Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Teekay Corporation Second Quarter 2008 Earnings Release Conference Call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. [Operator Instructions]. As a reminder, this call is being recorded. And now, for opening remarks and introductions, I would like to turn the call over to Mr. Bjorn Moller, Teekay's President and Chief Executive Officer and Mr. Vince Lok, Teekay's Chief Financial Officer. Please go ahead.

Before Mr. Moller begins, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the second quarter 2008 earnings presentation. Mr. Moller and Mr. Lok will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from those projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in our earnings release and the earnings release presentation available on our website. I will now turn the call over to Mr. Moller to begin.

Thank you, Kent and good morning ladies and gentlemen. Thanks for joining us on our second quarter earnings call. I am speaking to you from London this quarter and I am joined by our CFO, Vince Lok in Vancouver. For the Q&A session, we also have our Chief Strategy Officer, Peter Evensen and our Corporate Controller Ryan [ph] on the line. I am pleased to report on one of the strongest second quarter operating performances in our company's history, starting with the highlights for the quarter on slide 3. We earned net income on an operating basis of $77.1 million or $1.05 per share. We have determined that Teekay will need to restate certain financial results to adjusted accounting for certain derivatives on the hedge accounting rules and the results presented today do not reflect these adjustments. Vince will discuss this issue in more detail later in the call, but I should note that none of these adjustments will affect our cash flows or stockholders'. Cash flow from vessel operations or CFVO was $221.7 million, of which 53% came from our fixed rate businesses. The higher than normal percentage of CFVO generated in our spot tanker business was a result of us achieving our highest ever Q2 sot tanker rates. We acquired the remaining 35% of Teekay Petrojarl, taking our ownership of our FPSO business to 100%. We completed follow-on equity issuances in Teekay Offshore and Teekay LNG, raising more than $300 million of new third-party equity and in the process demonstrating that our unique financial structure provides us with access to reasonably priced capital even in today's difficult financial markets, and we remains active in the execution of our value creation strategy through accretive drop down from Teekay Corporation to each of our publicly listed daughter companies, which have…

Thanks, Bjorn and good morning everyone. Before dealing with the preliminary second quarter results, I will just discuss our plans to restate our financial payments from 2003 through to the end of the second quarter of 2008. During a process of finalizing our second quarter results, it was determined that certain of our derivative instruments did not technically qualify for hedging accounting treatment under FAS 133, the accounting standard for derivative instruments and hedging activities. These derivative instruments were used to hedge our interest rate, foreign currency and tanker freight risk and to-date had been accounted for as hedges. Our accounting for hedges, hedging activity is an extremely complex area. In excess of 10 implementation guidelines have been issued in addition to the FAS 133 standards. We recently discovered that the hedged documentation we prepared relating to certain of our derivatives do not meet all of the strict technical requirements of FAS 133. Accordingly, we will have to restate our financial results to recognize the change in fair value of such derivatives through the income statement rather than as a component of accumulated other comprehensive income, which is part of stockholders' equity on the balance sheet. As a result, the restatement will result in greater fluctuations in recorded net income, but will not have impact on our cash flows, liquidity, total stockholders' equity or adjusted EPS as reported by equity analysts. Also, there will no impact on any of our financial covenants. It is important to note that this is a strictly a change in accounting treatment for such derivatives. The derivative estimates that are the subject of this restatement are provided and continue to provide effective economic hedges even though they don't technically qualify as hedges for accounting purposes. As the necessity for restatement was recently discovered, we and…

Thank you, Vince. I just want to amplify the comments we made about the financial restatement issue. Obviously, it's very unfortunate. We are taking it very seriously and addressing it as a high priority. But it surrounds a very technical issue around the interpretation of accounting rules and it does not affect our cash flows, our liquidity and our shareholder equity and it does not affect the fundamental soundness of our business, which is very strong. With that, I would like to take it over to the operator to invite your questions. Thank you. Question And Answer

Thank you. [Operator Instructions]. So our first question today comes from Jonathan Chappell of JPMorgan. Please go ahead.

Thank you. Good morning and good afternoon there. Thanks for the detail on the restatements from the financial side. Just a quick question strategically. Does this restatement or the work you are doing on it has any impact whatsoever on the execution of dropdowns of your strategic initiations?

Peter, would you care to take that?

Hi Jonathan. No it doesn't. As it was pointed out it doesn't affect the cash flows going forward. So that FASB 133 doesn't affect that.

Okay. Regarding share buyback you have a strengthening balance sheet as you do some of these drop-downs and you raised some equity in the first half of the year. That is some of the parts that was about 38% higher or just drops straight right now to 38% discount to your sum of the parts. I know you have been in the past had a systematic buyback program, what's your flexibility to get more aggressive on buybacks at times where you think that the markets are not really giving you value for the strategy in execution.

Right. Well obviously we have taken note of where the share price is trading today and given the focus that I gave in my prepared remarks to this significant discount that we trade into as you mentioned relative to some of the costs that's only widened as a result of the trading today and when you couple that with the significant cash flows that Teekay's beginning to generate from its subsidiaries and new share buyback programs is something we will give careful consideration to how we make good progress to share our value creation strategy and I would also say that the risk return on any major project in our pipeline has to be fairly compelling when measured against the value creation of a share buyback. So it's certainly our [indiscernible] and all the more so at the moment.

Okay. And a couple of years ago, maybe a year and half ago there was comments about potentially increasing the dividend more frequently than once a year as you raise up the split on some of these spin-offs or daughter companies. Now that the TOO and TGP [ph] moves up in splits and the cash is accelerating to the TEEKAY parent, do you see more frequent dividend increases in the near future?

Well that's a technical issue because of the outlook. The overwriting point is what we you want to return to shareholders as opposed to where can you invest it profitably and whether you do it more frequently or once a year as we have done in the last four or five years. It is something we will discuss internally. I don't have any guidance on that at the moment. I think the major issue for us is what we do with surplus capital and... at all as to dividends and share buybacks.

Okay. And last one and then I will turn it over. Vince mentioned $0.07 a share of profit sharing that you actually generated but weren't allowed to account for in the second quarter, what's the... was it our first quarter in profit share that you accrued but didn't account and is it all going to be accounted for in the fourth quarter so we are going to see basically fourth quarter with the positive profit share all falling into that fourth quarter number?

Yes, as it relates to the $5.8 million most of that will be recognized in the fourth quarter. Of course that carries over and it stays on the results for the full calendar year; the $5.8 million relates to the portion accruing in the second quarter. In terms of the first quarter, there was no profit share accrued in the first quarter.

Okay. All right thank you Bjorn, Vince and Peter.

Thank you.

Thanks.

our next question today comes form Greg Miller (sic) [Lewis] of Credit Suisse. Please go ahead.

Yes. Good day gentlemen. I guess, Vince, just to follow-up quickly just going forward on that profit sharing, just to model it out. What sort of the splits that that those profit shares are at?

We have there basically four Suezmaxes and I think we disclosed some of the terms relating to those. And one of them is sitting in TKL and TEEKAY Tankers, were we share 50-50 above $33,500 a day. And as you can see whereas Suezmax partners... Suez spot rates are... that's a pretty significant amount. So that's sort of the rough quantum of the terms of those shares... products.

Okay, great. And then also just a real quick modeling question on... when did the 10 un-chartered small product tankers leave the fleet?

Here within the Q... in July roughly I mean --

How about this... how many operating days did the un-chartered small product tankers have in Q3?

Are you referring to the Suez tankers?

Yes.

Yes, it's roughly 10 equivalent in charters, effective... effectively at July 1st.

Okay so basically zero days?

That's right.

Okay great. And then just shifting gears a little bit. You mention that you are going to move on... move forward with the drop down of assets. I mean when you look at the daughter companies TOO and TGP at these levels and I am talking about trading levels. Does that sort of put a... put the brakes on the dropdown program going forward.

Well we have achieved the dropdowns that we wanted in all three for this year that enables us to increase the distributions. I think, we are going to have to wait and see when the market really sees the distribution increases in Teekay LNG and Teekay Offshore. Obviously the deal is not as accretive at the stock prices. A further dropdown then what it would have been. But as Darren [ph] pointed out, we are selling at a greater discount of the Teekay than what we were before. So the whole rate on Vectra [ph] which is to use the competitively priced capital at the subsidiaries is even more so than it was last week. Okay, so in other words it's going to be more driven by the parent company. So even... so in other words, even if the MLP market continues to be remain challenge, in potentially arising interest rate environment whether that be in '09 or whenever that happens, we should consider that the dropdown schedule... dropdowns will proceed in 2009.

Yes. And I think one of the benefits is that a lot of the earmark assets already have debt financing attached to them. And the... we have three agreements from our banks to be able to convey or sell those assets to the MLPs and the debt will automatically follow. So if you will even if there's an increase in the overall debt financing rates it will not take place on the assets that are dropped down because we've already pre-arranged financing on them.

Okay great.

So that's a real benefit given the amount of debt component in, that's a part of those dropdown.

Okay, great. And you mentioned... I mean revenues were down in the LNG fleet in Q2 and that was related to the five dry dockings. Was that on point where all those... how many of those were planted and what was the rationale for doing all part of them in the same quarter?

Well, we have to respond to customers and we had a... there's some customers who wanted us to move up some dry dockings particularly on some Suezmax tankers. And so that's what cause the bunching. Obviously we would have wanted to space it out but we moved for example one dry dock from the fourth quarter to the second quarter because the customer asked us to do that.

Some of the tankers in Teekay offshore for example, sorry in TGP delivered in very short order back in 2003 and there after the five year survey so they come and there's some bunching going on there.

Okay, great. And then one last thing, wanted to touch on PLO. You mentioned that having acquired Petrojarl, congratulations on that... that would enable you to accelerate the dropdowns in the FPSO... I mean were you the majority owner anyway?

Yes, we were majority owner but we have to go through the same... it's easier when you are 100% rather than have to make public all of those things of that TEEKAY Petrojarl level, we were selling from one subsidiary to another, now that we own 100% of the Teekay, it's easier to affect those dropdowns.

Okay, great. And then just to really touch on the FPSOs. I mean you mentioned there's the re-negotiations for many of the FPSOs are happening or beginning to happen. When should we sort of see those... those re-chartering of those FPSOs and at this point what sort of increases you think that you potentially could get on FPSOs on average.

I don't think we want to get drawn down that while we are negotiating, but I think it varies to meet some of the contracts to further... out of the money than others and of course you would expect greater adjustments on those contracts. I think we've previously guided that the contracts were running through to 2009, 2010 and that we would enter the window of renewals some 18 months before.

Okay, so guidance from I guess I think it was about a year ago is still the same guidance we should be looking at... thinking about.

That's right, obviously where you close on... we are getting all this [indiscernible] on the way but I cant really guide you too much.

Okay, thank you very much.

We are optimistic.

Thank you. Our next question comes from Justine Fisher of Goldman Sachs. Please go ahead.

Good morning.

Hi, Justine.

Good morning.

The first question is why the vessels in China are delayed exactly; is that because of... I don't know credit issue that would otherwise [indiscernible] order being delayed?

It's two... it's a combination of the yards general productivity and then the fact that we are holding their feet to the fire on our exacting standards. So when it comes to welding and quality of raw material being percentage for our supervision team, they will readily reject something which is not to our standards. So... and the yard is very good because I think the Teekay is a great mucky name that can help them gain international recognition for their capability. So there's an education process that we're helping them with, but we also... it's causing some delay in the construction.

Do you think --

Where we --

All right go ahead.

All, thanks.

Do you think Teekay is in need to holding this seat to the fire and these sort of things?

Probably not unique but I think we are... we are probably... this is a yard that has filled tankers before but not for export. So I think we have caught them at a time when they were on the learning curve and that's helpful in the sense that we build very strong relationship with yard and it's helpful to them because they can gain from our international experience. So, it's working out very well.

And, do you think that you would order vessels again either at this yard or other yard I guess on the same point in the learning curve again in the hindsight, would you go... would you...

With this [indiscernible] I mean this is... they are... China's going to be a big shipbuilding nation and it's important bridgehead for us to be that and so, okay at various points in their learning curve you may kind of put a little bit of an extra cost in there for extra supervision and things like that when you compare the pricing between Korea and China but it's kind of the... not at long before they will be right out there.

So you guys would... would you again... a yard in the similar position, maybe not even this yard.

Yes now I think China is a place that Teekay will build a lot of ships in the future.

You haven't disclosed the name of the yard have you?

It's at Bow High [ph]; I don't think it's secret.

Okay.

They don't yard, so it's not the progress yards. I think some of the yards are having the financial difficulties to stay on yards doing well, they are just coming up the learning curve.

Okay. And then about the... just with respect to the debt issuance and the unit issuance with the daughter company, just so that I can clarify. So what you are saying earlier about the debt, it is attached to the assets that you may drop down, that you can drop basically the debt with the asset. So you could obviously issue units again but there's no requirement to. But it was the same as it was before, right?

That's right.

And then as far as the debt that was gone to finance the Petrojarl transaction, is there... are you guys going to look to repay that with cash flows or is that sort of remain outstanding. Because that can... that's just separate from any assets that are dropped down, right.

That's right. That's we just drew on our corporate revolvers to finance that share acquisition.

And in terms of cash flow use, I mean is that different than that leadership previously in that, a lot of debt initiatives have been secured over the last two quarters and associated with assets. So is there a notion to potentially use some cash to pay that down too?

Yes, overtime with cash flow generated from our standalone operations as well as some dividends and subsidiaries. We manage our revolvers on a portfolio basis. So these revolvers would be paid down over in due course.

Okay. Thanks a lot.

Thank you.

Thank you. Our next question comes from Stephen Eriko, Local Wood Capital [ph]. Please go ahead.

Hi. Thank you very much. Three questions for you, number one, can you give me an idea, of the timing on when you expect to get this re-statement finished. Is this a 12-month period of time or is it something we could probably get complete in one to two months.

No won't take that long. We are making sure that we are doing a thorough review of all of our derivatives and all the documentation. We are going through all that along with the auditors reviewing and auditing that. So we expect to be able to re-file our financial some time in September this year.

Okay that's great. Secondly the $76 million of operating cash flow at Teekay standalone, can you tell me how much of that was just from your GP incentives or your total GP interest?

Well the... that number just right now is not a very significant number. On a annualized basis it's about $6 million or $7 million. However as we mentioned for Teekay offshore is expected to increase. It's third quarter distribution by 12 to 15% as a result of the recent dropdown in June, and that actually move the GP from 2% currently all the way through the 25%; we actually surpassed the $0.15 [ph]... 15% GP split. So that GP number is moving up very quickly.

Yes I know, in the past at one of your investment presentation your guys gave a schedule on quickly you thought that GP income grow is the something that you guys would... could update for us or put that schedule out again or specifically based on the TOO dividend increase that you just talked about and what's looking forward for the TGP dividend increase in the next quarter. What is this current $6 million to $7 million quarterly run... grow to?

I don't have a specific figure, I think you can refer back to the table that we provided which is assuming that we increase the distributions in TGT by 10% per annum and Teekay offshore by 15% per annum. So in terms of where we are in 2008, we're reaching those targets. So we're pretty much on target in terms of those forecasts.

Okay, thank you very much.

Thank you.

Thank you. Our next question comes from Alec Modizen [ph] of Cobalt Capital. Please go ahead.

Hi there. I just had a question about the operating cost. I just wanted... you mentioned that there were some one during the quarter in terms of repair and maintenance and dry dockings. And wanted to hopefully get some quantification about how much those one-offs were versus how much of the increase in operating cost was just general inflation?

Yes, in terms of the LNG side, in terms of timing differences, there are roughly about say $2 million of non-recurring. In terms of the shallow tanker, as you know we do a lot of the maintenance work during the summer month. So I wouldn't... that's more of a seasonal factor as apposed to non-recurring.

Okay. And then, I just hope you can just walk me through. I am having a little bit of trouble each quarter at previous translating the far [ph] prices... one season industry data into what you guys actually realized. I was hoping I could get some guidance on how long the time lag is between the core prices of the VLC now being realized in your results and you mentioned that that issue with the four Suezmax tankers and the lag in the profit share on the time charter. Is that all of the kind of spot sensitivity that one gets in the prime charter rate or is there anything else, that comes to --?

Yes, it's complex question you ask, I will try and address the way I understand it. First of all I guess the publicly available information say from Clarkson's, those rates that they publicize are intentionally disclaimed by Clarkson to not necessarily be attempting to be realistic tanker rates than more... it's more about the direction of the market, it's a very good indicator of direction and you can co-relate very closely with Clarkson and tankers rates but they are not actually... absolute numbers that should be compared to what a real tanker will learn in the real wealth. As far as when you have the volatility we have had in the last quarter, clearly you are going to be... it's a little bit of a lottery if you have ships showing after one week verses another week in a particular market, you can get quite big differences. But essentially you know it's a pretty transparent market and we track our balance against the entities and how we're doing and I guess our spot performance is generally strong. I am not sure if I answered your question.

Yes. I guess the other thing is do you have any deal on the... just the time lag issue that how long it takes a bit to be realized in your own results [indiscernible]?

Yes, I think the smaller the ship the shorter the voyage and the more frequent you have re-chartering of vessels and so typically on Aframaxes if the day rates go up and you pretty much will have a 3 to 4 week lag and on larger vessels you might have a quite a bigger life.

Okay, great. Thank.

Thank you. [Operator Instructions]. So our next question comes from Urs Dur of Lazard capital Market. Please go ahead.

Hello gentlemen, can you hear me?

Yes, definitely we can Urs.

Great. Good morning, good afternoon. I guess immediately a technical question. A lot of the standard stuff has been asked and it's good to see that the overall outlook is intact. But the question I just had mentioned by Vince in regards to the unrealized losses from the OMI, at the base, did you mention that's in this quarter?

That's right, there was $11.8 million of unrealized loss this quarter.

Yes. And why was that not included in the semi-sales [ph] as a pullout.

Yes, we... this is just to be consistent with what we have done in the previous quarters.

Yes.

We didn't include it in the previous quarters because it was not material. But this quarter it became a material amount given where spot rates are. So we were just trying to be consistent with how we treat the appendix A items. So you could choose to include or exclude it, I guess, when you do the numbers.

No, no, I appreciate that in that regard. And in that it was non-material before, I mean I guess I'm commenting here but it was not material before that and I think it's great it being consistent, so all compliments. But since it's now material, I think it was interesting to find out about that and softens a little bit of the $1.05 that we see as a clean number just my opinions are for all the comments. And other than that in regards to outlook if we could talk a little bit about where you see the taker market going in the next three months towards the end of the year a little bit again just on the pure spot tanker side, particularly Aframaxes and an outlook for next year, it's still lot of the icing on the cake of the overall cash flows; if you could comment a little bit further on the market.

Yes, I guess we are further seeing volatility but as I pointed out when you have last... at least being flat out, it's not going to take much. Just this week we saw an explosion on the BCC pipeline which has caused a suspension of 700,000 barrels a day of exports from the Eastern Mediterranean and then that's going to give some dislocation. There are ships that were chartered to load out of there, they are now going to be diverted to find other cargo, private... by the oil companies who have them on charter. And if that goes on for about a month as we hear it might be, it's possible that oil would be diverted into Black Sea ports causing extra ton-miles and extra delays through the cost for instance. That's an example; we have the hurricane season now with a couple of disruptions we've already seen. So I think when you have full capacity utilization, disruptions in order of the trading patterns tend to very stimulative to tanker rates and in addition we have very high oil production out of Middle East. So I am not concerned about the volatility we are seeing, I just think it's still extremely good markets at today's level and has every opportunity to grow upside. We are very positive.

Okay. So in this regard, we get a lot of questions from investors, just the decline in oil prices, while we had a bit of decline obviously in the west than in Europe on overall transportation demand. The global decline has been relatively small compared to going from 150 to 120 on oil. In your opinion, just more as a side comment, but in your opinion, do you feel that a low oil price could indeed enhance demand for spot Aframaxes globally?

Yeah, well I think if pricing as it seems to be now, it's moving to contango then you could get all sorts, crude oil inventories are relatively low...

Yes, and they are on a LIFO basis, right. So then incentize --

Yet some stockers are restocking going on as soon as you flipping into contango so you could actually get quite a kick up with some activity.

Okay. Well, thank you very much and thank you for the clarification. I appreciate it.

Thank you.

Our next question comes from Daniel Burke of Johnson Rice. Please go ahead. Daniel Burke - Johnson & Rice: Good day, all.

Hi Dan. Daniel Burke - Johnson & Rice: First, a real simple one. The 8 Aframaxes you mentioned recently in-chartering, can you give us an average rate, what those vessels were taking into the fleet?

Before I can give you kind of a talk about what the open market is doing, it just moved up in the last two weeks, but since we started I guess it started...when we started our in-charter activity, the open market was in the low to mid 30s a day and it's moved up to the high 30s and it subsequently moved in to the low 40s, but we have done well for us stocking before the great swing as high as they are now. So its... that was the three and you probably use sort of mid-30 as the guideline. Daniel Burke - Johnson & Rice: Okay, great. That's useful. And then the second and final question I had was just looking at the Teekay Corp net debt level and the expectations that will continue to trend downwards. I'm just looking through the second half for the year, trying to understand with asset sales proceed Teekay may realize as well as and to that end, I guess you've got Swift tankers that close, potentially you could have the sale of the Suezmaxes over to Teekay tankers. It's not likely if I heard correctly earlier that the additional drop-downs will occur to the MLPs over the second half of the year. Are there any other asset sales of any materiality that we're currently aware of?

I think, we've indicated our intention to expedite this multi-medium product tanker market, so the possibility of a one or two more ships there. We sold one older Aframax that what we saw was very affective price and we have a number of vessels in that age bracket but we are not... we are opportunistic. So we will play by... so of course enjoying very good earnings in those vessels. So that's... it's going to be... there is no large scale sale effort, but there is an opportunistic approach to ship values. Daniel Burke - Johnson & Rice: And I guess the second piece of that question then would be just if you could refresh me what the second half for the year CapEx looks like that's going to be funded through the Teekay Corp balance sheet and cash flow?

Yes, if you look at our CapEx table on the earnings release, in the spot tanker segment we have about a little bit over $200 million really into the spot tanker segment. And so those would be in the Teekay Corp standalone. The LNG piece is Teekay LNG partners. That's mainly due to the tanker that I told you. Daniel Burke - Johnson & Rice: Okay great. So just what we know now kind of balancing out all operating cash flow looks like it should flow through the bottom line of the Teekay Corp parent. I guess I can't generalize that could anticipate, that could grow, I know you can't comment on that. Okay guys. Thanks.

Thank you Daniel.

Thank you. And there are no further questions, please continue sir.

Okay. Well, we'd like to thank you very much for joining us today. It, certainly we have enjoyed the interaction and look forward to talking to you next quarter. Thank you very much.

Ladies and gentlemen, this does concludes your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great rest of the day.