UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

Commission file number 1-33198

TEEKAY OFFSHORE PARTNERS L.P.

(Exact name of Registrant as specified in its charter)

4th floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ     Form 40- F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes o     No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes o     No þ

 

 

		TEEKAY OFFSHORE PARTNERS L.P. 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda

EARNINGS RELEASE

TEEKAY OFFSHORE PARTNERS
REPORTS SECOND QUARTER RESULTS

Highlights

•		Generated distributable cash flow(1) of $42.6 million in the second quarter of 2011, up 52 percent from the same period of the prior year.
•		In June 2011, entered into a new long-term contract with BG Group plc to charter four newbuilding shuttle tankers in Brazil commencing in mid- to late-2013.
•		In July 2011, completed a $20 million private placement equity offering to partially finance the four newbuilding shuttle tankers.
•		Total liquidity of $294.0 million as at June 30, 2011.

Hamilton, Bermuda, August 11, 2011 — Teekay Offshore GP L.L.C., the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO), today reported the Partnership’s results for the quarter ended June 30, 2011. During the second quarter of 2011, the Partnership generated distributable cash flow⁽¹⁾ of $42.6 million, compared to $28.1 million in the same period of the prior year.

On July 22, 2011, the Partnership declared a cash distribution of $0.50 per unit for the quarter ended June 30, 2011. The cash distribution is payable on August 12, 2011 to all unitholders of record on August 5, 2011.

“The Partnership’s strong second quarter cash flow reflects the full quarter benefit of our acquisition of the remaining 49 percent interest in Teekay Offshore Operating L.P. in March 2011,” commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. “The fundamentals for deepwater offshore oil production, storage and transportation continue to be favorable and we are encouraged by the high level of recent tendering activity in the sector. Our business development efforts have been yielding results and recently resulted in the award of a new long-term shuttle tanker contract from a subsidiary of BG Group plc in Brazil. This contract will be serviced by four newbuilding shuttle tankers, scheduled to deliver in mid- to late-2013.”

Mr. Evensen added, “Our sponsor, Teekay Corporation, was recently awarded a significant new North Sea FPSO contract also with BG. This is positive for our future cash flow growth as the newbuilding FPSO unit should become eligible to be acquired by Teekay Offshore once operations under its charter contract commence in early 2014. In addition to our ability to secure projects or acquire vessels directly from third parties, the Partnership’s sponsor, Teekay Corporation, also provides us with an important pipeline of future growth opportunities.”

Summary of Recent Transactions

In June 2011, the Partnership entered into a new long-term contract with a subsidiary of BG Group plc (BG) to provide shuttle tanker services in Brazil. As previously announced, the contract with BG will be serviced by four Suezmax newbuilding shuttle tankers to be constructed by Samsung Heavy Industries for a total delivered cost of approximately $480 million. Upon their scheduled delivery in mid- to late-2013, the vessels will commence operations under ten-year, fixed-rate time-charter contracts. The contract with BG also includes certain extension options and vessel purchase options.

During July 2011, the Partnership sold 0.7 million common units through a private placement for net proceeds of $20.4 million (including the general partner’s contribution). The net proceeds from the offering were used to partially finance the shipyard installments for the four Suezmax newbuilding shuttle tankers.

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Teekay Offshore’s Fleet

The following table summarizes Teekay Offshore’s fleet as of August 10, 2011.

		Number of Vessels
		Owned				Chartered-				Committed
		Vessels				in Vessels				Newbuildings				Total
Shuttle Tanker Segment			31	(i)			5				4	(ii)			40
Conventional Tanker Segment			10	(iii)			—				—				10
FSO Segment			5				—				—				5
FPSO Segment			2				—				—				2
Total			48				5				4				57

In early August 2011, the Partnership sold its 1993-built conventional Aframax tanker, the Scotia Spirit, to a third party buyer for net proceeds of $8.3 million. As a result of the early termination of the time-charter for this vessel, the Partnership will receive a termination fee of $2.1 million in the third quarter of 2011.

Future Growth Opportunities

Pursuant to an omnibus agreement that Teekay Offshore entered into in connection with its initial public offering in December 2006, Teekay Corporation (Teekay) is obligated to offer to the Partnership its interest in certain shuttle tankers, FSO units, floating production, storage and offloading (FPSO) units and joint ventures it may acquire in the future, provided the vessels are servicing contracts with remaining durations of three years or greater. The Partnership may also acquire other vessels that Teekay may offer it from time to time.

Shuttle Tankers

Teekay Offshore recently acquired two Aframax shuttle tanker newbuildings (the Amundsen Spirit and the Nansen Spirit) and committed to acquire one additional Aframax shuttle tanker newbuilding (the Peary Spirit) that delivered to the Partnership in early August 2011. Teekay is obligated to offer the Partnership a fourth shuttle tanker newbuilding (the Scott Spirit) within 365 days after its delivery, provided the vessel is servicing a charter contract with remaining durations of three years or greater.

FPSO Units

Pursuant to the omnibus agreement and a subsequent agreement, Teekay is obligated to offer to sell the Petrojarl Foinaven FPSO unit, an existing FPSO unit, which is owned by Teekay and operating under a long-term contract in the North Sea, to Teekay Offshore prior to July 9, 2012. The purchase price for the Petrojarl Foinaven FPSO unit would be at its fair market value plus any additional tax or other costs to Teekay that would be required to transfer the FPSO unit to the Partnership.

In October 2010, Teekay signed a long-term contract with Petrobras to provide a FPSO unit for the Tiro and Sidon fields located in the Santos Basin offshore Brazil. The contract with Petrobras will be serviced by a newly converted FPSO unit, named Petrojarl Cidade de Itajai. The new FPSO unit is scheduled to deliver in mid-2012, when it will commence operations under a nine-year, fixed-rate time-charter contract to Petrobras with six additional one-year extension options. Pursuant to the omnibus agreement, Teekay is obligated to offer to the Partnership its 50 percent interest in this FPSO project at Teekay’s fully built-up cost, within 365 days after the commencement of the charter with Petrobras.

In May 2011, Teekay entered into a joint venture agreement with Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) to jointly pursue FPSO projects in Brazil. Odebrecht is a well-established Brazil-based company that operates in the engineering and construction, petrochemical, bioenergy, energy, oil and gas, real estate and environmental engineering sectors, with over 120,000 employees and a presence in over 20 countries. As part of the joint venture agreement, Odebrecht is a 50 percent partner in the Tiro Sidon FPSO project and Teekay is currently working with Odebrecht on other FPSO project opportunities which, pursuant to the omnibus agreement, may result in the future sale of new FPSO units to the Partnership.

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In June 2011, Teekay entered into a new contract with BG Norge Limited to provide a harsh weather FPSO unit for the Knarr oil and gas field located in the North Sea. The contract will be serviced by a newly-built FPSO unit to be constructed by Samsung Heavy Industries for a fully built-up cost of approximately $1 billion. Pursuant to the omnibus agreement, Teekay is obligated to offer to the Partnership its interest in this FPSO project at Teekay’s fully built-up cost, within 365 days after the commencement of the charter, which is expected to be during the first quarter of 2014.

Financial Summary

The Partnership reported adjusted net income attributable to the partners⁽¹⁾ (as detailed in Appendix A to this release) of $26.2 million for the quarter ended June 30, 2011, compared to $18.9 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $37.5 million and $21.7 million for the quarters ended June 30, 2011 and 2010, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net loss attributable to the partners of $11.4 million for the second quarter of 2011, compared to a net loss of $2.8 million in the same period of the prior year. Net revenues⁽²⁾ for the second quarter of 2011 increased to $201.6 million compared to $191.9 million in the same period of the prior year.

The Partnership reported adjusted net income attributable to the partners⁽¹⁾ (as detailed in Appendix A to this release) of $48.3 million for the six months ended June 30, 2011, compared to $39.0 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $36.2 million and $27.0 million for the six months ended June 30, 2011 and 2010, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $12.0 million for the six months ended June 30, 2011 and 2010. Net revenues⁽²⁾ for the six months ended June 30, 2011 increased to $409.9 million compared to $390.5 million in the same period of the prior year.

For accounting purposes, the Partnership is required to recognize, through the consolidated statements of (loss) income, changes in the fair value of certain derivative instruments as unrealized gains or losses. This revaluation does not affect the economics of any hedging transactions or have any impact on the Partnership’s actual cash flows or the calculation of its distributable cash flow.

The Partnership has recast its historical financial results to include the results of the Falcon Spirit FSO unit and the Cidade de Rio das Ostras (Rio das Ostras) FPSO unit relating to the periods prior to their acquisition by the Partnership from Teekay, and for which pre-acquisition results are referred to in this release as the Dropdown Predecessor. In accordance with GAAP, business acquisitions of entities under common control that have begun operations are required to be accounted for in a manner whereby the Partnership’s financial statements are retroactively adjusted to include the historical results of the acquired vessels from the date the vessels were originally under the control of Teekay. For these purposes, the Falcon Spirit was under common control by Teekay from December 15, 2009 until April 1, 2010, when it was sold to the Partnership and the Rio das Ostras FPSO unit was under common control by Teekay from April 1, 2008 to October 1, 2010, when it was sold to the Partnership.

On October 1, 2010, Teekay Offshore agreed to acquire Teekay’s interest in the newbuilding shuttle tanker Peary Spirit. Prior to its acquisition by the Partnership, this entity is considered a variable interest entity for accounting purposes. As a result, the Partnership’s consolidated financial statements include the financial position, operating results and cash flow contribution of the Peary Spirit subsequent to October 1, 2010. The Peary Spirit was acquired by the Partnership in early August 2011.

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Operating Results

The following table highlights certain financial information for Teekay Offshore’s four main segments: the Shuttle Tanker segment, the Conventional Tanker segment, the FSO segment, and the FPSO segment (please refer to the “Teekay Offshore’s Fleet” section of this release above and Appendix C for further details).

		Three Months Ended
		June 30, 2011
		(unaudited)
						Conventional
		Shuttle Tanker				Tanker				FSO				FPSO
(in thousands of U.S. dollars)		Segment				Segment				Segment				Segment				Total
Net revenues			113,471				30,915				14,626				42,561				201,573
Vessel operating expenses			42,109				6,012				7,411				19,665				75,197
Time-charter hire expense			18,182				—				—				—				18,182
Depreciation and amortization			28,704				5,557				2,991				8,911				46,163
Cash flow from vessel operations(1)			44,551				24,145				6,520				19,955				95,171

		Three Months Ended
		June 30, 2010
		(unaudited)
						Conventional
		Shuttle Tanker				Tanker				FSO				FPSO
(in thousands of U.S. dollars)		Segment				Segment				Segment				Segment(2)				Total
Net revenues			114,264				21,589				18,343				37,693				191,889
Vessel operating expenses			32,346				5,657				8,420				14,685				61,108
Time-charter hire expense			23,424				—				—				—				23,424
Depreciation and amortization			29,280				5,921				3,829				8,894				47,924
Cash flow from vessel operations(1)			49,343				14,793				9,404				15,513				89,053

Shuttle Tanker Segment

Cash flow from vessel operations from the Partnership’s shuttle tanker segment decreased to $44.6 million for the second quarter of 2011 compared to $49.3 million for the same period of the prior year, primarily due to higher vessel operating expenses mainly relating to higher crewing and repairs and maintenance costs, the termination of the time-charter of the Basker Spirit in the first quarter of 2011, and lower revenue as a result of fewer revenue days from vessels operating under contracts of affreightment. This was partially offset by an increase in revenues due to the September 2010 amended master agreement with Statoil, which includes the contribution from the two newbuilding shuttle tankers, the Amundsen Spirit and Nansen Spirit (which were acquired during the fourth quarter of 2010) and lower time-charter hire expense due to the redelivery of two in-chartered vessels.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership’s conventional tanker segment increased to $24.1 million in the second quarter of 2011 compared to $14.8 million for the same period of the prior year, primarily due to higher than normal net bunker revenues as a result of increases in bunker prices and a decrease in the number of off-hire days due to scheduled drydocking days.

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FSO Segment

Cash flow from vessel operations from the Partnership’s FSO segment decreased to $6.5 million in the second quarter of 2011 compared to $9.4 million for the same period of the prior year, primarily due to the sale of the Karratha Spirit FSO unit during the first quarter of 2011, and a lower charter rate for the Navion Saga that took effect in the second quarter of 2010 in accordance with its charter contract.

FPSO Segment

Cash flow from vessel operations from the Partnership’s FPSO segment increased to $20.0 million for the second quarter of 2011 compared to $15.5 million for the same period of the prior year, primarily due to the acquisition of the Rio das Ostras FPSO unit in October 2010, partially offset by higher vessel operating expenses.

Liquidity

As of June 30, 2011, the Partnership had total liquidity of $294.0 million, which consisted of $158.6 million in cash and cash equivalents and $135.4 million in undrawn revolving credit facilities.

Conference Call

The Partnership plans to host a conference call on August 12, 2011 at 1:00 p.m. (ET) to discuss its results for the second quarter of 2011. An accompanying investor presentation will be available on Teekay Offshore’s website at www.teekayoffshore.com prior to the start of the call. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:

	•		By dialing (866) 322-8032 or (416) 640-3406, if outside North America, and quoting conference ID code 4969510.
	•		By accessing the webcast, which will be available on Teekay Offshore’s website at www.teekayoffshore.com (the archive will remain on the website for a period of 30 days).

The conference call will be recorded and available until August 19, 2011. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 4969510.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK), is an international provider of marine transportation, oil production and storage services to the offshore oil industry. Teekay Offshore owns 40 shuttle tankers (including five chartered-in vessels and four committed newbuildings), five FSO units, 10 conventional oil tankers, and two FPSO units. Teekay Offshore also has rights to participate in certain other FPSO and shuttle tanker opportunities provided by its sponsor, Teekay Corporation.

Teekay Offshore’s common units trade on the New York Stock Exchange under the symbol “TOO”.

For Investor Relations enquiries contact:
Kent Alekson

Tel: +1 (604) 609-6442

Web site: www.teekayoffshore.com

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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands of U.S. dollars, except unit data)

		Three Months Ended												Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
		2011				2011				2010(1)				2011				2010(1)(2)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
REVENUES			234,145				233,771				226,838				467,916				460,417
OPERATING EXPENSES
Voyage expenses			32,572				25,465				34,949				58,037				69,903
Vessel operating expenses (3)			75,197				75,130				61,108				150,327				124,496
Time-charter hire expense			18,182				20,270				23,424				38,452				48,462
Depreciation and amortization			46,163				45,570				47,924				91,733				92,932
General and administrative (3)			18,157				18,730				16,347				36,887				32,981
Loss on sale of vessel			—				171				—				171				—
Write-down of vessel			8,194				900				—				9,094				—
Restructuring charge (4)			—				3,924				—				3,924				119
			198,465				190,160				183,752				388,625				368,893
Income from vessel operations			35,680				43,611				43,086				79,291				91,524
OTHER ITEMS
Interest expense			(8,890	)			(8,469	)			(9,326	)			(17,359	)			(19,206	)
Interest income			150				129				238				279				403
Realized and unrealized (loss) gain on derivative instruments (5)			(38,720	)			10,840				(57,863	)			(27,880	)			(82,338	)
Foreign exchange gain (loss) (6)			367				(799	)			2,249				(432	)			3,871
Income tax (expense) recovery			(3,037	)			(2,653	)			10,453				(5,690	)			17,364
Other income — net			1,159				1,310				1,409				2,469				3,890
Net (loss) income			(13,291	)			43,969				(9,754	)			30,678				15,508
Net (loss) income attributable to:
Non-controlling interests			(1,937	)			20,593				(7,572	)			18,656				3,277
Dropdown Predecessor (1)(2)			—				—				653				—				186
Partners			(11,354	)			23,376				(2,835	)			12,022				12,045
Limited partners’ units outstanding:
Weighted-average number of common units outstanding
- Basic and diluted			62,800,314				57,170,219				42,760,000				60,000,819				40,495,580
Total units outstanding at end of period			62,800,314				62,800,314				42,760,000				62,800,314				42,760,000

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		Three Months Ended												Six Months Ended
		June 30, 2011				March 31, 2011				June 30, 2010				June 30, 2011				June 30, 2010
Vessel operating expenses			(83	)			(184	)			(1,198	)			(267	)			(2,322	)
General and administrative			69				130				(840	)			199				(1,554	)

		Three Months Ended												Six Months Ended
		June 30, 2011				March 31, 2011				June 30, 2010				June 30, 2011				June 30, 2010
Realized (losses) gains relating to:
Interest rate swaps			(13,769	)			(13,702	)			(12,057	)			(27,471	)			(24,844	)
Foreign currency forward contract			1,204				418				(340	)			1,622				(495	)
			(12,565	)			(13,284	)			(12,397	)			(25,849	)			(25,339	)
Unrealized (losses) gains relating to:
Interest rate swaps			(26,969	)			20,765				(42,190	)			(6,204	)			(53,139	)
Foreign currency forward contracts			814				3,359				(3,276	)			4,173				(3,860	)
			(26,155	)			24,124				(45,466	)			(2,031	)			(56,999	)
Total realized and unrealized (losses) gains on non-designated derivative instruments			(38,720	)			10,840				(57,863	)			(27,880	)			(82,338	)

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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)

		As at				As at				As at
		June 30, 2011				March 31, 2011				December 31, 2010
		(unaudited)				(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents			158,644				123,422				166,483
Vessels held for sale			8,300				—				—
Other current assets			163,318				156,946				142,493
Vessels and equipment			2,302,656				2,218,025				2,247,323
Advances on newbuilding contracts			44,600				53,670				52,184
Other assets			71,468				75,501				78,267
Intangible assets			25,203				26,983				28,763
Goodwill			127,113				127,113				127,113
Total Assets			2,901,302				2,781,660				2,842,626
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities			90,121				101,491				101,287
Other current liabilities			183,793				145,511				113,183
Current portion of long-term debt			202,677				137,468				152,096
Long-term debt			1,714,458				1,667,768				1,565,044
Other long-term liabilities			144,718				117,483				140,842
Redeemable non-controlling interest			39,604				40,614				41,725
Equity:
Non-controlling interest			46,703				48,323				170,876
Partners’ equity			479,228				523,002				557,573
Total Liabilities and Equity			2,901,302				2,781,660				2,842,626

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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)

		Six Months Ended June 30,
		2011				2010 (1)
		(unaudited)				(unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net operating cash flow			152,506				147,017
FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt			311,472				81,600
Scheduled repayments of long-term debt			(69,429	)			(50,398	)
Prepayments of long-term debt			(50,360	)			(150,048	)
Advance from joint venture partner			14,500				—
Repayment of long-term debt relating to Dropdown Predecessor relating to Falcon Spirit			—				(32,834	)
Contribution by Teekay Corporation relating to acquisition of Rio das Ostras			2,000				—
Distribution to Teekay Corporation for the acquisition of Falcon Spirit			—				(11,295	)
Equity contribution from Teekay Corporation			—				5,020
Purchase of 49% interest in Teekay Offshore Operating L.P.			(160,000	)			—
Equity contribution from Teekay Corporation to Dropdown Predecessor relating to Falcon Spirit			—				805
Equity contribution from joint venture partner			2,250				333
Proceeds from issuance of common units			—				100,581
Expenses of equity offerings			(91	)			(5,043	)
Cash distributions paid by the Partnership			(61,335	)			(39,126	)
Cash distributions paid by subsidiaries to non-controlling interests			(19,642	)			(42,968	)
Other			—				(523	)
Net financing cash flow			(30,635	)			(143,896	)
INVESTING ACTIVITIES
Expenditures for vessels and equipment			(145,611	)			(4,813	)
Proceeds from sale of vessels and equipment			5,054				—
Investment in direct financing lease assets			370				(886	)
Direct financing lease payments received			10,477				11,607
Net investing cash flow			(129,710	)			5,908
(Decrease) increase in cash and cash equivalents			(7,839	)			9,029
Cash and cash equivalents, beginning of the period			166,483				109,407
Cash and cash equivalents, end of the period			158,644				118,436

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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A — SPECIFIC ITEMS AFFECTING NET (LOSS) INCOME
(in thousands of U.S. dollars)

Set forth below is a reconciliation of the Partnership’s unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net (loss) income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership’s financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership’s financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.

		Three Months Ended								Six Months Ended
		June 30, 2011				June 30, 2010				June 30, 2011				June 30, 2010
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Net (loss) income — GAAP basis			(13,291	)			(9,754	)			30,678				15,508
Net loss (income) attributable to non-controlling interests			1,937				7,572				(18,656	)			(3,277	)
Net income (loss) attributable to Dropdown Predecessor			—				(653	)			—				(186	)
Net (loss) income attributable to the partners			(11,354	)			(2,835	)			12,022				12,045
Add (subtract) specific items affecting net (loss) income:
Foreign exchange losses(1)			411				1,200				1,875				564
Foreign currency exchange losses resulting from hedging ineffectiveness (2)			14				2,052				68				3,912
Deferred income tax expense (recovery) relating to unrealized foreign exchange gains (3)			3,577				(10,997	)			10,096				(14,206	)
Unrealized losses on derivative instruments (4)			26,155				44,762				2,031				55,912
Loss on sale of vessel (5)			—				—				171				—
Write-down of vessel (6)			8,194				—				9,094				—
Restructuring charges and other(7)			—				3,634				4,873				3,753
Non-controlling interests’ share of items above			(810	)			(18,924	)			8,039				(22,943	)
Total adjustments			37,541				21,727				36,247				26,992
Adjusted net income attributable to the partners			26,187				18,892				48,269				39,037

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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B — RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in thousands of U.S. dollars)

Description of Non-GAAP Financial Measure — Distributable Cash Flow (DCF)

Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interest, non-cash items, estimated maintenance capital expenditures, gains and losses on vessel sales, unrealized gains and losses from derivatives, income (loss) from variable interest entities, non-cash income taxes, loss on write down of vessels and unrealized foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership’s capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership’s ability to make quarterly cash distributions. Distributable cash flow is not defined by GAAP and should not be considered as an alternative to net (loss) income or any other indicator of the Partnership’s performance required by GAAP. The table below reconciles distributable cash flow to net (loss) income for the quarter.

		Three Months Ended
		June 30, 2011
		(unaudited)
Net loss			(13,291	)
Add (subtract):
Depreciation and amortization			46,163
Write-down of vessel			8,194
Foreign exchange and other, net			1,579
Deferred income tax expense			2,680
Estimated maintenance capital expenditures			(25,793	)
Unrealized losses on non-designated derivative instruments (1)			26,155
Distributable Cash Flow before Non-Controlling Interest			45,687
Non-controlling interests’ share of DCF			(3,097	)
Distributable Cash Flow			42,590

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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C — SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)

		Three Months Ended June 30, 2011
		(unaudited)
		Shuttle				Conventional
		Tanker				Tanker				FSO				FPSO
		Segment				Segment				Segment				Segment				Total
Net revenues (1)			113,471				30,915				14,626				42,561				201,573
Vessel operating expenses			42,109				6,012				7,411				19,665				75,197
Time-charter hire expense			18,182				—				—				—				18,182
Depreciation and amortization			28,704				5,557				2,991				8,911				46,163
General and administrative			13,197				758				1,242				2,960				18,157
Write-down of vessel			—				8,194				—				—				8,194
Income from vessel operations			11,279				10,394				2,982				11,025				35,680

		Three Months Ended June 30, 2010
		(unaudited)
		Shuttle				Conventional
		Tanker				Tanker				FSO				FPSO
		Segment				Segment				Segment				Segment(2)				Total
Net revenues(1)			114,264				21,589				18,343				37,693				191,889
Vessel operating expenses			32,346				5,657				8,420				14,685				61,108
Time-charter hire expense			23,424				—				—				—				23,424
Depreciation and amortization			29,280				5,921				3,829				8,894				47,924
General and administrative			11,603				1,139				1,009				2,596				16,347
Income from vessel operations			17,611				8,872				5,085				11,518				43,086

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FORWARD LOOKING STATEMENTS

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements regarding: the Partnership’s future growth prospects, cash flows and distributions to unitholders; the timing of delivery of the four newbuilding shuttle tankers and expected future increase in the Partnership’s distributable cash flow as a result of the new long-term contract with BG in Brazil; the industry fundamentals for deepwater offshore oil production, storage and transportation; the potential for Teekay to offer additional vessels to the Partnership and the Partnership’s acquisition of any such vessels, including the Petrojarl Foinaven FPSO unit, the Petrojarl Cidade de Itajai FPSO unit, the Scott Spirit newbuilding Aframax shuttle tanker, and the newbuilding FPSO unit that will service the Knarr field under contract with BG Norge Limited; and the potential for the Partnership to acquire other vessels or offshore projects from Teekay or third parties. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; variability in shuttle tanker tonnage requirements under the Statoil master agreement; different-than-expected levels of oil production in the North Sea offshore fields; potential early termination of contracts, including the Rio das Ostras FPSO time-charter contract and the Statoil master agreement; failure of Teekay to offer to the Partnership additional vessels; the inability of the joint venture between Teekay and Odebrecht to secure new Brazil FPSO projects that may be offered for sale to the Partnership; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore’s general partner to acquire to acquire other vessels or offshore projects from from Teekay or third parties; the Partnership’s ability to raise financing for the BG newbuilding shuttle tankers and/or to purchase additional assets; failure to secure a new contract in excess of three years for the Scott Spirit shuttle tanker newbuilding; and other factors discussed in Teekay Offshore’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2010. The Partnership 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 Partnership’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.