing contracts of affreightment. Within the
shipping industry, the two methods used to account for voyage revenues and expenses are
the percentage of completion and the completed voyage methods. Most shipping companies,
including us, use the percentage of completion method. For each method, voyages may be
calculated on either a load-to-load or discharge-to-discharge basis. In other words,
revenues are recognized ratably either from the beginning of when product is loaded for
one voyage to when it is loaded for another voyage, or from when product is discharged
(unloaded) at the end of one voyage to when it is discharged after the next voyage. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>In applying the percentage of
completion method, we believe that in most cases the discharge-to-discharge basis of
calculating voyages more accurately reflects voyage results than the load-to-load basis.
At the time of cargo discharge, we generally have information about the next load port and
expected discharge port, whereas at the time of loading we are normally less certain what
the next load port will be. We use this method of revenue recognition for all spot voyages
and voyages servicing contracts of affreightment, with an exception for our shuttle
tankers servicing contracts of affreightment with offshore oil fields. In this case a
voyage commences with tendering of notice of readiness at a field, within the agreed
lifting range, and ends with tendering of notice of readiness at a field for the next
lifting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We recognize revenues from time
charters daily over the term of the charter as the applicable vessel operates under the
charter. We do not recognize revenues during days that the vessel is off-hire. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<A NAME=A124></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Vessel Lives and
Impairment</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The carrying value of each of our
vessels represents its original cost at the time of delivery or purchase less depreciation
or impairment charges. We depreciate our vessels on a straight-line basis over a
vessel&#146;s estimated useful life, less an estimated residual value. Depreciation is
calculated using an estimated useful life of 25 years for Aframax, Suezmax, VLCC and
product tankers, and 35 years for LNG carriers, from the date the vessel was originally
delivered from the shipyard, or a shorter period if regulations prevent us from operating
the vessels to 25 years or 35 years, respectively. In the shipping industry, the use of a
25-year vessel life for Aframax, Suezmax, VLCC and product tankers has become the
prevailing standard. In addition, the use of a 30 to 40 year vessel life for LNG carriers
is typical. However, the actual life of a vessel may be different, with a shorter life
potentially resulting in an impairment loss. We have reduced the estimated useful lives
from 25 years to an average of approximately 21 years for our 14 remaining vessels
affected by the International Maritime Organization&#146;s regulatory changes announced in
2003. We are not aware of any other regulatory changes or environmental liabilities that
we anticipate will have a material impact on our current or future operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The carrying values of our vessels
may not represent their fair market value at any point in time since the market prices of
secondhand vessels tend to fluctuate with changes in charter rates and the cost of
newbuildings. Both charter rates and newbuilding costs tend to be cyclical in nature. We
review vessels and equipment for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. We measure the
recoverability of an asset by comparing its carrying amount to future undiscounted cash
flows that the asset is expected to generate over its remaining useful life. If we
consider a vessel or equipment to be impaired, we recognize impairment in an amount equal
to the excess of the carrying value of the asset over its fair market value. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Generally, we drydock each vessel
every two and a half to five years. We capitalize a substantial portion of the costs we
incur during drydocking and amortize those costs on a straight-line basis from the
completion of a drydocking to the estimated completion of the next drydocking. We expense
costs related to routine repairs and maintenance incurred during drydocking that do no
improve or extend the useful lives of the assets. When significant drydocking expenditures
occur prior to the expiration of this period, we expense the remaining unamortized balance
of the original drydocking cost in the month of the subsequent drydocking. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Goodwill</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Effective January 1, 2002, goodwill
and indefinite lived intangible assets are not amortized, but reviewed for impairment
annually, or more frequently if impairment indicators arise. An impairment test requires
us to estimate future cash flows. If events or circumstances change, including reductions
in anticipated cash flows generated by operations, goodwill could become impaired and
require a charge to earnings. </FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>FORWARD-LOOKING STATEMENTS</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>This Report on Form 6-K for the
quarterly period ended September 30, 2004 contains certain forward-looking statements (as
such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended) concerning future events and our
operations, performance and financial condition, including, in particular, statements
regarding: our future growth prospects; tanker market fundamentals, including the balance
of supply and demand in the tanker market, and spot tanker charter rates; future capital
expenditures; delivery dates of and financing for newbuildings, and the commencement of
service of newbuildings under long-term contracts; the impact of the Teekay Shipping Spain
acquisition to our earnings, future cash flow from vessel operations and strategic
position; the growth prospects of the LNG shipping sector and the joint venture company
with the Teekay Shipping Spain controlling shareholder; the initial public offering of
Teekay LNG Partners L.P.; the Company&#146;s share repurchase plan; and the gain in the
fourth quarter of 2004 relating to the sale of five of our vessels. 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
&#147;believe&#148;, &#147;anticipate&#148;, &#147;expect&#148;, &#147;estimate&#148;,
&#147;project&#148;, &#147;will be&#148;, &#147;will continue&#148;, &#147;will likely
result&#148;, 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 or demand for oil,
petroleum products and LNG, either generally or in particular regions; the cyclical nature
of the tanker industry and our dependence on oil markets; greater or less than anticipated
levels of tanker newbuilding orders or greater or less than anticipated rates of tanker
scrapping; changes in trading patterns significantly impacting overall tanker tonnage
requirements; changes in applicable industry laws and regulations and the timing of
implementation of new laws and regulations; changes in typical seasonal variations in
tanker charter rates; changes in the offshore production of oil; competitive factors in
the markets in which we operate; our potential inability to integrate effectively the
operations of Teekay Shipping Spain or any other future acquisitions; the potential for
early termination of long-term contracts and inability of the Company to renew or replace
long-term contracts; shipyard production delays; conditions in the public equity markets;
the ultimate number of common units, if any, issued by Teekay LNG Partners L.P. in its
proposed public offering; and other factors detailed from time to time in our periodic
reports, including our Annual Report on Form 20-F for the year ended December 31, 2003,
filed with the SEC. 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. </FONT></P>
<BR>
<BR>
<BR>
<BR>
<BR>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES <BR>
SEPTEMBER 30, 2004 <BR>
PART I &#150; FINANCIAL INFORMATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ITEM 3 -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</FONT></H1>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We are exposed to market risk from
foreign currency fluctuations, changes in interest rates, and bunker fuel prices and spot
market rates for vessels. We use foreign currency forward contracts, interest rate swaps,
bunker fuel swap contracts and forward freight agreements to manage currency, interest
rate, bunker fuel price risks and spot market rates but do not use these financial
instruments for trading or speculative purposes. Please see Item 1 &#151; Notes to
Consolidated Financial Statements: Note 15 &#151; Derivative Instruments and Hedging
Activities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The following table sets forth
further information on the magnitude of these foreign exchange forward contracts, interest
rate swap agreements, bunker fuel swap contracts, and forward freight agreements: </FONT></P>

<PRE>
                                                 Contract              Carrying Amount                 Fair
(in USD 000's)                                    Amount           Asset         Liability             Value
- --------------------------------------------- ---------------- -------------- ----------------- -----------------
<U>September 30, 2004</U>
Foreign Currency Forward Contracts              $   104,606      $  11,902      $                  $     11,902
Interest Rate Swap Agreements                  (see note 1)                         133,306            (133,306)
Bunker Fuel Swap Contracts                            2,462            418                                  418
Forward Freight Agreements                           26,206                          19,465             (19,465)
Debt (including capital lease obligations)        2,647,290                      (2,647,290)         (2,697,600)

<U>December 31, 2003</U>
Foreign Currency Forward Contracts              $   146,912      $  20,944      $         -        $     20,944
Interest Rate Swap Agreements                       710,000              -            9,953              (9,953)
Bunker Fuel Swap Contracts                              696            183                -                 183
Forward Freight Agreements                           13,385              -            1,178              (1,178)
Debt (including capital lease obligations)        1,636,758              -        1,636,758          (1,686,002)
- --------------------------------------------- ---------------- -------------- ----------------- -----------------
</PRE>

 <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               See table below for contract amount. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>The table below provides information
about our financial instruments as at September 30, 2004, which are sensitive to changes
in interest rates. For debt 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. </FONT></P>

<PRE>                                                                 Expected Maturity Date
(in USD 000's)                                2004        2005         2006        2007         2008     Thereafter
- ----------------------------------------- ----------- ------------ ----------- ------------ ----------- ------------

<U>Long-Term Debt:</U>
  Fixed-Rate Debt                                -       45,000      151,140            -           -      351,589
  Average Interest Rate                          -        8.32%        7.30%            -           -       8.875%

  Variable Rate Debt (1)
     U.S. Dollar Denominated                36,736      102,375       92,157       53,830     315,906      727,421
     Euro Denominated (3)                      904        7,598        8,511        9,131       9,796      317,070

<U>Interest Rate Swaps: (2) (4)</U>
  Contract Amount                                -      100,000      500,000            -           -      434,000
  Average Fixed Pay Rate                         -        2.25%        2.79%            -           -        5.30%
  Contract Amount                            1,514        6,485        7,023        7,605       8,200      299,010
  Average Fixed Pay Rate                     6.76%        6.76%        6.76%        6.76%       6.76%        6.67%
  Contract Amount (3)                          904        7,598        8,511        9,131       9,796      317,070
  Average Fixed Pay Rate                     6.20%        5.90%        5.90%        5.90%       5.90%        5.93%
- ----------------------------------------- ----------- ------------ ----------- ------------ ----------- ------------
</PRE>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Interest payments are based on LIBOR (U.S. Dollar denominated debt) and EURIBOR
               (Euro denominated debt) plus a margin depending on our financial leverage. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 4-TNR" FSL="Project" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The average variable receive rate for our interest rates swaps is set monthly at
               1-month LIBOR or EURIBOR or semi-annually at 6-month LIBOR or EURIBOR. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 4-TNR" FSL="Project" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Amounts are the U.S. Dollar equivalents of (in 000&#145;s of Euros) 729 Euros
               (2004), 6,123 Euros (2005), 6,859 Euros (2006), 7,358 Euros (2007), 7,894 Euros
               (2008), and 255,516 Euros (thereafter). </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 4-TNR" FSL="Project" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               In November 2004, we entered into an additional $500.0 million of interest swap agreements.
               Please see Item 1 - Notes to Consolidated Financial Statements: Note 17 - Subsequent Events.</FONT></TD>
               </TR>
               </TABLE>
               <BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>For a more comprehensive discussion
related to the general characteristics of Quantitative and Qualitative Disclosures about
Market Risk, please refer to Item 11 &#151; Quantitative and Qualitative Disclosures about
Market Risk contained in our Annual Report on Form 20-F for the year ended December 31,
2003. </FONT></P>

<BR>
<BR>
<BR>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES <BR>
SEPTEMBER 30, 2004 <BR>
PART II &#150; OTHER INFORMATION </FONT></H1>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 1 &#150; Legal Proceedings</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 2 &#150; Changes in Securities and Use of Proceeds</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 3 &#150; Defaults Upon Senior Securities</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 4 &#150; Submission of Matters to a Vote of Security Holders</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 5 &#150; Other Information</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<A NAME=A138></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>Item 6 &#150; Exhibits</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>

<BR>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>THIS REPORT ON FORM 6-K IS HEREBY
INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS OF THE COMPANY.</B>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<B>&#149;       &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM F-3 (NO. 33-97746) FILED WITH THE SEC ON OCTOBER 4, 1995;<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM S-8 (NO. 333-42434) FILED WITH THE SEC ON JULY 28, 2000;<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM F-3 (NO. 333-102594) FILED WITH THE SEC ON JANUARY 17, 2003; AND<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM S-8 (NO. 333-119564) FILED WITH THE SEC ON OCTOBER 6, 2004</B>
</FONT></P>


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<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>


<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SIGNATURES</FONT></H1>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
</font></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<TD WIDTH=45% VALIGN=MIDDLE>
<FONT FACE="Times New Roman, Times, Serif" SIZE=3>Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;November 24, 2004</font>
</TD>
<TD WIDTH=55% VALIGN=TOP>
<FONT FACE="Times New Roman, Times, Serif" SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TEEKAY SHIPPING CORPORATION
<BR>
<BR>
<BR>
By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>/s/ Peter Evensen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Peter Evensen<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice-President and Chief Financial Officer<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Principal Financial and Accounting Officer)
</font>
</TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=3><B>Exhibit 15.1</B> </FONT></P>

<BR>
<BR>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ACKNOWLEDGEMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></H1>

<BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>We are aware of the incorporation by
reference in the Registration Statement (Form S-8 No. 333-42434) pertaining to the Amended
1995 Stock Option Plan of Teekay Shipping Corporation (&#147;Teekay&#148;), in the
Registration Statement (Form S-8 No. 333-119564) pertaining to the 2003 Equity Incentive
Plan and the Amended 1995 Stock Option Plan of Teekay, in the Registration Statement (Form
F-3 No. 333-102594) and related Prospectus of Teekay for the registration of up to
$500,000,000 of its common stock, preferred stock, warrants, stock purchase contracts,
stock purchase units or debt securities and in the Registration Statement (Form F-3 No.
33-97746) and related Prospectus of Teekay for the registration of 2,000,000 shares of
Teekay common stock under its Dividend Reinvestment Plan of our report dated July 23,
2004, relating to the unaudited consolidated interim financial statements and the
financial schedule listed in Index: Item 1 of Teekay and its subsidiaries that is included
in its interim report (Form 6-K) for the three and nine months ended September 30, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Pursuant to Rule 436(c) of the
Securities Act of 1933, our report is not a part of the registration statement prepared or
certified by accountants within the meaning of Section 7 or 11 of the Securities Act of
1933. </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<TD WIDTH=65%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Vancouver, Canada,<BR>
October 19, 2004</font></TD>

<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=3>/s/ ERNST &amp; YOUNG LLP<BR>
Chartered Accountants</font></TD>
</TR>
</TABLE>

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