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

TEEKAY LNG PARTNERS L.P.

(Exact name of Registrant as specified in its charter)

TK House
Bayside Executive Park
West Bay Street & Blake Road
P.O. Box AP-59212, Nassau, Bahamas
(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

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o		No þ

     If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82- o

 

 

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

INDEX

		PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Report of Independent Registered Public Accounting Firm			3
Unaudited Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2005 and 2004			4
Unaudited Consolidated Balance Sheets as at June 30, 2005 and December 31, 2004			5
Unaudited Consolidated Statement of Partners’ Capital/Stockholder Deficit for the six months ended June 30, 2005			6
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004			7
Notes to the Unaudited Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures about Market Risk			36
PART II: OTHER INFORMATION			38
SIGNATURES			39

ITEM 1 — FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Unitholders of
Teekay LNG Partners L.P.

We have reviewed the consolidated balance sheet of Teekay LNG Partners L.P. (successor to Teekay Luxembourg S.a.r.l.) and subsidiaries (or the Partnership) as of June 30, 2005 and the related consolidated statements of income (loss) for the three and six months ended June 30, 2005 and 2004 aggregated as follows:

Three months ended June 30, 2005

	•		April 1 to May 9, 2005
	•		May 10 to June 30, 2005

Three months ended June 30, 2004

	•		April 1 to April 30, 2004
	•		May 1 to June 30, 2004

Six months ended June 30, 2005

	•		January 1 to May 9, 2005
	•		May 10 to June 30, 2005

Six months ended June 30, 2004

	•		January 1 to April 30, 2004
	•		May 1 to June 30, 2004

We have also reviewed the consolidated statements of cash flows for the six months ended June 30, 2005 and 2004, and the changes in partners’ capital/stockholder deficit for the six months ended June 30, 2005 aggregated as follows:

Six months ended June 30, 2005

	•		December 31, 2004 to May 9, 2005
	•		May 10 to June 30, 2005

These financial statements are the responsibility of the Partnership’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Teekay Luxembourg S.a.r.l. (predecessor of Teekay LNG Partners L.P.) and subsidiaries as of December 31, 2004, the related consolidated statements of income, changes in stockholders’ equity (deficit) and cash flows for the nine months ended December 31, 2004 (not presented herein) and in our report dated February 28, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Vancouver, Canada, July 22, 2005		/s/ ERNST & YOUNG LLP Chartered Accountants

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES (Note 1)
(Successor to Teekay Luxembourg S.a.r.l.)

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. dollars, except unit and per unit data)

		Three Months Ended June 30,																Six Months Ended June 30,
		2005								2004								2005								2004
		April 1				May 10				April 1				May 1				January 1				May 10				January 1				May 1
		to				to				to				to				to				to				to				to
		May 9, 2005				June 30, 2005				April 30, 2004				June 30, 2004				May 9, 2005				June 30, 2005				April 30, 2004				June 30, 2004
		$				$				$				$				$				$				$				$
VOYAGE REVENUES			15,365				20,364				10,125				17,453				50,129				20,364				40,718				17,453
OPERATING EXPENSES
Voyage expenses			59				73				610				1,462				251				73				1,842				1,462
Vessel operating expenses			2,777				3,932				2,576				4,584				10,771				3,932				10,302				4,584
Depreciation and amortization			4,541				5,852				2,151				6,426				14,751				5,852				8,585				6,426
General and administrative			1,418				1,274				526				854				2,928				1,274				2,103				854
Total operating expenses			8,795				11,131				5,863				13,326				28,701				11,131				22,832				13,326
Income from vessel operations			6,570				9,233				4,262				4,127				21,428				9,233				17,886				4,127
OTHER ITEMS
Interest expense (notes 8 and 9)			(10,068	)			(8,196	)			(5,369	)			(11,070	)			(35,679	)			(8,196	)			(21,475	)			(11,070	)
Interest income			2,829				3,003				2,173				3,491				9,098				3,003				8,692				3,491
Foreign currency exchange gain (loss) (note 9)			7,296				22,993				11,007				(9,975	)			52,295				22,993				18,010				(9,975	)
Interest rate swaps gain			—				—				996				—				—				—				3,985				—
Other income (loss) – net (note 10)			(19,320	)			1,670				(11,611	)			604				(17,927	)			1,670				(10,934	)			604
Total other items			(19,263	)			19,470				(2,804	)			(16,950	)			7,787				19,470				(1,722	)			(16,950	)
Net income (loss)			(12,693	)			28,703				1,458				(12,823	)			29,215				28,703				16,164				(12,823	)
General partner’s interest in net income			—				9,233				—				—				—				9,233				—				—
Limited partners’ interest: (note 15)
Net income (loss)			(12,693	)			19,470				1,458				(12,823	)			29,215				19,470				16,164				(12,823	)
Net income (loss) per:
- Common unit (basic and diluted)			(0.54	)			0.64				0.06				(0.55	)			1.24				0.64				0.69				(0.55	)
- Subordinated unit (basic and diluted)			(0.54	)			0.64				0.06				(0.55	)			1.24				0.64				0.69				(0.55	)
- Total unit (basic and diluted)			(0.54	)			0.64				0.06				(0.55	)			1.24				0.64				0.69				(0.55	)
Weighted-average number of units outstanding:
- Common units (basic and diluted)			8,734,572				15,638,072				8,734,572				8,734,572				8,734,572				15,638,072				8,734,572				8,734,572
- Subordinated units (basic and diluted)			14,734,572				14,734,572				14,734,572				14,734,572				14,734,572				14,734,572				14,734,572				14,734,572
- Total units (basic and diluted)			23,469,144				30,372,644				23,469,144				23,469,144				23,469,144				30,372,644				23,469,144				23,469,144

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

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES (Note 1)
(Successor to Teekay Luxembourg S.a.r.l.)

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)

		As at				As at
		June 30,				December 31,
		2005				2004
		$				$
ASSETS
Current
Cash and cash equivalents			55,875				156,410
Restricted cash – current (note 5)			83,240				82,387
Accounts receivable			3,576				7,197
Prepaid expenses and other assets			2,758				3,449
Total current assets			145,449				249,443
Restricted cash – long-term (note 5)			303,800				352,725
Vessels and equipment (note 9)
At cost, less accumulated depreciation of $10,947 (December 31, 2004 - $5,829)			361,216				366,334
Vessels under capital leases, at cost, less accumulated depreciation of $20,237 (December 31, 2004 - $9,597) (note 5)			619,083				629,569
Advances on newbuilding contracts (note 14)			172,448				49,165
Total vessels and equipment			1,152,747				1,045,068
Other assets			11,061				20,394
Intangible assets – net (note 6)			173,792				178,457
Goodwill (note 6)			39,279				39,279
Total assets			1,826,128				1,885,366
LIABILITIES AND PARTNERS’ CAPITAL/STOCKHOLDER DEFICIT
Current
Accounts payable			2,590				11,411
Accrued liabilities			19,073				8,240
Current portion of long-term debt (note 9)			22,449				22,368
Current obligation under capital leases (note 5)			80,679				87,687
Advances from affiliate (note 8)			520				465,695
Total current liabilities			125,311				595,401
Long-term debt (note 9)			381,186				764,758
Long-term obligation under capital leases (note 5)			481,240				513,361
Other long-term liabilities			14,985				134,848
Total liabilities			1,002,722				2,008,368
Commitments and contingencies (notes 12 and 14)
Minority interest (note 14)			140,554				—
Partners’ capital/Stockholder deficit
Partners’ capital			745,361				—
Capital stock			—				180
Accumulated deficit			—				(79,504	)
Accumulated other comprehensive loss (note 11)			(62,509	)			(43,678	)
Total partners’ capital/stockholder deficit			682,852				(123,002	)
Total liabilities and partners’ capital/stockholder deficit			1,826,128				1,885,366

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

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES (Note 1)
(Successor to Teekay Luxembourg S.a.r.l.)

UNAUDITED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL/STOCKHOLDER DEFICIT
(in thousands of U.S. dollars and units)

						PARTNERS’ CAPITAL
						Limited Partners
																										Accumulated
		Stockholder																								Other
		Deficit																				General				Comprehensive
		(Predecessor)				Common								Subordinated								Partner				Loss				Total
		$				Units				$				Units				$				$				$				$
Balance as at December 31, 2004			(123,002	)			—				1				—				—				—				—				(123,001	)
Net income (January 1 to May 9, 2005)			29,215				—				—				—				—				—				—				29,215
Unrealized loss on derivative instruments (note 13)			(22,874	)			—				—				—				—				—				—				(22,874	)
Reclassification adjustment for loss on derivative instruments included in net income (note 13)			14,359				—				—				—				—				—				—				14,359
Sale of the Santiago Spirit (note 12)			(3,115	)			—				—				—				—				—				—				(3,115	)
Balance as at May 9, 2005			(105,417	)			—				1				—				—				—				—				(105,416	)
Equity contribution by Teekay Shipping Corporation (note 1)			105,417				8,734				211,788				14,735				357,318				11,614				(52,194	)			633,943
Proceeds from initial public offering of limited partnership interests, net of offering costs of $15,863 (note 2)			—				6,900				135,937				—				—				—				—				135,937
Issuance of units to non-employee directors (note 2)			—				4				—				—				—				—				—				—
Net income (May 10 – June 30, 2005)			—				—				10,025				—				9,445				9,233				—				28,703
Unrealized loss on derivative instruments (note 13)			—				—				—				—				—				—				(11,916	)			(11,916	)
Reclassification adjustment for loss on derivative instruments included in net income (note 13)			—				—				—				—				—				—				1,601				1,601
Balance as at June 30, 2005			—				15,638				357,751				14,735				366,763				20,847				(62,509	)			682,852

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

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)

		Six Months Ended June 30,
		2005				2004
		$				$
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income			57,918				3,341
Non-cash items:
Depreciation and amortization			20,603				15,011
Gain on sale of marketable securities			—				(85	)
Loss (gain) on sale of other assets			(186	)			11,922
Deferred income taxes			1,500				(1,745	)
Foreign currency exchange gain			(79,014	)			(6,718	)
Interest rate swaps gain			—				(3,985	)
Loss from settlement of interest rate swaps			7,820				—
Write-off of capitalized loan costs			7,462				—
Accrued interest and other – net			7,464				(253	)
Change in non-cash working capital items related to operating activities			1,458				2,038
Net operating cash flow			25,025				19,526
FINANCING ACTIVITIES
Proceeds from long-term debt			10,900				7,144
Scheduled repayments of long-term debt			(5,600	)			(12,236	)
Scheduled repayments of capital lease obligations			(3,346	)			(2,578	)
Prepayments of long-term debt			(339,438	)			(20,575	)
Proceeds from issuance of common units			141,327				—
Interest rate swap settlement costs			(143,295	)			—
Advances from affiliate			353,069				306,048
Advances to affiliate			(184,302	)			—
Decrease in restricted cash			10,440				—
Other			—				4,226
Net financing cash flow			(160,245	)			282,029
INVESTING ACTIVITIES
Expenditures for vessels and equipment			(48,921	)			(10,487	)
Purchase of Teekay Shipping Spain, S.L.			—				(297,303	)
Proceeds from sale of vessels and equipment			83,606				—
Proceeds from sale of marketable securities			—				899
Proceeds from sale of other assets			—				6,251
Other			—				(727	)
Net investing cash flow			34,685				(301,367	)
Increase (Decrease) in cash and cash equivalents			(100,535	)			188
Cash and cash equivalents, beginning of the period			156,410				21,328
Cash and cash equivalents, end of the period			55,875				21,516

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

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

1.		Basis of Presentation
		On April 30, 2004, Teekay Shipping Corporation through its subsidiary, Teekay Luxembourg S.a.r.l. (or Luxco), acquired all of the outstanding shares of Naviera F. Tapias S.A. and its subsidiaries (or Tapias) and renamed it Teekay Shipping Spain S.L. (or Teekay Spain). Teekay Shipping Corporation acquired Teekay Spain for $298.2 million in cash, plus the assumption of debt and remaining newbuilding commitments.
		On November 3, 2004, Teekay Shipping Corporation formed Teekay LNG Partners L.P., a Marshall Islands limited partnership (or the Partnership), to own and operate the liquefied natural gas (or LNG) and Suezmax crude oil marine transportation businesses conducted by Luxco and its subsidiaries (collectively, the Predecessor). On May 6, 2005, Teekay Shipping Corporation contributed all of the outstanding shares of Luxco, all but $54.9 million of the notes receivable from Luxco, and all of the equity interests of Granada Spirit L.L.C., which owns the Suezmax tanker, the Granada Spirit, to the Partnership in connection with the Partnership’s initial public offering of common units, which represent limited partner interests in the Partnership. The $54.9 million note receivable was subsequently repaid by the Partnership.
		In exchange for these shares and assets, Teekay Shipping Corporation received 8,734,572 common units and 14,734,572 subordinated units, which represent a 75.7% limited partner interest in the Partnership. The Partnership’s general partner, Teekay GP L.L.C. (or the General Partner) received a 2% general partner interest and all of the incentive distribution rights in the Partnership. Teekay GP L.L.C. is a wholly-owned subsidiary of Teekay Shipping Corporation.
		The accompanying unaudited consolidated interim financial statements include the accounts of Teekay Spain and its subsidiaries for periods prior to April 30, 2004. The consolidated financial statements include the accounts of Luxco and its subsidiaries, which includes Teekay Spain, for periods subsequent to April 30, 2004 and prior to May 10, 2005. The results for the periods subsequent to April 30, 2004 reflect the comprehensive revaluation of all assets (including intangible assets and goodwill) and liabilities of Teekay Spain at their fair values on the date of acquisition. For periods subsequent to May 10, 2005, the accompanying unaudited consolidated interim financial statements include the accounts of Teekay LNG Partners L.P., its subsidiaries, which include, among others, Luxco and Teekay Spain, and Teekay Nakilat Holdings Corporation, a variable interest entity for which the Partnership is the primary beneficiary. The transfer of the shares of and notes receivable from Luxco and equity interests of Granada Spirit L.L.C. to the Partnership represented a reorganization of entities under common control and consequently was recorded at historical cost. The book value of these assets on their transfer was $633.9 million.
		Prior to the acquisition of Teekay Spain by Teekay Shipping Corporation on April 30, 2004, Teekay Spain disposed of three businesses previously held in subsidiaries and unrelated to the marine transportation operations purchased by Teekay Shipping Corporation. The accompanying unaudited consolidated interim financial statements do not include the results of these three unrelated businesses. Proceeds received by Teekay Spain from the sale of these businesses have been accounted for as an equity contribution. In addition, immediately preceding the closing of the acquisition, Teekay Spain sold to its then controlling stockholder marketable securities, real estate, a yacht and other assets. The accompanying unaudited consolidated interim financial statements include results related to these assets.
		The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures required by generally accepted accounting principles in the United States for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with the consolidated financial statements of Luxco for the nine months ended December 31, 2004 and Teekay Spain for the year ended December 31, 2004 contained in the Partnership’s Prospectus filed with the U.S. Securities and Exchange Commission on May 6, 2005 in connection with the initial public offering. In the opinion of the General Partner’s management, these interim statements reflect all adjustments (consisting only of normal recurring accruals) necessary to present fairly, in all material respects, the Partnership’s consolidated financial position, results of operations, changes in partners’ capital/stockholder deficit and cash flows for the interim periods presented. The results of operations for the interim periods presented

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

		are not necessarily indicative of those for a full fiscal year. Significant intercompany balances and transactions have been eliminated.
2.		Initial Public Offering
		On May 10, 2005, the Partnership completed its initial public offering (or the Offering) of 6.9 million common units at a price of $22.00 per unit. This included 0.9 million common units sold to the underwriters in connection with the exercise of their over-allotment option. The proceeds received by the Partnership from the Offering and the use of those proceeds are summarized as follows:

Proceeds received:
Sale of 6,900,000 common units at $22.00 per unit		$	151,800
Use of proceeds from sale of common units:
Underwriting and structuring fees		$	10,473
Professional fees and other offering expenses to third parties			5,390
Repayment of advances from Teekay Shipping Corporation			129,400
Working capital			6,537
		$	151,800

		Concurrently with the Offering, the Partnership awarded 700 common units as compensation to each of the Partnership’s five non-employee directors. These common units reverse vest equally over a three-year period.
3.		Acquisition of Teekay Shipping Spain S.L.
		On April 30, 2004, the Predecessor acquired all of the outstanding shares of Tapias and renamed it Teekay Shipping Spain S.L. The Predecessor acquired Teekay Spain for $298.2 million in cash, plus the assumption of debt and remaining newbuilding commitments. Management of the General Partner believes the acquisition of Teekay Spain’s business has provided the Partnership with a strategic platform from which to expand its presence in the LNG shipping sector and immediate access to reputable LNG operations. The Partnership anticipates this will benefit it in acquiring future LNG projects. These benefits contributed to the recognition of goodwill. Teekay Spain’s results of operations have been consolidated with the Partnership’s results commencing May 1, 2004.
		As at June 30, 2005, the Partnership’s LNG fleet consisted of seven vessels, including three vessels currently under construction that Teekay Shipping Corporation has agreed to sell all of its interest in to the Partnership upon delivery of the first vessel, which is scheduled for the fourth quarter of 2006 (please see Note 14(b)). All seven vessels are contracted under long-term, fixed-rate time charters to international energy companies. As at June 30, 2005, the Partnership’s conventional crude oil tanker fleet consisted of five Suezmax tankers, including one newbuilding which delivered in July 2005. All five Suezmax tankers are contracted under long-term, fixed-rate time charters with a major Spanish oil company.

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

The following table summarizes the fair value of the assets acquired and liabilities of the Partnership at April 30, 2004.

		As at
		April 30, 2004
		$
ASSETS
Cash, cash equivalents and short-term restricted cash			85,092
Other current assets			7,415
Vessels and equipment			821,939
Restricted cash – long-term			311,664
Other assets – long-term			15,355
Intangible assets subject to amortization:
Time-charter contracts (weighted-average useful life of 19.2 years)			183,052
Goodwill ($3.6 million Suezmax tanker segment and $35.7 million LNG carrier segment)			39,279
Total assets acquired			1,463,796
LIABILITIES
Current liabilities			98,428
Long-term debt			668,733
Obligations under capital leases			311,011
Other long-term liabilities			87,439
Total liabilities assumed			1,165,611
Net assets acquired (cash consideration)			298,185

4.		Segment Reporting
		The Partnership has two reportable segments: its Suezmax tanker segment and its LNG carrier segment. The Partnership’s Suezmax tanker segment consists of conventional crude oil tankers operating on fixed-rate time-charter contracts. Prior to December 2004, it also included one Suezmax tanker operating on the spot market. The Partnership’s LNG carrier segment consists of LNG carriers subject to fixed-rate time charters. Segment results are evaluated based on income from vessel operations. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Partnership’s consolidated financial statements.
		The following tables include results for these segments for the interim periods presented in these financial statements.

		Three Months Ended June 30, 2005
		April 1 to May 9, 2005												May 10 to June 30, 2005
		Suezmax				LNG								Suezmax				LNG
		Tanker				Carrier								Tanker				Carrier
		Segment				Segment				Total				Segment				Segment				Total
		$				$				$				$				$				$
Voyage revenues			4,746				10,619				15,365				6,204				14,160				20,364
Voyage expenses			58				1				59				72				1				73
Vessel operating expenses			1,151				1,626				2,777				1,763				2,169				3,932
Depreciation and amortization			1,317				3,224				4,541				1,553				4,299				5,852
General and administrative (1)			709				709				1,418				667				607				1,274
Income from vessel operations			1,511				5,059				6,570				2,149				7,084				9,233
Expenditures for vessels and equipment			—				—				—				4,959				—				4,959

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

		Three Months Ended June 30, 2004
		April 1 to April 30, 2004												May 1 to June 30, 2004
		Suezmax				LNG								Suezmax				LNG
		Tanker				Carrier								Tanker				Carrier
		Segment				Segment				Total				Segment				Segment				Total
		$				$				$				$				$				$
Voyage revenues			6,122				4,003				10,125				9,454				7,999				17,453
Voyage expenses			602				8				610				1,347				115				1,462
Vessel operating expenses			1,799				777				2,576				2,947				1,637				4,584
Depreciation and amortization			1,512				639				2,151				3,679				2,747				6,426
General and administrative (1)			394				132				526				638				216				854
Income from vessel operations			1,815				2,447				4,262				843				3,284				4,127
Expenditures for vessels and equipment			267				80				347				4,651				314				4,965

		Six Months Ended June 30, 2005
		January 1 to May 9, 2005												May 10 to June 30, 2005
		Suezmax				LNG								Suezmax				LNG
		Tanker				Carrier								Tanker				Carrier
		Segment				Segment				Total				Segment				Segment				Total
		$				$				$				$				$				$
Voyage revenues			15,246				34,883				50,129				6,204				14,160				20,364
Voyage expenses			202				49				251				72				1				73
Vessel operating expenses			4,800				5,971				10,771				1,763				2,169				3,932
Depreciation and amortization			4,005				10,746				14,751				1,553				4,299				5,852
General and administrative (1)			1,464				1,464				2,928				667				607				1,274
Income from vessel operations			4,775				16,653				21,428				2,149				7,084				9,233
Expenditures for vessels and equipment			43,962				—				43,962				4,959				—				4,959

		Six Months Ended June 30, 2004
		January 1 to April 30, 2004												May 1 to June 30, 2004
		Suezmax				LNG								Suezmax				LNG
		Tanker				Carrier								Tanker				Carrier
		Segment				Segment				Total				Segment				Segment				Total
		$				$				$				$				$				$
Voyage revenues			24,708				16,010				40,718				9,454				7,999				17,453
Voyage expenses			1,809				33				1,842				1,347				115				1,462
Vessel operating expenses			7,196				3,106				10,302				2,947				1,637				4,584
Depreciation and amortization			6,047				2,538				8,585				3,679				2,747				6,426
General and administrative (1)			1,577				526				2,103				638				216				854
Income from vessel operations			8,079				9,807				17,886				843				3,284				4,127
Expenditures for vessels and equipment			5,039				483				5,522				4,651				314				4,965

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

A reconciliation of total segment assets to total assets presented in the unaudited consolidated interim balance sheet is as follows:

		As at				As at
		June 30,				December 31,
		2005				2004
		$				$
Total assets of the Suezmax tanker segment			264,563				287,058
Total assets of the LNG carrier segment			1,492,903				1,423,191
Cash and cash equivalents and marketable securities			55,875				156,410
Accounts receivable and other assets			12,787				18,707
Consolidated total assets			1,826,128				1,885,366

5.		Capital Lease Obligations and Restricted Cash
		Capital Leases
		Suezmax Tankers. As at June 30, 2005, the Partnership was a party to capital leases on four Suezmax tankers. Under the terms of the lease arrangements, which include the Partnership’s contractual right to full operation of the vessels pursuant to bareboat charters, the Partnership is required to purchase these vessels at the end of their respective lease terms for a fixed price. As at June 30, 2005, the weighted-average interest rate implicit in these capital leases was 7.7%. As at June 30, 2005, the remaining commitments under these capital leases, including the purchase obligations, approximated $210.6 million, including imputed interest of $26.3 million, repayable as follows:

Year		Commitment
2005		$	10.4	million
2006			145.8	million
2007			3.9	million
2008			3.9	million
2009			3.8	million
Thereafter			42.8	million

LNG Carriers. As at June 30, 2005, the Partnership was a party to capital leases on two LNG carriers, which are structured as “Spanish tax leases”. Under the terms of the Spanish tax leases, the Partnership will purchase these vessels at the end of their respective lease terms in 2006 and 2011, both of which purchase obligations have been fully funded with restricted cash deposits described below. As at June 30, 2005, the weighted-average interest rate implicit in the Spanish tax leases was 5.7%. As at June 30, 2005, the commitments under these capital leases, including the purchase obligations, approximated 365.3 million Euros ($441.9 million), including imputed interest of 53.2 million Euros ($64.3 million), repayable as follows:

Year		Commitment
2005		77.1 million Euros ($93.3 million)
2006		123.2 million Euros ($149.0 million)
2007		23.3 million Euros ($28.1 million)
2008		24.4 million Euros ($29.5 million)
2009		25.6 million Euros ($31.0 million)
Thereafter		91.7 million Euros ($111.0 million)

During 2003, these two LNG carriers were sold for aggregate proceeds of $399.2 million and leased back on terms described above. The sale of these vessels resulted in a gain of $70.5 million, which has been deferred and is being amortized over the remaining estimated useful life of the vessels.

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

		Restricted cash
		Under the terms of the Spanish tax leases for the two LNG carriers, the Partnership is required to have on deposit with financial institutions an amount of cash that, together with interest earned on the deposit, will equal the remaining amounts owing under the leases, including the obligations to purchase the LNG carriers at the end of the lease periods. This amount was 317.8 million Euros ($384.4 million) and 309.5 million Euros ($421.6 million) as at June 30, 2005 and December 31, 2004, respectively. These cash deposits are restricted to being used for capital lease payments and have been fully funded with term loans (please see Note 9) and a Spanish government grant. The interest rates earned on the deposits approximate the interest rates implicit in the Spanish tax leases. As at June 30, 2005 and December 31, 2004, the weighted-average interest rate earned on the deposits was 5.3%.
		The Partnership also maintains restricted cash deposits relating to certain term loans, which cash totaled $2.6 million and $13.5 million as at June 30, 2005 and December 31, 2004, respectively.
6.		Intangible Assets and Goodwill
		As at June 30, 2005, intangible assets consisted of:

Weighted-

Average

Gross

Net

Amortization

Carrying

Accumulated

Carrying

Period

Amount

Amortization

Amount

(years)

$

$

$

Time-charter contracts

19.2

182,522

8,760

173,792

All intangible assets were recognized on April 30, 2004 (please see Note 3). Amortization expense of intangible assets for the interim periods presented is as follows:

	Three Months Ended June 30,														Six Months Ended June 30,
	2005						2004								2005								2004
	April 1		May 10				April 1				May 1				January 1				May 10				January 1				May 1
	to		to				to				to				to				to				to				to
	May 9, 2005		June 30, 2005				April 30, 2004				June 30, 2004				May 9, 2005				June 30, 2005				April 30, 2004				June 30, 2004
	$		$				$				$				$				$				$				$
	1,037			1,296				—				1,763				3,369				1,296				—				1,763

The Partnership’s intangible assets are being amortized on a straight-line basis over the term of the time- charter contracts.

The carrying amount of goodwill as at June 30, 2005 and December 31, 2004 for the Partnership’s reporting segments is as follows:

			Suezmax				LNG
			Tanker				Carrier
			Segment				Segment				Total
			$				$				$
	Balance as at June 30, 2005 and December 31, 2004 (note 3)			3,648				35,631				39,279

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

7.		Cash Flows
		Cash interest paid by the Partnership during the six months ended June 30, 2005 and 2004 totaled $41.1 million and $21.1 million, respectively.
		Income taxes paid by the Partnership during the six months ended June 30, 2005 and 2004 totaled $3.2 million and $1.1 million, respectively.
8.		Advances from Affiliate

		June 30,				December 31,
		2005				2004
		$				$
Euro-denominated Demand Promissory Notes			—				371,073
Euro-denominated Participating Loan			—				94,622
Other (non-interest bearing)			520				—
Total			520				465,695

During the period from January 1, 2004 to May 10, 2005, Teekay Shipping Corporation made loans, net of repayments, to a subsidiary of the Partnership totaling 574.7 million Euros ($740.2 million) for the purchase of Teekay Spain (please see Note 3), for the repayment of terms loans associated with two of the Partnership’s LNG carriers (please see Note 9) and to settle interest rate swaps (please see Note 13). These loans, including 2.0 million Euros ($2.6 million) of unpaid accrued interest, were contributed by Teekay Shipping Corporation to the Partnership in connection with the Offering.

Interest payments on these Euro-denominated loans were based on the 12-month EURIBOR (June 30, 2005 – 2.1% and December 31, 2004 – 2.4%) plus a margin with the exception of one loan of 67.1 million Euros ($86.5 million), which was based on a fixed rate of 5.4%. At June 30, 2005 and at December 31, 2004, these margins ranged between 1.7% and 2.5%. The interest expense incurred on these loans for the interim periods presented is as follows:

Three Months Ended June 30,														Six Months Ended June 30,
2005						2004								2005								2004
April 1		May 10				April 1				May 1				January 1				May 10				January 1				May 1
to		to				to				to				to				to				to				to
May 9, 2005		June 30, 2005				April 30, 2004				June 30, 2004				May 9, 2005				June 30, 2005				April 30, 2004				June 30, 2004
$		$				$				$				$				$				$				$
2,526			—				—				2,438				7,325				—				—				2,438

9.

Long-Term Debt

		June 30,				December 31,
		2005				2004
		$				$
U.S. Dollar-denominated Term Loans due through 2005			14,462				343,390
Euro-denominated Term Loans due through 2023			389,173				443,736
			403,635				787,126
Less current portion			22,449				22,368
Total			381,186				764,758

The Partnership has several term loans outstanding, which, as at June 30, 2005, totaled $14.5 million of U.S. Dollar-denominated loans and 321.7 million Euros ($389.2 million) of Euro-denominated loans. The Euro-denominated loans were used to make restricted cash deposits that fully fund payments under capital

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES
(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

leases (please see Note 5). Immediately preceding the Offering, the Partnership repaid $337.3 million of term loans associated with two LNG carriers.

In connection with the Offering, one of the Partnership’s LNG carrier-owning subsidiaries amended its term loan agreement to provide for a $100 million senior secured revolving credit facility (or the Revolver). As at June 30, 2005, this facility was undrawn. The Revolver may be used by the Partnership for general partnership purposes and to fund cash distributions. Under the Revolver, the Partnership is required to reduce all borrowings used to fund cash distributions to zero for a period of at least 15 consecutive days during any 12-month period. The Revolver is available to the Partnership until September 2009.

All Euro-denominated term loans and Euro-denominated advances from affiliates (please see Note 8) are revalued at the end of each period using the then prevailing Euro/U.S. Dollar exchange rate. Due substantially to this revaluation, the Partnership recognized foreign exchange gains (losses) during the interim periods presented as follows:

	Three Months Ended June 30,														Six Months Ended June 30,
	2005						2004								2005								2004
	April 1		May 10				April 1				May 1				January 1				May 10				January 1				May 1
	to		to				to				to				to				to				to				to
	May 9,		June 30,				April 30,				June 30,				May 9,				June 30,				April 30,				June 30,
	2005		2005				2004				2004				2005				2005				2004				2004
	$		$				$				$				$				$				$				$
	7,296			22,993				11,007				(9,975	)			52,295				22,993				18,010				(9,975	)

Interest payments on the U.S. Dollar-denominated term loans and the Revolver are based on LIBOR plus a margin. Interest payments on the Euro-denominated term loans are based on EURIBOR plus a margin. At June 30, 2005 and December 31, 2004, these margins ranged between 0.5% and 1.3%.

The weighted-average effective interest rate for debt outstanding at June 30, 2005 was 3.6% (U.S. Dollar-denominated debt) and 3.3% (Euro-denominated debt). These rates do not reflect the effect of related interest rate swaps that the Partnership has used to hedge certain of its floating-rate debt (please see Note 13).

The term loans reduce in monthly payments with varying maturities through 2023. All term loans of the Partnership are collateralized by first-preferred mortgages on the vessels to which the loans relate, together with certain other collateral and guarantees from Teekay Spain.

The Partnership’s obligations under the Revolver are secured by a first-priority mortgage on one of its LNG carriers, the Hispania Spirit, and a pledge of certain shares of the subsidiary operating the carrier.

The aggregate long-term debt principal repayments required for periods subsequent to June 30, 2005 are $18.4 million (2005), $8.3 million (2006), $8.9 million (2007), $9.5 million (2008), $10.2 million (2009) and $348.4 million (thereafter).

All of the Partnership’s vessel financing is arranged on a vessel-by-vessel basis, and each financing is secured by the applicable vessel. The Partnership’s capital leases do not contain financial or restrictive covenants other than those relating to operation and maintenance of the vessels. The Partnership’s term loans relating to its LNG carriers contain covenants that require the maintenance of restricted cash deposits, unencumbered liquidity and minimum tangible net worth. In addition, the Partnership’s shipowning subsidiaries may not, in addition to other things, pay dividends or distributions if the Partnership is in default under the term loans.

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

The Partnership’s term loan for one of its LNG carriers, the Catalunya Spirit, contains covenants that require the maintenance of a minimum liquidity of 5.0 million Euros and to provide for a 1.2 million Euro restricted cash deposit annually.

10.

Other Income (Loss) – Net

		Three Months Ended June 30,																Six Months Ended June 30,
		2005								2004								2005								2004
		April 1				May 10				April 1				May 1				January 1				May 10				January 1				May 1
		to				to				to				to				to				to				to				to
		May 9,				June 30,				April 30,				June 30,				May 9,				June 30,				April 30,				June 30,
		2005				2005				2004				2004				2005				2005				2004				2004
		$				$				$				$				$				$				$				$
Loss on cancellation of interest rate swaps			(7,820	)			—				—				—				(7,820	)			—				—				—
Gain (loss) on sale of assets			—				186				(11,922	)			—				—				186				(11,922	)			—
Write-off of capitalized loan costs			(7,462	)			—				—				—				(7,462	)			—				—				—
Income tax recovery (expense)			(4,004	)			1,672				161				573				(2,648	)			1,672				645				573
Miscellaneous			(34	)			(188	)			150				31				3				(188	)			343				31
Other income (loss) – net			(19,320	)			1,670				(11,611	)			604				(17,927	)			1,670				(10,934	)			604

11.

Comprehensive Income (Loss)

		Three Months Ended June 30,																Six Months Ended June 30,
		2005								2004								2005								2004
		April 1				May 10				April 1				May 1				January 1				May 10				January 1				May 1
		to				to				to				to				to				to				to				to
		May 9,				June 30,				April 30,				June 30,				May 9,				June 30,				April 30,				June 30,
		2005				2005				2004				2004				2005				2005				2004				2004
		$				$				$				$				$				$				$				$
Net income (loss)			(12,693	)			28,703				1,458				(12,823	)			29,215				28,703				16,164				(12,823	)
Other comprehensive income (loss):
Unrealized loss on derivative instruments			(24,882	)			(11,916	)			—				(9,420	)			(22,874	)			(11,916	)			—				(9,420	)
Reclassification adjustment for loss on derivative instruments included in net income			9,246				1,601				—				4,428				14,359				1,601				—				4,428
Unrealized gain on marketable securities			—				—				—				—				—				—				467				—
Reclassification adjustment for gain on available-for- sale securities included in net income			—				—				—				—				—				—				(55	)			—
Comprehensive income (loss)			(28,329	)			18,388				1,458				(17,815	)			20,700				18,388				16,576				(17,815	)

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

(Successor to Teekay Luxembourg S.a.r.l.)

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data)

12.

Related Party Transactions

	a)		On May 6, 2005, Teekay Shipping Corporation contributed all of the outstanding shares of Luxco, all but $54.9 million of the notes receivable from Luxco, and all of the outstanding equity interests of Granada Spirit L.L.C., which owns the Suezmax tanker, the Granada Spirit, to the Partnership in connection with the Partnership’s initial public offering on May 10, 2005 of common units, which represent limited partner interests in the Partnership. The $54.9 million note receivable was subsequently repaid by the Partnership.
	b)		The Partnership has entered into an omnibus agreement with Teekay Shipping Corporation, the General Partner and others governing, among other things, when the Partnership and Teekay Shipping Corporation may compete with each other and certain rights of first offer on LNG carriers and Suezmax tankers.
	c)		The Partnership and certain of its operating subsidiaries have entered into services agreements with certain subsidiaries of Teekay Shipping Corporation pursuant to which the Teekay Shipping Corporation subsidiaries will provide the Partnership with administrative, advisory, technical and strategic consulting services for a reasonable, arms-length fee. During the period from May 10, 2005 to June 30, 2005, the Partnership incurred $0.2 million of these costs.
	d)		The General Partner was reimbursed by the Partnership for all expenses necessary or appropriate for the conduct of the Partnership’s business. During the period from May 10, 2005 to June 30, 2005, the Partnership incurred $0.1 million of these costs.
	e)		The Partnership has entered into an agreement with Teekay Shipping Corporation to purchase all of its interest (which will not be less than 70%) in Teekay Nakilat Holdings Corporation (or Teekay Nakilat), which in turn owns three LNG newbuildings and the related 20-year time charters. The purchase will occur upon the delivery of the first newbuilding, which is scheduled during the fourth quarter of 2006. The estimated purchase price of a 100% interest in Teekay Nakilat is approximately $124.5 million, plus the assumption of approximately $468.0 million of long-term debt. This purchase agreement has resulted in the consolidation of Teekay Nakilat as a variable interest entity (please see Note 14).
	f)		Following Teekay Shipping Corporation’s contribution of the Granada Spirit LLC to the Partnership on the closing of the Offering, the Partnership entered into a short-term, fixed-rate time charter and vessel sales agreement with a subsidiary of Teekay Shipping Corporation for the Granada Spirit.
			On May 26, 2005, the Partnership sold the Granada Spirit to a subsidiary of Teekay Shipping Corporation for $20.6 million, resulting in a gain on sale of $0.2 million. Net voyage revenues earned under the time-charter agreement with Teekay Shipping Corporation were $0.5 million.
	g)		In early 2005, the Partnership completed the sale of the Santiago Spirit (a newly constructed, double-hulled Suezmax tanker delivered in March 2005) to a subsidiary of Teekay Shipping Corporation for $70.0 million. The resulting $3.1 million loss on sale, net of income taxes, has been accounted for as an equity distribution.

TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES