-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 M3BZFH/DoxasbcpGmJilR+OudulbMDSpl3FaX7wbAgTmZpR9WwpQPPjgsdaR8A1k
 1xY5QjtNqK8oZx0siCJfhg==

<SEC-DOCUMENT>0000911971-05-000047.txt : 20051215
<SEC-HEADER>0000911971-05-000047.hdr.sgml : 20051215
<ACCEPTANCE-DATETIME>20051214182448
ACCESSION NUMBER:		0000911971-05-000047
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20050930
FILED AS OF DATE:		20051215
DATE AS OF CHANGE:		20051214

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:		051264919

	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_093005.htm
<DESCRIPTION>6K QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
<TEXT>





<HTML>
<HEAD>
<TITLE>TEEKAY SHIPPING CORPORATION</TITLE>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+ 1.4a) -->
</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%" noShade SIZE=1>

<P align=center>For the quarterly
period ended <U>September 30, 2005</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%" noShade SIZE=1>


<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><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=2>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=2>REPORT ON FORM 6-K FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005</FONT></H1>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>INDEX </U></FONT></H1>

<!-- 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=2>&nbsp;</FONT></TD>
<TD WIDTH=10% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I:</FONT></TD>
<TD WIDTH=79% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FINANCIAL INFORMATION </FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>PAGE</U></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>


<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 1.</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Statements (Unaudited)</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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=2>&nbsp;</FONT></TD>
     <TD WIDTH="72%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
     Report of Independent Registered Public Accounting Firm</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unaudited Consolidated Statements of Income
                       </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for the three and nine months ended September 30, 2005 and 2004
         </FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unaudited Consolidated Balance Sheets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as at September 30, 2005 and December 31, 2004</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unaudited Consolidated Statements of Cash Flows</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;for the nine months ended September 30, 2005 and 2004</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notes to the Unaudited Consolidated Financial Statements</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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=2>&nbsp;</FONT></TD>
<TD WIDTH=7% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 2.</FONT></TD>
<TD WIDTH=80% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>23&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 3.</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quantitative
and Qualitative Disclosures about Market Risk</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>

<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II:</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OTHER INFORMATION</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>


<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES</FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR><TD>&nbsp;</TD></TR>
</TABLE>


<BR>
<BR>
<BR>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="96" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>ITEM 1 -</font></b></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font size=2>
FINANCIAL STATEMENTS

</font></b></p> </td> </tr></table>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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=2>To the Board of Directors and
Stockholders 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=2>We have reviewed the consolidated
balance sheet of Teekay Shipping Corporation and subsidiaries as of September 30, 2005,
the related consolidated statements of income for the three and nine months ended
September 30, 2005 and 2004, and the consolidated statements of cash flows for the nine
months ended September 30, 2005 and 2004. These financial statements are the
responsibility of the Company&#146;s management. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 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=2>Based on our reviews, we are not
aware of any material modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with U.S. generally accepted
accounting principles. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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, 2004, and the related consolidated statements of income, changes in
stockholders&#146; equity and cash flows for the year then ended, and the related schedule
as of and for the year ended December 31, 2004 (not presented herein), and in our report
dated February 18, 2005, 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 consolidated
balance sheet as of December 31, 2004, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived. </FONT></P>


<BR>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
        <TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vancouver, Canada,<BR>
        November 28, 2005   (except for Note 17(e) which is as of December 6, 2005)</FONT></TD>
        <TD WIDTH=55% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ ERNST &amp; YOUNG LLP<BR>
        Chartered Accountants</FONT></TD>
</TR>
</TABLE>
<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=2>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=2>UNAUDITED CONSOLIDATED
STATEMENTS OF INCOME<BR>(in thousands of U.S. dollars, except share and per share amounts)</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></H1>

<PRE>
                                             <B>Three Months Ended September 30,      Nine Months Ended September 30,</B>
                                            -------------------------------------------------------------------------
                                                   <B><U>2005</U>               <U>2004</U>              <U>2005</U>              <U>2004</U>
                                                     $                  $                 $                 $</B>
                                            -------------------------------------------------------------------------

<B>VOYAGE REVENUES</B>                                   425,594            520,612         1,423,145         1,549,685
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------

<B>OPERATING EXPENSES</B>
Voyage expenses                                   107,835            106,466           304,660           319,058
Vessel operating expenses                          50,743             58,199           156,524           160,876
Time-charter hire expense                         120,556            120,898           353,592           336,137
Depreciation and amortization                      50,411             64,802           154,800           179,262
General and administrative                         40,455             29,050           114,332            82,491
Writedown / (gain) on sale of vessels
  and equipment <I>(note 11)</I>                          (6,576)           (53,512)         (124,323)          (54,565)
Restructuring charge                                    -                  -                 -             1,002
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------
<B>Total operating expenses</B>                          363,424            325,903           959,585         1,024,261
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------

<B>Income from vessel operations</B>                      62,170            194,709           463,560           525,424
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------

<B>OTHER ITEMS</B>
Interest expense                                  (29,599)           (35,225)         (100,615)          (87,460)
Interest income                                     8,254              5,900            24,910            12,038
Equity income from joint ventures                     854              2,535             6,565             7,659
Gain on sale of marketable securities                   -             90,070                 -            93,175
Foreign exchange gain (loss) <I>(note 7)</I>               3,063             (4,765)           50,602           (11,036)
Other - net <I>(note 12)</I>                              (2,067)            (7,892)          (18,732)           (6,916)
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------
<B>Total other items</B>                                 (19,495)            50,623           (37,270)            7,460
- ------------------------------------------- ------------------ ----------------- ----------------- ------------------

<B>Net income</B> <I>(note 13)</I>                               42,675            245,332           426,290           532,884
=========================================== ================== ================= ================= ==================

<B>Earnings per common share</B> <I>(note 15)</I>
     - Basic                                         0.55               2.94              5.34              6.46
     - Diluted                                       0.52               2.77              4.99              6.12
<B>Weighted-average number of common shares</B>
     - Basic                                   77,104,662         83,317,200        79,872,761        82,516,723
     - Diluted                                 82,559,885         88,718,531        85,395,369        87,110,068
=========================================== ================== ================= ================= ==================
</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<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>


<PAGE>

<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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=2>UNAUDITED CONSOLIDATED
BALANCE SHEETS<BR>(in thousands of U.S. dollars)</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></H1>

<PRE>
                                                                                         <B>As at           As at
                                                                                     September 30,    December 31,
                                                                                         2005            2004
                                                                                           $               $</B>
                                                                                  ---------------- -----------------
<B>ASSETS</B>
<B>Current</B>
Cash and cash equivalents <I>(note 7)</I>                                                       252,851         427,037
Restricted cash  <I>(note 8)</I>                                                                 95,612          96,087
Accounts receivable                                                                      119,373         210,089
Vessels held for sale <I>(note 11)</I>                                                            4,296         129,952
Net investment in direct financing leases - current                                       19,535               -
Prepaid expenses and other assets                                                         66,479          54,717
- --------------------------------------------------------------------------------- ---------------- -----------------
<B>Total current assets</B>                                                                     558,146         917,882
- --------------------------------------------------------------------------------- ---------------- -----------------
                                                                                         302,397         352,725
Restricted cash <I>(note 8)</I>

<B>Vessels and equipment</B> <I>(note 7)</I>
At cost, less accumulated depreciation of  $753,462
  (December 31, 2004 -  $960,597)                                                      2,519,446       2,613,379
Vessels under capital leases, at cost, less accumulated
  depreciation of $28,923 (December 31, 2004 - $11,047) <I>(note 8)</I>                         717,219         665,331
Advances on newbuilding contracts <I>(note 10)</I>                                              337,358         252,577
- --------------------------------------------------------------------------------- ---------------- -----------------
<B>Total vessels and equipment</B>                                                            3,574,023       3,531,287
- --------------------------------------------------------------------------------- ---------------- -----------------
Net investment in direct financing leases                                                 98,200         109,215
Investment in joint ventures                                                             143,768          59,637
Other assets                                                                              66,496          85,893
Intangible assets - net <I>(note 5)</I>                                                         258,109         277,511
Goodwill <I>(note 5)</I>                                                                        171,563         169,590
- --------------------------------------------------------------------------------- ---------------- -----------------

                                                                                       5,172,702       5,503,740
================================================================================= ================ =================


<B>LIABILITIES AND STOCKHOLDERS' EQUITY</B>
<B>Current</B>
Accounts payable                                                                          32,988          61,607
Accrued liabilities                                                                      135,120         144,415
Current portion of long-term debt <I>(note 7)</I>                                               157,231         119,453
Current obligation under capital leases <I>(note 8)</I>                                          84,356          88,934
- --------------------------------------------------------------------------------- ---------------- -----------------

<B>Total current liabilities</B>                                                                409,695         414,409
- --------------------------------------------------------------------------------- ---------------- -----------------
Long-term debt <I>(note 7)</I>                                                                1,576,147       1,988,551
Obligation under capital leases <I>(note 8)</I>                                                 563,925         547,607
Other long-term liabilities                                                              171,280         301,091
- --------------------------------------------------------------------------------- ---------------- -----------------
<B>Total liabilities</B>                                                                      2,721,047       3,251,658
- --------------------------------------------------------------------------------- ---------------- -----------------
Commitments and contingencies <I>(notes 8, 10 and 14)</I>

<B>Minority interest</B>                                                                        219,070          14,724

<B>Stockholders' equity</B>
Capital stock <I>(note 9)</I>                                                                   497,154         534,938
Retained earnings <I>(note 3)</I>                                                             1,825,994       1,758,552
Accumulated other comprehensive loss <I>(note 14)</I>                                           (90,563)        (56,132)
- --------------------------------------------------------------------------------- ---------------- -----------------
<B>Total  stockholders' equity</B>                                                            2,232,585       2,237,358
- --------------------------------------------------------------------------------- ---------------- -----------------

<B>Total  liabilities and stockholders' equity</B>                                            5,172,702       5,503,740
- --------------------------------------------------------------------------------- ---------------- -----------------
</PRE>
<!-- 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;<I>
The accompanying notes are an integral part of the unaudited interim consolidated
financial statements.</I> </FONT></P>


<PAGE>

<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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=2>UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS<BR>(in thousands of U.S. dollars)</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2> </FONT></H1>

<PRE>
                                                                                 <B>Nine Months Ended September 30,
                                                                                     2005               2004
                                                                                       $                  $</B>
                                                                             ------------------ -------------------
Cash and cash equivalents provided by (used for)
<B>OPERATING ACTIVITIES</B>
Net income                                                                           426,290            532,884
Non-cash items:
     Depreciation and amortization                                                   154,800            179,262
     Writedown / (gain) on sale of vessels and equipment                            (124,323)           (54,565)
     Loss on repurchase of bonds                                                      10,109                716
     Gain on sale of marketable securities                                                 -            (93,175)
     Equity income (net of dividends received: September 30, 2005 - $6,477;
       September 30, 2004 - $9,005)                                                      (88)             1,346
     Income taxes                                                                    (11,877)            16,301
     Loss from settlement of interest rate swaps                                       7,820                  -
     Writeoff of capitalized loan costs                                                7,462                  -
     Unrealized foreign exchange (gain) loss and other - net                         (46,921)           (10,707)
Change in non-cash working capital items related to operating activities              19,025            (33,170)
Expenditures for drydocking                                                          (13,420)           (18,668)
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>Net operating cash flow</B>                                                              428,877            520,224
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>FINANCING ACTIVITIES</B>
Proceeds from long-term debt                                                       1,706,310          1,471,862
Capitalized loan costs                                                                (3,879)            (2,192)
Scheduled repayments of long-term debt                                               (57,902)           (86,376)
Prepayments of long-term debt                                                     (1,981,349)        (1,462,439)
Repayments of capital lease obligations                                               (6,092)            (2,861)
Decrease (increase) in restricted cash                                                15,861             (1,969)
Settlement of interest rate swaps                                                   (143,295)                 -
Net proceeds from sale of Teekay LNG Partners L.P. units <I>(note 3)</I>                    135,713                  -
Investment in subsidiaries from minority owners <I>(note 10)</I>                             61,183                  -
Issuance of common stock upon exercise of stock options                               17,913             38,645
Repurchase of common stock <I>(note 9)</I>                                                 (369,047)                 -
Cash dividends paid                                                                  (33,450)           (30,862)
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>Net financing cash flow</B>                                                             (658,034)           (76,192)
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>INVESTING ACTIVITIES</B>
Expenditures for vessels and equipment                                              (357,062)          (465,227)
Proceeds from sale of vessels and equipment                                          505,196            220,917
Proceeds from sale of marketable securities                                                -            135,357
Purchase of Teekay Shipping Spain S.L. <I>(note 4)</I>                                            -           (286,854)
Investment in joint venture <I>(note 10)</I>                                                (80,756)                 -
Net investment in direct financing leases                                             (8,025)           (31,729)
Other                                                                                 (4,382)              (746)
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>Net investing cash flow</B>                                                               54,971           (428,282)
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>Increase (decrease) in cash and cash equivalents</B>                                    (174,186)            15,750

Cash and cash equivalents, beginning of the period                                   427,037            292,284
- ---------------------------------------------------------------------------- ------------------ -------------------

<B>Cash and cash equivalents, end of the period</B> <I>(note 6)</I>                                252,851            308,034
================================================================================= ================== ===================
</PRE>
<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>





<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>1.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Basis of Presentation</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
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 (or <I>Teekay</I>), which is incorporated under the laws of
the Republic of the Marshall Islands, and its wholly owned or controlled subsidiaries
(collectively, the <I>Company</I>). Certain information and footnote disclosures required
by generally accepted accounting principles in the United States 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, 2004. 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 months ended September 30,
2005 are not necessarily indicative of those for a full fiscal year.
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Certain of the comparative figures have been reclassified to conform with the presentation adopted
in the current period.</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>2.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Segment Reporting</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The Company has three reportable segments: its spot tanker segment, its fixed-rate tanker
segment, and its fixed-rate liquefied natural gas (or <I>LNG</I>) segment. The
Company&#146;s spot tanker segment consists of conventional crude oil tankers 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 its acquisition of Teekay Shipping Spain S.L. (or
<I>Teekay Spain</I>) on April 30, 2004 (see Note 4). 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 consolidated
financial statements.</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The following tables present results for these segments for the three and nine months ended
September 30, 2005 and 2004:</FONT></TD>
</TR>
</TABLE>

<PRE>
        --------------------------------------- --------------- --------------- --------------- ---------------
                                                       <B>Spot         Fixed-Rate      Fixed-Rate
                                                      Tanker          Tanker            LNG
                                                      Segment         Segment         Segment          Total</B>
          Three months ended September 30, 2005          <B>$               $               $               $</B>
         --------------------------------------- --------------- --------------- --------------- ---------------

         Voyage revenues - external.............      222,422         178,669          24,503         425,594
         Voyage expenses........................       88,338          19,497               -         107,835
         Vessel operating expenses..............       15,240          32,102           3,401          50,743
         Time-charter hire expense..............       68,089          52,467               -         120,556
         Depreciation and amortization..........       13,377          29,512           7,522          50,411
         General and administrative(1)..........       22,088          14,970           3,397          40,455
          Writedown / (gain) on sale of
            vessels and equipment...............       (8,687)          2,111               -          (6,576)
                                                 --------------- --------------- --------------- ---------------
         Income from vessel operations(2).......       23,977          28,010          10,183          62,170
                                                 =============== =============== =============== ===============

         Voyage revenues - intersegment.......              -           1,158               -           1,158
         Total assets as at September 30, 2005..      923,898       2,033,139       1,699,484       4,656,521

</PRE>
<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<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
          Writedown / (gain) on sale of
            vessels and equipment...............      (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 as at September 30, 2004..    1,182,320        2,089,147        1,280,209        4,551,676



         --------------------------------------- ---------------- ---------------- ---------------- ----------------
                                                       <B>Spot          Fixed-Rate       Fixed-Rate
                                                      Tanker           Tanker            LNG
                                                      Segment          Segment          Segment           Total</B>
         Nine months ended September 30, 2005            <B>$                $                $                $</B>
         --------------------------------------- ---------------- ---------------- ---------------- ----------------

         Voyage revenues - external.............      809,972          539,627           73,546        1,423,145
         Voyage expenses........................      253,888           50,722               50          304,660
         Vessel operating expenses..............       49,115           95,845           11,564          156,524
         Time-charter hire expense..............      206,585          147,007                -          353,592
         Depreciation and amortization..........       41,927           90,306           22,567          154,800
         General and administrative (1).........       63,723           41,010            9,599          114,332
          Writedown / (gain) on sale of
            vessels and equipment...............     (131,803)           7,480                -         (124,323)
                                                 ------------- ---------------- ---------------- ----------------
         Income from vessel operations(2)             326,537          107,257           29,766          463,560
                                                 ============= ================ ================ ================

         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, 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
          Writedown / (gain) on sale of
            vessels and equipment...............      (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
</PRE>
<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          Includes direct general and administrative expenses and indirect general and
               administrative expenses (allocated to each segment based on estimated use of
               corporate resources).</FONT></TD>
          </TR>
          </TABLE>
<BR>
         <!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          The Company&#146;s subsidiary, Teekay LNG Partners L.P., contributed $2.7
               million and $12.1 million, respectively, of income from vessel operations to the
               Company&#146;s fixed-rate tanker segment and fixed-rate LNG segment for the
               three months ended September 30, 2005, and $4.8 million and $19.2 million,
               respectively, for the period from May 10, 2005 (the date of the
               subsidiary&#146;s initial public offering) to September 30, 2005.</FONT></TD>
          </TR>
          </TABLE>

<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
A reconciliation of total segment assets to amounts presented in the consolidated balance
sheets is as follows:
</FONT></TD>
</TR>
</TABLE>

<PRE>
                                                                                   <B>As at              As at
                                                                               September 30,       December 31,
                                                                                    2005               2004
                                                                                     $                  $</B>
                                                                            ------------------- -------------------

         Total assets of all segments.......................................      4,656,521          4,717,184
         Cash and restricted cash...........................................        257,238            428,437
         Accounts receivable and other assets...............................        258,943            358,119
                                                                            ------------------- -------------------
            Consolidated total assets ......................................      5,172,702          5,503,740
                                                                            =================== ===================
</PRE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>3.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Initial Public Offering of Teekay LNG Partners L.P.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
On
May 10, 2005, the Company&#146;s subsidiary Teekay LNG Partners L.P. (or <I>Teekay
LNG</I>) completed its initial public offering (or the <I>Offering</I>) of 6.9 million
common units at a price of $22.00 per unit. This included 0.9 million common units sold to
the underwriters in connection with the exercise of their over-allotment option. As a
result of this transaction, the Company recorded a $12.3 million reduction to
stockholders&#146; equity. The Company accounts for gains or losses from the issuance of
shares or units by its subsidiaries as an adjustment to stockholders&#146; equity. The proceeds
received from the Offering and the use of those proceeds are summarized as follows:
</FONT></TD>
</TR>
</TABLE>
<BR>


<PRE>
         <B>Proceeds received:</B>
           Sale of 6,900,000 common units at $22.00 per unit...................................       $151,800
                                                                                               -----------------

         <B>Use of proceeds from sale of common units:</B>
           Underwriting and structuring fees..................................................         $10,473
           Professional fees and other offering expenses......................................           5,614
           Repayment of loans from Teekay Shipping Corporation................................         129,400
           Working capital....................................................................           6,313
                                                                                               -----------------
                                                                                                      $151,800
                                                                                               -----------------
</PRE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Teekay
LNG is a Marshall Islands limited partnership formed by the Company as part of its
strategy to expand its operations in the LNG shipping sector. Teekay LNG provides LNG and
crude oil marine transportation service under long-term, fixed-rate contracts with major
energy and utility companies through its fleet of LNG carriers and Suezmax class crude oil
tankers, primarily consisting of vessels obtained through the Company&#146;s acquisition
of Teekay Spain in April 2004.
</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
Immediately
preceding the Offering, the Company entered into an omnibus agreement with Teekay LNG
governing, among other things, when the Company and Teekay LNG may compete with each other
and certain rights of first offering on LNG carriers and Suezmax tankers. Under the
agreement, Teekay LNG has granted to the Company a 30-day right of first offer on any
proposed (a) sale, transfer or other disposition of any of Teekay LNG&#146;s Suezmax
tankers or (b) re-chartering of any of Teekay LNG&#146;s Suezmax tankers pursuant to a
time-charter with a term of at least three years if the existing charter expires or is
terminated early. Likewise, the Company has granted a similar right of first offer to
Teekay LNG for any LNG carriers it might own.
</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>4.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Acquisition of Teekay Shipping Spain S.L.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
On April 30, 2004, the Company acquired all of the outstanding shares of Naviera F. Tapias
S.A. and its subsidiaries and renamed it Teekay Shipping Spain S.L. (or <I>Teekay
Spain</I>). Teekay Spain engages in the marine transportation of crude oil and LNG. The
Company acquired Teekay Spain for $298.2 million in cash, plus the assumption of debt and
remaining newbuilding commitments. Management believes the acquisition of the Teekay 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 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. Teekay Spain&#146;s results of
operations have been consolidated with the Company&#146;s results commencing May 1, 2004.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
As
at September 30, 2005, Teekay Spain&#146;s LNG fleet consisted of four LNG vessels. Teekay
Spain&#146;s vessels are contracted under long-term, fixed-rate time charters to major
energy companies. As at September 30, 2005, Teekay Spain&#146;s conventional crude oil
tanker fleet consisted of five Suezmax tankers. All five Suezmax tankers are contracted
under long-term, fixed-rate time charters with a major Spanish oil company.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
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 Spain acquisition.</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
                                                                                                     <B>As at
                                                                                                 April 30, 2004
                                                                                                       $</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>

<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
The following table shows comparative summarized consolidated pro forma financial information
for the Company for the nine months ended September 30, 2004, giving effect to the
acquisition of 100% of the outstanding shares in Teekay Spain as if it had taken place on
January 1, 2004:</FONT></TD>
</TR>
</TABLE>
<BR>

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

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






<!-- 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=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 Spain for the nine months ended September 30, 2004
               included foreign exchange gains of approximately $7.3 million. Substantially all
               of these foreign exchange gains were unrealized. </FONT></TD>
               </TR>
               </TABLE>
               <BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>5.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Goodwill and Intangible Assets </B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
The changes in the carrying amount of goodwill for the nine months ended September 30, 2005
for the Company&#146;s reporting segments, are as follows:</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
                                                                  <B>Fixed-        Fixed-
                                                    Spot           Rate          Rate
                                                   Tanker         Tanker         LNG
                                                   Segment        Segment      Segment       Other        Total
                                                      $              $            $            $            $</B>
                                                  ------------ ------------ ------------ ------------- -----------
          Balance as of December 31, 2004.........         -      132,223       35,631        1,736      169,590
          Goodwill acquired.......................         -        1,973            -            -        1,973
                                                  ------------ ------------ ------------ ------------ ------------
          Balance as of September 30, 2005........         -      134,196       35,631        1,736      171,563
                                                  ============ ============ ============ ============ ============

          As at September 30, 2005, intangible assets consisted of:

                                                         <B>Weighted-
                                                          Average        Gross                            Net
                                                        Amortization    Carrying       Accumulated      Carrying
                                                           Period        Amount        Amortization      Amount
                                                          (years)           $               $               $</B>
                                                     --------------- --------------- --------------- ---------------
          Contracts of affreightment.................      10.2          124,250          42,476          81,774
          Time-charter contracts.....................      19.2          182,552          11,076         171,476
          Intellectual property......................       7.0            7,701           2,842           4,859
                                                     --------------- --------------- --------------- ---------------
                                                           15.4          314,503          56,394         258,109
                                                     =============== =============== =============== ===============

</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Aggregate amortization expense of intangible assets for the three and nine months ended September
30, 2005 was approximately $6.3 million ($8.0 million &#150; 2004) and $19.4 million
($19.4 million &#150; 2004), respectively. Amortization of intangible assets for the next
five fiscal years is expected to be $5.8 million (remainder of 2005), $22.3 million
(2006), $21.3 million (2007), $20.3 million (2008), $19.3 million (2009) and $169.1
million (thereafter).</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>6.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cash Flows </B> </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
Cash interest paid by the Company during the nine months ended September 30, 2005 and 2004
totaled approximately $101.2 million and $106.8 million, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>

<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>7.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Long-Term Debt</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
                                                                                   <B>September 30,     December 31,
                                                                                       2005              2004
                                                                                         $                $</B>
                                                                                  ---------------- -----------------
         Revolving Credit Facilities..............................................    855,000          530,000
         First Preferred Ship Mortgage Notes (8.32%)..............................          -           50,906
         Premium Equity Participating Security Units (7.25%) due May 18, 2006.....    143,750          143,750
         Senior Notes (8.875%) due July 15, 2011..................................    286,222          351,530
         U.S. Dollar-denominated Term Loan due 2017...............................     63,450          588,080
         EURO-denominated Term Loans due through 2023.............................    384,956          443,738
                                                                                  ---------------- -----------------
                                                                                    1,733,378        2,108,004
         Less current portion.....................................................    157,231          119,453
                                                                                  ---------------- -----------------
           Total.................................................................   1,576,147        1,988,551
                                                                                  ================ =================
</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
As
at September 30, 2005, the Company had five long-term revolving credit facilities (or the
<I>Revolvers</I>) available, which, as at such date, provided for borrowings of up to
$1,741.4 million, of which $886.4 million was undrawn. The amount available under the
Revolvers reduces by $29.4 million (2005), $146.9 million (2006), $148.2 million (2007),
$363.4 million (2008), $189.7 million (2009) and $863.8 million (thereafter). The
Revolvers are collateralized by first-priority mortgages granted on 49 of the
Company&#146;s vessels, together with other related collateral, and include a guarantee
from Teekay or its subsidiaries for all outstanding amounts.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
On
February 1, 2005, the Company repaid $45.0 million of the 8.32% First Preferred Ship
Mortgage Notes (or the <I>8.32% Notes</I>). On March 30, 2005, the Company effectively
repaid the remaining $5.9 million outstanding 8.32% Notes by depositing with the trustee,
The Bank of New York, an amount that will satisfy the outstanding principal and accrued
interest on the one remaining semi-annual repayment. As a result of these transactions,
the 8.32% Notes are no longer collateralized by first-preferred mortgages on any of the
Company&#146;s vessels and they are not guaranteed by any of the Company&#146;s
subsidiaries.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
7.25% Premium Equity Participating Security Units due May 18, 2006 (or the <I>Equity
Units</I>) 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 of the Company and all existing and
future debt of the Company&#146;s subsidiaries. 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 February 13, 2006).</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
The
8.875% Senior Notes due July 15, 2011 (or the <I>8.875% Notes</I>) rank equally in right
of payment with all of Teekay&#146;s existing and future senior unsecured debt and senior
to Teekay&#146;s existing and future subordinated debt. During the three and nine months
ended September 30, 2005, the Company repurchased a principal amount of $8.3 million and
$65.1 million, respectively, of the 8.875% Notes (see also Note 12). The 8.875% Notes are
not guaranteed by any of Teekay&#146;s subsidiaries and effectively rank behind all
existing and future secured debt of Teekay and other liabilities, secured and unsecured,
of its subsidiaries.
</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company has one U.S. Dollar-denominated 4.06% term loan outstanding, which, as at
September 30, 2005, totaled $63.5 million. This term loan bears interest at a fixed rate
of 4.06%. The U.S. Dollar-denominated term loan reduces in quarterly payments through 2017
and is collateralized by first-preferred mortgages on the three vessels to which the loan
relates, together with certain other collateral and is guaranteed by Teekay.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company has two Euro-denominated term loans outstanding, which, as at September 30, 2005
totaled 320.1 million Euros ($385.0 million). As part of certain capital leases, 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 loans are based on EURIBOR plus a margin. At September 30, 2005, the
margins ranged between 1.10% and 1.30%. The Euro-denominated term loans reduce in monthly
or quarterly payments with varying maturities through 2023 and are collateralized by
first-preferred mortgages on the two vessels to which the loans relate, together with
certain other collateral, and are guaranteed by a subsidiary of Teekay.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Both
Euro-denominated term loans are revalued at the end of each period using the then
prevailing Euro/U.S. Dollar exchange rate. Due substantially to this revaluation, the
Company recognized foreign exchange gains during the three and nine months ended September
30, 2005, of $3.1 million ($4.8 million loss &#150; 2004) and $50.6 million ($11.0 million
loss &#150; 2004), respectively.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Certain
loan agreements require that a minimum level of free cash be maintained. As at September
30, 2005, this amount was $100.0 million. Certain of the loan agreements also require that
the Company maintain a minimum level of free liquidity and undrawn revolving credit lines
with at least six months to maturity. As at September 30, 2005, this amount was $103.7
million.</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>8.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Capital Leases and Restricted Cash</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
<I><B>Capital Leases</B></I></FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
<I>Aframax
and Suezmax Tankers.</I> As at September 30, 2005, the Company was party to capital leases
on one Aframax tanker and five Suezmax tankers. Under the terms of the lease arrangements,
which include the Company&#146;s contractual right to full operation of the vessels
pursuant to bareboat charters, the Company is required to purchase these vessels after the
end of their respective lease terms for a fixed price. The weighted-average annual
interest rate implicit in these capital leases, at the inception of the leases, was 7.6%.
The Aframax tanker capital lease is a fixed-rate capital lease. The Suezmax tanker capital
leases are variable-rate capital leases, however, any change in the Company&#146;s lease
payments resulting from changes in interest rates is offset by a corresponding change in
the charter hire payments we receive under the vessels&#146; time charter contract. As at
September 30, 2005, the remaining commitments under these capital leases, including the
purchase obligations, approximated $329.5 million, including imputed interest of $61.9
million, repayable as follows:
</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
         <U><B>Year</B></U>                                                                                   <U><B>Commitment</B></U>
         2005..............................................................................    $7.5 million
         2006..............................................................................   154.8 million
         2007..............................................................................    12.8 million
         2008..............................................................................    12.7 million
         2009..............................................................................    12.6 million
         Thereafter........................................................................   129.1 million
</PRE>

<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
<I>LNG
Carriers.</I> As at September 30, 2005, the Company was a party to capital leases on two
LNG carriers that 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 in 2006 and 2011, both of which purchase obligations have been fully funded
with restricted cash deposits described below. As at September 30, 2005, the
weighted-average annual interest rate implicit in the Spanish tax leases was 5.7%. As at
September 30, 2005, the commitments under these capital leases, including the purchase
obligations, approximated 365.3 million Euros ($439.3 million), including imputed interest
of 48.7 million Euros ($58.6 million), repayable as follows:
</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
         <U><B>Year</B></U>                                                                            <U><B>Commitment</B></U>
         2005.............................................................   77.1.million.Euros ($92.7 million)
         2006.............................................................  123.2.million.Euros ($148.1 million)
         2007.............................................................   23.3.million.Euros ($28.0 million)
         2008.............................................................   24.4.million.Euros ($29.4 million)
         2009.............................................................   25.6.million.Euros ($30.8 million)
         Thereafter.......................................................   91.7.million.Euros ($110.3 million)

</PRE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
<I><B>Restricted Cash</B></I>
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
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 that, together with interest
on the deposit, will equal the remaining amounts owing under the leases, including the
obligations to purchase the LNG carriers at the end of the lease periods. This amount was
321.9 million Euros ($387.2 million) as at September 30, 2005 and 309.5 million Euros
($421.6 million) at December 31, 2004. 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. The interest rates earned on the deposits approximate the interest rates
implicit in the Spanish tax leases. As at September 30, 2005 and December 31, 2004, the
weighted-average interest rate earned on the deposits was 5.3% per annum.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company also maintains restricted cash deposits relating to certain term loans and other
obligations. As at September 30, 2005 and December 31, 2004, these amounts were $10.8
million and $27.2 million, respectively.</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>9.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Capital Stock</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
authorized capital stock of Teekay at September 30, 2005 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, 2005, Teekay had 75,411,986
shares of common stock and no shares of Preferred Stock issued and outstanding. On May 17,
2004, Teekay effected a two-for-one stock split relating to its common stock. 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>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
In
April and July 2005, Teekay announced that its Board of Directors had authorized the
repurchase of up to $225 million and $250 million, respectively, of shares of its common
stock in the open market. As at September 30, 2005, Teekay had repurchased 6,897,400
shares of common stock subsequent to such authorization at an average price of $43.70 per
share, for a total cost of $301.4 million.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
In
November 2004, Teekay announced that its Board of Directors had authorized the repurchase
of up to 3,000,000 shares of its common stock in the open market. As at December 31, 2004,
Teekay had repurchased 1,400,200 shares of common stock subsequent to such authorization
at an average price of $43.73 per share. In January 2005, Teekay repurchased an additional
1,599,800 shares at an average price of $42.27, for a total of 3,000,000 shares
repurchased at an average price of $42.95 per share, for a total cost of $128.9 million.
</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>

<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
As
at September 30, 2005, the Company had reserved pursuant to its 1995 Stock Option Plan and
2003 Equity Incentive Plan (collectively referred to as the <I>Plans</I>) 5,766,649 shares
of common stock for issuance upon exercise of options or equity awards granted or to be
granted. As at September 30, 2005, the number of options available for issuance under the
Plans was 1,456,056. As at September 30, 2005, options to purchase a total of 4,310,593
shares of Teekay&#146;s common stock were outstanding, of which 2,541,120 options were
then exercisable at prices ranging from $8.44 to $46.80 per share, with a weighted-average
exercise price of $18.43 per share. All outstanding options have exercise prices ranging
from $8.44 to $46.80 per share and a weighted-average exercise price of $24.46 per share.
All outstanding options expire between May 28, 2006 and June 2, 2015, ten years after the
date of each respective grant.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
Under
Statement of Financial Accounting Standards No. 123 (or <I>SFAS 123</I>), &#147;Accounting
for Stock-Based Compensation,&#148; as amended by Statement of Financial Accounting
Standards No. 148, &#147;Accounting for Stock-Based Compensation &#151; 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 (or <I>APB 25</I>),
&#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, as amended, to stock-based employee
compensation.</FONT></TD>
</TR>
</TABLE>
<BR>

<PRE>
                                                                 <B>Three Months Ended          Nine Months Ended
                                                                   September 30,               September 30,
                                                                 2005          2004          2005          2004
                                                                  $             $             $             $</B>
                                                             ------------ ------------- ------------- -------------
         Net income - as reported............................   42,675       245,332       426,290       532,884
           Less: Total stock option compensation expense.....    1,978         2,084         6,099         6,294
                                                             ------------ ------------- ------------- -------------
         Net income - pro forma..............................   40,697       243,248       420,191       526,590
                                                             ============ ============= ============= =============
         Basic earnings per common share:
           - As reported.....................................    0.55          2.94          5.34         6.46
           - Pro forma.......................................    0.53          2.92          5.26         6.38
         Diluted earnings per common share:
           - As reported.....................................    0.52          2.77          4.99         6.12
           - Pro forma.......................................    0.49          2.74          4.92         6.05
</PRE>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
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 2005 and 2004, expected life of five years,
dividend yield of 1.5% in 2005 and 2.0% in 2004, and risk-free interest rate of 4.1% in
2005 and 2.7% in 2004.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
As
at September 30, 2005, the Company had 652,452 restricted stock units outstanding that
were awarded in March 2005 as incentive based compensation. Each restricted stock unit is
equal in value to one share of the Company&#146;s common stock and reinvested dividends
from the date of the grant to the vesting of the restricted stock unit. Based on the
September 30, 2005 share price of $43.05 per share, the restricted stock units outstanding
at September 30, 2005 had a notional value of $28.1 million. The restricted stock units
vest in three equal amounts on March 31, 2006, March 31, 2007 and November 30, 2007. Upon
vesting, 122,945 of the restricted stock units will be paid to each grantee in the form of
cash, and 529,507 of the restricted stock units will be paid to each grantee in the form
of cash or shares of Teekay&#146;s common stock, at the election of the grantee. Shares of
Teekay&#146;s common stock issued as payment of the restricted stock units will be
purchased in the open market by the Company. During the three and nine months ended
September 30, 2005, the Company accrued $4.3 million and $9.6 million, respectively,
related to restricted stock units, which is primarily included in general and
administrative expenses.</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>10.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Commitments and Contingencies</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
<B>a) Vessels Under Construction</B>
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
As
at September 30, 2005, the Company was committed to the construction of four Aframax
tankers and three product tankers scheduled for delivery between November 2005 and March
2008, at a total cost of approximately $306.6 million, excluding capitalized interest. As
at September 30, 2005, payments made towards these commitments totaled $61.7 million,
excluding $6.3 million of capitalized interest and other miscellaneous construction costs.
Long-term financing arrangements existed for $235.0 million of the unpaid cost of these
vessels. The Company intends to finance the remaining unpaid amount of $9.9 million
through incremental debt or surplus cash balances, or a combination thereof. As at
September 30, 2005, the remaining payments required to be made under these newbuilding
contracts were: $33.6 million in 2005, $60.6 million in 2006, $100.0 million in 2007, and
$50.7 million in 2008. Two of the Aframax tankers will be subject to 10-year time charters
to Skaugen PetroTrans Inc., a joint venture of the Company, upon delivery in 2008.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
As
at September 30, 2005, the Company was committed to the construction of five
LNG carriers scheduled for delivery between October 2006 and February 2009. The Company
has entered into these transactions with joint venture partners who have taken a 30%
interest in the vessels and related long-term, fixed-rate time charter contracts. The
total cost of these LNG carriers is approximately $891.6 million, (including the joint
venture partners&#146; share of $267.5 million), excluding capitalized interest. As at
September 30, 2005, payments made towards these commitments totaled $253.9 million
(including the joint venture partners&#146; 30% share of $76.2 million), excluding $15.5
million of capitalized interest and other miscellaneous construction costs. Long-term
financing arrangements existed for $343.1 million of the unpaid cost of these LNG
carriers. The Company intends to finance its 70% portion of the remaining unpaid amount of
$294.6 million through incremental debt or surplus cash balances, or a combination
thereof. As at September 30, 2005, the remaining payments required to be made under these
contracts (including the joint venture partners&#146; 30% share) were: $137.2
million in 2005, $137.3 million in 2006, $253.5 million in 2007, $73.6 million in 2008 and
$36.1 million in 2009.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Three
of the LNG carriers will be subject to 20-year, fixed-rate time charters to
Ras Laffan Natural Gas Co. Limited (II), a joint venture between Qatar Gas Transport
Company Ltd. and ExxonMobil RasGas Inc., a subsidiary of ExxonMobil Corporation. Pursuant
to existing agreements, the Company has agreed to sell to Teekay LNG its ownership
interest in these three vessels and related charter contracts.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Two
of the LNG carriers will be subject to 20-year, fixed rate time charters to
The Tangguh Production Sharing Contractors, a consortium led by BP Berau, a subsidiary of
BP plc. Pursuant to existing agreements, the Company is required to offer its ownership
interest in these two vessels and related charter contracts to Teekay LNG.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
During
September 2005, the Company purchased from Hyundai Heavy Industries Co., Ltd. options to
have constructed two LNG carriers at a predetermined price for delivery in 2009.
The options expire December 31, 2005. If the options are exercised, then the $6.0 million
cost for the options will be applied to the first construction installment payment. If the
options are not exercised, the fee will be forfeited. (See also Note 17.)
</FONT></TD>
</TR>
</TABLE>
<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=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS <BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
<B>b) Joint Ventures</B>
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
In
August 2005, the Company announced that it had been awarded long-term fixed-rate contracts
to charter four LNG carriers to Ras Laffan Liquefied Natural Gas Co. Limited (3) (or
<I>RasGas 3</I>), a joint venture company between a subsidiary of ExxonMobil Corporation
and Qatar Petroleum. The vessels will be chartered to RasGas 3 at fixed rates, with
inflation adjustments, for a period of 25 years (with options to extend up to an
additional 10 years), scheduled to commence in the first half of 2008. The Company is
entering into these transactions with its joint venture partner, Qatar Petroleum, which
has taken a 60% interest in the vessels and time charters. In connection with this award,
the joint venture has entered into agreements with Samsung Heavy Industries Co. Ltd. to
construct four 217,000 cubic meter LNG carriers at a total cost of approximately $1.0 billion (of which
the Company&#146;s 40% portion is $400.7 million), excluding capitalized interest. As at
September 30, 2005, payments made towards these commitments by the joint venture company
totaled $200.3 million, excluding capitalized interest and other miscellaneous
construction costs (of which the Company&#146;s 40% contribution was $80.1 million). The
joint venture company intends to finance the remaining unpaid amount of $801.3 million
through incremental debt or equity contributions, or a combination thereof. As at
September 30, 2005, the remaining payments required to be made under these newbuilding
contracts (including the joint venture partners&#146; 60% share) were $200.8 million in
2006, $400.2 million in 2007 and $200.3 million in 2008.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Under
the terms of a joint venture agreement with an entity controlled by the former controlling
shareholder of Teekay Spain, Teekay will make capital contributions to the joint venture
company of $50.0 million in share premium. If Teekay has not contributed the $50.0 million
equity prior to April 30, 2007, it will be required to pay the other partner up to $25.0
million calculated by a pre-determined formula based on the occurrence of certain future
events.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
Teekay
and certain of its subsidiaries have guaranteed their share of the outstanding mortgage
debt in four 50%-owned joint venture companies. As at September 30, 2005, Teekay and these
subsidiaries had guaranteed $99.0 million, or 50% of the total $198.0 million, in
outstanding mortgage debt of the joint venture companies. These joint venture companies
own an aggregate of four shuttle tankers.
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
<B>c) Long-Term Incentive Program</B>
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
In
2005, the Company adopted the Vision Incentive Plan (or the <I>Plan</I>) to reward
exceptional corporate performance and shareholder returns. This Plan will result in an
award pool for senior management based on the following two measures: (a) economic profit
from 2005 to 2010 (or the <I>Economic Profit</I>); and (b) market value added from 2001 to
2010 (or the <I>Market Value Added</I>). The Plan terminates on December 31, 2010. Under
the Plan, the Economic Profit is the difference between the Company&#146;s annual return
on invested capital and its weighted-average cost of capital multiplied by its average
invested capital employed during the year, and Market Value Added is the amount by which
the average market value of the Company for the preceding 18 months exceeds the average
book value of the Company for the same period.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
In
2008, if the Plan&#146;s award pool has a cumulative positive balance based on the
Economic Profit contributions for the preceding three years, an interim distribution may
be made to participants in an amount not greater than half of the award pool. In 2011, the
balance of the Plan award pool will be distributed to the participants. Fifty percent of
any distribution from the award pool, in each of 2008 and 2011, must be paid in a form
that is equity-based, with vesting on half of this percentage deferred for one year and
vesting on the remaining half of this percentage deferred for two years.
</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>

<BR>
<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Economic Profit contributions added to the award pool each quarter are accrued when
incurred. The estimated Market Value Added contributions are accrued on a straight-line
basis from the date of plan approval, which was March 9, 2005, until December 31, 2010.
Any subsequent increases or decreases to the Market Value Added contribution are accrued
on a straight-line basis until December 31, 2010. During the three and nine months ended
September 30, 2005, the Company accrued $3.6 million and $13.9 million, respectively, of
the Plan contributions in general and administrative expenses.
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
<B>d) Other</B>
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company has been awarded a contract by a consortium of major oil companies to construct
and install on seven of its shuttle tankers volatile organic 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 2006 at a total cost of approximately $109.7 million. As at
September 30, 2005, the Company had made payments towards these commitments of
approximately $77.2 million. As at September 30, 2005, the remaining payments required to
be made towards these commitments were $23.8 million in 2005 and $8.7 million in 2006.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company enters into indemnification agreements with certain officers and directors. In
addition, the Company enters into other indemnification agreements in the ordinary course
of business. The maximum potential amount of future payments required under these
indemnification agreements is unlimited. However, the Company maintains what it believes
is appropriate liability insurance that reduces its exposure and enables the Company to
recover future amounts paid up to the maximum amount of the insurance coverage, less any
deductible amounts pursuant to the terms of the respective policies, the amounts of which
are not considered material.</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>11.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vessel Sales, Writedown on Vessels and Equipment and Vessels Held for Sale</B> </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
During
the third quarter of 2005, the Company recorded a net gain of $8.1 million primarily related to the
sale of a single-hulled Aframax tanker built in 1990.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
In
March 2005, the Company sold and leased back a 1991-built shuttle tanker that is now being
accounted for as an operating lease. The sale generated a $2.1 million gain, which has
been deferred and is being amortized over the 6.5 year term of the lease. The Company is
also amortizing a deferred gain on the sale and lease back pursuant to the operating
leases of three vessels sold in December 2003. The results for the three and nine months
ended September 30, 2005 include $0.6 million and $2.0 million, respectively, of
amortization of these deferred gains.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
results for the nine months ended September 30, 2005 include $134.6 million of gains on
the sale of 12 Aframax tankers built between 1988 and 1991, one shuttle tanker built in
1986, one Suezmax tanker built in 1990 and one newbuilding Suezmax tanker that was sold
concurrently upon its delivery in March 2005.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
results for the three and nine months ended September 30, 2005 include $2.1 million and
$12.3 million, respectively, of writedowns of certain offshore equipment due to a lower
estimated net realizable value arising from the early termination in June 2005 of a
contract.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
During
the third quarter of 2005, the Company entered into an agreement to sell one shuttle
tanker built in 1981. The Company expects to record a gain of approximately $4.2 million
relating to the sale upon delivery in the fourth quarter of 2005. The vessel is presented
on the September 30, 2005 balance sheet as vessel held for sale.</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>12.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Other &#150; net</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<PRE>
                                                             <B>Three Months Ended           Nine Months Ended
                                                       September 30,  September 30,  September 30,  September 30,
                                                           2005           2004            2005            2004
                                                             $              $               $               $</B>
                                                        -------------- -------------- -------------- --------------
         Minority interest expense......................   (5,354)          (404)        (12,429)         (1,633)
         Loss on bond redemption <I>(note 7)</I>..............    (1,334)          (716)        (10,109)           (716)
         Loss from settlement of interest rate swaps
           <I>(note 14)</I>...................................         -              -          (7,820)              -
         Writeoff of capitalized loan costs.............        -              -          (7,462)              -
         Income tax recovery (expense)..................    2,005         (8,066)         11,877         (16,301)
         Dividend income................................        -              3               -           5,679
         Miscellaneous..................................    2,616          1,291           7,211           6,055
                                                        --------------- ------------- ---------------- ---------------
         Other - net.............................          (2,067)        (7,892)        (18,732)         (6,916)
                                                        =============== ============= ================ ===============
</PRE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>13.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Comprehensive Income</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<PRE>

                                                             <B>Three Months Ended           Nine Months Ended
                                                       September 30,  September 30,  September 30,  September 30,
                                                           2005          2004            2005            2004
                                                             $             $               $               $</B>
                                                        ------------- -------------- -------------- --------------
         Net income....................................    42,675       245,332         426,290         532,884
         Other comprehensive income:
            Unrealized gain (loss) on marketable
               securities..............................         -       (12,020)              -          39,369
            Reclassification adjustment for gain on
             sale of marketable securities included
             in net income............................          -       (91,153)              -         (92,588)
            Unrealized gain (loss) on derivative
             instruments..............................     39,251       (43,191)        (46,925)        (67,645)
            Reclassification adjustment for (gain)
             loss on derivative instruments included
             in net income............................     (2,211)       (1,098)         12,493           5,048
                                                       -------------- ------------- ---------------- ---------------
          Comprehensive income.........................    79,715        97,871         391,858         417,069
                                                       ============== ============= ================ ===============

 </PRE>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>14.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Derivative Instruments and Hedging Activities</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
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 and bunker fuel
prices.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
The
Company hedges portions of its forecasted expenditures denominated in foreign currencies
with foreign exchange forward contracts. As at September 30, 2005, the Company was
committed to foreign exchange contracts for the forward purchase of approximately
Norwegian Kroner 422.0 million, Canadian Dollars 24.1 million and Singapore Dollars 2.4
million for U.S. Dollars at an average rate of Norwegian Kroner 6.65 per U.S. Dollar,
Canadian Dollar 1.27 per U.S. Dollar and Singapore Dollar 1.66 per U.S. Dollar,
respectively. The foreign exchange forward contracts mature as follows: $27.9 million in
2005; and $56.0 million in 2006.</FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
As
at September 30, 2005, 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>Fair Value    Weighted-
                                                                              / Carrying    Average         Fixed
                                                    Interest     Principal    Amount of     Remaining      Interest
                                                      Rate        Amount      Liability        Term          Rate
                                                     Index           $            $          (years)       (%) (1)</B>
                                                  ------------- ------------ ------------- ------------- -------------
         U.S. Dollar-denominated interest
            rate swaps............................   LIBOR        700,000       (5,366)          2.9         4.4
         U.S. Dollar-denominated interest
            rate swaps (2)........................   LIBOR      1,384,000       40,055          12.6         5.2
         Euro-denominated interest rate
            swaps (3) (4).........................  EURIBOR       384,956       14,701          18.7         3.8
       ________________________________________________
</PRE>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          Excludes the margin the Company pays on its variable-rate debt, which as of September 30,
2005 ranged from 1.1% to 1.3%.</FONT></TD>
          </TR>
          </TABLE>
<BR>
         <!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          Inception dates of swaps are 2006 ($678 million), 2007 ($256 million) and 2009 ($450 million).</FONT></TD>
          </TR>
          </TABLE>
<BR>
         <!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(3) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          Principal amount reduces monthly to 70.1 million Euros ($84.4 million) by the maturity dates
of the swap agreements.</FONT></TD>
          </TR>
          </TABLE>
<BR>
         <!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 5- TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
          <TR VALIGN=TOP>
          <TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
          <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4) </FONT></TD>
          <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
          Principal amount is the U.S. Dollar equivalent of 320.1 million Euros.</FONT></TD>
          </TR>
          </TABLE>

<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-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=2>
During
April 2005, the Company repaid term loans of $337.3 million on two LNG carriers and
settled the related interest rate swaps. A loss of $7.8 million was recognized as a result
of these interest rate swap settlements (see also Note 12). During April 2005, the Company
also settled interest rate swaps associated with 322.8 million Euros ($390.5 million) of
term loans and entered into new swaps of the same amount with a lower fixed interest rate.
A loss of 39.2 million Euros ($50.4 million) relating to these interest rate swap
settlements has been deferred in accumulated other comprehensive income and is being
recognized over the remaining term of the term loans. The cost to settle all of these
interest rate swaps was $143.3 million.

<BR><BR>
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's
         exposure to the spot  charter  market.  As at September  30, 2005,  the Company was  committed to forward  freight  agreements
         totaling  1.3 million  metric  tonnes with an  aggregate  notional  principal  amount of $14.0  million.  The forward  freight
         agreements expire between October and December 2005.
<BR><BR>

The Company hedges a portion of its bunker fuel  expenditures  with bunker fuel swap contracts.  As at September 30, 2005, the
         Company was committed to contracts  totalling  2,400 metric  tonnes with a  weighted-average  price of $180.75 per tonne.  The
         fuel swap contracts expire between October and December 2005.

<BR><BR>
The Company is exposed to credit loss in the event of  non-performance  by the counter parties to the foreign exchange forward
         contracts,  interest rate swap agreements,  forward freight  agreements and bunker fuel swap contracts;  however,  the Company
         does not anticipate non-performance by any of the counter parties.

<BR><BR>
 During the three and nine months ended  September 30, 2005, the Company  recognized a net gain of $0.2 million ($0.4 million -
         2004)  and a net loss of $0.8  million  ($0.7  million - 2004),  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 (loss) income, respectively.

<BR><BR>

As at September 30, 2005 and December 31, 2004, the Company's  accumulated  other  comprehensive  loss consisted of unrealized
         losses on derivative instruments totaling $90.6 million and $56.1 million, respectively.

 </FONT></TD>
</TR>
</TABLE>
<BR>

<PAGE>

<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<BR>(all tabular amounts stated in thousands of U.S. dollars, except share and per share data)</FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>15.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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,
                                                        2005            2004            2005            2004
                                                          $               $               $               $</B>
                                                  --------------- --------------- --------------- --------------
         Net income available for common
           stockholders...........................      42,675         245,332         426,290         532,884
                                                  --------------- --------------- --------------- --------------

         Weighted-average number of
           common shares..........................  77,104,662      83,317,200      79,872,761      82,516,723
         Dilutive effect of employee stock
           options and restricted stock awards....   2,132,202       2,675,439       2,212,487       2,222,783
         Dilutive effect of Equity Units..........   3,323,021       2,725,892       3,310,121       2,370,562
                                                  --------------- --------------- --------------- --------------
         Common stock and common stock
           equivalents............................  82,559,885      88,718,531      85,395,369      87,110,068
                                                  =============== =============== =============== ==============

         Earnings per common share:
           - Basic................................        0.55            2.94            5.34            6.46
           - Diluted..............................        0.52            2.77            4.99            6.12



</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
For
both the three and nine months ended September 30, 2005, the anti-dilutive effect of 0.6
million shares attributable to outstanding stock options was excluded from the
calculations of diluted earnings per share. All outstanding stock options and Equity Units
were dilutive for the three and nine months ended September 30, 2004.
</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>16.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Recent Pronouncements</B> </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
On
December 16, 2004, the Financial Accounting Standards Board (or <I>FASB</I>) issued FASB
Statement No. 123(R) (or <I>SFAS 123(R)</I>), &#147;Share-Based Payment&#148;, which is a
revision of FASB Statement No. 123, &#147;Accounting for Stock-Based Compensation&#148;. SFAS 123(R) supersedes APB 25 and requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer an
acceptable alternative.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
SFAS
123(R) must be adopted for all fiscal years beginning after June 15, 2005. Early adoption
will be permitted in periods in which financial statements have not yet been issued. The
Company expects to adopt SFAS 123(R) on January 1, 2006.</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
SFAS 123(R) permits public companies to adopt its requirements using one of the following two
methods: </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
a)&nbsp; A &#147;modified prospective&#148; method in which compensation cost is
          recognized beginning with the effective date based on (i) the requirements of
          SFAS 123(R) for all share-based payments granted after the effective date and
          (ii) the requirements of SFAS 123 for all awards granted to employees prior to
          the effective date of SFAS 123(R) that remain unvested on the effective date; or</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
b)&nbsp; A &#147;modified retrospective&#148; method which includes the requirements of
          the modified prospective method described above, but also permits entities to
          restate based on the amounts previously recognized under SFAS 123 for purposes
          of pro forma disclosures either (i) all prior periods presented or (ii) prior
          interim periods of the year of adoption.</FONT></TD>
</TR>
</TABLE>
<BR>



<PAGE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS<BR>(all tabular amounts stated in thousands of U.S.
dollars, except share and per share data) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Project" -->
<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=2>
The
Company plans to adopt SFAS 123(R) using the modified prospective method. The adoption of
SFAS 123(R)&#145;s fair value method will have a significant impact on the Company&#146;s
results of operations, although it will not affect the Company&#146;s overall financial
position. The impact of adoption of SFAS 123(R) cannot be predicted at this time because
it will depend on levels of share-based payments granted in the future. However, had the
Company adopted SFAS 123(R) in prior periods, the impact of that standard would have
approximated the impact of SFAS 123 as described in the disclosure of pro forma net income
and earnings per share in Note 9 of these financial statements.</FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-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><B>17.</B>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Subsequent Events</B> </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>a) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               On November 23, 2005, the Company&#146;s subsidiary, Teekay LNG, completed its
               follow-on public offering of 4.0 million common units at a price of $27.40 per
               unit. On November 29, 2005, Teekay LNG completed the sale and issuance of an
               additional 0.6 million common units at a price of $27.40 per unit, upon the
               exercise in full of the over-allotment option granted to the underwriters. Total
               gross proceeds from the offering were $126.0 million.</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>b) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Concurrently with Teekay LNG&#146;s follow-on offering, the Company sold to
               Teekay LNG three double-hulled Suezmax tankers and related long-term, fixed-rate
               time charters for an aggregate price of $180 million. These vessels, the
               <I>African Spirit</I>, <I>Asian Spirit</I> and <I>European Spirit</I>, have an
               average age of two years and are chartered to a subsidiary of ConocoPhillips, an
               international, integrated energy company. Teekay LNG financed the acquisition
               with the net proceeds of the public offering, together with borrowings under its
               revolving credit facility and cash balances.</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>c) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company has entered into an agreement to sell its remaining
               single-hulled Aframax tanker built in 1989 for total proceeds of approximately
               $20.0 million. The vessel is scheduled to be delivered to the buyer during the
               fourth quarter of 2005, at which time the Company expects to record a gain of
               approximately $10.1 million relating to the sale.</FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 4-TNR" FSL="Default" -->
          <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>d) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During October 2005, the Company purchased from Samsung Heavy Industries Co.,
               Ltd. options to have constructed two LNG carriers at a predetermined price
               for delivery in 2009 and 2010. The options expire January 15, 2006, but the
               Company may extend them to January 31, 2006 for an additional cost of $0.5
               million for each option. If the options are exercised, then the $6.0 million cost for the options
               and any extension fee will be applied to the first construction installment
               payment. If the options are not exercised, the fees will be forfeited.</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>e) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 On December 6, 2005, the Company announced that its Board of Directors has
               authorized the repurchase of up to $180.0 million of its common stock in
               the open market.  Since the end of November 2004 when the Company announced the
               authorization of its first share repurchase program, the Company has
               repurchased $554.7 million of its outstanding shares.  With $49.2 million remaining under the existing
               share repurchase program, the $180.0 million increase results in a total remaining share repurchase
               authorization of approximately $229.2 million.</FONT></TD>
               </TR>
               </TABLE>
               <BR>

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font size=2>SEPTEMBER 30, 2005</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font size=2>PART I &#150; FINANCIAL INFORMATION<BR><BR></font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.06in;text-align:center;'><b><font size=2> </font></b></p>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="96" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>ITEM 2 -</font></b></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font size=2>
MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

</font></b></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><b><font size=2>General</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>
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 2004. Through our acquisition of Teekay Shipping Spain
S.L. (or <I>Teekay </I> <I>Spain</I>) (formerly Naviera F. Tapias S.A.), we have also
expanded into the liquefied natural gas (or <I>LNG</I>) shipping sector. As at September
30, 2005, our fleet (excluding vessels managed for third parties) consisted of 146 vessels
(including 16 newbuildings on order, 52 vessels time-chartered-in, five vessels owned through joint ventures
and one vessel held for sale). Our conventional oil tankers provide
for a total cargo-carrying capacity of approximately 13.7 million deadweight tonnes (or
mdwt), and our LNG and liquid petroleum gas carriers have total cargo-carrying capacity of
approximately 2.2 million cubic meters.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Our voyage revenues are derived from:<BR><BR></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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Voyage charters, which are charters for shorter intervals that are 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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Time charters and bareboat 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, based on inflation, interest rates or current market rates; 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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>The table below illustrates the primary distinctions among these types of charters and
contracts:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="border-collapse:collapse">
    <tr style='page-break-inside:avoid; height:27.0pt'>
        <TD WIDTH="173" VALIGN="bottom" STYLE="padding:0in 4.5pt 0in 4.5pt; height:27.0pt">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <TD WIDTH="120" VALIGN="bottom" STYLE="padding:0in 4.5pt 0in 4.5pt; height:27.0pt">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6.0pt;margin-bottom:0pt'><u><font size=2>Voyage Charter</font><sup><font size=1>(1)</font></sup></u><u></u></p> </td>
        <TD WIDTH="108" VALIGN="bottom" STYLE="padding:0in 4.5pt 0in 4.5pt; height:27.0pt">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6.0pt;margin-bottom:0pt'><u><font size=2>Time-Charter</font></u><u></u></p> </td>
        <TD WIDTH="107" VALIGN="bottom" STYLE="padding:0in 4.5pt 0in 4.5pt; height:27.0pt">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6.0pt;margin-bottom:0pt'><u><font size=2>Bareboat-Charter</font></u><u></u></p> </td>
        <TD WIDTH="114" VALIGN="bottom" STYLE="padding:0in 4.5pt 0in 4.5pt; height:27.0pt">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Contract of Affreightment</font></u><u></u></p> </td> </tr>
    <tr style='page-break-inside:avoid;height:17.25pt'>
        <td width="173" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:4pt;margin-bottom:0pt;line-height:120.44%'><font size=2>Typical contract length</font></p> </td>
        <td width="120" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Single voyage</font></p> </td>
        <td width="108" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>One year or more</font></p> </td>
        <td width="107" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>One year or more</font></p> </td>
        <td width="114" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:.9pt;text-indent:-.9pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>One year or more</font></p> </td> </tr>
    <tr style='page-break-inside:avoid;height:15.25pt'>
        <td width="173" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:120.44%'><font size=2>Hire rate basis</font><sup><font size=1>(2)</font></sup></p> </td>
        <td width="120" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Varies</font></p> </td>
        <td width="108" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Daily</font></p> </td>
        <td width="107" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Daily</font></p> </td>
        <td width="114" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Typically daily</font></p> </td> </tr>
    <tr style='page-break-inside:avoid;height:17.25pt'>
        <td width="173" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:125.44%'><font size=2>Voyage expenses </font><sup><font size=1>(3)</font></sup></p> </td>
        <td width="120" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>We pay</font></p> </td>
        <td width="108" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer pays</font></p> </td>
        <td width="107" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer pays</font></p> </td>
        <td width="114" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>We pay</font></p> </td> </tr>
    <tr style='page-break-inside:avoid;height:17.25pt'>
        <td width="180" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:125.44%'><font size=2>Vessel operating expenses </font><sup><font size=1>(3)</font></sup></p> </td>
        <td width="120" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>We pay</font></p> </td>
        <td width="108" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>We pay</font></p> </td>
        <td width="107" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer pays</font></p> </td>
        <td width="114" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>We pay</font></p> </td> </tr>
    <tr style='page-break-inside:avoid; height:17.25pt'>
        <td width="173" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:125.44%'><font size=2>Off-hire</font><sup><font size=1>(4)</font></sup></p> </td>
        <td width="120" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer does not pay</font></p> </td>
        <td width="108" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Varies</font></p> </td>
        <td width="107" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer typically pays</font></p> </td>
        <td width="114" valign=top style='padding:0in 4.5pt 0in 4.5pt; height:12.25pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:6pt;margin-bottom:0pt'><font size=2>Customer typically does not pay</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><b><font size=1>_____________________________________________________________________________</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="396" style='border-collapse:collapse'>
    <tr >
        <td width="24" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>(1)</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>Under a consecutive voyage charter, the customer pays for idle time.</font></p> </td>
        <td  width="57">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="24" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>(2)</font></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&#147;<I>Hire</I>&#148; rate refers to the basic payment from the charterer for the use of the vessel.</font></p> </td> </tr>
    <tr >
        <td width="24" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>(3)</font></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>
Defined below under &#147;Important Financial and Operational Terms and Concepts.&#148;</font></p> </td> </tr>
    <tr >
        <td width="24" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>(4)</font></p> </td>
        <td width="295" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>
&#147;<I>Off-hire</I>&#148; refers to the time a vessel is not available for service.</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="24" ></td>

        <td width="295" ></td>

        <td width="20" ></td>

        <td width="57" ></td> </tr> </table>

<BR>
<BR>
<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Public Offerings by
Teekay LNG Partners L.P. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 10, 2005, our subsidiary
Teekay LNG Partners L.P. (or <I>Teekay LNG</I>) sold, as part of an initial public
offering, 6.9 million of its common units at $22.00 per unit for proceeds of $135.7
million, net of $16.1 million of commissions and other expenses associated with the
offering. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 23, 2005, Teekay LNG
completed a follow-on public offering of 4.0 million common units at a price of $27.40 per
unit. On November 29, 2005, Teekay LNG completed the sale and issuance of an additional
0.6 million common units at a price of $27.40 per unit, upon the exercise in full of the
over-allotment option granted to the underwriters. Proceeds from the follow-on
offering were $120.3 million, net of an estimated $5.7 million of offering expenses. As of
the date of this report, we own a 67.8% interest in Teekay LNG, including our 2% general
partner interest. Please read Item 1 &#150; Financial Statements: Note 3 &#150; Initial
Public Offering of Teekay LNG Partners L.P and Note 17 &#150; Subsequent Events. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sale of Three Suezmax
Tankers to Teekay LNG Partners L.P. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In November 2005, we sold to Teekay
LNG three double-hulled Suezmax class crude oil tankers and related long-term, fixed-rate
time charters for an aggregate price of $180 million. These vessels, the <I>African
Spirit</I>, the <I>Asian </I>Spirit and the <I>European Spirit</I>, have an average age of
two years and are chartered to a subsidiary of ConocoPhillips, an international,
integrated energy company. Teekay LNG financed the acquisition with the net proceeds of
the previously mentioned follow-on public offering of its common units, together with
borrowings under its revolving credit facility and cash balances. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Segments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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=2><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=2>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. Substantially all of our conventional
Aframax, large product and small product tankers 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 three months ended September 30, 2005, we took
delivery of a newbuilding large product tanker currently trading on the spot market.
During this period, we also completed the sale of a single-hulled Aframax tanker built in
1990 and recorded a gain of approximately $8.8 million. As at September 30, 2005, we had
two Aframax tankers on order in our spot tanker segment, one that delivered in November
2005 and one scheduled to be delivered in April 2007, and three large product tankers
scheduled to be delivered between November 2006 and March 2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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=2>Our fixed-rate tanker segment
includes our shuttle tanker operations, floating storage and offtake vessels, liquid
petroleum gas carrier, and conventional crude oil, methanol and product tankers on
long-term, fixed-rate time-charter contracts or contracts of affreightment. Our shuttle
tanker business is operated through our business unit Teekay Navion Shuttle Tankers, which
includes the shuttle tanker operations of our subsidiaries Navion AS and Ugland Nordic
Shipping AS. This business unit provides services to oil companies, primarily in the North
Sea, under long-term, fixed-rate contracts of affreightment or time-charter contracts.
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 three months ended September 30, 2005, we took delivery of one
newbuilding conventional crude oil Suezmax tanker, which has commenced a 20-year time
charter contract with Compania Espanola de Petroleos, S.A., a Spanish energy conglomerate.
In connection with the closing of its initial public offering, we have transferred to
Teekay LNG our rights in this Suezmax tanker along with four additional Suezmax tankers.
As at September 30, 2005, we had on order, for our fixed-rate tanker segment, two
newbuilding conventional crude oil Aframax tankers. Upon delivery of the Aframax tankers,
which are scheduled for January and March 2008, the vessels will commence 10-year
long-term charters to our Skaugen PetroTrans joint venture. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Fixed-Rate LNG Segment</I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our fixed-rate LNG segment consists
of LNG carriers subject to long-term, fixed-rate time-charter contracts. The acquisition
of Teekay Spain on April 30, 2004 established our entry into the LNG shipping sector. Our
fixed-rate LNG segment includes four LNG carriers acquired as part of the Teekay Spain
acquisition. Two of the LNG carriers have been included from the date of the Teekay Spain
acquisition; the other two vessels delivered in July and December 2004, respectively. As
at September 30, 2005, we had nine newbuilding LNG carriers on order, of which three will
commence service under long-term, fixed-rate charter contracts with Ras Laffan Liquefied
Natural Gas Co. Limited II (or <I>RasGas II</I>), a joint venture company between a
subsidiary of ExxonMobil Corporation and Qatar Petroleum. These charters will commence
upon deliveries of the vessels, which are scheduled for 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 up to an additional 15 years. These LNG
charter contracts are subject, in certain circumstances, to termination and vessel
purchase rights in favor of RasGas II. Qatar Gas Transport Company has exercised its right
to acquire a 30% interest in these vessels. In connection with the closing of its initial
public offering, we have transferred to Teekay LNG all of our LNG carriers and have agreed
to sell to Teekay LNG all of our interest in the three RasGas II vessels upon delivery of
the first such vessel in 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2005, we were awarded a 70%
interest in two LNG carriers and related 20-year, fixed-rate time charters to service the
Tangguh LNG project in Indonesia. The customer will be The Tangguh Production Sharing
Contractors, a consortium led by BP Berau, a subsidiary of BP plc. We have contracted to
construct two double-hulled LNG carriers of 155,000 cubic meters each at a total delivered
cost of approximately $450 million. The charters will commence upon vessel deliveries,
which are scheduled for late 2008 and early 2009. We will have operational responsibility
for the vessels in this project. In accordance with an existing agreement, we are required
to offer our ownership interest in these vessels and related charter contracts to Teekay
LNG. The remaining 30% interest in the project is held by BLT LNG Tangguh Corporation, a
subsidiary of PT Berlian Tanker Tbk. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In August 2005, we were awarded a 40%
interest in four LNG carriers and related 25-year, fixed-rate time charters (with options
to extend up to an additional 10 years) to service expansion of the LNG project in Qatar.
The customer will be Ras Laffan Liquefied Natural Gas Co. Limited (3) (or
<I>RasGas&nbsp;3</I>), a joint venture company between Qatar Petroleum and a subsidiary of
ExxonMobil Corporation. We have contracted to construct four double-hulled LNG carriers of
217,000 cubic meters each at a total delivered cost of approximately $1.1 billion. The
charters will commence upon vessel deliveries, which are scheduled for the first half of
2008. The remaining 60% interest in the project will be held by Qatar Gas Transport
Company Ltd. We will have operational responsibility for the vessels in this project.
Under the charters, Qatar Gas Transport Company Ltd. may assume operational responsibility
beginning 10 years following delivery of the vessels. In accordance with an existing
agreement, we are required to offer our ownership interest in these vessels and related
charter contracts to Teekay LNG. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acquisition of Teekay
Shipping Spain S.L. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 30, 2004, we acquired 100%
of the issued and outstanding shares of Teekay Spain for $298.2 million in cash and the
assumption of existing debt and then remaining newbuilding commitments. Please read Item 1
&#150; Financial Statements: Note 4 &#150; Acquisition of Teekay Shipping Spain S.L. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Important Financial and
Operational Terms and Concepts </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We use a variety of financial and
operational terms and concepts when analyzing our performance. These include the
following: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Voyage Revenues.</I></B><I></I>
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>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Forward Freight
Agreements.</I></B><I></I> We are exposed to market risk for vessels in our spot tanker
segment from changes in spot market rates for vessels. In certain cases, we use forward
freight agreements (or <I>FFAs</I>) to manage this risk. FFAs involve contracts to provide
a fixed number of theoretical voyages at fixed-rates, thus hedging a portion of our
exposure to the spot charter market. These agreements are recorded as assets or
liabilities and measured at fair value. Changes in the fair value of the FFAs are
recognized in other comprehensive income (loss) until the hedged item is recognized as
voyage revenues in income. The ineffective portion of a change in fair value is
immediately recognized into income through voyage revenues. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Voyage Expenses.</I></B><I></I>
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>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Net Voyage
Revenues.</I></B><I></I> 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 about the deployment of our vessels and their
performance than voyage revenues, the most directly comparable financial measure under
accounting principles generally accepted in the United States (or <I>GAAP</I>). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Vessel Operating
Expenses.</I></B><I></I> Under all types of charters for our vessels, except for bareboat
charters, we are responsible for vessel operating expenses, which include crewing, repairs
and maintenance, insurance, stores, lube oils and communication expenses. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Income from Vessel Operations.
</I></B>To assist us in evaluating our operations by segment, we 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 expense, income taxes, foreign currency and other income and
losses. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Drydocking.</I></B><I></I>&nbsp;&nbsp;&nbsp;&nbsp;
          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. In
          addition, a shipping society classification intermediate survey is performed on
          our LNG carriers between the second and third year of a five-year drydocking
          period. We capitalize a substantial portion of the costs incurred during
          drydocking and for the survey and amortize those costs on a straight-line basis
          from the completion of a drydocking or intermediate survey to the estimated
          completion of the next drydocking. We expense costs related to routine repairs
          and maintenance incurred during drydocking or intermediate survey that do not
          improve or extend the useful lives of the assets. The number of drydockings
          undertaken in a given period, and the nature of the work performed determine the
          level of drydocking expenditures. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Depreciation and Amortization.
</I></B>&nbsp;Our depreciation and amortization expense typically consists of:</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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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>
<BR>
<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=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
charges related to the amortization of drydocking expenditures over the estimated number
of years to the next scheduled drydocking; and
</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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
charges related to the amortization of the fair value of the time charters, contracts of
affreightment and intellectual property where amounts have been attributed to those items
in acquisitions. These amounts are amortized over the period during which the asset is
expected to contribute to our future cash flows.
</FONT></TD>
</TR>
</TABLE>
<BR>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Time Charter Equivalent
Rates.</I></B><I></I> 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; (or <I>TCE</I>) rates, which represent net voyage revenues divided by
revenue days. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Revenue Days.</I></B><I></I>
Revenue days are the total number of calendar days our vessels were in our possession
during a period, less the total number of off-hire days during the period associated with
major repairs, drydockings or special or intermediate surveys. Consequently, revenue days
represents the total number of days available for the vessel to earn revenue. Idle days,
which are days when the vessel is available for the vessel to earn revenue, yet is not
employed, are included in revenue days. We use revenue days to explain changes in our net
voyage revenues between periods. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Calendar-ship-days.</I></B><I></I>&nbsp;&nbsp;&nbsp;&nbsp;
          Calendar-ship-days are equal to the total number of calendar days that our
          vessels were in our possession during a period. As a result, we use calendar
          ship days in explaining changes in vessel operating expenses, time charter hire
          expense and depreciation and amortization. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Restricted Cash
Deposits.</I></B><I></I> 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, or bareboat charters, for the vessels. The restricted cash
deposits, together with interest earned thereon, will equal the remaining amounts we owe
under the lease arrangements, including our obligation to purchase the vessels at the end
of the lease terms. During vessel construction, we borrowed under the term loans and made
restricted cash deposits equal to construction installment payments. We also maintain
restricted cash deposits relating to certain term loans and other obligations. Please read
Item 1 &#150; Financial Statements: Note 8 &#150; Capital Leases and Restricted Cash. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tanker Market Overview </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the third quarter of 2005,
tanker freight rates continued to follow their traditional seasonal pattern, declining
from the very high levels experienced earlier this year. However, subsequent to the end of
the third quarter, Aframax tanker rates have surged to levels not experienced since the
record highs achieved in the fourth quarter of 2004, with charter rates earned on several
Aframax routes exceeding rates earned by larger ships. Hurricane related production
disruptions and refinery outages in the U.S. Gulf led to increased distance over which
crude oil and product imports had to be carried, which increase tonne-mile demand,
particularly for crude and product tankers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global oil demand, an underlying
driver of tanker demand, averaged 82.5 million barrels per day (or <I>mb/d</I>) during the
third quarter of 2005, an increase of 0.6 mb/d over the previous quarter and 0.8 mb/d, or
1.0%, higher than the third quarter of 2004. In November 2005, the International Energy
Agency (or <I>IEA</I>) reduced its annual global oil demand growth forecast for 2005 by
0.4 mb/d, primarily due to the economic impact of high energy prices and hurricane-related
disruptions in the United States. However, the outlook for the fourth quarter of 2005
remains firm with global oil demand estimated to be 2.6 mb/d, or 3.2%, higher than the
third quarter of 2005 and 1.3 mb/d, or 1.5%, higher than the fourth quarter of 2004. For
2006, the IEA is forecasting a further increase in oil demand of 1.7 mb/d, or 2.0%, from
2005 levels, to 85.0 mb/d. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global oil supply, a direct driver of
tanker demand, averaged 84.1 mb/d during the third quarter of 2005, which was down 0.4
mb/d from the second quarter of 2005, but 0.8 mb/d higher than the third quarter of 2004.
Long-haul Middle East OPEC oil production rose by 0.3 mb/d in the third quarter of 2005
from the previous quarter, while non-OPEC production declined by 0.7 mb/d as a result of
the U.S. Gulf production outages and scheduled summer field maintenance in the North Sea. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The size of the world tanker fleet
rose to 349.4 million deadweight tonnes (<I>mdwt</I>) as of September 30, 2005, up 4.0
mdwt, or 1.2%, from the end of the previous quarter. Deletions aggregated 3.1 mdwt in the
third quarter of 2005, up from 2.2 mdwt in the previous quarter. Deliveries of tanker
newbuildings during the third quarter of 2005 increased to 7.1 mdwt from 6.8 mdwt
delivered during the previous quarter. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of September 30, 2005, the world
tanker orderbook stood at 87.6 mdwt, representing 25.1% of the world tanker fleet,
compared to 89.7 mdwt, or 26.0%, as of June 30, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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, while 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>i.e.</I> voyage revenues less voyage expenses) and TCE
rates of our three reportable segments where applicable. Please read Item 1 &#150;
Financial Statements: Note 2 &#150; Segment Reporting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following tables compare our
operating results by reportable segment for the three and nine months ended September 30,
2005 and 2004, and compare our net voyage revenues (which is a non-GAAP financial measure)
by reportable segment for the three and nine months ended September 30, 2005 and 2004 to
voyage revenues, the most directly comparable GAAP financial measure: </FONT></P>

<PRE>
- ----------------------------- ------------------------------------------ --------------------------------------------
                                         <B>Three Months Ended                          Three Months Ended
                                         September 30, 2005                          September 30, 2004</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............... 222,422    178,669    24,503    425,594    326,287    177,000    17,325    520,612
Voyage expenses...............  88,338     19,497         -    107,835     88,444     17,967        55    106,466
                              ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
Net voyage revenues........... 134,084    159,172    24,503    317,759    237,843    159,033    17,270    414,146
Vessel operating expenses.....  15,240     32,102     3,401     50,743     23,457     31,635     3,107     58,199
Time charter hire expense.....  68,089     52,467         -    120,556     71,346     49,552         -    120,898
Depreciation and amortization.  13,377     29,512     7,522     50,411     24,913     34,739     5,150     64,802
General and administrative(1).  22,088     14,970     3,397     40,455     13,580     14,212     1,258     29,050
Writedown / (gain) on sale of
  vessels and equipment.......  (8,687)     2,111         -     (6,576)   (49,821)    (3,691)        -    (53,512)
                              ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
Income from vessel operations.  23,977     28,010    10,183     62,170    154,368     32,586     7,755    194,709
- ----------------------------- ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
</PRE>

<PAGE>
<BR>
<PRE>
- ----------------------------- ------------------------------------------ --------------------------------------------
                                          <B>Nine Months Ended                           Nine Months Ended
                                         September 30, 2005                          September 30, 2004</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..............  809,972    539,627    73,546  1,423,145    992,809    531,552    25,324  1,549,685
Voyage expenses..............  253,888     50,722        50    304,660    263,920     54,968       170    319,058
                              ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
Net voyage revenues..........  556,084    488,905    73,496  1,118,485    728,889    476,584    25,154  1,230,627
Vessel operating expenses....   49,115     95,845    11,564    156,524     70,663     85,469     4,744    160,876
Time charter hire expense....  206,585    147,007         -    353,592    191,271    144,866         -    336,137
Depreciation and amortization.  41,927     90,306    22,567    154,800     75,775     95,960     7,527    179,262
General and administrative(1).  63,723     41,010     9,599    114,332     38,679     41,813     1,999     82,491
Writedown / (gain) on sale of
  vessels and equipment.......(131,803)     7,480         -   (124,323)   (50,874)    (3,691)        -    (54,565)
Restructuring charge..........       -          -         -          -      1,002          -         -      1,002
                              ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
Income from vessel operations. 326,537    107,257    29,766    463,560    402,373    112,167    10,884    525,424
- ----------------------------- ---------- --------- ---------- ---------- ---------- ---------- --------- ----------
</PRE>


<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 3-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>(1)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Includes direct general and administrative expenses and indirect general and
               administrative expenses (allocated to each segment based on estimated use of
               corporate resources).</FONT></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following tables outline the TCE
rates earned by the vessels in our spot tanker segment for the three and nine months ended
September 30, 2005 and 2004: </FONT></P>

<PRE>
- ------------------------------------------- ------------------------------------- -----------------------------------
                                                     <B>Three Months Ended                   Three Months Ended
                                                     September 30, 2005                   September 30, 2004</B>
                                            ------------------------------------- -----------------------------------
                                             Net Voyage               TCE per    Net Voyage               TCE per
                                              Revenues    Revenue     Revenue     Revenues    Revenue    Revenue
Vessel Type                                   ($000's)      Days       Day ($)    ($000's)      Days      Day ($)
- ------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------

Very Large Crude Carriers..................         -           -           -      15,848         202      78,455
Suezmax Tankers (1)........................    10,064         409      24,606      28,282         620      45,616
Aframax Tankers(1).........................    85,225       3,430      24,846     168,617       5,315      31,729
Large Product Tankers......................    26,671         975      27,355      13,104         558      23,484
Small Product Tankers......................    12,124       1,003      12,088      11,992         863      13,896
- ------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Totals.....................................   134,084       5,817      23,050     237,843       7,558      31,469
=========================================== =========== =========== =========== =========== =========== ===========
</PRE>


<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 3-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>(1)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Results for the three months ended September 30, 2005 and 2004 for our Suezmax
               tankers include realized losses from FFAs of $0.1 million ($289 per revenue day)
               and $1.9 million ($3,130 per revenue day), respectively. Results for the three
               months ended September 30, 2005 and 2004 for our Aframax tankers include
               realized gains from FFAs of $1.8 million ($512 per revenue day) and realized
               losses from FFAs of $0.2 million ($33 per revenue day), respectively.</FONT></TD>
          </TR>
          </TABLE>
          <BR>


<PRE>
- ------------------------------------------- ------------------------------------- -----------------------------------
                                                     <B>Nine Months Ended                    Nine Months Ended
                                                     September 30, 2005                   September 30, 2004</B>
                                            ------------------------------------- -----------------------------------
                                             Net Voyage               TCE per    Net Voyage               TCE per
                                              Revenues    Revenue     Revenue     Revenues    Revenue    Revenue
Vessel Type                                   ($000's)      Days       Day ($)    ($000's)      Days      Day ($)
- ------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------

Very Large Crude Carriers..................     8,347          90      92,744      50,205         745      67,389
Suezmax Tankers (1) .......................    55,589       1,526      36,428      88,618       1,828      48,478
Aframax Tankers(1) ........................   379,733      11,326      33,529     516,748      15,405      33,544
Oil/Bulk/Ore Carriers(2) ..................         -           -           -       3,248         150      21,653
Large Product Tankers......................    69,630       2,404      28,964      34,185       1,456      23,479
Small Product Tankers......................    42,785       2,948      14,513      35,331       2,612      13,526
- ------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Totals.....................................   556,084      18,294      30,397     728,335      22,196      32,813
=========================================== =========== =========== =========== =========== =========== ===========
</PRE>


<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 3-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>(1)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
           Results for the nine months ended September 30, 2005 and 2004 for our Suezmax
               tankers include realized losses from FFAs of $3.0 million ($1,989 per revenue
               day) and $4.1 million ($2,228 per revenue day), respectively. Results for the
               nine months ended September 30, 2005 and 2004 for our Aframax tankers include
               realized gains from FFAs of $2.2 million ($197 per revenue day) and realized
               losses from FFAs of $3.8 million ($249 per revenue day), respectively.</FONT></TD>
          </TR>
          </TABLE>
          <BR>


<!-- MARKER FORMAT-SHEET="Para (List) Hang Lvl 3-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>(2)</FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          The oil/bulk/ore carrier fleet&#146;s net voyage revenues exclude $0.6 million
               (nine months ended September 30, 2004) 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 in 2004.</FONT></TD>
          </TR>
          </TABLE>
          <BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because we completed our acquisition
of Teekay Spain on April 30, 2004, our 2004 financial results for our segments only
reflect Teekay Spain&#146;s results of operations commencing May 1, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Spot Tanker Segment</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 affect our revenues and earnings. Our average TCE rate for the vessels
in our spot tanker segment decreased 26.8% and 7.4%, respectively, to $23,050 and $30,397
for the three and nine months ended September 30, 2005, from $31,469 and $32,839 for the
same periods last year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table provides a
summary of the changes in calendar-ship-days for owned and chartered-in vessels in our
spot tanker segment by: </FONT></P>

<PRE>
- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                         <B>Three Months Ended September 30,                  Nine Months Ended September 30,</B>
- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                              <B>2005           2004         Percentage       2005            2004        Percentage</B>
                         (Calendar-Ship- (Calendar-Ship-    <B>Change</B>    (Calendar-Ship- (Calendar-Ship-    <B>Change</B>
                              Days)           Days)          (%)           Days)           Days)          (%)
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------

Owned Vessels..........       2,510          4,170          (39.8)         8,287         12,489          (33.6)
Chartered-in Vessels...       3,425          3,507           (2.3)        10,251         10,020            2.3
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------
Total..................       5,935          7,677          (22.7)        18,538         22,509          (17.6)
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------
</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The average calendar-ship-days for
our spot tanker fleet (including vessels chartered-in) decreased 22.7% and 17.6%,
respectively, for the three and nine months ended September 30, 2005, from the same
periods last year. These decreases were primarily due to the sale of a number of older
single-hull vessels during the 12 months ended September 30, 2005 as part of our fleet
renewal program, partially offset by newbuilding deliveries and additional chartered-in
vessels. These fleet changes reduced the average age of the vessels in our spot tanker
segment from 7.1 years at September 30, 2004 to 5.7 years at September 30, 2005. As of
September 30, 2005, we had one remaining single-hull vessel in our spot tanker fleet, that
was subsequently sold. Please read Item 1 &#150; 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=2><I><U>Net Voyage
Revenues.</U></I><U></U> Net voyage revenues for the spot tanker segment decreased 43.6%
and 23.7%, respectively, to $134.1 million and $556.1 million for the three and nine
months ended September 30, 2005, from $237.8 million and $728.9 million for the same
periods last year, primarily due to the decrease in spot tanker rates and fleet size. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Vessel Operating
Expenses.</U></I><U></U> Vessel operating expenses decreased 35.0% and 30.5%,
respectively, to $15.2 million and $49.1 million for the three and nine months ended
September 30, 2005, from $23.5 million and $70.7 million for the same periods last year.
These decreases were mainly attributable to the sale of older vessels in the last 12
months and lower repairs and maintenance activity as a result of the reduction in the
average age of the vessels in our spot tanker segment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Time-Charter Hire
Expense.</U></I><U></U> Time-charter hire expense decreased 4.6% to $68.1 million for the
three months ended September 30, 2005, compared to $71.3 million for the same period last
year, due primarily to the decrease in average number of vessels chartered-in.
Time-charter hire expense increased 8.0% to $206.6 million for the nine months ended
September 30, 2005, compared to $191.3 million for the same period last year, due
primarily to the increase in the average number of chartered-in Aframax and product
tankers. In addition, our average per day time-charter hire expense decreased 2.3% and
increased 5.6%, respectively, to $19,880 per day and $20,153 per day for the three and
nine months ended September 30, 2005, from $20,344 per day and $19,089 per day 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=2><I><U>Depreciation and
Amortization.</U></I><U></U> Depreciation and amortization expense decreased 46.3% and
44.7%, respectively, to $13.4 million and $41.9 million for the three and nine months
ended September 30, 2005, from $24.9 million and $75.8 for the same periods last year.
These decreases were primarily due to the previously mentioned sales of older vessels,
partially offset by newbuildings deliveries in the previous 12 months. Drydock
amortization was $1.6 million and $4.9 million, respectively, for the three and nine
months ended September 30, 2005, compared to $4.3 million and $13.2 million for the same
periods last year. The decreases in drydock amortization were primarily due to the
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=2><I><U>Gain on Sale of
Vessels.</U></I><U></U> Gain on sale of vessels for the three months ended September 30,
2005 reflects gains of $8.7 million, which includes $8.1 million of gains primarily from
the sale of an older single-hulled Aframax tanker, as well as $0.6 million of amortization
of a deferred gain on the sale and leaseback of three Aframax tankers in December 2003.
Gain on sale of vessels for the nine months ended September 30, 2005 reflects gains of
$131.8 million, which include $130.0 million of gains from the sale of 12 older Aframax
vessels, one Suezmax tanker built in 1990 and a Suezmax tanker newbuilding, as well as
$1.8 million of amortization of a deferred gain on the sale and leaseback of the three
Aframax tankers in December 2003. The gains on sale of vessels of $0.6 million and $1.8
million, respectively, for the three and nine months ended September 30, 2004 also
primarily reflect the amortization of the deferred gain on the sale and leaseback of those
three Aframax vessels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Restructuring
Charges.</U></I><U></U> We incurred restructuring charges of $1.0 million for the nine
months ended September 30, 2004 relating to the closure of our Oslo office. We had no
restructuring charges in the three months ended September 30, 2004, or the three and nine
months ended September 30, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Fixed-Rate Tanker Segment</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table provides a
summary of the change in calendar-ship-days by owned and chartered-in vessels for our
fixed-rate tanker segment: </FONT></P>

<PRE>

- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                         <B>Three Months Ended September 30,                  Nine Months Ended September 30,</B>
- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                              <B>2005           2004         Percentage       2005            2004        Percentage</B>
                         (Calendar-Ship-(Calendar-Ship-     <B>Change</B>    (Calendar-Ship- (Calendar-Ship-    <B>Change</B>
                              Days)          Days)           (%)           Days)           Days)          (%)
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------

Owned Vessels.........        3,868          3,861            0.2         11,264         10,942            2.9
Chartered-in Vessels..        1,694          1,469           15.3          4,636          4,477            3.6
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------
Total.................        5,562          5,330            4.4         15,900         15,419            3.1
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------
</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The average calendar-ship-days for
our fixed-rate tanker segment (including vessels chartered-in) increased 4.4% and 3.1%,
respectively, for the three and nine months ended September 30, 2005, compared to the same
periods last year. The increase for the three months ended September 30, 2005 was
primarily due to an increase in the number of vessels chartered-in, including a very large
crude carrier (or <I>VLCC</I>) that commenced service under a long-term charter in April
2005. The increase for the nine months ended September 30, 2005 was primarily due to the
addition of five Suezmax tankers from the acquisition of Teekay Spain on April 30, 2004
and an increase in the number of vessels chartered-in, partially offset by the sale of
older vessels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Net Voyage
Revenues.</U></I><U></U> Net voyage revenues for our fixed-rate tanker segment increased
0.1% and 2.6%, respectively, to $159.2 million and $488.9 million, for the three and nine
months ended September 30, 2005, from $159.0 million and $476.6 million for the same
periods last year, due primarily to the increase in fleet size, partially offset by lower
utilization of the shuttle tanker fleet due to longer than normal seasonal maintenance of
offshore oil facilities, the delayed startup of certain fields in the North Sea and the
waiting time incurred in the redeployment of two shuttle tankers and some sub-sea
equipment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Vessel Operating
Expenses.</U></I><U></U> Vessel operating expenses increased 1.5% and 12.1%, respectively,
to $32.1 million and $95.8 million for the three and nine months ended September 30, 2005,
from $31.6 million and $85.5 million for the same periods last year, due primarily to
higher repair and maintenance activity on our shuttle tanker fleet. The increase for the
nine months ended September 30, 2005 was primarily due to the increased number of owned
vessels, including the commencement of operations upon delivery of the <I>Pattani
Spirit</I> in April 2004, a floating storage and offtake unit, under a long-term
fixed-rate charter with Unocal. The five Suezmax tankers from the Teekay Spain acquisition
have higher average daily vessel operating expenses than our other Suezmax tankers in this
segment due to Spanish crew requirements. As a result, for the nine months ended September
30, 2005 compared to the same period in 2004, vessel operating expenses increased 12.1%,
compared to a 2.9% increase in the number of calendar ship days,
primarily as a result of costs relating to the Spanish crew requirements. However, under
the terms of our time charter contracts for the related Suezmax tankers, the TCE rates
earned for these vessels is also higher to compensate for the higher costs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Time-Charter Hire
Expense.</U></I><U></U> Time-charter hire expense increased 5.9% and 1.5%, respectively,
to $52.5 million and $147.0 million for the three and nine months ended September 30,
2005, compared to $49.6 million and $144.9 million for the same periods last year,
primarily due to the increase in the average number of vessels chartered-in. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Depreciation and
Amortization.</U></I><U></U> Depreciation and amortization expense decreased 15.0% and
5.9%, respectively, to $29.5 million and $90.3 million for the three and nine months ended
September 30, 2005, from $34.7 million and $96.0 million for the same periods last year,
due primarily to the sale of older vessels as part of our fleet renewal program.
Depreciation and amortization expense included amortization of contracts of affreightment
and time charter contracts of $3.8 million and $11.9 million, respectively, for the three
and nine months ended September 30, 2005, compared to $6.2 million and $16.4 million for
the same periods last year. Depreciation and amortization expense included amortization of
drydocking costs of $2.1 million and $6.4 million, respectively, for the three and nine
months ended September 30, 2005, compared to $2.1 million and $5.1 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=2><I><U>Writedown / (Gain) on Sale of
Vessels and Equipment.</U></I><U></U> Writedown of vessels and equipment of $2.1 million
for the three months ended September 30, 2005 was primarily related to a writedown of the
carrying value of certain offshore equipment that was employed on a short-term contract
servicing a marginal oil field that was prematurely shut down due to a lower than expected
oil production rate. We expect to be able to re-deploy this equipment on another field,
and have entered a contract that commenced in October 2005 to employ some of this
equipment. Writedown and gain on sale of vessels and equipment of $7.5 million for the
nine months ended September 30, 2005 consists of $12.3 million from the previously
mentioned writedown of equipment, partially offset by a $4.8 million gain on the sale of
an older shuttle tanker in the first quarter of 2005. There were no writedowns or vessel
sales in the three and nine months ended September 30, 2004 in the fixed-rate tanker
segment. Gain on sale of vessels and equipment of $3.7 million for both the three and nine
months ended September 30, 2004 is related to the sale of a 1980&#145;s built shuttle
tanker. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Fixed-Rate LNG Segment</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table provides a
summary of the change in calendar-ship-days for our fixed-rate LNG segment: </FONT></P>

<PRE>

- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                         <B>Three Months Ended September 30,                  Nine Months Ended September 30,</B>
- ----------------------- --------------------------------- ---------------- ------------------------------ -------------
                              <B>2005           2004         Percentage       2005            2004        Percentage</B>
                         (Calendar-Ship- (Calendar-Ship-    <B>Change</B>    (Calendar-Ship- (Calendar-Ship-    <B>Change</B>
                              Days)          Days)           (%)           Days)           Days)          (%)
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------

Owned Vessels..........         368            262           40.5          1,092            384          184.4
- -----------------------  -------------- -------------- -------------- -------------- -------------- --------------

</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The results of our fixed-rate LNG
segment reflect the operations of our four LNG carriers acquired as part of our
acquisition of Teekay Spain on April 30, 2004, including deliveries of newbuilding
carriers in July 2004 and December 2004. We had no LNG shipping operations prior to the
Teekay Spain acquisition. On May 10, 2005, our subsidiary Teekay LNG issued 6,900,000
common units as part of its initial public offering, effectively reducing our ownership of
Teekay LNG to 77.7%. In November 2005, Teekay LNG issued an additional 4,600,000 common
units, further reducing our ownership of Teekay LNG to 67.8%. Please read &#147;Public
Offerings by Teekay LNG Partners L.P.&#148; above. As of September 30, 2005, all of the
vessels (excluding vessels under construction) in our fixed-rate LNG segment were owned by Teekay LNG. The results below reflect
100% of these vessels. The minority owners&#146; share of the results of these vessels is
reflected as minority interest expense contained in other &#150; net in our consolidated
statements of income. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Net Voyage
Revenues.</U></I><U></U> Net voyage revenues for the fixed-rate LNG segment increased
41.9% and 192.2%, respectively, to $24.5 million and $73.5 million for the three and nine
months ended September 30, 2005, from $17.3 million and $25.2 million for the for the same
periods last year, primarily due to the deliveries of the LNG carriers in July and
December 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Vessel Operating
Expenses.</U></I><U></U> Vessel operating expenses increased 9.5% and 143.8%, respectively
to $3.4 million and $11.6 million for the three and nine months ended September 30, 2005,
from $3.1 million and $4.7 million for the same periods last year, primarily due to the
above mentioned LNG carrier deliveries and repair and maintenance work on one of our LNG
carriers in early 2005, partially offset by lower insurance, service costs and other
operating costs primarily reflecting volume purchasing cost savings. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Depreciation and
Amortization.</U></I><U></U> Depreciation and amortization expense increased 46.1% and
199.8%, respectively, to $7.5 million and $22.6 million for the three and nine months
ended September 30, 2005, from $5.2 million and $7.5 million for the same periods last
year, primarily due to the above mentioned LNG carrier deliveries. Depreciation and
amortization expense included amortization of time charter contracts acquired as part of
the Teekay Spain acquisition of $2.2 million and $6.6 million, respectively, for the three
and nine months ended September 30, 2005, compared to $1.5 million and $2.2 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=2><B><I>Other Operating Results</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>General and Administrative
Expenses.</U></I><U></U> General and administrative expenses increased 39.3% and 38.6%,
respectively, to $40.5 million and $114.3 million for the three and nine months ended
September 30, 2005, from $29.1 million and $82.5 million for the same periods last year.
The increases primarily reflect: </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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
increases of $3.6 million and $13.9 million, for the three and nine months ended September
30, 2005, respectively, relating to the adoption of a long-term incentive program for
management during March 2005 (please read Item 1 &#150; Financial Statements: Note 10
&#150; Commitments and Contingencies &#150; Long-Term Incentive Program);</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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
increases of $4.3 million and $9.6  million,  for the three and nine months  ended  September  30, 2005,
             respectively,  from the grant of 0.7 million  restricted  stock units to employees in March 2005 (Please
             read Item 1 - Financial Statements:  Note 9 - Capital Stock);</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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
increase of $1.8 million for the nine months ended  September  30, 2005 relating to our  acquisition  of
             Teekay Spain in April 2004; 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=2>&nbsp;</FONT></TD>
<TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;</FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
increases of $1.8 million and $5.9 million, for the three and nine months ended September
30, 2005, respectively, from the weakening of the U.S. Dollar from corresponding 2004
levels relative to other currencies in which we pay certain general and administrative
expenses.</FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Interest
Expense.</U></I><U></U> Interest expense decreased 16.0% to $29.6 million for the three
months ended September 30, 2005, from $35.2 million for the same period last year,
primarily due to repayment of term loans and settlement of related interest rate swaps in
the second quarter of 2005 in connection with Teekay LNG&#146;s initial public offering.
Interest expense increased 15.0% to $100.6 million for the nine months ended September 30,
2005, from $87.5 million for the same period last year, primarily due to interest on the
additional debt we assumed as part of our acquisition of Teekay Spain. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Interest Income.</U></I><U></U>
Interest income increased to $8.3 million and $24.9 million, respectively, for the three
and nine months ended September 30, 2005, from $5.9 million and $12.0 million for the same
periods last year, primarily due to interest earned on cash and restricted cash included
in Teekay Spain. Please read Item 1 &#150; Financial Statements: Note 8 &#150; Capital
Leases and Restricted Cash. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Equity Income From Joint
Ventures.</U></I><U></U> Equity income from joint ventures decreased to $0.9 million and
$6.6 million, respectively, for the three and nine months ended September 30, 2005,
compared to $2.5 million and $7.7 million in the same periods last year, primarily due to
a temporary decline in earnings from our 50% share in Skaugen Petrotrans, which
provides lightering services primarily in the Gulf of Mexico and was adversely affected by
Hurricanes Katrina and Rita. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Gain on Sale of Marketable
Securities.</U></I><U></U> Gain on sale of marketable securities was $90.1 million and
$93.2 million, respectively, for the three and nine months ended September 30, 2004,
primarily from the sale of our investment in A/S Dampskibsselskabet TORM. We sold no
marketable securities in the three and nine months ended September 30, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Foreign Exchange Gains
(Losses).</U></I><U></U> Foreign exchange gains were $3.1 million and $50.6 million,
respectively, for the three and nine months ended September 30, 2005, compared to foreign
exchange losses of $4.8 million and $11.0 million for the same periods last year,
primarily due to the strengthening of the U.S. Dollar relative to other currencies,
particularly the Euro, since June 30, 2005 and December 31, 2004, respectively. Most of
our foreign currency gains or losses are attributable to the revaluation of our
Euro-denominated term loans at the end of each period for financial reporting purposes,
and substantially all of the gains or losses are unrealized. As of the date of this report, our
Euro-denominated revenues generally approximate our Euro-denominated operating expenses and our Euro-denominated
interest and principal repayments.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Other Income
(Loss).</U></I><U></U> Other loss for the three and nine months ended September 30, 2005
was $2.1 million and $18.7 million, respectively, and was primarily comprised of a $1.3
million loss on bond redemption (three months) and $10.1 million (nine months), loss from
settlement of interest rate swaps of $7.8 million (nine months), writeoff of capitalized
loan costs of $7.5 million (nine months), minority interest expense of $5.4 million (three
months) and $12.4 million (nine months), partially offset by income tax recovery of $2.0
million (three months) and $11.9 million (nine months), and leasing income from our
volatile organic compound emissions equipment. The loss from settlement of interest rate
swaps and the writeoff of capitalized loan costs are non-recurring items related to debt
repayments made prior to the initial public offering of Teekay LNG. The minority interest
expense in the three and nine months ended September 30, 2005 primarily reflects the
minority owners share of the foreign exchange gains incurred by Teekay LNG. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other loss for the three and nine
months ended September 30, 2004 was $7.9 million and $6.9 million, respectively, and was
primarily comprised of a $0.7 million loss on bond redemption (both three and nine
months), income tax expense of $8.1 million (three months) and $16.3 million (nine months)
and minority interest expense of $0.4 million (three months) and $1.6 million (nine
months), partially offset by dividend income of $5.7 million (nine months) 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=2><I><U>Net Income.</U></I><U></U> As a
result of the foregoing factors, net income was $42.7 million and $426.3 million,
respectively, for the three and nine months ended September 30, 2005, compared to $245.3
million and $532.9 million for the same periods last year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIQUIDITY AND CAPITAL
RESOURCES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Liquidity and Cash Needs</U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at September 30, 2005, our total
cash and cash equivalents was $252.9 million, compared to $427.0 million as at December
31, 2004. Our total liquidity, including cash and undrawn long-term borrowings, was $1.1
billion as at September 30, 2005, down from $1.3 billion as at December 31, 2004. The
decrease in liquidity was mainly the result of long-term debt repayments, scheduled
reduction of revolvers, cash used for capital expenditures, share repurchases and payment
of dividends, partially offset by cash generated by our operating activities and proceeds
from the sale of vessels during the nine months ended September 30, 2005. We believe that
our working capital is sufficient for our present requirements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Cash Flows</U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes our
cash and cash equivalents provided by (used for) operating, financing and investing
activities for the periods presented: </FONT></P>

<PRE>
- ------------------------------------------------------------------- -----------------------------------------------
                                                                                  <B>Nine Months Ended</B>
- ------------------------------------------------------------------- -----------------------------------------------
                                                                       <B>September 30, 2005      September 30, 2004</B>
                                                                            ($000's)                ($000's)
- ------------------------------------------------------------------- ----------------------- -----------------------
Net operating cash flows...........................................         428,877                 520,224
Net financing cash flows...........................................        (658,034)                (76,192)
Net investing cash flows...........................................          54,971                (428,282)
- ------------------------------------------------------------------- ----------------------- -----------------------
</PRE>
<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Operating Cash Flows</U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The decrease in net operating cash
flow mainly reflects the decrease in aggregate calendar-ship-days for our fleet to 35,530 for the nine
months ended September 30, 2005, compared to 38,312 calendar-ship-days for the same period in
2004, and the reduction in average spot TCE rates. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Financing Cash Flows</U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Scheduled debt repayments were $57.9
million during the nine months ended September 30, 2005, compared to $86.4 million during
the same period last year. Debt prepayments were $2.0 billion during the nine months ended
September 30, 2005, compared to $1.5 billion during the same period last year. We used
cash generated from operations, proceeds from vessel sales and longer-term financings to
make these prepayments. Of our debt prepayments in the nine months ended September 30,
2005, $629.0 million was used to prepay a number of term loans and $1.3 billion was used
to prepay revolving credit facilities. In addition, we used $65.1 million to repay a
portion of the 8.875% Senior Notes due July 11, 2011 and $5.9 million to repay the 8.32%
First Preferred Ship Mortgage Notes (by way of a deposit held at The Bank of New York, the
trustee). Occasionally we use our revolving credit facilities to temporarily finance
capital expenditures until longer-term financing is obtained, at which time we typically
use all or a portion of the proceeds from the longer-term financings to prepay outstanding
amounts under the facilities. Please read Item 1 &#150; Financial Statements: Note 7
&#150; Long-Term Debt. In addition, in April 2005 we paid $143.3 million to settle
interest rate swaps associated with $727.4 million of debt. Please read Item 1 &#150;
Financial Statements: Note 14 &#150; Derivative Instruments and Hedging Activities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months ended
September 30, 2005, net proceeds from the initial public offering of Teekay LNG were
$135.7 million. We used these proceeds towards prepaying debt as noted above. Please read
Item 1 &#150; Financial Statements: Note 3 &#150; Initial Public Offering of Teekay LNG
Partners L.P. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at September 30, 2005, our total
long-term debt was $1.7 billion, compared to $2.1 billion as at December 31, 2004. As at
September 30, 2005, our revolving credit facilities provided for borrowings of up to $1.7
billion, of which $886.3 million was undrawn. The aggregate amount available under our
revolving credit facilities reduces by $29.4 million (2005), $146.9 million (2006), $148.2
million (2007), $363.4 million (2008), $189.7 million (2009) and $863.8 million
(thereafter). The revolving credit facilities are collateralized by first-priority
mortgages granted on 49 of our vessels, together with other related collateral, and are
guaranteed by Teekay or our subsidiaries. Our 7.25% Premium Equity Participating Security
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 or quarterly payments with varying maturities
through 2023. Please read Item 1 &#150; Financial Statements: Note 7 &#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=2>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, and prepayment privileges (in some
cases with penalties). Certain of the loan agreements require that a minimum level of free
cash be maintained. As at September 30, 2005, this amount was $100.0 million. Certain of
the loan agreements also require that we maintain a minimum level of free liquidity and
undrawn revolving credit lines with at least six months to maturity. As at September 30,
2005, this amount was $103.7 million. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months ended
September 30, 2005, we received $61.2 million from our 30% minority interest partners
toward construction of five LNG carriers. Please read Item 1 &#150; 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=2>Dividends paid during the nine months
ended September 30, 2005 were $33.5 million, or $0.4125 per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the first quarter of 2005, we
repurchased 1.6 million shares for $67.6 million, or $42.27 per share, which completed a
3.0 million share repurchase program that cost a total of $128.9 million or $42.95 per
share. During the second and third quarter of 2005, pursuant to the share repurchase
programs announced in April and July 2005 for up to $225.0 million and $250.0 million,
respectively, we repurchased 6.9 million shares for $301.4 million, or $43.70 per share. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Investing Cash Flows</U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months ended
September 30, 2005, we incurred capital expenditures for vessels and equipment of $357.1
million. These capital expenditures primarily represented the installment payments on our
Aframax tankers and LNG carriers under construction. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months ended
September 30, 2005, we completed the sale of 12 Aframax tankers built between 1988 and
1991, three Suezmax tankers built in 1990 and 2005, of which one was immediately leased
back upon delivery under a capital lease arrangement, and two shuttle tankers built in
1986 and 1991, respectively. These vessels were sold for total proceeds of $505.2 million. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the nine months ended
September 30, 2005, we contributed $80.7 million toward construction of four LNG carriers
in which we hold a 40% interest. Please read Item 1 &#150; Financial Statements: Note 10
&#150; Commitments and Contingencies. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commitments and
Contingencies </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes our
long-term contractual obligations as at September 30, 2005: </FONT></P>

<PRE>
- ------------------------------------------------------ ----------- ----------- ----------- ----------- -------------

In millions of U.S. Dollars                                         Less than     1 - 3       3 - 5     More than
                                                           Total     1 year       years       years      5 years
- ------------------------------------------------------ ----------- ----------- ----------- ----------- -----------

<B>U.S. Dollar-Denominated Obligations:</B>
    Long-term debt (1)................................    1,348.4         1.3       169.6       345.2       832.3
    Chartered-in vessels (operating leases) ..........    1,251.1       107.7       562.7       250.4       330.3
    Commitments under capital leases (2) .............      329.5         7.5       167.6        25.3       129.1
    Newbuilding installments (3)......................      882.7       170.9       551.4       160.4           -
    Commitment for volatile organic compound
         emissions equipment..........................       32.5        23.8         8.7           -           -
                                                       ----------- ----------- ----------- ----------- -----------
   <B>Total U.S. Dollar-denominated obligations</B>              3,844.2       311.2     1,460.0       781.3     1,291.7
                                                       ----------- ----------- ----------- ----------- -----------

<B>Euro-Denominated Obligations:</B>(4)
    Long-term debt (5)................................      385.0         2.0        17.0        19.7       346.3
    Commitments under capital leases(2) (6)...........      439.3        92.7       176.1        60.2       110.3
                                                       ----------- ----------- ----------- ----------- -----------
   <B>Total Euro-denominated obligations</B>                       824.3        94.7       193.1        79.9       456.6
                                                       ----------- ----------- ----------- ----------- -----------

<B>Total</B>                                                     4,668.5       405.9     1,653.1       861.2     1,748.3
                                                       =========== =========== =========== =========== ===========
</PRE>
<!-- 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>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Excludes interest payments.</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>
               We are committed to capital leases on one Aframax tanker, five Suezmax tankers
               and two LNG carriers. Each capital lease requires us to purchase the vessel at
               the end of its respective lease term. The amounts in the table include our
               purchase obligations for the vessels. Please read Item 1 &#150; Financial
               Statements: Note 8 &#150; Capital Leases and Restricted Cash.</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>
               Represents remaining construction costs, including the joint venture partners&#146; 30% interest, if
applicable, but excluding capitalized interest and miscellaneous construction costs, for
four Aframax tankers, three product tankers and five LNG carriers. Please read Item 1
&#150; Financial Statements: Note 10 &#150; Commitments and Contingencies.</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>
               Euro-denominated obligations are presented in U.S. Dollars and have been
               converted using the prevailing exchange rate as of September 30, 2005.</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>(5) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                Excludes interest payments.</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>(6) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Existing restricted cash deposits, together with the interest earned on the
               deposits, will equal the remaining amounts we owe under the lease arrangements,
               including our obligation to purchase the vessels at the end of the lease terms.</FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have entered into a joint venture
agreement with our 60% partner to construct four LNG carriers. As at September 30, 2005,
the remaining commitments, excluding capitalized interest and other miscellaneous
construction costs, on these vessels totaled $801.3 million, of which our share is $320.5
million. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We and certain of our subsidiaries
have guaranteed our share of the outstanding mortgage debt in four 50%-owned joint venture
companies. Please read Item 1 &#150; Financial Statements: Note 10 &#150; Commitments and
Contingencies &#150; Joint Ventures. We do not believe these off-balance sheet
arrangements have, and we have no other off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future material effect on our financial condition,
results of operations, liquidity, capital expenditures or capital resources. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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
equity securities or any combination thereof. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Project" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting
Policies </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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 read Note 1 to our consolidated financial statements for the
year ended December 31, 2004, included in our Annual Report on Form 20-F filed with the
SEC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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=2>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=2>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. However we do not begin recognizing voyage revenue for any of our vessels until a
charter has been agreed to by the customer and us, even if the vessel has discharged its
cargo and is sailing to the anticipated load port on its next voyage. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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=2>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 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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="Head Left-TNR" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Drydocking</I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Generally, we drydock each vessel
every two and a half to five years. In addition, a shipping society classification
intermediate survey is performed on our LNG carriers between the second and third year of
their five-year drydocking period. We capitalize a substantial portion of the costs we
incur during drydocking and for the survey and amortize those costs on a straight-line
basis from the completion of a drydocking or intermediate survey to the estimated
completion of the next drydocking. We expense costs related to routine repairs and
maintenance incurred during drydocking or intermediate survey that do not improve or
extend the useful lives of the assets. When significant drydocking expenditures occur
prior to the expiration of the original amortization period, the remaining unamortized
balance of the original drydocking cost and any unamortized intermediate survey costs are
expensed 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=2><I>Goodwill and Intangible
Assets</I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We allocate the cost of acquired
companies to the identifiable tangible and intangible assets and liabilities acquired,
with the remaining amount being classified as goodwill. Certain intangible assets, such as
time charter contracts, contracts of affreightment and intellectual property are being
amortized over time. Our future operating performance will be affected by the amortization
of intangible assets and potential impairment charges related to goodwill. Accordingly,
the allocation of purchase price to intangible assets and goodwill may significantly
affect our future operating results. The allocation of the purchase price of the acquired
companies to intangible assets and goodwill requires management to make significant
estimates and assumptions, including estimates of future cash flows expected to be
generated by the acquired assets and the appropriate discount rate to value these cash
flows. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill and indefinite lived assets
are not amortized, but reviewed for impairment annually, or more frequently if impairment
indicators arise. The process of evaluating the potential impairment of goodwill and
intangible assets is highly subjective and requires significant judgment at many points
during the analysis. The fair value of our reporting units was estimated based on
discounted expected future cash flows using a weighted-average cost of capital rate. The
estimates and assumptions regarding expected cash flows and the discount rate require
considerable judgment and are based upon existing contracts, historical experience,
financial forecasts and industry trends and conditions. </FONT></P>


<PAGE>
<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=2>FORWARD-LOOKING
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Report on Form 6-K for the
quarterly period ended September 30, 2005 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; gains on sales of vessels; and
Teekay&#146;s share repurchase plan. 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 and LNG markets; greater or less than
anticipated levels of vessel newbuilding orders or greater or less than anticipated rates
of vessel scrapping; changes in trading patterns significantly impacting overall vessel
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 any future acquisitions; the potential for early termination of long-term
contracts and our inability to renew or replace long-term contracts; shipyard production
delays; conditions in the public equity markets; 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, 2004, 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>


<PAGE>
<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=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES<BR>SEPTEMBER 30, 2005<BR>PART I &#150; FINANCIAL INFORMATION</FONT></H1>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="96" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>
ITEM 3 -</font></b></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font size=2>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></b></p> </td> </tr></table>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are exposed to fluctuations in
foreign currency exchange rates, interest rates, 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. Please read Item 1 &#151; Financial Statements:
Note 14 &#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=2>The following table sets forth
further information about these foreign exchange forward contracts, interest rate swap
agreements, bunker fuel swap contracts, forward freight agreements and our long-term debt
as at September 30, 2005 and December 31, 2004: </FONT></P>

<PRE>
                                                    <B>Contract               Carrying Amount                 Fair
                                                     Amount            Asset           Liability          Value</B>
                                                 ---------------------------------------------------------------------
                                                                    <B>(in millions of U.S. dollars)</B>
<U>September 30, 2005</U>
Foreign Currency Forward Contracts...............       82.5            3.2                                   3.2
Interest Rate Swap Agreements....................    2,469.0                              49.4              (49.4)
Bunker Fuel Swap Contracts.......................        0.4            0.2                                   0.2
Forward Freight Agreements.......................       14.0                               0.6               (0.6)
Debt (including capital lease obligations).......    2,381.7                           2,381.7           (2,420.3)

<U>December 31, 2004</U>
Foreign Currency Forward Contracts...............      104.2           16.6                                  16.6
Interest Rate Swap Agreements....................    2,304.9                             158.5             (158.5)
Bunker Fuel Swap Contracts.......................        3.6            0.1                                   0.1
Forward Freight Agreements.......................       40.0                               3.3               (3.3)
Debt (including capital lease obligations).......    2,744.5                           2,744.5           (2,801.6)
</PRE>
<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table below provides information
about our financial instruments as at September 30, 2005, which are sensitive to changes
in interest rates. For debt obligations, the table presents principal payments 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>
                                                                 <B> Expected Maturity Date
                                       2005       2006        2007       2008        2009     Thereafter  Rate (9)</B>
                                     ---------------------------------------------------------------------------------
                                                    <B>(in millions of U.S. dollars, except percentages)</B>

<U>Long-Term Debt:</U>
  Fixed-Rate Debt ...................   1.3      149.2        5.4         5.4        5.4       326.7        7.7%
  Average Interest Rate..............   4.1%       7.1%       4.1%        4.1%       4.1%        8.2%

  Variable-Rate Debt
     U.S. Dollar-Denominated(1)......     -          -       15.0       283.2       51.2       505.6        4.4%
     Euro-Denominated(2)(3)..........   2.0        8.2        8.8         9.5       10.2       346.3        3.3%

  Capital Lease Obligations(4)
     Fixed-Rate Obligations(5).......   2.5      137.0        5.1         5.3        5.5       112.1        7.6%
     Average Interest Rate (6).......   7.6%       8.8%       6.2%        6.3%       6.3%        6.2%

<U>Interest Rate Swaps: (7)</U>
  Contract Amount (US Dollar-
     Denominated)(8).................      -     500.0          -           -      200.0     1,384.0        4.5%
  Average Fixed Pay Rate(1)..........      -       2.8%         -           -        4.2%        5.2%
  Contract Amount (Euro-
     Denominated)(3).................   2.0        8.2        8.8         9.5       10.2       346.3        3.8%
Average Fixed Pay Rate(2)............   3.8%       3.8%       3.8%        3.8%       3.8%        3.8%
</PRE>

<!-- 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>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                Interest payments for U.S. Dollar-denominated debt and interest rate swaps are
          based on LIBOR.</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>
               Interest payments on Euro-denominated debt and interest rate swaps are based on
          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>
               Euro-denominated amounts have been converted to U.S. Dollars using the
               prevailing exchange rate as of September 30, 2005.</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>
               Excludes capital lease obligations (present value of minimum lease payments) of
               316.6 million Euros ($380.7 million) on two of our LNG carriers. Under the terms
               of these lease obligations, we are required to have on deposit with financial
               institutions an amount of cash that, together with the interest earned thereon,
               will fully fund the amount owing under the capital lease obligations, including
               purchase obligations. Consequently, we are not subject to interest rate risk
               from these obligations.</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>(5) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The amount of capital lease obligations represents the present value of minimum
               lease payments together with our purchase obligation.</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>(6) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The average interest rate is the weighted-average interest rate implicit in the
               capital lease obligations at the inception of the leases.</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>(7) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The average variable receive rate for our interest rate swaps is set monthly at
               1-month LIBOR or EURIBOR or semi-annually at the 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>(8) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The inception date of the interest rate swaps maturing in 2009 is 2006. The
               inception dates of the interest rate swaps maturing after 2009 are 2005 ($200.0
               million), 2006 ($478.0 million), 2007 ($256.0 million) and 2009 ($450.0
               million).</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>(9) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Rate refers to the weighted-average effective interest rate for our debt,
               including the margin we pay on our floating-rate debt, as at September 30, 2005,
               and average fixed pay rate for our swap agreements, as applicable. The average
               fixed pay rate for our interest rate swaps excludes the margin we pay on our
               floating-rate debt, which as of September 30, 2005 ranged from 1.1% to 1.3%.</FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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, 2004.</FONT></P>

<PAGE>
<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=2>TEEKAY SHIPPING
CORPORATION AND SUBSIDIARIES<BR>September 30, 2005<BR>PART II &#150; OTHER INFORMATION</FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 1 &#150; Legal
Proceedings</U><BR><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"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 2 &#150; Changes in
Securities and Use of Proceeds</U><BR><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"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 3 &#150; Defaults
Upon Senior Securities</U><BR><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"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 4 &#150; Submission
of Matters to a Vote of Security Holders</U><BR><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"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 5 &#150; Other
Information</U><BR><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"  -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Item 6 &#150; Exhibits</U><BR><BR>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None</FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><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=2>
<B>&#149;       &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 33-97746) FILED WITH THE SEC ON OCTOBER 4,
1995;<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-42434) FILED WITH THE SEC
ON JULY&nbsp;28, 2000;<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 333-102594)
FILED WITH THE SEC ON JANUARY&nbsp;17, 2003; AND<BR>
&#149;        &nbsp;&nbsp;&nbsp;REGISTRATION STATEMENT ON FORM
S-8 (FILE NO. 333-119564) FILED WITH THE SEC ON OCTOBER 6, 2004</B>
</FONT></P>


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

<PAGE>

<BR>


<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES</FONT></H1>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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=2>Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 14, 2005</font>
</TD>
<TD WIDTH=55% VALIGN=TOP>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>
<BR>



<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Project" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit 15.1</B></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACKNOWLEDGEMENT 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=2>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 (or <I>Teekay</I>), 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 April 22,
2005, relating to the unaudited consolidated interim financial statements of Teekay and
its subsidiaries that is included in its interim report (Form 6-K) for the three months
ended September 30, 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Rule 436(c) of the
Securities Act of 1933, our report is not a part of the registration statements 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=2>Vancouver, Canada,<BR>
December 14, 2005</font></TD>

<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Ernst &amp; Young LLP<BR>
Chartered Accountants</font></TD>
</TR>
</TABLE>





</BODY>
</HTML>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
