Good morning ladies and gentlemen, thank you for standing by. Welcome to Teekay Corporation First 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, sir.

Before Mr. Moller begins, I would like to direct all participants to our website at www.teekay.com, where you will find the copy of the first 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 earnings release presentation available on our website. I will now turn it over to Mr. Moller to begin.

Thank you Dave. Good morning ladies and gentlemen. Thanks for joining us for our first quarter earnings call. As usual, I am joined by our CFO, Vince Lok and for the Q&A session, we also have our Chief Strategy Officer Peter Evensen available. Starting with the highlights for the quarter on slide number three, we earned net income on an operating basis of $60.8 million, or $0.83 per share. Cash flow from vessel operations or CFVO, was $184.8 million with approximately one-third coming from our spot business and the reminder from our fixed-rate business. We repurchased close to 500,000 of our shares for $20.5 million, or around $41 per share. Q1 average tanker rates were higher than the previous quarter and this improving trend has continued into Q2 where we are currently enjoying very high tanker rates due to strong fundamentals. And as I will be describing this morning, we are actively executing in our 2008 strategy which we presented to you last quarter. Slide number four provides you with the quick reminder of that 2008 value creation strategy, which is to grow each of our subsidiaries accretively through drop downs of existing and future assets from Teekay Corporation and from third-party acquisitions. The Benefits to Teekay are two-fold, to increase the performance fees we've received from our daughter companies, thereby increasing free cash flow and return on invested capital at Teekay and to increase the share price of our daughter companies in order to raise the sum of parts value. On slide number five, we highlight our recent progress in executing on this strategy and I'll spend a few minutes talking you through these developments. It was another exit quarter for Teekay LNG Partners, shown in the box on the bottom-left of the slide. We dropped down the two…

Thanks Bjorn and good morning everyone. Net income for the first quarter was $60.8 million or $0.83 per share when excluding the items listed in the Appendix A of our earrings release, which relates mainly to unrealized losses from foreign exchange translation and interest rates swaps. Looking at our operating segments on slide 13, we generated $185 million in cash flow from vessel operations or CFVO during the first quarter, compared to $138 million in the previous quarter. The offshore segment CFVO declined by $2 million from the fourth quarter of 2007, mainly reflecting an increase in the number of off-hire days in our shuttle tanker and FPSO fleets due to unexpected repairs. Partially offset by a decrease in vessel operating expenses. In the first quarter, two of our shuttle tankers incurred a total of 102 days of unscheduled off-hire, which resulted in a $3.8 million reduction in revenues. Our new Siri FPSO commenced its charter in Brazil on February 1st. However, the CFVO from this unit was not material in the first quarter due to start up cost and that full production did not commence until early in the second quarter. We estimate that the second quarter CFVO for the offshore segment will be slightly higher than the first quarter, because the full impact from the Siri FPSO and lower expected off-hire days will mostly be offset by higher maintenance cost for the offshore fleet, as we begin to move into the usual summer maintenance season in the North Sea. CFVO from the fixed-rate tanker segment increased by $1 million, primarily due to the net increase in the fleet size. For the second quarter, we expect CFVO from the fixed-rate tanker segment to increase to approximately $26 million, as a result of the addition of two MR product tankers,…

Thank you, Vince. I just want to say that we are very excited about the progress we are making in our strategic approach with the news to report in each of our daughter companies and we are very excited about the momentum of the tanker market and Teekay's recent growth in that sector as well. So with that, we would like to open it up to questions from the analysts and investors. Question And Answer

Thank you. [Operator instructions]. Your first question today will come from Jonathan Chappell of JP Morgan. Please go ahead.

Thank you. Good morning, guys.

Hi, Jon.

Bjorn, can you remind us on the Petrojarl contract renewals, when do they officially expire? How early before those expirations are you attempting to get the kind of mark-to-market rate and really what's your alternative if you can't get the current contracts renewed at market rates, are there other potential opportunities for those assets?

Yes, we... I guess that's on disclosure and it's on Petrojarl annual report, but essentially the series FPSO which is now producing in Brazil, is on a two option one year contract that's been widely publicized and discussions in the early stages ongoing production opportunity for that vessel, but that's not suppressing that we are confident that ship will probably spend all or most of its technical and operational life in Brazil. We have currently two contracts in the North Sea that are likely to end in 2010 and one of them is under active negotiation and the other one, I guess is under consideration. So, I would hope that we would have something in the next couple of quarters to report. On the renewal side, hopefully, we'll have some new projects that we can also secure.

Okay. Sticking with the offshore segment, the refinery shut down disruptions earlier in the second quarter in the North Sea, did that have any significant impact on your shuttle tanker business or any of your business out in that area?

I think what happened in the North Sea was, of course the freight market was strengthening and that caused our customers to try and use the shuttle tankers for slightly longer voyages. They have, I guess, under the time charter provision, the right to go for... to different destinations, they pay the same day rate, which is like in the mid 50s a day. And so if it's a weak spot market, they will typically shuttle the crude from nearby storage gathering facilities and ship it out on VL Suezmax's Trans-Atlantic, but if the spot market is very hot, they actually can choose to directly deliver crude oil in shuttle tankers into the Mediterranean, the U.S. and so typically if you have a disrupted market, especially in a firm freight market, then they tend to use up more shuttle days, so we certainly would not have suffered any idle time from that.

Okay. And then finally, there is large discrepancies in different Aframax markets over the last several weeks and months, kind of grew up on TK understanding that half your business is done in the Pacific Basin and half basically in the Caribs. Are you more flexible now, are you getting more exposure to potentially the North Sea in the Med markets which had been hotter of late, recently?

Yes, we are, we are still using the same rule of thumb, but I guess we have a more varied underlying trading platform. I think in the fourth and sorry, the vessel base sold in the second quarter reflect the fact that the first month of the second quarter April was quite a bit weak in the Pacific than it was in the Atlantic, but that has since caught up. So the current day rates in the Indo-Pacific are 40,000 to 45,000 and that's similar to the Caribbean market. So, we are certainly doing more in the Mediterranean and of course with our Suezmax business, we're generally doing a lot more in the Atlantic than we are on Pacific. So, we have moved a few ships from the Pacific into the Mediterranean this last few months in response to the strong rates. We've also traded couple of LR2 product carriers from clean into dirty to take advantage of that big differential. So, we're quite flexible.

Okay, very helpful. Thanks, Bjorn.

Thank you. And your next call will come from Mr. Urs Dur of Lazard Capital Markets. Please go ahead?

Good morning, guys.

Good morning, Urs.

Hi. Saw you on CNBC this morning, guess, you were up early. I was wondering if you could discuss because I appreciate your position on the order book and I tend to have a general agreement. How many conversions are you seeing on the Aframax side or is that specified in the presentation? I didn't quite see that.

Well, I think the number we used in our presentation was 45 for Aframaxes.

Okay.

So, of course we are only assuming that half of the vessels sold scrap this year would go, and all of the ships sold, sorry, let me repeat that. Half of the ships sold for conversion in '08 so far, half of those assumed to actually go ahead this year, whereas all of the ships that were sold as conversion last year, we assume will get done by the time the year is over. So we think that's a pretty conservative assumption.

Do you see next year in your assumptions going forward. Next year, similar tightness, and do you see issues in regards to scrapping going forward, considering this the phase out, there is going to be an awful lot of tonnage that will be legislatively redundant and of the vast majority of the trading world. Do you see bottlenecks for scrapping and do you see a similar tightness next year with the fleet growth?

Well, we definitely have more inflow of new tonnage next year, that's quite understood. But again, we think China will have a bigger share next year and they will have the same domino effect of delays. So that's one thing that will possibly mitigate the incoming tonnage, but it's still going to be big number. So the question is how can that be absorbed? And on that front, I would say, clearly, I don't think anybody is talking about 2015 phase out of single-hulls, the question is is it 2010 or are people going to start phasing the vessels out even sooner? Of course that depends on the market, it would be a bit of a self-rule [ph] filling support of the market if the market where to weaken.

Yes.

I think it will very quickly get people scrapping their ships at $700, $800 a ton light ship scrap price, and you will also of course, with the dry market being at a record level, a strong demand for offshore there is really no reason single-hulls tankers will not really be phased out of it. So, that's even before we get to what the demand side is. So, I would say that there are so many wild cards I think that are going to disrupt the ability of the order book to overpower the market. And I mean this is a slow speed thing that I described, is a very significant factor. If Suezmax rates were to drop below 50,000 a day, if people being rational, essentially you would see 6% of the supply side disappear overnight.

Yes.

Significant.

That would be... so we will see, you right, a lot of wild cards. Finally, you mentioned and one sees it if one looks at consensus across the board in tankers that, people sort of expect seasonal slowdowns in third quarter or in the summer. I was wondering if you... you mentioned it just very briefly, but if you have any insight as to what the potential causes of that could be and what the potential offsets to that could be. Do you have any insight that you can provide there?

Well, I think a lot is going to be depending on stocking patterns this year, which relate to contango versus backwardation, so I guess if you are going to see continued backwardation then you know, you probably are not going to see any stock building over the... or limited stock building, over summer then you might get a weaker summer whereas if you get more of a contango then I think you could see a run through replenished stocks in some of the markets where stocks are available on the low side.

Okay, excellent, thank you very much.

Thank you, Urs.

Yes.

Thank you. And the next question will be from Greg Lewis of Credit Suisse. Please go ahead.

Good morning, gentlemen.

Hello.

I guess, a follow-up on Urs' last question, I mean, given what's happening in China with strong demand and questions surrounding the order book, it almost sounds like we are looking at potentially '09 being better than that was previously expected say 3 months ago. Are you sort of comfortable with that sort of --?

Yes, I think that... I think that is a generally firming undertone. I mean, the fact that we are looking at the strongest Q2 on record now at a time when we should have been seeing through the usual seasonal weakness, is mind boggling. And the fact that it's based on fundamentals rather than sort of disruption events speaks volumes I think. So I mean, you look at how difficult it is to get drydocking space, how long ship... time ships are taking repairing, how much it's costing, the value of scraps deals, if you have a ship that's due to be phased out in 2010 or is being discriminated out why stick around, so I think you could actually see a lot of front loading of the single-hull phased out.

Okay. So then given like the strong environment, I mean clearly we're in now and potentially that we will be in... is it more becoming more of a challenge for you to sort of charter in tonnage at what you would consider to be attractive rates?

Well, the market is firmer now than it was, I still think you can... I mean what has so far been different between tanker business and drydock businesses is to drive our time charter rates have really gone up very significant and you can do five year charters at very high rates, if you have a vessel. In the tanker side, it's really difficult to cover a ship long-term at high rates and conversely, it's relatively easy to charter in a vessel for 3 or 5-year period. So, the issue is, are you getting the right quality of ships, the right quality of owners and of course in our case, we have the luxury of our newbuilding program which is going to add operating leverage to us at a very good time. So, we'll be opportunistic, I think there will be some seasonality and people have amazingly short memories. The ship owners will adjust their rates based on a relatively shallow dip in the markets sometimes, so we will play with it.

Okay, great. And then I just have a few quick questions. One was on slide seven, when you referred to that spot guidance, is that just for, I know that's for the spot segment, but is that for just the spot vessels in the spot segment or is that the aggregate of the spot fleet, which includes the longer term ex-time charters?

Yeah that guidance is just for the spot portion of the spot segment so, it's less than one year component.

Okay, great. And then my other question was, and Vince, you sort of mentioned the typical seasonal slowdown in the shuttle tanker business in Q2. Looking... clearly, we are in the middle of Q2 at this point, is that going to be primarily in Q2 or should we sort of expect that... that the sort of straddle into Q3 as well?

Yes, typically it's higher in the second quarter and gradually declines as we head into the fall. So, it will continue into the early part of the third quarter, but then likely activity levels pick up near the end of the third quarter

Okay. But it will primarily be in Q2?

That's usually the peak seasonal maintenance period.

Okay. Sure and then actually you know just one last question, you mentioned that you converted a couple of your LR tankers into crude tankers?

Yes, with the trading vessels.

Yes, yes for the trading... roughly that's sort of clean those tanks to get them back in the product fleet like, what's sort of the timing and the cost of that?

That depends what the last cargos are and so on. In our case, we have a number of contracts to carry condensate in the Atlantic Basin, which some of which are not that color sensitive, so you can actually use those cargos as clean up cargos, which allows you to make the clean up and return process a lot easier. So, it's not a major factor.

Okay, great. Thank you.

Thank you.

Thank you. And your next question will come from Justine Fisher of Goldman Sachs. Please go ahead.

Good morning.

Hi, Justine.

I think that bondholders are probably excited to see the unit offerings from the MLPs going to pay down debt and I was wondering if there is any, I mean, I know you can't comment on how imminent they might be, but I mean, well, is it... I mean, how many... how often do you may be plan to do that or how much more of those can we expect? Are those going to be on a regular basis or...?

We have a defined plan for the drop downs. Of course it's market sensitive, but it also depends upon going through the... where we have a drop down it depends upon going through the conflicts committee process. As we announced today, we are going through that process on Teekay Offshore in order to have another 25% of OPCO, move into Teekay Offshore. And the other ones are on a more of an opportunistic basis, but we are committed towards that schedule of trying to move more assets down into the daughters where it will have a lower cost of capital.

Can you remind us which assets are left at the top?

We have of course all the... our shareholding in Petrojarl is up at the top and we have about 30 tankers up there that are eligible to go down into Teekay tankers. And then we have a few more fixed rate tankers that don't automatically belong up there as well as of course 75% which we hope soon to be 50% of the OPCO or the offshore franchise.

So as far as the physical assets are concerned, there is only 30 tankers and then a few fixed rate tankers as well?

That's correct.

And is the goal to get all those out of OPCO?

The goal isn't to get them out of OPCO, the goal was to sell the rest of OPCO down into Teekay Offshore, but ultimately, as it relates to those 30 tankers, yes, we would like to have them inside of Teekay Tankers.

The 30 tankers are distinct from OPCO those are small tankers.

And so the process would work whereby Teekay just continually dropped assets down until Teekay Corp, I guess as a holding company follow the MLPs and that's it?

Well, Teekay also is generating new transactions right, on top of that so we can re-employ the funds as well into new projects, which as we have said is part of our asset manager, we are always looking at developing new projects and then there is the warehousing component going on as well, so we hope if we can reemploy the money in good projects going forward, then of course, we'll have to look at returning it to the shareholders. But right know, we have great opportunities in our Offshore franchise and then of course we also have the trading of the conventional tankers that we do up at Teekay where we in-charter in ships and then we charter them out and play the spot market.

But they still, I mean, those still aren't owned assets and so ultimately it seems like there may be few... there may be no real owned physical asset at Teekay Corp. and while Teekay Corp may be a conduit for additional growth projects, eventually those will be dropped down to, right?

Yes. But all this takes a certain amount of time and with our FPSOs we have... so yes, you are right in principle that, that could happen, but that assumes that all those people we have dedicated toward business development can find some great projects in the offshore realm and or the shipping realm. I think the ConocoPhillips transaction, for example, in December, which moved us closer into one of a... one of what we would call a strategic customer, is the right kind of thing that you are going to see Teekay moving towards, because more customers want to use us for their outsourcing needs. So, we actually see a wealth of opportunities up at Teekay. Having said that, we are also cognizant of trying to close the... some of the parts.

Okay. And I have a question on the LNG market. I know that Teekay's LNG vessels are on very long-term charters, and so, doesn't really affect you, but just qualitatively, have you guys... given the fact that you are probably the first of the public tanker companies in the U.S. to get into LNG years ago, have you been disappointed by the way that markets unfolded?

I think we have... are realistic about the market, which is that, so much money is going into gas right now that it can't fulfill all of the projects. So the projects have been delayed. This isn't anything new, we saw this in the early 80s when people were going to build a lot of refineries, those refineries ended up being delayed or sometimes not being built as the case, was in the Mid East. But there is a resource issue as I am sure you will hear from other companies that are trying to build the liquefaction. So, we have noticed that and of course we had to change our model and our model involves going out and then buying more LNG vessels on the water with long term contracts, where you see Kenai you just saw us look at the Skaugen transaction, we think there is a lot of great opportunities there in order to consolidate what was a fragmented market. So, for us, the big question is changing the model, but definitely the amount of tenders have moved on, we are also moving into more value-added strategies. If it's hard to get a liquefaction plant built on land, we are looking, for example, at floating LNG, because you can build those cheaper in shipyards and other offshore fabrication yards and then you can float them into other places. So, that's all part of our strategy, and that's certainly what you are seeing worldwide. This huge build out as people try to tap into the resources.

Okay, thanks. And then just one last question, how many of the senior notes are outstanding at the end of the quarter?

Roughly about $250 million.

Okay, thanks.

Thank you. Your next question will come from Tim Mullen of Virginia National Bank. Please go ahead.

Good morning. As a follow up on that, on your slide 15, with the disaggregated balance sheet, what is the make up of the long-term debt on capital leases, particularly I'm wondering what part of that is made up of leases, the parent company only number?

The parent company number, very little, most of that is sitting in Teekay LNG where we have leases on the Suezmaxes and on a few of the LNG vessels. So, most of that in Teekay parent's is long-term, is in the from of debt and bonds

Okay, very good. And also thank you for adding that disaggregated stuff, that's very helpful.

Thank you.

[Operator Instructions]. And your next question will come from Daniel Burke of Johnson Rice. Please go ahead.

Good morning.

Hi, Dan.

I was curious on the sale of the OMI or the former OMI product carriers, do you still have the other four, I think and why are they non-core and then you're changing it all your outlook on the product sector?

Okay. The four Handymaxes are... Handymaxes and the MRs even though they are relatively close in terms of dead weight, size, they actually are relatively distinct markets. So, to have four of each doesn't actually give you eight vessels in a particular pond. So, we determined that on the basis of other priorities around offshore and gas and spot tanker crude assets, it wasn't very likely that we would... to go with enough capital to build up a meaningful position in those two segments. So, we had the opportunity to unload the Handymax tankers, we still have the four MR tankers, two of those were placed on five-year charters to ConocoPhillips at attractive rates and the other two are trading... well, actually, they are I think either just coming off some time charters that we have inherited, but they are not... they are not a long-term charter at this time.

Okay. So now real change in hike?

So just to add, sorry, I mean this is the... it's a market with a lot of units, so there are number of fairly sizeable constellations have been formed by A.P. Moller and others where they have, where they are running like 50, 70 ships. But to have 4 ships or 2 ships, it is not a back up, so that is not the game Teekay plays on.

Okay. And then just one other one, Bjorn. A lot of security around situations in Chinese shipyards, you mentioned that you're personally seeing six month delay, any more color on, is it componentary issues? Just general slowdown, any more color you can give on in your experience specifically what's creating that delay?

There are a number of factors. One is quality, and we have pretty high standards, so a sizeable supervision team will drive the Chinese shipyards not [ph] and so we are happy with the welding. So, we will check blocks and have them represented and so on so, that's one factor. And the other factor is just supply chain and the fact that the yards are not as productive as I think they are expected to be. So, it's a combination of factors.

Okay, great. Thanks for that.

Thank you.

Thank you. The next question will come from Rupesh Sahu [ph] of Titan Capital. Please go ahead.

Yes. With regards to the OPCO dropdown to TOO, do you have any initial thoughts on what... how TOO will finance that either via debt or equity or combination? And then also, how do you... how you value OPCO... what's the preliminary plan on valuing the drop down?

As it relates to the first part of the question, how will you finance it? That has to be done through equity, that isn't an asset that you can necessarily leverage. As it goes to the second one, Teekay has made an offer to Teekay Offshore and Teekay Offshore conflicts committee is evaluating that and is in active discussions in order to arrive at a price that is beneficial to Teekay Offshore.

So would Teekay then accept TOO equity or is would TOO do a secondary offering to third party investors?

I don't think I want to be drawn on exactly what the financial plans is going to be at this point.

Okay. Will it be fair to say that the dropdown prices that you offer TOO is less than the indicative price of TOO's trading... did you understand me?

Yes, I think that's the fair assumptions that, unless you do that the deal is not going to be accretive and there is no point in Teekay Offshore buying any asset unless it's an accretive asset.

All right. You wouldn't care to give us some sort of discount, will you?

I would not want to be drawn on what that value is right now.

Okay. But then and also I guess, last question, TOO's assets if I understand, are predominantly meaning like 85% or more of their asset value, it really stopped, is that plus or minus, correct?

Yes.

Okay, thank you very much.

Thank you.

Thank you.

Thank you and there are no further questions at this time, please continue.

Okay. We would like to thank you very much for attending. This an exciting time in the tanker market, we look forward to reporting to you next quarter. Have a great day. Thank you.

Thank you ladies and gentlemen this concludes the conference call for today. You may now disconnect your lines and have a great afternoon.