Teekay Corporation Annual Report 1998

← All annual reports

FY1998 Annual Report · Teekay Corporation

Loading PDF…

FIRST
CHOICE

Teekay Shipping Corporation
Annual Report 1998

C o r p o r a t e P r o f i l e

Teekay Shipping Corporation is dedicated to being the first choice for quality-conscious customers in the shipping

industry. The Company owns and manages the world’s largest and most modern fleet of medium-sized tankers, operating

primarily in the Indo-Pacific Basin. Teekay maintains a continuous presence in the world tanker market and employs

approximately 2,000 people in its shore offices and sea-going operations. The Company’s Common Stock is listed

on the New York Stock Exchange and trades under the symbol TK.

Contents

Financial Highlights

Chairman’s Message

to Shareholders

President’s Report

to Shareholders

10 Market Update

12 Fleet Profile

12 Map of Operations

14 Core Ideology

16 Operations Review

23 Management’s

Discussion & Analysis

28 Auditors’ Report

29 Financial Statements

32 Notes to the

Consolidated

Financial Statements

40 Five Year Financial

Summary

41 Board of Directors

42 Corporate Information

Teekay Shipping Corporation’s

Annual General Meeting will take place on

September 2, 1998 at 10:00 am at the Royal Automobile

Club, 89 Pall Mall, London, England.

F i n a n c i a l H i g h l i g h t s
(in thousands of U.S. dollars, except per share and per day data and ratios)

Year ended
March 31, 1998

Year ended
March 31, 1997

Income Statement Data

Net voyage revenues

305,260

280,212

Net income

Balance Sheet Data

Total assets

Total stockholders’ equity

Per Share Data

Net income per share

Weighted average shares

70,504

42,630

1,460,183

689,455

1,372,838

629,815

2.46

1.52

outstanding (thousands)

28,655

28,138

Other Financial Data

EBITDA

Net debt to capitalization (%)

Capital expenditures:

Vessel purchases, gross

Drydocking

Operating cash flow per ship per day

209,582

46.9

197,199

12,409

12,664

191,632

48.0

65,104

23,124

11,819

EARNINGS
EARNINGS
PER SHARE
PER SHARE

$ US

2.5

6
6
4
4
.
.
2
2

2
2
5
5
1
1

.
.

7
7
1
1
1
1

.
.

2.0

1.5

1.0

0.5

5
5
3
3
0
0

.
.

9595

9696

9797
Fiscal Year

9898

0.0

NET INCOME
NET INCOME

CASH FLOW(1)(1)
CASH FLOW

5
.
0
7

.
.

6
6
2
2
4
4

$ millions
80

.
.

2
2
0
0
3
3

.
.

0
0
9
9
2
2

4
4
6
6

.
.

6
.
9
0
2

6
6
.
.
1
1
9
9
1
1

.
.

2
2
6
6
6
6
1
1

.
.

4
4
1
1
5
5
1
1

.
.

8
8
6
6
4
4
1
1

$ millions
240

200

160

120

94*
94*

9595

9696

9797
Fiscal Year

9898

*11 month period ending March 31,
1994

94*94*

9595

9696

9797
Fiscal Year

9898

*11 month period ending March 31, 1994
(1)Earnings before interest, taxes, depre-
ciation and amortization (EBITDA)

C h a i r m a n ’s M e s s a g e t o S h a r e h o l d e r s

A message from

Axel Karlshoej,

Chairman of

the Board

of Directors

This year marks the 25th

that of the Board of Directors

the role of President and

anniversary of the founding of

to Captain Jim Hood for his

Chief Executive Officer,

Teekay Shipping Corporation.

leadership during that

effective March 31, 1998.

As Chairman of the Board, it

challenging period. Over the

As Teekay celebrates

is a great pleasure for me to

past six years, the senior

25 years as a quality leader

celebrate the Company’s

management team, led by

in oil transportation services,

achievements and pay tribute

Jim Hood, has instituted

the Company has all the

to those who have contributed

some important changes. The

elements in place for cont-

to its 25 years of success.

Company’s financial position

inued success: a modern,

Teekay has a well-founded

has been strengthened and

well-equipped fleet, strong

reputation for excellence that

Teekay has successfully made

financial resources and the

marks every aspect of its

the transition from a private

people to support growth.

operations and distinguishes

to a public company. The

Under the direction of our

the Company among its

efforts of those years have

experienced, knowledgeable

industry peers. Both our cust-

secured Teekay’s unique

management team, I am

omers and our competitors

position of strength in the

confident that the achieve-

recognize the unique spirit of

shipping industry.

ments of the years ahead

Teekay that appears in the

The past year has been

will yield rewards for the

dedication and professionalism

particularly important for

Company and its shareholders.

of people across the Company,

Teekay in terms of preparing

and in the meticulous atten-

for the next stage of its

tion to the highest standards

growth. We have significantly

of quality and safety. That

expanded the scope of our

spirit is the legacy of our

value-added services to

founder, and my brother,

customers in Australia, and

Torben Karlshoej, a legacy

have devoted much effort to

Axel Karlshoej

which we are proud to carry on.

strategic planning. Changes in

The years immediately

the senior management team

Chairman of the Board

June 8, 1998

following the loss of Torben in

have also been part of the

1992 were difficult ones for

Company’s preparation for

Teekay. I would like to express

future growth. I am pleased

my personal appreciation and

to announce that, following

Jim Hood’s retirement,

Bjorn Moller, our former Chief

Operating Officer, took on

Teekay’s reputation
for excellence distinguishes the
Company among its industry peers.

P r e s i d e n t ’s R e p o r t t o S h a r e h o l d e r s

We are building

our vision

of Teekay’s future.

A message from

Fiscal 1998 was an excellent

Solid Financial

Bjorn Moller,

year for Teekay – financially,

Performance

President and Chief

operationally and strategically.

Net voyage revenues rose

Executive Officer

The Company continued to

by 8.9 percent in fiscal 1998

improve its financial perform-

to $305.3 million, and net

ance, recording the best

income by over 65 percent

results since fiscal 1992. It

to $70.5 million, or $2.46

was also a year of building

per share compared to $1.52

for the future, with profitable

per share for fiscal 1997.

growth and strategic planning

Operating cash flow on a

among our most important

per ship per day basis

achievements.

increased by 7.1 percent

from $11,819 in fiscal 1997

controls and substantial

to $12,664 in fiscal 1998.

economies of scale. We also

Several factors contri-

took advantage of our strong

buted to our solid financial

financial position to reduce

performance. Rising oil con-

interest expense. We are

sumption worldwide created

pleased with the fiscal 1998

an increased demand for

results, in terms of both the

tankers, while tanker supply

figures and the Company’s

remained unchanged. At

performance relative to

approximately 70 percent,

the industry.

Teekay’s fleet utilization rate

remained high. On the cost

side, Teekay continues to

achieve some of the lowest

operating costs in the industry

by maintaining tight cost

INCOME FROM
INCOME FROM
VESSEL OPERATIONS
VESSEL OPERATIONS
$ millions
120

6
.
7
0
1

100

3
3
.
.
4
4
9
9

3
3
.
.
6
6
7
7

8
8
.
.
0
0
6
6

8
8
.
.
2
2
5
5

94*
94*

9595

9696
9797
Fiscal Year

9898

*11 month period ending March 31,
1994

Strong Core Operations

working relationships with the

In fiscal 1998, we continued

world’s major oil companies

to focus our operations in our

which we continued to

core business segments: the

strengthen in fiscal 1998.

Indo-Pacific Basin, primarily

During the past year,

Japan, Australia and the U.S.

Teekay continued to take a

West Coast. The Company is

proactive approach to critical

well recognized as the leading

industry issues. In March

oil transportation supplier

1998, the Company was the

in these quality-sensitive

first independent tanker

markets due to its consistently

operator to conduct an oil spill

high level of service, reliability

response drill in Australia, an

and safety. We have close

area of extremely high envir-

Profitable growth and strategic planning were

among this year’s most important achievements.

P r e s i d e n t ’s R e p o r t t o S h a r e h o l d e r s c o n t i n u e d

The past year was significant for Teekay
from a strategic viewpoint.

onmental sensitivity. We have

of approximately 13.7 years.

also put oil spill response

As part of Teekay’s commit-

contingency plans into place

ment to maintaining a modern

in our other key trading areas.

fleet, the Company has

ordered two large, double-hull

The Fleet

Aframax newbuildings from

At March 31, 1998, our

Samsung Heavy Industries for

fleet stood at 46 ships of

delivery in 1999. The Company

4.6 million deadweight

also holds options for further

tons. The fleet is certified

newbuildings.

to be in compliance with

the International Safety

A Year of Strategic

Management code which

Growth

comes into effect July 1, 1998.

Our success as a leading

In fiscal 1998, we

provider of transportation

continued to modernize our

services to major oil companies

fleet, selling three older

has been based on a highly

tankers and replacing them

focused business strategy.

with eight newer vessels, two

By concentrating the world’s

of which are time-chartered-in.

largest modern fleet of

The result is that our fleet is

Aframax tankers in the

even more homogenous

quality-sensitive areas of the

than before, and the average

Indo-Pacific Basin, and

age of our ships is 7.8 years,

maintaining integrated

compared to the average age

marine operations, we have

of the world oil tanker fleet

established a position that is

unique in our industry. Over

the past year, we took

advantage of several growth

opportunities that were

directly related to this

position.

Strategic Projects

jointly owned by Chevron

our customers with a volume

The Teekay Vision:

in Australia

and Texaco.

and flexibility of transporta-

Putting Our Strengths

Teekay’s acquisition of the

The Australian tanker

tion that cannot be offered by

to Work

entire marine operation of

acquisition was followed by

other service providers. The

Teekay’s success has always

Caltex Australia Petroleum

another example of lever-

close customer relationships

been guided by clear strategic

Pty. Ltd. (CAPPL, formerly

aging Teekay’s position to

that result from this type of

objectives. Our latest planning

APPL) is an example of this

secure a long-term value-

contract offer potential for

initiative is dedicated to

type of achievement. In

added contract.The Company’s

future growth.

building our vision for the

December 1997, Teekay

reputation for operational

Previously, spot market

future – a vision that is

acquired CAPPL’s two product

excellence and safety was key

trading accounted for almost

grounded in our core purpose

tankers and staff of 156

to securing a long-term

all of our revenues. The long-

of making Teekay “the first

sea-going and on-shore

agreement with Apache

term contracts initiated in

choice” of our customers in

employees. Under profitable

Energy to convert a Teekay

fiscal 1998 represent an

the shipping industry.

contracts varying in length up

Aframax for use as an off-

important new aspect of

The vision building

to 13 years, the Company

shore floating storage and

Teekay’s business. Through

process, which involved

provides CAPPL with world-

off-take (FSO) unit for the

these agreements and

extensive consultation with

class, cost-effective operations

Stag Field in Australia. Teekay

expansion activities, we are

our customers, provided valu-

and comprehensive service

has entered into a profitable

levering off our strengths to

able input on the Company’s

for four tankers.

contract to operate the FSO

broaden the Company’s

position in the market and

This agreement demon-

for eight to fourteen years.

revenue base.

confirmed our strengths, as

strates Teekay’s ability to act

as an outsourcing partner

Strategic Contracts

for oil companies in tanker

of Affreightment

operations. It has also brought

During the past year, the

Teekay closer to Caltex, one of

Company expanded its

Asia’s largest refiners, which is

activity in strategic contracts

of affreightment involving the

Australian and other markets.

These contracts are structured

around Teekay’s unique

scheduling ability and provide

We are pursuing
opportunities
that are directly
related to our
unique industry
position.

P r e s i d e n t ’s R e p o r t t o S h a r e h o l d e r s c o n t i n u e d

We are dedicated to making Teekay
the first choice of our customers.

well as identifying areas for

added solutions to oppor-

approximately $69 million.

improvement. People through-

tunities that arise from our

This offering, along with the

out the Company are now

market position and our

sale of shares by our major

involved in implementing

network of customer relation-

shareholder, has doubled the

our vision.

ships. Third, many of the

public float of Teekay stock,

Teekay’s future growth

strengths that have made us

thus improving liquidity for our

will be driven by a three-

successful can be brought

shareholders.

part strategy tailored to our

to bear in other geographical

competitive strengths. First,

markets and industry

Moving Forward

the Company’s existing

segments. Our customers

The vision building process

Aframax Indo-Pacific opera-

regard us as among the best

has energized us and has

tions will remain an important

in the industry, in terms of

shown us that Teekay can be

part of our business. We will

professional staff, flexible,

a larger, better and more

continue to optimize and

responsive service, and

profitable company than it is

grow this niche position by

quality operations, and have

today. Teekay is a highly

increasing our fleet and

frequently indicated a desire

successful operator in markets

pursuing strategic cargo

for Teekay to widen its service

that are subject to cyclical

contracts. Second, we intend

offering. On this basis, we

pressures. While overall supply

to develop further value-

intend to investigate potential

and demand fundamentals

new markets and industry

point to a favourable industry

segments, and will consider

outlook in the medium term,

entering those that appear

the timing of delivery of new

the most promising.

tankers and scrapping may

To assist in financing the

cause volatility in freight

implementation of Teekay’s

growth strategy, in early June

1998, the Company concluded

the public sale of 2.8 million

primary shares, raising

rates, particularly in the next

responsible for the Company’s

few years. However, we

excellent performance of the

believe this will offer growth

past year and will continue

opportunities for stronger

our drive toward achieving

companies in our industry like

the Teekay vision.

Teekay. Our challenge will be

to identify the right strategic

mix in response.

On behalf of the Board,

I would like to express our

thanks to the management

team and all Teekay

Bjorn Moller

President and

Chief Executive Officer

employees. Your efforts are

June 8, 1998

M a r k e t U p d a t e
A review of tanker supply and demand

Finely balanced

supply and demand

During 1997, an increase in

Tanker Demand

consumption and forecasts

associated longer average

Arabian Gulf OPEC production,

Tanker demand is expressed in

growth of 2.0 percent for 1998.

voyage length for oil tankers.

combined with a stable world

“ton-miles” and is measured

The location of oil supply

For example, approximately

tanker fleet size, caused crude

as the product of the amount

relative to major discharge

13 million dwt. of tanker ton-

oil tanker freight rates to rise.

of oil transported in tankers,

points affects average tanker

nage is required to ship one

This is evidenced by the

multiplied by the distance over

voyage length. From 1993

million barrels per day from

average world Aframax TCE

which this oil is transported.

through 1996, much of the

the Arabian Gulf to the United

(Time Charter Equivalent)

In recent years, two

world’s increased oil supply

States, compared to approx-

rates which rose to $21,258

trends in the world oil market

came from the North Sea and

imately 5 million dwt. to ship

per day in 1997 from $17,231

have had a strong impact on

Caribbean regions. In 1997,

the same volume from the

per day in 1996, an increase

the tanker market: the overall

however, Arabian Gulf OPEC

North Sea to the United States.

of 23.4 percent. As well,

growth in oil demand and an

oil provided most of the 3.6

The recent trend toward

average VLCC (Very Large

increase in average voyage

percent increase in world

an increased share of world

Crude Carrier) rates increased

length. According to the

supply. Arabian Gulf OPEC

oil supply originating from

to $35,577 per day in 1997

International Energy Agency

supply grew by 6.6 percent

Arabian Gulf OPEC producers

from $27,093 per day in 1996,

(IEA), between 1993 and

in 1997, while there was

has had a positive effect on

an increase of 31.3 percent.

1997, world oil consumption

virtually no change in North

tanker demand.

grew at a compounded

Sea supply.

annual rate of 2.2 percent. In

Incremental supply from

Tanker Supply

1997, the IEA reported a 2.9

the Arabian Gulf creates a more

The supply of tankers is

percent increase in world oil

significant increase in demand

conditioned by new vessel

for tanker services than

deliveries and the scrapping,

CONTINUED RISE IN AFRAMAX TCE RATES
CONTINUED RISE IN AFRAMAX TCE RATES
US $/day

incremental supply from the

conversion and loss of

25,000

20,000

15,000

North Sea and the Caribbean,

tonnage. Since 1993, the

because of the greater dis-

world tanker fleet has been

tance from the Arabian Gulf

relatively stable at approx-

to discharge points and the

imately 300 million dwt.

9090

9191

9292

9393
Calendar Year

9494

9595

9696

9797

10,000

Information based on industry data

GROWTH IN OIL DEMAND
GROWTH IN OIL DEMAND

million b/d

8787

8888

8989

9090

9191

9292

9393

9494

9595

9696

9797

Calendar Year

Source: IEA, PIRA Energy Group

Scrapping generally

also adversely affect the

involves older tankers; in 1997,

economics of operating

the average age of Aframax

older vessels. In addition,

tankers scrapped was approx-

the International Maritime

imately 23 years. Currently,

Organization (IMO) regulations

approximately 39 percent of

impose certain restrictions

the vessels in the world’s

on vessels trading beyond

tanker fleet are 20 years of

25 years of age.

age or older.

Recently, there has been

INCREMENTAL CHANGE IN OIL SUPPLY
INCREMENTAL CHANGE IN OIL SUPPLY

barrels/day (thousands)

1,600

1,200

800

400

9191

9292

9393

9494
Calendar Year

9595

9696

9797

-400

Arabian Gulf OPEC

North Sea

A number of factors

an increase in newbuilding

TTANKER SUPPLY

EMAND BALANCE
ANKER SUPPLY//DDEMAND BALANCE

millions of dwt.

affect the decision to scrap.

orders due to the favourable

Aging vessels typically require

charter rate environment and

substantial repairs and

in anticipation of increased

maintenance to conform to

scrapping. At March 31, 1997,

industry standards, including

the newbuilding orderbook

repairs often associated with

held orders for 26.0 million

Special Surveys. Vessels must

dwt., equivalent to 8.7 percent

be certified to be “in-class” in

of the then existing fleet. One

order to continue to trade. As

year later, at March 31, 1998,

the age of a vessel increases,

the newbuilding orderbook

the costs of maintaining it in-

held orders for 45.7 million

class rise considerably, so that

dwt., equivalent to 15.3

it may become more econo-

percent of the existing fleet.

320

240

160

8787

8888

8989

9090

9191

9292

9393

9494

9595

9696

9797

Calendar Year

Supply

Demand

Information based on industry data

DEVELOPMENT OF TANKER SUPPLY
DEVELOPMENT OF TANKER SUPPLY
Fleet Size
millions of dwt.

Deliveries & Scrappings
millions of dwt.

320

305

290

275

-10

260

8888

8989

9090

9191

9292

9393

9494

9595

9696

9797

-20

Calendar Year

mical to scrap an older vessel

Even with these new orders,

Delivered

Scrapped

Fleet Size

Information based on industry data

than to continue to operate it.

the orderbook represents a

The increased demand for

significantly smaller

safety and reliability asso-

percentage of the fleet than

ciated with modern vessels, as

vessels 20 years and older, at

well as the higher rates and

39 percent, which are likely

operating cost efficiencies

to be scrapped within the next

available to newer vessels

several years.

GING FLEET
ORDERBOOK vs. AGING FLEET
ORDERBOOK vs. A

millions of dwt.

120

PHASE OUT OF
PHASE OUT OF
70s TANKERS
MID-MID-70s TANKERS

millions of dwt.

7777

8787

8888

8989

9090

9191

9292

9393
9494
Calendar Year

9595

9696

9797

MarMar
9898

7711

7272

7474

7373
7676
Calendar Year

7575

Vessels 20 years and older

Orderbook

Information based on industry data

Currently Trading

Scrapped to Date

Information based on industry data

F l e e t P r o f i l e a n d M a p o f Te e k a y O p e r a t i o n s
As at May 31, 1998

Onomichi Class – 15 Ships

Imabari Class – 10 Ships

dwt.

Year Built

dwt.

Year Built

Hamane Spirit DH*

Poul Spirit DH

Torben Spirit DH

Leyte Spirit DH

Luzon Spirit DH

Mayon Spirit DH

Samar Spirit DH

Palmstar Lotus

Palmstar Thistle

Teekay Spirit

Onozo Spirit

Palmstar Cherry

Palmstar Poppy

Palmstar Rose

Palmstar Orchid

105,300

98,600

100,200

1997

Nassau Spirit DH

107,000

1995

Senang Spirit DH

1994

Sebarok Spirit DH

1992

Seraya Spirit DS**

1992

Sentosa Spirit DS

1992

Alliance Spirit DS

1992

Seletar Spirit DS

1991

Semakau Spirit DS

1991

Singapore Spirit DS

1991

Sudong Spirit DS

1990

95,700

97,300

1998

1994

1993

1992

1989

1988

1987

1990

Oil/Bulk/Ore (OBO) Carriers – 2 Ships

1990

Victoria Spirit DH

1989

Vancouver Spirit DH

103,200

1993

1992

Hyundai Class – 6 Ships

Magellan Spirit DS

dwt.

Year Built

dwt.

Year Built

Shilla Spirit

Ulsan Spirit

Dampier Spirit (FSO†)

Namsan Spirit

Pacific Spirit

Pioneer Spirit

Other Aframax – 9 Ships

Seabridge (1)

Kyushu Spirit DS

Seamaster (1)

Torres Spirit

Koyagi Spirit

Hakuyou Maru (1)

106,700

105,200

95,600

101,000

96,000

93,000

1990

Palm Monarch

1990

Mendana Spirit

1988

Other Size Tankers – 4 Ships

1988

Musashi Spirit

1988

Palmerston DB***

Barrington DH

Scotland DS

1996

95,000

89,900

81,700

280,700

36,700

33,300

40,800

1985

1981

1980

1993

1990

1989

1982

1991

Total Tonnage:

4,576,200

113,000

1999

1990

Newbuilding DH

1989

Newbuilding DH

1987

(1) Time-chartered-in

* DH – Double-hull tanker

** DS – Double-sided tanker

***DB – Double bottomed tanker

† Floating storage and off-take unit

Teekay Offices

Nassau:

Headquarters

Administration

London:

Chartering

Glasgow:

Crewing

Singapore: Chartering

Operations

Technical

Quality Control

Manila:

Crewing

Tokyo:

Chartering

Technical

Purchasing

Quality Control

Sydney:

Operations

Crewing

Quality Control

Technical

Vancouver: Chartering

Operations

Crewing

Purchasing

Risk Management

Quality Control

Financial

Information Systems

Deployment of the Teekay fleet, March 26, 1998

C o r e I d e o l o g y

Making Teekay

the First Choice

Core Purpose

To be the first choice of our customers in the shipping industry; and to uphold the

Teekay Standard as a respected symbol of quality. In fulfilling this purpose, we will

create enduring value for our shareholders.

Core Values

• Professionalism, reliability and integrity • Safety, quality and pollution prevention

• Responsiveness and creativity towards customers’ needs • Loyalty to employees

• Competitive and entrepreneurial spirit • Continuous self-improvement

Over the past year, we devoted

As part of our vision

considerable effort to building

building process, we have also

our vision of Teekay’s future.

renewed our commitment

During the process, we revisited

to continuous improvement.

the Company’s core purpose

Throughout the Company,

and core values and have

cross-functional task forces

integrated these key elements

are evaluating the way

into our growth strategy.

we work. This will ensure

Our strategy focuses

that a culture of continuous

on the core capabilities that

improvement supports

make Teekay a preferred

Teekay’s future growth.

supplier for many of the

world’s largest oil companies

and a respected symbol

of quality throughout the

industry. We plan to leverage

off our strengths to pursue

opportunities for growth.

Strategic
planning
teams are
moving the
Company
forward.

Strategic planning

team meeting, Vancouver,

May 22, 1998

O p e r a t i o n s R e v i e w

The First Choice for

responsive, flexible service

Innovative Solutions

each voyage to meet our

These contracts are

to Customer Needs

customers’ specific require-

tailored to suit the individual

Timely, responsive and

ments. Our modern, homo-

needs of the customer. For

flexible service has long been

genous fleet gives us the

example, the freight rate can

a hallmark of Teekay. The

ability to substitute certain

be fixed in advance for the

Company operates chartering

ships to increase scheduling

duration of the agreement or,

offices in London, Vancouver,

flexibility. Our operational

under some circumstances, it

Tokyo and Singapore so

expertise enables us to

can be variable; the cargo

that customers are assured

optimize cargo stowage plans,

volume can range from a full

of a quick response, around

to deliver the most efficient

ship to a single tank; the

the clock.

and cost-effective solutions

load and discharge ports can

Teekay is committed to

for our customers.

specify individual berths

providing superior customer

or may cover a diverse geo-

support. We take an inno-

Contracts of

graphical range. In some

vative approach, guided by

Affreightment

instances, depending on

a “can do” spirit, to arrange

Teekay’s proven performance

scheduling and the customer’s

and professionalism support

needs, the same vessel may

long-term relationships

perform a series of consecutive

with quality-conscious

voyages.

customers. A growing number

of these customers entrust a

significant volume of their

transportation requirements

to the Company on the basis

of contracts of affreightment.

Teekay’s stringent

quality requirements and

superior vessel specifications

are key factors in establishing

and maintaining on-going

charter arrangements with

the major oil companies and

oil traders that represent our

customer base. Long-term

agreements provide customers

with a secure supply of

reliable transportation, and

provide Teekay with a stable

revenue base and increased

utilization rates. The mutual

benefits of such arrangements

ensure that this is an area of

the Company’s business that

is likely to continue to grow.

The First Choice for

quality operations

O p e r a t i o n s R e v i e w c o n t i n u e d

The First Choice for

safety and

reliability

The First Choice for

value-added solutions

As we pursue new growth

going and shore employees.

regulations of the Govern-

industry issues such as oil spill

opportunities, Teekay’s

Teekay’s Australian office

ment of Western Australia’s

response preparedness.

industry expertise and

will manage CAPPL’s tanker

Department of Minerals and

The Company was the first

reputation for safety and

operation and provide full

Energy (DME).

independent tanker operator

quality represent strong

in-house ship management of

to conduct a simulated oil spill

competitive advantages. In

four vessels for up to 13 years.

Outstanding Safety

response drill in Australia.

fiscal 1998, these advantages

Systems

The exercise took place in

led to some important

Offshore Services

Teekay has traditionally taken

March 1998, in Botany Bay,

strategic developments.

A number of Teekay’s core

a proactive approach to

near Sydney Harbour.

strengths came into play in

safety that extends beyond

The management of

Strong Ship

another oil company’s

regulatory compliance. The

the Australian tankers and

Management

decision to work with the

Company has developed a

the FSO operation represent

Teekay is well known

Company to assist in the

complete Safety Management

significant achievements for

throughout the industry for

development of an Australian

System that integrates

Teekay. These activities point

its efficient, cost-effective

offshore oil field. Apache

rigorous safety procedures

to the Company’s growing

ship management and main-

Energy chose Teekay to supply

and practices into every

role as a partner to major

tenance practices. Those

and convert an Aframax tanker

aspect of vessel operations.

oil companies in providing

strengths, combined with

for use as a floating storage

In addition to main-

value-added shipping and

knowledge and experience

and off-take (FSO) unit at the

taining the highest standards

offshore services.

gained in trading along the

Stag Field location and to

of safety in its vessel opera-

Australian coast were critical

manage its operation on an

tions, Teekay regularly tackles

factors in reaching agreement

on-going basis. The Company’s

with Caltex Australian

ability to provide a cost-

Petroleum Pty. Ltd. (CAPPL,

effective solution and compre-

formerly APPL), to acquire

hensive safety systems,

and manage their marine

combined with the expansion

operations.

of Teekay’s Australian

The Company substan-

operations, were key deciding

tially increased its presence in

factors for this project.

Australia with this acquisition,

Following a successful, on-

which included two product

time, on-budget conversion,

tankers and a staff of 156 sea-

the FSO Dampier Spirit is now

on station, operating under

the strict offshore safety

O p e r a t i o n s R e v i e w c o n t i n u e d

The First Choice for

shareholder value

In fiscal 1998,Teekay continued

Resources to

Financial Strategy

to combine high vessel utiliza-

Grow and Prosper

From 1987 to 1993, Teekay

tion with cost advantages

The Company has successfully

substantially expanded

to produce premium operating

built the resources to support

and upgraded its fleet. Our

performance, with cash flow

further growth which is

investment in a modern,

per ship per day at $12,664

expected to increase share-

uniform fleet represents

and net income at $70.5 million,

holder value. Over the past

one of the Company’s core

the highest since fiscal 1992.

six years, we have worked

strengths and has enabled us

aggressively to restructure

to take advantage of econo-

and strengthen our financial

mies of scale and keep close

position. As a result, Teekay

control of ship operating and

has the financial strength and

maintenance costs. Most

flexibility required to take

importantly, this investment

advantage of growth

has allowed us to acquire new

opportunities such as the

tonnage opportunistically,

acquisition and expansion

rather than being compelled

activities of the past year.

to modernize an aging fleet.

For the past five years

the Company’s financial

strategy has been directed

have resulted in a number of

toward reducing the debt

long-term contracts of up to

incurred from 1989 to 1993.

13 years at profitable rates,

At March 31, 1998, total

providing a stable revenue

debt minus cash stood at

base.

$610 million from a high of

For the future, we will

$933 million at January 1993,

continue to expand our

and the ratio of net debt to

business by pursuing the three

capitalization was 47 percent.

strategies for growth that we

In the future, Teekay’s

identified through our vision

cashflow will be available to

building process: i.e., growing

take advantage of growth

our niche position in the Indo-

opportunities. In addition,

Pacific Basin, providing value-

in early June 1998, the

added service solutions to our

Company concluded the sale

customers, and applying our

of 2.8 million primary shares,

strengths in new geographical

raising approximately

and industry segments.

$69 million, resulting in an

The Company is in a

even stronger equity base

strong financial position and

for financing the Company’s

we are striving to maintain

future growth.

our financial flexibility by

ensuring access to equity

Capitalizing on

capital markets and public

A Unique Industry

debt markets. With this

Position

flexibility in combination with

Teekay’s dedication to quality,

our strong core capabilities,

efficiency and safety is

Teekay is well prepared to

yielding positive returns.

grow and prosper.

Projects initiated in fiscal

1998, such as the tanker fleet

acquisition and floating

storage facility in Australia,

Teekay’s dedication
to quality, efficiency
and safety is yielding
positive returns.

O p e r a t i o n s R e v i e w c o n t i n u e d

OPERATING CASH
OPERATING CASH
FLOW PER SHIP DAY
FLOW PER SHIP DAY
$ thousands
14

9393

9494

9595

9696

9797

Calendar Year

Teekay Shipping

Other bulk shipping
companies*

*Weighted average of BEA, BSH, LOFS, OMI, OSG

REVENUE
REVENUE

.
.

6
0
2 4
2
2
2
8
8
3
3

.
.

3
3
6
6
3
3
3
3

7
7

.
.

7
7
1
1
3
3

.
.

0
0
0
0
2
2
3
3

$ millions
450

375

300

225

150

94*
94*

9595

9696
9797
Fiscal Year

9898

*11 month period ending March 31,
1994

LEVERAGE(1)(1)
LEVERAGE

9
9
.
.
5
5
6
6

3
3
.
.
3
3
6
6

1
1
.
.
1
1
5
5

0
0
.
.
8
8
4
4

9
.
6
4

9494

9595

9696
9797
Fiscal Year

9898

(1)Net debt/capitalization

CAPITAL
CAPITAL
EXPENDITURES
EXPENDITURES

$ millions
240

200

160

120

94*94*

9595

9696
9797
Fiscal Year

9898

*11 month period ending March 31,
1994

Vessel and equipment, gross

Drydocking

M a n a g e m e n t ’s D i s c u s s i o n & A n a l y s i s o f R e s u l t s o f O p e r a t i o n s
a n d F i n a n c i a l C o n d i t i o n

General

The Company is a leading provider of international crude oil and petroleum product transportation services to major oil companies,

major oil traders and government agencies, principally in the region from the Red Sea to the U.S. West Coast. The Company’s current

operating fleet consists of 46 vessels, including 42 Aframax oil tankers (including three vessels time-chartered-in) and Oil/Bulk/Ore

(“O/B/O”) carriers, three smaller oil tankers, and one Very Large Crude Carrier (“VLCC”), for a total cargo-carrying capacity of

approximately 4.6 million tonnes.

During fiscal 1998, approximately 66% of the Company’s net voyage revenue was derived from spot voyages. The balance

of the Company’s revenue is generated primarily by two other modes of employment: time charters, whereby vessels are chartered

to customers for a fixed period; and contracts of affreightment (“COAs”), whereby the Company carries an agreed quantity of cargo

for a customer over a specified trade route over a given period of time. In fiscal 1998, 18% of net voyage revenues was generated

by time charters and COAs priced on a spot market basis. In the aggregate, approximately 84% of the Company’s net voyage revenue

during fiscal 1998 was derived from spot voyages or time charters and COAs priced on a spot market basis, with the remaining

16% being derived from fixed-rate time-charters and COAs. This dependence on the spot market, which is within industry norms,

contributes to the volatility of the Company’s 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 markets have historically exhibited seasonal variations

in charter rates. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern

hemisphere and unpredictable weather patterns which tend to disrupt vessel scheduling.

In December 1997, the Company acquired two vessels and related shore support services from an Australian affiliate of

Caltex Petroleum. These two tankers, together with one of the Company’s existing Aframax tankers, have been time chartered to the

Caltex affiliate in connection with the Company’s provision of Caltex’s oil transportation requirements formerly provided by that affiliate.

The Company has converted one of its existing vessels to a floating storage and off-take unit, which is sharing crews with the vessels

employed in the Caltex arrangement (together with the other three vessels involved in this arrangement, the “Australian Vessels”). Vessel

operating expenses for the Australian Vessels are substantially higher than those for the rest of the Company’s fleet, primarily as a

result of higher costs associated with employing an Australian crew.The time-charter rates for the Australian Vessels are correspondingly

higher to compensate for these increased costs. During fiscal 1998, the Australian Vessels earned net voyage revenues and an average

TCE rate (as defined below) of $8.4 million and $25,347, respectively, and incurred vessel operating expenses of $3.2 million,

or $10,276 on a per ship per day basis. The results of the Australian Vessels are included in the Company’s consolidated financial

statements included herein.

Results of Operations

Bulk shipping industry freight rates are commonly measured at the net voyage revenue level in terms of “time charter equivalent”

(or “TCE”) rates, defined as voyage revenues less voyage expenses (excluding commissions), divided by voyage ship-days for the

round-trip voyage. Voyage revenues and voyage expenses are a function of the type of charter, either spot charter or time charter,

and port, canal and fuel costs depending on the trade route upon which a vessel is sailing, in addition to being a function of the

level of shipping freight rates. For this reason, 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. Therefore, the

discussion of revenue below focuses on net voyage revenue and TCE rates.

M a n a g e m e n t ’s D i s c u s s i o n & A n a l y s i s o f R e s u l t s o f O p e r a t i o n s
a n d F i n a n c i a l C o n d i t i o n c o n t i n u e d

Fiscal 1998, Fiscal 1997, and Fiscal 1996

Operating results for the past three years reflect the improvement in average TCE rates experienced by the Company’s fleet during this

period, as well as the increase in the size of the Company fleet. The Company sold a total of seven of its older Aframax tankers during

the three fiscal years ended March 31, 1998, and acquired a total of twelve newer Aframax tankers (including two time-chartered-in vessels)

and two modern product tankers during the same period. The Company’s average fleet size increased by two vessels, or 4.9%, in fiscal

1998 compared to fiscal 1997, following an earlier increase of two vessels, or 4.6%, in fiscal 1997 compared to fiscal 1996.

Net voyage revenues increased 8.9% to $305.3 million in fiscal 1998 from $280.2 million in fiscal 1997, and increased

14.0% in fiscal 1997 from $245.7 million in fiscal 1996, reflecting a combination of improvement in TCE rates and an increase in the

Company’s fleet size. The Company’s average TCE rate in fiscal 1998, excluding the Australian Vessels, was up 5.0% to $21,373 from

$20,356 in fiscal 1997, and up 10.4% in fiscal 1997 from $18,438 in fiscal 1996, in part due to lower bunker fuel prices.

In spite of the increase in fleet size, vessel operating expenses decreased 2.9% to $70.5 million in fiscal 1998 from

$72.6 million in fiscal 1997, primarily as a result of a reduction in insurance premiums as well as more favorable foreign exchange

rates between the U.S. Dollar and certain Asian currencies, particularly the Japanese Yen and the Korean Won, for spare parts and

supplies purchased during the latter half of fiscal 1998. In fiscal 1997, vessel operating expenses increased 7.0%, from $67.8 million

in fiscal 1996, primarily as a result of the increase in the size of the Company’s owned fleet. As a result of a more competitive market

for qualified sea-going personnel, adjustments were made to crew wage rates and salaries effective April 1, 1998, which will increase

vessel operating expenses by approximately $300 per ship per day, or $4.3 million per year in aggregate, commencing in fiscal 1999.

Time-charter hire expense was $10.6 million in fiscal 1998, up from $3.5 million in fiscal 1997 and $2.5 million in fiscal

1996, as a result of two vessels time-chartered-in by the Company during fiscal 1998 as compared to only one vessel time-chartered-

in during the latter part of fiscal 1996 and part of fiscal 1997.

Depreciation and amortization expense increased by 4.6% to $94.9 million in fiscal 1998 from $90.7 million in fiscal 1997, and

increased by 10.1% in fiscal 1997 from $82.4 million in fiscal 1996, as a result of the increase in the average size of the Company’s owned

fleet, an increase in the average cost base of the fleet resulting from the replacement of some of the Company’s older vessels with newer

vessels, and a larger than usual number of scheduled drydockings during the past two fiscal years. Depreciation and amortization expense

included amortization of drydocking costs of $11.7 million, $10.9 million, and $8.6 million in fiscal years 1998, 1997, and 1996, respectively.

General and administrative expenses rose 12.1% to $21.5 million in fiscal 1998 from $19.2 million in fiscal 1997, and

increased 14.7% in fiscal 1997 from $16.8 million in fiscal 1996, primarily as a result of the cost of compliance with increasingly

stringent tanker industry regulations, increases in senior management compensation, and the start-up cost and additional ongoing

personnel and facility costs associated with expanding the Company’s Australian office in December 1997. Management anticipates

hiring additional senior management and staff personnel in connection with the further expansion of the Company’s operations.

Income from vessel operations increased 14.2% to $107.6 million in fiscal 1998 from $94.3 million in fiscal 1997, and

increased 23.6% in fiscal 1997 from $76.3 million in fiscal 1996, due to improved TCE rates and relatively stable costs.

Interest expense decreased by 7.4% to $56.3 million in fiscal 1998 from $60.8 million in fiscal 1997, following a 3.3%

decrease in fiscal 1997 from $62.9 million in fiscal 1996, reflecting the reduction in the Company’s average debt balance and a

lower average interest rate on debt borrowings, in each case compared to the prior fiscal year. In June 1998, the Company concluded

the public offering of 2.8 million shares of its Common Stock. The Company anticipates using the net proceeds of approximately

$69 million from the offering, together with other funds, to redeem its 9 5⁄8% First Preferred Ship Mortgage Notes due 2003. Interest

income of $7.9 million in fiscal 1998, $6.4 million in fiscal 1997, and $6.5 million in fiscal 1996, largely reflected increasing cash

balances, offset in fiscal 1997 by lower interest rates.

Other income of $11.2 million in fiscal 1998 consisted primarily of $14.4 million in gains on the sale of three vessels,

offset partially by $3.5 million in losses related to the prepayment of debt. Other income of $2.8 million in fiscal 1997 and $9.2 million

in fiscal 1996 consisted primarily of gains on the sale of vessels.

As a result of the foregoing factors, the Company’s net income was $70.5 million in fiscal 1998, which included

$14.4 million in gains on asset sales. In comparison, the Company’s net income was $42.6 million in fiscal 1997, which included

$2.7 million in gains on assets sales, and $29.1 million in fiscal 1996, which included $8.8 million in gains on asset sales.

The following table illustrates the relationship between fleet size (measured in ship-days), TCE performance, and operating

results per calendar ship-day. To facilitate comparison to the prior years’ results, the figures in the table below exclude the results

from the Company’s Australian Vessels.

Average number of ships

Total calendar ship-days

Voyage days (A)

Net voyage revenue before commissions (B) (000s)

TCE (B/A)

Operating results per calendar ship-day:

Net voyage revenue

Vessel operating expense

General and administrative expense

Drydocking expense

Year Ended
March 31, 1998

Year Ended
March 31, 1997

Year Ended
March 31, 1996

15,341

14,229

$ 304,115

21,373

19,358

4,554

1,375

765

14,937

14,071

286,429

20,356

18,760

4,922

1,286

733

14,310

13,612

250,981

18,438

17,173

4,787

1,171

602

Operating cash flow per calendar ship-day

12,664

11,819

10,613

Liquidity and Capital Resources

The Company’s total liquidity, including cash, marketable securities and undrawn long-term lines of credit, was $186.3 million as at

March 31, 1998, down from $258.6 million as at March 31, 1997, and $197.3 million as at March 31, 1996. The Company’s total

liquidity had been increasing as a result of internally generated cash and debt refinancings, but declined during the fourth quarter of

fiscal 1998 due to the purchase of two vessels which were paid for using existing cash balances and the Revolver (as defined below).

Net cash flow from operating activities was $161.1 million in fiscal 1998, compared to $139.2 million and $98.4 million in fiscal

years 1997 and 1996, respectively, reflecting an improvement in tanker charter market conditions accompanied by a relatively stable

cost environment, the increase in the size of the Company’s fleet, and a reduction in interest expense.

In January 1998, the Company replaced its existing revolving credit facility with a new revolving credit facility (the

“Revolver”) providing for borrowings of up to $200.0 million. The amount available under the Revolver reduces by $10.0 million

semi-annually commencing in July 1999, with a final balloon reduction in January 2006. Interest payments are based on LIBOR plus

a margin depending on the financial leverage of the Company; at March 31, 1998 the margin was +0.50%.

Scheduled debt repayments were $33.9 million during fiscal 1998, compared to $16.0 million in fiscal 1997 and

$57.9 million in fiscal 1996. In addition to scheduled debt repayments, the Company prepaid long-term debt of $150.7 million in

M a n a g e m e n t ’s D i s c u s s i o n & A n a l y s i s o f R e s u l t s o f O p e r a t i o n s
a n d F i n a n c i a l C o n d i t i o n c o n t i n u e d

fiscal 1998, primarily representing prepayments out of the proceeds of the Revolver and repurchases of $26.3 million of its

9 5⁄8% First Preferred Ship Mortgage Notes due 2003.

Dividends declared during fiscal 1998 were $24.6 million, or $0.86 per share, of which $16.0 million was paid in cash and

$8.6 million was paid in the form of shares of Common Stock issued under the Company’s dividend reinvestment plan.

Three vessels were sold in fiscal 1998, resulting in net proceeds of $33.9 million. Subsequent to March 31, 1998, the

Company sold an additional vessel for net proceeds of approximately $10.5 million. In fiscal 1997, the Company sold its interest in a

50%-owned vessel, resulting in net proceeds of $6.4 million which the Company received in the early part of fiscal 1998.

During fiscal 1998, the Company incurred capital expenditures for vessels and equipment of $197.2 million, primarily

as a result of taking delivery of two newbuilding double-hull Aframax tankers, two modern second-hand Aframax tankers, and two

modern second-hand product tankers. Capital expenditures for drydocking were $18.4 million in fiscal 1998, $16.6 million in fiscal

1997, and $7.4 million in fiscal 1996, reflecting a larger than usual number of scheduled drydockings during the last two fiscal years.

Subsequent to March 31, 1998, the Company entered into an agreement for the construction of two newbuilding double-hull

Aframax tankers, with deliveries scheduled for July and September 1999, with the option to purchase further newbuildings under

similar terms. The agreement is subject to certain conditions that must be satisfied by the tankers’ builder. The estimated delivered

price for each vessel, including all related charges, is approximately $38.0 million. The Company intends to pay for these purchases

by using existing cash balances, borrowings under the Revolver or other debt financing.

As part of its growth strategy, the Company will continue to consider strategic opportunities, including the acquisition

of additional vessels and the expansion into new markets. The Company may choose to pursue such opportunities through internal

growth, joint ventures, or business acquisitions. The Company intends to finance any future acquisitions through various sources of

capital, including internally generated cash flow, existing credit lines, additional debt borrowings, and the issuance of additional

shares of capital stock.

Year 2000 Compliance

The Company relies on computer systems and software to operate its business, including applications used in chartering, shipping,

communications, finance and various administrative functions. To the extent that the Company’s software applications contain

source code that is unable to appropriately interpret the calendar year 2000 and subsequent years, some level of modification for

replacement of such applications will be necessary. The Company is reviewing all of its systems in order to verify that they are “Year

2000 compliant” and believes, with limited exceptions, that they will require only minor modification. Accordingly, management does

not expect Year 2000 compliance costs to have a material adverse effect on the Company. No assurance can be given, however, that

all of the Company’s systems will be Year 2000 compliant or that compliance costs or the impact of any failure by the Company

to achieve full Year 2000 compliance will not have a material adverse effect on the Company. In addition, the Company could be

adversely affected by the failure of one or more of its customers, lenders, suppliers or other organizations with which it conducts

business to become fully Year 2000 compliant.

Forward-Looking Statements

The Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 1998 and this Annual Report to Shareholders for

1998 contain 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 the Company’s operations,

performance and financial condition, including, in particular, statements regarding: tanker supply and demand; the Company’s

market share in the Indo-Pacific Basin; future capital expenditures, including expenditures for newbuilding vessels; the Company’s

growth strategy and measures to implement such strategy; the Company’s competitive strengths; and future success of the Company.

These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are

inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual

results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual

results to differ materially include, but are not limited to: the cyclical nature of the tanker industry and its dependence on oil markets;

the supply of tankers available to meet the demand for transportation of petroleum products; scrapping dynamics and rates; the

Company’s dependence on spot oil voyages; competitive factors in the markets in which the Company operates; environmental

and other regulation; the Company’s potential inability to achieve and manage growth; risks associated with operations outside

the United States; and other factors detailed from time to time in the Company’s periodic reports filed with the U.S. Securities and

Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions

to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or

any change in events, conditions or circumstances on which any such statement is based.

A u d i t o r s ’ R e p o r t

To the Shareholders of Teekay Shipping Corporation

We have audited the accompanying consolidated balance sheets of Teekay Shipping Corporation and subsidiaries as of March 31,

1998 and 1997, and the related consolidated statements of income and retained earnings and cash flows for each of the three

years in the period ended March 31, 1998. These financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well

as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial

position of Teekay Shipping Corporation and subsidiaries as at March 31, 1998 and 1997, and the consolidated results of their

operations and their cash flows for each of the three years in the period ended March 31, 1998, in conformity with accounting

principles generally accepted in the United States.

Nassau, Bahamas

May 15, 1998

Chartered Accountants

C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e a n d R e t a i n e d E a r n i n g s
(in thousands of U.S. dollars, except per share amounts)

Net Voyage Revenues

Voyage revenues

Voyage expenses

Net voyage revenues

Operating Expenses

Vessel operating expenses

Time charter hire expense

Depreciation and amortization

General and administrative

Income from vessel operations

Other Items

Interest expense

Interest income

Other income (note 10)

Net Income

Retained earnings, beginning of the year

Year Ended
March 31, 1998

Year Ended
March 31, 1997

Year Ended
March 31, 1996

$ 406,036

382,249

336,320

100,776

102,037

90,575

$ 305,260

280,212

245,745

70,510

72,586

67,841

10,627

94,941

21,542

3,461

90,698

19,209

2,503

82,372

16,750

$ 197,620

$ 107,640

185,954

94,258

169,466

76,279

(56,269)

(60,810)

(62,910)

7,897

11,236

(37,136)

70,504

382,178

6,358

2,824

6,471

9,230

(51,628)

42,630

363,690

(47,209)

29,070

406,547

$ 452,682

406,320

435,617

Exchange of redeemable preferred stock (note 8)

Dividends declared and paid

(24,580)

(24,142)

(60,000)

(11,927)

Retained earnings, end of the year

$ 428,102

382,178

363,690

Earnings per common share (notes 1 and 8)

– basic

– diluted

2.46

2.44

1.52

1.50

1.17

The accompanying notes are an integral part of the consolidated financial statements.

C o n s o l i d a t e d B a l a n c e S h e e t s
(in thousands of U.S. dollars)

Assets

Current

Cash and cash equivalents

Marketable securities (note 3)

Accounts receivable

– trade

– other

Prepaid expenses and other assets

Total current assets

Marketable securities (note 3)

Vessels and equipment (notes 1, 5 and 9)

At cost, less accumulated depreciation of $500,779

(1997 – $457,779)

Advances on vessels

Total vessels and equipment

Investment

Other assets

Liabilities and Stockholders’ Equity

Current

Accounts payable

Accrued liabilities (note 4)

Current portion of long-term debt (note 5)

Total current liabilities

Long-term debt (note 5)

Total liabilities

Stockholders’ equity

Capital stock (note 8)

Retained earnings

Total stockholders’ equity

Commitments and contingencies (notes 5, 6 and 9)

The accompanying notes are an integral part of the consolidated financial statements.

As at
March 31, 1998

As at
March 31, 1997

87,953

117,523

13,448

23,092

1,235

13,786

25,745

1,066

14,666

139,514

159,000

13,853

$ 1,297,883

$ 1,187,399

8,938

$ 1,297,883

$ 1,196,337

8,933

6,335

11,166

$ 1,460,183

$ 1,372,838

16,164

16,315

29,195

52,932

98,291

672,437

770,728

26,982

36,283

79,580

663,443

743,023

261,353

247,637

428,102

382,178

689,455

629,815

$ 1,460,183

$ 1,372,838

C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w s
(in thousands of U.S. dollars)

Cash and cash equivalents provided by (used for)

Operating Activities

Net income

Add (deduct) charges to operations not requiring

a payment of cash and cash equivalents:

Depreciation and amortization

Gain on disposition of assets

Loss on repurchase of 9 5⁄8% Notes

Equity income (net of dividend received:

March 31, 1997 – $282)

Other – net

Change in non-cash working capital items related to

Year Ended
March 31, 1998

Year Ended
March 31, 1997

Year Ended
March 31, 1996

70,504

42,630

29,070

94,941

(14,392)

2,175

(45)

2,735

90,698

82,372

(8,784)

(2,414)

2,785

(1,139)

2,452

operating activities (note 11)

5,201

5,459

(5,556)

Net cash flow from operating activities

$ 161,119

139,158

98,415

Financing Activities

Proceeds from long-term debt

$ 208,600

240,000

448,000

Scheduled repayments of long-term debt

(33,876)

(16,038)

(57,850)

Prepayments of long-term debt

(150,655)

(250,078)

(505,962)

Scheduled payments on capital lease obligations

Prepayments of capital lease obligations

Net proceeds from issuance of Common Stock

Cash dividends paid

Capitalized loan costs

5,126

(15,990)

(994)

1,283

(13,493)

(1,130)

(1,527)

(43,023)

137,872

(7,094)

(5,965)

Net cash flow from financing activities

12,211

(39,456)

(35,549)

Investing Activities

Expenditures for vessels and equipment (net of capital lease

financing of: 1998 – $NIL; 1997 – $NIL; 1996 – $44,550)

$ (197,199)

(65,104)

(79,293)

Expenditures for drydocking

Proceeds from disposition of assets

Net cash flow from investment

Proceeds on sale of available-for-sale securities

Purchases of available-for-sale securities

Other

Net cash flow from investing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the year

(18,376)

(16,559)

(2,296)

33,863

6,380

14,854

(42,154)

(268)

(7,405)

28,428

3,273

111,770

(41,993)

$ (202,900)

(29,570)

117,523

(83,959)

15,743

101,780

14,780

77,646

24,134

Cash and cash equivalents, end of the year

87,953

117,523

101,780

The accompanying notes are an integral part of the consolidated financial statements.

N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.

They include the accounts of Teekay Shipping Corporation (“Teekay”), which is incorporated under the laws of Liberia, and its

wholly owned or controlled subsidiaries (the “Company”). Significant intercompany items and transactions have been eliminated

upon consolidation.

The preparation of financial statements in conformity with generally accepted accounting principles requires management

to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual

results could differ from those estimates.

Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current period.

Reporting currency

The consolidated financial statements are stated in U.S. dollars because the Company operates in international shipping markets

which utilize the U.S. dollar as the functional currency.

Investment

The Company’s 50% interest in Viking Consolidated Shipping Corp. (“VCSC”) is carried at the Company’s original cost plus its

proportionate share of the undistributed net income. On March 12, 1997, VCSC sold its one remaining vessel and it is not anticipated

that the operating companies of VCSC will have active operations in the near future. The disposal of this vessel and the related gain

on sale has been reflected in these consolidated financial statements (see Note 10 – Other Income).

Operating revenues and expenses

Voyage revenues and expenses are recognized on the percentage of completion method of accounting. Estimated losses

on voyages are provided for in full at the time such losses become evident. The consolidated balance sheets reflect the

deferred portion of revenues and expenses applicable to subsequent periods.

Voyage expenses comprise all expenses relating to particular voyages, including bunker fuel expenses, port fees, canal

tolls, and brokerage commissions. Vessel operating expenses comprise all expenses relating to the operation of vessels, including

crewing, repairs and maintenance, insurance, stores and lubes, and miscellaneous expenses including communications.

Marketable securities

The Company’s investments in marketable securities are classified as available-for-sale securities and are carried at fair value. Net

unrealized gains or losses on available-for-sale securities, if material, are reported as a separate component of stockholders’ equity.

Vessels and equipment

All pre-delivery costs incurred during the construction of newbuildings, including interest costs, and supervision and technical costs

are capitalized. The acquisition cost and all costs incurred to restore used vessel purchases to the standard required to properly

service the Company’s customers are capitalized. Depreciation is calculated on a straight-line basis over a vessel’s useful life,

estimated by the Company to be twenty years from the date a vessel is initially placed in service.

Interest costs capitalized to vessels and equipment for the years ended March 31, 1998, 1997 and 1996 aggregated

$283,000, $232,000, and $106,000, respectively.

Expenditures incurred during drydocking are capitalized and amortized on a straight-line basis over the period until the

next anticipated drydocking. When significant drydocking expenditures recur prior to the expiry of this period, the remaining balance

of the original drydocking is expensed in the month of the subsequent drydocking. Drydocking expenses amortized for the years

ended March 31, 1998, 1997 and 1996 aggregated $11,737,000, $10,941,000, and $8,617,000 respectively.

Vessels acquired pursuant to bareboat hire purchase agreements are capitalized as capital leases and are amortized over

the estimated useful life of the acquired vessel.

Other assets

Loan costs, including fees, commissions and legal expenses, are capitalized and amortized over the term of the relevant loan.

Amortization of loan costs is included in interest expense.

Interest rate swap agreements

The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expenses.

Premiums and receipts, if any, are recognized as adjustments to interest expense over the lives of the individual contracts.

Forward contracts

The Company enters into forward contracts as a hedge against changes in foreign exchange rates. Market value gains and losses are

deferred and recognized during the period in which the hedged transaction is recorded in the accounts.

Cash flows

Cash interest paid during the years ended March 31, 1998, 1997 and 1996 totaled $55,141,000, $57,400,000, and $59,021,000,

respectively.

The Company classifies all highly liquid investments with a maturity date of three months or less when purchased as cash

and cash equivalents.

Income taxes

The legal jurisdictions of the countries in which the Company and the majority of its subsidiaries are incorporated do not impose

income taxes upon shipping-related activities.

Earnings per share

In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (“SFAS 128”),

“Earnings per share”. SFAS 128 requires dual presentation of basic earnings per share (“EPS”) and diluted EPS on the face of all

statements of earnings ending after December 15, 1997 for all entities with complex capital structures. The Company’s EPS for all

periods presented herein are in conformity with SFAS 128 (see Note 8 – Capital Stock).

Accounting for Stock-Based Compensation

Effective April 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for

Stock-Based Compensation.” SFAS 123 requires expanded disclosures of stock-based compensation arrangements with employees

and encourages (but does not require) companies 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 (“APB 25”) “Accounting for Stock Issued to Employees” and has

disclosed the required pro forma effect on net income and earnings per share as if the fair value method of accounting as prescribed

in SFAS 123 had been applied (see Note 8 – Capital Stock).

N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s c o n t i n u e d
(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Business Operations

The Company is engaged in the ocean transportation of petroleum cargoes worldwide through the ownership and operation of

a fleet of tankers. All of the Company’s revenues are earned in international markets.

A single customer, an international oil company, accounted for approximately 14% ($56,537,000) of the Company’s

consolidated voyage revenues for fiscal 1998. Another customer, also an international oil company, accounted for approximately

13% ($48,696,000), of consolidated voyage revenues for fiscal 1997. No more than one customer accounted for over 10% of

the Company’s consolidated voyage revenues in each of the last three fiscal years.

Investments in Marketable Securities

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Approximate
Market and
Carrying Value

March 31, 1998

Available-for-sale securities

27,304

(16)

27,301

The cost and approximate market value of available-for-sale securities by contractual maturity, as at March 31, 1998, are shown

Approximate Market

Cost

and Carrying Value

13,456

13,848

27,304

13,448

13,853

27,301

March 31, 1998

March 31, 1997

15,845

15,458

9,272

4,078

9,294

2,230

29,195

26,982

as follows:

Less than one year

Due after one year through five years

Accrued Liabilities

Voyage and vessel

Interest

Payroll and benefits

Long-Term Debt

March 31, 1998

March 31, 1997

Revolving Credit Facility

129,000

First Preferred Ship Mortgage Notes (8.32%)

U.S. dollar debt due through 2008

First Preferred Ship Mortgage Notes (9 5⁄8%)

U.S. dollar debt due through 2003

Floating rate (1998: LIBOR + 0.55% to 1%; 1997: LIBOR + 0.65% to 1 1⁄2%)

U.S. dollar debt due through 2009

Less current portion

225,000

123,718

151,200

247,651

323,526

725,369

699,726

52,932

36,283

672,437

663,443

In January 1998, the Company refinanced approximately $105.0 million of its floating rate debt and replaced the previous corporate

revolving credit facility with a new $200 million corporate revolving credit facility (the “Revolver”) at improved rates and credit

terms. The amount available under the Revolver reduces by $10.0 million semi-annually commencing in July 1999, with a final

balloon reduction in January 2006. Interest payments are based on LIBOR plus a margin depending on the financial leverage of the

Company; at March 31, 1998 the margin was + 0.50%. As at March 31, 1998, the undrawn amount available under the Revolver was

$71.0 million. The Revolver is collateralized by first priority mortgages granted on eight of the Company’s Aframax tankers, together

with certain other related collateral, and a guarantee from the Company for all amounts outstanding under the Revolver.

The 8.32% First Preferred Ship Mortgage Notes due February 1, 2008 (the “8.32% Notes”) are collateralized by first

preferred mortgages on seven of the Company’s Aframax tankers, together with certain other related collateral, and are guaranteed

by seven subsidiaries of Teekay that own the mortgaged vessels (the “8.32% Notes Guarantor Subsidiaries”) to a maximum of 95%

of the fair value of their net assets. As at March 31, 1998, the fair value of these net assets approximated $252.0 million. The 8.32%

Notes are also subject to a sinking fund, which will retire $45.0 million principal amount of the 8.32% Notes on each February 1,

commencing 2004.

Upon the 8.32% Notes achieving Investment Grade Status and subject to certain other conditions, the guarantees of the

8.32% Notes Guarantor Subsidiaries will terminate, all of the collateral securing the obligations of the Company and the 8.32%

Notes Guarantor Subsidiaries under the Indenture and the Security Documents will be released (whereupon the Notes will become

general unsecured obligations of the Company) and certain covenants under the Indenture will no longer be applicable to the Company.

The 9 5⁄8% First Preferred Ship Mortgage Notes due July 15, 2003 (the “9 5⁄8% Notes”) are collateralized by first preferred

mortgages on six of the Company’s Aframax tankers, together with certain other related collateral, and are guaranteed by six

subsidiaries of Teekay that own the mortgaged vessels (the “9 5⁄8% Notes Guarantor Subsidiaries”) to a maximum of 95% of the fair

value of their net assets. As at March 31, 1998, the fair value of these net assets approximated $186.0 million. The 9 5⁄8% Notes are

also subject to a sinking fund, which will retire $25.0 million principal amount of the 9 5⁄8% Notes, on each July 15, which commenced

on July 15, 1997. During fiscal 1998, the Company repurchased a principal amount of $26.3 million of the 9 5⁄8% Notes. During fiscal

1996, the Company repurchased $23.8 million of these notes, which was applied to reduce the July 15, 1997 sinking fund

requirement. The 9 5⁄8% Notes are redeemable at the option of the Company, in whole or in part, on or after July 15, 1998 at the

following redemption prices expressed as a percentage of principal:

N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s c o n t i n u e d
(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Long-Term Debt continued

July 15

1998

1999

2000

Redemption Price

104.813%

102.406%

100.000%

Upon a Change of Control each 9 5⁄8% Note holder and 8.32% Note holder has the right, unless the Company elects to redeem these

Notes, to require the Company to purchase these Notes at 101% of their principal amount plus accrued interest.

All floating rate loans are collateralized by first preferred mortgages on the vessels to which the loans relate, together with

certain other collateral, and guarantees from Teekay.

Among other matters, the long-term debt agreements generally provide for such items as maintenance of certain vessel

market value to loan ratios and minimum consolidated financial covenants, prepayment privileges (in some cases with penalties), and

restrictions against the incurrence of additional debt and new investments by the individual subsidiaries without prior lender consent.

The amount of Restricted Payments, as defined, that the Company can make, including dividends and purchases of its own capital

stock, is limited as of March 31, 1998, to $74.0 million.

As at March 31, 1998, the Company was committed to a series of interest rate swap agreements whereby $150 million of

the Company’s floating rate debt was swapped with fixed rate obligations having an average remaining term of 7.5 months. The swap

agreements expire between October 1998 and December 1998. These arrangements effectively change the Company’s interest rate

exposure on $150 million of debt from a floating LIBOR rate to an average fixed rate of 5.86%. The Company is exposed to credit loss

in the event of non-performance by the counter parties to the interest rate swap agreements; however, the Company does not

anticipate non-performance by any of the counter parties.

The aggregate annual long-term debt principal repayments required to be made for the five fiscal years subsequent to

March 31, 1998 are $52,932,000 (fiscal 1999), $53,058,000 (fiscal 2000), $53,191,000 (fiscal 2001), $62,332,000 (fiscal 2002), and

$72,199,000 (fiscal 2003).

Leases

Charters-out

Time charters to third parties of the Company’s vessels are accounted for as operating leases. The minimum future revenues to be

received on time charters currently in place are $46,222,000 (fiscal 1999) and $39,631,000 (fiscal 2000), $39,602,000 (fiscal 2001),

$39,562,000 (fiscal 2002), $39,562,000, (fiscal 2003), and $215,533,000 thereafter.

The minimum future revenues should not be construed to reflect total charter hire revenues for any of the years.

Charters-in

Minimum commitments under vessel operating leases are $19,681,000 (fiscal 1999), $9,445,000 (fiscal 2000), $6,844,000 (fiscal

2001), and $412,000 (fiscal 2002).

Fair Value of Financial Instruments

Carrying amounts of all financial instruments approximate fair market value except for the following:

Long-term debt – The fair values of the Company’s fixed rate long-term debt are based on either quoted market prices or

estimated using discounted cash flow analyses, based on rates currently available for debt with similar terms and remaining maturities.

Interest rate swap agreements – The fair value of interest rate swaps, used for hedging purposes, is the estimated amount

that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates

and the current credit worthiness of the swap counter parties.

The estimated fair value of the Company’s financial instruments is as follows:

Carrying Amount

Fair Value

Carrying Amount

Fair Value

March 31, 1998

March 31, 1997

Cash, cash equivalents and

marketable securities

115,254

117,523

Long-term debt

725,369

737,785

699,726

695,265

Interest rate swap agreements –

net receivable (payable) position

Foreign currency contracts

(176)

339

1,154

(181)

The Company transacts with investment grade rated financial institutions and requires no collateral from these institutions.

Capital Stock

Authorized

25,000,000 Preferred Stock with a par value of $1 per share

125,000,000 Common Stock with no par value

Common

Stock

Thousands

of Shares

Preferred

Stock

Thousands

of Shares

Issued and outstanding

Balance March 31, 1995

33,000

36,000

600

May 15, 1995 1-for-2 Reverse Common Stock Split

(18,000)

July 19, 1995 Initial Public Offering 6,900,000

shares at $21.50 per share of Common Stock

(net of share issue costs)

137,613

6,900

July 19, 1995 Exchange of Redeemable Preferred

Stock for 2,790,698 shares of Common Stock

60,000

Reinvested Dividends

Exercise of Stock Options

4,833

259

2,791

201

(1)

(600)

Balance March 31, 1996

235,705

27,904

Reinvested Dividends

Exercise of Stock Options

10,649

1,283

364

Balance March 31, 1997

247,637

28,328

Reinvested Dividends

Exercise of Stock Options

8,590

5,126

273

232

Balance March 31, 1998

261,353

28,833

The Company has reserved 1,844,135 shares of Common Stock for issuance upon exercise of options granted pursuant to the

Company’s 1995 Stock Option Plan (the “Plan”).

N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s c o n t i n u e d
(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

During fiscal 1998, 1997 and 1996, the Company granted options under the Plan to acquire up to 359,750, 343,250 and

796,750 shares of Common Stock (the “Grants”), respectively, to certain eligible officers, key employees (including senior sea staff), and

directors of the Company. The options have a 10-year term and follow a graded-vesting schedule. The options granted during fiscal 1998

and 1997 vest equally over four years from the date of grant. At March 31, 1998, all options granted during fiscal 1996 have vested.

A summary of the Company’s stock option activity, and related information for the years ended March 31 follows:

Fiscal 1998

Fiscal 1997

Fiscal 1996

Options Weighted-Average
Exercise Price

(’000s)

Options
(’000s)

Weighted-Average
Exercise Price

Options
(’000s)

Weighted-Average
Exercise Price

Outstanding-beginning of year

1,056

$23.40

Granted

Exercised

Forfeited

Outstanding-end of year

Exercisable at end of year

Weighted-average fair value

of options granted during

360

(232)

(23)

1,161

565

33.50

22.02

30.39

$26.66

$22.14

779

343

(60)

(6)

1,056

519

$21.50

27.38

21.50

24.00

$23.40

$21.50

797

(12)

(6)

779

383

$21.50

21.50

$21.50

the year (per option)

$8.13

$6.72

$5.16

Exercise prices for the options outstanding as of March 31, 1998 ranged from $21.50 to $33.50 and have a weighted-average

remaining contractual life of 8.10 years.

The Company applies APB 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its

employee stock options (see Note 1 – Accounting for Stock-Based Compensation). Under APB 25, because the exercise price of the Company’s

employee stock options equals the market price of underlying stock on the date of grant, no compensation expense is recognized.

Had the Company recognized compensation costs for the Grants consistent with the methods recommended by SFAS 123

(see Note 1 – Accounting for Stock-Based Compensation), the Company’s net income and earnings per share for those fiscal years

would have been stated at the pro forma amounts as follows:

Net income:

As reported

Pro forma

Basic earnings per common share:

As reported

Pro forma

Diluted earnings per common share:

As reported

Pro forma

Year Ended

March 31, 1998

Year Ended

March 31, 1997

Year Ended

March 31, 1996

70,504

42,630

29,070

69,090

40,679

26,842

2.46

2.41

2.44

2.39

1.52

1.45

1.50

1.44

1.17

1.08

1.17

1.08

Basic earnings per share is based upon the following weighted average number of common shares outstanding: 28,655,000 shares

at March 31, 1998; 28,138,000 shares at March 31, 1997; and 24,837,000 shares at March 31, 1996. Diluted earnings per share,

which gives effect to the aforementioned stock options, is based upon the following weighted average number of common shares

outstanding: 28,870,000 shares at March 31, 1998; 28,339,000 shares at March 31, 1997; and 24,902,000 shares at March 31, 1996.

The fair values of the Grants were estimated on the dates of grant using the Black-Scholes option-pricing model with

the following assumptions: risk-free average interest rates of 6.29%, 6.44%, and 6.14% for fiscal 1998, fiscal 1997 and fiscal 1996,

respectively, dividend yield of 3.0%; expected volatility of 25%; and expected lives of 5 years.

Commitments and Contingencies

As at March 31, 1998, the Company was committed to foreign exchange contracts for the forward purchase of approximately

Japanese Yen 100 million and Singapore dollars 15.9 million for U.S. dollars, at an average rate of Japanese Yen 128.3 per U.S. dollar

and Singapore dollar 1.68 per U.S. dollar, respectively, for the purpose of hedging accounts payable and accrued liabilities.

10.

Other Income

Year Ended

March 31, 1998

Year Ended

March 31, 1997

Year Ended

March 31, 1996

Gain on disposition of assets

14,392

8,784

Equity in results of 50% owned company

Write off of loan costs due to refinancing

Loss on extinguishment of debt

Miscellaneous – net

(1,308)

(2,175)

282

2,696

1,139

128

(693)

11,236

2,824

9,230

For the year ended March 31, 1997, Equity in results of the 50% owned company included a $2,732,000 gain on a vessel sale. Gross

realized gains and (losses) on sales of available-for-sale securities for the year ended March 31, 1996 aggregated $1,787,000 and

($1,732,000), respectively.

11.

Change in Non-Cash Working Capital Items Related to Operating Activities

Year Ended

March 31, 1998

Year Ended

March 31, 1997

Year Ended

March 31, 1996

Accounts receivable

2,484

(1,873)

(4,792)

Prepaid expenses and other assets

Accounts payable

Accrued liabilities

12.

Subsequent Events

880

5,814

(3,977)

665

4,554

2,113

(2,058)

281

1,013

5,201

5,459

(5,556)

In May 1998, the Company commenced an offering of up to 8,050,000 shares of Common Stock, of which 2,800,000 shares are being

offered by the Company and up to 5,250,000 shares are being offered by a selling shareholder. The net proceeds to the Company of

the offering will be used to redeem a portion of the 9 5⁄8% Notes.

Subsequent to March 31, 1998 the Company entered into an agreement (subject to certain conditions) for the construction

of two Aframax vessels for a cost of $76.0 million, scheduled for delivery in July and September of 1999.

F i v e Ye a r S u m m a r y o f F i n a n c i a l I n f o r m a t i o n
(U.S. dollars in thousands, except per share and per day data and ratios)

Income Statement Data:

Net voyage revenues

Income from vessel

operations

Net income

Per Share Data:

Earnings per share

Weighted average shares

Fiscal Year
ended March 31,
1998

Fiscal year
ended March 31,
1997

Fiscal year
ended March 31,
1996

Fiscal year
ended March 31,
1995

11 month period
ended March 31,
1994

$ 305,260

$ 280,212

$ 245,745

$ 235,009

$ 236,690

107,640

70,504

94,258

42,630

76,279

29,070

52,816

6,368

60,777

30,158

2.46

1.52

1.17

0.35

1.68

outstanding (thousands)

28,655

28,138

24,837

18,000

Balance Sheet Data (at end of period):

Total assets

$1,460,183

$1,372,838

$1,355,301

$1,306,474

$1,405,147

Total stockholders' equity

689,455

629,815

599,395

439,066

433,180

Other Financial Data:

EBITDA

$ 209,582

$ 191,632

$ 166,233

$ 146,756

$ 151,364

Net debt to capitalization (%)

46.9

48.0

51.0

63.3

65.9

Capital expenditures:

Vessel purchases, gross

$ 197,199

65,104

$ 123,843

7,465

$ 163,509

Drydocking

12,409

23,124

11,641

11,917

13,296

Fleet Data:

Average number of ships

Time-charter equivalent (TCE)

21,373

20,356

18,438

16,552

17,431

Operating cash flow

per ship per day

12,664

11,819

10,613

8,944

9,133

B o a r d o f D i r e c t o r s

Axel Karlshoej

Director and

Chairman of the Board

President of Nordic Industries

Bjorn Moller

Director, President and

Chief Executive Officer

Arthur F. Coady

Director, Executive

Vice President and

General Counsel

Michael D. Dingman

Director

Chairman and

Chief Executive Officer of

The Shipston Group Limited

Morris L. Feder

Director

President of Worldwide

Cargo Inc.

Steve G.K. Hsu

Director

Chairman of Oak Maritime

(H.K.) Inc., Limited

Thomas Kuo-Yuen Hsu

Director

Executive Director of Expedo

& Company (London) Ltd.

C o r p o r a t e I n f o r m a t i o n

Stock Transfer Agent and Registrar

Investor Relations

The Bank of New York

101 Barclay Street, 11 West

P.O. Box 11258

Church Street Station

New York, New York 10286

Tel: 1-800-524-4458

Stock Exchange Listing

New York Stock Exchange

Symbol: TK

There were 28.8 million shares outstanding

at March 31, 1998.

Share Price Information

A copy of the Company’s Annual Report on

Form 20-F is available by writing or calling:

Teekay Shipping (Canada) Ltd.

Investor Relations

1400 – 505 Burrard Street

Vancouver, B.C.

Canada V7X 1M5

Tel: (604) 844-6654

Fax: (604) 844-6619

website: www.teekay.com

Corporate Headquarters

Teekay Shipping Corporation

4th Floor, Euro Canadian Centre

The following table sets forth the New York Stock

Marlborough Street & Navy Lion Road

Exchange high and low prices of the Company’s stock

P.O. Box SS-6293

for each quarter during fiscal 1998:

Nassau

The Bahamas

Quarter ended

High

Low

Dividends Declared

June 30, 1997

$345⁄8

$28

(per share)

$0.215

September 30, 1997

$36

$3015⁄16

$0.215

December 31, 1997

March 31, 1998

$377⁄8

$339⁄16

$303⁄8

$277⁄8

$0.215

Teekay Shipping Limited

4th Floor, Euro Canadian Centre

Marlborough Street & Navy Lion Road

P.O. Box SS-6293

Nassau

The Bahamas

Teekay Shipping (Canada) Ltd.

505 Burrard Street, 14th Floor

Vancouver, B.C.

Canada V7X 1M5

Teekay Shipping (UK) Ltd.

49 St. James Street

London SW1A 1JT

United Kingdom

Teekay Shipping (Glasgow) Ltd.

183 St. Vincent Street

Glasgow G2 5QD

United Kingdom

Teekay Shipping (Singapore) Pte. Ltd.

8 Shenton Way

#44-03 Temasek Tower

Singapore 068811

Mayon Marine Management, Inc.

PVB Building, Ground Floor

Gen. Luna St. Cor., Sta. Potenciana St.

Intramuros

Manila

Philippines

Teekay Shipping (Japan) Ltd.

6F Eiyu Irifune Building

1-13 Irifune 3 - Chome, Chuo-ku

Tokyo 104

Japan

Teekay Shipping (Australia) Pty. Ltd.

Bayview Tower

Level 6

1753 – 1765 Botany Road

Banksmeadow, NSW 2019

Australia

.
c
n
I

)
r
e
v
u
o
c
n
a
V
(

s
e
i
g
e
t
a
r
t
S

l
e
l
l

a
r
a
P

y
b

d
e
c
u
d
o
r
p

d
n
a

d
e
n
g
i
s
e
D

PRINTED IN CANADA