Teekay Offshore Partners Announces Public Offering of 7,000,000 Common Units

HAMILTON, BERMUDA (NYSE: TOO) announced today that it plans to offer 7,000,000 common units representing limited partner interests in a public offering. Teekay Offshore expects to grant the underwriters a 30-day option to purchase an additional 1,050,000 common units to cover over-allotments, if any.

In addition and concurrently with the closing of the public offering, Teekay Corporation (Teekay) has agreed that it will purchase directly from Teekay Offshore in a private placement an aggregate of $65.0 million worth of common units at the public offering price.

The Partnership expects to use the net proceeds from the public offering and the concurrent private placement to purchase an additional 25.0% interest in Teekay Offshore Operating L.P. (OPCO), a Marshall Islands limited partnership, from Teekay, for $205.0 million. The Partnership will use any remaining net proceeds to partially repay amounts it borrowed from OPCO to facilitate the purchase of three vessels in 2007. OPCO will apply any net proceeds it receives from Teekay Offshore towards the purchase of two 2008-built Aframax lightering tankers or the repayment of debt.

Teekay Offshore Partners L.P. is a publicly-traded master limited partnership formed by Teekay (NYSE: TK), and is an international provider of marine transportation and storage services to the offshore oil industry. Teekay Offshore currently owns a 26% interest in and controls OPCO with a fleet of 34 shuttle tankers (nine of which are chartered-in), four floating storage and offtake (FSO) units and nine conventional crude oil Aframax tankers. The Partnership also has direct ownership interests in two shuttle tanker and one FSO.

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

After the offering and the concurrent private placement, Teekay will own approximately a 50% interest in Teekay Offshore, including common units, subordinated units and its general partner interest. This ownership interest will be reduced to approximately 49% if the underwriters exercise their over-allotment option in full. Subsequent to the offering, Teekay Offshore expects to own 51% of OPCO.

The joint book running managers for this offering are Citi, Merrill Lynch & Co. and Lehman Brothers. The co-managers are Morgan Stanley, JPMorgan, and Raymond James.

When available, copies of the prospectus supplement and accompanying base prospectus related to this offering may be obtained from Citigroup Global Markets Inc., Brooklyn Army Terminal, 140 58th Street, Brooklyn, New York, 11220, Attention: Prospectus Department; phone: (800) 831-9146; Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, Attention: Prospectus Department, New York, New York 10080, or Lehman Brothers, c/o Broadridge Integrated Distribution Services, 1155 Long Island Avenue, Edgewood, NY 11717, via fax at 631-254-7140 or via email at qiana.smith@broadridge.com.

This news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The common units will be offered and sold pursuant to an effective registration statement on Form F-3 previously filed with the Securities and Exchange Commission (the SEC). This offering may be made only by means of a prospectus supplement and accompanying base prospectus, which will be filed with the SEC.

The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause the outcome to be materially different. These risks and uncertainties include, but are not limited to, those discussed in Teekay Offshore's public filings with the SEC. Teekay Offshore undertakes no obligation to revise or update any forward looking statements, unless required to do so under the securities laws.

Contacts: Teekay Offshore Partners L.P. Scott Gayton Investor Relations Enquiries (604) 609-4740 Teekay Offshore Partners L.P. Alana Duffy Media Enquiries (604) 844-6605 Website: www.teekayoffshore.com

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