EXHIBIT 15.2
 CONSOLIDATED BALANCE SHEET
OF
TEEKAY OFFSHORE GP L.L.C.




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TEEKAY OFFSHORE GP L.L.C.
     Vancouver, Canada
    
    /s/ Ernst & Young LLPApril 30, 2010
    
    Chartered Accountants
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TEEKAY OFFSHORE GP L.L.C. (Note 1)
 CONSOLIDATED BALANCE SHEET
 (in thousands of U.S. dollars)
 As atDecember 31, 2009$ASSETSCurrentCash and cash equivalents (note 6)
    
    
    103,363Accounts receivable
    
    
    66,976Net
investment in direct financing leases  current (note 7)
    
    
    20,641Prepaid expenses
    
    
    33,936Due from affiliates (note 9)
    
    
    17,833Current portion of derivative instruments (note 10)
    
    
    6,152Other current assets
    
    
    1,399Total current assets
    
    
    250,300Vessels and equipment(note 6 and 7)At cost, less accumulated depreciation of $993,330
    
    
    1,917,248Net investment in direct financing leases (note 7)
    
    
    35,620Derivative instruments (note 10)
    
    
    2,195Other assets
    
    
    20,226Intangible
assets  net (note 4)
    
    
    36,885Goodwill (note 4)
    
    
    127,113Total assets
    
    
    2,389,587LIABILITIES AND MEMBERS EQUITYCurrentAccounts payable
    
    
    13,989Accrued liabilities (note 5)
    
    
    59,714Due to affiliate (note 9)
    
    
    39,876Current portion of derivative instruments (note 10)
    
    
    31,852Current portion of long-term debt (note 6)
    
    
    108,159Total current liabilities
    
    
    253,590Long-term
debt  (including a loan due to parent of $60,000) (note 6)
    
    
    1,627,455Deferred income taxes (note 11)
    
    
    16,481Derivative instruments (note 10)
    
    
    38,327Other long-term liabilities
    
    
    18,439Total liabilities
    
    
    1,954,292Commitments and contingencies (notes 6, 7, 10 and 12)Total EquityMembers equity
    
    
    6,033Non-controlling interest
    
    
    429,247Accumulated other comprehensive income
    
    
    15Total equity
    
    
    435,295Total liabilities and equity
    
    
    2,389,587
 The accompanying notes are an integral part of the Consolidated Balance Sheet.
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 1.
    
    Summary of Significant Accounting Policies
 Basis of presentationTeekay Offshore GP L.L.C. (the Companyor the General Partner), a Marshall Islands limited
liability company, was formed on August 25, 2006 to become the general partner of Teekay
Offshore Partners L.P. (the Partnership). The Company is a wholly owned subsidiary of Teekay
Corporation. On August 25, 2006, Teekay Corporation contributed $1,000 to the Company in
exchange for a 100% ownership interest. The Company initially invested $20 in the Partnership
for its 2% general partner interest.During August 2006, Teekay Corporation formed the Partnership, a Marshall Islands limited
partnership, as part of its strategy to expand in the marine transportation, processing and
storage sectors of the offshore oil industry and for the Partnership to acquire, in connection
with the Partnerships initial public offering of its common units, a 26.0% interest in Teekay
Offshore Operating L.P. (or OPCO), consisting of a 25.99% limited partner interest to be held
directly by the Partnership and a 0.01% general partner interest to be held through the
Partnerships ownership of Teekay Offshore Operating GP L.L.C., OPCOs sole general partner.This consolidated balance sheet has been prepared in accordance with the United States generally
accepted accounting principles (or GAAP). It includes the accounts of the Company and Teekay
Offshore Partners L.P., a partnership that it controls via its general partner interest.
Significant intercompany balances and transactions have been eliminated upon consolidation. The
preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the balance sheet and accompanying
notes. Actual results may differ from those estimates.The Company evaluated events and transactions occurring after the balance sheet date and through
the day the financial statements were available to be issued which was April 30, 2010.Foreign currencyThe consolidated financial statements are stated in U.S. dollars. The functional currency of the
Partnership is U.S. dollars because the economic environment it operates in primarily uses the
U.S. Dollar. Transactions involving other currencies during the year are converted into
U.S. dollars using the exchange rates in effect at the time of the transactions. At the balance
sheet dates, monetary assets and liabilities that are denominated in currencies other than the
U.S. dollar are translated to reflect the year-end exchange rates.Operating revenues and expensesThe Partnership recognizes revenues from time charters and bareboat charters daily over the term
of the charter as the applicable vessel operates under the charter. The Partnership does not
recognize revenue during days that the vessel is off-hire. Shuttle tanker voyages servicing
contracts of affreightment with offshore oil fields commence with tendering of notice of
readiness at a field, within the agreed lifting range, and ends with tendering of notice of
readiness at a field for the next lifting. Receipt of incentive-based revenue from the
Partnerships FPSO is dependent upon the operating performance of the vessel and such revenue is
recognized when earned by fulfillment of the applicable performance criteria. All other revenues
from voyage charters are recognized on a percentage of completion method. The Partnership used a
discharge-to-discharge basis in determining percentage of completion for all voyage charters,
whereby it recognizes revenue ratably from when product is discharged (unloaded) at the end of
one voyage to when it is discharged after the next voyage. The Partnership does not begin
recognizing revenue until a charter has been agreed to by the customer and the Partnership, even
if the vessel has discharged its cargo and is sailing to the anticipated load port on its next
voyage. The consolidated balance sheet reflects the deferred portion of revenues and expenses,
which will be earned and incurred, respectively, in subsequent periods. As at December 31, 2009,
there was no deferred revenue. As at December 31, 2009, the deferred portion of expenses, which
are included in prepaid expenses, was $17.9 million.Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses,
port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils
and communication expenses. Voyage expenses and vessel operating expenses are recognized when
incurred.Cash and cash equivalentsThe Partnership classifies all highly liquid investments with an original maturity date of three
months or less when purchased as cash and cash equivalents.Accounts receivable and allowance for doubtful accountsAccounts receivable are recorded at the invoiced amount and do not bear interest. The allowance
for doubtful accounts is the Partnerships best estimate of the amount of probable credit losses
in existing accounts receivable. The Partnership determines the allowance based on historical
write-off experience and customer economic data. The Partnership reviews the allowance for
doubtful accounts regularly and past due balances are reviewed for collectability. Account
balances are charged off against the allowance when the Partnership believes that the receivable
will not be recovered.Vessels and equipmentAll pre-delivery costs incurred during the construction of newbuildings, including interest,
supervision and technical costs, are capitalized. The acquisition cost and all costs incurred to
restore used vessels purchased by the Partnership to the standards required to properly service
the Partnerships customers are capitalized.
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 Depreciation is calculated on a straight-line basis over a vessels estimated useful life, less
an estimated residual value. Depreciation is calculated using an estimated useful life of
25 years, commencing from the date the vessel is delivered from the shipyard, or a shorter
period if regulations prevent the Partnership from operating the vessel for 25 years.
 Vessel capital modifications include the addition of new equipment or can encompass various
modifications to the vessel which are aimed at improving and/or increasing the operational
efficiency and functionality of the asset. This type of expenditure is amortized over the
estimated useful life of the modification. Expenditures covering recurring routine repairs or
maintenance are expensed as incurred.
 Generally, the Partnership drydocks each shuttle tanker and conventional oil tanker every two
and a half to five years. FSO and FPSO units are generally not drydocked. The Partnership
capitalizes a portion of the costs incurred during drydocking and amortizes those costs on a
straight-line basis from the completion of a drydocking over the estimated useful life of the
drydock. The Partnership includes in capitalized drydocking those costs incurred as part of the
drydocking to meet regulatory requirements, or expenditures that either add economic life to the
vessel, increase the vessels earning capacity or improve the vessels operating efficiency. The
Partnership expenses costs related to routine repairs and maintenance performed during
drydocking that do not improve operating efficiency or extend the useful lives of the assets.
 Drydocking activity for the year ended December 31, 2009 is summarized as follows:
 Year EndedDecember 31, 2009$Balance at beginning of year
    
    
    76,619Cost incurred for drydocking
    
    
    34,974Drydock amortization
    
    
    (25,459
    )Balance at end of year
    
    
    86,134
 Vessels and equipment that are held and used are assessed for impairment when events or
circumstances indicate the carrying amount of the asset may not be recoverable. If the assets
net carrying value exceeds the net undiscounted cash flows expected to be generated over its
remaining useful life, the carrying amount of the asset is reduced to its estimated fair value.
Estimated fair value is determined based on discounted cash flows or appraised values depending
on the nature of the asset.Direct financing leasesThe Partnership assembles, installs, operates and leases equipment that reduces volatile organic
compound emissions (or VOC equipment) during loading, transportation and storage of oil and oil
products. Leasing of the VOC equipment is accounted for as a direct financing lease with lease
payments received by the Partnership being allocated between the net investment in the lease and
other income using the effective interest method so as to produce a constant periodic rate of
return over the lease term.Debt issuance costsDebt issuance costs, including fees, commissions and legal expenses, are deferred and presented
as other non-current assets. Debt issuance costs of revolving credit facilities are amortized
on a straight-line basis over the term of the relevant facility. Debt issuance costs of term
loans are amortized using the effective interest rate method over the term of the relevant loan.
Amortization of debt issuance costs is included in interest expense.Goodwill and intangible assetsGoodwill is not amortized, but reviewed for impairment annually or more frequently if impairment
indicators arise. A fair value approach is used to identify potential goodwill impairment and,
when necessary, measure the amount of impairment. The Partnership uses a discounted cash flow
model to determine the fair value of reporting units, unless there is a readily determinable
fair market value. Intangible assets are assessed for impairment when and if impairment
indicators exist. An impairment loss is recognized if the carrying amount of an intangible asset
is not recoverable and its carrying amount exceeds its fair value.The Partnerships intangible assets are amortized over their respective lives with the amount
amortized each year being weighted based on the projected revenue to be earned under the
contracts.Derivative instrumentsAll derivative instruments are initially recorded at cost as either assets or liabilities in the
accompanying consolidated balance sheets and subsequently remeasured to fair value, regardless
of the purpose or intent for holding the derivative. The method of recognizing the resulting
gain or loss is dependent on whether the derivative contract is designed to hedge a specific
risk and also qualifies for hedge accounting. The Partnership generally does not apply hedge
accounting to its derivative instruments, except for certain foreign exchange currency
contracts. (See Note 10.)When a derivative is designated as a cash flow hedge, the Partnership formally documents the
relationship between the derivative and the hedged item. This documentation includes the
strategy and risk management objective for undertaking the hedge and the method that will be
used to assess the effectiveness of the hedge. Any hedge ineffectiveness is recognized
immediately in earnings, as are any gains and losses on the derivative that are excluded from
the assessment of hedge effectiveness. The Partnership does not apply hedge accounting if it is
determined that the hedge was not effective or will no longer be effective, the derivative was
sold or exercised, or the hedged item was sold, repaid or no longer possible of occurring.
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 For derivative financial instruments designated and qualifying as cash flow hedges, changes in
the fair value of the effective portion of the derivative financial instruments are initially
recorded as a component of accumulated other comprehensive income in partners equity. In the
periods when the hedged items affect earnings, the associated fair value changes on the hedging
derivatives are transferred from partners equity to the corresponding earnings line item. The
ineffective portion of the change in fair value of the derivative financial instruments is
immediately recognized in earnings. If a cash flow hedge is terminated and the originally hedged
items may still possibly affect earnings, the gains and losses initially recognized in partners
equity remain until the hedged item impacts earnings, at which point they are transferred to the
corresponding earnings line item. If the hedged items may no longer affect earnings, amounts
recognized in partners equity are immediately transferred to earnings. Gains and losses from
the Partnerships hedge accounted foreign currency forward contracts are recorded primarily in
vessel operating expenses and general and administrative expense.For derivative financial instruments that are not designated or that do not qualify as hedges
under FASB ASC 815, Derivatives and Hedging, as amended, the changes in the fair value of the
derivative financial instruments are recognized in earnings. Gains and losses from the
Partnerships non-designated derivative instruments are recorded in realized and unrealized
gains (losses) on non-designated derivative instruments in the consolidated statements of income
(loss).Income taxesThe Partnerships Norwegian and Australian subsidiaries are subject to income taxes. The
Partnership accounts for such taxes using the liability method. Under the liability method,
deferred tax assets and liabilities are recognized for the anticipated future tax effects of
temporary differences between the financial statement basis and the tax basis of the
Partnerships assets and liabilities using the applicable jurisdictional tax rates. A valuation
allowance for deferred tax assets is recorded when it is more likely than not that some or all
of the benefit from the deferred tax asset will not be realized.Recognition of uncertain tax positions is dependent upon whether it is more-likely-than-not that
a tax position taken or expected to be taken in a tax return will be sustained upon examination,
including resolution of any related appeals or litigation processes, based on the technical
merits of the position. If a tax position meets the more-likely-than-not recognition threshold,
it is measured to determine the amount of benefit to recognize in the financial statements based
on guidance in the interpretation. The Partnership recognizes interest and penalties related to
uncertain tax positions in income tax expense.Adoption of new accounting pronouncementsIn January 2009, the Partnership adopted an amendment to Financial Accounting Standards Board
(FASB) ASC 805, Business Combinations. This amendment requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at
the acquisition date, measured at their fair values as of that date. This amendment also
requires the acquirer in a business combination achieved in stages to recognize the identifiable
assets and liabilities, as well as the non-controlling interest in the acquiree, at the full
fair values of the assets and liabilities as if they had occurred on the acquisition date. In
addition, this amendment requires that all acquisition related costs be expensed as incurred,
rather than capitalized as part of the purchase price, and those restructuring costs that an
acquirer expected, but was not obligated to incur, be recognized separately from the business
combination. The amendment applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008. The Partnerships adoption of this amendment did not have a
material impact on the Partnerships consolidated financial statements.In January 2009, the Partnership adopted an amendment to FASB ASC 810, Consolidation, which
requires us to make certain changes to the presentation of our financial statements. This
amendment requires that non-controlling interests in subsidiaries held by parties other than the
partners be identified, labeled and presented in the statement of financial position within
equity, but separate from the partners equity. This amendment requires that the amount of
consolidated net income (loss) attributable to the partners and to the non-controlling interest
be clearly identified on the consolidated statements of income (loss). In addition, this
amendment provides for consistency regarding changes in partners ownership including when a
subsidiary is deconsolidated. Any retained non-controlling equity investment in the former
subsidiary will be initially measured at fair value. Except for the presentation and disclosure
provisions of this amendment, which were adopted retrospectively to the Partnerships
consolidated financial statements, this amendment was adopted prospectively.In January 2009, the Partnership adopted an amendment to FASB ASC 820 Fair Value Measurements
and Disclosures,which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements for non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). Non-financial assets and non-financial
liabilities include all assets and liabilities other than those meeting the definition of a
financial asset or financial liability. The Partnerships adoption of this amendment did not
have a material impact on the Partnerships consolidated financial statements.In January 2009, the Partnership adopted an amendment to FASB ASC 815 Derivatives and Hedging,
which requires expanded disclosures about a companys derivative instruments and hedging
activities, including increased qualitative, and credit-risk disclosures. See Note 10 of the
notes to the consolidated financial statements.In January 2009, the Partnership adopted an amendment to FASB ASC 350, Intangibles  Goodwill
and Other,which amends the factors that should be considered in developing assumptions relating
to renewal or extension provisions used to determine the useful life of a recognized intangible
asset. The adoption of the amendment did not have a material impact on the Partnerships
consolidated financial statements.
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 In January 2009, the Partnership adopted an amendment to FASB ASC 323, Investments  Equity
Method and Joint Ventures,which addresses the accounting for the acquisition of equity method
investments, for changes in value and changes in ownership levels. The adoption of this
amendment did not have a material impact on the Partnerships consolidated financial statements.In April 2009, the Partnership adopted an amendment to FASB ASC 825, Financial Instruments,
which requires disclosure of the fair value of financial instruments to be disclosed on a
quarterly basis and that disclosures provide qualitative and quantitative information on fair
value estimates for all financial instruments not measured on the balance sheet at fair value,
when practicable, with the exception of certain financial instruments (see Note 8).In April 2009, the Company adopted an amendment to FASB ASC 855, Subsequent Events,which
established general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued.
This amendment requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for selecting that date, that is, whether that date represents
the date the financial statements were issued or were available to be issued. This amendment is
effective for interim and annual reporting periods ending after June 15, 2009. The adoption of
this amendment did not have a material impact on the consolidated balance sheet. (see Note 14).In June 2009, the FASB issued the FASB ASC effective for financial statements issued for interim
and annual periods ending after September 15, 2009. The ASC identifies the source of GAAP
recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (or SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. On the effective
date, the ASC superseded all then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the ASC will become
non-authoritative. The Partnership adopted the ASC on July 1, 2009 and incorporated it in the
Partnerships notes to the consolidated financial statements.In October 2009, the Partnership adopted an amendment to FASB ASC 820 Fair Value Measurements
and Disclosures,which clarifies the fair value measurement requirements for liabilities that
lack a quoted price in an active market and provides clarifying guidance regarding the
consideration of restrictions when estimating the fair value of a liability. The adoption of
this amendment did not have a material impact on the Partnerships consolidated financial
statements.
 2.
    
    Public Offerings
 On June 18, 2008, the Partnership completed a follow-on public offering of 7.0 million common
units at a price of $20.00 per unit, for gross proceeds of $140.0 million. Concurrently with
the public offering, Teekay Corporation, which controls the Partnership, acquired 3.25 million
common units of the Partnership in a private placement at the same public offering price for a
total cost of $65.0 million. On July 16, 2008, the underwriters for the public offering
partially exercised their over-allotment option and purchased an additional 375,000 common units
for an additional $7.5 million in gross proceeds to the Partnership. As a result of these equity
transactions, the Partnership raised gross proceeds of $216.8 million (including the Companys
proportionate 2% capital contribution), and Teekay Corporations ownership of the Partnership
was reduced from 59.8% to 50.0% (including its indirect 2% general partner interest). The
Partnership used the net proceeds from the equity offerings of approximately $210.7 million to
fund the acquisition of an additional 25% interest in Teekay Offshore Operating L.P. (or OPCO)
from Teekay Corporation and to repay a portion of advances to the Partnership from OPCO.On August 4, 2009, the Partnership completed a follow-on public offering of 6.5 million common
units at a price of $14.32 per unit, for gross proceeds of $95.0 million (including the
Companys $1.9 million proportionate capital contribution). The underwriters concurrently
exercised their overallotment option to purchase an additional 975,000 units on August 4, 2009,
providing additional gross proceeds of $14.2 million (including the Companys $0.3 million
proportionate capital contribution). The Partnership used the total net proceeds of
approximately $104.1 million from the equity offering to reduce amounts outstanding under one of
its revolving credit facilities.On March 22, 2010, the Partnership completed a follow-on offering of 4.4 million common units
(see Note 14(b)).
 3.
    
    Segment Reporting
 The Partnership is engaged in the international transportation of crude oil through the
operation of its oil tankers, FSO units and FPSO unit. The Partnerships revenue is earned in
international markets.The Partnership has four reportable segments: its shuttle tanker segment; its conventional
tanker segment; its FSO segment; and its FPSO segment. The Partnerships shuttle tanker segment
consists of shuttle tankers operating primarily on fixed-rate contracts of affreightment,
time-charter contracts or bareboat charter contracts. The Partnerships conventional tanker
segment consists of conventional tankers operating on fixed-rate time-charter contracts or
bareboat charter contracts. The Partnerships FSO segment consists of its FSO units subject to
fixed-rate time-charter contracts or bareboat charter contracts. The Partnerships FPSO segment
consists of its FPSO unit subject to operations and charter contracts. Segment results are
evaluated based on income from vessel operations. The accounting policies applied to the
reportable segments is the same as those used in the preparation of the Partnerships
consolidated financial statements.
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 A reconciliation of total segment assets to total assets presented in the accompanying
consolidated balance sheet is as follows:
 December 31, 2009$Shuttle tanker segment
    
    
    1,516,988Conventional tanker segment
    
    
    317,690FSO segment
    
    
    103,622FPSO segment
    
    
    324,912UnallocatedCash and cash equivalents
    
    
    103,363Accounts receivable and other assets
    
    
    23,012Consolidated total assets
    
    
    2,389,587
 4.
    
    Goodwill and Intangible Assets
 a)
    
    Goodwill  shuttle tanker segment
 December 31, 2009$Balance at beginning of year
    
    
    127,113Goodwill acquired
    
    
    Goodwill impairment
    
    
    Balance at end of year
    
    
    127,113
 b)
    
    Intangible Assets
 As at December 31, 2009, intangible assets consisted of:
 Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Amount$
    
    
    $
    
    
    $Contracts of affreightment (shuttle tanker segment)
    
    
    124,250
    
    
    
    (88,016
    )
    
    
    36,234Time-charter contracts (FPSO segment)
    
    
    353
    
    
    
    (92
    )
    
    
    261Other intangible assets (FPSO segment)
    
    
    390
    
    
    
    
    
    
    
    390124,993
    
    
    
    (88,108
    )
    
    
    36,885
 Amortization of intangible assets for the next five years subsequent to December 31, 2009 is
expected to be $8.1 million (2010), $7.0 million (2011), $6.0 million (2012), $5.0 million
(2013), and $4.0 million (2014).
 5.
    
    Accrued Liabilities
 December 31, 2009$Voyage and vessel
    
    
    45,963Interest
    
    
    11,559Payroll and benefits
    
    
    2,19259,714
 6.
    
    Long-Term Debt
 December 31, 2009$U.S. Dollar-denominated Revolving Credit Facilities due through 2018
    
    
    1,406,974U.S. Dollar-denominated Term Loan Due to Parent
    
    
    60,000U.S. Dollar-denominated Term Loans due through 2017
    
    
    268,6401,735,614Less current portion
    
    
    108,159Total
    
    
    1,627,455
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TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 As at December 31, 2009, the Partnership had eight long-term revolving credit facilities, which,
as at such date, provided for borrowings of up to $1.59 billion, of which $183.9 million was
undrawn. The total amount available under the revolving credit facilities reduces by
$164.1 million (2010), $173.3 million (2011), $183.0 million (2012), $329.5 million (2013),
$638.0 million (2014) and $102.9 million (thereafter). Five of the revolving credit facilities
are guaranteed by certain subsidiaries of the Partnership for all outstanding amounts and
contain covenants that require Teekay Offshore Operating L.P. (or OPCO) to maintain the greater
of a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with
at least six months to maturity) of at least $75.0 million and 5.0% of OPCOs total consolidated
debt. One of the revolving credit facilities are guaranteed by the Partnership for all
outstanding amounts and contain covenants that require the Partnership to maintain the greater
of a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with
at least six months to maturity) of at least $75.0 million and 5.0% of the Partnerships total
consolidated debt. The remaining revolving credit facilities are guaranteed by Teekay
Corporation and contain covenants that require Teekay Corporation to maintain the greater of a
minimum liquidity (cash and cash equivalents) of at least $50.0 million and 5.0% of Teekay
Corporations total consolidated debt which has recourse to Teekay Corporation. The revolving
credit facilities are collateralized by first-priority mortgages granted on 34 of the
Partnerships vessels, together with other related security.
 The Partnership has a U.S. Dollar-denominated term loan outstanding from Teekay Corporation,
which, as at December 31, 2009, totaled $60 million. The $60 million unsecured subordinated debt
facility bears interest at a fixed rate of 10.00% and matures at the earlier of the date the
Partnership receives sufficient net proceeds from an equity offering to repay this tranche, and
a term of five years. This amount was repaid after year end, (see Note 14(b)).
 As at December 31, 2009, the Partnerships six 50%-owned subsidiaries each had an outstanding
term loan, which in the aggregate totaled $268.6 million. The term loans reduce over time with
quarterly and semi-annual payments and have varying maturities through 2017. All term loans are
collateralized by first-priority mortgages on the vessels to which the loans relate, together
with other related security. As at December 31, 2009, the Partnership had guaranteed $86.2
million of these term loans, which represents its 50% share of the outstanding vessel mortgage
debt of five of these 50%-owned subsidiaries. The other owner and Teekay Corporation have
guaranteed the remaining $182.4 million.
 Interest payments on the revolving credit facilities and the term loans (excluding the term loan
due to parent) are based on LIBOR plus a margin. At December 31, 2009, the margins ranged
between 0.45% and 3.25%. The weighted-average effective interest rate on the Partnerships
variable rate long-term debt as at December 31, 2009 was 1.4%. This rate does not include the
effect of the Partnerships interest rate swaps (See Note 10).
 The aggregate annual long-term debt principal repayments required to be made subsequent to
December 31, 2009 are $108.2 million (2010), $183.8 million (2011), $160.8 million (2012),
$328.9 million (2013), $765.6 million (2014), and $188.3 million (thereafter).
 As at December 31, 2009 the Partnership was in compliance with all covenants in the credit
facilities and long-term debt.
 7.
    
    Leases
 Charters-outTime charters and bareboat charters of the Partnerships vessels to customers are accounted for
as operating leases. The cost, accumulated depreciation and carrying amount of the vessels
employed on operating leases at December 31, 2009 was $2.3 billion, $0.8 billion and $1.5
billion, respectively. As at December 31, 2009, minimum scheduled future revenues under time
charters and bareboat charters to be received by the Partnership, then in place were
approximately $1.6 billion, comprised of $416.2 million (2010), $304.9 million (2011), $252.3
million (2012), $178.6 million (2013), $111.7 million (2014) and $358.6 million (thereafter).The minimum scheduled future revenues should not be construed to reflect total charter hire
revenues for any of the years. In addition, minimum scheduled future revenues have been reduced
by estimated off-hire time for period maintenance.Direct Financing LeaseLeasing of the VOC equipment is accounted for as direct financing leases. As at December 31,
2009, the minimum lease payments receivable under the direct financing leases approximated $65.2
million, including unearned income of $9.0 million. As at December 31, 2009, future scheduled
payments under the direct financing leases to be received by the Partnership, then in place were
approximately $65.2 million, comprised of $25.4 million (2010), $21.3 million (2011), $15.1
million (2012), $2.4 million (2013) and $1.0 million (2014).Charters-inAs at December 31, 2009, minimum commitments owing by the Partnership under vessel operating
leases by which the Partnership charters-in vessels were approximately $227.1 million, comprised
of $74.0 million (2010), $58.7 million (2011), $42.9 million (2012), $31.4 million (2013), $13.5
million (2014) and $6.6 million (thereafter). The Partnership recognizes the expense from these
charters, which is included in time-charter hire expense, on a straight-line basis over the firm
period of the charters.
 8.
    
    Fair Value of Measurements
 The following methods and assumptions were used to estimate the fair value of each class of
financial instrument:
 Cash and cash equivalents The fair value of the Partnerships cash and cash equivalents
approximate their carrying amounts reported in the accompanying consolidated balance sheets.
  F - 9




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##### 



TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 Due to / from affiliates The fair value of the amounts due to and from affiliates approximate
their carrying amounts reported in the accompanying consolidated balance sheets due to the
current nature of the balances.
 Long-term debt The fair values of the Partnerships variable-rate long-term debt are either
based on quoted market prices or estimated using discounted cash flow analyses, based on rates
currently available for debt with similar terms and remaining maturities and the current credit
worthiness of the Partnership.
 Due to joint venture
partners and Due to parent The fair value of the Partnerships loans from
joint venture partners and loan from parent approximates their carrying amounts reported in the
accompanying consolidated balance sheets.
 Derivative instruments The fair value of the Partnerships derivative instruments is the
estimated amount that the Partnership would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates, foreign exchange rates and the
current credit worthiness of both the Partnership and the derivative counterparties. The
estimated amount is the present value of future cash flows. The Partnership transacts all of its
derivative instruments through investment-grade rated financial institutions at the time of the
transaction and requires no collateral from these institutions. Given the current volatility in
the credit markets, it is reasonably possible that the amount recorded as a derivative liability
could vary by a material amount in the near term.
 The Partnership categorizes its fair value estimates using a fair value hierarchy based on the
inputs used to measure fair value. The fair value hierarchy has three levels based on the
reliability of the inputs used to determine fair value as follows:
    The estimated fair value of the Partnerships financial instruments and categorization using the
fair value hierarchy for these financial instruments that are measured at fair value on a
recurring basis are as follows:
 December 31, 2009Carrying
    
    
    FairAmount
    
    
    ValueFair Value Hierarchy
    
    
    Asset (Liability)
    
    
    Asset (Liability)Level(1)
    
    
    $
    
    
    $Cash and cash equivalents
    
    
    
    
    
    
    103,363
    
    
    
    103,363Due from affiliate (note 9c)
    
    
    
    
    
    
    17,833
    
    
    
    17,833Due to affiliate (note 9c)
    
    
    
    
    
    
    (39,876
    )
    
    
    (39,876
    )Long-term debt
    
    
    
    
    
    
    (1,675,614
    )
    
    
    (1,559,210
    )Loan due to Parent
    
    
    
    
    
    
    (60,000
    )
    
    
    (60,000
    )Due to joint venture partners
    
    
    
    
    
    
    
    
    
    
    Derivative instruments(note 10)Interest rate swap agreements(2)
    
    Level 2
    
    
    (76,072
    )
    
    
    (76,072
    )Foreign currency forward contracts
    
    Level 2
    
    
    6,192
    
    
    
    6,192
 
 (1)
    
    The fair value hierarchy level is only applicable to each financial instrument on the
consolidated balance sheets that are recorded at fair value on a recurring basis.(2)
    
    The fair value of the Partnerships interest rate swap agreements includes $8.0 million
of accrued interest as at December 31, 2009, which is recorded in accrued liabilities on
the balance sheet.
 The Partnership has determined that there were no non-financial assets or non-financial
liabilities carried at fair value at December 31, 2009.
 9.
    
    Related Party Transactions
 a.
    
    The Partnership has entered into an omnibus agreement with Teekay Corporation, Teekay
LNG Partners L.P., the Company and others governing, among other things, when the
Partnership, Teekay Corporation and Teekay LNG Partners L.P. may compete with each other
and certain rights of first offering on liquefied natural gas carriers, oil tankers,
shuttle tankers, FSO units and floating production, storage and offloading units.b.
    
    On September 10, 2009, the Partnership acquired from Teekay Corporation the Petrojarl
Varg,together with its operations and charter contracts with Talisman Energy, for a
purchase price of $320 million. The purchase price of $320 million is accounted for as an
equity distribution to Teekay Corporation. To the extent the purchase price is greater than
the corresponding book value, the excess is reflected as a reduction in Partners Equity
and the remainder is shown as a reduction in Dropdown Predecessor Equity. The purchase was
financed through vendor financing made available by Teekay Corporation of $220 million. The
remaining $100 million was paid in cash and financed from existing debt facilities. The
$220 million vendor financing from Teekay Corporation was comprised of two tranches. The
senior tranche was a $160 million short-term debt facility bearing interest at LIBOR plus a
margin of 3.25% and was repaid in November 2009. The junior tranche of the vendor financing
was a $60 million unsecured subordinated debt facility bearing interest at 10% per annum
and was repaid in March 2010. (See Note 6).
  F - 10




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##### 



TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 On the dropdown, all assets and liabilities of the Petrojarl Vargoperations, except for the
vessel and the contracts with Talisman Energy, were retained by Teekay Corporation. These net
liabilities retained by Teekay Corporation totalled $175.0 million and are accounted for as a
non-cash equity contribution from Teekay Corporation.c.
    
    At December 31, 2009, due from affiliates totaled $17.8 million and due to affiliates
totaled $39.9 million. Due to and from affiliates are non-interest bearing and unsecured
and are expected to be settled within the next fiscal year in the normal course of
operations.
 10.
    
    Derivative Instruments and Hedging Activities
 The Partnership uses derivatives to manage certain risks in accordance with its overall risk
management policies.Foreign Exchange Risk
 The Partnership economically hedges portions of its forecasted expenditures denominated in
foreign currencies with foreign currency forward contracts. These foreign currency forward
contracts are generally designated, for accounting purposes, as cash flow hedges of forecasted
foreign currency expenditures.
 As at December 31, 2009, the Partnership was committed to the following foreign currency forward
contracts:
 Fair Value / CarryingContract Amount in
    
    
    Amount of Asset (Liability)
    
    
    Average
    
    
    Expected MaturityForeign Currency
    
    
    (thousands of U.S. Dollars)
    
    
    Forward
    
    
    2010
    
    
    2011(thousands)
    
    
    Hedge
    
    
    Non-hedge
    
    
    Rate(1)
    
    
    (in thousands of U.S. Dollars)Norwegian Kroner
    
    
    694,000
    
    
    
    5,934
    
    
    
    (18
    )
    
    
    6.15
    
    
    
    96,585
    
    
    
    16,343British Pound
    
    
    53
    
    
    
    (15
    )
    
    
    
    
    
    
    0.53
    
    
    
    99
    
    
    
    Euro
    
    
    19,622
    
    
    
    636
    
    
    
    (345
    )
    
    
    0.71
    
    
    
    24,611
    
    
    
    3,194$
    6,555
    
    
    $
    (363
    )
    
    
    
    
    
    $
    121,295
    
    
    $
    19,537
 (1)
    
    Average forward rate represents the contracted amount of foreign currency one U.S.
Dollar will buy.
 Interest Rate RiskThe Partnership enters into interest rate swaps, which exchange a receipt of floating interest
for a payment of fixed interest to reduce the Partnerships exposure to interest rate
variability on its outstanding floating-rate debt. The Partnership has not designated, for
accounting purposes, its interest rate swaps as cash flow hedges of its USD LIBOR denominated
borrowings.As at December 31, 2009, the Partnership was committed to the following interest rate swap
agreements:
 Fair Value /
    
    
    Weighted-Carrying
    
    
    Average
    
    
    FixedInterest
    
    
    Principal
    
    
    Amount of
    
    
    Remaining
    
    
    InterestRate
    
    
    Amount
    
    
    Liability
    
    
    Term
    
    
    RateIndex
    
    
    $
    
    
    $
    
    
    (Years)
    
    
    (%)(1)U.S. Dollar-denominated interest rate swaps
    
    LIBOR
    
    
    500,000
    
    
    
    34,995
    
    
    
    9.4
    
    
    
    4.2U.S. Dollar-denominated interest rate swaps(2)
    
    LIBOR
    
    
    714,692
    
    
    
    41,077
    
    
    
    7.2
    
    
    
    3.71,214,692
    
    
    
    76,072
 (1)
    
    Excludes the margin the Partnership pays on its variable-rate debt, which as at
December 31, 2009, ranged from 0.45% and 3.25%.(2)
    
    Principal amount reduces quarterly or semi-annually.(3)
    
    The fair value of the Partnerships interest rate swap agreements includes $8.0 million
of accrued interest which is recorded in accrued liabilities on the balance sheet.
 The Partnership is exposed to credit loss in the event of non-performance by the counter-parties
to the foreign currency forward contracts and the interest rate swap agreements. In order to
minimize counterparty risk, the Partnership only enters into derivative transactions with
counterparties that are rated A- or better by Standard & Poors or A3 or better by Moodys at
the time of the transactions. In addition, to the extent possible and practical, interest rate
swaps are entered into with different counterparties to reduce concentration risk.
  F - 11




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##### 



TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 11.
    
    Income Taxes
 The significant components of the Partnerships deferred tax liabilities and assets are as
follows:
 December 31, 2009$Deferred tax assets:Tax losses carried forward
    
    
    64,023Provisions
    
    
    514Total deferred tax assets:
    
    
    64,537Deferred tax liabilities:Vessels and equipment
    
    
    48,690Long-term debt
    
    
    29,599Other
    
    
    2,729Total deferred tax liabilities
    
    
    81,018Net deferred tax liabilities (2)
    
    
    16,481Current portion
    
    
    Long-term portion of net deferred tax liabilities
    
    
    16,481
 (1)
    
    The net operating loss carry forwards of $227.6 million are available to offset future
taxable income in the applicable jurisdictions, and can be carried forward indefinitely.(2)
    
    The change in the net deferred tax liabilities is related to the change in temporary
differences and foreign exchange gains.
 12.
    
    Commitments and Contingencies
 The Partnership may, from time to time, be involved in legal proceedings and claims that arise
in the ordinary course of business. The Partnership believes that any adverse outcome,
individually or in the aggregate, of any existing claims would not have a material affect on its
financial position, results of operations or cash flows, when taking into account its insurance
coverage and indemnifications from charterers or Teekay Corporation.
 13.
    
    Accounting Pronouncements Not Yet Adopted
 In June 2009, the FASB issued an amendment to FASB ASC 810, Consolidationsthat eliminates
certain exceptions to consolidating qualifying special-purpose entities, contains new criteria
for determining the primary beneficiary, and increases the frequency of required reassessments
to determine whether a company is the primary beneficiary of a variable interest entity. This
amendment also contains a new requirement that any term, transaction, or arrangement that does
not have a substantive effect on an entitys status as a variable interest entity, a companys
power over a variable interest entity, or a companys obligation to absorb losses or its right
to receive benefits of an entity must be disregarded. The elimination of the qualifying
special-purpose entity concept and its consolidation exceptions means more entities will be
subject to consolidation assessments and reassessments. During February 2010, the scope of the
revised standard was modified to indefinitely exclude certain entities from the requirement to
be assessed for consolidation. This amendment is effective for fiscal years beginning after
November 15, 2009, and for interim periods within that first period, with earlier adoption
prohibited. The Partnership is currently assessing the potential impacts, if any, on its
consolidated financial statements.
 In June 2009, the FASB issued an amendment to FASB ASC 860, Transfers and Servicesthat
eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions
for reporting a transfer of a portion of a financial asset as a sale, clarifies other
sale-accounting criteria, and changes the initial measurement of a transferors interest in
transferred financial assets. This amendment will be effective for transfers of financial assets
in fiscal years beginning after November 15, 2009 and in interim periods within those fiscal
years with earlier adoption prohibited. The Partnership is currently assessing the potential
impacts, if any, on its consolidated financial statements.
 In September 2009, the FASB issued an amendment to FASB ASC 605, Revenue Recognitionthat
provides for a new methodology for establishing the fair value for a deliverable in a
multiple-element arrangement. When vendor specific objective or third-party evidence for
deliverables in a multiple-element arrangement cannot be determined, the Partnership will be
required to develop a best estimate of the selling price of separate deliverables and to
allocate the arrangement consideration using the relative selling price method. This amendment
will be effective for the Partnership on January 1, 2011. The Partnership is currently assessing
the potential impacts, if any, on its consolidated financial statements.
 In January 2010, the FASB issued an amendment to FASB ASC 820, Fair Value Measurements and
Disclosures, which amends the guidance on fair value to add new requirements for disclosures
about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair
value disclosures about the level of disaggregation and about inputs and valuation techniques
used to measure fair value. This amendment effective for the first reporting period beginning
after December 15, 2009, except for the requirement to provide the Level 3 activity of
purchases, sales, issuances, and settlements on a gross basis, which will be effective for
fiscal years beginning after December 15, 2010, and for interim periods within those fiscal
years. The adoption will have no impact on the Partnerships results of operations, financial
position, or cash flows.
  F - 12




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##### 



TEEKAY OFFSHORE GP L.L.C.
NOTES TO THE CONSOLIDATED BALANCE SHEET  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
 14.
    
    Subsequent Events
 (a)
    
    All of the Partnerships subordinated units converted into an equal number of common
units as of January 1, 2010 as all the applicable financial tests in the partnership
agreement were met.(b)
    
    On March 22, 2010, the Partnership completed a public offering of 4.4 million common
units at a price of 19.48 per unit, for gross proceeds of $87.5 million (including the
Companys $1.7 million proportionate capital contribution). The underwriters concurrently
exercised their overallotment option to purchase an additional 660,000 units on March 22,
2010, providing additional gross proceeds of $13.1 million (including the Companys $0.3
million proportionate capital contribution). The Partnership used the total net proceeds
from the offering to repay the remaining $60.0 million of the Teekay Corporation vendor
financing from the acquisition of the Petrojarl Vargand to finance a portion of the
acquisition of the Falcon Spirit, a FSO unit, from Teekay Corporation for $43.4 million on
April 1, 2010.
 15.
    
    Supplemental information
 The following balance sheet shows the consolidation of the Teekay Offshore GP L.L.C. balance
sheet on a stand-alone basis with the balance sheet of Teekay Offshore Partners L.P., as of
December 31, 2009.
 Teekay Offshore
    
    
    Consolidation of
    
    
    Teekay OffshoreG.P. L.L.C
    
    
    Teekay Offshore
    
    
    G.P. L.L.CStand-alone
    
    
    Partners L.P.
    
    
    Consolidated$
    
    
    $
    
    
    $ASSETSCurrentCash and cash equivalents
    
    
    1,616
    
    
    
    101,747
    
    
    
    103,363Accounts receivable
    
    
    
    
    
    
    66,976
    
    
    
    66,976Net Investment in direct financing leases
    
    
    
    
    
    
    20,641
    
    
    
    20,641Prepaid expenses
    
    
    
    
    
    
    33,936
    
    
    
    33,936Due from affiliates
    
    
    160
    
    
    
    17,673
    
    
    
    17,833Current portion of derivative instruments
    
    
    
    
    
    
    6,152
    
    
    
    6,152Other current assets
    
    
    
    
    
    
    1,399
    
    
    
    1,399Total current assets
    
    
    1,776
    
    
    
    248,524
    
    
    
    250,300Vessels and equipment
    
    
    
    
    
    
    1,917,248
    
    
    
    1,917,248Net investment in direct financing leases
    
    
    
    
    
    
    35,620
    
    
    
    35,620Derivative instruments
    
    
    
    
    
    
    2,195
    
    
    
    2,195Other assets
    
    
    
    
    
    
    20,226
    
    
    
    20,226Intangible
assets  net
    
    
    
    
    
    
    36,885
    
    
    
    36,885Goodwill
    
    
    
    
    
    
    127,113
    
    
    
    127,113Total assets
    
    
    1,776
    
    
    
    2,387,811
    
    
    
    2,389,587LIABILITIES AND MEMBERS EQUITYCurrentAccounts payable
    
    
    5
    
    
    
    13,984
    
    
    
    13,989Accrued liabilities
    
    
    
    
    
    
    59,714
    
    
    
    59,714Due to affiliate
    
    
    
    
    
    
    39,876
    
    
    
    39,876Current portion of derivative instruments
    
    
    
    
    
    
    31,852
    
    
    
    31,852Current portion of long-term debt
    
    
    
    
    
    
    108,159
    
    
    
    108,159Total current liabilities
    
    
    5
    
    
    
    253,585
    
    
    
    253,590Long-term debt
    
    
    
    
    
    
    1,627,455
    
    
    
    1,627,455Deferred income taxes
    
    
    
    
    
    
    16,481
    
    
    
    16,481Derivative instruments
    
    
    
    
    
    
    38,327
    
    
    
    38,327Other long-term liabilities
    
    
    
    
    
    
    18,439
    
    
    
    18,439Total liabilities
    
    
    5
    
    
    
    1,954,287
    
    
    
    1,954,292Total EquityMembers equity
    
    
    1,771
    
    
    
    4,262
    
    
    
    6,033Non-controlling interest
    
    
    
    
    
    
    429,247
    
    
    
    429,247Accumulated other comprehensive income
    
    
    
    
    
    
    15
    
    
    
    15Total equity
    
    
    1,771
    
    
    
    433,524
    
    
    
    435,295Total liabilities and equity
    
    
    1,776
    
    
    
    2,387,811
    
    
    
    2,389,587
  F - 13