Teekay Offshore Part : Teekay Offshore Partners Reports First Quarter Results

Teekay Offshore Partners L.P. (NYSE: TOO):

Highlights

• Generated $9.0 million in distributable cash flow for the first quarter of 2007
• Declared a cash distribution of $7.0 million, or $0.35 per unit, for the first quarter

Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO) today reported net income of $6.8 million for the quarter ended March 31, 2007, compared to a net loss of $48.2 million for the quarter ended December 31, 2006. The results for the first quarter of 2007 and the fourth quarter of 2006 included foreign currency translation losses of $4.2 million and $55.5 million, respectively, which are discussed further below.

The Partnership owns a 26% interest in Teekay Offshore Operating L.P. (OPCO), which owns and operates the world's largest fleet of shuttle tankers, in addition to floating storage and offtake (FSO) units and double-hull conventional oil tankers. The Partnership controls OPCO through the ownership of its general partner, and the Partnership's parent company, Teekay Shipping Corporation (Teekay), owns the remaining 74% interest in OPCO. Since the Partnership controls OPCO through its ownership of its general partner, the Partnership's financial statements includes the consolidated results of both the Partnership and OPCO. Initially, the Partnership will conduct all operations through OPCO and its subsidiaries; however in the future, the Partnership intends to conduct additional operations through wholly-owned subsidiaries.

During the three months ended March 31, 2007, the Partnership generated $9.0 million of distributable cash flow⁽¹⁾. On April 23, 2007, Teekay Offshore GP LLC, the general partner of Teekay Offshore, declared a cash distribution of $0.35 per unit ($1.40 per unit on an annualized basis) for the first quarter of 2007, representing a total cash distribution of $7.0 million. The cash distribution will be paid on May 14, 2007, to all unitholders of record on May 1, 2007.

For accounting purposes, the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period. This revaluation does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency exchange gains or losses in the income statement, as reflected in the foreign currency translation losses for the three months ended March 31, 2007 and December 31, 2006.

The $4.2 million foreign currency translation loss in the first quarter of 2007 primarily relates to the revaluation of foreign currency-denominated monetary assets and liabilities. The foreign currency translation loss of $55.5 million incurred in the fourth quarter of 2006 mainly relates to the revaluation of the deferred income taxes and a Norwegian Kroner denominated loan owed to Teekay by a subsidiary of OPCO from October 2006 and up to the date of closing the Partnership's initial public offering (IPO) on December 19, 2006. Teekay sold this loan receivable to OPCO immediately before the IPO and as a result, the foreign currency translation gains and losses subsequent to the IPO date are expected to be significantly lower.

(1) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

Future Growth Opportunities

Teekay is obligated to offer Teekay Offshore certain shuttle tankers, FSO units, and Floating Production Storage and Offloading (FPSO) units it may acquire in the future, provided the vessels are servicing contracts in excess of three years in length. Teekay Offshore also has visible near-term built-in growth opportunities in each of its business segments:

Shuttle Tankers

Teekay is obligated to offer the Partnership the opportunity to acquire its interest in two shuttle tankers, which will operate under 13-year fixed-rate charters with Petrobras of Brazil. The vessels must be offered to the Partnership within one year from their date of delivery. One of the vessels commenced its charter with Petrobras in April 2007 and the second vessel is expected to complete its shuttle tanker conversion near the end of the second quarter of 2007.

In January 2007, Teekay ordered two Aframax shuttle tanker newbuildings, which are scheduled to deliver during the third quarter of 2010, for a total delivered cost of approximately $240 million. It is anticipated that these vessels will be offered to the Partnership and will be used to service either new long-term, fixed-rate contracts Teekay may be awarded prior to delivery or OPCO's contracts-of-affreightment in the North Sea.

FSO Units

Teekay is obligated to offer Teekay Offshore the opportunity to acquire one FSO unit currently being upgraded. This vessel must be offered to the Partnership within one year from its date of delivery, which is expected to be in the second quarter of 2007. The FSO unit will operate under a 7-year time charter to Apache Corporation of Australia.

FPSO Units

Teekay is obligated to offer the Partnership its interest in certain future FPSO projects, some of which may be acquired from Teekay Petrojarl ASA (Teekay Petrojarl). As at March 31, 2007, Teekay owned 64.5% of Teekay Petrojarl, which currently owns four FPSO units operating in the North Sea. In addition, Petrobras awarded Teekay Petrojarl a two-year charter contract for an FPSO commencing in the first quarter of 2008.

Teekay's Remaining Interest in OPCO

Teekay may offer to Teekay Offshore additional limited partner interests in OPCO that Teekay owns. Teekay currently owns 74% of OPCO and Teekay Offshore owns the remaining 26%.

Operating Results

The following table highlights certain financial information for Teekay Offshore's three main segments: the shuttle tanker segment, the conventional tanker segment, and the FSO segment (Please read the ?OPCO Fleet? section of this release below and Appendix B for further details):

(1) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense and amortization of deferred gains. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Partnership's web site at www.teekayoffshore.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.

Shuttle Tanker Segment

Cash flow from vessel operations from the Partnership's shuttle tanker segment increased to $47.7 million for the first quarter of 2007, compared to $42.9 million for the previous quarter, primarily due to the change in accounting treatment for five of OPCO's 50%-owned shuttle tankers. On December 1, 2006, the operating agreements for these joint ventures were amended, resulting in OPCO obtaining control of these joint ventures and consequently, OPCO has consolidated these entities effective December 1, 2006.

As anticipated, the Partnership's shuttle tanker fleet benefited from seasonally strong oil production in the North Sea during the past two quarters. Since regular maintenance of offshore oil facilities in the North Sea typically occur during the summer months, a portion of the Partnership's shuttle tanker fleet usually experiences lower utilization during these periods and higher utilization in the winter months.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership's conventional tanker segment increased to $21.4 million for the first quarter of 2007, compared to $17.6 million for the previous quarter, primarily due to the inclusion of the results from the Navion Saga which temporarily traded in the spot market as a conventional crude oil tanker during the quarter. This vessel will commence a three-year FSO time charter contract commencing in the second quarter of 2007.

FSO Segment

Cash flow from vessel operations from the Partnership's FSO segment increased to $3.6 million for the first quarter of 2007, compared to $2.9 million for the previous quarter, primarily due to a scheduled drydocking of one of OPCO's FSO units during the fourth quarter of 2006.

OPCO Fleet

The following table summarizes OPCO's fleet as of March 31, 2007:

(1) Includes five shuttle tankers in which the Partnership's ownership interest is 50%

Liquidity

As of March 31, 2007, the Partnership had total liquidity of $442.3 million, comprising $114.3 million in cash and cash equivalents and $328.0 million in undrawn medium-term revolving credit facilities.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Shipping Corporation (NYSE: TK), is an international provider of marine transportation and storage services to the offshore oil industry. Teekay Offshore Partners owns a 26.0% interest in and controls Teekay Offshore Operating L.P., a Marshall Islands limited partnership with a fleet of 36 shuttle tankers (including 12 chartered-in vessels), four floating storage and offtake units and nine conventional crude oil Aframax tankers. Teekay Offshore Partners L.P. also has rights to participate in certain floating production, storage and offloading (FPSO) opportunities.

Teekay Offshore Partners' common units trade on the New York Stock Exchange under the symbol ?TOO?.

Earnings Conference Call

The Partnership plans to host a conference call at 12:00 p.m. ET on Friday May 11, 2007, to discuss the Partnership's results and the outlook for its business activities. The Partnership's earnings presentation will be available on the Partnership's web site at www.teekayoffshore.com prior to the call. All unitholders and interested parties are invited to participate in the conference call by dialing 866-215-0058, or 416-915-9616, or listen to the live conference call through the web site at www.teekayoffshore.com. The Partnership plans to make available a recording of the conference call until midnight May 18, 2007 by dialing 866-245-6755 or 416-915-1035, access code 172392 or via the Partnership's web site until June 11, 2007.

⁽¹⁾ During August 2006, Teekay Shipping Corporation (Teekay) formed Teekay Offshore, as part of its strategy to expand in the marine transportation, processing and storage sectors of the offshore oil industry. Teekay Offshore owns a 26% interest in Teekay Offshore Operating L.P. (OPCO), which owns and operates the world's largest fleet of shuttle tankers, in addition to FSO units and double-hull conventional tankers. Teekay Offshore controls OPCO through its ownership of OPCO's general partner and Teekay owns the remaining 74% interest in OPCO. Prior to the closing of Teekay Offshore's initial public offering on December 19, 2006, Teekay transferred eight Aframax-class conventional crude oil tankers to a subsidiary of Norsk Teekay Holdings Ltd. (Norsk Teekay) and one FSO unit to Teekay Offshore Australia Trust. Subsequently, Teekay transferred to OPCO all of the outstanding interests of four wholly-owned subsidiaries, Norsk Teekay, Teekay Nordic Holdings Inc., Teekay Offshore Australia Trust and Pattani Spirit LLC (collectively referred to as Teekay Offshore Partners Predecessor). Combined consolidated financial results for periods prior to December 19, 2006 are attributable primarily to Teekay Offshore Partners Predecessor.

⁽²⁾ For periods prior to the Partnership's IPO on December 19, 2006, represents the number of units received by Teekay in exchange for a 26% interest in OPCO at the time of the IPO.

TEEKAY OFFSHORE PARTNERS L.P. APPENDIX B - SUPPLEMENTAL INFORMATION   (in thousands of U.S. dollars)
	Three Months Ended March 31, 2007
	(unaudited)
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