UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)



¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

x

ý	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2014~~

2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period fromto

Commission file number 1-33867

TEEKAY TANKERS LTD.

(Exact name of Registrant as specified in its charter)

Republic of The Marshall Islands

(Jurisdiction of incorporation or organization)

4^th

4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda

Telephone: (441) 298-2530

(Address and telephone number of principal executive offices)

Edith Robinson

4^th

4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda

Telephone: (441) 298-2530

Fax: (441) 292-3931

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered, or to be registered, pursuant to Section 12(b) of the Act.



Title of each class		Name of each exchange on which registered
Class A common stock, par value of $0.01 per share		New York Stock Exchange

Securities registered, or to be registered, pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

~~None~~

Indicate the number of outstanding shares of each issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

~~95,343,091~~

136,071,379 shares of Class A common stock, par value of $0.01 per share.

~~16,720,945~~

23,232,757 shares of Class B common stock, par value of $0.01 per share.

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No xý

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ¨ No xý

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes xý No ¨

Indicate by check mark if the registrant (1) has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes xý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~filer.~~filer, or an emerging growth company. See ~~definition~~the definitions of ~~“accelerated~~“large accelerated filer," "accelerated filer,” and ~~large accelerated filer”~~"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨ Accelerated Filer xý Non-Accelerated Filer ¨ Emerging growth company ¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 13(a) of the Exchange Act. ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



U.S. GAAP xý	International Financial Reporting Standards as issued by the International Accounting Standards Board ¨	Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No xý

TEEKAY TANKERS LTD.

INDEX TO REPORT ON FORM 20-F

INDEX



~~PART I~~		PAGE
PART I
Item 1.		Identity of Directors, Senior Management and Advisors		4	7

Item 2.		Offer Statistics and Expected Timetable		4	7

Item 3.		Key Information	7
		4

		Selected Financial Data	7
		4

		Risk Factors	12
		7

		Tax Risks		16	22

Item 4.		Information on the Company	23
		17

		A. History and Development of the Company	23
		17

		B. Business Overview	24
		17

		Our Fleet	25
		18

		Business Strategies	27
		19

		Our Charters and Participation in the Gemini Suezmax Pool, Teekay Aframax Pools and Taurus Tankers LR2 Pool and Norient Product Pool	28
		19

		Industry and Competition	29
		20

		Safety, Management of Ship Operations and Administration	31
		22

		Risk of Loss, Insurance and Risk Management	31
		22

		Flag, Classification, Audits and Inspections	32
	Regulations	23	33

		~~Regulations~~		23

		C. Organizational Structure	38
		27

		D. Property, Plant and Equipment	38
		27

		E. Taxation of the Company	38
		27

		United States Taxation	38
		27

		Marshall Islands Taxation		28	39

Item 4A.		Unresolved Staff Comments		28	40

Item 5.		Operating and Financial Review and Prospects	40
	General	28	40

		~~General~~		29

		Significant Developments in 2014 and 2015	40
		29

		Our Charters	42
		30

		Important Financial and Operational Terms and Concepts	42
		30

		Items You Should Consider When Evaluating Our Results	43
	Results of Operations	31 44
	Liquidity and Capital Resources	53
	Commitments and Contingencies	56
	Off-Balance Sheet Arrangements	57
	Critical Accounting Estimates	57
Item 6.	Directors, Senior Management and Employees	59



	~~Results of Operations~~		32

	~~Liquidity and Capital Resources~~		37

	~~Commitments and Contingencies~~		40

	~~Off-Balance Sheet Arrangements~~		40

	~~Critical Accounting Estimates~~		40

~~Item 6.~~	~~Directors, Senior Management and Employees~~		43

	Directors and Executive Officers of Teekay Tankers Ltd.	60
	43

	Compensation of Directors and Senior Management	61
	44

	Long-Term Incentive Program	62
	44

Board Practices
63
44
Crewing and Staff
64
45
Share Ownership
46
64
Item 7.
Major Shareholders and Related Party Transactions
64
46
A. Major Shareholders
64
46
B. Related Party Transactions
47
65
Item 8.
Financial Information
71
52
Consolidated Financial Statements and Notes
71
52
Legal Proceedings
71
52
Dividend Policy
71
52
Significant Changes
52
71
Item 9.
The Offer and Listing
52
71
Item 10.
Additional Information
72
53
Articles of Incorporation and Bylaws
72
53
Material Contracts
72
53
Exchange Controls and Other Limitations Affecting Security Holders
73
53
Material U.S. Federal Income Tax Considerations
73
53
Non-United States Tax Considerations
77
57
Documents on Display
57
77
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
78
57
Foreign Currency Fluctuation Risk
78
57
Interest Rate Risk
78
58
Spot Tanker Market Rate Risk
58
78
Item 12.
Description of Securities Other than Equity Securities
79
PART II
58
~~PART II.~~
Item 13.
Defaults, Dividend Arrearages and Delinquencies
58
79
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
58
79
Item 15.
Controls and Procedures
79
59
Management’s Report on Internal Control over Financial Reporting
59
79
Item 16A.
Audit Committee Financial Expert
59
80
Item 16B.
Code of Ethics
59
80
Item 16C.
Principal Accountant Fees and Services
59
80
Item 16D.
Exemptions from the Listing Standards for Audit Committees
60
81
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
60
81
Item 16F.
Change in Registrant’s Certifying Accountant
81
Item 16G.
Corporate Governance
81
Item 16H.
Mine Safety Disclosure
81
PART III
60
Item 17.
~~Item 16G.~~
~~Corporate Governance~~Financial Statements
60


~~Item 16H.~~		~~Mine Safety Disclosure~~		60

~~PART III.~~

Item ~~17.~~ 18.		Financial Statements	81
Item 19.	Exhibits	82
Signature		60

~~Item 18.~~		~~Financial Statements~~84		60

~~Item 19.~~		~~Exhibits~~		61

~~Signature~~				63

PART I

This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in this report.

Unless otherwise indicated, references in this Annual Report to “Teekay Tankers Ltd.,~~” “we,” “us”~~ the "Company", "we”, "us" and ~~“our”~~"our" and similar terms refer to Teekay Tankers Ltd. and/or one or more of its subsidiaries, except that those terms, when used in this Annual Report in connection with the common stock described herein, shall mean specifically Teekay Tankers Ltd. References in this Annual Report to “Teekay Corporation” refer to Teekay Corporation and/or any one or more of its subsidiaries.

In addition to historical information, this Annual Report contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements relate to future events and our operations, objectives, expectations, performance, financial condition and intentions. When used in this Annual Report, the words “expect,” “intend,” “plan,” “believe,” “anticipate,” “estimate” and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this Annual Report include, in particular, statements regarding:

our future financial condition, or results of operations and ~~our~~ future revenues, expenses and ~~expenses;~~

capital expenditures, and our expected financial flexibility and ability to fund capital expenditures and pursue acquisitions and other expansion opportunities;

our dividend policy and ability to pay dividends on shares of our common stock;

the crude oil and refined product tanker market fundamentals, including the balance of supply and demand in the tanker market, ~~estimated growth~~changes in the world tanker fleet, ~~estimated growth~~changes in global oil demand and crude oil tanker demand, the rate of global oil production, and changes in long-haul crude tanker movements, tanker fleet utilization and spot tanker ~~rates and potential for floating storage;~~

rates;

changes in the production of or demand for oil or refined products;

changes in trading patterns significantly affecting overall vessel tonnage requirements; greater or less than anticipated levels of tanker newbuilding orders and deliveries and greater or less than anticipated rates of tanker scrapping or use of tankers for floating storage;

our compliance with, and the effect on our business and operating results of, covenants under our term loans and credit ~~facilities and our ability to refinance our credit facility due in 2017;~~

facilities;

future oil prices, production and refinery capacity;

the effect of lower global oil prices, including the potential impact on oil stockpiling, refinery throughput, bunker fuel prices, and oil futures markets;

~~our future financial position and ability to take advantage of growth opportunities in the global conventional tanker market;~~

~~tanker market conditions and fundamentals, including the balance of supply and demand in these markets and spot tanker charter rates and oil production;~~

~~the ability of Tanker Investments Ltd. (or TIL) to benefit from the cyclical tanker market;~~

our expectations about the availability of vessels to purchase, the expected costs and time it may take to construct and deliver newbuildings, or the useful lives of our vessels;

planned capital expenditures and the ability to fund capital expenditures;

the ability to leverage Teekay Corporation’s relationships and reputation in the shipping industry;

the expected benefits of participation in vessel pooling arrangements;

the effectiveness of our chartering strategy in capturing upside opportunities and reducing downside risks, including our ability to take advantage of the tanker market recovery;

the expected benefits of our acquisition in 2015 of the ship-to-ship transfer business, including the ability of the acquired business to provide stable cash flow to help us partially manage the cyclicality of the tanker market, and our ability to leverage this acquisition to grow our presence in, and take advantage of the expected increased volumes moving in and out of, the U.S. Gulf, and to increase our market share in the ship-to-ship global supports business;

our expectation regarding the U.S. Gulf lightering trade and the impact on this trade from the lifted ban on U.S. crude oil exports;

our expectation that our U.S. Gulf lightering business will complement our spot trading strategy in the Caribbean to the U.S. Gulf market, allowing Teekay to better optimize the deployment of the fleet that we trade in this region through better scheduling flexibility and utilization;

our ability to execute our ship-to-ship support services strategy by accessing opportunities created by oil market arbitrages and oil traders optimizing their USD ton/mile on cargoes;

our ability to execute our lightering strategy by leveraging our existing fleet and acumen to provide a full service lightering business model to customers;

the impact of alternative methods of delivering crude oil on our lightering business;

the ability to maximize the use of vessels, including the redeployment of vessels no longer under time charters;

our expectation regarding our vessels’ ability to perform to specifications and maintain their hire rates;

operating expenses, availability of crew, number of off-hire days, dry-docking requirements and insurance costs;

the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards applicable to our business;

the anticipated impact on us and the shipping industry, and timing of ~~future~~ regulatory changes or environmental liabilities;

expenses under service agreements with other affiliates of Teekay Corporation;

the anticipated taxation of our company and of distributions to our ~~stockholders;~~

shareholders;

our expectations as to any impairment of our vessels;

construction and delivery delays in the tanker industry generally;

customers’ increasing emphasis on environmental and safety concerns;

meeting our going concern requirements and our liquidity needs, including anticipated funds and sources of financing for liquidity and capital expenditure needs and the sufficiency of cash ~~flows;~~

flows, and our estimation that we will have sufficient liquidity for at least a one-year period;

our ability to refinance existing debt obligations, to raise additional debt and capital to fund capital expenditures and negotiate extensions or redeployments of existing assets;

the future valuation or impairment of goodwill;

our use of interest rate swaps to reduce interest rate exposure;

the expected effect of off-balance sheet arrangements;

our hedging activities relating to foreign exchange, interest rate and spot market risks;

the ability of counterparties to our derivative contracts to fulfill their contractual obligations;

the delivery timing of new charter-in vessels;

changes in or additions to applicable industry laws and regulations, including Regulation (EU) No 1257/2013, which imposes rules regarding ship recycling and management of hazardous materials on vessels; and the timing of implementation of new laws and regulations;

our expectations regarding payments made on behalf of our co-obligors in connection with the loan arrangements in which certain other subsidiaries of Teekay Corporation are also borrowers;

our position that we are not a passive foreign investment company;

our business strategy and other plans and objectives for future operations;

our ability to ~~pay dividends on~~enforce our ~~common stock;~~arbitration award against STX Offshore & Shipbuilding Co. Ltd.; and

continued material variations in the period-to-period fair value of our derivative instruments.

Forward-looking statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to, those factors discussed below in Item 3 – Key Information: Risk Factors and other factors detailed from time to time in other reports we file with or furnish to the U.S. Securities and Exchange Commission (or theSEC).

We do not intend to revise any forward-looking statements in order to reflect any change in our expectations or events or circumstances that may subsequently arise. You should carefully review and consider the various disclosures included in this Annual Report and in our other filings made with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

~~Item 1.Identity of Directors, Senior Management and Advisors~~

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

~~Item 2.Offer Statistics and Expected Timetable~~

Item 2. Offer Statistics and Expected Timetable

Not applicable.

~~Item 3.Key Information~~


Item 3.	Key Information

Selected Financial Data

Set forth below is selected consolidated financial and other data of Teekay Tankers Ltd. and its subsidiaries for fiscal years ~~2010~~2012 through ~~2014,~~2016, which have been derived from our consolidated financial statements. The following table should be read together with, and is qualified in its entirety by reference to, Item 5 – Operating and Financial Review and Prospects included herein, and the historical financial statements and accompanying notes and the Report of Independent Registered Public Accounting Firm thereon (which is included herein), with respect to the fiscal years ~~2014, 2013~~2016, 2015 and ~~2012.~~

2014.

From time to time we have purchased vessels from Teekay ~~Corporation.~~Corporation (or Teekay) and from Teekay Offshore Partners L.P. (or TOO), an entity controlled by Teekay. During the fiscal years ~~2010~~2012 through ~~2014,~~2016, we acquired from Teekay ~~Corporation~~and TOO a total of 1815 conventional oil and product tankers of varying ~~size.~~sizes. These acquisitions were deemed to be business acquisitions between entities under common control. Accordingly, we have accounted for these transactions in a manner similar to the pooling of interest method whereby our consolidated financial statements prior to the date these vessels were acquired by us are retroactively adjusted to include the results of these acquired vessels.

The periods retroactively adjusted include all periods that we and the acquired vessels were both under the common control of Teekay ~~Corporation~~ and had begun operations. As a result, our consolidated statements of ~~loss~~income (loss) for the years ended December 31, ~~2012, 2011~~2015, 2014, 2013, and ~~2010~~2012 reflect the results of operations of these vessels, referred to herein as the ~~Dropdown Predecessor,~~"Entities under Common Control," as if we had acquired them when each respective vessel began operations under the ownership of ~~Teekay Corporation.~~Teekay. Please refer to Item 5 – Operating and Financial Review and Prospects: Items You Should Consider When Evaluating Our Results of Operations and Item 18 – Financial Statements: Note 13 – ~~Summary~~Acquisition of ~~Significant Accounting Policies.~~

Entities under Common Control.

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (orGAAP).

   Years Ended December 31,
   2010 2011 2012 2013 2014
   (in thousands, except share, per share, and fleet data)
Income Statement Data:
Revenues
   $ 240,350 $ 215,072 $ 197,429 $ 170,087 $ 235,593
Voyage expenses⁽¹⁾
   (5,301 ) (3,449 ) (4,618 ) (8,337 ) (9,984 )
Vessel operating expenses⁽²⁾
   (89,083 ) (92,543 ) (96,160 ) (91,667 ) (93,022 )
Time-charter hire expense⁽³⁾
   —   (4,046 ) (3,950 ) (6,174 ) (22,160 )
Depreciation and amortization
   (77,317 ) (74,482 ) (72,365 ) (47,833 ) (50,152 )
General and administrative⁽²⁾
   (9,187 ) (7,671 ) (7,985 ) (12,594 ) (11,959 )
Vessel impairment and net (loss) gain on sale of vessels
   (1,864 ) (58,034 ) (352,546 ) (71 ) 9,955
Goodwill impairment charge
   —   (19,294 ) —   —   —


Income (loss) from operations
57,598 (44,447 ) (340,195 ) 3,411 58,271
Interest expense
(51,140 ) (40,539 ) (20,009 ) (10,023 ) (8,741 )
Interest income
100 71 50 158 287
Realized and unrealized loss on derivative instruments
(28,684 ) (27,783 ) (7,963 ) (1,524 ) (1,712 )
Equity (loss) income
—   —   (1 ) 854 5,228
Other (expenses) income
(1,016 ) (377 ) (2,063 ) (1,014 ) 3,809


Net (loss) income
$ (23,142 ) $ (113,075 ) $ (370,181 ) $ (8,138 ) $ 57,142


Earnings (loss) per share⁽⁴⁾
- Basic
$ 0.37 $ (0.15 ) $ (4.54 ) $ (0.10 ) $ 0.67
- Diluted
$ 0.37 $ (0.15 ) $ (4.54 ) $ (0.10 ) $ 0.66
Balance Sheet Data (at end of year):
Cash and cash equivalents
14,889 18,566 26,341 25,646 162,797
Investment in term loans and interest receivable on term loans
117,825 118,598 119,385 136,061 —
Vessels and equipment⁽⁵⁾
1,435,478 1,310,496 885,992 859,308 828,291
Total assets
1,678,423 1,641,469 1,105,656 1,097,529 1,165,359
Total debt⁽⁶⁾
1,158,801 999,930 739,293 755,957 666,458
Common stock and additional paid in capital
481,336 588,441 672,560 673,217 802,650
Total equity
440,791 578,164 302,183 284,672 455,723
Cash Flow Data:
Cash and cash equivalents provided by (used in):
Operating cash flow
58,402 24,020 27,542 6,202 13,603
Financing cash flow
48,051 (16,006 ) (13,905 ) (1,097 ) 13,721
Investing cash flow
(101,996 ) (4,337 ) (5,862 ) (5,800 ) 109,827
Number of outstanding shares of common stock at the end of the period
51,986,744 61,876,744 83,591,030 83,591,030 112,064,036
Other Financial Data:
Net revenues⁽⁷⁾
235,049 211,623 192,811 161,750 225,609
EBITDA⁽⁸⁾
105,215 1,875 (277,857 ) 49,560 115,748
Adjusted EBITDA⁽⁸⁾
135,763 106,986 82,652 53,039 106,896
Capital expenditures
Expenditures for vessels and equipment
(11,987 ) (4,337 ) (2,518 ) (1,904 ) (2,063 )
Expenditures for dry docking
(9,311 ) (3,197 ) (7,003 ) (19,245 ) (17,072 )
Fleet Data:
Average number of tankers⁽⁹⁾
Suezmax
10.0 10.0 10.0 10.0 10.0
Aframax
13.0 12.7 13.0 12.6 13.4
Product
6.0 6.0 6.0 6.0 7.6
VLCC
—      —      —      0.5 0.8



	Years Ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except share, per share, and fleet data)
Income Statement Data:
Revenues		$526,896			$514,193			$250,002			$180,015			$207,384
Voyage expenses⁽¹⁾	(55,241		)	(19,816		)	(11,223		)	(8,337		)	(4,618		)
Vessel operating expenses ⁽²⁾	(182,598		)	(137,164		)	(98,403		)	(91,667		)	(96,166		)
Time-charter hire expense ⁽³⁾	(59,647		)	(74,898		)	(22,160		)	(6,174		)	(3,950		)
Depreciation and amortization	(104,149		)	(73,760		)	(53,292		)	(50,973		)	(75,492		)
General and administrative expenses ⁽²⁾	(18,211		)	(17,354		)	(12,821		)	(13,522		)	(8,857		)
(Loss) gain on sale of vessels	(20,594		)	771			9,955			(71		)	—
Asset impairments	—			—			—			—			(352,546		)
Restructuring charges	—			(4,772		)	—			—			—
Income (loss) from operations	86,456			187,200			62,058			9,271			(334,245		)
Interest expense	(29,784		)	(17,389		)	(9,128		)	(10,454		)	(20,677		)
Interest income	117			107			287			158			50
Realized and unrealized loss on derivative instruments	(964		)	(1,597		)	(1,712		)	(1,524		)	(7,963		)
Equity income (loss)	13,101			14,411			5,228			854			(1		)
Other (expense) income	(6,071		)	(3,097		)	3,805			(1,014		)	(2,064		)
Net income (loss)		$62,855			$179,635			$60,538			($2,709	)		($364,900	)
Earnings (loss) per share ⁽⁴⁾
- Basic		$0.40			$1.36			$0.67			($0.10	)		($4.54	)
- Diluted		$0.40			$1.35			$0.66			($0.10	)		($4.54	)
Balance Sheet Data (at end of year):
Cash and cash equivalents	68,108			96,417			162,797			25,646			26,341
Investment in term loans and interest receivable on term loans	—			—			—			136,061			119,385
Vessels and equipment ⁽⁵⁾	1,605,372			1,767,925			897,237			931,374			961,198
Total assets	1,932,425			2,169,476			1,241,172			1,168,023			1,178,293
Total debt ⁽⁶⁾	953,928			1,191,235			718,960			810,217			799,300
Common stock and additional paid in capital	1,103,304			1,094,874			802,650			673,217			672,560
Total equity	920,624			877,461			478,278			300,831			314,730
Cash Flow Data:
Cash and cash equivalents provided by (used in):
Operating cash flows	209,976			166,789			20,940			14,753			35,165
Financing cash flows	(275,109		)	648,800			6,405			(9,648		)	(21,528		)
Investing cash flows	36,824			(881,969		)	109,806			(5,800		)	(5,862		)
Number of outstanding shares of common stock at the end of the year	159,304,136			156,030,618			112,064,036			83,591,030			83,591,030
Other Financial Data:
Net revenues ⁽⁷⁾	471,655			494,377			238,779			171,678			202,766
EBITDA ⁽⁸⁾	196,671			270,677			122,671			58,560			(268,781		)
Adjusted EBITDA⁽⁸⁾	229,319			279,076			113,819			62,039			91,728
Capital expenditures
Expenditures for vessels and equipment	(9,226		)	(848,229		)	(2,084		)	(1,904		)	(2,518		)
Expenditures for dry docking	(9,340		)	(39,617		)	(17,072		)	(19,245		)	(7,003		)
Fleet Data:
Average number of tankers ⁽⁹⁾
Suezmax	22.0			13.4			10.0			10.0			10.0
Aframax	21.8			22.0			15.4			14.6			15.0
Product	9.2			12.2			7.6			6.0			6.0
VLCC	0.5			0.5			0.8			0.5			—


(1)	Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Voyage expenses also include certain costs associated with full service lightering activities which include: short-term in-charter expenses, bunker fuel expenses and other port expenses.

(2)

Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils, and communication expenses among others. In order to more closely align our presentation to that of many of our peers, the cost of ship management activities of $13.9 million, $8.4 million, $6.0 million, and $5.6 million, for ~~year~~the years ended December 31, 2016, 2015, 2014 and 2013, respectively, has been presented in vessel operating expenses. Prior to 2013, we included these amounts in general and administrative expenses. All such costs incurred in comparative periods have been reclassified from general and administrative expenses to vessel operating ~~expenses to conform to the presentation adopted in the current period.~~expenses. The amounts reclassified for the ~~years~~year ended December 31, ~~2013,~~ 2012 ~~2011 and 2010 were $5.6 million,~~was $7.0 ~~million, $8.5 million and $7.4 million, respectively.~~

million.


(3)	Time-charter hire expense includes vessel operating lease expense incurred to charter-in vessels.

(4)

Earnings (loss) per share is determined by dividing (a) net income (loss) after adding (deducting) ~~adding~~ the amount of net income (loss) attributable to the ~~Dropdown Predecessor~~Entities under Common Control by (b) the weighted-average number of shares outstanding during the applicable period. The calculation of weighted-average number of shares includes the total Class A and total Class B shares outstanding during the applicable period. The computation of diluted earnings per share assumes the exercise of all dilutive stock options and restricted stock units using the treasury stock method. The computation of diluted loss per share does not assume such exercises.


(5)	Vessels and equipment consists of (a) vessels, at cost less accumulated depreciation, and (b) advances on any newbuildings.


(6)	Total debt includes the current and long-term portion of debt, and amounts due to affiliates.

(7)

Net revenues is a non-GAAP financial measure. Consistent with general practice in the shipping industry, we use “net revenues” (defined as revenues less voyage expenses) as a measure of equating revenues generated from voyage charters to revenues generated from time charters, which assists us in making operating decisions about the deployment of our vessels and their performance. Under time charters the charterer pays the voyage expenses, whereas under voyage charters the ship-owner pays these expenses. Some voyage expenses are fixed, and the remainder can be estimated. If we, as the ship owner, pay the voyage expenses, we typically pass the approximate amount of these expenses on to our customers by charging higher rates under the contract to them. As a result, although revenues from different types of contracts may vary, the net revenues are comparable across the different types of contracts. We principally use net revenues ~~a non-GAAP financial measure,~~ because it provides more meaningful information to us than revenues, the most directly comparable GAAP financial measure. Net revenues are also widely used by investors and analysts in the shipping industry for comparing financial performance between companies and to industry averages. The following table reconciles net revenues with revenues:

   Years Ended December 31,
   2010    2011    2012    2013    2014
Revenues
   $ 235,053       $ 203,749       $ 185,930       $ 162,410       $ 226,475
Interest income from investment in term loans
   5,297    11,323    11,499    7,677    9,118
Voyage expenses
   (5,301 )    (3,449 )    (4,618 )    (8,337 )    (9,984 )










Net revenues
$ 235,049    $ 211,623    $ 192,811    $ 161,750    $ 225,609



	Years Ended December 31,
	2016			2015			2014			2013			2012
Revenues	$	526,896		$	514,193		$	240,884		$	172,338		$	195,885
Interest income from investment in term loans	—			—			9,118			7,677			11,499
Voyage expenses	(55,241		)	(19,816		)	(11,223		)	(8,337		)	(4,618		)
Net revenues	$	471,655		$	494,377		$	238,779		$	171,678		$	202,766

(8)

EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA before ~~net loss (gain)~~(loss) gain on sale of vessels, ~~goodwill impairment, and vessel impairment and~~asset impairments, realized ~~and~~losses on interest rate swaps, unrealized ~~loss~~gains on derivative instruments, dilution gain on share issuance by the equity accounted investment and share of the above items in non-consolidated equity accounted investments. Both measures are used as supplemental financial measures by management and by external users of our financial statements, such as investors, as discussed below:

Financial and operating ~~performance.~~performance. EBITDA and Adjusted EBITDA assist our management and investors by increasing the comparability of our fundamental performance from period to period and against the fundamental performance of other companies in our industry that provide EBITDA or Adjusted EBITDA-based information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest expense, taxes, depreciation or amortization (or other items in determining Adjusted EBITDA), which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including EBITDA and Adjusted EBITDA as financial and operating measures benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength and health in assessing whether to continue to hold shares of our Class A common stock.

Liquidity. EBITDA and Adjusted EBITDA allow us to assess the ability of assets to generate cash sufficient to service debt, pay dividends and undertake capital expenditures. By eliminating the cash flow effect resulting from our existing capitalization and other items such as dry-docking expenditures, working capital changes and foreign currency exchange gains and losses, EBITDA and Adjusted EBITDA provide consistent measures of our ability to generate cash over the long term. Management uses this information as a significant factor in determining (a) our proper capitalization (including assessing how much debt to incur and whether changes to the capitalization should be made) and (b) whether to undertake material capital expenditures and how to finance them, all in light of our dividend policy. Use of EBITDA and Adjusted EBITDA as liquidity measures also permits investors to assess the fundamental ability of our business to generate cash sufficient to meet cash needs, including dividends on shares of our Class A common stock.

Neither EBITDA nor Adjusted EBITDA ~~which are non-GAAP measures,~~ should be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA as presented in this Annual Report may not be comparable to similarly titled measures of other companies.

   Years Ended December 31,
   2010    2011    2012    2013    2014
Reconciliation of “Adjusted EBITDA” to “Net (loss) income”

Net (loss) income
   $ (23,142 )    $ (113,075 )    $ (370,181 )    $ (8,138 )    $ 57,142
Depreciation and amortization
   77,317    74,482    72,365    47,833    50,152
Interest expense, net of interest income
   51,040    40,468    19,959    9,865    8,454










EBITDA
$ 105,215 $ 1,875 $ (277,857 ) $ 49,560 $ 115,748










Vessel impairment and net loss (gain) on sale of vessels
1,864 58,034 352,546 71 (9,955 )
Goodwill impairment
—   19,294 —   —   —
Realized and unrealized loss on derivative instruments
28,684 27,783 7,963 1,524 1,712
Fair value on initial recognition of stock purchase warrant
—   —   —   —   (3,420 )
Dilution gain on equity accounted investment
—   —   —   —   (2,054 )
Adjustments related to equity accounted investments
—   —   —   1,884 4,865










Adjusted EBITDA
$ 135,763 $ 106,986 $ 82,652 $ 53,039 $ 106,896

   Years Ended December 31,
   2010    2011    2012    2013    2014
Reconciliation of “Adjusted EBITDA” to “Net operating cash flow”

Net operating cash flow
   $ 58,402    $ 24,020    $ 27,542    $ 6,202    $ 13,603
Interest expense, net of interest income
   51,040    40,468    19,959    9,865    8,454
Expenditures for dry docking
   9,311    3,197    7,003    19,245    17,072
Realized loss on derivative instruments
   14,859    39,021    9,543    9,887    9,993
Change in working capital
   1,961    833    19,794    6,586    51,679
Other cash flows, net
   190    (553 )    (1,189 )    (630 )    6,704
Fair value on initial recognition of stock purchase warrant
   —      —      —      —      (3,420 )
Dilution gain on equity accounted investment
   —      —      —      —      (2,054 )
Adjustments related to equity accounted investments
   —      —      —      1,884    4,865










Adjusted EBITDA
$ 135,763 $ 106,986 $ 82,652 $ 53,039 $ 106,896

The following table reconciles our historical consolidated EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and our historical consolidated Adjusted EBITDA to net operating cash flow, the most directly comparable GAAP financial measure.



	Years Ended December 31,
	2016			2015			2014			2013			2012
Reconciliation of “Adjusted EBITDA” to “Net income (loss)”
Net income (loss)	$	62,855		$	179,635		$	60,538		$	(2,709	)	$	(364,900	)
Depreciation and amortization	104,149			73,760			53,292			50,973			75,492
Interest expense, net of interest income	29,667			17,282			8,841			10,296			20,627
EBITDA	$	196,671		$	270,677		$	122,671		$	58,560		$	(268,781	)
Loss (gain) on sale of vessels	20,594			(771		)	(9,955		)	71			—
Asset impairments	—			—			—			—			352,546
Realized loss on interest rate swaps	12,797			9,790			9,993			9,887			9,543
Unrealized gain on derivative instruments	(9,679		)	(8,193		)	(8,281		)	(8,363		)	(1,580		)
Fair value on initial recognition of stock purchase warrant	—			—			(3,420		)	—			—
Dilution gain on equity accounted investment	—			—			(2,054		)	—			—
Adjustments related to equity accounted investments ⁽ⁱ⁾	8,936			7,573			4,865			1,884			—
Adjusted EBITDA	$	229,319		$	279,076		$	113,819		$	62,039		$	91,728



	Years Ended December 31,
	2016			2015		2014			2013			2012
Reconciliation of “Adjusted EBITDA” to “Net operating cash flow”
Net operating cash flow	$	209,976		$	166,789	$	20,940		$	14,753		$	35,165
Interest expense, net of interest income	29,667			17,282		8,841			10,296			20,627
Expenditures for dry docking	8,608			39,617		17,072			19,245			7,003
Realized loss on interest rate swaps	12,797			9,790		9,993			9,887			9,543
Change in working capital	(44,496		)	25,880		50,904			6,633			20,609
Other cash flows, net	3,831			12,145		6,678			(659		)	(1,219		)
Fair value on initial recognition of stock purchase warrant	—			—		(3,420		)	—			—
Dilution gain on equity accounted investment	—			—		(2,054		)	—			—
Adjustments related to equity accounted investments⁽ⁱ⁾	8,936			7,573		4,865			1,884			—
Adjusted EBITDA	$	229,319		$	279,076	$	113,819		$	62,039		$	91,728

(i)

The following table reflects certain non-GAAP adjustments to the results of our equity accounted investments. The adjusted results should not be considered as an alternative to any measure of financial performance or liquidity presented in accordance with GAAP. Adjustments to equity investments include some, but not all, items that affect equity income and these measures and adjustments may vary among other companies, and may not be comparable to adjustments to similarly titled measures of other companies. When using Adjusted EBITDA as a measure of liquidity it should be noted that this measure includes the Adjusted EBITDA from our equity accounted for investments. We do not have control over the operations, nor do we have any legal claim to the revenue and expenses of our equity accounted for investments. Consequently, the cash flow generated by our equity accounted for investments may not be available for use by us in the period generated.

Adjustments relating to equity income from our equity accounted investments are as follows:



	Years Ended December 31,
	2016		2015			2014			2013			2012

Depreciation and amortization	5,926		4,535			2,947			1,136			—
Interest expense, net of interest income	2,870		2,769			1,427			444			—
Realized and unrealized loss on derivative instruments	115		344			416			341			—
Foreign exchange loss (gain)	25		(75		)	226			—			—
Other	—		—			(151		)	(37		)	—
Adjustments related to equity accounted investments	$	8,936	$	7,573		$	4,865		$	1,884		$	—


(9)	Average number of tankers consists of the average number of vessels that were in our possession during a period, including time-chartered in vessels, the vessel owned by the High-Q joint venture and vessels of the ~~Dropdown Predecessor.~~ Entities under Common Control.

Risk Factors

Some of the following risks relate principally to the ~~industry~~industries in which we operate and to our business in general. Other risks relate principally to the securities market and to ownership of our common stock. The occurrence of any of the events described in this section could materially and adversely affect our business, financial condition, operating results and ability to pay ~~distributions~~dividends on, and the trading price of our common stock.

Our ability to repay or refinance debt obligations and to fund our capital expenditures will depend on certain financial, business and other factors, many of which are beyond our control. To the extent we are able to finance these obligations and expenditures with cash from operations or by issuing debt or common shares, our ability to make cash dividends may be diminished or our financial leverage may increase or our shareholders may be diluted. Our business may be adversely affected if we need to access other sources of funding.

To fund our existing and future debt obligations and capital expenditures, we may be required to use existing liquidity, cash from operations, incur borrowings, raise capital through the sale of assets or ownership interests in certain assets or joint venture entities, debt or additional equity securities and/or seek to access other financing sources. Our access to potential funding sources and our future financial and operating performance will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control.

If we are unable to access additional financing arrangements and generate sufficient cash flow to meet our debt, capital expenditure and other business requirements, we may be forced to take actions such as:

restructuring our debt;

seeking additional debt or equity capital;

selling additional assets or equity interests in certain assets or joint ventures;

further reducing cash distributions;

reducing, delaying or cancelling business activities, acquisitions, investments or capital expenditures; or

seeking bankruptcy protection.

Such measures might not be successful, and additional debt or equity capital may not be available on acceptable terms or enable us to meet our debt, capital expenditure and other obligations. Some of such measures may adversely affect our business and reputation. In addition, credit agreements may restrict our ability to implement some of these measures.

Use of cash from operations for capital purposes will reduce cash available for dividends to shareholders. The ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions in general. Even if we are successful in obtaining necessary funds, the terms of such financings could limit our ability to pay cash dividends to shareholders or operate our business as currently conducted. In addition, incurring additional debt may significantly increase interest expense and financial leverage, and issuing additional equity securities may result in significant shareholder dilution and would increase the aggregate amount of cash required to maintain quarterly dividends. The sale of certain assets would reduce cash from operations and the cash available for shareholders.

Our primary liquidity needs in the next few years are to refinance loans as they mature and to make scheduled repayments of debt, in addition to paying debt service costs, quarterly dividends on equity, operating expenses and dry docking expenditures and funding general working capital requirements. We anticipate that our primary sources of funds in the next few years will be existing liquidity, cash flows from operations, bank debt or other sources of financing and equity issuances.

The cyclical nature of the tanker industry may lead to volatile changes in charter rates, and significant fluctuations in the utilization of our vessels, which may adversely affect our earnings.

Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of and demand for tanker capacity and changes in the supply of and demand for oil and oil products. The cyclical nature of the tanker industry may cause significant increases or decreases in the revenues we earn from our vessels and may also cause significant increases or decreases in the value of our vessels. If the tanker market is depressed, our earnings may decrease. Our exposure to industry business cycles is more acute because of our exposure to the spot tanker market, which is more volatile than the tanker industry generally. Our ability to operate profitably in the spot market and to recharter our other vessels upon the expiration or termination of their charters will depend upon, among other factors, economic conditions in the tanker market.

The factors affecting the supply of and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

Key factors that influence the supply of tanker capacity include:

environmental concerns and regulations;

the number of newbuilding deliveries;

the scrapping rate of older vessels;

conversion of tankers to other uses; and

the number of vessels that are out of service.

Key factors that influence demand for tanker capacity include:

supply of oil and oil products;

demand for oil and oil products;

regional availability of refining capacity;

global and regional economic and political conditions;

the distance oil and oil products are to be moved by sea; and

changes in seaborne and other transportation patterns.

Historically, the tanker markets have been volatile as a result of the many conditions and factors that can affect the price and the supply of, and demand for, tanker capacity. Changes in demand for transportation of oil over longer distances and in the supply of tankers to carry that oil may materially affect our revenues, profitability and cash flows.

A continuation of the recent significant declines in oil prices may adversely affect our growth prospects and results of operations.

Global crude oil prices have significantly declined since mid-2014. A continuation of lower oil prices or a further decline in oil prices may adversely affect our business, results of operations and financial condition and our ability to pay dividends, as a result of, among other things:

a reduction in exploration for or development of new oil fields or energy projects, or the delay or ~~cancelation~~cancellation of existing projects as energy companies lower their capital expenditures budgets, which may reduce our growth opportunities;

potential lower demand for tankers, which may reduce available charter rates and revenue to us upon chartering or rechartering of our vessels;

customers failing to extend or renew contracts upon expiration;

the inability or refusal of customers to make charter payments to us due to financial constraints or otherwise; or

declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings.

A significant increase in crude oil prices could negatively impact tanker freight rates.

Crude oil prices have declined significantly since mid-2014, which has generally benefited the tanker market as it has led to higher oil demand, stronger refining margins, additional import demand for stockpiling purposes and lower bunker costs. A significant increase in crude oil prices compared to current levels could reverse many of these positive drivers and negatively impact tanker freight rates.

Changes in the oil markets could result in decreased demand for our vessels and services.

Demand for our vessels and services in transporting oil depends upon world and regional oil markets. Any decrease in shipments of crude oil in those markets could have a material adverse effect on our business, financial condition and results of operations. Historically, those markets have been volatile as a result of the many conditions and events that affect the price, production and transport of oil, including competition from alternative energy sources. Past slowdowns of the U.S. and world economies have resulted in reduced consumption of oil products and decreased demand for our vessels and services, which reduced vessel earnings. Additional slowdowns could have similar effects on our operating results and may limit our ability to expand our fleet.

Changes in the spot tanker market may result in significant fluctuations in the utilization of our vessels and our profitability.

During ~~2014~~2016 and ~~2013,~~2015, we derived approximately ~~65.1%~~78.2% and ~~46.3%~~84.6%, respectively, of our net revenues from vessels operating in the spot tanker market, either directly or by means of participation in pooling agreements (which includes vessels operating under full service lightering contracts and charters with an initial term of less than one year). Due to our involvement in the spot-charter market, declining spot rates in a given period generally will result in corresponding declines in our operating results for that period.

The spot-charter market is highly volatile and fluctuates based upon tanker and oil supply and demand. The successful operation of our vessels in the spot-charter market depends upon, among other things, obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. Future spot rates may not be sufficient to enable our vessels trading in the spot tanker market to operate profitably or to provide sufficient cash flow to service our debt obligations.

The operation of a significant number of our tankers in the ~~Gemini Suezmax Pool, Teekay Aframax Pools, Taurus Tankers LR2 Pool and Norient Product Pool~~pooling arrangements could limit our earnings.

As of December 31, ~~2014, ten~~2016, 14 of our Suezmax tankers, ~~three of our owned and seven of our time-chartered in Aframax tankers, and~~ three of our owned and four of our time-chartered in Aframax tankers, and five of our owned Long Range 2 (or LR2) product tankers operated in, and generated revenues to us through participation in, a Suezmax tanker pooling arrangement (the~~Gemini~~Teekay Suezmax Pool), two Aframax tanker revenue sharing arrangements (theTeekay Aframax Pools), and an LR2 product tanker pooling arrangement (theTaurus Tankers LR2 Pool), respectively. The Teekay Suezmax Pool, Teekay Aframax Pools and Taurus Tankers LR2 Pool are each managed by Teekay Tanker Operations Ltd. (orTTOL), in which Teekay Corporation and we each have a 50% interest, while the Gemini Suezmax Pool is owned 50% by TTOL. In addition, as of December 31, 2014, two of our MR product tankers operated in the Norient Product Pool, which is managed by a third party unaffiliated with Teekay Corporation.interest. Pooling arrangements are designed to spread the costs and risks associated with commercial management of vessels and to share the net revenues earned by all of the vessels in the pool. Although the net revenues are apportioned based on the actual earning days each vessel is available and the relative

performance capabilities of each vessel, a pool may include vessels that do not perform as well in actual operation as our vessels. As a result, our share of the net pool revenues may be less than what we could earn operating our vessels independently. Certain vessels of Tanker Investments Ltd. (TIL), in which we have an ownership interest, also participate in some of these pooling arrangements.

The removal of any vessels from the ~~Gemini Suezmax Pool, Teekay Aframax Pools, Taurus Tankers LR2 Pool, Norient Product Pool or any other~~ pooling ~~arrangement~~arrangements in which we participate may adversely affect our operating results.

Participants in the ~~Gemini~~Teekay Suezmax Pool, including third parties, have each agreed to include in the pool certain qualifying Suezmax-class crude tankers of the pool participants and their respective affiliates, including us, that operate in the spot market or pursuant to time charters

of less than one year. We and Teekay Corporation have each committed to include in the Teekay Aframax Pools all of our and its respective Aframax-class crude tankers that are employed in the spot market or operate pursuant to time charters of less than 90 days. Participants in the Taurus Tankers LR2 Pool, including third parties, have each agreed to include in the pool certain qualifying LR2 product tankers of the pool participants and their respective affiliates, including us, that operate in the spot market or pursuant to time charters of less than one year. Participants in the Norient Product Pool, including third parties, have each agreed to include in that pool certain qualifying MR product tankers of the pool participants and their respective affiliates, including us, that operate in the spot market or pursuant to time charters of less than one year. If we or any participant remove vessels from any pooling arrangement in which we participate to operate under longer-term time charters, the benefits to us of the pooling arrangements could diminish. In addition, the European Union is in the process of substantially reforming the way it regulates traditional agreements for maritime services from an antitrust perspective. These changes may impose new restrictions on the way pools are operated or may prohibit pooling arrangements altogether. If for any reason our vessels, Teekay Corporation’s vessels, or any third party vessels cease to participate in any pooling arrangement in which we participate, or if the pooling arrangements are significantly restricted, we may not achieve the benefits intended by pool participation and our results of operations could be harmed.

Our failure to renew or replace fixed-rate charters could cause us to trade the related vessels in the spot market, which could adversely affect our operating results and make them more volatile.

As of December 31, ~~2014,~~2016, a total of ~~eight~~13 of our tankers, one time-chartered in vessel and one jointly-owned vessel operated under fixed-rate time-charter contracts, ~~five~~seven of which are scheduled to expire in ~~2015, three~~2017, seven in ~~2016,~~2018, and one in ~~2018,~~2019, respectively. If upon their scheduled expiration or any early termination we are unable to renew or replace fixed-rate charters on favorable terms, if at all, or if we choose not to renew or replace these fixed-rate charters, we may employ the vessels in the volatile spot market. Increasing our exposure to the spot market, particularly during periods of unfavorable market conditions, could harm our results of operations and make them more volatile.

Our vessels operate in the highly competitive international tanker market.

The operation of oil tankers and transportation of crude oil and refined petroleum products are extremely competitive businesses. Competition arises primarily from other tanker owners, including major oil companies and independent tanker companies, some of which have substantially greater financial strength and capital than do we or ~~than does~~ Teekay Corporation. Competition for the transportation of oil and oil products can be intense and depends on price and the location, size, age, condition of the tanker and the acceptability of the tanker and its operators to the charterers. Our competitive position may erode over time.

Our operating results are subject to seasonal fluctuations.

Our tankers operate in markets that have historically exhibited seasonal variations in tanker demand and, therefore, in spot-charter rates. This seasonality may result in quarter-to-quarter volatility in our results of operations. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance. In addition, unpredictable weather patterns during the winter months tend to disrupt vessel scheduling, which historically has increased oil price volatility and oil trading activities in the winter months. As a result, revenues generated by the tankers in our fleet have historically been weaker during ~~the~~our fiscal quarters ended June 30 and September 30, and stronger in our fiscal quarters ended December 31 and March 31.

Future economic downturns, including disruptions in the global credit markets, could adversely affect our ability to grow.

Economic downturns and financial crises in the global markets could produce illiquidity in the capital markets, market volatility, heightened exposure to interest rate and credit risks, and reduced access to capital markets. If global financial markets and economic conditions significantly deteriorate in the future, we may face restricted access to the capital markets or bank lending, which may make it more difficult and costly to fund future growth. Decreased access to such resources could have a material adverse effect on our business, financial condition and results of operations.

Economic downturns may affect our customers’ ability to charter our vessels and pay for our services and may adversely affect our business and results of operations.

Economic downturns in the global financial markets may lead to a decline in our customers’ operations or ability to pay for our services, which could result in decreased demand for our vessels and services. Our customers’ inability to pay could also result in their default on our current contracts and charters. A decline in the amount of services requested by our customers or their default on our contracts with them could have a material adverse effect on our business, financial condition and results of operations.

Exposure to currency exchange rate fluctuations could result in fluctuations in our operating results.

Our primary economic environment is the international shipping market, which utilizes the U.S. Dollar as its functional currency. Consequently, virtually all of our revenues and the majority of our expenses are in U.S. Dollars. However, we incur certain voyage expenses, vessel operating expenses, and general and administrative expenses in foreign currencies, the most significant of which are the Euro, Singapore Dollar, Canadian Dollar and British Pound. This partial mismatch in revenues and expenses could lead to fluctuations in our net income due to changes in the value of the U.S. Dollar relative to other currencies.

We may not be able to grow or to manage our growth effectively.

One of our principal strategies is to continue to grow by expanding our operations and adding vessels to our fleet. Our future growth will depend upon a number of factors, some of which are beyond our control. These factors include our ability to:

identify suitable tankers or shipping companies for acquisitions or joint ventures;

integrate successfully any acquired tankers or businesses with our existing operations; and

obtain required financing for our existing and any new operations.

In addition, competition from other companies, many of which have significantly greater financial resources than do we or ~~than does~~ Teekay Corporation, may reduce our acquisition opportunities or cause us to pay higher prices. Our failure to effectively identify, purchase, develop and integrate any tankers or businesses could adversely affect our business, financial condition and results of operations.

We may not realize expected benefits from acquisitions, and implementing our growth strategy through acquisitions may harm our financial condition and performance.

Any acquisition of a vessel or business may not be profitable at or after the time of acquisition and may not generate cash flows sufficient to justify the investment. In addition, our acquisition growth strategy exposes us to risks that may harm our business, financial condition and operating results, including risks that we may:

fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;

be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet;

decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;

significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;

incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired; or

incur other significant charges, such as impairment of intangible assets, asset devaluation or restructuring charges.

~~Unlike newbuildings,~~

To the extent we acquire existing vessels, they typically do not carry warranties as to their ~~condition.~~condition, unlike newbuilding vessels. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel’s condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows and liquidity, and harm our financial condition and performance.

Our entry into the business of providing ship-to-ship lightering services and LNG terminal management and consultancy services may be unsuccessful.

In July 2015, we acquired ship-to-ship transfer business from a company jointly owned by Teekay Corporation and a Norway-based marine transportation company, I.M. Skaugen SE. The acquired business provides ship-to-ship transfer services in the oil, gas and dry bulk industries, as well as LNG terminal management and consultancy services. We have no or limited prior experience in these businesses and competitors may have greater experience and resources than do we or Teekay Corporation. The markets for ship-to-ship transfer business and these consultancy services may have different competitive dynamics than our existing business, and customers may not engage us to provide these new services. As a result, our entry into these new markets may not be successful.

Over time, the value of our vessels may decline, which could adversely affect our ability to obtain financing or our operating results.

Vessel values for oil tankers can fluctuate substantially over time due to a number of different factors. Vessel values may decline from existing levels. If the operation of a tanker is not profitable, or if we cannot re-deploy a chartered tanker at attractive rates upon charter termination, rather than continue to incur costs to maintain and finance the vessel, we may seek to dispose of it. Our inability to dispose of the vessel at a fair market value or the disposition of the vessel at a fair market value that is lower than its book value could result in a loss on its sale and adversely affect our results of operations and financial condition. ~~In addition, three~~As of December 31, 2016, two of our credit facilities contain loan-to-value financial covenants tied to the value of the ~~vessel~~vessels that ~~collateralizes~~collateralize these credit facilities. A significant decline in the market value of these tankers may require us to pledge additional collateral to avoid a default under these credit facilities. We are required to maintain vessel value to outstanding loan principal balance ratios ranging from 105%~~-130%~~-125%. At December 31, ~~2014,~~2016, we were in compliance with these requirements.

In addition, if we determine at any time that a vessel’s future useful life and earnings require us to impair its value on our consolidated financial statements, we may need to recognize a significant charge against our earnings. Vessel values had declined significantly in prior years, which contributed to significant vessel and goodwill impairment charges against our ~~earnings.~~

~~Delays~~earnings in ~~deliveries of any newbuildings could harm our operating results and financial condition.~~

The delivery of any newbuilding that we may order could be delayed, which would delay our receipt of revenues related to the vessel. The completion and delivery of newbuildings could be delayed because of:

2012.

~~quality or engineering problems;~~

~~changes in governmental regulations or maritime self-regulatory organization standards;~~

~~work stoppages or other labor disturbances at the shipyard;~~

~~bankruptcy or other financial crisis of the shipbuilder;~~

~~a backlog of orders at the shipyard;~~

~~political or economic disturbances;~~

~~weather interference or catastrophic event, such as a major earthquake, tsunami or fire;~~

~~requests for changes to the original vessel specifications;~~

~~shortages of or delays in the receipt of necessary construction materials, such as steel;~~

~~an inability to finance the construction of the vessels; or~~

~~an inability to obtain requisite permits or approvals.~~

~~If delivery of a vessel is significantly delayed, it could adversely affect our results of operations and financial condition and our ability to pay dividends to our stockholders.~~

We will be required to make substantial capital expenditures to expand the size of our fleet. We generally will be required to make significant installment payments for any acquisitions of newbuilding vessels prior to their delivery and generation of revenue. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our financial leverage could increase or our ~~stockholders’~~shareholders’ ownership interest in us could be diluted.

We will be required to make substantial capital expenditures to increase the size of our fleet. We intend to expand our fleet by acquiring tankers primarily from third ~~parties or from Teekay Corporation.~~parties. Our acquisitions may also include newbuildings. We generally will be required to make installment payments on any newbuildings prior to their delivery. We typically pay 10% to 20% of the purchase price of a tanker upon signing the purchase contract, even though delivery of the completed vessel does not occur until much later (approximately two to three years from the order). To fund

expansion capital expenditures, we may be required to use cash balances or cash from operations, incur borrowings or raise capital through the ~~sale~~incurrence of debt or issuance of additional equity securities. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering, as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain funds for capital expenditures could have a material adverse effect on our business, results of operations and financial condition. Even if we are successful in obtaining the necessary funds, incurring additional debt may significantly increase our interest expense and financial leverage, which could limit our financial flexibility and ability to pursue other business opportunities. In addition, issuing additional equity securities may result in significant ~~stockholder~~shareholder ownership dilution and would increase the aggregate amount of cash required to pay quarterly dividends.

An increase in operating costs could adversely affect our cash flows and financial condition.

We have entered into a long-term management agreement (or theManagement Agreement) with Teekay Tankers Management Services Ltd. (ourManager), a subsidiary of Teekay Corporation. Under the Management Agreement, we must reimburse our Manager for vessel operating expenses (including crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses). These expenses depend upon a variety of factors, many of which are beyond our or our Manager’s control. Some of these costs, primarily relating to insurance, commodities, crew compensation and enhanced security measures, have been increasing and may increase in the future. Increases in any of these costs would decrease our earnings and adversely affect our cash flows and financial condition.

Financing agreements containing operating and financial restrictions may restrict our business and financing activities.

The operating and financial restrictions and covenants in our revolving credit facilities, term loans and in any of our future financing agreements could adversely affect our ability to finance future operations or capital needs or to pursue and expand our business activities. For example, these financing arrangements may restrict our ability to:

incur or guarantee indebtedness;

change ownership or structure, including mergers, consolidations, liquidations and dissolutions;

pay dividends;

grant liens on our assets;

sell, transfer, assign or convey assets;

make certain investments; and

enter into a new line of business.

Our ability to comply with covenants and restrictions contained in debt instruments may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, we may fail to comply with these covenants. If we breach any of the restrictions, covenants, ratios or tests in the financing agreements, our obligations may become immediately due and payable, and the lenders’ commitment, if any, to make further loans may terminate. A default under one financing agreement could also result in foreclosure on any of our vessels and other assets securing related loans, or trigger a default under other financing agreements.

Our substantial debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying dividends.

As of December 31, ~~2014,~~2016, our long-term debt was approximately ~~$656.1~~$933.0 million and an additional ~~$126.2~~$34.3 million was available to us under our revolving credit facilities. We will continue to have the ability to incur additional debt, subject to limitations in our revolving credit facilities. Our level of debt could have important consequences to us, including the following:

our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, business opportunities and dividends to our ~~stockholders;~~

shareholders;

our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our industry or the economy generally; and

our debt level may limit our flexibility in responding to changing business and economic conditions.

Our ability to service our debt depends upon, among other things, our financial and operating performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.

Our insurance may be insufficient to cover losses that may occur to our vessels or result from our operations.

The operation of oil tankers and lightering vessels, is inherently risky. Although we carry hull and machinery (marine and war risks) and protection and indemnity insurance, all risks may not be adequately insured against, and any particular claim may not be paid. In addition, we do not carry insurance on our vessels covering the loss of revenues resulting from vessel off-hire time, based on its cost compared to our off-hire experience. Any significant off-hire time of our vessels could harm our business, operating results and financial condition. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. Certain of our insurance coverage is maintained through mutual protection and indemnity associations, and as a member of such associations we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves.

~~Our Manager~~

We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A catastrophic oil spill, marine disasters or natural disasters could exceed the insurance coverage, which could harm our business, financial condition and operating results. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain certification with applicable maritime ~~self-regulatory~~regulatory organizations.

Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult to obtain. In addition, the insurance that may be available may be significantly more expensive than existing coverage.

Terrorist attacks, piracy, increased hostilities, political change or war could lead to further economic instability, increased costs and disruption of business.

Terrorist attacks, piracy and the current or future conflicts in the Middle East and elsewhere, and other current and future conflicts and political change, may adversely affect our business, operating results, financial condition, and ability to raise capital and fund future growth. Continuing hostilities in the Middle East and elsewhere may lead to additional armed conflicts or to further acts of terrorism and civil disturbance in the United States or elsewhere, which may contribute further to economic instability and disruption of oil production and distribution, which could result in reduced demand for our ~~services.~~

services and have an adverse impact on our operations and our ability to conduct business.

In addition, oil facilities, shipyards, vessels, pipelines, oil fields or other infrastructure could be targets of future terrorist attacks or warlike operations and our vessels could be targets of pirates, hijackers, terrorists or ~~hijackers.~~warlike operations. Any such attacks could lead to, among other things, bodily injury or loss of life, vessel or other property damage, increased vessel operational costs, including insurance costs, and the inability to transport oil to or from certain locations. Terrorist attacks, war, piracy, hijacking or other events beyond our control that adversely affect the distribution, production or transportation of oil to be shipped by us could entitle customers to terminate ~~the~~ charters which would harm our cash flow and business.

Acts of piracy on ocean-going vessels ~~have recently increased in frequency,~~continue to be a risk, which could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, Gulf of Guinea and the Indian Ocean off the coast of Somalia. While there ~~continue~~continues to be a significant ~~numbers~~risk of piracy ~~incidents~~ in the Gulf of Aden and Indian Ocean, recently there have been increases in the frequency and severity of piracy incidents off the coast of West ~~Africa.~~Africa and a resurgent piracy risk in the Straits of Malacca and surrounding waters. If these piracy attacks result in regions in which our vessels are deployed being named on the Joint War Committee Listed Areas, war risk insurance premiums payable for such coverage ~~may~~can increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ ~~onboard~~on-board security guards and escort vessels, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, hijacking as a result of an act of piracy against our vessels, or an increase in cost or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition and results of operations.

Our substantial operations outside the United States expose us to political, governmental and economic instability, which could harm our operations.

Because our operations and the operations of our customers are primarily conducted outside of the United States, they may be affected by economic, political and governmental conditions in the countries where we engage in business or where our vessels are registered. Any disruption caused by these factors could harm our business, including by reducing the levels of oil exploration, development and production activities in these areas. We derive some of our revenues from shipping oil from politically unstable regions. Conflicts in these regions have included attacks on ships and other efforts to disrupt shipping. Hostilities or other political instability in regions where we operate or where we may operate could have a material adverse effect on the growth of our business, results of operations and financial condition and ability to make cash distributions. In addition, tariffs, trade embargoes and other economic sanctions by the United States or other countries to which we trade may limit trading activities with those

countries, which could also harm our business and ability to make cash distributions. Finally, a government could requisition one or more of our vessels, which is most likely during war or national emergency. Any such requisition would cause a loss of the vessel and could harm our cash flows and financial results.

Past port calls by our vessels, or third-party vessels from which we derived pooling revenues, to countries that are subject to sanctions imposed by the United States and the European Union may impact investors’ decisions to invest in our securities.

The United States ~~government~~ has imposed sanctions on ~~Iran,~~ Syria and Sudan. The United States and the European Union (orEU~~) has~~ EU) also had imposed sanctions on ~~trade with~~ Iran. The EU lifted these sanctions in January 2016. At that time, the U.S. lifted its secondary sanctions on Iran, which applied to foreign persons, but has retained its primary sanctions, which apply to U.S. entities and their foreign subsidiaries. In the past, conventional oil tankers owned or chartered-in by us, or third-party vessels participating in commercial pooling arrangements from which we derive revenue, made limited port calls to those countries for the loading and discharging of oil products. Those port calls did not violate U.S. or EU sanctions at the time and we intend to maintain our compliance with all U.S. and EU sanctions. In addition, we have no future contracted loadings or discharges in any of those countries and intend not to enter into voyage charter contracts for the transport of oil or gas to or from Iran, Syria or Sudan. We believe that our compliance with these sanctions and our lack of any future port calls to those countries does not and will not adversely impact our revenues, because port calls to these countries have never accounted for any material amount of our revenues. However, some investors might decide not to invest in us simply because we have previously called on, or through our participation in pooling arrangements have previously received revenue from calls on, ports in these sanctioned countries. Any such investor reaction could adversely affect the market for our common shares.

Marine transportation is inherently risky, and an incident involving significant loss of product or environmental contamination by any of our vessels could harm our reputation and business.

Vessels and their cargoes are at risk of being damaged or lost because of events such as:

marine disasters;

bad weather or natural disasters;

mechanical or electrical failures;

grounding, capsizing, fire, explosions and collisions;

piracy;

human error; and

war and terrorism.

An accident involving any of our vessels could result in any of the following:

death or injury to persons, loss of property or damage to the environment and natural resources;

delays in the delivery of cargo;

loss of revenues from charters;

liabilities or costs to recover any spilled oil or other petroleum products and to restore the eco-system affected by the spill;

governmental fines, penalties or restrictions on conducting business;

higher insurance rates; and

damage to our reputation and customer relationships generally.

Any of these events could have a material adverse effect on our business, financial condition and operating results.

The shipping industry is subject to substantial environmental and other regulations, which may significantly limit operations and increase expenses.

Our operations are affected by extensive and changing international, national and local environmental protection laws, regulations, treaties and conventions in force in international waters, the jurisdictional waters of the countries in which our vessels operate, as well as the countries of our vessels’ registration, including those governing oil spills, discharges to air and water, and the handling and disposal of hazardous substances and wastes. Many of these requirements are designed to reduce the risk of oil spills and other pollution. In addition, we believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will lead to additional regulatory requirements, including enhanced risk assessment and security requirements and greater inspection and safety requirements on vessels. We expect to incur substantial expenses in complying with these laws and regulations, including expenses for vessel modifications and changes in operating procedures.

These requirements may affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in, certain ports. Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities, including cleanup obligations, in the event that there is a release of petroleum or other hazardous substances from our vessels or otherwise in connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of or exposure to hazardous materials associated with our operations. In addition,

failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations, including, in certain instances, seizure or detention of our vessels. For further information about regulations affecting our business and related requirements on us, please read Item 4 – Information on the Company: B. Business Overview—Regulations.

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

Due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. Compliance with changes in laws, regulations and obligations relating to climate change could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.

Adverse effects upon the oil industry relating to climate change may also adversely affect demand for our services. Although we do not expect that demand for oil will lessen dramatically over the short-term, in the long-term climate change may reduce the demand for oil or increased regulation of greenhouse gases may create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

Maritime claimants could arrest, or port authorities could detain, our vessels, which could interrupt our cash flow from these vessels.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of funds to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet or the pooling arrangements in which we operate for claims relating to another of our ships. In addition, port authorities may seek to detain our vessels in port, which could adversely affect our operating results or relationships with customers.

We depend on Teekay Corporation to assist us in operating our business and competing in our markets, and our business will be harmed if Teekay Corporation fails to assist us.

Pursuant to the terms of the Management Agreement, our Manager provides to us commercial, technical, administrative and strategic services, including vessel maintenance, crewing, purchasing, shipyard supervision, insurance and financial services. Our operational success and ability to execute our growth strategy depend significantly upon the satisfactory performance of these services by our Manager. Our business will be harmed if our Manager fails to perform these services satisfactorily, if it stops providing these services to us or if it terminates the Management Agreement, as it is entitled to do under certain circumstances. The circumstances under which we are able to terminate the Management Agreement are limited and do not include mere dissatisfaction with our Manager’s performance. In addition, upon any termination of the Management Agreement, we may lose our ability to benefit from economies of scale in purchasing supplies and other advantages that we believe our relationship with Teekay Corporation provides. Furthermore, the profitable operation of our tankers that participate in tanker pooling arrangements depends largely on the efforts of the pool managers, Teekay Corporation’s participation in the pooling arrangements and its reputation and relationships in the shipping industry. Under the pooling arrangements, the earnings and voyage expenses of all of the vessels in pools are aggregated, or pooled, and divided according to an agreed formula. If Teekay Corporation suffers material damage to its reputation or relationships, it may harm our ability to:

maximize revenues of our tankers included in the pooling arrangements;

acquire new tankers or obtain new time charters;

renew existing time charters upon their expiration;

successfully interact with shipyards during periods of shipyard construction constraints;

obtain financing on commercially acceptable terms; or

maintain satisfactory relationships with suppliers and other third parties.

If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of operations and financial condition.

Teekay Corporation and its affiliates may engage in competition with us.

In our articles of incorporation and in a contribution, conveyance and assumption agreement we entered into with Teekay Corporation in connection with our initial public offering, we have renounced business opportunities that may be attractive to both Teekay Corporation and us in favor of Teekay Corporation, which may strengthen Teekay Corporation’s ability to compete with us.

The pooling arrangements we participate in are managed, in whole or in part, by Teekay Corporation subsidiaries. When operated in a pool, chartering decisions are made by the pool manager and vessel earnings are based on a formula designed to allocate the pool’s earnings to vessel owners based on actual on-hire performance of the vessels they contributed, and attributes of the vessels, rather than amounts actually earned by those vessels. If we, Teekay Corporation or its affiliates terminate the pooling arrangements in which we participate pursuant to the terms thereof or if vessels of Teekay Corporation or us cease operating in the pooling arrangements for any other reason, our tankers may compete with other vessels owned or operated by Teekay Corporation to provide crude oil transportation services. In addition, we may compete with Teekay Corporation in seeking to charter any vessels in our fleet under fixed-rate time charters, whether upon the expiration or early termination of existing time charters or otherwise.

~~During 2012, we acquired four Suezmax tankers, three Aframax tankers, three LR2 product tankers and three MR product tankers from Teekay Corporation (or the~~~~2012 Acquired Business~~). In connection with the 2012 Acquired Business transaction, Teekay Corporation entered into a non-competition agreement with us in June 2012 that (a) limits Teekay Corporation’s ability to expand its direct or indirect fleet of conventional and product tankers and (b) provides us a right of first refusal to acquire existing or newbuilding conventional and product tankers pursuant to opportunities Teekay Corporation develops. The non-competition agreement expires on June 15, 2015.

Teekay Corporation may be unable to attract and retain qualified, skilled employees or crew necessary to operate our ~~business.~~

business, and the cost of attracting and retaining such personnel may increase.

Our success depends in large part on Teekay Corporation’s ability to attract and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract and retain qualified crew members is intense. The shipping industry continues to forecast a shortfall in qualified personnel, and crew or other compensation may increase in the future. If crew costs increase and we are not able to increase our rates to compensate for any such increases, our financial condition and results of operations may be adversely affected. Any inability we experience in the future to hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.

The superior voting rights of our Class B common stock held by Teekay Corporation limit our Class A common ~~stockholders’~~shareholders’ ability to control or influence corporate matters.

Our Class B common stock has five votes per share and our Class A common stock has one vote per share. However, the voting power of the Class B common stock is limited such that the aggregate voting power of all shares of outstanding Class B common stock can at no time exceed 49% of the voting power of our outstanding Class A common stock and Class B common stock, voting together as a single class. As of the date of this Annual Report, Teekay Corporation indirectly owns shares of Class A and Class B common stock representing a majority of the voting power of our outstanding capital stock. Through its ownership of all of our Class B common stock and of our Manager and other entities that provide services to us, Teekay Corporation has substantial control and influence over our management and affairs and over all matters requiring ~~stockholder~~shareholder approval, including the election of directors and significant corporate transactions. In addition, because of this dual-class common stock structure, Teekay Corporation will continue to be able to control matters submitted to our ~~stockholders~~shareholders for approval even though it owns significantly less than 50% of the outstanding shares of our common stock. This voting control limits our remaining Class A common ~~stockholders’~~shareholders’ ability to influence corporate matters and, as a result, we may take actions that our Class A common ~~stockholders~~shareholders do not view as beneficial.

Our Manager has rights to terminate the Management Agreement and, under certain circumstances, could receive substantial sums in connection with such termination; however, even if our Board of Directors or our ~~stockholders~~shareholders are dissatisfied with our Manager, there are limited circumstances under which we can terminate the Management Agreement.

Our Management Agreement has an initial term through December 31, 2022 and will automatically renew for subsequent five-year terms provided that certain conditions are met. Our Manager has the right to terminate the Management Agreement with 12 months’ notice. Our Manager also has the right to terminate the Management Agreement after a dispute resolution process if we have materially breached the Management Agreement. The Management Agreement will terminate upon the sale of all or substantially all of our assets to a third party, our liquidation or after any change of control of our company occurs. If the Management Agreement is terminated as a result of an asset sale, our liquidation or change of control, then our Manager may be paid a termination fee. Any such payment could be substantial.

In addition, our rights to terminate the Management Agreement are limited. Even if we are not satisfied with the Manager’s efforts in managing our business, unless our Manager materially breaches the agreement or experiences certain bankruptcy or change of control events, we have only a limited right to terminate the agreement after 10 years and may not be able to terminate the agreement until the end of the initial 15-year term. If we elect to terminate the Management Agreement at either of these points or at the end of any subsequent renewal term, our Manager will receive a termination fee, which may be substantial.

Our Manager could receive a performance fee which is contingent on our results of operations and financial condition.

If Gross Cash Available for Distribution (as defined in the Management Agreement) for a given fiscal year exceeds $3.20 per share of our common stock (subject to adjustment for stock dividends, splits, combinations and similar events, and based on the weighted-average number of shares outstanding for the year) (or theIncentive Threshold), our Manager generally will be entitled to payment of a performance fee equal to 20% of all Gross Cash Available for Distribution for such year in excess of the Incentive Threshold. Although the performance fee is payable on an annual basis, we accrue any amounts expected to be payable in respect of the performance fee on a quarterly basis. Gross Cash Available for Distribution generally represents the distributable cash flows that we generate from operations.

Many seafaring employees are covered by collective bargaining agreements, and the failure to renew those agreements or any future labor agreements may disrupt operations and adversely affect our cash flows.

A significant portion of Teekay Corporation’s seafarers that crew our vessels are employed under collective bargaining agreements. Teekay Corporation may become subject to additional labor agreements in the future. Teekay Corporation may suffer labor disruptions if relationships

deteriorate with the seafarers or the unions that represent them. The collective bargaining agreements may not prevent labor disruptions, particularly when the agreements are being renegotiated. Salaries are typically renegotiated annually or biannually for seafarers. Although these negotiations have not caused labor disruptions in the past, any labor disruptions could harm our operations and could have a material adverse effect on our business, results of operations and financial condition.

Our executive officers and directors and the executive officers and directors of our Manager have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor interests of other Teekay Corporation affiliates above our interests and those of our Class A common ~~stockholders.~~

shareholders.

Conflicts of interest may arise between Teekay Corporation, our Manager and their affiliates, on the one hand, and us and our ~~stockholders,~~shareholders, on the other hand. As a result of these conflicts, Teekay Corporation or our Manager may favor their own interests and the interests of their affiliates over our interests and those of our ~~stockholders.~~shareholders. These conflicts include, among others, the following situations:

our Chief Executive Officer and Chief Financial Officer and ~~one~~three of our directors also serve as executive officers or directors of Teekay Corporation and/or our Manager, and we have limited their fiduciary duties regarding corporate opportunities that may be attractive to both Teekay Corporation and us;

our Manager advises our Board of Directors about the amount and timing of asset purchases and sales, capital expenditures, borrowings, issuances of additional common stock and cash reserves, each of which can affect our ability to pay dividends to our ~~stockholders~~shareholders and the amount of the performance fee payable to our Manager under the Management Agreement;

our executive officers and those of our Manager do not spend all of their time on matters related to our business; and

our Manager will advise us of costs incurred by it and its affiliates that it believes are reimbursable by us.

The fiduciary duties of certain of our officers and directors may conflict with their duties as officers or directors of Teekay Corporation and its affiliates.

Our officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our ~~stockholders.~~shareholders. However, our Chief Executive Officer and our Chief Financial Officer and three of our directors also serve as executive officers of Teekay Corporation and/or ~~our Manager, and one of our non-independent directors also serves as an~~ executive ~~officer of Teekay Corporation and director~~officers of our Manager, and as a result, have fiduciary duties to manage the business of Teekay Corporation and its affiliates in a manner beneficial to such entities and their ~~stockholders~~shareholders or partners, as the case may be. Consequently, these officers and ~~directors~~director may encounter situations in which their fiduciary obligations to Teekay Corporation or our Manager or their affiliates, on the one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in our best interest or that of our ~~stockholders.~~

shareholders.

Our U.S. Gulf lightering business competes with alternative methods of delivering crude oil to ports, which may limit our earnings in this market.

Our U.S. Gulf lightering business faces competition from alternative methods of delivering crude oil shipments to port, including offshore offloading facilities. While we believe that lightering offers advantages over alternative methods of delivering crude oil to U.S. Gulf ports, our lightering revenues may be limited due to the availability of alternative methods.

Our full service lightering operations are subject to specific risks that could lead to accidents, oil spills or property damage.

Lightering is subject to specific risks arising from the process of safely bringing two large moving tankers next to each other and mooring them for lightering operations, in which oil, refined petroleum products or other cargoes are transferred from one ship to the other. These operations require a high degree of expertise and present a higher risk of collision or spill compared to when docking a vessel or transferring cargo at port. Lightering operations, similar to marine transportation in general, are also subject to risks due to events such as mechanical failures, human error, and weather conditions.

Tax Risks

In addition to the following risk factors, you should read ~~“Item 4E.~~Item 4E - Taxation of the ~~Company” and “Item 10.~~Company, Item 10 - Additional Information—Material U.S. Federal Income Tax ~~Considerations”~~Considerations and “—Item 10 - Additional Information—Non-United States Tax ~~Considerations”~~Considerations for a more complete discussion of the expected material U.S. federal and non-U.S. income tax considerations relating to us and the ownership and disposition of our Class A common stock.

U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. shareholders.

A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company” (or~~PFIC~~) PFIC) for such purposes in any taxable year for which either (a) at least 75% of its gross income consists of “passive income,” or (b) at least 50% of the average value of the entity’s assets is attributable to assets that produce or are held for the production of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties (other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business). By contrast, income derived from the performance of services does not constitute “passive income.”

There are legal uncertainties involved in determining whether the income derived from our time-chartering activities constitutes rental income or income derived from the performance of services, including the decision inTidewater Inc. v. United States,, 565 F.3d 299 (5th Cir. 2009), which held that income derived from certain time-chartering activities should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of the Internal Revenue Code of 1986, as amended (or the~~Code~~) Code). However, the Internal Revenue Service (or~~IRS~~) IRS) stated in an Action on Decision (AOD 2010-01) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in theTidewater decision, and in its discussion stated that the time charters at issue inTidewater would be treated as producing services income for PFIC purposes. The IRS’s statement with respect toTidewater cannot be relied upon or otherwise cited as precedent by taxpayers. Consequently, in the absence of any binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court would not follow theTidewater decision in interpreting the PFIC provisions of the Code. Nevertheless, based on the current composition of our assets and operations (and those of our subsidiaries), we intend to take the position that we are not now and have never been a PFIC. No assurance can be given, however, that this position would be sustained by a court if contested by the IRS, or that we would not constitute a PFIC for any future taxable year if there were to be changes in our assets, income or operations.

If the IRS were to determine that we are or have been a PFIC for any taxable year during which a U.S. Holder (as defined below under “Item 10 – Additional Information – Material U.S. Federal Income Tax Considerations”) held our stock, such U.S. Holder would face adverse tax consequences. For a more comprehensive discussion regarding ~~our status as a PFIC and~~ the tax consequences to U.S. Holders if we are treated as a PFIC, please read ~~“Item 10:~~Item 10 - Additional Information-Material U.S. Federal Income Tax Considerations-United States Federal Income Taxation of U.S. Holders-Consequences of Possible PFIC Classification.”

We may be subject to taxes, which ~~reduces~~could affect our ~~cash available for distribution to our shareholders.~~

operating results.

We or ~~some of~~ our subsidiaries ~~may be~~are subject to tax in ~~the~~certain jurisdictions in which we or our subsidiaries are organized own assets or have operations, which reduces ~~the amount of~~ our ~~cash available for distribution.~~operating results. In computing our tax ~~obligation~~obligations in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, ~~in jurisdictions in which operations are conducted~~ further reducing ~~the cash available for distribution.~~our operating results. In addition, changes in our operations or ownership could result in additional tax being imposed on us or on our subsidiaries in jurisdictions in which operations are conducted. For example, if Teekay Tankers Ltd. was not able to satisfy the requirements of the exemption from U.S. taxation under Section 883 of the Code, our U.S. source income would become subject to taxation under Section 887 of the Code. The amount of such tax would depend upon the amount of income we earn from voyages into or out of the United States, which is not within our complete control.

Also, jurisdictions in which we or our subsidiaries are organized, own assets or have operations may change their tax laws, or we may enter into new business transactions relating to such jurisdictions, which could result in increased tax liability and reduce our operating results. Please read Item 4 - Information on the Company—Taxation of the Company.

Item 4. Information on the Company

~~Item 4.Information on the Company~~

~~A.History and Development of the Company~~


A.	History and Development of the Company

Teekay Tankers Ltd. (“we,” “us,” or “the Company”) ~~are~~is an international provider of marine transportation to global oil industries. We were formed as a Marshall Islands corporation in October 2007 by Teekay Corporation (NYSE: TK), a leading provider of marine services to the global oil and natural gas industries. We completed our initial public offering on December 18, 2007 with an initial fleet of nine Aframax oil tankers which were transferred to us by Teekay ~~Corporation~~

Corporation.

Our conventional fleet size has increased from nine owned Aframax tankers in 2007 to 2743 owned ~~vessels, 12~~conventional tankers, seven in-chartered vessels and one jointly-owned Very Large Crude Carrier (orVLCC) as of December 31, ~~2014.~~2016. The capacity of our conventional tanker fleet has risen from approximately 980,000 deadweight tonnes (ordwt) in 2007 to approximately ~~4,900,000~~6,890,000 dwt as of December 31, ~~2014.~~2016. Over the last five years, we have acquired a total of 1813 conventional tankers from Teekay Corporation, ~~including seven Suezmax~~17 conventional tankers ~~five Aframax~~from external parties and two conventional tankers ~~three Long Range 2 (or~~~~LR2~~~~) product tankers, and three Medium Range (or~~MR~~) product tankers.~~from TOO. In March 2014, we also assumed ownership of two VLCCs that previously served as collateral under term loans we made to a third party. We subsequently sold those two VLCCs in May 2014. Please read Item 18 – Financial Statements: Note 56 – Investment in Term Loans. ~~In December 2014, we entered into agreements to acquire~~We also sold two MR tankers in 2016 and one ~~Aframax~~MR tanker ~~and four LR2 product tankers. We took delivery of three and two of these vessels~~ in ~~February and March 2015, respectively.~~2015. Please read Item 18 – Financial Statements: Note ~~20 – Subsequent Events. Over~~21 - Vessel Sales and Vessel Acquisitions.

In July 2015 we acquired the ~~last five years, we have sold~~ship-to-ship transfer business (or TMS, previously referred to as SPT) from a company jointly owned by Teekay Corporation and a Norway-based marine transportation company, I.M. Skaugen SE. TMS provides a full suite of ship-to-ship transfer services in the oil, gas and dry bulk industries. In addition to full service lightering and lightering support, TMS also provides consultancy and LNG terminal management services. This acquisition established us as a global company in the ship-to-ship transfer business. As of December 31, 2016, TMS operated a fleet of seven ship-to-ship support vessels, including four owned and three ~~Aframax and two VLCC tankers.~~ chartered-in vessels.

From time to time, we also charter-in vessels, typically from third parties as part of our chartering strategy. Please read “Business Strategies” below in this Item. ~~In 2010, we entered into a joint venture with a third party to construct a VLCC newbuilding, which was delivered in June 2013.~~ Most of our acquisitions were financed by a combination of utilizing the net proceeds from public equity offerings or private placements, as well as the assumption of existing debt, drawing on our revolving credit facility, and using our available working capital.

~~In April 2013, we entered into agreements with STX Offshore & Shipbuilding Co. Ltd. (or~~~~STX~~) of South Korea to construct four fuel-efficient 113,000 dwt LR2 product tanker newbuildings plus options to order up to an additional 12 vessels. The payment of our first shipyard installment was contingent on us receiving acceptable refund guarantees for the shipyard installment payments. In October and November 2013, we exercised our options to order eight additional LR2 newbuildings, in aggregate, under option agreements relating to the original STX LR2 shipbuilding agreements signed in April 2013. STX did not produce shipbuilding contracts within the specified timeframe of the option declarations, and informed us that there was no prospect of the refund guarantees being provided under any of the firm or option contracts and therefore, STX is in breach of the option agreements. In December 2013, the newbuilding agreements were terminated by us and in February 2014, the option agreements were terminated. In February 2014, we commenced legal action for damages. In November 2014, we placed $0.6 million in an escrow account as cash security pending the resolution of this matter. Please read Item 18 – Financial Statements: Note 19 –Shipbuilding Contracts and Note 20 – Subsequent Events.

We are incorporated under the laws of the Republic of The Marshall Islands as Teekay Tankers Ltd. and maintain our principal executive offices at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda. Our telephone number at such address is (441) 298-2530.

~~B.Business Overview~~


B.	Business Overview

Our primary business is to own ~~crude~~ oil and product tankers and we employ a chartering strategy that seeks to capture upside opportunities in the tanker spot market while using fixed-rate time charters to reduce downside risks. During 2015, we expanded our service offerings to our customers through the purchase of a ship-to-ship transfer business that provides full service lightering as well as lightering support services and consultancy and LNG terminal management services. This acquisition, which is adjacent to our core competencies, along with our existing conventional tanker commercial management and technical management operations, is expected to improve our ability to manage the cyclicality of the tanker market through the less volatile cash flows generated by these business areas. Historically, the tanker industry has experienced volatility in profitability due to changes in the supply of, and demand for, tanker capacity. Tanker supply and demand are each influenced by several factors beyond our control.

Teekay Corporation, which formed us in 2007, is a leading provider of marine services to the global oil and natural gas industries, and together with its subsidiaries, is one of the world’s largest operator of medium-sized oil tankers. We believe we benefit from Teekay Corporation’s expertise, relationships and reputation as we operate our fleet and pursue growth opportunities. We have acquired the majority of our current operating fleet from Teekay Corporation at various times since our inception and we anticipate additional opportunities to expand our fleet through acquisitions of tankers from third parties, and additional tankers that Teekay Corporation and its subsidiaries may offer to us from time to time. These tankers may include crude oil and product tankers.

~~Since~~

Commencing in December 2015, we adopted a dividend policy under which quarterly dividends are to range from 30% to 50% of our quarterly adjusted net income, subject to the ~~first quarter~~discretion of ~~2013, we have distributed~~our Board of Directors, with a minimum quarterly dividend of $0.03 per share. Adjusted net income is a non-GAAP measure which excludes specific items affecting net income that are typically excluded by securities analysts in their published estimates of our financial results. Prior to this change, our dividend policy was to distribute to our shareholders a fixed quarterly dividend of $0.03 per share ($0.12 per share annually)~~, which~~. Our dividend policy is reviewed ~~from time to time~~ by our Board of ~~Directors.~~Directors from time to time. Prior to the first quarter of 2013, we distributed to our shareholders on a quarterly basis, all of our Cash Available for Distribution, subject to any reserves our Board of Directors determined to be required for prudent conduct of our business. For additional information about our dividend policy, please read Item 8 – Financial Information: Dividend Policy.

Under the supervision of our executive officers and Board of Directors, our operations are managed by Teekay Tankers Management Services Ltd. (ourManager), a subsidiary of Teekay Corporation, that provides to us commercial, technical, administrative and strategic services. We have entered into a long-term agreement with our Manager (theManagement Agreement) pursuant to which our Manager and its affiliates provide to us technical, administrative and strategic services. Commercial services are provided to us by other wholly or partially owned subsidiaries of Teekay Corporation that manage the ~~Gemini~~Teekay Suezmax Pool, the Teekay Aframax Pools and the Taurus Tankers LR2 Pool. We pay our Manager a market-based fee for its services. In order to provide our Manager with an incentive to improve our operation and financial conditions, we have agreed to pay a performance fee to our Manager under certain circumstances, in addition to the basic fee provided in the Management Agreement. Please read Item 7 – Major Shareholders and Related Party Transactions: Related Party Transactions—Management Agreement for additional information about the Management Agreement.

We employ our chartering strategy based on the outlook of our Manager for freight rates, oil tanker market conditions and global economic conditions. As of December 31, ~~2014,~~2016, we owned 2743 conventional tankers, in-chartered seven conventional and three ship-to-ship support vessels, ~~in-chartered 12~~owned four ship-to-ship support vessels and owned a 50% ofinterest in a VLCC ~~held by our~~through a joint ~~venture with Wah Kwong Maritime Transport Holdings Limited.~~venture. Please refer to the “Our Fleet” table below. We employ our vessels on fixed rate time-charter out contracts and in various pooling arrangements, the majority of which are managed by wholly or partially owned subsidiaries of Teekay Corporation which employ vessels on the spot market. By employing some of our vessels in these pooling arrangements with Teekay Corporation, we believe we benefit from Teekay Corporation’s expertise in commercial management of oil tankers and economies of scale of a larger fleet, including higher vessel utilization and daily revenues. We also believe that these pooling arrangements limit Teekay Corporation’s ability to compete with us in the spot market.

Our Fleet

~~As at December 31, 2014, our fleet consisted of 40 vessels, including 12 in-chartered vessels and one 50%-owned VLCC.~~

The following table summarizes our fleet as at December 31, ~~2014:~~

   Owned
Vessels    Chartered-in
Vessels    Total
Fixed-rate:

Aframax Tankers
   7    —         7
Medium Range Product Tankers
   1    —         1
VLCC Tankers⁽¹⁾
   1    —         1






Total Fixed-Rate Fleet⁽²⁾
9 —      9
Spot-rate:
Suezmax Tankers
10 —      10
Aframax Tankers
4 8 12
Long Range 2 Product Tankers
3 4 7
Medium Range Product Tankers
2 —      2






Total Spot Fleet⁽³⁾
19 12 31






Total Teekay Tankers Fleet
28 12 40

2016:



	Owned Vessels	Chartered-in Vessels	Total
Fixed-rate:
Suezmax Tankers	5	—	5
Aframax Tankers	6	—	6
Long Range 2 Product Tankers	2	1	3
VLCC Tankers ⁽¹⁾	1	—	1
Total Fixed-Rate Fleet ⁽²⁾	14	1	15
Spot-rate:
Suezmax Tankers	17	—	17
Aframax Tankers	8	6	14
Long Range 2 Product Tankers	5	—	5
Total Spot Fleet ⁽³⁾	30	6	36
Ship-to-Ship Support Vessels	4	3	7
Total Teekay Tankers Fleet	48	10	58


(1)	~~Includes a~~A VLCC that we own through a 50/50 joint venture with Wah Kwong Maritime Transport Holdings Limited (please refer to Note 68 - Investments in and advances to Equity Accounted Investments, included in Item 18 – Financial Statements in this Annual Report).


(2)	The number of time-charter out contracts scheduled to expire include ~~five~~seven in ~~2015, and three~~2017, seven in ~~2016, respectively, and~~2018 (including one jointly owned VLCC time-charter out ~~contract is scheduled to expire~~contract) and one in ~~2018.~~ 2019.


(3)	As at December 31, ~~2014,~~2016, the four pooling arrangements in which we participate, and including vessels owned by other pool members, were comprised of a total of 2529 Suezmax tankers, 3132 modern Aframax tankers, 3 Aframax tankers over 15-year-old, 18and 11 LR2 product ~~tankers and 43 MR product~~ tankers.

The following table provides additional information about our owned Suezmax-class oil tankers as of December 31, ~~2014, all~~2016, of which 20 are Bahamian flagged and two are Malta flagged.

Vessel
   Capacity
(dwt)    Built    Employment    Daily Rate    Expiration of
Charter
Ashkini Spirit
   165,200       2003    Pool    —         —
Ganges Spirit
   159,500       2002    Pool    —         —
Godavari Spirit
   159,100       2004    Pool    —         —
Iskmati Spirit
   165,300       2003    Pool    —         —
Kaveri Spirit
   159,100       2004    Pool    —         —
Pinnacle Spirit
   160,400       2008    Pool    —         —
Narmada Spirit
   159,200       2003    Pool    —         —
Summit Spirit
   160,500       2008    Pool    —         —
Yamuna Spirit
   159,400       2002    Pool    —         —
Zenith Spirit
   160,500       2009    Pool    —         —



Total Capacity
1,608,200



Vessel	Capacity (dwt)	Built	Employment	Daily Rate	Expiration of Charter
Ashkini Spirit	165,200	2003	Pool	—	—
Athens Spirit	158,500	2012	Pool	—	—
Atlanta Spirit ⁽¹⁾	158,700	2011	Spot	—	—
Barcelona Spirit	158,500	2011	Pool	—	—
Beijing Spirit	156,500	2010	Pool	—	—
Ganges Spirit ⁽²⁾	159,500	2002	Spot	—	—
Godavari Spirit	159,100	2004	Time charter	$32,906	Aug-17
Iskmati Spirit	165,300	2003	Pool	—	—
Kaveri Spirit	159,100	2004	Pool	—	—
London Spirit	158,500	2011	Pool	—	—
Los Angeles Spirit	159,200	2007	Time charter	$22,500	Dec-17
Montreal Spirit ⁽³⁾	150,000	2006	Pool	—	—
Moscow Spirit	156,500	2010	Pool	—	—
Narmada Spirit	159,200	2003	Pool	—	—
Pinnacle Spirit	160,400	2008	Pool	—	—
Rio Spirit	158,400	2013	Pool	—	—
Seoul Spirit	160,000	2005	Pool	—	—
Summit Spirit	160,500	2008	Time Charter	$26,200	Aug-18
Sydney Spirit	158,500	2012	Pool	—	—
Tokyo Spirit⁽⁴⁾	150,000	2006	Time charter	$18,066	Mar-17
Yamuna Spirit⁽⁵⁾	159,400	2002	Spot	—	—
Zenith Spirit	160,500	2009	Time charter	$32,906	Jul-17
Total Capacity	3,491,500


(1)	The Suezmax tanker Atlanta Spirit joined the Teekay Suezmax Pool in February 2017.


(2)	The Suezmax tanker Ganges Spirit was sold and delivered to its new owner in January 2017.


(3)	The Suezmax tanker Montreal Spirit entered a time-charter out contract which commenced in February 2017.


(4)	The Suezmax tanker Tokyo Spirit completed a time-charter out contract and joined the Teekay Suezmax Pool in February 2017.


(5)	The Suezmax tanker Yamuna Spirit was sold and delivered to its new owner in March 2017.

The following table provides additional information about our owned Aframax-class oil tankers as of December 31, ~~2014,~~2016, all of which are Bahamian flagged.

Vessel
   Capacity
(dwt)    Built    Employment    Daily Rate    Expiration of
Charter
Americas Spirit
   111,900       2003    Time charter    $21,000       Sep 2015
Australian Spirit
   111,900       2004    Time charter    $21,000       Jan 2016
Axel Spirit
   115,400       2004    Time charter    $19,500       Dec 2016
Erik Spirit⁽¹⁾
   115,500       2005    Time charter    $14,100       Jan 2015
Esther Spirit
   115,400       2004    Time charter    $16,500       Dec 2015
Everest Spirit
   115,000       2004    Time charter    $15,500       Apr 2016
Helga Spirit
   115,500       2005    Time charter    $16,750       Aug 2015
Kanata Spirit
   113,000       1999    Pool    —         —
Kareela Spirit
   113,100       1999    Pool    —         —
Kyeema Spirit
   113,400       1999    Pool    —         —
Matterhorn Spirit
   114,800       2005    Spot    —         —



Total Capacity
1,254,900



Vessel	Capacity (dwt)	Built	Employment	Daily Rate	Expiration of Charter
Americas Spirit	111,900	2003	Pool	—	—
Australian Spirit	111,900	2004	Time charter	$22,000	Jun-17
Axel Spirit	115,400	2004	Time charter	$18,000	Dec-17
Erik Spirit	115,500	2005	Pool	—	—
Esther Spirit	115,400	2004	Time charter	$25,000	Dec-18
Everest Spirit	115,000	2004	Time charter	$25,000	Apr-19
Explorer Spirit	105,800	2008	Spot	—	—
Helga Spirit	115,500	2005	Time charter	$24,900	Sep-18
Kanata Spirit	113,000	1999	Pool	—	—
Kareela Spirit	113,100	1999	Spot	—	—
Kyeema Spirit ⁽¹⁾	113,400	1999	Spot	—	—
Matterhorn Spirit	114,800	2005	Spot	—	—
Navigator Spirit	105,800	2008	Spot	—	—
Yamato Spirit	107,600	2008	Time charter	$23,000	Jun-18
Total Capacity	1,574,100


(1)	~~The Aframax tanker~~~~Erik~~ In March 2017, the Company entered into an agreement to sell the Kyeema Spirit ~~completed a time-charter out contract and joined the Aframax RSA pool in January 2015.~~ .

The following table provides additional information about our owned LR2 product-class oil tankers as of December 31, ~~2014,~~2016, all of which are Bahamian flagged.

Vessel
   Capacity
(dwt)    Built    Employment    Daily Rate    Expiration of
Charter
Donegal Spirit
   105,200       2006    Pool    —         —
Galway Spirit
   105,200       2007    Pool    —         —
Limerick Spirit
   105,200       2007    Pool    —         —



Total Capacity
315,600

~~The following table provides additional information about our owned MR product-class oil tankers as of December 31, 2014, all of which are Bahamian flagged.~~

Vessel
   Capacity
(dwt)    Built    Employment    Daily Rate    Expiration of
Charter
Hugli Spirit⁽¹⁾
   46,900       2005    Time charter    $ 37,400       Feb 2015
Mahanadi Spirit
   47,000       2000    Pool    —         —
Teesta Spirit
   46,900       2004    Pool    —         —



Total Capacity
140,800

~~(1)~~

~~The charter rate on the~~~~Hugli Spirit~~ ~~includes approximately $14,000 per day for the additional costs relating to Australian crew versus International crew.~~



Vessel	Capacity (dwt)	Built	Employment	Daily Rate	Expiration of Charter
Donegal Spirit	105,600	2006	Time charter	$17,750	Oct-18
Galway Spirit	105,600	2007	Time charter	$17,000	Mar-18
Leyte Spirit	109,700	2011	Pool	—	—
Limerick Spirit	105,600	2007	Pool	—	—
Luzon Spirit	109,600	2011	Pool	—	—
Sebarok Spirit	109,600	2011	Pool	—	—
Seletar Spirit	109,000	2010	Pool	—	—
Total Capacity	754,700

The following table provides additional information about our VLCC-class oil tanker as of December 31, ~~2014,~~2016, which is Hong Kong flagged.

Vessel
   Capacity
(dwt)    Built    Employment    Daily Rate    Expiration of
Charter
Hong Kong Spirit⁽¹⁾
   319,000       2013       Time charter       $ 37,500       Jul 2018



Vessel	Capacity (dwt)	Built	Employment	Daily Rate	Expiration of Charter
Hong Kong Spirit⁽¹⁾	319,000	2013	Time charter	$37,500	Jul-18


(1)	The VLCC vessel, Hong Kong Spirit,, is owned through a 50/50 joint venture. The charter rate on this vessel is subject to a profit sharing amount that is being calculated every six months.

Please read Note 810 - Long-Term Debt included in Item 18 – Financial Statements included in this Annual Report for information with respect to major encumbrances against our vessels.

Business Strategies

Our primary business strategies include the following:

Expand our fleet through accretive acquisitions. Since our initial public offering, we have purchased 21 conventional tankers from Teekay Corporation, ~~at prices equal to their fair market values.~~two conventional tankers from TOO and 17 conventional tankers from third parties. In the future, we anticipate growing our fleet primarily through acquisitions of tankers from third parties, by securing additional ~~third parties~~ in-chartered vessels and by ordering newbuildings.

Tactically manage our mix of spot, charter, lightering, and ~~charter~~LNG terminal management and consultancy contracts. We employ a chartering strategy that seeks to capture upside opportunities in the spot market while using fixed-rate ~~time charters~~contracts to reduce downside risks. We believe that our Manager’s experience operating through cycles in the tanker spot market will assist us in employing this strategy and

seeking to maximize operating results.

In addition, we expect that the July 2015 acquisition of TMS will provide stable cash flow, to partially offset volatility in the tanker market, through global ship-to-ship support services, full service lightering, and LNG terminal management and consultancy services.

Increase cash flow by participating in ~~the~~ pooling arrangements. Through the participation of a significant number of our vessels in the ~~Gemini~~Teekay Suezmax Pool, the Teekay Aframax Pools and the Taurus Tankers LR2 Pool, we believe that we benefit from Teekay Corporation’s reputation and the scope of Teekay Corporation’s operations. We believe that the cash flow we derive over time from operating some of our vessels in these pooling arrangements exceeds the amount we would otherwise derive by operating these vessels outside of the pooling arrangements due to higher vessel utilization and daily revenues. We also derive pool and vessel management income as a result of our August 2014 purchase of a 50% interest in TTOL, which includes Teekay Corporation’s conventional tanker commercial and technical management operations and is the owner of interests in ~~three~~four of the pooling arrangements. We seek to increase this fee income by increasing the number of vessels participating in the applicable pooling arrangements and receiving management services from TTOL.

Provide superior customer service by maintaining high reliability, safety, environmental and quality standards. We believe that energy companies seek transportation partners that have a reputation for high reliability, safety, environmental and quality standards. We leverage our reputation for operational expertise and customer base to further expand these relationships with consistent delivery of superior customer service through our Manager.

Our Chartering Strategy and Participation in the ~~Gemini Suezmax Pool, Teekay Aframax Pools, Taurus Tankers LR2 Pool and Norient Product Pool~~

Vessel Pooling Arrangements

Chartering Strategy. We operate our vessels in both the spot market and under time charters of varying lengths in an effort to maximize cash flow from our vessels based on our Manager’s outlook for freight rates, oil tanker market conditions and global economic conditions. As of December 31, ~~2014,~~2016, a total of 1730 of our owned vessels and 12six time-chartered in vessels operated in the spot market through participation in Teekay managed pooling arrangements or on spot voyage charters. ~~Ten~~Fourteen of ~~these~~our owned vessels operated in the ~~Gemini~~Teekay Suezmax Pool, three of our owned vessels and ~~seven~~four time-chartered in vessel operated in the Teekay Aframax Pools while ~~three~~five of our owned ~~and four time-chartered in~~ vessels operated in the Taurus Tankers LR2 Pool. In addition, ~~one~~eight of our owned vessels and ~~one~~two time-chartered in ~~vessel~~vessels operated in the spot market on

voyage charters. ~~As well, two of our MR vessels operated in the spot market through participation in the Norient Product Pool, which is managed by a third party unaffiliated with Teekay Corporation.~~ As of December 31, ~~2014, eight~~2016, 13 of our owned vessels, one in-chartered vessel and one jointly-owned vessel operated under fixed-rate time-charter contracts. Our mix of vessels trading in the spot market, providing lightering services in the U.S. Gulf (or USG), or subject to fixed-rate time charters will change from time to time. Our Manager also may seek to hedge our spot exposure through the use of freight forward agreements or other financial instruments. Likewise, the managers of the pooling arrangements in which we participate may, with our approval, enter into fixed-rate time charters for vessels we include in those pooling arrangements, thereby decreasing spot-rate exposure without withdrawing the vessels from the pooling arrangements.

~~The Gemini Suezmax Pool, the Teekay Aframax Pools, and the Taurus Tankers LR2 Pool.~~

Vessel Pooling Arrangements. As of December 31, ~~2014,~~2016, and including our owned and time-chartered in vessels, the ~~Gemini~~Teekay Suezmax Pool and Teekay Aframax Pools were comprised of 2529 Suezmax and 3435 Aframax crude tankers, respectively, and the Taurus Tankers LR2 Pool included 1811 LR2 product tankers. Under the pooling arrangements, the aggregate revenues generated by the entire applicable pools are distributed to pool members, including us, pursuant to a pre-arranged weighting system based on actual earnings days each vessel is available during the applicable period and on each vessel’s earnings capability based on its characteristics, speed and bunker consumption. The allocation for each vessel participating in the pool is established based on observations and historical consumption and performance measures of the individual vessel. Payments based on net cash flow applicable to each tanker are made on a monthly basis to pool participants and adjusted at standard intervals determined by each pool based on the weighting system. We have agreed with the respective pool managers and pool participants to include certain of our vessels trading on voyage charters into the pooling arrangements assuming the vessel meets the respective pooling criteria. For example, our Suezmax tankers that are operating on voyage charters with terms of less than one year are included in the ~~Gemini~~Teekay Suezmax ~~pool.~~Pool. Likewise, Aframax tankers and LR2 tankers on voyage charters with terms of 90 days or less participate in the Teekay Aframax Pools and the Taurus Tankers LR2 Pool, respectively. Please read Item 7 – Major Shareholders and Related Party Transactions: Related Party Transactions—Pooling Arrangements, for additional information about the ~~Gemini~~Teekay Suezmax Pool, the Teekay Aframax Pools, and the Taurus Tankers LR2 Pool.

Voyage Charters. Tankers operating in the spot market typically are chartered for a single voyage, which may last up to several weeks. Spot market revenues may generate increased profit margins during times when tanker rates are increasing, while tankers operating under fixed-rate time charters generally provide more predictable cash ~~flows.~~flows without exposure to the variable expenses such as port charges and bunkers. Under a typical voyage charter in the spot market, the shipowner is paid on the basis of moving cargo from a loading port to a discharge port. The shipowner is responsible for paying both vessel operating costs and voyage expenses, and the charterer is responsible for any delay at the loading or discharging ports. Voyage expenses are all expenses attributable to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Vessel operating expenses are incurred regardless of particular voyage details and include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. When the vessel is “off hire,” or not available for service, the vessel is unavailable to complete new voyage charters until the off hire is finalized and the vessel becomes available again for service. In addition, if the vessel is “off hire” while trading in a commercial pooling arrangement, the vessel will have those off hire days deducted from its monthly calculation of available days for the purpose of pool distributions. Under a voyage charter, the shipowner is generally required, among other things, to keep the vessel seaworthy, to crew and maintain the vessel and to comply with applicable ~~regulations~~

regulations.

Time Charters. A time charter is a contract for the use of a vessel for a fixed period of time at a specified daily rate. A customer generally selects a time charter if it wants a dedicated vessel for a period of time, and the customer is commercially responsible for the use of the vessel. Under a typical time charter, the shipowner provides crewing and other services related to the vessel’s operation, the cost of which is included in the daily rate, while the customer is responsible for substantially all of the voyage expenses. When the vessel is off hire, the customer generally is not required to pay the hire rate and the owner is responsible for all costs. “Hire rate” refers to the basic payment from the charterer

for the use of the vessel. Under our time charters, hire is payable monthly in advance in U.S. Dollars. Hire payments may be reduced, or under some time charters the shipowner must pay liquidated damages, if the vessel does not perform to certain of its specifications, such as if the amount of fuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount. When the vessel is “off hire,” or not available for service, the charterer generally is not required to pay the hire rate, and the shipowner is responsible for all costs, including the cost of fuel bunkers, unless the charterer is responsible for the circumstances giving rise to the lack of availability. A vessel generally will be deemed to be off hire if there is an occurrence preventing the full working of the vessel.

Time-Charters-in. A time-charter in vessel is one that is contracted from another party for use by us for a fixed period of time at a specified daily rate. We may choose to place the time-chartered in vessel in a pooling arrangement if it meets the standards to participate in a pooling arrangement or to employ it on a fixed-rate time-charter out for the same period of time the vessel is chartered-in to us or for shorter depending on the market conditions and the Manager’s outlook for the market. Under a typical time-charter in, the shipowner provides crewing and other services related to the vessel’s operation, the cost of which is included in the daily hire rate. The customer is responsible for substantially all of the voyage-related expenses. When the vessel is off hire the customer generally is not required to pay the hire rate, and the shipowner is responsible for all costs, including the cost of fuel bunkers, unless the charterer is responsible for the circumstances giving rise to the lack of availability. A vessel generally will be deemed to be off hire if there is an occurrence preventing the full working of the vessel.

Our Full Service Lightering, Ship-to-ship Support Services, and LNG Terminal Management and Consultancy Strategy

Full Service Lightering. Full service lightering (or FSL) is the process of transferring cargo between vessels of different sizes. Our lightering capability leverages access to our Aframax fleet operating in the USG and our offshore lightering support acumen to provide a full service lightering business model to customers. These customers include oil companies and trading companies that are importing or exporting crude oil in the USG to or from larger Suezmax and VLCC vessels which are port restricted due to their size. We believe that our full service lightering in the USG will provide additional base cargo volume complementary to our spot trading strategy in the Caribbean to the USG market, and allow our Manager to better optimize the deployment of the fleet that we trade in this region through better scheduling flexibility and utilization.

Ship-to-Ship Support Services and LNG Terminal Management and Consultancy Services. Ship-to-ship (or STS) support service is the process of transferring cargo between seagoing ships positioned alongside each other, either stationary or underway. Demand for global ship-to-ship support services is often driven by oil market arbitrages and oil traders optimizing their USD ton/mile on cargoes. We intend to access various opportunities related to the provision of global ship-to-ship services, including blending, breaking of bulk cargo shipments, and the optimization of markets in contango which may use floating storage as a more cost-effective solution to shore tankage. LNG terminal management and consultancy services revolve around tailored service provisions focusing on areas such as LNG terminal operations and maintenance, LNG terminal development, LNG bunkering solutions, and commissioning and compatibility services. We seek to obtain more sustainable revenue through long-term, fixed-rate contracts for these services.

Industry and Competition

We compete in the Suezmax (120,000 to 199,999 dwt) and Aframax (80,000 to 119,999 dwt) crude oil tanker markets. Our competition in the Aframax and Suezmax markets is also affected by the availability of other size vessels that compete in these markets. Suezmax size vessels and Panamax (55,000 to 79,999 dwt) size vessels can compete for many of the same charters for which our Aframax tankers compete; Aframax size vessels and VLCCs (200,000 to 319,999 dwt) can compete for many of the same charters for which our Suezmax tankers may compete. Because of their large size, VLCCs and Ultra Large Crude Carriers (320,000+ dwt) (orULCCs) rarely compete directly with Aframax tankers, and ULCCs rarely compete with Suezmax tankers for specific charters. However, because VLCCs and ULCCs comprise a substantial portion of the total capacity of the market, movements by such vessels into Suezmax trades and of Suezmax vessels into Aframax trades would heighten the already intense competition.

We also compete in the LR2 (80,000 to 119,999 dwt) ~~and MR (40,000 to 59,999 dwt)~~ product tanker ~~markets.~~market. Our competition in the LR2 ~~and MR~~ product tanker ~~markets~~market is affected by the availability of other size vessels that compete in ~~these markets.~~the market. Long Range 1 (LR1) (60,000-79,999 dwt) size vessels can compete for many of the same charters for which our LR2 tankers ~~compete; LR1 and Handysize (25,000 – 39,999 dwt) vessels can compete for many of the same charters for which our MR tankers may~~ compete.

Seaborne transportation of crude oil and refined petroleum products are provided both by major energy companies (private as well as state-owned) and by independent ship owners. The desire of many major energy companies to outsource all or a portion of their shipping requirements has caused the number of conventional oil tankers owned by energy companies to decrease in the last 20 years. As a result of this trend, independent tanker companies now own or control a large majority of the international tanker fleet.

As of December 31, ~~2014,~~2016, other large operators of Aframax tonnage (including newbuildings on order) included ~~Malaysian International Shipping Corporation (approximately 48 Aframax vessels),~~ Sovcomflot (approximately 42 vessels), Malaysian International Shipping Corporation (or MISC) (approximately 36 Aframax vessels), the Sigma Pool (approximately 29 vessels) and the Navig8 Pool (approximately ~~26 vessels), and the Sigma Pool (approximately 26~~20 vessels). Other large operators of Suezmax tonnage (including newbuildings on order) as of such date included Nordic American Tankers (approximately 30 vessels), the Stena Sonangol Pool (approximately 22 vessels), ~~Nordic American Tankers~~Euronav (approximately 2421 vessels), Navig8 (approximately 20 vessels), the Blue Fin Pool (approximately ~~19 vessels), Euronav (approximately 23 vessels), Scorpio (approximately 23~~16 vessels), and Sovcomflot (approximately 1615 vessels).

As of December 31, ~~2014,~~2016, we were effectively one of three active full service lightering businesses in the USG, the largest being AET Tankers (or AET) (a subsidiary company of MISC) and the smallest being OSG Lightering (a subsidiary of International Seaways Inc.). USG lightering trade has a steady foundation of demand due to ongoing imports into the United States, and has recently found support in reverse-lightering due to changes to U.S. policy which now permit U.S.-produced crude oil to be exported to global destinations. AET currently maintains the majority of lightering market share in the USG. However through our acquisition of SPT (now known as Teekay Marine Solutions or TMS),

we have targeted this region in an effort to grow our presence and take advantage of the expected increased volumes moving both in and out of the USG. The USG lightering trade shows stability in the current environment where U.S. refineries appear still to be dependent on imports borne on larger VLCC and Suezmax class vessels to feed the U.S. Gulf Coast refinery requirements. We also expect USG lightering will see incremental benefits resulting from the lifted ban on US crude oil exports should that oil be transported on larger size vessels, including VLCC and Suezmax vessels targeted for Asia.

As of December 31, 2016, the largest operators of LR2 tonnage (including newbuildings on order) included Scorpio Tankers (approximately 25 vessels), the Navig8 LR2 pool (approximately 2621 vessels), Torm Tankers (approximately 14 vessels), the Sigma Pool (approximately 13 vessels), and Ocean Tankers (approximately 12 vessels) ~~and the Sigma Pool (approximately 10 vessels)~~. As of December 31, 2014, the largest operators of MR tonnage (including newbuildings on order) included Scorpio Tankers (approximately 51 vessels), Torm (approximately 44 vessels), the Norient pool (approximately 47 vessels), Stena Bulk (approximately 40 vessels), the Handytankers Pool (approximately 31 vessels), Sovcomflot (approximately 26 vessels) and Diamond S Shipping (approximately 33 vessels).

Competition in both the crude and product tanker market is primarily based on price, location (for single-voyage or short-term charters), size, age, condition and acceptability of the vessel, oil tanker shipping experience and quality of ship operations, and the size of an operating fleet, with larger fleets allowing for greater vessel substitution, availability and customer service. Aframax and Suezmax tankers are particularly well-suited for short-haul and medium-haul crude oil ~~routes;~~routes, while LR2 tankers are well-suited for long and medium-haul refined product ~~routes while MR tankers are well-suited for short and medium-haul refined product~~ routes.

Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in oil tanker demand and oil tanker supply. The cyclical nature of the tanker industry causes significant increases or decreases in charter rates earned by operators of oil tankers. Because voyage charters occur in short intervals and are priced on a current, or “spot,” market rate, the spot market is more volatile than time charters and the tanker industry generally. In the past, there have been periods when spot rates declined below the operating cost of the vessels.

Our largest competitor in the ship-to-ship global supports business and the LNG terminal management and consultancy business is Fendercare Marine. Fendercare Marine is well-established and was relatively unchallenged in what was a niche market until 2006, when SPT developed from being primarily a U.S. based supplier. Through the growth of SPT we have gained market share, and now under TMS, we look to increase our presence further through our intended business development.

Oil Tanker Demand.Demand for oil tankers is a function of several factors, including world oil demand and supply (which affect the amount of crude oil and refined products transported in tankers), and the relative locations of oil production, refining and consumption (which affects the distance over which the oil or refined products are transported).

Oil has been one of the world’s primary energy sources for a number of decades. As of ~~April 2015,~~January 2017, the International Energy Agency (orIEA) estimated that oil consumption will increase from ~~92.5~~96.5 million barrels per day (or mb/d)d) in ~~2014,~~2016, to ~~93.6~~97.8 mb/d in ~~2015~~2017 driven by increasing consumption in non-OECD countries. A majority of known oil reserves are located in regions far from major consuming regions, which contributes positively toward demand for oil tankers.

The distance over which crude oil or refined petroleum products is transported is determined by seaborne trading and distribution patterns, which are principally influenced by the relative advantages of the various sources of production and locations of consumption. Seaborne trading patterns are also periodically influenced by geopolitical events, such as wars, hostilities and trade embargoes that divert tankers from normal trading patterns, as well as by inter-regional oil trading activity created by oil supply and demand imbalances. Historically, the level of oil exports from the Middle East has had a strong effect on the crude tanker market due to the relatively long distance between this supply source and typical discharge points. Over the past few years, the growing economies of China and India have increased and diversified their oil imports, resulting in an overall increase in transportation distance for crude tankers. Major consumers in Asia have increased their crude import volumes from longer-haul producers, such as those in the Atlantic Basin.

The limited growth in refinery capacity in developed nations, the largest consumers of oil in recent years, and increasing refinery capacity in the Middle East and parts of Asia where capacity surplus supports exports, have also altered traditional trading patterns and contributed to the overall increase in transportation distance for both crude tankers and products tankers.

Oil Tanker Supply. New Aframax, Suezmax ~~LR2~~ and MRLR2 tankers are generally expected to have a lifespan of approximately 25 to 30 years, based on estimated hull fatigue life. However, U.S. and international regulations require the earlier phase-out of existing vessels that are not double-hulled, regardless of their expected lifespan. As of December 31, ~~2014,~~2016, the world Aframax crude tanker fleet consisted of ~~609~~627 vessels, with an additional 4589 Aframax ~~crude oil tanker newbuildings on order for delivery through 2019; the world Suezmax crude tanker fleet consisted of 444 vessels, with an additional 58 Suezmax~~ crude oil tanker newbuildings on order for delivery through 2017; the world Suezmax crude tanker fleet consisted of 468 vessels, with an additional 80 Suezmax crude oil tanker newbuildings on order for delivery through 2018; the world LR2 product tanker fleet consisted of ~~258~~314 vessels, and with an additional 7144 LR2 ~~product tanker newbuildings on order through 2017; and the world MR product tanker fleet consisted of 1,412 vessels, with an additional 267 MR~~ product tanker newbuildings on order through 2018. Currently, delivery of a vessel typically occurs within two to three years after ordering.

The supply of oil tankers is primarily a function of new vessel deliveries, vessel scrapping and the conversion or loss of tonnage. The level of newbuilding orders is primarily a function of newbuilding prices in relation to current and prospective charter market conditions. Another factor that affects tanker supply is the available shipyard capacity. The level of vessel scrapping activity is primarily a function of scrapping prices in relation to current and prospective charter market conditions and operating, repair and survey costs. Industry regulations also affect scrapping levels. Please read “—Regulations” below. Demand for drybulk vessel and floating storage off-take units, to which tankers can be converted, strongly affects the number of tanker conversions.

For more than a decade, there has been a significant and ongoing shift toward quality in vessels and operations, as charterers and regulators increasingly focus on safety and protection of the environment. Since 1990, there has been an increasing emphasis on environmental protection through legislation and regulations such as OPA 90, International Maritime Organization (orIMO) regulations and protocols, and classification

society procedures that demand higher quality tanker construction, maintenance, repair and operations. We believe that operators with proven ability to integrate these required safety regulations into their operations have a competitive advantage.

Safety, Management of Ship Operations and Administration

Safety and environmental compliance are our top operational priorities. Our vessels are operated by our Manager in a manner intended to protect the safety and health of our employees, the general public and the environment. We ~~and our Manager~~ actively seek to manage the risks inherent in our business and are committed to eliminating incidents that threaten the safety and integrity of our vessels, such as groundings, fires, collisions and petroleum spills. In 2007, ~~our Manager~~we introduced a behavior-based safety program called “Safety in Action” to further enhance the safety culture in our fleet. We are also committed to reducing our emissions and waste generation. In 2008, ~~our Manager~~we introduced the Quality Assurance and Training Officers (orQATO) Program to conduct rigorous internal audits of our processes and provide our seafarers with onboard training.

Teekay Corporation, through certain of its subsidiaries, provides technical management services for all of our vessels. Teekay Corporation has obtained through Det Norske Veritas Germanischer Lloyd (or ~~DNV~~DNV-GL), the Norwegian classification society, approval of its safety management system as in compliance with the International Safety Management Code (orISM Code), and this system has been implemented for all of our vessels. As part of Teekay Corporation’s ISM Code compliance, all of the vessels’ safety management certificates are maintained through ongoing internal audits performed by Teekay Corporation’s certified internal auditors and intermediate audits performed by ~~DNV.~~

~~Our Manager~~DNV-GL.

In addition to the mandatory internal audits conducted by the QATOs, an internal audit is conducted by the Teekay Tanker’s Health Safety, Environment and Quality (or HSEQ) team every quarter to ensure that all ship management functions are strictly adhered to.

Teekay Tankers conducts quarterly Safety Management courses for senior officers, Onboard Safety Officer courses for safety officers and Rating safety courses. These are delivered by senior managers from Teekay Tankers.

Depending on existing HSEQ trends, various campaigns are run to address the shortcomings that are identified.

Additionally, a number of other projects have been implemented, including the Navigation Safety Handbook, Significant Incident Potential (SIP), Behavioral Safety (E-colors) as well as Risk Tools handbook.

Teekay Corporation provides, through certain of its subsidiaries, expertise in various functions critical to our operations and access to human resources, financial and other administrative functions. Critical ship management functions that our Manager provides to us through its affiliates include:

vessel ~~maintenance;~~

maintenance (including repairs and dry docking) and certification;

~~crewing;~~

crewing by competent seafarers;

~~purchasing;~~

purchasing of stores, bunkers and spare parts;

shipyard supervision;

insurance; and

financial management services.

These functions are supported by onboard and onshore systems for maintenance, inventory, purchasing and budget management.

All vessels are operated by ~~our Manager~~us under a comprehensive and integrated Safety Management System that complies with the ISM Code, the International Standards Organization’s (orISO) 9001 for Quality Assurance, ISO 14001 for Environment Management Systems, and Occupational Health and Safety Assessment Series (orOHSAS) 18001 and the new Maritime Labour Convention 2006 ~~(MLC 2006)~~ that became enforceable on August 20, 2013. The management system is certified by ~~DNV.~~DNV-GL. Although certification is valid for five years, compliance with the above mentioned standards is confirmed on a yearly basis by a rigorous auditing procedure that includes both internal audits as well as external verification audits by ~~DNV~~DNV-GL and certain flag states.

In addition, Teekay Corporation’s day-to-day focus on cost control is applied to our operations. Teekay Corporation and two other shipping companies participate in a purchasing alliance, Teekay Bergesen Worldwide, which leverages the purchasing power of the combined fleets, mainly in such commodity areas as lube oils, paints and other chemicals. Through our Manager, we benefit from this purchasing alliance.

Risk of Loss, Insurance and Risk Management

The operation of any ocean-going vessel carries an inherent risk of catastrophic marine disasters, death or injury of persons and property losses caused by adverse weather conditions, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. In addition, the transportation of crude oil and petroleum products is subject to the risk of spills and to business interruptions due to political circumstances in foreign countries, hostilities, labor strikes, sanctions and boycotts. The occurrence of any of these events may result in loss of revenues or increased costs.

We carry hull and machinery (marine and war risks) and protection and indemnity insurance coverage to protect against most of the accident-related risks involved in the conduct of our business. Hull and machinery insurance covers loss of or damage to a vessel due to marine perils

such as collision, grounding and weather. Protection and indemnity insurance indemnifies us against other liabilities incurred while operating vessels, including injury to the crew, third parties, cargo loss and pollution. The current maximum amount of our coverage for pollution is $1 billion per vessel per incident. We also carry insurance policies covering war risks (including piracy and terrorism). None of our vessels are insured against loss of revenues resulting from vessel off-hire time, based on the cost of this insurance compared to our off-hire experience. We believe that current insurance coverage is adequate to protect against most of the accident-related risks involved in the conduct of our business and that we maintain appropriate levels of environmental damage and pollution coverage. However, we cannot guarantee that all covered risks are adequately insured against, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. More stringent environmental regulations ~~at times in the past~~ have resulted in increased costs for, and may result in the lack of availability of, insurance against the risks of environmental damage or pollution.

In our operations, we use Teekay Corporation’s thorough risk management program which includes, among other things, risk analysis tools, maintenance and assessment programs, a seafarers competence training program, seafarers workshops and membership in emergency response organizations. We believe we benefit from Teekay Corporation’s commitment to safety and environmental protection as certain of its subsidiaries assist us in managing our vessel operations.

Teekay Corporation has achieved certification under the standards reflected in ISO 9001 for quality assurance, ISO 14001 for environment management systems, ~~Occupational Health and Safety Advisory Services~~OHSAS 18001, and the IMO’s International Management Code for the Safe Operation of Ships and Pollution Prevention on a fully integrated basis.

Flag, Classification, Audits and Inspections

Our vessels are registered with reputable flag states, and the hull and machinery of all of our vessels have been “classed” by one of the major classification societies and members of the International Association of Classification Societies ltd (orIACS): ~~DNV,~~DNV-GL, Lloyd’s Register of Shipping or the American Bureau of Shipping.

The applicable classification society certifies that the vessel’s design and build conforms to the applicable class rules and meets the requirements of the applicable rules and regulations of the country of registry of the vessel and the international conventions to which that country is a signatory. The classification society also verifies throughout the vessel’s life that it continues to be maintained in accordance with those rules. In order to validate this, the vessels are surveyed by the classification society, in accordance to the classification society rules, which in the case of our vessels follows a comprehensive five-year special survey cycle, renewed every fifth year. During each five-year period the vessel undergoes annual and intermediate surveys, the scrutiny and intensity of which is primarily dictated by the age of the vessel. ~~Because~~As our vessels are modern and we have enhanced the resiliency of the underwater coatings of each vessel hull and marked the hull to facilitate underwater inspections by divers, their underwater areas are inspected in a dry dock at five-year intervals. In-water inspection is carried out during the second or third annual inspection (i.e. during an intermediate survey).

In addition to class surveys, the vessel’s flag state also verifies the condition of the vessel during annual flag state inspections, either independently or by additional authorization to class. Also, port state authorities of a vessel’s port of call are authorized under international conventions to undertake regular and spot checks of vessels visiting their jurisdiction.

Processes followed onboard are audited by either the flag state or the ~~class~~classification society acting on behalf of the flag state to ensure that they meet the requirements of the ISM Code. ~~DNV~~DNV-GL typically carries out this task. We also follow an internal process of internal audits undertaken annually at each office and ~~vessel annually.~~

vessel.

We follow a comprehensive inspections scheme supported by our sea staff, shore-based operational and technical specialists and members of our QATO program. We carry out regular inspections, which help us to ensure that:

our vessels and operations adhere to our operating standards;

the structural integrity of the vessel is being maintained;

machinery and equipment is being maintained to give reliable service;

we are optimizing performance in terms of speed and fuel consumption; and

~~the vessel’s~~our vessels' appearance supports our brand and meets customer expectations.

Our customers also often carry out vetting inspections under the Ship Inspection Report Program, which is a significant safety initiative introduced by the Oil Companies International Marine Forum to specifically address concerns about sub-standard vessels. The inspection results permit charterers to screen a vessel to ensure that it meets their general and specific risk-based shipping requirements.

We believe that the heightened environmental and quality concerns of insurance underwriters, regulators and charterers will generally lead to greater scrutiny, inspection and safety requirements on all vessels in the oil tanker markets and will accelerate the scrapping or phasing out of older vessels throughout these markets.

Overall, we believe that our relatively new, well-maintained and high-quality vessels provide us with a competitive advantage in the current environment of increasing regulation and customer emphasis on quality of service.

Regulations

General

Our business and the operation of our vessels are significantly affected by international conventions and national, state and local laws and regulations in the jurisdictions in which our vessels operate, as well as in the country or countries of their registration. Because these conventions, laws and regulations change frequently, we cannot predict the ultimate cost of compliance or their impact on the resale price or useful life of our vessels. Additional conventions, laws and regulations may be adopted that could limit our ability to do business or increase the cost of our doing business and that may materially affect our operations. We are required by various governmental and quasi-governmental agencies to obtain permits, licenses and certificates with respect to our operations. Subject to the discussion below and to the fact that the kinds of permits, licenses and certificates required for the operations of the vessels we own will depend on a number of factors, we believe that we will be able to continue to obtain all permits, licenses and certificates material to the conduct of our operations.

International Maritime Organization (or IMO)

The IMO is the United Nations’ agency for maritime ~~regulation.~~safety and prevention of pollution. IMO regulations relating to pollution prevention for oil tankers have been adopted by many of the jurisdictions in which our tanker fleet operates. Under IMO regulations, and subject to limited exceptions, a tanker must be of double-hull construction in accordance with the requirements set out in these regulations, or be of another approved design ensuring the same level of protection against oil pollution. All of our tankers are double-hulled.

Many countries, but not the United States, have ratified and follow the liability regime adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended (orCLC). Under this convention, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil (e.g. crude oil, fuel oil, heavy diesel oil or lubricating oil), subject to certain defenses. The right to limit liability to specified amounts that are periodically revised is forfeited under the CLC when the spill is caused by the owner’s actual fault or when the spill is caused by the owner’s intentional or reckless conduct.

Vessels trading to contracting states must provide evidence of insurance covering the limited liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative regimes or common law governs, and liability is imposed either on the basis of fault or in a manner similar to the CLC.

IMO regulations also include the International Convention for Safety of Life at Sea (orSOLAS), including amendments to SOLAS implementing the International Ship and Port Facility Security Code (orISPS), the ISM Code, the International Convention on Load Lines of 1966. SOLAS provides rules for the construction of and the equipment required for commercial vessels and includes regulations for their safe operation. Flag states, which have ratified the convention and the treaty generally employ the classification societies, which have incorporated SOLAS requirements into their class rules, to undertake surveys to confirm compliance.

SOLAS and other IMO regulations concerning safety, including those relating to treaties on training of shipboard personnel, lifesaving appliances, radio equipment and the global maritime distress and safety system, are applicable to our operations. Non-compliance with IMO regulations, including SOLAS, the ISM Code, ISPS and other regulations, may subject us to increased liability or penalties, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to or detention in some ports. For example, the ~~U.S.~~United States Coast Guard (or USCG) and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and European Union ports. The ISM Code requires vessel operators to obtain a safety management certification for each vessel they manage, evidencing the shipowner’s development and maintenance of an extensive safety management system. Each of the existing vessels in our fleet is currently ISM Code-certified, and we expect to obtain safety management certificates for each newbuilding vessel upon delivery.

The IMO’s Maritime Safety Committee (or MSC) has adopted the International Code of Safety for Ships using Gases or other Low-flashpoint Fuels (the IGF Code), which is a mandatory code for ships fuelled by gases or other low-flashpoint fuels. The IGF Code, which is applicable from January 1, 2017, sets out mandatory provisions for the arrangement, installation, control and monitoring of machinery, equipment and systems using low-flashpoint fuel, in order to minimize the risk to the ship, its crew and the environment taking into account the nature of these fuels.

Annex VI to the ~~IMO’s~~IMO's International Convention for the Prevention of Pollution from Ships (MARPOL)~~(or~~ (or Annex VI) sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits emissions of ozone depleting substances, emissions of volatile compounds from cargo tanks and the incineration of specific substances. Annex VI also includes a world-wide cap on the sulfur content of fuel oil and allows for special ~~areas~~“emission control areas” (or ECAs) to be established with more stringent controls on sulfur emissions.

Annex VI also provides for a three-tier reduction in nitrogen oxide (or NOx) emissions from marine diesel engines, with the final tier (‘‘Tier III’’) to apply to engines installed on vessels constructed on or after January 1, 2016 and which operate in the North American ECA or the U.S. Caribbean Sea ECA. The Tier III requirements will also apply to ECAs designated in the future by the IMO. In October 2016, the IMO’s MEPC approved the designation of the North Sea and the Baltic Sea as ECAs for NOx emissions. These two new NOx ECAs and the related amendments to Annex VI of MARPOL are expected to be formally adopted by IMO’s MEPC in 2017 and the two new ECAs are expected to enter into effect on January 1, 2021.

The IMO has issued guidance regarding protecting against acts of piracy off the coast of Somalia. We comply ~~within~~with these guidelines.

~~In addition,~~

The IMO's Ballast Water Management Convention has been adopted by 54 countries, the combined merchant fleets of which represent 53.30% of the gross tonnage of the world’s merchant shipping, and will enter into force on September 8, 2017. The convention stipulates two standards for discharged ballast water. The D-1 standard covers ballast water exchange while the D-2 standard covers ballast water treatment. Once effective, the convention will require the implementation of either the D-1 or D-2 standard. There will be a transitional period from the entry into force to the International Oil Pollution Prevention (or IOPP) renewal survey in which ballast water exchange (reg. D-1) can be employed. After the first IOPP renewal survey, vessels will be required to meet the discharge standard D-2 by installing an approved Ballast Water Management System (or BWMS). Ships constructed after entry into force will be required to have a treatment system installed at delivery. Besides the IMO ~~has proposed (by~~convention, ships sailing in U.S. waters are required to employ a type-approved BWMS which is compliant with USCG regulations. To date, the ~~adoption in 2004 of the International Convention~~USCG have issued Type Approval (or TA) for the ~~Control and Management of Ships’ Ballast Water and Sediments (or the~~~~Ballast Water Convention~~~~)) that all tankers of the size we operate that were built starting in 2012 contain~~following ballast water treatment systems ~~to comply with~~(or BWTS):

•Alfa Laval;

•Ocean Saver; and

•Optimarin.

We expect the ~~ballast water performance standard specified~~USCG will issue more TAs for BWTS in the ~~Ballast Water Convention,~~future. Plans have been set for the decoupling of IOPP surveys with Harmonized System of Survey and ~~that all other similarly sized tankers install water ballast treatment systems~~Certification for vessels planning to drydock in ~~order to comply~~2018 with approval from the ballast water performance standard from 2016. In the latter case, compliance is required not later than by their first intermediate or renewal survey in relation to the International Ballast Water Management Certificate, whichever occurs first, after the anniversary date of delivery of the relevant vessel in the year of compliance with the applicable standard. This convention has not yet entered into force, but when it becomes effective, weFlag and Classification Society. We estimate that the installation of ~~ballast water treatment systems on our tankers~~approved BWTS may cost between $2 million and $3 million per vessel.

The IMO has also developed and adopted an International Code for Ships Operating in Polar Waters (or Polar Code) which deals with matters regarding design, construction, equipment, operation, search and rescue and environmental protection in relation to ships operating in waters surrounding the two poles. The Polar Code includes both safety and environmental provisions and will be mandatory, with the safety provisions becoming part of SOLAS and the environmental provisions becoming part of MARPOL. In November 2014, the IMO’s MSC adopted the Polar Code and the related amendments to SOLAS in relation to safety, while in May 2015, the IMO’s Marine Environment Protection Committee (orMEPC) ~~is expected to adopt~~adopted the environmental provisions of the Polar Code and associated amendments to ~~MARPOL at its next session in 2015. Once adopted, the~~MARPOL. The Polar Code ~~is to enter into force on~~has become mandatory for new vessels built after January 1, 2017.

For existing ships, this code will be applicable from the first intermediate or renewal survey beginning on or after January 1, 2018.

In addition to the requirements of major IMO shipping conventions, the exploration for and production of oil and gas within the Newfoundland & Labrador (or NL) offshore area is conducted pursuant to the Canada Newfoundland and Labrador Atlantic Accord Implementation Act (or the Accord Act) in accordance with the conditions of a license and authorization issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board (or CNLOPB). Various regulations dealing with environmental, occupational health and safety, and other aspects of offshore oil and gas activities have been enacted under the Accord Act. The CNLOPB has also issued interpretive guidelines concerning compliance with the regulations, and compliance with CNLOPB guidelines may be a condition of the issuance or renewal of the license and authorizations. These regulations and guidelines require that the shuttle tankers in the NL offshore area meet stringent standards for equipment, reporting and redundancy systems, and for the training and equipping of seagoing staff. Further, licensees are required by the Accord Act to provide a benefits plan satisfactory to CNLOPB. Such plans generally require the licensee to: establish an office in NL; give NL residents first consideration for training and employment; make expenditures for research and development and education and training to be carried out in NL; and give first consideration to services provided from within NL and to goods manufactured in NL. These regulatory requirements may change as regulations and CNLOPB guidelines are amended or replaced from time to time.

MARPOL Annex I also states that oil residue may be discharged directly from the sludge tank to the shore reception facility through standard discharge connections. They may also be discharged to the incinerator or to an auxiliary boiler suitable for burning the oil by means of a dedicated discharge pump. Oil residue tanks shall have no discharge connection to the engine room bilge system, bilge tank or OWS except in the following cases:

the residue tank may be fitted with manually operated self-closing valves and arrangements for subsequent visual monitoring of the settled water that lead to an oily water holding tank or bilge well;

the sludge tank discharge piping and bilge water piping may be connected to a common line leading to the standard discharge connection; however, the interconnection of line shall not allow for the transfer of sludge to the bilge system; and

a screw down non-return valve in lines connecting to the standard discharge connection, provides an acceptable means for not allowing for the transfer of sludge to the bilge system. Ship operators and managers, should before the first IOPP renewal survey, ensure that such systems are compliant. In the event that modifications are required, system drawings will be subject to approval.

Annex I is applicable for existing vessels with a first renewal survey beginning on or after January 1, 2017. It is anticipated that most vessels constructed after December 31, 1991 already comply with Annex I as MARPOL has since provided a unified interpretation prohibiting interconnections between sludge and bilge systems.

MSC 91 adopted amendments to SOLAS Regulation II-2/10 to add a new paragraph 10.4 to clarify that a minimum of two-way portable radiotelephone apparatus for each fire party for firefighters' communication shall be carried on board. These radio devices shall be of explosion proof type or intrinsically safe type. All existing ships built before July 1, 2014 should comply with this requirement by the first safety equipment survey after July 1, 2018. All new vessels constructed (keel laid) on or after July 1, 2014 must comply with this requirement at the time of delivery.

As per MSC. 338(91), requirements have been highlighted for audio and visual indicators for breathing apparatus which will alert the user before the volume of the air in the cylinder has been reduced to no less than 200 liters. This applies to ships constructed on or after July 1, 2014. Ships constructed before July 1, 2014 must comply no later than July 1, 2019.

European Union (or EU)

Like the IMO, the EU has adopted regulations phasing out single-hull tankers. All of our tankers are double-hulled. On May 17, 2011, the European ~~Commission~~commission carried out a number of unannounced inspections, at the offices of some of the world’s largest container line operators starting an antitrust investigation. We ~~were~~are not directly affected by this investigation and believe that we are compliant with antitrust rules. Nevertheless, it is possible that the investigation could be widened and new companies and practices could come under scrutiny within the EU.

The EU has also adopted legislation (Directive 2009/16/EC on Port State Control as subsequently amended) that: bans from European waters manifestly sub-standard vessels (defined as vessels that have been detained twice by EU port authorities, in the preceding two years); creates obligations on the part of EU member port states to inspect minimum percentages of vessels using these ports annually; provides for increased surveillance of vessels posing a high risk to maritime safety or the marine environment; and provides the EU with greater authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies (Directive 2009/15/EC as amended by Directive 2014/111/EU of December 17, 2014).

Two new regulations were introduced by the European Commission in September 2010, as part of the implementation of the Port State Control Directive. These came into force on January 1, 2011 and ~~introduce~~introduced a ranking system (published on a public website and updated daily) displaying shipping companies operating in the EU with the worst safety records. The ranking is judged upon the results of the technical inspections carried out on the vessels owned by a particular shipping company. Those shipping companies that have the most positive safety records are rewarded by subjecting them to fewer inspections, ~~whilst~~while those with the most safety shortcomings or technical failings recorded upon inspection will in turn be subject to a greater frequency of official inspections to their vessels.

The EU has, by way of Directive 2005/35/EC, which has been amended by Directive 2009/123/EC created a legal framework for imposing criminal penalties in the event of discharges of oil and other noxious substances from ships sailing in its waters, irrespective of their flag. This relates to discharges of oil or other noxious substances from vessels. Minor discharges shall not automatically be considered as ~~offences,~~offenses, except where repetition leads to deterioration in the quality of the water. The persons responsible may be subject to criminal penalties if they have acted with intent, recklessly or with serious negligence and the act of inciting, aiding and abetting a person to discharge a polluting substance may also lead to criminal penalties.

The EU has adopted ~~regulations~~a Directive requiring the use of low sulfur fuel. Currently, vessels are required to burn fuel with sulfur content not exceeding 1% (while within EU member states’ territorial seas, exclusive economic zones and pollution control zones that are included in SOx Emission Control Areas). BeginningSince January 1, 2015, vessels ~~are~~have been required to burn fuel with sulfur content not exceeding 0.1% while within EU member states’ territorial seas, exclusive economic zones and pollution control zones that are included in SOX Emission Control Areas. Other jurisdictions have also adopted regulations requiring the use of low sulfur fuel. ~~The~~Since January 1, 2014, the California Air Resources Board (orCARB) ~~requires~~has required vessels to burn fuel with 0.1% sulfur content or less within 24 nautical miles of ~~California as of~~California. China also established emission control areas in the Pearl River Delta, the Yangtze River Delta and the Bohai Bay rim area with restrictions, commencing on January 1, ~~2014.~~ 2016, on the maximum sulfur content of the fuel to be used by vessels within those areas, which limits become progressively stricter over time. Commencing January 1, 2017, all the key ports within the three China ECAs (i.e. Tianjin, Qinhuangdao, Tangshan, Huanghua, Shenzhen, Guangzhou, Zhuhai, Shanghai, Ningbo-Zhoushan, Suzhou and Nantong) have implemented the low sulfur bunker requirements.

IMO regulations require that as of January 1, 2015, all vessels operating within ~~Emissions control Areas (or~~ECAs) worldwide recognized under MARPOL Annex VI must comply with 0.1% sulfur requirements. Currently, the only grade of fuel meeting ~~this low~~0.1% sulfur content requirement is low sulfur marine gas oil (or~~LSMGO)~~LSMGO). Since ~~July~~January 1, ~~2010,~~2015, the applicable sulfur content limits in the North Sea, the Baltic Sea and the English Channel ~~sulfur control areas~~ECAs have been ~~1.00%~~0.1%. Other established ECAs under Annex VI to MARPOL are the North American ECA and the United States Caribbean Sea ECA. Certain modifications were ~~completed on our Suezmax tankers~~necessary in order to optimize operation on LSMGO of equipment originally designed to operate on Heavy Fuel Oil (orHFO)~~, and to ensure our compliance with the Directive.~~. In addition, LSMGO is more expensive than HFO and this ~~impacts~~will impact the costs of operations. However, for vessels employed on ~~fixed-term~~fixed term business, all fuel costs, including any increases, are borne by the charterer.

Our exposure to increased cost is in our spot trading vessels, although our competitors bear a similar cost increase as this is a regulatory item applicable to all vessels. All required vessels in our fleet trading to and within regulated low sulfur areas are able to comply with fuel requirements. The global cap on the sulfur content of fuel oil is currently 3.5%, to be reduced to 0.5% by January 1, 2020. The reduced global cap of 0.5% as of January 1, 2020 was subject to a feasibility review, which was completed in 2016 and on the basis of which the IMO’s Marine Environment Protection Committee (or the MEPC) decided in October 2016 to implement the 0.5% global sulfur cap as of January 1, 2020.

The EU ~~has recently adopted~~Ship Recycling Regulation ~~(EU) No 1257/2013 which imposes rules regarding ship recycling~~(1257/2013) entered into force on December 30, 2013. It aims to prevent, reduce and ~~management of hazardous materials on vessels. The Regulation sets out requirements for the recycling of vessels in an environmentally sound manner at approved recycling facilities, so as to~~ minimize ~~the adverse~~accidents, injuries and other negative effects ~~of recycling~~ on human health and the ~~environment.~~environment when ships are recycled and the hazardous waste they contain is removed. The ~~Regulation also contains rules~~legislation applies to ~~control~~all ships flying the flag of an EU country and ~~properly manage~~to vessels with non-EU flags that call at an EU port or anchorage. It sets out responsibilities for ship owners and for recycling facilities both in the EU and in other countries. Each new ship has to have on board an inventory of the hazardous materials ~~on vessels and prohibits~~(such as asbestos, lead or ~~restricts the installation~~mercury) it contains in either its structure or equipment. The use of certain hazardous materials is forbidden. Before a ship is recycled, its owner must provide the company carrying out the work with specific information about the vessel and prepare a ship recycling plan. Recycling may only take place at facilities listed on ~~vessels. The Regulation aims at facilitating~~ the ~~ratification~~EU ‘List of facilities’. In 2014, the Council Decision 2014/241/EU was adopted, authorizing EU countries having ships flying their flag or registered under their flag to ratify or to accede to the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships adopted by the IMO in 2009 (which has not entered into force). It applies to vessels flying the flag of a Member State. In addition, certain of its provisions also apply to vessels flying the flag of a third country calling at a port or anchorage of a Member State. For example, when calling at a port or anchorage of a Member State, the vessels flying the flag of a third country will be required, amongst other things, to have on board an inventory of hazardous materials which complies with the requirements of the Regulation and to be able to submit to the relevant authorities of that Member State a copy of a statement of compliance issued by the relevant authorities of the country of their flag and verifying the inventory.Ships. The Regulation is to apply ~~not earlier than December 31, 2015 and~~ not later than December 31, 2018, although certain of its provisions are to apply at different stages, with some of them being applicable from December 31, ~~2014~~2020. Pursuant to this Regulation, the EU Commission has recently published the first version of a

European List of approved ship recycling facilities meeting the requirements of the regulation, as well as four further implementing decisions dealing with certification and ~~certain others are to apply from December 31, 2020.~~

other administrative requirements set out in the Regulation.

United States

The United States has enacted an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills, including discharges of oil cargoes, bunker fuels or lubricants, primarily through the Oil Pollution Act of 1990 (orOPA 90) and the Comprehensive Environmental Response, Compensation and Liability Act (orCERCLA). OPA 90 affects all owners, operators, and bareboat charterers, whose vessels trade to the United States or its territories or possessions or whose vessels operate in United States waters, which include the U.S. territorial sea and 200-mile exclusive economic zone around the United States. CERCLA applies to the discharge of “hazardous substances” rather than “oil” and imposes strict joint and several ~~liability~~liabilities upon the owners, operators or bareboat charterers of vessels for cleanup costs and damages arising from discharges of hazardous substances. We believe that petroleum products should not be considered hazardous substances under CERCLA, but additives to oil or lubricants used on vessels might fall within its scope.

Under OPA 90, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable (unless the oil spill results solely from the act or omission of a third party, an act of God or an act of war and the responsible party reports the incident and reasonably cooperates with the appropriate authorities) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. These other damages are defined broadly to include:

natural resources damages and the related assessment costs;

real and personal property damages;

net loss of taxes, royalties, rents, fees and other lost revenues;

lost profits or impairment of earning capacity due to property or natural resources damage;

net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and

loss of subsistence use of natural resources.

OPA 90 limits the liability of responsible parties in an amount it periodically updates. The liability limits do not apply if the incident was proximately caused by violation of applicable U.S. federal safety, construction or operating regulations, including IMO conventions to which the United States is a signatory, or by the responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the oil removal activities. Liability under CERCLA is also subject to limits unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations. We currently maintain for each of our vessel’s pollution liability coverage in the maximum coverage amount of $1 billion per incident. A catastrophic spill could exceed the coverage available, which could harm our business, financial condition and results of operations.

Under OPA 90, with limited exceptions, all newly built or converted tankers delivered after January 1, 1994 and operating in U.S. waters must be double-hulled. All of our tankers are double-hulled.

OPA 90 also requires owners and operators of vessels to establish and maintain with the United States Coast Guard (or theCoast Guard) evidence of financial responsibility in an amount at least equal to the relevant limitation amount for such vessels under the statute. The Coast Guard has implemented regulations requiring that an owner or operator of a fleet of vessels must demonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum limited liability under OPA 90 and CERCLA. Evidence of financial responsibility may be demonstrated by insurance, surety bond, self-insurance, guaranty or an alternative method subject to approval by the Coast Guard. Under the self-insurance provisions, the ~~shipowner~~ship owners or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of

financial responsibility. ~~Teekay Corporation has~~We have complied with the Coast Guard regulations by obtaining financial guaranties from one of its subsidiaries covering our vessels. If other vessels in our fleet trade into the United States in the future, we expect to obtain guaranties from third-party insurers.

OPA 90 and CERCLA permit individual U.S. states to impose their own liability regimes with regard to oil or hazardous substance pollution incidents occurring within their boundaries and some states have enacted legislation providing for unlimited strict liability for spills. Several coastal states require state-specific evidence of financial responsibility and vessel response plans. We intend to comply with all applicable state regulations in the ports where our vessels call.

Owners or operators of vessels, including tankers, operating in U.S. waters are required to file vessel response plans with the Coast Guard, and their tankers are required to operate in compliance with their Coast Guard approved plans. Such response plans must, among other things:

address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a “worst case discharge”;

describe crew training and drills; and

identify a qualified individual with full authority to implement removal actions.

We have filed vessel response plans with the Coast Guard and have received its approval of such plans. In addition, we conduct regular oil spill response drills in accordance with the guidelines set out in OPA 90. The Coast Guard has announced it intends to propose similar regulations requiring certain vessels to prepare response plans for the release of hazardous substances.

OPA 90 and CERCLA do not preclude claimants from seeking damages resulting from the discharge of oil and hazardous substances under other applicable law, including maritime tort law. The application of this doctrine varies by jurisdiction.

The U.S. Clean Water Act (or the Clean Water Act) also prohibits the discharge of oil or hazardous substances in U.S. navigable waters and imposes strict liability in the form of penalties for unauthorized discharges. The Clean Water Act imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA 90 and CERCLA discussed above.

Our vessels that discharge certain effluents, including ballast water, in U.S. waters must obtain a Clean Water Act permit from the Environmental Protection Agency (orEPA) titled the “Vessel General Permit” and comply with a range of effluent limitations, best management practices, reporting, inspections and other requirements. The current Vessel General Permit incorporates Coast Guard requirements for ballast water exchange and includes specific technology-based requirements for vessels, and includes an implementation schedule to require vessels to meet the ballast water effluent limitations by the first ~~drydocking~~dry docking after ~~January 1, 2014 or~~ January 1, 2016, depending on the vessel size. Vessels that are constructed after December 1, 2013 are subject to the ballast water numeric effluent limitations. Several U.S. states have added specific requirements to the Vessel General Permit and, in some cases, may require vessels to install ballast water treatment technology to meet biological performance standards.

Greenhouse Gas Regulation

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (or theKyoto ~~Protocol~~)Protocol) entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of greenhouse gases. In December 2009, more than 27 nations, including the United States, entered into the Copenhagen Accord. The Copenhagen Accord is non-binding, but is intended to pave the way for a comprehensive, international treaty on climate change. In December 2015 the Paris Agreement (or the Paris Agreement) was adopted by a large number of countries at the 21st Session of the Conference of Parties (commonly known as COP 21, a conference of the countries which are parties to the United Nations Framework Convention on Climate Change; the COP is the highest decision-making authority of this organization). The Paris Agreement, which entered into force on November 4, 2016, deals with greenhouse gas emission reduction measures and targets from 2020 in order to limit the global temperature increases to well below 2˚ Celsius above pre-industrial levels. Although shipping was ultimately not included in the Paris Agreement, it is expected that the adoption of the Paris Agreement may lead to regulatory changes in relation to curbing greenhouse gas emissions from shipping.

In July 2011, the IMO adopted regulations imposing technical and operational measures for the reduction of greenhouse gas emissions. These new regulations formed a new chapter in Annex VI and became effective on January 1, 2013. The new technical and operational measures include the “Energy Efficiency Design ~~Index,”~~Index” (or the EEDI), which is mandatory for newbuilding vessels, and the “Ship Energy Efficiency Management Plan,” which is mandatory for all vessels. In October 2016, the IMO’s MEPC adopted updated guidelines for the calculation of the EEDI. In addition, the IMO is evaluating various mandatory measures to reduce greenhouse gas emissions from international shipping, which may include market-based instruments or a carbon tax. In October 2014, the IMO’s MEPC agreed in principle to develop a system of data collection regarding fuel consumption of ships. In October 2016, the IMO adopted a mandatory data collection system under which vessels of 5,000 gross tonnages and above are to collect fuel consumption and other data and to report the aggregated data so collected to their flag state at the end of each calendar year. The new requirements are expected to enter into force on March 1, 2018. The IMO also approved a roadmap for the development of a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships with an initial strategy to be adopted in 2018 and a revised strategy to be adopted in 2023.

The EU also has indicated that it intends to propose an expansion of ~~the~~an existing ~~European Union~~EU emissions trading ~~scheme~~regime to include emissions of greenhouse gases from vessels, and individual countries in the EU may impose additional requirements. The EU has adopted Regulation (EU) 2015/757 on the monitoring, reporting and verification (MRV) of CO2 emissions from vessels (or the MRV Regulation), which entered into force on July 1, 2015. The MRV Regulation aims to quantify and reduce CO2 emissions from shipping. It lists the requirements on MRV of carbon dioxide emissions and requires ship owners and operators to annually monitor, report and verify CO2 emissions for vessels larger than 5,000 gross tonnage calling at any EU and EFTA (Norway and Iceland) port (with a few exceptions, such as fish-catching or fish-processing vessels). Data collection takes place on a per voyage basis and starts January 1, 2018. The reported CO2 emissions, together with additional data, such as cargo and energy efficiency parameters, are to be verified by independent verifiers and sent to a central database, managed by the European Maritime Safety Agency. To comply with the EU MRV regulation, we have prepared an EU MRV monitoring plan and EU MRV monitoring template in line with legislative requirement. The approved EU-MRV monitoring plan is expected to be placed on all our vessels by August 31, 2017. The EU is currently considering a proposal for ~~a regulation establishing a system~~the inclusion of ~~monitoring, reporting and verification of greenhouse gas~~ shipping ~~emissions (or~~~~MRV system~~~~). The proposed MRV system may be the precursor to a market-based mechanism to be adopted~~ in the ~~future.~~ EU Emissions Trading System as from 2021 in the absence of a comparable system operating under the IMO.

In the United States, the EPA issued an “endangerment finding” regarding greenhouse gases under the Clean Air Act. While this finding in itself does not impose any requirements on our industry, it authorizes the EPA to regulate directly greenhouse gas emissions through a rule-making process. In addition, climate change initiatives are being considered in the United States Congress and by individual states. Any passage of new climate control legislation or other regulatory initiatives by the IMO, EU, the United States or other countries or states where we operate that restrict emissions of greenhouse gases could have a significant financial and operational impact on our business that we cannot predict with certainty at this time.

Vessel Security Regulation

The ISPS ~~code~~ was adopted by the IMO in December 2002 in the wake of heightened concern over worldwide terrorism and became effective on July 1, 2004. The objective of ~~the~~ ISPS ~~code~~ is to enhance maritime security by detecting security threats to ships and ports and by requiring the development of security plans and other measures designed to prevent such threats. Each of the existing vessels in our fleet currently complies with the requirements of ISPS and ~~MTSA.~~

Maritime Transportation Security Act of 2002 (U.S. specific requirements). Procedures are in place to inform the Maritime Security Council Horn of Africa (or MSCHOA ) whenever our vessels are calling in the Indian Ocean Region or West Coast of Africa (or WAC) high risk area. In order to mitigate the security risk, security arrangements are required for vessels which travel through the Gulf of Aden and WAC region.

~~C.Organizational Structure~~


C.	Organizational Structure

As of December 31, ~~2014,~~2016, Teekay Corporation (NYSE: TK), through its 100%-owned subsidiary Teekay Holdings Ltd., had a ~~26.2%~~25.4% economic interest in us through its ownership of ~~12.6~~17.2 million of our shares of Class A common stock and ~~16.7~~23.2 million shares of our Class B common stock.

Our shares of Class A common stock entitle the holders thereof to one vote per share and our shares of Class B common stock entitle the holders thereof to five votes per share, subject to a 49% aggregate Class B common stock voting power maximum. As such, we are controlled by Teekay Corporation. Teekay Corporation also controls its public subsidiaries Teekay LNG Partners L.P. (NYSE: TGP) and Teekay Offshore Partners L.P. (NYSE: TOO).

Please read Exhibit 8.1 to this Annual Report for a list of our subsidiaries as of December 31, ~~2014.~~

2016.

~~D.Property, Plant and Equipment~~

~~We believe that our well-maintained and high-quality vessels provide us with a competitive advantage in the current environment of increasing regulation and customer emphasis on quality of service.~~

Our vessels are regularly inspected by our seafaring staff, who perform much of the necessary routine maintenance. Shore-based operational and technical specialists also inspect our vessels on a regular basis. Upon completion of each inspection, action plans are developed to address any items requiring improvement. All action plans are monitored until they are completed. The objectives of these inspections are to:


D.	Property, Plant and Equipment

~~ensure adherence to our operating standards;~~

~~maintain the structural integrity of the vessel;~~

~~maintain machinery and equipment to give full reliability in service;~~

~~optimize performance in terms of speed and fuel consumption; and~~

~~ensure the vessel’s appearance will support our reputation and meet customer expectations.~~

Other than our vessels and related equipment, we do not have any material property.

Please see “Item 4. Information on the Company: Note ~~B –~~ B–Our Fleet” for a description of our vessels and “Item 18. Financial Statements: Note 8—10—Long-Term Debt” for information about major encumbrances against our vessels.

~~E.Taxation of the Company~~

The following discussion is a summary of the principal United States and Marshall Islands tax laws applicable to us. The following discussion of tax matters, as well as the conclusions regarding certain issues of tax law that are reflected in such discussion, are based on current law. No assurance can be given that changes in or interpretation of existing laws will not occur or will not be retroactive or that anticipated future factual matters and circumstances will in fact occur. Our views have no binding effect or official status of any kind, and no assurance can be given that the conclusions discussed below would be sustained if challenged by taxing authorities.


E.	Taxation of the Company


1.	United States Taxation

The following is a discussion of the expected material U.S. federal income tax considerations applicable to us. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (or theCode), legislative history, applicable U.S. Treasury Regulations (orTreasury Regulations), judicial authority and administrative interpretations, all as in effect on the date of this Annual Report, and which are subject to change, possibly with retroactive effect, or are subject to different interpretations. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below.

Taxation as a Corporation. We are taxed as a corporation for U.S. federal income tax purposes. As such, we are subject to U.S. federal income tax on our income to the extent it is from U.S. sources or otherwise is effectively connected with the conduct of a trade or business in the United States as discussed below.

Taxation of Operating Income. A significant portion of our gross income will be attributable to the transportation of crude oil and related products. For this purpose, gross income attributable to transportation (orTransportation Income) includes income derived from, or in connection with, the use (or hiring or leasing for ~~use)~~use) of a vessel to transport cargo, or the performance of services directly related to the use of any vessel to transport cargo, and thus includes both time-charter and bareboat-charter income.

Fifty percent (50%) of Transportation Income attributable to transportation that either begins or ends, but that does not both begin and end, in the United States (orU.S. Source International Transportation Income) is considered to be derived from sources within the United States. Transportation Income attributable to transportation that both begins and ends in the United States (orU.S. Source Domestic Transportation Income) is considered to be 100% derived from sources within the United States. Transportation Income attributable to transportation exclusively between non-U.S. destinations is considered to be 100% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally will not be subject to U.S. federal income tax.

Based on our current operations, a substantial portion of our Transportation Income is from sources outside the United States and not subject to U.S. federal income tax. In addition, we believe that we have not earned any U.S. Source Domestic Transportation Income, and we expect that we will not earn ~~any~~a material amount of such income in future years. However, certain of our subsidiaries which have made special U.S. tax elections to be treated as partnerships or disregarded as entities separate from us for U.S. federal income tax purposes are potentially engaged in activities which could give rise to U.S. Source International Transportation Income. Unless the exemption from U.S. taxation under Section 883 of the Code (or theSection 883 Exemption) applies, our U.S. Source International Transportation Income generally will be subject to U.S. federal income taxation under either the net basis and branch profits taxes or the 4% gross basis tax, each of which is discussed below.

The Section 883 Exemption. In general, the Section 883 Exemption provides that if a non-U.S. corporation satisfies the requirements of Section 883 of the Code and the Treasury Regulations thereunder (or theSection 883 Regulations), it will not be subject to the net basis and branch profits taxes or the 4% gross basis tax described below on its U.S. Source International Transportation Income. As discussed below, we believe that under our current ownership structure, the Section 883 Exemption will apply and we will not be taxed on our U.S. Source International Transportation Income. The Section 883 Exemption does not apply to U.S. Source Domestic Transportation Income.

A non-U.S. corporation will qualify for the Section 883 Exemption if, among other things, it (i) is organized in a jurisdiction outside the United States that grants an exemption from tax to U.S. corporations on international Transportation Income (or anEquivalent Exemption), (ii) ~~satisfies~~meets one of three ownership tests (orOwnership Tests) described in the Section 883 Regulations, and (iii) meets certain substantiation, reporting and other requirements (or theSubstantiation Requirements).

We are organized under the laws of the Republic of The Marshall Islands. The U.S. Treasury Department has recognized the Republic of The Marshall Islands as a jurisdiction that grants an Equivalent Exemption. We also believe that we will be able to satisfy the Substantiation Requirements necessary to qualify for the Section 883 Exemption. Consequently, our U.S. Source International Transportation Income (including for this purpose, our share of any such income earned by our subsidiaries that have properly elected to be treated as partnerships or disregarded as entities separate from us for U.S. federal income tax purposes) will be exempt from U.S. federal income taxation provided we satisfy one of the Ownership ~~Test.~~Tests. We believe that we should satisfy one of the Ownership ~~Test~~Tests because our stock is primarily and regularly traded on an established securities market in the United States within the meaning of Section 883 of the Code and the Section 883 Regulations. We can give no assurance, however, that changes in the ownership of our stock subsequent to the date of this report will permit us to continue to qualify for the Section 883 exemption.

The Net Basis and Branch Profits Taxes. If the Section 883 Exemption does not apply, our U.S. Source International Transportation Income may be treated as effectively connected with the conduct of a trade or business in the United States (orEffectively Connected Income) if we have a fixed place of business in the United States and substantially all of our U.S. Source International Transportation Income is attributable to regularly scheduled transportation or, in the case of income derived from bareboat charters, is attributable to a fixed place of business in the United States. Based on our current operations, none of our potential U.S. Source International Transportation Income is attributable to regularly scheduled transportation or is derived from bareboat charters attributable to a fixed place of business in the United States. As a result, we do not anticipate that any of our U.S. Source International Transportation Income will be treated as Effectively Connected Income. However, there is no assurance that we will not earn income pursuant to regularly scheduled transportation or bareboat charters attributable to a fixed place of business in the United States in the future, which would result in such income being treated as Effectively Connected Income.

U.S. Source Domestic Transportation Income generally will be treated as Effectively Connected Income. However, we do not anticipate that ~~any~~a material amount of our income has been or will be U.S. Source Domestic Transportation Income.

Any income we earn that is treated as Effectively Connected Income would be subject to U.S. federal corporate income tax (the highest statutory rate currently is 35%), and a 30% branch profits tax imposed under Section 884 of the Code. In addition, a branch interest tax could be imposed on certain interest paid or deemed paid by us.

On the sale of a vessel that has produced Effectively Connected Income, we generally would be subject to the net basis and branch profits taxes with respect to our gain ~~not in excess~~recognized up to the amount of certain prior deductions for depreciation that reduced Effectively Connected Income. Otherwise, we would not be subject to U.S. federal income tax with respect to gain realized on the sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles.

The 4% Gross Basis Tax. If the Section 883 Exemption does not apply and we are not subject to the net basis and branch ~~profit~~profits taxes described above, we would be subject to a 4% U.S. federal income tax on our gross U.S. Source International Transportation Income, without benefit of deductions. For ~~2015,~~2017, we estimate that the U.S. federal income tax on such U.S. Source International Transportation Income would be approximately ~~$1.2~~$3.5 million if the Section 883 Exemption does not apply, based on the amount of U.S. Source International Transportation Income we earned for ~~2014.~~2016. The amount of such tax for which we ~~are~~may be liable ~~for~~in any year ~~will~~would depend upon the amount of income we earn from voyages into or out of the United States in such year, however, which is not within our complete control.


2.	Marshall Islands Taxation

Because we and our controlled affiliates do not, and we do not expect that we and our controlled affiliates will, conduct business or operations in the Republic of the Marshall Islands, neither we nor our controlled affiliates are subject to income, capital gains, profits or other taxation under current Marshall Island ~~law.~~law, other than taxes or fees due to (i) the continued existence of legal entities registered in the Republic of the Marshall Islands, (ii) the incorporation or dissolution of legal entities registered in the Republic of the Marshall Islands, (iii) filing certificates (such as certificates of incumbency, merger, or redomiciliation) with the Marshall Islands registrar, (iv) obtaining certificates of good standing from, or certified copies of documents filed with, the Marshall Islands registrar, or (v) compliance with Marshall Islands law concerning vessel ownership, such as tonnage tax. As a result, distributions by controlled affiliates to us are not subject to Marshall Islands taxation.


3.	Other Taxation

We and our subsidiaries are subject to taxation in certain non-U.S. jurisdictions because we or our subsidiaries are either organized, or conduct business or operations, in such jurisdictions, but, we do not expect any such tax to be material. However, we cannot assure this result as tax

laws in these or other jurisdictions may change or we may enter into new business transactions relating to such jurisdictions, which could affect our tax liability.

Item 4A. Unresolved Staff Comments

None.

~~Item 4A.Unresolved Staff Comments~~

~~None.~~

~~Item 5.Operating and Financial Review and Prospects~~

Item 5. Operating and Financial Review and Prospects

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Our business is to own oil and product tankers and we employ a chartering strategy that seeks to capture upside opportunities in the tanker spot market while using fixed-rate time charters to reduce downside risks. During 2015, we further developed our service offerings to our customers through the purchase of a ship-to-ship transfer business that provides full service lightering as well as lightering support services and consultancy and LNG terminal management services. This acquisition, which is adjacent to our core competencies, along with our existing conventional tanker commercial management and technical management operations, is expected to improve our ability to manage the cyclicality of the tanker market through the less volatile cash flows generated by these business areas. Historically, the tanker industry has experienced volatility in profitability due to changes in the supply of, and demand for, tanker capacity. Tanker supply and demand are each influenced by several factors beyond our control. We were formed in October 2007 by Teekay Corporation (NYSE: TK) ((or Teekay), a leading provider of marine services to the global oil and gas industries and the world’s largest operator of medium-sized oil tankers, and we completed our initial public offering in December 2007.

Through the participation of some of our vessels in pooling arrangements, we expect to benefit from Teekay’s reputation and the scope of its operations in increasing our cash flows. Our mix of vessels trading in the spot market or subject to fixed-rate time charters will change from time to time. Teekay currently holds a majority of the voting power of our common stock, which includes Class A common stock and Class B common stock.

Commencing in ~~2013,~~December 2015, we adopted a new dividend policy under which quarterly dividends are expected to range from 30% to 50% of our quarterly adjusted net income, subject to the discretion of our Board of Directors, with a minimum quarterly dividend of $0.03 per share. Adjusted net income is a non-GAAP measure which excludes specific items affecting net income that are typically excluded by securities analysts in their published estimates of our financial results. Prior to this change, our dividend policy iswas to distribute to our ~~stockholders~~shareholders a fixed quarterly dividend of $0.03 per share ($0.12 per share annually). Prior to 2013, we distributed to our stockholders on a quarterly basis all of our Cash Available for Distribution, subject to any reserves the Board of Directors determined were required for the prudent conduct of our business.~~Cash Available for Distribution~~ represented net (loss) income, plus depreciation and amortization, unrealized losses from derivatives, non-cash items and any write-offs or other non-recurring items, less unrealized gains from derivatives and net income attributable to the historical results of vessels acquired by us from Teekay, prior to their acquisition by us, for the period when these vessels were owned and operated by Teekay. Our dividend policy is reviewed by our Board of Directors from time to time.

Significant Developments in ~~2014~~2016 and ~~2015~~

~~Public Share Issuance~~

Early 2017

LNG Terminal Service

In December 2014, we issued 20.0 million shares of Class A common stock in a public offering and 4.2 million shares of Class A common stock to Teekay in a concurrent private placement, at a price of $4.80 per share for gross proceeds of $116.0 million (net proceeds of $111.2 million). In connection with this offering, we granted the underwriters a 30-day option to purchase up to an additional 3 million shares of Class A common stock. The underwriters exercised this option in full and on January 2, 2015, we issued a further 3 million shares of Class A common stock for gross proceeds of $14.4 million (net proceeds of $13.7 million). We used the proceeds from the issuance to acquire modern second hand tankers, as described below, and for general corporate purposes.

~~Vessel Purchase Commitments~~

~~In December 2014, we~~November 2016, our ship-to-ship transfer business (or TMS) signed an ~~agreement to acquire one 2008-built Aframax tanker~~operational and maintenance subcontract with Teekay LNG Bahrain Operations L.L.C., an entity wholly owned by Teekay LNG Partners L.P. (or TGP), for the ~~purchase price of $37.0 million and placed $3.7 million in an escrow account in connection with this purchase. In December 2014, we also signed agreements to acquire four modern LR2 vessels~~Bahrain LNG Import Terminal. As the subcontractor, TMS will provide pre-mobilization services for a total purchase price of $193.3 million. We took delivery of three and two of these vessels in February and March 2015, respectively. Please see Item 18 – Financial Statements: Note 20 – Subsequent Events.

~~Investment in Tanker Investments Ltd. (~~~~TIL~~)

~~In January 2014, we and Teekay jointly created TIL, which seeks to opportunistically acquire, operate, and sell modern secondhand tankers to benefit from~~ an expected ~~recovery~~period of 21 months, mobilization services and other general operational and maintenance services of the ~~tanker market. TIL completed a $250 million equity private placement~~facility. We have agreed to guarantee the performance of this contract by TMS.

New Lightering Business Contracts

In the latter part of 2016, we secured two significant Aframax lightering contracts with major oil companies for firm periods of 12 and 24 months, which commenced in ~~which we~~October 2016 and Teekay co-invested $25 million each for a combined 20% initial ownership in the new company. In addition, we each received a stock purchase warrant to acquire up to an additional 750,000 shares of TIL’s common stock, linked to TIL’s future share price performance. In March 2014, TIL completed a $175 million initial public offering and listed its shares on the Oslo Stock Exchange, which reduced our ownership interest in TIL from 10.0% to 6.5%.

In October 2014, we purchased in the open market an additional 0.9 million common shares in TIL, representing 2.43% of the then outstanding common shares of TIL. We acquired these shares at a price of NOK 69 per share, or a purchase price of $10.0 million. Following completion of the purchase, we held 3.4 million common shares in TIL, representing 8.94% of the then outstanding common shares of TIL. As a result of a TIL share repurchase program, as of December 31, 2014, we owned 9.29% of TIL’s common stock.

As of December 31, 2014, TIL had completed the acquisition of two 2010-built VLCC vessels from us, four 2009-built Suezmax tankers from Teekay Corporation and six 2009, 2010 and 2011-built Aframax tankers and two 2012-built coated Aframax vessels from third parties. As of December 31, 2014, TIL had signed an agreement to acquire four 2009-built and two 2010-built Suezmax tankers from a third party, which are expected to deliver in the first half of 2015, which will bring the total number of vessels owned by TIL to 20.

~~Acquisition of Teekay’s Commercial and Technical Operations (~~~~TTOL~~)

On August 1, 2014, we purchased from Teekay a 50% interest in TTOL, which owns conventional tanker commercial management and technical management operations, including direct ownership in three commercially managed tanker pools, for an aggregate price of approximately $23.5 million, including net working capital. As consideration for this acquisition, we issued to Teekay 4.2 million Class B common shares, which had an approximate value of $17 million, or $4.03 per share, on the acquisition closing date. In addition, we reimbursed Teekay for $6.5 million of working capital we assumed from Teekay in connection with the purchase.

~~VLCC Mortgage Loan Resolution and Sale of VLCCs to TIL~~

In March 2014, we exercised our rights under security documentation to realize the amounts owed under our investment in term loans and assumed full ownership of two 2010-built VLCC vessels, which previously secured our investment in the term loans. At the time of our assumption of ownership, these vessels had a fair value of approximately $144 million, which exceeded the carrying value of the loans. As a result, in the first quarter of 2014 we recognized $9.1 million of interest income owing under the loans.

In May 2014, we sold the two wholly-owned subsidiaries, each of which owned one of the VLCCs, to TIL for aggregate proceeds of $154 million, plus related working capital on closing. We recognized a $10 million gain on the sale of the VLCCs in the second quarter of 2014.

~~Additional~~ November 2016, respectively.

Time ~~Chartered-in~~Charter-Out Vessels

During the year ended December 31, ~~2014,~~2016, we entered into ~~four new in-charter~~time charter-out contracts for two Suezmax tankers, with an average daily rate of $24,400, two LR2 ~~vessels~~product tankers, with an average daily rate of $17,400 and ~~seven new in-charter~~one Aframax tanker, with a daily rate of $23,000. We also extended time charter-out contracts for two Aframax vessels, ~~which were delivered at various times during the year.~~ with an average daily rate of $20,000. These contracts have firm periods ranging from 12 to 24 months.

Time Chartered-in Vessels

During the year ended December 31, ~~2014,~~2016, we ~~also exercised~~entered into in-charter contracts for two Aframax tankers, with an ~~option~~average daily rate of $17,800 and which were delivered to ~~extend~~us in the fourth quarter of 2016. In December 2015, we entered into an in-charter contract for one Aframax ~~tanker. These contracts brought~~tanker, which was delivered to us in February 2016, has a daily rate of $22,750 and is scheduled to expire in March 2021.

During the year ended December 31, 2016, we also redelivered back to their respective owners seven in-chartered Aframax tankers and two in-chartered LR2 product tankers.

Vessel Sales

During the year ended December 31, 2016, we completed the sale of two Medium Range (or MR) tankers, the Teesta Spirit and the Hugli Spirit, for net proceeds of $27.2 million. The vessels were written down to their agreed sales price in the second and third quarters of 2016, respectively, resulting in an aggregate loss on sale of the vessels of $14.7 million.

In October 2016, we agreed to sell two Suezmax tankers, the Yamuna Spirit and Ganges Spirit. The vessels were written down to their agreed sales prices and the resulting write down of $6.2 million was recognized in 2016. The Ganges Spirit was delivered to its buyer in January 2017 and the Yamuna Spirit was delivered to its buyer in March 2017.

New Time-Charter Swap

Effective June 1, 2016, we entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels. Under such agreement, we will receive $27,776 per day, less a 1.25% brokerage commission, and pay 55% of the net revenue distribution of two Aframax equivalent vessels employed in our ~~total number~~Aframax revenue sharing pooling arrangement less $500 per day, for a period of ~~time chartered-in vessels~~11 months plus an additional two months at the counterparty's option.

Continuous Offering Program and Private Placement

In December 2016, we re-opened our continuous offering program (or COP) under which we may issue shares of our Class A common stock at market prices up to ~~12 as~~a maximum aggregate amount of $80.0 million. As of December 31, ~~2014, increasing~~2016, we sold approximately 3.0 million shares under this COP for net proceeds of $7.6 million, net of issuance costs. In January 2017, we sold approximately 3.8 million shares under this COP for net proceeds of $8.6 million, net of issuance costs. In addition, we issued 2.2 million new shares to Teekay in a private placement for gross proceeds of $5.0 million, and the price per share was set to equal the weighted average price of the Company's Class A common stock for the ten trading days ending on the date of issuance.

New Loan Facilities

In January 2016, we entered into a $894.4 million long-term debt facility, consisting of both a term loan and a revolving credit component, which are scheduled to mature in January 2021. The funds were used to repay our ~~exposure~~two bridge loan facilities, which matured in late January 2016, and a portion of our main corporate revolving credit facility, which was scheduled to mature in 2017.

New Interest Rate Swaps

In February 2016, in connection with our new long-term debt facility, we entered into a total of nine new interest rate swaps. Four of the interest rate swaps commenced and are scheduled to terminate in October 2016 and December 2020, respectively, and have notional amounts of $50.0 million each with fixed rates of 1.462%. The remaining five interest rate swaps commenced in the first quarter of 2016 and are scheduled to terminate in January 2021, of which one swap has a notional amount of $75.0 million, one swap has a notional amount of $50.0 million, and three swaps have notional amounts of $25.0 million each with fixed rates of 1.549%, 1.155% and 1.549%, respectively.

Acquisition of Entities under Common Control

In December 2015, we acquired from Teekay Offshore Partners L.P. (or TOO), which is an entity controlled by Teekay, two conventional oil tankers and related time-charter contracts and debt facilities for an aggregate price of $39.0 million, including working capital of approximately $8.6 million and net of outstanding debt of approximately $49.6 million (or the 2015 Acquired Business). Of this net amount, $30.4 million was paid on closing of the transaction in December 2015 and the remaining $8.6 million was settled in early 2016.

The acquisition of the 2015 Acquired Business was accounted for as a transfer of a business between entities under common control. As a result, our consolidated financial statements prior to the ~~spot tanker market.~~

~~Commencement~~date the interests in these vessels were actually acquired by us have been retroactively adjusted to include the results of these vessels during the periods they were under common control of Teekay and had begun operations. The effect of adjusting such information to account for the 2015 Acquired Business in periods prior to our acquisition thereof is referred to as the "Entities under Common Control." Please read Item 1 - Financial Statements: Note 3 - Acquisition of Entities under Common Control.

Legal Action for Damages

In April 8, 2013, we entered into agreements with STX Offshore & Shipbuilding Co., Ltd (orSTX) of South Korea to construct four, fuel-efficient 113,000 dead-weight tonne LR2 product tanker newbuildings plus options to order up to an additional 12 vessels. The payment of our first shipyard installment was contingent on us receiving acceptable refund guarantees for the shipyard installment payments. In May 2013, STX commenced a voluntary financial restructuring with its lenders, and as a result, STX’s refund guarantee applications were temporarily suspended. In October and November 2013, we exercised our options to order eight additional newbuildings, in aggregate, under an option ~~agreements~~agreement relating to the original STX LR2 shipbuilding agreements signed in April ~~2013.~~2013 (or the Option Agreement). STX did not produce shipbuilding contracts within the specified timeframe of the option declarations and, informed us that there was no prospect of the refund guarantees being provided under any of the firm or ~~option agreements.~~Option Agreement. Therefore, STX is in breach of the ~~option agreements.~~Option Agreement. In December

2013, we terminated the newbuilding agreements and in February 2014, we terminated the option ~~agreements.~~agreement. In February 2014, we commenced a legal action against STX for damages. In November 2014, we placed $0.6 million into an escrow account as cash security pending the resolution of this matter.

In February 2016, our subsidiaries obtained an English Court Order requiring STX to pay a total of $32.4 million in respect of four firm shipbuilding contracts. As a result, our subsidiaries have exercised their rights under English law to seek the assistance of the English court in the enforcement of the arbitration awards. We and our subsidiaries are pursuing other routes to enforce the awards against STX. Additionally, the cash deposit of $0.6 million which was held in escrow was refunded to us in March 2016.

STX has filed for bankruptcy protection and as of December 31, 2016, all Korean enforcement actions are stayed. STX has had that protection recognized in England and Wales. We will not be in a position to take any further action on enforcement and recognition in the UK or Korea while the bankruptcy protection remains in place. No amounts have been recorded as receivable in respect of these awards due to uncertainty of their collection.

The option agreement case has gone through trial and despite finding that we had valid option agreements, the judgment was ruled against us due to uncertainty of delivery dates. We are considering whether to appeal this ruling.

Our Charters

We generate revenues by charging customers for the transportation of their crude oil using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships:

Voyage charters participating in pooling arrangements are charters for shorter intervals that are priced on a current or “spot” market rate then adjusted for pool participation based on predetermined criteria; and

Time charters, whereby vessels are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates or current market rates.

The table below illustrates the primary distinctions among these types of charters and contracts:



		Voyage Charter	Time Charter
Typical contract length		Single voyage	One year or more
Hire rate basis⁽¹⁾	Varies	~~Varies~~	Daily
Voyage expenses⁽²⁾		We pay	Customer pays
Vessel operating expenses⁽³⁾		We pay	We pay
Off hire⁽⁴⁾		Customer does not pay	Customer does not pay


(1)	“~~Hire~~”Hire” rate refers to the basic payment from the charterer for the use of the vessel.


(2)	Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions.


(3)	Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses.


(4)	“~~Off hire~~”Off-hire” refers to the time a vessel is not available for service.

Important Financial and Operational Terms and Concepts

We use a variety of financial and operational terms and concepts when analyzing our performance. These include the following:

Revenues. Revenues primarily include revenues from time charters, voyage charters, pool arrangements, full service lightering and lightering support services and interest income from investment in term loans. Revenues are affected by hire rates and the number of days a vessel operates. Revenues are also affected by the mix of our business between time charters, voyage charters and vessels operating in pool arrangements. Hire rates for voyage charters are more volatile, as they are typically tied to prevailing market rates at the time of a voyage.

Voyage Expenses. Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Voyage expenses are typically paid by the ship owner under voyage charters and the customer under time charters.

Net Revenues. Net revenues represent revenues less voyage expenses. Because the amount of voyage expenses we incur for a particular charter depends upon the type of the charter, we use net revenues to improve the comparability between periods of reported revenues that are

generated by the different types of charters and contracts. We principally use net revenues, a non-GAAP financial measure, because we believe it provides more meaningful information to us about the deployment of our vessels and their performance than does revenues, the most directly comparable financial measure under United States generally accepted accounting principles (orGAAP).

Vessel Operating Expenses. We are responsible for vessel operating expenses, which include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. The two largest components of our vessel operating expenses are crew costs and repairs and maintenance. We expect these expenses to increase as our fleet matures and to the extent that it expands.

Income from Vessel Operations.To assist us in evaluating our operations, we analyze the income we receive after deducting operating expenses, but prior to interest expense and interest income, realized and unrealized gains and losses on derivative instruments, equity income and other expenses.

Dry docking. We must periodically dry dock each of our vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, we dry dock each of our vessels every two and a half to five years, depending upon the age of the vessel. We capitalize a substantial portion of the costs incurred during dry docking and amortize those costs on a straight-line basis from the completion of a dry docking over the estimated useful life of the dry dock. We expense, as incurred, costs for routine repairs and maintenance performed during dry dockings that do not improve or extend the useful lives of the assets. The number of dry dockings undertaken in a given period and the nature of the work performed determine the level of dry-docking expenditures.

Depreciation and Amortization. Our depreciation and amortization expense typically consists of charges related to the depreciation of the historical cost of our fleet (less an estimated residual value) over the estimated useful lives of our vessels, ~~and~~ charges related to the amortization of dry-docking expenditures over the estimated number of years to the next scheduled dry ~~docking.~~

docking, and charges related to the amortization of our intangible assets over the estimated useful life of 10 years.

Time-Charter Equivalent (TCE) Rates. Bulk shipping industry freight rates are commonly measured in the shipping industry at the net revenues level in terms of “time-charter equivalent” (or TCE) rates, which represent net revenues divided by revenue days. We calculate TCE rates as net revenue per revenue day before related-party pool management fees and pool commissions, and off-hire bunker expenses.

Revenue Days. Revenue days are the total number of calendar days our vessels were in our possession during a period, less the total number of off-hire days during the period associated with major repairs, dry dockings or special or intermediate surveys. Consequently, revenue days represents the total number of days available for the vessel to earn revenue. Idle days, which are days when the vessel is available for the vessel to earn revenue yet is not employed, are included in revenue days. We use revenue days to explain changes in our net revenues between periods.

Average Number of Ships.Historical average number of ships consists of the average number of vessels that were in our possession during a period. We use average number of ships primarily to highlight changes in vessel operating expenses and depreciation and amortization.

Items You Should Consider When Evaluating Our Results

You should consider the following factors when evaluating our historical financial performance and assessing our future prospects:

•

~~Our financial results reflect the results of the interests in vessels acquired from Teekay for all periods the vessels were under common control.~~ ~~During 2012, we acquired four Suezmax tankers, three Aframax tankers, three LR2 product tankers and three MR product tankers from Teekay (which we refer to collectively as the~~~~2012 Acquired Business~~). The acquisition of these vessels was deemed to be a business acquisition between entities under common control. Accordingly, we have accounted for this transaction in a manner similar to the pooling of interests method. Under this method of accounting our financial statements, for periods prior to the date the interests in these vessels were actually acquired by us, are retroactively adjusted to include the results of these acquired vessels. The periods retroactively adjusted include all periods that we and the acquired vessels were both under common control of Teekay and had begun operations. Our statement of loss for December 31, 2012 includes the 2012 Acquired Business for the periods it was under common control of Teekay prior to the acquisition by us. All financial or operational information contained herein for the periods prior to the date the interests in these vessels were actually acquired by us, and during which we and the applicable vessels were under common control of Teekay, are retroactively adjusted to include the results of these acquired vessels and are collectively referred to as the “~~Dropdown Predecessor”~~.

Our financial results reflect the results of the interests in vessels acquired from Teekay for all periods the vessels were under common control. The 2015 Acquired Business was deemed to be a business acquisition between entities under common control. Accordingly, we have accounted for this transaction in a manner similar to the pooling of interests method. Under this method of accounting our consolidated financial statements, for periods prior to the date the interests in these vessels were actually acquired by us, are retroactively adjusted to include the results of these acquired vessels. The periods retroactively adjusted include all periods that we and the acquired vessels were both under common control of Teekay and had begun operations. All financial or operational information contained herein for the periods prior to the date the interests in these vessels were actually acquired by us, and during which we and the applicable vessels were under common control of Teekay, are retroactively adjusted to include the results of these acquired vessels and are collectively referred to as the “Entities under Common Control”.

Our voyage revenues are affected by cyclicality in the tanker markets. The cyclical nature of the tanker industry causes significant increases or decreases in the revenue we earn from our vessels, particularly those we trade in the spot market.

Tanker rates also fluctuate based on seasonal variations in demand. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and increased refinery maintenance. In addition, unpredictable weather patterns during the winter months tend to disrupt vessel scheduling, which historically has increased oil price volatility and oil trading activities in the winter months. As a result, revenues generated by our vessels have historically been weaker during the quarters ended June 30 and September 30, and stronger in the quarters ended December 31 and March 31.

Our U.S. Gulf lightering business competes with alternative methods of delivering crude oil to ports, which may limit our earnings in this area of our operations. Our U.S. Gulf lightering business faces competition from alternative methods of delivering crude oil shipments to port, including offshore offloading facilities. While we believe that lightering offers advantages over alternative methods of delivering crude oil to U.S. Gulf ports, our lightering revenues may be limited due to the availability of alternative methods.

Vessel operating and other costs are facing industry-wide cost pressures. The shipping industry continues to ~~experience~~forecast a ~~global manpower shortage of~~shortfall in qualified ~~seafarers in certain sectors due~~personnel which could lead to ~~growth in the world fleet and competition for qualified personnel. Going forward, there may be significant~~ increases in crew ~~compensation as vessel~~manning costs, however weak shipping markets and slowing growth may ease officer ~~supply dynamics~~shortages. We will continue to ~~change.~~focus on our manning and training strategies to meet future needs, but going forward crew compensation may increase. In addition, factors such as pressure on commodity and raw material prices, as well as changes in regulatory requirements could also contribute to operating expenditure increases. We continue to take action aimed at improving operational

efficiencies, and to temper the effect of inflationary and other price escalations; however, increases to operational costs are still likely to occur in the future.

•
~~The amount and timing of dry dockings of our vessels can significantly affect our revenues between periods.~~Our vessels are normally off-hire when they are being dry docked. We had nine vessels dry dock in 2014, compared to seven vessels which dry docked in 2013 and one vessel which started dry docking in 2013 and finished in 2014 and four vessels which dry docked in 2012. The total number of off-hire days relating to dry dockings during the years ended December 31, 2014, 2013 and 2012 were 292, 218 and 78, respectively. For our current fleet, there are seven vessels scheduled to dry dock in 2015.

The amount and timing of dry dockings of our vessels can significantly affect our revenues between periods. Our vessels are normally off-hire when they are being dry docked. We had two vessels drydock in 2016, compared to 18 vessels which dry docked in 2015 and nine vessels which dry docked in 2014. The total number of off-hire days relating to dry dockings during the years ended December 31, 2016, 2015 and 2014 were 82, 603, and 292, respectively. For our current fleet, there are nine vessels scheduled to dry dock in 2017.

Results of Operations

In accordance with GAAP, we report gross revenues in our consolidated statements of income ~~(loss)~~ and include voyage expenses among our operating expenses. However, ship-owners base economic decisions regarding the deployment of their vessels upon anticipated TCE rates, and industry analysts typically measure bulk shipping freight rates in terms of TCE rates. This is because under time-charter contracts the customer usually pays the voyage expenses, while under voyage charters the ship-owner usually pays the voyage expenses, which typically are added to the hire rate at an approximate cost. Accordingly, the discussion of revenue below focuses on net revenues and TCE rates where applicable.

For the years ended December 31, 2016 and 2015, operating results of our conventional tanker segment and ship-to-ship (or STS) segment are presented separately. Our STS transfer business (or TMS) was acquired in July 2015, therefore no revenues or expenditures were incurred in 2014. Our conventional tanker segment includes the operations of all our tankers, including those employed on full service lightering contracts. Our STS transfer segment includes the operating results from lightering support services provided to our conventional tanker segment as part of full service lightering operations and other services associated with our lightering support operations.

Year Ended December 31, ~~2014~~2016 versus Year Ended December 31, ~~2013~~

2015

Conventional Tanker Segment

Our conventional tanker segment consists of conventional crude oil and product tankers that (i) are subject to long-term, fixed-rate time-charter contracts (which have an original term of one year or more), (ii) operate in the spot tanker market, or (iii) are subject to time-charters that are priced on a spot market basis or are short-term, fixed-rate contracts (which have an original term of less than one year).

The following table presents our operating results for the years ended December 31, ~~2014~~2016 and ~~2013~~2015 and compares net revenues, anon-GAAP financial measure, for those periods to revenues, the most directly comparable GAAP financial measure.

   Year Ended December 31,
(in thousands of U.S. dollars)
   2014    2013
Revenues
   226,475    162,410
Interest income from investment in term loans
   9,118    7,677
Less: voyage expenses
   (9,984 )    (8,337 )




Net revenues
225,609 161,750
Vessel operating expenses
(93,022 ) (91,667 )
Time-charter hire expense
(22,160 ) (6,174 )
Depreciation and amortization
(50,152 ) (47,833 )
General and administrative
(11,959 ) (12,594 )
Gain (loss) on sale of vessels
9,955 (71 )




Income from vessel operations
58,271 3,411
Interest expense
(8,741 ) (10,023 )
Interest income
287 158
Realized and unrealized loss on derivative instruments
(1,712 ) (1,524 )
Equity income
5,228 854
Other income (expenses)
3,809 (1,014 )




Net income (loss)
57,142 (8,138 )



	Year Ended December 31,
(in thousands of U.S. dollars)	2016		2015		% Change
Revenues	488,961		496,455		(2	)%
Less: voyage expenses ⁽¹⁾	(58,442	)	(19,468	)	200	%
Net revenues	430,519		476,987		(10	)%
Vessel operating expenses ⁽²⁾	(150,100	)	(123,572	)	21	%
Time-charter hire expense	(57,368	)	(74,860	)	(23	)%
Depreciation and amortization	(99,024	)	(72,118	)	37	%
General and administrative expenses	(14,444	)	(15,369	)	(6	)%
(Loss) gain on sale of vessels	(20,926	)	771		(2,814	)%
Restructuring charges	—		(4,445	)	(100	)%
Income from vessel operations	88,657		187,394		(53	)%
Equity income	13,101		14,411		(9	)%


(1)	Includes $3.2 million of voyage expenses for the year ended December 31, 2016 relating to lightering support services which the ship-to-ship transfer segment provided to the conventional tanker segment for full service lightering operations.


(2)	Includes $0.8 million of vessel operating expenses for the year ended December 31, 2015 relating to lightering support services which the ship-to-ship transfer segment provided to the conventional tanker segment for full service lightering operations.

Tanker Market

~~Crude tanker spot~~

Tanker rates ~~strengthened considerably during 2014,~~in 2016 softened from the highs seen in 2015, yet remained in-line with ~~rates at~~ the ~~end~~ten-year average as a result of ~~the year averaging the highest for a fourth quarter since 2008. Demand for crude~~ongoing positive demand fundamentals. Global oil ~~improved throughout 2014 as positive fleet fundamentals and changing trade patterns were coupled~~demand remained strong in 2016 with ~~a near 50% drop in the price~~growth of ~~crude oil. The drop in the price of oil was due to supply exceeding demand by close to 0.8~~1.5 million barrels per day (mb/d) ~~and~~, which was 0.4 mb/d higher than the ten-year average. Global oil supply was also strong, with record high OPEC production for 2016 of 32.6 mb/d. However, unexpected supply outages in Nigeria put pressure on mid-sized tanker demand in mid-2016. Oil prices remained in the mid-$40 per barrel range for most of 2016 before increasing in December 2016 as OPEC commenced firmed plans for production cuts as a ~~decision by OPEC in November 2014~~means to ~~not cut production in favour of continuing production at around 30 mb/d.~~

~~Lower~~rebalance oil markets. While ongoing low prices ~~have encouraged~~throughout the ~~filling of both~~year provided some support for tonne-mile demand through strategic and commercial ~~reserves,~~stockpiling programs, record high onshore stock levels towards the second half of 2016 resulted in lower import requirements as refiners

struggled with elevated stockpile levels. Tanker fleet growth also created some downside pressure to tanker rates towards the second half of 2016 as crude tanker fleet growth reached 6% and scrapping dipped to the lowest level since 1995.

Looking ahead, we anticipate 2017 to present some headwinds to the crude tanker spot tanker market. Total tanker fleet growth is forecast to be approximately 4.5%, which is slightly lower than 2016 but in-line with the ten-year average. However, most fleet growth in 2017 will come from the mid-sized segments, with mid-size fleet growth expected to be approximately 5%. The outlook for 2018 is more positive given a lack of ordering and the expectation for increased scrapping due to an aging fleet and changes to the regulatory landscape.

Global oil demand is forecast to grow by 1.4 mb/d in 2017 (average of IEA, EIA, and OPEC forecasts), which is similar to 2016 and above the ten-year average growth rate of 1.1 mb/d. On the supply side, OPEC production cuts of approximately 1.2 mb/d, with the majority of cuts (approximately 0.8 mb/d) coming from Middle East OPEC producers, will be negative for overall crude volumes available for transport. While OPEC production cuts may continue through the year, non-OPEC production increases of approximately 0.3 mb/d are expected as firming oil prices encourage more drilling, particularly in ~~China where~~ the ~~government~~U.S. The result could benefit the mid-sized tanker segments from increased tonne-mile demand as oil supply in the Atlantic basin continues to ~~fill the second stage of its Strategic Petroleum Reserve.~~grow. In addition, ~~refineries~~the Brent - Dubai oil price spread has narrowed considerably as a result of OPEC cuts, and many crude buyers are sourcing Brent-benchmarked crudes as they become more economically attractive. These price/supply factors could offset some of the headwinds that the crude tanker market faces in 2017 as they have ~~responded~~the potential to ~~low~~introduce volatility into regional tanker demand, which is positive for spot tanker rates.

In summary, we anticipate that 2017 will present some headwinds to crude tanker rates due to cuts to OPEC production, rising oil prices, ~~by increasing throughput in order to take advantage of improved refining margins. Further, the fall~~and fleet growth. However, we believe that this dip in the ~~price of~~current market cycle will be relatively short and shallow. In addition, lower fleet growth, strong oil ~~has translated into~~demand growth, particularly in Asia, and a ~~reduction in bunker prices, which has been positive for tanker earnings by lowering voyage operating costs.~~

In the product tanker sector, earnings improved during 2014 over 2013 levels, and by year end averaged the highest for a fourth quarter since 2008. LR2 rates have been supported by record high levels of Asian naphtha imports from the West, coupled with anpotential increase in long-haul product exports as new refineries in the Middle East ramp up production. The reduction in global oil prices has also been positive for the LR2 trade, as lower naphtha prices in relation to liquefied petroleum gas (~~LPG~~~~) has led some petrochemical plants to process more naphtha instead of LPG.~~

~~The global tanker fleet grew by 7.2 million deadweight tonnes (~~~~mdwt~~), or 1.4%, in 2014. The majority of the fleet growth during the year was in the product sectors, whereas the crude tanker fleet grew by just 2.2 mdwt, or 0.7%. The global Suezmax and uncoated Aframax fleets reduced in size by three vessels, or 0.6%, and 19 vessels, or 2.9%, respectively. Looking ahead, the global tanker fleet is forecasted to grow by only 1.7% in 2015, with growth again weighted towards the product sectors and another year of negative fleet growth expected for the Suezmax and uncoated Aframax sectors.

~~Global oil demand, based on an average of forecasts~~movements from the ~~International Energy Agency,~~Atlantic basin to the Energy Information Administration, and OPEC, is forecasted to grow by 1.0 mb/d in 2015, which is 0.1 mb/d higher than demand growth in 2014. Non-OECD countries, and China in particular, are expected to account for the majority of oil demand growth in 2015. The “call on OPEC”Pacific basin is expected to ~~grow by 0.1 mb/d in 2015, which could be positive for tanker tonne-mile demand in 2015.~~

The outlook for crude tanker fleet utilization and spot tanker rates is expected to remain positive in 2015 based on a shrinking mid-size crude tanker fleet and a continued increase in tanker tonne-mile demand as more crude oil moves on long-haul trades fromprovide support towards the Atlantic to the Pacific basins. The impact of low oil prices, high refinery throughput, and increased onshore stockpiling in the first quarter of 2015 are also expected to support positive tanker demand in the first half of 2015.

next market upturn.

Fleet and TCE Rates

As at December 31, ~~2014,~~2016, we owned 2743 double-hulled conventional oil tankers, time-chartered in ~~eight~~six Aframax tankers and ~~four~~one LR2 product ~~tankers~~tanker from third parties and owned a 50% interest in one ~~VLCC.~~VLCC, the results of which are included in equity income. The number of vessels we own, as well as our financial and operational results, ~~includes~~include the ~~Dropdown Predecessor~~Entities under Common Control in all relevant periods presented. Please read Item 18 – Financial Statements: Note 13 – ~~Summary~~Acquisition of ~~Significant Accounting Policies~~Entities under Common Control. included in the notes to our consolidated financial statements included in this Annual Report.

As defined and discussed above, we calculate TCE rates as net revenue per revenue day before related-party pool management fees and pool commissions, and off-hire bunker expenses. The following table outlines the average TCE rates earned by vessels for ~~2014~~2016 and ~~2013:~~

   Year Ended December 31, 2014    Year Ended December 31, 2013
   Net Revenues⁽¹⁾⁽²⁾
(in thousands)    Revenue
Days    Average TCE
per Revenue
Day    Net Revenues⁽²⁾⁽³⁾
(in thousands)    Revenue
Days    Average TCE
per Revenue
Day
Voyage-charter contracts - Suezmax
   $ 67,221       2,926    $ 22,976       $ 38,659       2,817    $ 13,550
Voyage-charter contracts - Aframax
   $ 37,777       1,692    $ 22,321       $ 14,472       1,183    $ 12,063
Voyage-charter contracts - LR2
   $ 30,294       1,698    $ 17,842       $ 14,633       1,094    $ 13,164
Voyage-charter contracts - MR
   $ 9,828       697    $ 14,108       $ 7,474       555    $ 13,414
Voyage-charter contracts - VLCC
   $ 1,323       96    $ 13,805       —      —      —
Time-charter contracts - Suezmax
   $ 13,727       676    $ 20,292       $ 13,560       680    $ 19,875
Time-charter contracts - Aframax
   $ 51,761       2,928    $ 17,676       $ 57,226       3,314    $ 17,140
Time-charter contracts - MR
   $ 13,170       365    $ 36,081       $ 16,599       517    $ 32,008












Total
$ 225,101    11,078 $ 20,319    $ 162,623    10,160 $ 15,861

2015:



	Conventional Tanker Segment
	Year Ended December 31, 2016
	Revenues⁽¹⁾		Voyage Expenses ⁽²⁾			Adjustments ⁽³⁾		Net Revenues		Revenue Days	Average TCE per Revenue Day ⁽³⁾
	(in thousands)		(in thousands)			(in thousands)		(in thousands)

Voyage-charter contracts - Suezmax		$179,438		($5,214	)		$5,614		$179,838	6,705		$26,820
Voyage-charter contracts - Aframax ⁽⁴⁾		$155,499		($50,693	)		$3,673		$108,479	5,145		$21,086
Voyage-charter contracts - LR2		$47,086		$53			$1,477		$48,616	2,572		$18,903
Voyage-charter contracts - MR		$8,305		($30	)		$302		$8,577	535		$16,035
Time-charter out contracts - Suezmax		$30,597		($1,108	)		$476		$29,965	1,029		$29,124
Time-charter out contracts - Aframax		$54,594		($1,017	)		$718		$54,295	2,327		$23,332
Time-charter out contracts - LR2		$12,201		($433	)		$130		$11,898	526		$22,629
Total⁽¹⁾		$487,720		($58,442	)		$12,390		$441,668	18,839		$23,445


(1)	Excludes $1.2 million of in-process revenue contract revenue.


(2)	Includes $3.2 million of inter-segment voyage expenses relating to lightering support services provided by the ship-to-ship transfer segment.


(3)	Average TCE per Revenue Day excludes a total of ~~$6.9~~$12.0 million in pool management fees and commissions payable for commercial management offor our vessels and ~~$1.8~~$0.4 million in off-hire bunker and other ~~expenses.~~ expenses, all of which are included as part of the adjustments.

~~(2)~~
(4)	Includes $48.2 million of revenues and $34.8 million of voyage expenses related to the full service lightering business, which includes $3.2 million inter-segment voyage expenses referenced in note 2 relating to lightering support services provided to the full service lightering business by the ship-to-ship transfer segment.



	Conventional Tanker Segment
	Year Ended December 31, 2015
	Revenues⁽¹⁾		Voyage Expenses			Adjustments ⁽²⁾			Net Revenues		Revenue Days	Average TCE per Revenue Day ⁽²⁾
	(in thousands)		(in thousands)			(in thousands)			(in thousands)

Voyage-charter contracts - Suezmax		$154,579		($2,568	)		$5,702			$157,713	4,021		$39,217
Voyage-charter contracts - Aframax ⁽³⁾		$158,783		($13,683	)		$4,214			$149,314	4,800		$31,109
Voyage-charter contracts - LR2		$79,158		($342	)		$3,042			$81,858	2,845		$28,777
Voyage-charter contracts - MR		$19,346		($61	)		$1,088			$20,373	960		$21,205
Time-charter out contracts - Suezmax		$14,235		($278	)		$317			$14,274	483		$29,577
Time-charter out contracts - Aframax ⁽⁴⁾		$54,550		($2,337	)		$1,796			$54,009	2,864		$18,835
Time-charter out contracts - LR2		$4,607		($132	)		$5			$4,480	175		$25,623
Time-charter out contracts - MR		$6,427		($66	)		($4,391	)		$1,970	50		$39,036
Total⁽¹⁾		$491,685		($19,467	)		$11,773			$483,991	16,198		$29,875


(1)	Excludes ~~interest income from investment in term loan~~$4.8 million of ~~$9.1 million and $7.7 million for 2014 and 2013, respectively.~~ in-process revenue contract revenue.

~~(3)~~	~~Excludes~~
(2)	Average TCE per Revenue Day excludes a total of ~~$5.3~~$12.6 million in pool management fees and commissions payable for commercial management for our vessels, $4.4 million of crew redundancy costs recovery from one of our ~~vessels~~customers and ~~$3.2~~$3.7 million in off-hire bunker and other ~~expenses.~~ expenses, all of which are included as part of the adjustments.

(3) Includes $15.0 million of revenues and $5.8 million of voyage expenses related to the full service lightering business.
(4) Net revenues and average TCE per revenue day in 2015 include $1.4 million related to the Entities under Common Control.

Net Revenues. Net revenues ~~increased~~decreased to ~~$225.6~~$430.5 million for ~~2014~~2016 from ~~$161.8~~$477.0 million for ~~2013~~2015 primarily due to:

~~an increase~~

a decrease of ~~$26.6~~$99.8 million ~~resulting from higher~~due to lower average realized spot tanker rates earned by our Suezmax, Aframax, LR2 and MR tankers in ~~2014~~2016 compared to ~~2013;~~

2015;

a net increase of $24.4 million due to the addition of seven in-chartered Aframax tankers and four in-chartered LR2 product tankers in 2014, the addition of two VLCCs in March 2014 that were subsequently sold to TIL in May 2014 and the full year impact of an Aframax tanker in-chartered in 2013, partially offset by the redelivery of an in-chartered Aframax tanker to its owner in 2013;

~~an increase of $12.1 million resulting from higher average realized rates earned by our Aframax tankers in 2014 compared to 2013;~~

~~an increase of $5.1 million resulting from higher average realized rates earned by our LR2 product tankers in 2014 compared to 2013;~~

~~an increase of $1.4 million due to an increase in interest income earned on our investments in term loans;~~

~~a net increase of $0.6 million due to lower management fees, commissions, off-hire bunker expense and other expenses; and~~

~~an increase of $0.4 million resulting from higher average realized rates earned by our MR product tankers in 2014 compared to 2013;~~

~~partially offset by~~

a net decrease of ~~$4.6~~$16.2 million ~~resulting from~~due to various vessels changing employment between fixed-rate charters and spot voyage charters; ~~and~~

a ~~net~~ decrease of ~~$2.4~~$4.4 million due to ~~more~~redundancy cost for the Australian seafarers that we recovered from the customer upon expiration of a time-charter out contract of a MR product tanker in the first quarter of 2015; and

a decrease of $3.5 million of in-process revenue contract amortization we recognized in revenue in 2016 compared to 2015;

partially offset by

a net increase of $43.9 million, primarily due to the addition of 12 Suezmax tankers, two LR2 product tankers and one Aframax tanker that we acquired during 2015 and the change in the average size of the in-charter fleet, partially offset by the sale of two MR product tankers in 2015 and 2016;

a net increase of $13.9 million due to fewer off-hire days in ~~2014~~2016 compared to ~~2013.~~

2015;

an increase of $10.5 million due to higher average rates earned on our out-chartered Aframax tankers in 2016 compared to 2015;

an increase of $4.2 million due to the acquisition of the full service lightering business that was part of the SPT acquisition during the third quarter of 2015;

a net increase of $4.0 million due to lower pool management fees, commissions, off-hire bunker and other expenses in 2016 compared to 2015 due primarily to lower average TCE rates; and

an increase of $1.1 million for 2016 due to one additional calendar day as 2016 was a leap year.

Vessel Operating Expenses. Vessel operating expenses increased to ~~$93.0~~$150.1 million for ~~2014~~2016 from ~~$91.7~~$123.6 million for ~~2013~~2015 primarily due to:

an increase of ~~$2.2~~$27.0 million ~~relating~~ primarily ~~to more repairs conducted~~resulting from the addition of 12 modern Suezmax tankers, one Aframax tanker and four LR2 product tankers, acquired in ~~2014 on certain~~2015, including two LR2 product tankers that were previously in-chartered. This was partially offset by the sales of ~~our vessels, including a heating coil repair on a Suezmax~~two MR tankers in the second half of 2016 and one MR tanker ~~at a cost of $1.3 million during~~sold in the ~~first~~fourth quarter of ~~2014, for which we received an indemnification payment from Teekay; and~~

2015;

an increase of ~~$1.0~~$1.7 million due to higher ship management fees resulting from the 17 vessels acquired in 2015; and

an increase of $0.6 million due to inflationary increases and higher crew and manning expenses related to performance-based compensation paid to seafarers which were recognized in 2016;

partially offset by

a decrease of $0.9 million due to lower fleet overhead costs primarily resulting from the timing of seafarer training, crew agency fees and other initiatives; and

a decrease of $0.9 million due to lower insurance premiums paid and insurance credits received during the year.

Time-charter Hire Expense. Time-charter hire expense decreased to $57.4 million for 2016 from $74.9 million for 2015 due to the changes in the average size of the in-charter fleet, decreases in the average in-charter rate in 2016 compared to 2015, the acquisition of two LR2 product tankers in February 2015 which were previously in-chartered, two in-chartered Aframax tankers which were offhire during the year and lower time-charter rates due to profit sharing components of one Aframax tanker and one LR2 product tanker.

Depreciation and Amortization. Depreciation and amortization increased to $99.0 million for 2016 from $72.1 million for 2015. The increase primarily relates to the addition of 12 Suezmax tankers, one Aframax tanker and four LR2 product tankers acquired in 2015, the amortization of customer relationships in relation to the acquisition of the ship-to-ship transfer business in July 2015 and higher amortization of dry-docking expenditures in 2016 as compared to the prior year. This was partially offset by the sale of two MR tankers in the second half of 2016 and the sale of one MR tanker in the fourth quarter of 2015.

General and Administrative Expenses. General and administrative expenses decreased to $14.4 million for 2016 compared to $15.4 million for 2015, primarily due to $0.5 million of higher corporate expenses incurred during 2015 primarily as a result of legal expenses related to the STX arbitration (please read Item 18 – Financial Statements: Note 22 – Shipbuilding Contracts) and legal expenses incurred related to the acquisitions of vessels and the ship-to-ship business in 2015.

(Loss) Gain on Sale of Vessels. Loss on sale of vessels of $20.9 million for the year ended December 31, ~~2014 relating to the operating expenses incurred by the two VLCCs, which joined our fleet in March 2014 and which we subsequently sold to TIL in May 2014;~~

~~partially offset by~~

~~a decrease of $1.8 million relating to lower levels of planned maintenance, equipment overhauls and purchases of consumables in 2014 as compared to 2013.~~

~~Time-charter Hire Expense.~~ Time-charter hire expense increased to $22.2 million for 2014 from $6.2 million for 2013 due to the addition of seven in-chartered Aframax tankers and four LR2 tankers to our fleet in the year ended December 31, 2014, partially offset by the redelivery of one previously in-chartered Aframax tanker to its owner in the third quarter of 2013.

~~Depreciation and Amortization~~.~~Depreciation and amortization increased to $50.2 million for 2014 from $47.8 million for 2013. The increase~~2016 primarily relates to ~~higher amortization~~the sale of ~~dry-docking expenditures in 2014 as compared~~the two MR tankers and the two held for sale Suezmax tankers which were written down to ~~the prior year.~~

~~General and Administrative Expenses.~~ ~~General and administrative expenses decreased to $12.0 million for 2014 compared to $12.6 million for 2013, primarily due to:~~

~~a net decrease of $0.9 million due to lower administrative and strategic fees partially offset by higher equity-based compensation expenses incurred in 2014;~~

~~partially offset by~~

~~an increase of $0.4 million as a result of higher corporate expenses incurred primarily as a result of increased legal expenses related to the STX arbitration and other projects.~~

~~Gain (loss) on Sale of Vessels~~.their respective agreed sales prices. Gain on sale of vessels of ~~$10.0~~$0.8 million for the year ended December 31, ~~2014~~2015 related to the sale of ~~two wholly-owned subsidiaries, each of which owned~~ one ~~VLCC,~~MR tanker. Please refer to ~~TIL~~Item 18 - Financial Statements: Note 21 - Vessel Sales and Vessel Acquisitions.

Restructuring Charges. Restructuring charges for ~~aggregate proceeds of $154.0 million plus related working capital on closing. The subsidiaries had a net book value of $144.0 million at the time of the transaction.~~

~~Interest Expense.~~ ~~Interest expense decreased~~2015 relate to ~~$8.7 million for 2014 from $10.0 million for 2013, primarily~~crew redundancy costs incurred due to the ~~prepayment~~change in nationality of ~~$152 million~~crew on one of our ~~revolving credit facilities~~vessels, which we recovered from one of our customers.

Equity Income.

The following table reflects our equity income for 2016 and 2015,



	Year Ended December 31,
(in thousands of U.S. dollars)	2016	2015
High-Q Joint Venture	4,359	3,218
Tanker Investments Ltd.	3,515	7,280
Teekay Tanker Operations Ltd.	5,227	3,913
Total equity income	13,101	14,411

Equity income decreased to $13.1 million in ~~May 2014 using the gross proceeds~~2016 from ~~the sale~~$14.4 million for 2015 primarily due to:

a decrease of ~~two wholly-owned subsidiaries to TIL in May 2014, as well as lower average balances of fixed-rate debt~~$3.8 million due to ~~scheduled repayments made on thefixed-rate~~ ~~facilities during the year ended December 31, 2014.~~

~~Realized and unrealized loss on derivative instruments~~~~. Realized and unrealized loss on derivative instruments increased to $1.7 million for 2014~~lower equity earnings from ~~$1.5 million for 2013. Realized and unrealized loss on derivative instruments is comprised of~~Tanker Investments Ltd. (or TIL) resulting from overall lower realized ~~and unrealized gains or losses on our interest rate swaps and unrealized gains or losses on a stock purchase warrant issued to us by TIL.~~

~~Realized and unrealized losses on interest rate swaps were $2.9 million for the year ended December 31, 2014,~~average spot rates earned in 2016 compared to $1.5 million for the year ended December 31, 2013. During 2014 and 2013, we had interest rate swap agreements with aggregate average outstanding notional amounts of approximately $300 million and $322.9 million, respectively, and with weighted average fixed rates of approximately 3.59% and 3.42%, respectively. Short term variable benchmark interest rates during these periods were generally less than 1.0%. As a result, we incurred realized losses of $10.0 million and $9.9 million for the years ended December 31, 2014 and 2013, respectively, under the interest rate swap agreements.

~~The changes in the fair value of the interest rate swaps resulted in unrealized gains of $7.1 million and $8.4 million for the years ended December 31, 2014 and 2013, respectively, due to~~2015, partially offset by an increase resulting from our increased ownership interest in ~~long-term benchmark interest rates~~TIL to 11.3% in ~~both years.~~

~~In addition~~2016 as compared to our interest rate swaps, we have a stock purchase warrant entitling us to purchase up to 750,000 shares of common stock of TIL. The stock purchase warrant had a fair value of $4.7 million as of December 31, 2014 and we recognized an unrealized gain of $1.2 million for the year ended December 31, 2014.

Please see Item 5 - Operating and Financial Review and Prospects – Valuation of Derivative Instruments, which explains how our derivative instruments are valued, including the significant factors and uncertainties10.2% in ~~determining the estimated fair value and why changes in these factors result in material changes in realized and unrealized loss or gain on derivative instruments from period to period.~~

~~Equity income.~~

   Year Ended December 31,
(in thousands of U.S. dollars)
   2014    2013
High-Q Joint Venture
   2,702    854
Tanker Investments Ltd.
   (184 )    —
Dilution gain in respect of the Initial Public Offering of Tanker Investments Ltd.
   2,054    —
Teekay Tanker Operations Ltd.
   656    —




Total equity income
5,228 854

~~We recorded equity income of $5.2 million and $0.9 million for the year ended December 31, 2014 and 2013, respectively. The~~2015;

partially offset by

an increase of ~~$4.3~~$1.3 million ~~is primarily~~ due to higher equity ~~income earned~~earnings from our 50% interest in Teekay Tankers Operations Ltd. (or TTOL), primarily relating to our share of cancellation fees paid to Anglo-Eastern during the first quarter of 2015 for acquiring its 49% share in Teekay Marine Ltd. and the timing of vessels which transitioned from the ~~full year~~Gemini Suezmax pool to the Teekay Suezmax RSA in 2015. This was partially offset by overall lower realized average spot rates earned in 2016 compared to 2015; and

an increase of ~~operations of the VLCC owned in our investment in~~$1.1 million due to higher equity earnings from the High-Q joint venture primarily resulting from profit share recognized in the second quarter of 2016 as ~~well as equity income from our investment~~VLCC rates averaged above certain thresholds, triggering a profit sharing with the customer.

Please refer to Item 18 – Financial Statements: Note 8 – Investments in TTOL, partially offset by the equity loss from our investment in TIL for the year ended December 31, 2014. In the year ended December 31, 2014, we also recognized a $2.1 million dilution gain as a result of our reduced ownership in TIL from TIL’s share issuance completed as part of its initial public offering in March 2014.

and Advances to Equity Accounted Investments.

The High-Q joint venture has an interest rate swap agreement which exchanges a receipt of floating interest for a payment of fixed interest to reduce the joint venture’s exposure to interest rate variability on its outstanding floating rate debt. Our proportionate share of realized and unrealized gains or losses relating to this instrument has been included in the equity income from the High-Q joint venture. For the years ended December 31, ~~2014~~2016 and ~~2013,~~2015, our proportionate share of realized losses was ~~$0.4~~$0.2 million and ~~$0.2~~$0.3 million, respectively, and unrealized ~~losses~~gains were ~~$nil and~~ $0.1 million and $nil, respectively.

~~Other income (expenses).~~ ~~Other income was $3.8 million in 2014, compared~~

Ship-to-ship Transfer Segment

Our ship-to-ship transfer segment consists of our lightering support services, including those services provided to our conventional tanker segment, which includes full service lightering operations, and other expenses of $1.0 million in 2013. The increase primarily relates to income of $3.4 million recognized upon receipt of the TIL stock purchase warrant in the first quarter of 2014, which we received for our involvement in the formation of TIL, as well as favorable foreign exchange fluctuations and a decrease in our estimate of freight tax expenseslightering support services. Our results for the year ended December 31, ~~2014~~2015, include five months of operations of this segment, from the date of our acquisition of SPT (now referred to as ~~compared to the prior year.~~

~~Net Income (Loss).~~ ~~As a result of the foregoing factors, we recorded net income of $57.1 million for 2014, compared to a loss of $8.1 million for 2013.~~

~~Year Ended December~~TMS) on July 31, ~~2013 versus Year Ended December 31, 2012~~

2015.

The following table presents our operating results for ~~2013~~the years ended December 31, 2016 and ~~2012~~2015 and compares net revenues, a non-GAAP financial measure, for those periods to revenues, the most directly comparable GAAP financial measure.

   Year Ended December 31,
(in thousands of U.S. dollars)
   2013    2012
Revenues
   162,410    185,930
Interest income from investment in term loans
   7,677    11,499
Less: voyage expenses
   (8,337 )    (4,618 )




Net revenues
161,750 192,811
Vessel operating expenses
(91,667 ) (96,160 )
Time-charter hire expense
(6,174 ) (3,950 )
Depreciation and amortization
(47,833 ) (72,365 )
General and administrative
(12,594 ) (7,985 )
Vessel impairment and net loss on sale of vessels
(71 ) (352,546 )




Income (loss) from vessel operations
3,411 (340,195 )
Interest expense
(10,023 ) (20,009 )
Interest income
158 50
Realized and unrealized loss on derivative instruments
(1,524 ) (7,963 )
Equity income (loss)
854 (1 )
Other expenses
(1,014 ) (2,063 )




Net loss
(8,138 ) (370,181 )

~~Fleet and TCE Rates~~

~~As at December 31, 2013, we owned 27 double-hulled conventional oil tankers, time-chartered~~



	Year Ended December 31,
(in thousands of U.S. dollars)	2016		2015		% Change
Revenues⁽¹⁾	41,136		18,587		121	%
Less: voyage expenses	—		(348	)	(100	)%
Net revenues	41,136		18,239		126	%
Vessel operating expenses	(32,498	)	(14,441	)	125	%
Time-charter hire expense	(2,279	)	(38	)	5,897	%
Depreciation and amortization	(5,125	)	(1,642	)	212	%
General and administrative expenses	(3,767	)	(1,985	)	90	%
Gain on sale of vessels	332		—		100	%
Restructuring charge	—		(327	)	(100	)%
Loss from vessel operations	(2,201	)	(194	)	1,035	%


(1)	Includes $3.2 million of revenues for the year ended December 31, 2016 (2015 - $0.8 million) relating to lightering support services which the ship-to-ship transfer segment provided to the conventional tanker segment for full service lightering operations.

Loss from vessel operations. Loss from vessel operations increased for 2016 compared to 2015 primarily due to a full operating year of TMS, which was acquired in ~~one Aframax vessel from a third party and owned a 50% interest~~the latter half of 2015. The increase in ~~one VLCC. The~~the number of ~~vessels we own, as well as our financial~~lightering support operations in 2016 resulted in higher revenues and ~~operational results, includes~~expenses; however, a majority of this additional volume was in support of the Dropdown Predecessor in all relevant periods presented. Please read Item 18 – Financial Statements: Note 1 – Summary of Significant Accounting Policies included in the notes to our consolidated financial statements attached in this Report.

~~As defined and discussed above, we calculate TCE rates as net revenue per revenue day before related-party pool management fees and pool commissions, and off-hire bunker expenses.~~ conventional tanker segment’s full service lightering operations or other areas which generated lower margins.

Other Operating Results

The following table ~~outlines~~compares our other operating results for the ~~average TCE rates earned by vessels for 2013~~years ended December 31, 2016 and ~~2012:~~

   Year Ended December 31, 2013    Year Ended December 31, 2012
   Net Revenues⁽¹⁾⁽²⁾
(in thousands)    Revenue
Days    Average TCE
per Revenue
Day    Net Revenues⁽²⁾⁽³⁾
(in thousands)    Revenue
Days    Average TCE
per Revenue
Day
Voyage-charter contracts - Suezmax
   $ 38,659       2,817    $ 13,550       $ 32,983       1,865    $ 17,688
Voyage-charter contracts - Aframax
   $ 14,472       1,183    $ 12,063       $ 19,279       1,583    $ 12,179
Voyage-charter contracts - LR2
   $ 14,633       1,094    $ 13,164       $ 13,568       1,098    $ 12,357
Voyage-charter contracts - MR
   $ 7,474       555    $ 13,414       —      —      —
Time-charter contracts - Suezmax
   $ 13,560       680    $ 19,875       $ 37,529       1,682    $ 22,311
Time-charter contracts - Aframax
   $ 57,226       3,314    $ 17,140       $ 56,039       3,043    $ 18,418
Time-charter contracts - MR
   $ 16,599       517    $ 32,008       $ 28,063       1,092    $ 25,711












Total
$ 162,623    10,160 $ 15,861    $ 187,461    10,363 $ 18,091

~~(1)~~
~~Excludes a total of $5.3 million in pool management fees and commissions payable for commercial management of our vessels and $3.2 million in off-hire bunker and other expenses.~~
~~(2)~~
~~Excludes interest income from investment in term loan of $7.7 million and $11.5 million for 2013 and 2012, respectively.~~
~~(3)~~
~~Excludes a total of $4.7 million in pool management fees and commissions payable for commercial management of our vessels and $1.5 million in off-hire bunker and other expenses.~~

~~Net Revenues.~~ ~~Net revenues decreased~~2015:



	Year Ended December 31,
(in thousands of U.S. dollars)	2016		2015
Interest expense	(29,784	)	(17,389	)
Interest income	117		107
Realized and unrealized loss on derivative instruments	(964	)	(1,597	)
Other expense	(6,071	)	(3,097	)

Interest Expense. Interest expense increased to ~~$161.8~~$29.8 million for ~~2013~~2016 from ~~$192.8~~$17.4 million for ~~2012, primarily due to:~~

~~a net decrease of $15.2 million resulting from various vessels changing employment between fixed-rate charters and voyage charters;~~

~~a decrease of $11.4 million resulting from lower average realized rates earned by our Suezmax tankers in 2013 compared to 2012;~~

•

~~a decrease of $3.8 million due to the sale of the~~~~Nassau Spirit~~~~in January 2013;~~

~~a decrease of $3.8 million due to a decrease in interest income earned on our investments in term loans;~~

~~a decrease of $3.4 million resulting from lower average realized rates earned by our Aframax tankers in 2013 compared to 2012;~~

~~a decrease of $2.3 million due to an increase in pool management fees, pool commissions and off-hire bunker expenses in 2013 compared to 2012; and~~

~~a net decrease of $1.1 million due to more off-hire days in 2013 compared to 2012;~~

~~partially offset by~~

~~an increase of $7.0 million resulting from higher average realized rates earned by our MR product tankers in 2013 compared to 2012;~~

a net increase of $2.1 million due to the addition of an in-chartered Aframax tanker, partially offset by the redeliveries of three in-chartered Aframax tankers to their owners in March 2012, June 2012 and July 2013; and

~~an increase of $1.1 million resulting from higher average realized rates earned by our LR2 product tankers in 2013 compared to 2012.~~

~~Vessel Operating Expenses.~~ ~~Vessel operating expenses decreased to $91.7 million for 2013 compared to $96.2 million for 2012~~2015, primarily due to ~~the reduction of $3.9 million due~~additional interest incurred to ~~the sale of the~~~~Nassau Spirit~~ in January 2013, a decrease of $0.6 million due to cost reduction initiatives for crew related costs as well as a reduction of $1.3 million in technical management costs, partially offset by an increase of $0.7 million due to the timing and extent of planned vessel maintenance and repairs as well as a $0.6 million increase relating to insurance costs in 2013 compared to 2012.

~~Time-charter Hire Expense.~~~~Time-charter hire expense increased to $6.2 million for 2013 compared to $4.0 million for 2012 due to the addition of one Aframax tanker to our fleet in the first quarter of 2013.~~

~~Depreciation and Amortization~~.Depreciation and amortization decreased to $47.8 million for 2013 compared to $72.4 million for 2012. The decrease in 2013 relates primarily to the vessel write down of seven Suezmax tankers, four Aframax tankers and one product tanker recorded in the fourth quarter of 2012 and the sale of the~~Nassau Spirit~~. Please see Item 18 – Financial Statements: Note 18 – Vessel Sales, Vessel Acquisitions and Vessel Impairments included in the notes to our consolidated financial statements attached to this Annual Report.

~~General and Administrative Expenses.~~ ~~General and administrative expenses increased to $12.6 million for 2013 compared to $8.0 million for 2012, primarily due to:~~

~~an increase of $5.3 million in administrative and strategic fees due to the increase in fleet size and increases in management cost allocations for the year ended December 31, 2013;~~

~~partially offset by~~

~~a decrease of $0.7 million in corporate expenses such as audit, consulting and legal fees in 2013 as compared to 2012, due in part to the costs related to~~finance the acquisition of ~~vessels~~the 12 modern Suezmax tankers which were acquired in ~~2012.~~

the latter part of 2015.

~~Vessel Impairments~~

Realized and ~~Net~~Unrealized Loss on ~~Sale of Vessels~~Derivative Instruments. ~~Vessel impairments and net loss on sale of vessels totaled $0.1 million for the year ended December 31, 2013 and represented a loss realized on the sale of an Aframax tanker, the~~~~Nassau Spirit~~~~. The vessel was classified as held for sale on the consolidated balance sheet as at December 31, 2012 and was sold in January 2013 for proceeds of $9.1 million.~~

Vessel impairments and net loss on sale of vessels totaled $352.5 million for the year ended December 31, 2012. Indicators of impairment were present in the fourth quarter of 2012 which triggered an impairment test to be conducted on certain of our conventional oil tankers. At the time of the impairment test these indicators of impairment included a negative change in the outlook for the crude tanker market, a delay in the expected timing of a recovery of the crude tanker market, and the expected discrimination impact from more fuel efficient vessels being constructed. As a result of these developments, we recognized impairments on seven Suezmax tankers, four Aframax tankers and one MR product tanker, which in aggregate amounted to $352.5 million. In December 2012, we entered into an agreement to sell one of the four impaired Aframax tankers, the~~Nassau Spirit. The vessel sale was completed in January 2013 and the vessel was classified as held for sale on the consolidated balance sheet as at December 31, 2012.~~

~~Interest Expense.~~ ~~Interest expense decreased to $10.0 million for 2013 compared to $20.0 million for 2012, primarily due to:~~

a decrease of $7.8 million in interest expense primarily due to interest allocation related to the Dropdown Predecessor during 2012. Long-term debt of the Dropdown Predecessor, bearing interest at 8.5%, was replaced with revolving credit facilities, which had an average outstanding interest rate of approximately 1.3%, and debt levels related to the 2012 Acquired Business were reduced after we acquired it in June 2012; and

~~a decrease of $2.2 million due to lower variable interest rates in 2013 compared to 2012.~~

Realized and unrealized loss on derivative instruments~~. Realized and unrealized losses on~~ decreased to $1.0 million for 2016 from $1.6 million for 2015. In February 2016, we entered into a total of nine new interest rate swap agreements relating to our new credit facility. Four of the interest rate swaps ~~were $1.5~~have notional amounts of $50.0 million ~~for~~each, with fixed rates of 1.462%, and commenced in October 2016. The remaining five interest rate swaps commenced in the ~~year ended~~first quarter of 2016, of which one swap has a notional amount of $75.0 million, one swap has a notional amount of $50.0 million, and three swaps have notional amounts of $25.0 million each, with fixed-rates of 1.549%, 1.155% and 1.549%, respectively.

As at December 31, ~~2013, compared to $8.0 million for the year ended December 31, 2012. During 2013 and 2012,~~2016, we had interest rate swap agreements with aggregate ~~average~~ outstanding notional amounts of ~~approximately $322.9~~$400.0 million with a weighted-average fixed rate of 1.46%. Realized losses on the interest rate swaps increased from $12.8 million in 2016 compared to $9.8

million in 2015 primarily due to the termination of an interest rate swap in the first quarter of 2016 and the expiration of the another interest rate swap in October 2016. This was partially offset by the nine new interest rate swap agreements which were entered into in February 2016.

The changes in the fair value of the interest rate swaps resulted in unrealized gains of $13.7 million and ~~$415.0~~$7.7 million for the years ended December 31, 2016 and 2015, respectively, and ~~with weighted average fixed rates of approximately 3.42% and 2.87%, respectively. Short term variable~~were primarily due to an increase in our long-term benchmark interest rates, ~~during these periods were generally less than 1.0%, and, as a result, we incurred realized losses~~partially offset by the termination of ~~$9.9 million and $9.6 million, respectively, during 2013 and 2012 under the~~an existing interest rate swap ~~agreements.~~

~~Long-term benchmark interest rates increased~~ in ~~2013~~early 2016.

Effective June 1, 2016, we also entered into a time-charter swap for 55% of two Aframax equivalent vessels. Under such agreement, we will receive $27,776 per day, less a 1.25% brokerage commission, and ~~2012, causing us to recognize~~pay 55% of the net revenue distribution of two Aframax equivalent vessels employed in our Aframax revenue sharing pooling arrangement, less $500 per day, for a period of 11 months plus an additional two months at the counterparty's option. As at December 31, 2016, the time-charter swap had a fair value of $0.9 million which resulted in an unrealized gain of ~~$8.4~~$0.9 million. We also recognized realized gains of $2.2 million ~~for~~on the time-charter swap in the year ended December 31, ~~2013~~2016.

In addition, we have a stock purchase warrant entitling us to purchase up to 750,000 shares of common stock of TIL. The stock purchase warrant had a fair value of $0.3 million as at December 31, 2016 and we recognized unrealized losses of $4.9 million in 2016 compared to an unrealized gain of ~~$1.6~~$0.5 million ~~for the prior year.~~ in 2015.

Please see Item 5 - Operating and Financial Review and Prospects – Valuation of Derivative Instruments, which explains how our derivative instruments are valued, including the significant factors and uncertainties in determining the estimated fair value and why changes in these factors result in material changes in realized and unrealized loss or gain on derivative instruments from period to period.

~~Equity income (loss).~~ ~~We recorded equity income of $0.9~~

Other Expense. Other expense was $6.1 million in ~~the year ended December 31, 2013,~~2016, compared to $(1) thousand in the prior year. This income represents our 50% share of the income earned by the joint venture, jointly controlled by us and Wah Kwong Maritime Transport Holdings Ltd., from the operation of the VLCC from its delivery date of June 14, 2013.

~~Other expenses.~~ ~~Other expenses were $1.0~~$3.1 million in ~~2013, compared to $2.1 million in 2012.~~2015. The ~~decrease in other expenses~~increase is primarily ~~related~~due to ~~a decrease~~an increase in our estimate of freight tax ~~expenses due to~~expense as a ~~decreased number~~result of ~~voyages to certain fright tax jurisdictions and a change~~the trading patterns of our fleet, partially offset by changes in ~~the~~ foreign exchange ~~for the year ended December 31, 2103 as compared to the prior year.~~

rates.

Net ~~Loss~~.Income. As a result of the foregoing factors, we recorded net income of $62.9 million for 2016, compared to $179.6 million for 2015.

Year Ended December 31, 2015 versus Year Ended December 31, 2014

The following table presents our operating results for 2015 and 2014 and compares net revenues, a non-GAAP financial measure, for those periods to revenues, the most directly comparable GAAP financial measure.



	Conventional Tankers				Ship-to-ship Transfer			Total
	Year Ended December 31,
(in thousands of U.S. dollars)	2015		2014		2015		2014	2015		2014
Revenues⁽¹⁾	496,455		240,884		17,738		—	514,193		250,002
Interest income from investment in term loans	—		9,118		—		—	—		—
Less: voyage expenses	(19,468	)	(11,223	)	(348	)	—	(19,816	)	(11,223	)
Net revenues	476,987		238,779		17,390		—	494,377		238,779
Vessel operating expenses⁽¹⁾	(122,723	)	(98,403	)	(14,441	)	—	(137,164	)	(98,403	)
Time-charter hire expense	(74,860	)	(22,160	)	(38	)	—	(74,898	)	(22,160	)
Depreciation and amortization	(72,118	)	(53,292	)	(1,642	)	—	(73,760	)	(53,292	)
General and administrative	(15,369	)	(12,821	)	(1,985	)	—	(17,354	)	(12,821	)
Gain on sale of vessels	771		9,955		—		—	771		9,955
Restructuring charge	(4,445	)	—		(327	)	—	(4,772	)	—
Income (loss) from vessel operations	188,243		62,058		(1,043	)	—	187,200		62,058
Equity income	14,411		5,228		—		—	14,411		5,228


(1)	Excludes $0.8 million of revenues and vessel operating expenses for the year ended December 31, 2015 relating to lightering support services which the ship-to-ship transfer segment provided to the conventional tanker segment for full service lightering operations.

Fleet and TCE Rates

As at December 31, 2015, we owned 45 double-hulled conventional oil tankers, time-chartered in ten Aframax tankers and three LR2 product tankers from third parties and owned a 50% interest in one VLCC. The number of vessels we own, as well as our financial and operational results, includes the Entities under Common Control in all relevant periods presented. Please read Item 18 – Financial Statements: Note 3 – Acquisition of Entities under Common Control included in the notes to our consolidated financial statements included in this Annual Report.



	Conventional Tanker Segment
	Year Ended December 31, 2015
	Revenues⁽¹⁾		Voyage Expenses			Adjustments ⁽²⁾			Net Revenues		Revenue Days	Average TCE per Revenue Day ⁽²⁾
	(in thousands)		(in thousands)			(in thousands)			(in thousands)

Voyage-charter contracts - Suezmax		$154,579		($2,568	)		$5,702			$157,713	4,021		$39,217
Voyage-charter contracts - Aframax ⁽³⁾		$158,783		($13,683	)		$4,214			$149,314	4,800		$31,109
Voyage-charter contracts - LR2		$79,158		($342	)		$3,042			$81,858	2,845		$28,777
Voyage-charter contracts - MR		$19,346		($61	)		$1,088			$20,373	960		$21,205
Time-charter out contracts - Suezmax		$14,235		($278	)		$317			$14,274	483		$29,577
Time-charter out contracts - Aframax ⁽⁴⁾		$54,550		($2,337	)		$1,796			$54,009	2,864		$18,835
Time-charter out contracts - LR2		$4,607		($132	)		$5			$4,480	175		$25,623
Time-charter out contracts - MR		$6,427		($66	)		($4,391	)		$1,970	50		$39,036
Total⁽¹⁾		$491,685		($19,467	)		$11,773			$483,991	16,198		$29,875


(1)	Excludes $4.8 million of in-process revenue contract revenue.


(2)	Average TCE per Revenue Day excludes a total of $12.6 million in pool management fees and commissions payable for commercial management for our vessels, $4.4 million of crew redundancy costs recovery from one of our customers and $3.7 million in off-hire bunker and other expenses, all of which are included as part of the adjustments.


(3)	Includes $15.0 million of revenues and $5.8 million of voyage expenses related to the full service lightering business.


(4)	Net revenues and average TCE per revenue day in 2015 include $1.4 million related to the Entities under Common Control.



	Conventional Tanker Segment
	Year Ended December 31, 2014
	Revenues		Voyage Expenses			Adjustments ⁽¹⁾			Net Revenues		Revenue Days	Average TCE per Revenue Day ⁽¹⁾
	(in thousands)		(in thousands)			(in thousands)			(in thousands)

Voyage-charter contracts - Suezmax		$64,599		($459	)		$3,081			$67,221	2,926		$22,976
Voyage-charter contracts - Aframax		$39,498		($3,784	)		$2,063			$37,777	1,692		$22,321
Voyage-charter contracts - LR2		$29,008		$71			$1,215			$30,294	1,698		$17,842
Voyage-charter contracts - MR		$9,253		($22	)		$597			$9,828	697		$14,108
Voyage-charter contracts - VLCC		$4,315		($3,025	)		$33			$1,323	96		$13,805
Time-charter out contracts - Suezmax		$13,728		($75	)		$74			$13,727	676		$20,292
Time-charter out contracts - Aframax		$66,974		($3,766	)		$1,978			$65,186	3,658		$17,819
Time-charter out contracts - MR		$13,509		($163	)		($176	)		$13,170	365		$36,081
Total⁽²⁾		$240,884		($11,223	)		$8,865			$238,526	11,808		$20,200


(1)	Average TCE per Revenue Day excludes a total of $7.1 million in pool management fees and commissions payable for commercial management for our vessels and $1.8 million in off-hire bunker and other expenses, all of which are included as part of the adjustments.


(2)	Excludes interest income from investment in term loans of $9.1 million.

Net Revenues. Net revenues increased to $494.4 million for 2015 from $238.8 million for 2014 primarily due to:

a net ~~loss~~increase of ~~$8.1~~$144.0 million resulting from the addition of 11 Suezmax tankers (excluding one which is currently in drydock), one Aframax tanker and four LR2 product tankers acquired in 2015, the addition of two in-chartered Aframax tankers and one LR2 product tanker in 2015, the addition of two Aframax tankers owned by Entities under Common Control, the addition of seven in-chartered Aframax tankers and four in-chartered LR2 product tankers in 2014, partially offset by the addition of two VLCCs in March 2014 that were subsequently sold to TIL in May 2014 and the sale of a MR product tanker in 2015;

an increase of $46.2 million resulting from higher average realized rates earned by our Suezmax tankers in 2015 compared to 2014;

an increase of $26.6 million resulting from the acquisition of SPT during 2015, of which $9.2 million is related to full service lightering operations that are included as part of our conventional tanker segment;

an increase of $18.5 million resulting from higher average realized rates earned by our LR2 product tankers in 2015 compared to 2014;

an increase of $13.6 million resulting from higher average realized rates earned by our Aframax tankers in 2015 compared to 2014;

a net increase of $13.4 million resulting from various vessels changing employment between fixed-rate charters and voyage charters;

an increase of $4.8 million resulting from in-process revenue contract amortization we recognized in revenue in 2015;

an increase of $4.7 million resulting from higher average realized rates earned by our MR product tankers in 2015 compared to 2014; and

an increase of $4.4 million resulting from redundancy costs for Australian seafarers that we recovered from our customer upon expiration of a time-charter out contract of a MR product tanker in 2015;

partially offset by

a decrease of $9.1 million due to the interest income we recognized on our investments in term loans in 2014;

a net decrease of $6.6 million due to higher management fees, commissions, off-hire bunker expense and other expenses in 2015 compared to 2014; and

a net decrease of $4.9 million due to more off-hire days in 2015 compared to 2014, primarily as a result of higher drydocking activity.

Vessel Operating Expenses. Vessel operating expenses increased to $137.2 million for ~~2013,~~2015 from $98.4 million for 2014 primarily due to:

an increase of $24.3 million resulting from the addition of 11 modern Suezmax tankers (excluding one which is currently in drydock), one Aframax tanker and four LR2 product tankers acquired in 2015;

an increase of $13.7 million due to additional expenditures associated with the ship-to-ship business we acquired during the second half of 2015;

an increase of $5.4 million relating to the timing and extent of planned vessel maintenance and repairs;

an increase of $2.3 million due to higher ship management fees relating to the 16 vessels and the ship-to-ship transfer business acquired in 2015;

an increase of $1.0 million due to the additional expenditures assumed from the Entities under Common Control; and

an increase of $0.2 million due to higher port costs and fleet overhead costs related to the timing of seafarer training and other initiatives;

partially offset by

decreases of $5.7 million due to lower crewing costs resulting from a change in the nationality of crew on an MR product tanker as well as favorable current year foreign currency exchange rates impacting crew wage expenditures; and

a decrease of $2.3 million due to repairs on a Suezmax tanker which was incurred during 2014.

Time-charter Hire Expense. Time-charter hire expense increased to $74.9 million for 2015 from $22.2 million for 2014 due to the addition of two in-chartered Aframax tankers and one LR2 tankers to our fleet in the year ended December 31, 2015, additional time charters from external parties in connection with our ship-to-ship transfer business we acquired in July 2015, higher time-charter rates due to profit sharing components and options we exercised to extend certain in-chartered contracts at higher rates, and the timing of eight time-charter contracts which we entered into during the latter half of 2014. This was partially offset by a decrease as a result of two previously in-chartered LR2 product tankers which we acquired in February 2015 and a decrease resulting from the addition of the Entities under Common Control as we acquired one previously in-chartered vessel as part of the 2015 Acquired Business.

Depreciation and Amortization. Depreciation and amortization increased to $73.8 million for 2015 from $53.3 million for 2014. The increase primarily relates to the addition of 12 Suezmax tankers, one Aframax tankers and four LR2 product tankers acquired in 2015, the acquisition of the ship-to-ship transfer business in July 2015, and higher amortization of dry-docking expenditures in 2015 as compared to ~~a loss of $370.2~~the prior year.

General and Administrative Expenses. General and administrative expenses increased to $17.4 million for ~~2012.~~

2015 compared to $12.8 million for 2014, primarily due to:

an increase of $2.8 million as a result of higher corporate expenses incurred during 2015 primarily as a result of legal expenses related to the STX arbitration (please read Item 18 – Financial Statements: Note 22 – Shipbuilding Contracts) and legal expenses incurred related to the acquisitions of vessels and the ship-to-ship business in 2015;

a net increase of $1.9 million due to additional general and administrative expenses related to the ship-to-ship business acquired in July 2015; and

an increase of $0.3 million due to increased stock-based compensation granted to our Board of Directors, one of our officers and certain employees of Teekay subsidiaries that provided services to us;

partially offset by

a net decrease of $0.3 million due to lower administrative, strategic management, and other fees incurred; and

a decrease of $0.2 million due to lower expenses in the Entities under Common Control in 2015 compared to 2014.

Gain on Sale of Vessels. Gain on sale of vessels of $0.8 million for the year ended December 31, 2015 related to the sale of the Mahanadi Spirit with a sale price of $11.2 million.

Gain on sale of vessels of $10.0 million for the year ended December 31, 2014 related to the sale of two wholly-owned subsidiaries, each of which owned one VLCC, to Tanker Investments Ltd. (or TIL) for aggregate proceeds of $154.0 million plus related working capital on closing.

Restructuring Charges. Restructuring charges for 2015 relate to severance payments made during the year in relation to the acquisition of the ship-to-ship transfer business as well as crew redundancy costs due to the change in nationality of crew on one of our vessels which we recovered from one of our customers.

Equity Income.

Year Ended December 31,
(in thousands of U.S. dollars) 2015 2014
High-Q Joint Venture 3,218
2,702
Tanker Investments Ltd. 7,280
(184 )
Dilution gain in respect of the Initial Public Offering of Tanker Investments Ltd. —
2,054
Teekay Tanker Operations Ltd. 3,913
656
Total equity income 14,411
5,228

Equity income increased to $14.4 million in 2015 from $5.2 million for 2014 primarily due to:

an increase of $5.4 million due to higher equity earnings from TIL resulting from overall higher realized average spot rates earned in 2015 compared to 2014, its acquisition of six Suezmax vessels delivered during 2015 and one Aframax vessel delivered during 2014, partially offset by a decrease relating to a dilution gain recorded in 2014 resulting from our reduced ownership interest in TIL from TIL’s share issuance completed as part of its initial public offering (or IPO) in 2014;

an increase of $3.3 million due to a full year of earnings from our 50% interest in TTOL, which we acquired in 2014; and

an increase of $0.5 million due to higher equity earnings from the High-Q joint venture resulting from higher unrealized gain on derivatives recognized in 2015 compared to 2014.

Please refer to Item 18 – Financial Statements: Note 8 – Investments in and Advances to Equity Accounted Investments.

The High-Q joint venture has an interest rate swap agreement which exchanges a receipt of floating interest for a payment of fixed interest to reduce the joint venture’s exposure to interest rate variability on its outstanding floating rate debt. Our proportionate share of realized and unrealized gains or losses relating to this instrument has been included in the equity income from the High-Q joint venture. For the years ended December 31, 2015 and 2014, our proportionate share of realized losses was $0.3 million and $0.4 million, respectively, and unrealized losses were $nil.

Other Operating Results

The following table compares our other operating results for the years ended December 31, 2015 and 2014:

Year Ended December 31,
(in thousands of U.S. dollars) 2015 2014
Interest expense (17,389 ) (9,128 )
Interest income 107
287
Realized and unrealized loss on derivative instruments (1,597 ) (1,712 )
Other (expenses) income (3,097 ) 3,805

Interest Expense. Interest expense increased to $17.4 million for 2015 from $9.1 million for 2014, primarily due to additional interest incurred from two new term loan facilities which were drawn in 2015 to finance the acquisition of the 12 modern Suezmax tankers, one Aframax tanker and four LR2 product tankers that we acquired during 2015.

Realized and Unrealized Loss on Derivative Instruments. Realized and unrealized loss on derivative instruments decreased to $1.6 million for 2015 from $1.7 million for 2014. Realized and unrealized loss on derivative instruments is comprised of realized and unrealized gains or losses on our interest rate swaps and unrealized gains or losses on a stock purchase warrant issued to us by TIL.

Realized and unrealized losses on interest rate swaps were $2.1 million for the year ended December 31, 2015, compared to $2.9 million for the year ended December 31, 2014. During 2015 and 2014, we had interest rate swap agreements with aggregate average outstanding notional amounts of approximately $300.0 million and with weighted average fixed rate of approximately 3.59%. Short-term variable benchmark interest rates during these periods were generally less than 1.0%. As a result, we incurred realized losses of $9.8 million and $10.0 million for the years ended December 31, 2015 and 2014, respectively, under the interest rate swap agreements.

The changes in the fair value of the interest rate swaps resulted in unrealized gains of $7.7 million and $7.1 million for the years ended December 31, 2015 and 2014, respectively, due to an increase in long-term benchmark interest rates in both years.

In addition to our interest rate swaps, we have a stock purchase warrant entitling us to purchase up to 750,000 shares of common stock of TIL. The stock purchase warrant had a fair value of $5.2 million and $4.7 million as of December 31, 2015 and 2014, respectively. We recognized an unrealized gain of $0.5 million and $1.2 million for the years ended December 31, 2015 and 2014, respectively.

Please see Item 5 - Operating and Financial Review and Prospects – Valuation of Derivative Instruments, which explains how our derivative instruments are valued, including the significant factors and uncertainties in determining the estimated fair value and why changes in these factors result in material changes in realized and unrealized loss or gain on derivative instruments from period to period.

Other (Expenses) Income. Other expenses was $3.1 million in 2015, compared to other income of $3.8 million in 2014. The decrease primarily relates to income of $3.4 million which we recognized upon receipt of the TIL stock purchase warrant in the first quarter of 2014 for our involvement in the formation of TIL and an increase of $3.3 million in our estimate of freight tax expenses for the year ended December 31, 2015 due to higher vessel activity as compared to the prior year.

Net Income. As a result of the foregoing factors, we recorded net income of $179.6 million for 2015, compared to $60.5 million for 2014.

Liquidity and Capital Resources

Liquidity and Cash Needs

Our primary sources of liquidity are cash and cash equivalents, cash flows provided by our operations, our undrawn credit facilities, proceeds from sales of vessels, and capital raised through financing transactions. As at December 31, ~~2014,~~2016, our total cash and cash equivalents were ~~$162.8~~$68.1 million, compared to ~~$25.6~~$96.4 million at December 31, ~~2013.~~2015. Our cash balance at December 31, ~~2014~~2016 had ~~increased~~decreased primarily as a result of ~~our December 2014 public offering and concurrent private placement~~repayments of our ~~Class A~~long-term debt (described below) and dividends paid on our shares of common stock, which ~~generated net~~were partially offset by cash flow from our operations, by proceeds of $111.2 million to be used to fund, in part, our acquisition of five vessels for a total purchase price of $230.3 million in early 2015. Subsequent to December 31, 2014, we also secured a loan facility in the amount of $126.6 million with a maturity date of January 30, 2016, raised an additional $13.7 million of net proceedsreceived from the ~~issuance~~sale of ~~shares upon the exercise by the underwriters of their option to purchase shares in connection with~~two MR tankers and two lightering support vessels and distributions we received from our ~~December 2014 public offering, and prepaid $95.0 million of one of our revolving credit facilities.~~

equity accounted investments.

Our total liquidity, including cash, cash equivalents and undrawn credit facilities, was ~~$289.0~~$102.4 million as at December 31, ~~2014,~~2016, compared to ~~$173.8~~$111.0 million as at December 31, ~~2013. Including the proceeds from January 2015 share issuance referred to above, our liquidity increased to $302.7 million.~~2015. We ~~believe~~anticipate that our ~~working capital is sufficient~~primary sources of funds for our ~~present requirements.~~

short-term liquidity needs will be cash flows from operations, existing cash and cash equivalents and undrawn long-term borrowings, refinancing existing loans and new financings or equity issuances, which we believe will be sufficient to meet our existing liquidity needs for at least the next 12 months.

Our short-term liquidity requirements include the payment of operating expenses, dry-docking expenditures, ~~funding the purchase of five vessels,~~ debt servicing costs, dividends on our shares of common stock, scheduled repayments of long-term debt, as well as funding our other working capital requirements. Our short-term charters and spot market tanker operations contribute to the volatility of our net operating cash flow, and thus our ability to generate sufficient cash flows to meet our short-term liquidity needs. Historically, the tanker industry has been cyclical, experiencing volatility in profitability and asset values resulting from changes in the supply of, and demand for, vessel capacity. In addition, tanker spot markets historically have exhibited seasonal variations in charter rates. Tanker spot markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere and unpredictable weather patterns that tend to disrupt vessel scheduling. ~~Through December 31, 2012,~~

From the first quarter of 2013 to the dividend paid in the fourth quarter of 2015, we distributed ~~the majority~~a portion of our cash flow to shareholders through a full payout dividend policy, subject to certain reserves determined by our Board of Directors. Our Board of Directors modified our dividend policy, and commencing in the first quarter of 2013, we pay a fixed quarterly dividend of $0.03 per share on our common ~~shares,~~shares. Commencing with the dividend paid in the first quarter of 2016, we have adopted a new dividend policy under which ~~amount is reviewed~~quarterly dividends are expected to range from ~~time~~30% to ~~time by~~50% of our quarterly adjusted net income, subject to the discretion of our Board of ~~Directors.~~

Directors, with a minimum quarterly dividend of $0.03 per share. Adjusted net income is a non-GAAP measure which excludes specific items affecting net income that are typically excluded by securities analysts in their published estimates of our financial results. Specific items affecting net income include foreign exchange gain or losses, unrealized gains or losses on derivative instruments, gain or losses on sale of vessels and debt issuance costs which were written off in connection with the refinancing of our debt facilities in the first quarter of 2016.

Our long-term capital needs are primarily for capital expenditures and debt repayment. Generally, we expect that our long-term sources of funds will be cash balances, long-term bank borrowings and other debt or equity ~~financings.~~financings, which includes equity issuances from our COP. We expect that we will rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and expansion capital ~~expenditures, including opportunities~~expenditures.

In October 2016, we ~~may pursue~~agreed to ~~purchase additional vessels~~sell two Suezmax tankers for an aggregate sales price of $33.8 million. The sale of one Suezmax tanker was completed in January 2017 and the sale of the other Suezmax tanker was completed in March 2017. We used the proceeds from ~~Teekay or third parties.~~

~~Our primary~~these sales to repay a portion of our corporate revolving credit facility, which is ~~repayable~~scheduled to mature in ~~full in November~~ 2017. As ofat December 31, ~~2014,~~2016, the revolving credit facility had an outstanding balance of ~~$452.0~~$55.1 million.

In January 2016, we entered into a new $894.4 million long-term debt facility, consisting of which we prepaid $95.0 million in January 2015. Immediately preceding its maturity in November 2017, the maximum amount available under the facility is $349.4 million. Our ability to refinance any amounts outstanding under this facility on or prior to maturity in November 2017 will likely depend on the strength of the tanker market. If the tanker market weakens materially, we may need to raise additional liquidity through issuance of common shares, preferred shares or bonds, orboth a ~~combination thereof. Alternatively, we may seek to renegotiate our primary~~term loan and a revolving credit facility, which is scheduled to ~~extend repayment~~mature in January 2021, of ~~the facility. This may result~~which $845.8 million was used to repay our two bridge loan facilities, which matured in ~~an increase~~late January 2016, and a portion of our main corporate revolving credit facility, which was scheduled to mature in ~~the rate of interest we pay on amounts borrowed under the facility. In addition, our liquidity requirements in 2017 may impact the types of investments we make prior to this date.~~

2017.

Our revolving credit facilities and term loans are described in Item 18 – Financial Statements: Note 810 - Long-Term Debt to our consolidated financial statements included in this Annual Report. Our revolving credit facilities and term loans contain covenants and other restrictions we believe are typical of debt financing collateralized by vessels, including those that restrict the relevant subsidiaries from incurring or guaranteeing additional indebtedness, making certain negative pledges or granting certain liens, and selling, transferring, assigning or conveying assets. In the future, some of the covenants and restrictions in our financing agreements could restrict the use of cash generated by ship-owning subsidiaries in a manner that could adversely affect our ability to pay dividends on our common stock. However, we do not currently expect that these covenants will have such an effect. Our revolving credit facilities and term loans require us to maintain financial covenants. Should we not meet these financial covenants, the lender may declare our obligations under the agreements immediately due and payable and terminate any further loan commitments, which would significantly affect our short-term liquidity requirements. As at December 31, ~~2014,~~2016, we and Teekay were in compliance with all covenants relating to our revolving credit facilities and term loans.

We are exposed to market risk from changes in interest rates, foreign currency fluctuations and spot market rates. We use interest rate swaps to manage interest rate risk. We do not use this financial instrument for trading or speculative purposes.

Passage of any climate control legislation or other regulatory initiatives that restrict emissions of greenhouse gases could have a significant financial and operational impact on our business, which we cannot predict with certainty at this time. Such regulatory measures could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. In addition, increased regulation of greenhouse gases may, in the ~~long term,~~long-term, lead to reduced demand for oil and reduced demand for our services.

Cash Flows

The following table summarizes our sources and uses of cash for the periods presented:

   Year Ended December 31,
(in thousands of U.S. dollars)
   2014    2013    2012
Net cash flow from operating activities
   13,603    6,202    27,542
Net cash flow provided by (used for) financing activities
   13,721    (1,097 )    (13,905 )
Net cash flow provided by (used for) investing activities
   109,827    (5,800 )    (5,862 )

Year Ended December 31,
(in thousands of U.S. dollars) 2016 2015 2014
Net cash flow from operating activities 209,976
166,789
20,940
Net cash flow (used for) provided by financing activities (275,109 ) 648,800
6,405
Net cash flow provided by (used for) investing activities 36,824
(881,969 ) 109,806

Operating Cash Flows

Changes in net cash flow from operating activities primarily reflect fluctuations in spot tanker rates, change in interest rates, fluctuations in working capital balances, the timing and the amount of dry-docking expenditures, repairs and maintenance activities, and vessel additions and dispositions. Our exposure to the spot tanker market has contributed significantly to historical fluctuations in operating cash flows as a result of highly cyclical spot tanker rates.

Net cash flow ~~from~~provided by operating activities increased to ~~$13.6~~$210.0 million in ~~2014,~~2016, compared to ~~$6.2~~$166.8 million in ~~2013,~~2015, primarily as a result of the following:

a net increase of ~~$50.3~~$70.4 million in operating ~~earnings before depreciation, amortization, unrealized gains/losses on derivative instruments, equity income, gain (loss) on sale~~cash flows in 2016 due to the timing of ~~vessels~~the settlement of operating assets and ~~changes in other non-cash items related to operating activities,~~liabilities primarily as a result of the decrease in pool receivables due to lower TCE rates in late 2016 compared to the prior year; and

an increase of $31.0 million in operating cash flows in 2016 relating to lower expenditures on dry-docking activities. In 2016, we dry docked two Suezmax tankers, whereas in 2015 we dry docked seven Suezmax tankers, seven LR2 product tankers, two Aframax tankers, and two MR tankers.

partially offset by

a net decrease of $58.2 million in operating earnings primarily as a result of lower average realized TCE rates, partially offset by the increase in fleet size in 2016 as compared to the prior year.

Net cash flow provided by operating activities increased to $166.8 million in 2015, compared to $20.9 million in 2014, primarily as a result of the following:

a net increase of $143.4 million in operating earnings primarily as a result of an increase in our fleet size (due to the acquisition of 12 modern Suezmax vessels, four LR2 product tankers, and one Aframax tanker, the addition of two Aframax tankers from the Entities under Common Control, and the chartering-in of an additional nine vessels), operating earnings associated with the ship-to-ship transfer business we acquired during the second half of 2015, and higher average realized TCE rates ~~in the spot market and~~due to our increased exposure to the spot ~~market due to the addition of seven time-chartered in Aframax vessels~~market; and four time-chartered in LR2 vessels in the year ended December 31, 2014, which traded in the Teekay-managed pools as well as placing certain of our vessels in Teekay pools upon expiration of their time-charter out contracts; and

a net increase of ~~$2.2~~$25.0 million in operating cash flows due to ~~fewer~~the timing of the settlement of operating assets and liabilities;

partially offset by

a decrease of $22.5 million in operating cash flows relating to higher expenditures on dry-docking activities in ~~2014 as a result of a lower average cost per~~2015. In 2015, we dry ~~dock of an~~docked seven Suezmax tankers, seven LR2 product tankers, two Aframax ~~or an~~tankers, and two MR ~~vessel as compared to a Suezmax vessel. In~~tankers, whereas in 2014, we dry docked seven Aframax tankers, one MR and one Suezmax ~~tanker, whereas~~tanker.

Financing Cash Flows

Net cash used for financing activities was $275.1 million in ~~2013, six Suezmax and two Aframax tankers underwent scheduled drydockings;~~

~~partially offset~~2016, compared to net cash provided by

financing activities of $648.8 million in 2015, primarily as a ~~net decrease~~result of ~~$45.1~~the following:

an increase of $692.9 million ~~due to changes~~ in ~~non-cash working capital relating to our vessel operations~~cash outflows primarily due to an increase in ~~pool receivables~~repayments and prepayments on our term loans and revolving credit facilities compared to 2015;

a net decrease of $202.8 million in cash inflows due to lower proceeds from ~~affiliates as a result~~equity offerings in 2016 compared with 2015, including the effect of ~~higher average realized spot rates~~the 2015 issuances of shares under private placements to partially fund the acquisition of the 12 Principal Maritime vessels and the ship-to-ship transfer business in ~~2014~~2015, substantially lower sales of Class A common stock during 2016 under our COP, and proceeds from the underwriters' exercise of their over-allotment option in January 2015 for an additional 3.0 million shares of Class A common stock; and

an increase of $31.7 million in ~~fleet size. Due from affiliates also increased mainly as a result of~~cash outflows related to additional cash dividends paid during 2016 due to the change in our dividend policy and ~~bunker contributions we paid when~~the increase in the number of shares of outstanding Class A and B common stock from our ~~newly time-chartered~~2015 issuances;

partially offset by

a decrease of $3.5 million in ~~vessels joined Teekay pools and when our vessels joined Teekay pools upon~~cash used for financing activities from the ~~expiration of their time-charter out contracts.~~

Entities under Common Control.

Net cash ~~flow from operating~~provided by financing activities ~~decreased~~increased to ~~$6.2~~$648.8 million in ~~2013,~~2015, compared to ~~$27.5~~$6.4 million in ~~2012,~~2014, primarily as a result of the following:

a net decrease of $32.3 million in operating earnings before interest, depreciation, amortization, unrealized gains/losses on derivative instruments, equity income, impairment and changes in other non-cash items related to operating activities, primarily as a result of lower average realized TCE rates and an increase in voyage and time-charter hire expenses in 2013 as compared to 2012; and

~~a net decrease of $12.2 million due to dry-docking expenditures for eight vessels in 2013 compared to four in 2012;~~

~~partially offset by~~

a net increase of ~~$13.2~~$545.6 million ~~due~~in proceeds from additional borrowings, including a new term loan facility of $397.2 million to ~~changes in non-cash working capital relating~~finance the acquisition of 12 modern Suezmax tankers and a new term loan facility of $126.6 million to ~~our vessel operations;~~finance the acquisition of four LR2 product tankers and

a one Aframax tanker, net ~~increase~~ of ~~$10.0 million due to lower interest expenses~~repayments and prepayments on our ~~debt for the year ended December 31, 2013 compared to the prior year as a result of replacing long-term debt of the Dropdown Predecessor, bearing interest rate at 8.5% with~~term loans and revolving credit ~~facilities, which had an average outstanding interest rate of approximately 1.3% in 2013.~~

facilities; and

~~Financing Cash Flows~~

~~Net cash inflow from financing activities increased to $13.7 million in 2014, compared to net cash outflow of $1.1 million in 2013, primarily as a result of the following:~~

a net increase in financing cash inflows of $44.5 million as a result of additional borrowings under our debt facilities and a decrease in repayments of debt facilities. For the year ended December 31, 2014 compared to the 2013, we borrowed $39.6 million more under our revolving credit facilities and term loans and repaid $4.9 million less in scheduled debt repayments;

~~an increase of $111.2~~$131.1 million in ~~cash received from a public offering and concurrent private placement of our shares in December 2014. We issued 24.2~~proceeds related to equity offerings, including an additional 19.7 million shares of Class A common stock ~~at $4.80 per share for~~issued to Teekay Corporation and a group of institutional investors to partially fund the acquisition of 12 Principal Maritime vessels, an additional 13.4 million shares of Class A common stock issued under our COP, an additional 6.5 million shares of Class B common stock issued to Teekay Corporation in order to finance the acquisition of SPT, and an additional 3.0 Class A common stock issued in January 2015;

partially offset by

a net ~~proceeds~~increase of ~~$111.2~~$28.1 million in cash used for financing activities from the ~~December 2014 public offering and concurrent private placement. We undertook no public offerings or private placements in 2013; and~~

Entities under Common Control;

an increase of ~~$1.3 million due to an indemnification payment received from Teekay for the repairs performed on the heating coils of one Suezmax tanker we purchased from Teekay in 2010;~~

~~partially offset by~~

~~an increase of $142.0~~$5.0 million in cash outflows related to additional cash dividends paid during 2015 due to ~~increased long-term debt prepayments (primarily as a result of cash generated from our sale of two VLCCs as described in the investing section).~~

~~Net cash outflow from financing activities was $1.1 million in 2013, compared to $13.9 million in 2012, as a result of the following:~~

a net increase in financing cash inflows of $50.2 million as a result of net borrowing, repayments, and prepayments on our credit facilities. For the year ended December 31, 2013 compared to the 2012, we borrowed $26.9 million more from our revolving credit facilities; repaid $11.7 million more in scheduled debt repayments; and decreased our prepayments of long term debt by $35.0 million;

an increase in ~~financing cash inflows~~the number of ~~$22.2 million as a result~~shares of ~~lower dividend payments for the year ended December 31, 2013 compared to the prior year;~~outstanding Class A and

B common stock from our 2015 issuances; and

~~a net decrease~~

an increase of ~~$6.2 million in~~ cash outflow ~~resulting~~of $1.3 million related to an equity contribution from Teekay to indemnify the ~~net financing activities of~~costs required to repair the ~~Dropdown Predecessor;~~

~~partially offset by~~

~~a decrease of $65.8 million~~Kaveri Spirit in cash received from public offerings 2013 compared to the year ended December 31, 2012. We undertook no public offerings in 2013, compared with a public offering during 2012 in which we issued 17.3 million shares at $4.00 per share for net proceeds of $65.8 million.

2014.

Investing Cash Flows

Net cash provided by investing activities ~~increased to $109.8~~was $36.8 million in ~~2014,~~2016, compared to net cash used for investing activities of ~~$5.8~~$882.0 million in the prior year, primarily as a result of the following:

a decrease of cash outflows of $612.0 million related to the cash consideration paid to acquire the 12 modern Suezmax vessels from Principal Maritime Tankers in 2015;

a decrease of cash outflows of $227.0 million related to the acquisition of four LR2 product tankers and one Aframax tanker in 2015 as well as other capital expenditures made during the year;

a decrease of cash outflows of $45.6 million, net of working capital adjustments, related to the acquisition of TMS in 2015;

an increase of cash inflows of $16.5 million related to gross proceeds received from the sale of two MR tankers and two lightering support vessels which were sold in the second half of 2016;

an increase of cash inflows of $15.2 million primarily related to the return of capital received in 2016 from our investment in TTOL; and

an increase of cash inflows of $2.5 million related to the 2016 repayment of a loan to us from our High-Q joint venture.

Net cash used for investing activities increased to $882.0 million in 2015, compared to net cash provided by investing activities of $109.8 million in the prior year, primarily as a result of the following:

an increase of cash outflows of $612.0 million related to the cash consideration paid to acquire the 12 modern Suezmax vessels from Principal Maritime Tankers in 2015;

an increase of cash outflows of $230.4 million related to the acquisition of four LR2 product tankers and one Aframax tanker in 2015 as well as other capital expenditures made during the year;

a decrease of cash inflows of $154.0 million ~~in cash inflows due~~related to gross proceeds from the sale of two wholly-owned subsidiaries, each of which owned one VLCC, to TIL in May of 2014; ~~and~~

an increase of ~~$10.3~~cash outflows of $45.6 million, net of working capital adjustments, related to the acquisition of TMS in 2015;

a decrease of cash inflows ~~due~~of $1.2 million related to the term loan advance recoveries ~~made as~~ received in 2014; and

a ~~result~~decrease of ~~our taking ownership~~cash inflows of $1.0 million related to the ~~two 2010-built VLCC tankers, which were collateral for all amounts owing under~~2014 net loan repayment from the ~~term loans;~~

High-Q joint venture;

partially offset by

a net decrease of cash outflows of ~~$35.6~~$41.3 million ~~for~~related to investments in and advances to equity accounted ~~investments during 2014. We~~investments. In 2014 we invested $35.0 million in common shares of TIL (2015 - $nil) and paid $6.5 million in connection with the purchase of our investment in TTOL (2015 - $0.2 million); and ~~received a net repayment~~

an increase in cash inflows of ~~$2.0~~$11.1 million ~~from the High-Q joint venture in the year ended December 31, 2014, as compared~~related to ~~$3.9 million of advances to the High-Q joint venture in the year ended December 31, 2013;~~

~~a decrease of $9.1 million due to~~gross proceeds from the sale of one ~~Aframax~~MR tanker in ~~January 2013 for proceeds of $9.1 million;~~

2015.

~~a decrease of $3.7 million due to a deposit placed in escrow in 2014 for the purchase of one Aframax tanker, which was delivered in the first quarter of 2015; and~~

~~an increase of $0.2 million in cash outflows during 2014 for upgrades and other capital expenditures on our fleet.~~

~~Net cash used for investing activities for the year ended December 31, 2013 decreased to $5.8 million, compared to $5.9 million in 2012, as a result of the following:~~

•

~~a decrease in cash used for investing activities of $9.1 million in 2013 as a result of proceeds received from the sale of one Aframax tanker,~~~~the Nassau Spirit~~~~, which was sold in January 2013; and~~

~~a decrease in cash used for investing activities of $0.6 million due to a reduction in expenditures for vessel and equipment for the year ended December 31, 2013 compared to the prior year;~~

~~partially offset by~~

an net increase in cash used for investing activities of $9.1 million due to additional funding, which was required to negotiate the release from detention in Egypt of one of the VLCCs securing our investment in term loans as well as to fund operating expenditures related to the VLCCs then trading under our management in the spot tanker market; and

an increase of $0.5 million primarily as a result of our funding to our 50/50 joint venture to meet shipyard obligations for the construction of a VLCC newbuilding, which was completed in June of 2013.

Please read Item 18 – Financial Statements: Note 56 – Investment in Term Loans and Note 68 - Investments in and advances to equity accounted investments for specific details on our investment in term loans and 50/50 joint venture activities included in the notes to our consolidated financial statements attached in this Annual Report.

Commitments and Contingencies

The following table summarizes our long-term contractual obligations as at December 31, ~~2014:~~

(in millions of U.S. dollars)
   Total    2015    2016
and 2017    2018
and 2019    Beyond
2019
U.S. Dollar-Denominated Obligations

Long-term debt⁽¹⁾
   656.1    42.0    497.9    76.4    39.8
Chartered-in vessels (operating leases)⁽²⁾
   62.3    49.0    13.3    —      —










Total
718.4 91.0 511.2 76.4 39.8

2016:



	Total	2017	2018	2019	2020	2021
(in millions of U.S. dollars)
U.S. Dollar-Denominated Obligations
Scheduled repayments of revolving facilities, term loans and other debt ⁽¹⁾	455.0	122.3	110.1	110.0	110.0	2.6
Repayments at maturity of revolving facilities, term loans and other debt ⁽¹⁾	486.7	49.1	65.5	—	—	372.1
Chartered-in vessels (operating leases) ⁽²⁾	53.1	26.8	8.3	8.3	8.3	1.4
Total	994.8	198.2	183.9	118.3	118.3	376.1

(1)

Excludes all expected interest payments of ~~$6.5~~$22.6 million ~~(2015)~~(2017), ~~$9.0~~$18.7 million ~~(2016~~(2018), $15.2 million (2019), $12.2 million (2020) and ~~2017), $1.6~~$5.3 million ~~(2018 and 2019), and $0.6 million (beyond 2019)~~(2021). Expected interest payments are based on the ~~existing interest rates for fixed-rate loans that range from 4.06% to 4.90% and~~ existing interest rates for variable-rate loans at LIBOR plus margins that range from ~~0.3%~~0.30% to ~~1.0%~~2.00% at ~~December 31, 2014. The expected interest payments do not reflect the effect of related interest rate swaps that we have used to hedge certain of our floating-rate debt.~~

December 31, 2016. The expected interest payments do not reflect the effect of related interest rate swaps that we have used to hedge certain of our floating-rate debt.

(2)

Excludes payments required if we execute all options to extend the terms of in-chartered leases. If we exercise all options to extend the terms of in-chartered leases, we would expect to be obligated to additional total payments of ~~$65.3~~$43.1 million ~~(2015)~~(2017), ~~$32.3 million (2016), $7.4 million (2017) and $5.6~~$17.7 million (2018), $8.3 million (2019), $8.3 million (2020), and $1.4 million (2021).

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties. For a further description of our material accounting policies, please read Item 18 – Financial Statements: Note 1 – Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report.

Revenue Recognition

Description. We recognize voyage revenue using the proportionate performance method. Under this method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. This means that voyage revenues are recognized ratably either from the beginning of when product is loaded for one voyage to when it is loaded for the next voyage, or from when product is discharged (unloaded) at the end of one voyage to when it is discharged after the next voyage.

A portion of our revenues is also generated from the offshore ship-to-ship transfer of commodities, primarily crude oil and refined oil products, but also liquid gases and various other products. We also generate revenues from other technical activities such as terminal management, consultancy, procurement and equipment rental. Short-term contracts for these services are recognized as services are completed based on a percentage of completion method. Long-term contracts are recognized over the duration of the contract period.

Judgments and Uncertainties. In applying the proportionate performance method, we believe that in most cases the discharge-to-discharge basis of calculating voyages more accurately reflects voyage results than the load-to-load basis. At the time of cargo discharge, we generally have information about the next load port and expected discharge port, but at the time of loading we are typically less certain what the next load port will be. We use this method of revenue recognition for all spot voyages. However we do not begin recognizing revenue for any of our vessels until a charter has been agreed to by the customer and us, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage.

Effect if Actual Results Differ from Assumptions. If actual results are not consistent with our estimates in applying the proportionate performance method, our revenues could be overstated or understated for any given period by the amount of such difference.

Vessel Lives and Impairment

Description. Acquisitions of vessels from Teekay were deemed to be business acquisitions between entities under common control. Accordingly, the carrying value of each such vessel represents Teekay’s carrying value at the date we acquired the vessel, less subsequent depreciation and impairment charges. We depreciate the original cost, less an estimated residual value, of these vessels on a straight-line basis over each vessel’s estimated useful life. The carrying values of our vessels may not represent their market value at any point in time because the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. Both charter rates and newbuilding costs tend to be cyclical in nature.

We review vessels and equipment for impairment whenever events or circumstances indicate the carrying value of an asset, including the carrying value of the charter contract, if any, under which the vessel is employed, may not be recoverable. This occurs when the asset’s carrying value is greater than the future undiscounted cash flows the asset is expected to generate over its remaining useful life. If the estimated future undiscounted cash flows of an asset exceed the asset’s carrying value, no impairment is recognized even though the fair value of the asset may be lower than its carrying value. If the estimated future undiscounted cash flows of an asset are less than the asset’s carrying value and the fair value of the asset is less than its carrying value, the asset is written down to its fair value. Fair value is calculated as the net present value of estimated future cash flows, which, in certain circumstances, will approximate the estimated market value of the vessel. For a vessel under charter, the discounted cash flows from that vessel may exceed its market value, as market values may assume the vessel is not employed on an existing charter.

The following table presents the aggregate market values and carrying values of our vessels that we have determined have a market value that is less than their carrying value as of January 1, ~~2015.~~2017. While the market values of these vessels are below their carrying values, no

impairment has been recognized on any of these vessels in ~~2014~~2016 as the estimated future undiscounted cash flows relating to such vessels are greater than their carrying values.

We consider the vessels reflected in the following table to be at a higher risk of future impairment. This table is disaggregated for vessels which have estimated future undiscounted cash flows that are marginally or significantly greater than their respective carrying values. Vessels with estimated future cash flows significantly greater than their respective carrying values would not necessarily represent vessels that would likely be impaired in the next twelve months. The recognition of an impairment in the future for those vessels may primarily depend upon our deciding to dispose of the vessel instead of continuing to operate it. In deciding whether to dispose of a vessel, we determine whether it is economically preferable to sell the vessel or continue to operate it. This assessment includes an estimation of the net proceeds expected to be received if the vessel is sold in its existing condition compared to the present value of the vessel’s estimated future revenue, net of operating costs. Such estimates are based on the charter market outlook and estimated operating costs, given a vessel’s type, condition and age. In addition, we typically do not dispose of a vessel that is servicing an existing customer contract. The recognition of an impairment in the future may be more likely for vessels that have estimated future undiscounted cash only marginally greater than their respective carrying values.

Aframax, Suezmax and Product Tankers
(in thousands of USD, except number of vessels)
   # Vessels    Market
Values⁽¹⁾    Carrying
Values
Conventional Tankers⁽²⁾
   3       $ 40,800       $ 55,331
Conventional Tankers⁽³⁾
   17       $ 487,400       $ 584,617
Total
   20       $ 528,200       $ 639,948



Aframax, Suezmax and Product Tankers (in thousands of U.S. dollars, except number of vessels)	# Vessels	Market Values⁽¹⁾		Carrying Values
Conventional Tankers ⁽²⁾	12	$	160,200	$	278,159
Conventional Tankers ⁽³⁾	29	$	798,200	$	1,315,415
Total	41	958,400		1,593,574


(1)	Market values are determined using reference to second-hand market comparables. Since vessel values can be volatile, our estimates of market value may not be indicative of either the current or future prices we could obtain if we sold any of the vessels.


(2)	Undiscounted cash flows are marginally greater than the carrying values.


(3)	Undiscounted cash flows are significantly greater than the carrying values.

Judgments and Uncertainties.Depreciation is calculated using an estimated useful life of 25 years for conventional crude oil and product tankers, commencing at the date the vessel was originally delivered from the shipyard. However, the actual life of a vessel may be different than the estimated useful life, with a shorter actual useful life resulting in an increase in quarterly depreciation and potentially resulting in an impairment loss. The estimated useful life of our vessels takes into account design life, commercial considerations and regulatory restrictions. Our estimates of future cash flows involve assumptions about future charter rates, vessel utilization, operating expenses, dry-docking expenditures, vessel residual values and the remaining estimated life of our vessels. Our estimated charter rates are based on rates under existing vessel contracts and market rates at which we expect we can re-charter our vessels. Our estimates of vessel utilization, including estimated off-hire time, are based on historical experience and our projections of the number of future conventional tanker voyages. Our estimates of operating expenses and dry-docking expenditures are based on historical operating and dry-docking costs and our expectations of future inflation and operating requirements. Vessel residual values are a product of a vessel’s lightweight tonnage and an estimated scrap rate. The remaining estimated lives of our vessels used in our estimates of future cash flows are consistent with those used in the calculations of depreciation.

In our experience, certain assumptions relating to our estimates of future cash flows are more predictable by their nature, including estimated revenue under existing contract terms, on-going operating costs and remaining vessel life. Certain assumptions relating to our estimates of future cash flows require more discretion and are inherently less predictable, such as future charter rates beyond the firm period of existing contracts and vessel residual values, due to factors such as the volatility in vessel charter rates and vessel values. We believe that the assumptions used to estimate future cash flows of our vessels are reasonable at the time they are made. We can make no assurances, however, as to whether our estimates of future cash flows, particularly future vessel charter rates or vessel values, will be accurate.

Effect if Actual Results Differ from Assumptions.If we conclude that a vessel or equipment is impaired, we recognize a loss in an amount equal to the excess of the carrying value of the asset over its fair value at the date of impairment. The written-down amount becomes the new lower cost basis and will result in a lower annual depreciation expense than for periods before the vessel impairment.

Dry docking

Description. We capitalize a substantial portion of the costs we incur during dry docking and amortize those costs on a straight-line basis from the completion of a dry docking to the estimated date of completion of the next dry docking. We immediately expense costs for routine repairs and maintenance performed during dry docking that do not improve or extend the useful lives of the assets.

Judgments and Uncertainties. Amortization of capitalized dry-docking expenditure requires us to estimate the period of the next dry docking. While we typically dry dock each vessel every ~~2.5~~two and a half to 5five years, we may dry dock the vessels at an earlier date. The actual life of a vessel may be different, with a shorter life resulting in an increase in the quarterly depreciation and potentially resulting in an impairment loss. The estimates and assumptions regarding expected cash flows require considerable judgment and are based upon existing contracts, historical experience, financial forecasts and industry trends and conditions. We are not aware of any indicators of impairments nor any regulatory changes or environmental liabilities that we anticipate will have a material impact on our current or future operations.

Effect if Actual Results Differ from Assumptions. If we change our estimate of the next dry dock date we will adjust our annual amortization of dry-docking expenditures.

Valuation of Derivative Instruments

Description. Our risk management policies permit the use of derivative financial instruments to manage interest rate risk. We also have a stock purchase warrant from our involvement in the formation of ~~TIL.~~TIL and entered into a time-charter swap agreement to reduce our exposure to spot tanker market rate variability for certain vessels that are employed in the Aframax revenue sharing pooling arrangement. Changes in fair value of derivative financial instruments that are not designated as cash flow hedges for accounting purposes are recognized in earnings in the consolidated ~~statement~~statements of ~~loss.~~

income.

Judgments and Uncertainties.The fair value of our derivative instruments and the change in fair value of our derivative instruments from period to period result from our use of interest rate swap agreements, a time-charter swap agreement and a stock purchase warrant.

The fair value of our interest rate swap agreements is the estimated amount that we would receive or pay to terminate the agreements in an arm’s length transaction under normal business conditions at the reporting date, taking into account current interest rates and the current credit worthiness of ourselves and the interest rate swap counterparties. The estimated amount for interest rate swap agreements is the present value of estimated future cash flows, being equal to the difference between the benchmark interest rate and the fixed rate in the interest rate swap agreement, multiplied by the notional principal amount of the interest rate swap agreement at each interest reset date.

The fair value of our interest rate swap agreements at the end of each period is most significantly impacted by the interest rate implied by the benchmark interest rate yield curve, including its relative steepness. Interest rates have experienced significant volatility in recent years in both the short and long term. While the fair value of our interest rate swap agreements is typically more sensitive to changes in short-term rates, significant changes in the long-term benchmark interest rate also materially impact our interest rate swap agreements.

The fair value of our interest rate swap agreements is also impacted by changes in our specific credit risk included in the discount factor. We discount our interest rate swap agreements with reference to the credit default swap spreads of global industrial companies with a similar credit rating and by considering any underlying collateral. The process of determining credit worthiness requires significant judgment in determining which source of credit risk information most closely matches our risk profile.

The benchmark interest rate yield curve and our specific credit risk are expected to vary over the life of the interest rate swap agreements. The larger the notional amount of the interest rate swap agreements outstanding and the longer the remaining duration of the interest rate swap agreements, the larger the impact of any variability in these factors will be on the fair value of our interest rate swaps. We economically hedge the interest rate exposure on a significant amount of our long-term debt and for long durations. As such, we have historically experienced, and we expect to continue to experience, material variations in the period-to-period fair value of our derivative instruments.

The fair value of our time-charter swap agreement is the estimated future payments we would receive under normal business conditions at the reporting date, taking into account current spot tanker market rates (or spot rates) and the current credit worthiness of ourselves and the time-charter swap counterparty. The estimated amount for the time-charter swap agreement is the present value of estimated future cash flows, being equal to the difference between a fixed rate and a floating rate based on the spot tanker market.

The estimated fair value of our time-charter swap agreement at the end of each period is most significantly impacted by the spot rate and the expected volatility of the spot market. Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of and demand for tanker capacity and changes to the supply of and demand for oil and oil products. The cyclical nature of the tanker industry may cause significant increases or decreases in spot rates which will have a material impact on the time-charter swap agreement.

The estimated value of the stock purchase warrant was determined using a Monte-Carlo simulation and is based, in part, on the historical price of common shares of TIL, the risk-free interest rate, vesting conditions and the historical volatility of comparable companies. The fair value of our stock purchase warrant at the end of each period is most significantly impacted by the stock price of TIL and the expected volatility of the TIL stock price. TIL seeks to opportunistically acquire, operate and sell modern second hand tankers to benefit from an expected recovery in the current cyclical low of the tanker market. Pending such transactions, TIL is employing its oil tankers on the spot market. Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of and demand for tanker capacity and changes in the supply of and demand for oil and oil products. The cyclical nature of the tanker industry may cause significant increases or decreases in the value of TIL’s vessels, TIL’s stock price and the value of the stock purchase warrant we hold.

Effect if Actual Results Differ from Assumptions.Although we measure the fair value of our derivative instruments utilizing the inputs and assumptions described above, if we were to terminate the interest rate swap agreements and time-charter swap or sell the stock purchase warrant at the reporting date, the amount we would pay or receive to terminate the interest rate swap agreements and time-charter swap and the amount we would receive upon sale of the stock purchase warrant may differ from our estimate of fair value. If the estimated fair value differs from the actual termination amount, an adjustment to the carrying amount of the applicable derivative asset or liability would be recognized in earnings for the current period. Such adjustments could be material. See Item 18 – Financial Statements: Note 912 – Derivative Instruments for the effects on the change in fair value of our derivative instruments on our consolidated statements of ~~loss.~~

income.

~~Item 6.Directors, Senior Management and Employees~~

Item 6. Directors, Senior Management and Employees

Our Board of Directors and executive officers oversee and supervise our operations. Subject to this oversight and supervision, our operations are managed generally by our Manager.

Our President and Chief Executive Officer, Kevin Mackay and our Chief Financial Officer, Vincent Lok allocate their time between managing our business and affairs directly as such officers and indirectly as officers of our Manager, and the business and affairs of Teekay Corporation, for which they also serve as executive team member and Executive Vice President and Chief Financial Officer, respectively. The amount of time Messrs. Mackay and Lok allocate among our business and the businesses of Teekay Corporation, our Manager and other subsidiaries of Teekay Corporation varies from time to time depending on the various circumstances and needs of the businesses, such as the relative levels of strategic activities of the businesses.

Our officers and individuals providing services to us or our subsidiaries may face a conflict regarding the allocation of their time between our business and the other business interests of Teekay Corporation or its affiliates. We intend to seek to cause our officers to devote as much time to the management of our business and affairs as is necessary for the proper conduct thereof.

Please also read Item 7 – Major Shareholders and Related Party Transactions: Related Party Transactions.

Directors and Executive Officers of Teekay Tankers Ltd.

The following table provides information about the directors and executive officers of Teekay Tankers Ltd. ~~Directors are elected for one-year terms.~~ The business address of each of our directors and officers listed below is c/o 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08 Bermuda. Ages of the directors and executive officers are as of December 31, ~~2014.~~

2016.



Name	Age	Position
Arthur Bensler	5759	Chairman of the Board of Directors
~~Kevin Mackay~~ Richard J.F. Bronks	4651	Director⁽¹⁾
Richard T. du Moulin	70	Director ⁽¹⁾
Kenneth Hvid	48	Director ⁽²⁾
William Lawes	73	Director ⁽¹⁾
Vincent Lok	48	Chief Financial Officer
Kevin Mackay	48	President and Chief Executive Officer⁽¹⁾
~~Vincent Lok~~ Bjorn Moller	46	~~Chief Financial Officer~~
~~Richard J.F. Bronks~~	49	~~Director~~⁽²⁾
~~William Lawes~~	71	~~Director~~⁽²⁾
~~Bjorn Moller~~	5759	Director

~~Richard T. du Moulin~~

~~Director~~⁽²⁾

(1)	~~Effective June 20, 2014.~~

~~(2)~~

Member of Audit Committee, Conflicts Committee, and Nominating and Governance Committee.

(2) Appointed February 22, 2017.

Certain biographical information about each of these individuals is set forth below.

Arthur Bensler joined ~~our~~the Board of Directors as Chairman onin June ~~12,~~ 2013. He has served as ~~our~~ Corporate Secretary from 2007 to September 2014 and as General Counsel to the Company since its inception. Mr. Bensler is Executive Vice President, Corporate Secretary and General Counsel of Teekay Corporation (NYSE:TK) and President of Teekay Shipping (Canada) Ltd. He has more than 15 years of experience in the shipping industry, joining Teekay Corporation in 1998 as General Counsel. He was promoted to the position of Vice President and General Counsel in 2002, became the Corporate Secretary of Teekay Corporation in 2003 and was further promoted to Executive Vice President and General Counsel in 2006. Mr. Bensler served as Committee Director of the Britannia Steamship Insurance Association Limited from January 2005 to April 2010 and has served as a Committee Director of The Standard Club Ltd., a mutual insurance association, since November 2010, where he is also a member of the Nominating & Governance Committee and the Strategy Committee.

~~Kevin Mackay~~ was appointed as our President & Chief Executive Officer on June 20, 2014 and also leads a global network of commercial offices in Asia, Europe and North America, with the responsibility of marketing Teekay’s fleet of conventional tankers. Mr. Mackay joined Teekay from Phillips 66, where he headed the global marine business unit, responsible for all aspects of marine transportation, including chartering, operations, demurrage, strategy and freight trading, business improvement and marine risk management. He held a similar role as the General Manager, Commercial Marine at ConocoPhillips from 2009 to 2012 before the formation of Phillips 66. Mr. Mackay started his career working for Neptune Orient Lines in Singapore from 1991 to 1995. He then joined AET Inc. Limited (~~AET~~) (formerly American Eagle Tankers Inc.) in Houston, where he ultimately was the Regional Director - Americas, Senior Vice President, responsible for AET’s business in the Americas. Mr. Mackay holds a B.Sc. (Econ) Honours from the London School of Economics & Political Science.

~~Vincent Lok~~ has served as our Chief Financial Officer since October 2007. Mr. Lok has served as Teekay Corporation’s Executive Vice President and Chief Financial Officer since July 2007. He has held a number of finance and accounting positions with Teekay Corporation, including Controller from 1997 until his promotions to the positions of Vice President, Finance in March 2002 and Senior Vice President and Treasurer in February 2004. He was subsequently appointed Senior Vice President and Chief Financial Officer in November 2006. Mr. Lok also serves as the Chief Financial Officer of our Manager. Prior to joining Teekay Corporation, Mr. Lok worked as a Chartered Accountant with Deloitte & Touche LLP. Mr. Lok is also a Chartered Financial Analyst.

Richard J.F. Bronks joined ~~our~~the Board of Directors of Teekay Tankers Ltd. in January 2008. Mr. Bronks retired from Goldman Sachs in 2007, where he held a number of positions during his career. From 2004 until March 2007, Mr. Bronks was responsible for building Goldman Sachs’ equity, bond and loan financing business in emerging markets, including Central and Eastern Europe, Russia, the Former Soviet Union, the Middle East, Turkey and Africa. From 1999 to 2004, Mr. Bronks served as a co-head of Goldman’s global commodity business, engaged in the trading of commodities and commodity derivatives, and the shipping and storage of physical commodities. From 1993 to 1999, Mr. Bronks served as a member of Goldman’s oil derivatives business in London and New York. Prior to joining Goldman Sachs, Mr. Bronks was employed by BP Oil International, in both its oil derivatives business and its crude oil trading business.

~~William Lawes~~ joined our Board of Directors in January 2008. In January 2014, Mr. Lawes also joined the board of Tanker Investments Ltd., an Oslo Stock Exchange listed company established by Teekay Corporation and Teekay Tankers and served as Chairman of the Audit Committee in 2014. Mr. Lawes served as a Managing Director and a member of the Europe, Africa and Middle East Regional Senior Management Board of JPMorgan Chase and its predecessor banks based in London from 1987 until 2002. His functional responsibility was Chief Credit and Counterparty Risk Officer for the region. Prior to joining JPMorgan Chase, he was Global Head of Shipping Finance at Grindlays Bank. Mr. Lawes is qualified as a member of the Institute of Chartered Accountants of Scotland. Since March 2005, Mr. Lawes has served as a Director and Chairman of the Audit Committee of Diana Shipping Inc., a global provider of shipping transportation services. Prior to his retirement in 2010, Mr. Lawes was a trustee and Chairman of the Finance and Audit Committee of Care International UK, a global humanitarian charity, for 12 years.

~~Bjorn Moller~~ served as our Chief Executive Officer from October 2007 until March 2011. Mr. Moller also served as the President and Chief Executive Officer of Teekay Corporation from April 1998 until March 2011. He also served as Vice Chairman and Director of Teekay GP L.L.C. from when it was formed in November 2004, and Vice Chairman and Director of Teekay Offshore GP L.L.C. from when it was formed in August 2006, in each case until March 2011. Mr. Moller continues to serve as a Director of Teekay Tankers and Teekay Corporation and is a director of Kattegat Limited, the parent company of Resolute Investments, Ltd., the largest shareholder of Teekay Corporation. Mr. Moller has over 35 years of experience in the shipping industry, and served as Chairman of the International Tanker Owners Pollution Federation from 2006 to 2013. He served in senior management positions with Teekay Corporation for more than 20 years, and led Teekay’s overall operations from January 1997, following his promotion to the position of Chief Operating Officer. Prior to that, Mr. Moller headed Teekay Corporation’s global chartering operations and business development activities.

Richard T. du Moulin joined our Board of Directors in December 2007. Mr. du Moulin is currently the President of Intrepid Shipping L.L.C., a position he has held since he founded Intrepid Shipping in 2002. From 1998 to 2002, Mr. du Moulin served as Chairman and Chief Executive Officer of Marine Transport Corporation. Mr. du Moulin is a member of the Board of Trustees and Chairman of the Seamens Church Institute of New York and New Jersey. Mr. du Moulin currently serves as a Director of Tidewater Inc. and is on the board of Pangaea Logistics Solutions, Ltd., a dry bulk shipping company. Mr. du Moulin served as Chairman of Intertanko, the leading trade organization for the tanker industry, from 1996 to 1999 and served as a director of Globe Wireless L.L.C.

Kenneth Hvid joined our Board of Directors on February 22, 2017. He was appointed President and Chief Executive Officer of Teekay Corporation on February 1, 2017 and has served as a director of Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. since 2011. He joined Teekay Corporation in 2000 and was responsible for leading its global procurement activities until he was promoted in 2004 to Senior Vice President, Teekay Gas Services. During this time, Mr. Hvid was involved in leading Teekay through its entry and growth

in the LNG business. He held this position until the beginning of 2006, when he was appointed President of the Teekay Navion Shuttle Tankers and Offshore division. In that role he was responsible for the global shuttle tanker business as well as initiatives in the floating storage and offtake business and related offshore activities. Mr. Hvid served as Teekay's Chief Strategy Officer and Executive Vice President from 2011 to December 2015, as a director of Teekay GP L.L.C. from 2011 to June 2015 and as President and Chief Executive Officer of Teekay Offshore Group Ltd., from May 2015 until January 31, 2017. In January 2014, Mr. Hvid also joined the board of Tanker Investments Ltd., an Oslo Stock Exchange listed company established by Teekay Corporation and Teekay Tankers Ltd., and serves as its Chairman. Mr. Hvid has 28 years of global shipping experience, 12 of which were spent with A.P. Moller in Copenhagen, San Francisco and Hong Kong. In 2007, Mr. Hvid joined the board of Gard P.& I. (Bermuda) Ltd.

William Lawes joined our Board of Directors in January 2008. In January 2014, Mr. Lawes also joined the board of Tanker Investments Ltd., an Oslo Stock Exchange listed company established by Teekay Corporation and Teekay Tankers Ltd., and serves as Chairman of the Audit Committee. Mr. Lawes served as a Managing Director and a member of the Europe, Africa and Middle East Regional Senior Management Board of JPMorgan Chase and its predecessor banks based in London from 1987 until 2002. His functional responsibility was Chief Credit and Counterparty Risk Officer for the region. Prior to joining JPMorgan Chase, he was Global Head of Shipping Finance at Grindlays Bank. Mr. Lawes is qualified as a member of the Institute of Chartered Accountants of Scotland. Since March 2005, Mr. Lawes has served as a Director and Chairman of the Audit Committee of Diana Shipping Inc., a global provider of shipping transportation services. He was appointed as Trustee and Member of the Finance and Investment Committee of Seafarers UK in 2016.

Vincent Lok has served as Chief Financial Officer of Teekay Tankers Ltd. since October 2007. Mr. Lok has served as Teekay Corporation’s Executive Vice President and Chief Financial Officer since July 2007. He has held a number of finance and accounting positions with Teekay Corporation, including Controller from 1997 until his promotions to the positions of Vice President, Finance in March 2002 and Senior Vice President and Treasurer in February 2004. He was subsequently appointed Senior Vice President and Chief Financial Officer in November 2006. Mr. Lok also serves as a director of Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. and as the Chief Financial Officer of our Manager. Prior to joining Teekay Corporation, Mr. Lok worked as a Chartered Accountant with Deloitte & Touche LLP. Mr. Lok is also a Chartered Financial Analyst.

Kevin Mackay became President and Chief Executive Officer of Teekay Tankers Ltd. in June, 2014 running one of the world’s leading tanker companies. Mr. Mackay joined Teekay Tankers from Phillips 66, where he headed the global marine business unit, responsible for all aspects of marine transportation, from commercial to marine risk management. He held a similar role as the General Manager, Commercial Marine at ConocoPhillips from 2009 to 2012 before the formation of Phillips 66. Mr. Mackay started his career working for Neptune Orient Lines in Singapore from 1991 to 1995. He then helped establish AET Inc. Limited (AET) in Houston, where he rose through various roles, ultimately to Regional Director - Americas, Senior Vice President, responsible for AET’s business in the Americas. Mr. Mackay holds a B.Sc. (Econ) Honors from the London School of Economics & Political Science. He is currently a serving as a board member on the International Tanker Oil Pollution Federation and as an Executive Committee Member in INTERTANKO.

Bjorn Moller served as our Chief Executive Officer from October 2007 until March 2011. Mr. Moller also served as the President and Chief Executive Officer of Teekay Corporation from April 1998 until March 2011. He also served as Vice Chairman and Director of Teekay GP L.L.C. from when it was formed in November 2004, and Vice Chairman and Director of Teekay Offshore GP L.L.C. from when it was formed in August 2006, in each case until March 2011. Mr. Moller continues to serve as a Director of Teekay Tankers Ltd. and Teekay Corporation and is a director of Kattegat Limited, the parent company of Resolute Investments, Ltd., the largest shareholder of Teekay Corporation. Mr. Moller has over 35 years of experience in the shipping industry, and served as Chairman of the International Tanker Owners Pollution Federation from 2006 to 2013. He served in senior management positions with Teekay Corporation for more than 20 years, and led Teekay’s overall operations from January 1997, following his promotion to the position of Chief Operating Officer. Prior to that, Mr. Moller headed Teekay Corporation’s global chartering operations and business development activities.

Compensation of Directors and Senior Management

Executive Compensation

Our executive officers that are employees of Teekay Corporation or other subsidiaries thereof, and their compensation (other than any awards under our long-term incentive plan described below) is set and paid by Teekay Corporation or its subsidiaries, and we reimburse Teekay Corporation for time spent by our executive officers on our management matters. This reimbursement is a component of the management fee we pay our Manager, pursuant to the Management Agreement. ~~The~~For the year ended December 31, 2016, the aggregate amount of such reimbursement ~~for the year ended December 31, 2014~~excluding any long-term incentive plan awards issued directly by us was ~~$1.1~~$0.9 million ~~(2013:~~(2015: $1.4 million; and ~~2012:~~2014: $1.1 million).

Teekay Corporation’s annual bonus plan, in which each of our executive officers participates, considers both company performance and team performance.

Compensation of Directors

Officers of us or Teekay Corporation who serve as our directors do not receive additional compensation for their service as directors. Each of our non-employee directors receives compensation for attending meetings of the Board of Directors, as well as committee meetings. Non-employee directors receive an annual cash fee of $50,000 and an annual award of $70,000 paid by way of a grant of ~~at the non-employee director’s choice~~ restricted stock units or stock ~~options.~~options, at the director's choice. In addition, members of the Audit Committee each receive a committee cash fee of $7,500 per year, and the chair of the Audit Committee receives a fee of $12,500 for serving in that role. Members of the Conflicts Committee each receive a committee fee of $7,500 per year, and the chair of the Conflicts Committee receives a fee of $12,500 for serving in that role. The chair of the

Nominating and Governance Committee receives a fee of $5,000 for serving in that role. In addition, each director is reimbursed for out-of-pocket expenses in connection with attending meetings of the Board of Directors and committees. Each director is fully indemnified by us for actions associated with being a director to the extent permitted under Marshall Islands law.

During ~~2014,~~2016, our four non-employee directors received an aggregate of $260,000 in cash fees for their services as directors ~~(2013: $301,250; 2012: $342,500)~~(2015: $260,000; 2014: $260,000). In addition, each non-employee director received a $70,000 annual award for ~~2014~~2016 to be paid by way of a grant of, at the director’s choice, restricted stock units or stock options, granted under our 2007 Long-Term Incentive Plan ~~Pursuant~~pursuant to this annual ~~retainer, during 2014,~~retainer. During 2016, we granted 284,693 options ~~to purchase up to 152,346 shares of Class A Common Stock at an exercise price of $4.10~~(2015: nil; 2014: 152,346) and ~~17,073~~9,358 restricted stock units ~~(2013: 142,157; and 2012: 82,573)~~(2015: 51,948; 2014: 17,073) to non-employee directors. The stock options and restricted stock units vest immediately.

Long-Term Incentive Program

In the year ended December 31, ~~2014,~~2016, we granted under our 2007 Long-Term Incentive Plan options to acquire up to ~~110,829~~216,043 shares of Class A ~~Common~~common stock (2015: 58,434; 2014: 110,829) and ~~586,014~~279,980 restricted stock units (2015: 192,387; 2014: 586,014) to certain employees of Teekay’s subsidiaries that provide services to us. Each option under the plans has a 10-year term and vests equally over three years from the grant date. Each restricted stock unit is equal in value to one share of our common shares plus reinvested ~~distributions~~dividends from the grant date to the vesting date. Upon vesting, the value of the restricted stock unit awards is paid to each recipient in the form of shares of Class A common stock. We intend to satisfy these grants by issuing shares from authorized capital. Please read Item 18 – Financial Statements: Note 1214 – Capital Stock.

Board Practices

Our Board of Directors (or theBoard) currently consists of ~~five~~six members. Directors are appointed to serve for a one-year term and until their successors are appointed or until they resign or are removed.

There are no service contracts between us and any of our directors providing for benefits upon termination of their employment or service.

The Board has determined that each of our directors, other than Bjorn Moller, ~~previous Chief Executive Officer~~a director of Teekay Corporation, ~~and~~ Arthur Bensler, the Executive Vice President and General Counsel of Teekay Corporation, and Kenneth Hvid, the President and Chief Executive Officer of Teekay Corporation, has no material relationship with Teekay Tankers Ltd. (either directly or as a partner, shareholder or officer of an organization that has a relationship with Teekay ~~Tankers)~~Tankers Ltd.) and is independent within the meaning of Teekay ~~Tankers’~~Tankers Ltd.’s director independence standards, which reflect the NYSE director independence standards, as currently in effect and as they may be changed from time to time.

The Board has adopted our Corporate Governance Guidelines that address, among other things, director qualification standards, director functions and responsibilities, director access to management, director compensation and management succession. This document is available under the “About Us—Corporate Governance” section of our website ~~(www.teekaytankers.com)~~(www.teekay.com).

NYSE does not require a company like ours, which is a “foreign private issuer” and of which more than 50% of the voting power is held by another company, to have a majority of independent directors on the Board of Directors or to establish compensation or nominating/corporate governance committees composed of independent ~~directors~~

directors.

Nevertheless, the Board has the following three committees: Audit Committee, Conflicts Committee, and Nominating and Governance Committee. The membership of these committees as of December 31, ~~2014~~2016 and the function of each of the committees are described below. Each of the committees is currently comprised of independent members and operates under a written charter adopted by the Board. All of the committee charters are available under “Other Information—Corporate Governance” in the Investor Centre of our Web site atwww.teekay.com. During ~~2014,~~2016, the Board held ~~six~~four meetings. Directors attended all board ~~meetings, with the exception of two board members who did not attend~~meetings. There was one ~~meeting. There were three~~ committee member ~~absences from a total of 16~~absent for one committee ~~meetings~~meeting in ~~2014.~~

2016.

Our Audit Committee is composed entirely of directors who satisfy applicable NYSE and SEC audit committee independence standards. Our Audit Committee is comprised of William Lawes (Chair), Richard J.F. Bronks and Richard du Moulin. All members of the committee are financially literate and the Board has determined that Mr. Lawes qualifies as an audit committee financial expert.

The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of:

the integrity of our consolidated financial statements;

our compliance with legal and regulatory requirements;

the independent auditors’ qualifications and independence; and

the performance of our internal audit function and independent auditors.

Our Conflicts Committee is composed entirely of directors who satisfy the heightened NYSE and SEC independence standards applicable to Audit Committee membership. The Conflicts Committee is comprised of Richard du Moulin (Chair), Richard J.F. Bronks and William Lawes. The Conflicts Committee reviews matters that the Board refers to the committee for consideration and which constitute (a) matters the Board believes may involve conflicts of interest between (i) us and (ii) our controlling ~~stockholder~~shareholder Teekay Corporation or its affiliates (other than us) or (b) material related-party transactions, including transactions between us and our or Teekay Corporation’s officers or directors or their affiliates. The Board is not obligated to seek approval of the Conflicts Committee on any matter, and may determine the resolution of any conflict of interest itself.

Our Nominating and Governance Committee is comprised entirely of directors who satisfy the general NYSE independence standards. Our Nominating and Governance Committee is comprised of Richard J.F. Bronks (Chair), Richard du Moulin and William Lawes.

The Nominating and Governance Committee:

identifies individuals qualified to become Board members;

selects and recommends to the Board director and committee member candidates;

maintain oversight of the operation and effectiveness of the Board of Directors and the corporate governance of the Company;

develops, updates and recommends to the Board corporate governance principles and policies applicable to us, monitors compliance with these principles and policies and recommends to the Board appropriate changes;

monitors compliance with such principles and policies;

discharges responsibilities of the Board relating to the Board’s compensation; and

oversees the evaluation of the Board and its committees.

Crewing and Staff

Our Manager provides us with all of our staff other than our Chief Executive Officer and Chief Financial Officer. Our executive officers have the authority to hire additional staff as they deem necessary.

As of December 31, ~~2014,~~2016, approximately ~~1,239~~1,700 seagoing staff served on our vessels. The majority of our subsidiaries employ seagoing staff directly and certain subsidiaries of Teekay Corporation employ the crews for one of our vessels. These crews serve on the vessels pursuant to service agreements between our Manager, acting on our behalf, and those subsidiaries.

Teekay Corporation and its affiliates regard attracting and retaining motivated seagoing personnel as a top priority. Teekay Corporation has entered into a Collective Bargaining Agreement with the Philippine Seafarers’ Union, an affiliate of the International Transport Workers’ Federation (or ~~ITF)~~ITF), and a Special Agreement with ITF London, which covers substantially all of the officers and seamen that operate our vessels. We believe that Teekay Corporation’s relationships with these labor unions are good.

We believe that Teekay Corporation’s commitment to training is fundamental to the development of the highest caliber of seafarers for marine operations. Teekay Corporation’s cadet training approach is designed to balance academic learning with hands-on training at sea. Teekay Corporation has relationships with training institutions in Australia, Canada, Croatia, India, Latvia, Norway, the Philippines, South Africa and the United Kingdom. After receiving formal instruction at one of these institutions, a cadet’s training continues onboard vessels. Teekay Corporation also has a career development plan that was devised to ensure a continuous flow of qualified officers who are trained on its vessels and familiarized with its operational standards, systems and policies. We believe that high-quality crewing and training policies will play an increasingly important role in distinguishing larger independent shipping companies that have in-house or affiliate capabilities from smaller companies that must rely on outside ship managers and crewing agents on the basis of customer service and safety.

Share Ownership

The following table sets forth certain information regarding beneficial ownership, as of December 31, ~~2014,~~2016, of our Class A common stock by our directors and executive officers as a group. None of these persons beneficially owns any of our Class B common stock. The information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules a person or entity beneficially owns any shares that the person or entity (a) has or shares voting or investment power or (b) has the right to acquire as of March 1, ~~2015~~2017 (60 days after December 31, ~~2014)~~2016) through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table. Information for all persons listed below is based on information delivered to us.



Identity of Person or Group	Class A Common Stock	Percent of Class A Common Stock Owned		Percent of Total Class A and Class B Common Stock Owned⁽¹⁾
All directors and executive officers as a group (8 persons) ⁽¹⁾	1,220,526	0.9	%	0.8	%

Identity of Person or Group
   Class A
Common Stock    Percent of
Class A
Common Stock
Owned Percent of Total
Class A and
Class B
Common Stock
Owned⁽¹⁾
All directors and executive officers as a group (7 persons)⁽¹⁾
   390,368    0.4 % 0.3 %


(1)	Excludes shares of Class A and Class B common stock beneficially owned by Teekay Corporation. Please read Item 7 - Major Shareholders and Related Party Transactions for more detail. Also excludes shares beneficially owned by our former director, Peter Evensen, who retired from the Board on January 31, 2017.

Item 7. Major Shareholders and Related Party Transactions

~~Item 7.Major Shareholders and Related Party Transactions~~

~~A.Major Shareholders~~


A.	Major Shareholders

The following table sets forth information regarding the beneficial ownership, as of ~~February 28, 2015,~~March 1, 2017, of our Class A and Class B common stock by each entity or group we know to beneficially own more than 5% of the outstanding shares of our Class A common stock or our Class B common stock. Information for certain holders is based on their latest filings with the SEC or information delivered to us. The number of shares beneficially owned by each entity or group is determined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules a person or entity beneficially owns any shares as to which the person or entity has or shares voting or investment power. In addition, an entity or group beneficially owns any shares that the entity or group has the right to acquire as of ~~June~~April 30, ~~2015~~2017 (60 days after ~~April~~March 1, ~~2015)~~2017) through the exercise of any stock option or other right. Unless otherwise indicated, each entity or group listed below has sole voting and investment power with respect to the shares set forth in the following table.



Identity of Person or Group	Class A Common Stock	Percent of Class A Common Stock Owned		Class B Common Stock	Percent of Class B Common Stock Owned		Percent of Total Class A and Class B Common Stock Owned
Teekay Corporation⁽¹⁾	19,309,646	13.6	%	23,232,757	100.0	%	25.7	%
Huber Capital Management, LLC ⁽²⁾	19,539,671	13.8	%	—	—		11.8	%

Identity of Person or Group
   Class A
Common
Stock    Percent of
Class A
Common
Stock Owned Class B
Common
Stock    Percent of
Class B
Common Stock
Owned Percent of
Total Class A
and Class B
Common
Stock Owned
Teekay Corporation⁽¹⁾
   12,643,196    12.9 % 16,720,945    100.0 % 25.5 %
T. Rowe Price Associates, Inc., T. Rowe Price Small-Cap Values Fund, Inc., as a group⁽²⁾
   8,654,323    8.8 % —         0.0 % 7.5 %
Huber Capital Management, LLC⁽³⁾
   5,421,092    5.5 % —      0.0 % 4.7 %


(1)	The voting power represented by shares beneficially owned by Teekay Corporation is ~~7.0%~~7.5% for Class A common stock, ~~45.9%~~45.0% for Class B common stock and ~~52.9%~~52.5% for total Class A and Class B common stock.

(2)

According to the Schedule ~~13G~~13G/A filed with the SEC on February 10, 2015, T. Rowe Price Associates, Inc. has sole voting power as to 2,275,660 of the shares, T. Rowe Price Small-Cap Value Fund, Inc. has sole voting power as to 4,946,403 of the shares, and T. Rowe Price Associates, Inc. has sole dispositive power as to all of the shares. The voting power represented by shares beneficially owned by T. Rowe Price Associates, Inc. and T. Rowe Price Small-Cap Value Fund, Inc., as a group, is 8.8% for Class A common stock and 7.5% for total Class A and Class B common stock.

~~(3)~~
~~According to the Schedule 13G filed with the SEC on February 12, 2015,~~13, 2017, Huber Capital Management, LLC has sole voting power and sole dispositive power as to ~~3,386,992~~8,301,070 and 19,539,671 of the ~~shares.~~shares, respectively. The voting power represented by shares beneficially owned by Huber Capital Management, LLC is ~~5.5%~~7.6% for Class A common stock and ~~4.7%~~7.6% for total Class A and Class B common stock.

Our Class B common stock entitles the holder thereof to five votes per share, subject to a 49% aggregate Class B common stock voting power maximum, while our Class A common stock entitles the holder thereof to one vote per share. Except as otherwise provided by the Marshall Islands Business Corporations Act, holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of ~~stockholders,~~shareholders, including the election of directors. Teekay Corporation currently controls all of our outstanding Class B common stock and ~~12,643,196~~19,309,646 shares of our Class A common stock. Because of our dual-class structure, Teekay Corporation may continue to control all matters submitted to our ~~stockholders~~shareholders for approval even if it and its affiliates come to own significantly less than 50% of our outstanding shares of capital stock. Shares of our Class B common stock will convert into shares of our Class A common stock on a one-for-one basis upon certain transfers thereof or if the aggregate number of outstanding shares of Class A common stock and Class B common stock beneficially owned by Teekay Corporation and its affiliates falls below 15% of the aggregate number of outstanding shares of our common stock

We are controlled by Teekay Corporation. We are not aware of any arrangements, the operation of which may at a subsequent date result in a change in control of us.

~~B.Related Party Transactions~~


B.	Related Party Transactions

Please read Item 18 – Financial statements: Note 1315 – Related Party Transactions for a description of our various related-party transactions.

Relationship with Teekay Corporation

Control

Through its ownership of our capital stock, Teekay Corporation controls us. Please read “—Major Shareholders” above.

Business Opportunities

Under a contribution, conveyance and assumption agreement entered into in connection with our initial public offering in December 2007, Teekay Corporation and we agreed that Teekay Corporation and its other affiliates may pursue any Business Opportunity (as defined below) of which it, they or we become aware. Business Opportunities may include, among other things, opportunities to charter-out, charter-in or acquire oil tankers or to acquire tanker businesses.

Pursuant to the contribution, conveyance and assumption agreement, we agreed that:

Teekay Corporation and its other affiliates may engage (and will have no duty to refrain from engaging) in the same or similar activities or lines of business as us, and that we will not be deemed to have an interest or expectancy in any business opportunity, transaction or other matter (each a Business ~~Opportunity)~~Opportunity) in which Teekay Corporation or any of its other affiliates engages or seeks to engage merely because we engage in the same or similar activities or lines of business as that related to such Business Opportunity;

if Teekay Corporation or any of its other affiliates (whether through our Manager, any of Teekay Corporation’s or any of its other affiliate’s officers or directors who are also officers or directors of us, or otherwise) acquires knowledge of a potential Business Opportunity that may be deemed to constitute a corporate opportunity of both Teekay Corporation and us, then (i) neither Teekay Corporation, our Manager nor any of such officers or directors will have any duty to communicate or offer such Business Opportunity to us and (ii) Teekay Corporation may pursue or acquire such Business Opportunity for itself or direct such Business Opportunity to another person or entity; and

any Business Opportunity of which our Manager or any person who is an officer or director of Teekay Corporation (or any of its other affiliates) and of us becomes aware shall be a Business Opportunity of Teekay Corporation.

If Teekay Corporation or its other affiliates no longer beneficially own shares representing at least 20% of the total voting power of our outstanding capital stock, and no person who is an officer or director of us is also an officer or director of Teekay Corporation or its other affiliates, then the business opportunity provisions of the contribution, conveyance and assumption agreement will terminate.

Our articles of incorporation also renounce in favor of Teekay Corporation business opportunities that may be attractive to both Teekay Corporation and us. This provision likewise effectively limits the fiduciary duties we or our ~~stockholders~~shareholders otherwise may be owed regarding these business opportunities by our directors and officers who also serve as directors or officers of Teekay Corporation or its other affiliates.

Non-competition Agreement

In connection with our acquisition from Teekay Corporation of 13 vessels in June 2012 as part of the 2012 Acquired Business transaction, we entered into a non-competition agreement with Teekay Corporation. The following discussion describes certain provisions of the agreement.

Non-competition. Under the non-competition agreement, Teekay Corporation has agreed that neither it nor any of its controlled affiliates other than us will own or operate conventional oil or product tankers until June 15, 2015. However, this restriction does not prevent Teekay Corporation or any of its controlled affiliates from, among other things:

	a)
(a)	owning, operating or chartering any conventional oil or product tankers that Teekay Corporation and its controlled subsidiaries owned or chartered-in as of June 15, 2012 (or any replacement tankers upon any actual or constructive loss of such vessels);

b)
(b)
providing ship management services relating to conventional oil or product tankers; or

(c)

acquiring up to a 9.9 percent interest in any publicly traded company that owns, operates or charters conventional oil or product tankers; acquiring up to a 50 percent interest in any company that engages no more than the lesser of 20 percent of its assets or $100 million in the business of owning, operating or chartering conventional oil or product tankers; or owning any interests in us, Teekay Offshore Partners L.P. or Teekay LNG Partners L.P.

Right of First Refusal. The non-competition agreement also provides us with a right of first refusal to acquire existing or newbuilding conventional and product tankers pursuant to opportunities Teekay Corporation develops prior to June 15, 2015. The non-competition agreement generally provides that Teekay Corporation must offer us such acquisition opportunities at their fair market value, for existing tankers, or the fully built-up cost, for newbuildings, and the price may include an allocation of design and development costs for any newbuildings constructed using an energy efficient design developed by Teekay Corporation.

Please see Item 10 –- Additional Information: Material Contracts.

Teekay Tankers’ Executive Officers and Certain of its Directors

Kevin Mackay, who has served since June 2014 as our President and Chief Executive Officer, is also an executive ~~office~~officer of our Manager and a member of the executive team of Teekay Corporation.

Vincent Lok, our Chief Financial Officer, is also the Chief Financial Officer of our Manager and the Executive Vice President and Chief Financial Officer of Teekay Corporation.

Arthur Bensler, our Chairman of the Board, is also Executive Vice President and General Counsel of Teekay Corporation and Director and President of Teekay Shipping (Canada) Ltd.

Kenneth Hvid, a member of our Board of Directors, is President and Chief Executive Officer of Teekay Corporation and is a Director of Teekay Offshore GP L.L.C.

Because our executive officers are employees of Teekay Corporation or other of its subsidiaries, their compensation (other than any awards under our long-term incentive plan) is set and paid by Teekay Corporation or such other applicable subsidiaries. Pursuant to an agreement with Teekay Corporation, we have agreed to reimburse Teekay Corporation or its applicable subsidiaries for time spent by our executive officers on our management matters.

Registration Rights Agreement

In connection with our initial public offering, we entered into a registration rights agreement with Teekay Corporation pursuant to which we granted Teekay Corporation and its affiliates certain registration rights with respect to shares of our Class A and Class B common stock owned by them. Pursuant to the agreement, Teekay Corporation has the right, subject to certain terms and conditions, to require us, on up to three separate occasions, to register under the U.S. Securities Act of 1933, as amended, shares of Class A common stock, including Class A common stock issuable upon conversion of Class B common stock, held by Teekay Corporation and its affiliates for offer and sale to the public (including by way of underwritten public offering) and incidental or “piggyback” rights permitting participation in certain registrations of our common stock.

Management Agreement

In connection with our initial public offering in December 2007, we entered into the long-term Management Agreement with our Manager, Teekay Tankers Management Services Ltd., a subsidiary of Teekay Corporation. Pursuant to the Management Agreement, the Manager provides the following types of services to us: commercial (primarily vessel chartering), technical (primarily vessel maintenance and crewing), administrative (primarily accounting, legal and financial) and strategic (primarily advising on acquisitions, strategic planning and general management of the business).

Our Manager has agreed to use its best efforts to provide these services upon our request in a commercially reasonable manner and may provide these services directly to us or subcontract for certain of these services with other entities, primarily other Teekay Corporation subsidiaries. Under the Management Agreement, our Manager remains responsible for any subcontracted services. We will indemnify our Manager for any losses it incurs in connection with providing services to us, excluding losses caused by the recklessness, gross negligence or willful misconduct of our Manager or its employees or agents, for which losses our Manager will indemnify us.

Compensation of the Manager

Management Fee.In return for services under the Management Agreement, we pay our Manager a management fee based on the following components:

Commercial services ~~fee.~~fee. We pay a fee to our Manager for commercial services it provides to us currently equal to 1.25% of the gross revenue attributable to the vessels, on time charter, our Manager commercially manages for us (excluding vessels participating in the ~~Gemini~~Teekay Suezmax Pool, Teekay Aframax Pools or the Taurus Tankers LR2 Pool). We paid commercial service fees of $1.9 million for 2016, $1.2 million for 2015, and $1.1 million for 2014 ~~$1.1~~excluding the commercial management fees of $0.2 million for ~~2013,~~2015 and ~~$1.1~~$0.2 million for ~~2012.~~

2014 attributable to the Entities under Common Control.

Technical services ~~fee.~~fee. We pay a fee to our Manager for technical services, ~~fees,~~ and we paid technical services fees of $9.2 million for 2016, $7.0 million for 2015, and $5.6 million for 2014 ~~$5.6 million for 2013, and $6.9 million for 2012 including~~excluding the technical management fees of ~~$2.6~~$0.4 million for 2015 and $0.4 million for 2014 attributable to the Dropdown Predecessor. Please see Item 18 – Financial Statements: Note 1 – Summary of Significant Accounting Policies – Dropdown Predecessor, in our consolidated financial statements included in this Annual Report.

Entities under Common Control.

Administrative and strategic services ~~fees.~~fees. We pay fees to our Manager for administrative and strategic services that reimburse our Manager for its related direct and indirect expenses in providing such services and which includes a profit margin. The amount of the profit margin is based on the most recent transfer pricing study performed by an independent, nationally recognized accounting firm with respect to similar administrative and strategic services. The transfer pricing study is updated at least annually. We paid administrative and strategic services fees of $10.1 million for 2016, $8.4 million for 2015, and $8.7 million for 2014 ~~$10.8~~excluding administrative and strategic services fees of $0.7 million for ~~2013,~~2015 and ~~$5.5~~$0.9 million for ~~2012.~~

2014 attributable to the Entities under Common Control.

For additional information about these services and fee, please see Item 18 – Financial Statements: Note 3 – Acquisition of Entities under Common Control and Item 18 – Financial Statements: Note 15f – Related Party Transactions – Management fee - Related and Other, in our consolidated financial statements included in this Annual Report.

Performance Fee. In order to provide our Manager with an incentive to improve the results of our operations and financial condition, the Management Agreement also provides for payment to our Manager of a performance fee in certain circumstances, in addition to the basic fees described above. Our Manager generally is entitled to payment of a performance fee equal to 20% of the Gross Cash Available for Distribution (as defined in the Management Agreement) if in a given fiscal year this figure exceeds $3.20 per share of our common stock (subject to adjustment for stock dividends, splits, combinations and similar events, and based on the weighted-average number of shares outstanding for the year) (or theIncentive Threshold).

Since January 1, 2008, we have maintained an internal account (or theCumulative Dividend Account) that reflects, on an aggregate basis, the amount by which our dividends for a fiscal year are greater or less than the $2.65 per share annual incentive baseline (subject to adjustments for stock dividends, splits, combinations and similar events, and based on the weighted-average number of shares outstanding for the fiscal year). The Cumulative Dividend Account is intended to ensure that our ~~stockholders~~shareholders receive an equivalent of at least $2.65 per share in annualized dividends before any performance fee is paid. If Gross Cash Available for Distribution per share exceeds the Incentive Threshold in respect of a particular fiscal year, we will only pay our Manager a performance fee if the Cumulative Dividend Account is zero or positive; if there is a deficit in the Cumulative Dividend Account, the performance fee may be reduced. Following the end of each five-year period, commencing January 1, 2013, the Cumulative Dividend Account balance will be reset to zero. We paid no performance fees to our Manager in ~~2014, 2013,~~2016, 2015, or ~~2012.~~

2014.

Term and Termination Rights. Subject to certain termination rights, the initial term of the Management Agreement will expire on December 31, 2022. If not terminated, the Management Agreement will automatically renew for a five-year period and thereafter be extended in additional five-year increments if we do not provide notice of termination in the fourth quarter of the year immediately preceding the end of the respective term.

We may terminate the Management Agreement in certain circumstances, including, among others, if:

our Manager materially breaches the Management Agreement (and the matter is unresolved after a 90-day dispute resolution period) or experiences certain bankruptcy events or experiences a change of control to which we do no consent;

we ~~provide~~had provided notice in the fourth quarter of 2016 after two-thirds of our Board of Directors elects to terminate the Management Agreement, ~~which~~such termination would behave been effective on December 31, ~~2017;~~2017 (we did not provide such notice); or

we provide notice in the fourth quarter of 2021, which termination would be effective on December 31, 2022. If the Management Agreement extends pursuant to its terms as described above, we can elect to exercise this optional termination right in the fourth quarter of the year immediately preceding the end of the respective term.

If we elect to terminate the Management Agreement under either of the last two bullet points described above, our Manager will receive a payment (theTermination Payment) in an amount equal to the aggregate performance fees payable for the immediately preceding five fiscal years. Any Termination Payment will be paid to our Manager in four quarterly installments over the course of the fiscal year following termination.

Our Manager may terminate the Management Agreement prior to the end of its term under either of the following two circumstances:

after December 18, 2012 with 12 months’ notice. At our option, our Manager will continue to provide technical services to us for up to an additional two-year period from termination, provided that our Manager or its affiliates continue in the business of providing such services to third parties for similar types of vessels; or

if we materially breach the agreement and the matter is unresolved after a 90-day dispute resolution period.

If our Manager elects to terminate the Management Agreement under the second circumstance described above, our Manager will receive the Termination Payment, payable in four quarterly installments over the course of the first year following termination.

The Management Agreement will terminate automatically and immediately if we experience any of certain changes of control. Upon any such termination, we will be required to pay our Manager the Termination Payment in a single installment.

Pooling Agreements

~~Gemini~~

Teekay Suezmax Pool

~~We along~~

In November 2015, we and certain third party vessel owners entered into a new revenue sharing pool agreement (the Suezmax Pooling Agreement) with Teekay ~~Corporation~~Chartering Limited, a subsidiary of TTOL. Pursuant to this agreement, we have agreed to include in the pool certain qualifying Suezmax-class crude tankers that are employed and operate in the spot market or pursuant to time charters of less than one year.

Prior to November 2015, we along with certain third party vessel owners and operators ~~are~~were parties to a revenue sharing pool agreement (theGemini Pooling Agreement) pursuant to which these pool participants ~~have~~had each agreed ~~to procure~~ to include in the pool certain qualifying Suezmax-class crude tankers of the pool participants and their respective affiliates, including us, that ~~operate~~operated in the spot market or pursuant to time charters of less than one year. The Gemini Suezmax Pool iswas jointly and equally owned by TTOL, in which Teekay Corporation and we each have a 50% interest, and a third party.

As of December 31, ~~2014,~~2016, the Teekay Suezmax Pool consisted of 29 Suezmax tankers (including 16 of our tankers). Vessels trading in the Gemini Suezmax Pool ~~consisted~~completed their voyages in early 2016, and upon completion, these vessels delivered to and continued to trade in the Teekay Suezmax Pool. The Gemini Suezmax Pool has completed all operations and is in the process of ~~25 Suezmax tankers, including ten of our tankers.~~ being wound up.

A participating Suezmax tanker will no longer participate in the ~~Gemini~~Teekay Suezmax Pool if it becomes subject to a time charter with a term exceeding one year, unless otherwise agreed by all pool participants. In addition, vessels no longer participate in the pool if they suffer an actual or constructive total loss or if they are sold to or become controlled by a person who is not an affiliate of a party to the ~~Gemini~~Suezmax Pooling Agreement.

Vessel owners remain responsible for the technical management of their vessels in the ~~Gemini~~Teekay Suezmax Pool, and our Manager provides these technical services with respect our vessels pursuant to the Management Agreement.

Allocation of ~~Gemini~~Suezmax Pool Earnings.The ~~Gemini~~Teekay Suezmax Pool provides a revenue sharing mechanism whereby aggregate revenues and related expenses of the pool are distributed to pool participants based on an allocation formula. Revenues generated by vessels operating in the ~~Gemini~~ Suezmax Pool less voyage expenses (such as fuel and port charges) incurred by these vessels and other applicable expenses are pooled and allocated according to a specified weighting system that recognizes each vessel’s earnings capability based on its characteristics, speed and bunker consumption, as well as actual on-hire performance. The allocation for each vessel participating in the pool is established based on observations and historical consumption and performance measures of the individual vessel. Payments based on net cash flow applicable to each tanker are made on a monthly basis to pool participants and adjusted every six months based on the weighting system.

Commercial Management Fee and Working Capital Payments. ~~Gemini Tankers, a jointly owned company by TTOL and a third party,~~ Teekay Chartering Limited provides commercial services to pool participants and otherwise administers the pool in exchange for a fee currently equal to ~~$325~~$350 per vessel per day ~~(which increased from $275 per vessel per day commencing July 1, 2012)~~ plus 1.25% of the gross revenues attributable to the participant’s vessels.

~~Effective February 1, 2012,~~

Upon delivery of each of our vessels ~~entering~~to the ~~Gemini~~Teekay Suezmax Pool, we are required to ~~have approximately 3,000 metric tons of bunker fuel on board. Any difference between this amount and the actual quantity on board is added to or subtracted from a~~advance working ~~capital contribution requirement, with valuation of bunker fuel based on the last invoiced price prior to joining the pool. Working~~ capital in an aggregate amount of ~~$2.0~~$1.5 million, ~~is required,~~ subject to adjustments made at the ~~bunker fuel adjustment described above and~~discretion of the pool manager. We may be required to ~~a $300,000 minimum adjusted~~advance additional working capital ~~amount. If a vessel has less than 2,000 metric tons of bunker fuel on board, it may be refused entry~~funds from time to ~~the pool until such time as the bunker fuel quantities meet the required limits.~~time. Working capital advances are returned when a vessel no longer participates in the pool, less any set-offs for outstanding liabilities or ~~contingencies and taking into account the differences in bunker fuel values at the time of withdrawal compared to when the vessel entered into the pool.~~contingencies. Please read Item 18 – Financial Statements: Note ~~13(h)~~15i – Related Party Transactions.

Term and Termination. There is no specific expiration date for the ~~Gemini~~Suezmax Pooling Agreement. However, the ~~Gemini~~Teekay Suezmax Pool may be wound up ~~upon unanimous agreement of all participants or upon 90 days advance notice by Gemini Tankers.~~if there are no participants. A pool participant may withdraw from the ~~Gemini~~Teekay Suezmax Pool upon at least 3090 days’ notice and shall cease to participate in the ~~Gemini~~Suezmax Pool if, among other things, it materially breaches the ~~Gemini~~Suezmax Pooling Agreement and fails to resolve the breach within a specified cure period or experiences certain bankruptcy events.

Teekay Aframax Pools

We entered into revenue sharing pool agreements (theTeekay Pooling Agreements) with Teekay Corporation and Teekay Chartering Limited, a subsidiary of TTOL. Pursuant to the Teekay Pooling Agreements, we and Teekay Corporation have agreed to include in the Teekay Aframax Pools all of our and its respective Aframax-class oil tankers that are employed in the spot market or operate pursuant to time charters of less than 90 days. As of December 31, ~~2014,~~2016, the Teekay Aframax Pools consisted of 3435 Aframax tankers, which included three of our owned tankers, ~~and seven~~four of our in-chartered ~~tankers.~~tankers, and five of our owned LR2 product tankers which are commercially managed by and cross trading from the Taurus Tankers LR2 pool. Any Aframax tanker that becomes subject to a time charter with a term of at least 90 days or becomes subject to enforcement action under a ship-mortgage foreclosure or similar proceeding will no longer participate in the Teekay Aframax Pools, unless otherwise agreed by Teekay Corporation and us. In addition, vessels will no longer participate in the pool if they suffer an actual or constructive total loss or if they are sold to or become controlled by a third party who is not a party to the Teekay Pooling Agreements.

Under the Teekay Pooling Agreements, Teekay Chartering Limited commercially manages the Teekay Aframax Pools by providing chartering and marketing services for all participating tankers. We remain responsible for the technical management of our vessels in the Teekay Aframax Pools, and our Manager provides these technical services to us pursuant to the Management Agreement.

Allocation of Teekay Aframax Pools’ Earnings. The Teekay Aframax Pools provide a revenue sharing mechanism whereby aggregate revenues and related expenses of the pools are distributed to pools’ participants based on an allocation formula. Revenues generated by vessels operating in the Teekay Aframax Pools less voyage expenses (such as fuel and port charges) incurred by these vessels and other applicable expenses are pooled and allocated according to a specified weighting system that recognizes each vessel’s earnings capability based on its characteristics, speed and bunker consumption, as well as actual on-hire performance. The allocation for each vessel participating in the pools is established based on observations and historical consumption and performance measures of the individual vessel. Payments based on net cash flow applicable to each tanker are made on a monthly basis to ~~pools’~~pool participants and adjusted every six months based on the weighting system.

Commercial Management Fee and Working Capital Payments. Teekay Chartering Limited provides commercial services to us and otherwise administers the pools in exchange for a fee currently equal to $350 per vessel per day plus 1.25% of the gross revenues attributable to the participant’s vessels. ~~The amount of the daily per vessel fee is adjusted every three years by agreement between Teekay Chartering Limited and us or, if needed, by arbitration.~~

Upon delivery of each of our vessels to the Teekay Aframax Pools, we are required to advance to Teekay Chartering Limited $250,000 for working capital purposes. We may be required to advance additional working capital funds from time to time. Working capital advances will be returned to us when a vessel no longer participates in the pools, less any set-offs for outstanding liabilities or contingencies. Please read Item 18 – Financial Statements: Note ~~13(h)~~15i – Related Party Transactions.

Term and Termination Rights. Subject to certain termination rights, the initial term of the Teekay Pooling Agreement expires on December 31, 2022. If not terminated, the Teekay Pooling Agreement will automatically renew for a five-year period and thereafter be extended in additional five-year increments unless we provide a notice of termination in the fourth quarter of the year immediately preceding the end of the respective term.

We may also terminate the Teekay Pooling Agreement in certain other circumstances, including, among others, if:

Teekay Chartering Limited or Teekay Corporation materially breaches the Teekay Pooling Agreement (and the matter is unresolved after a 90-day dispute resolution period) or experiences certain bankruptcy events or if Teekay Chartering Limited experiences a change of control to which we do no consent; or

the Management Agreement terminates for any reason.

Either Teekay Chartering Limited or Teekay Corporation may terminate the Teekay Pooling Agreement prior to the end of its term under any of the following circumstances:

after December 18, 2012 with 12 months’ notice;

if we materially breach the Teekay Pooling Agreement and the matter is unresolved after a 90-day dispute resolution period; or

if the Management Agreement terminates for any reason.

Taurus Tankers LR2 Pool

We along with ~~Teekay Corporation and~~ certain third party vessel owners and operators are parties to a revenue sharing pool agreement (theTaurus Pooling Agreement) pursuant to which these pool participants have each agreed to include in the pool certain qualifying LR2-class product tankers of the pool participants and their respective affiliates, including us, that operate in the spot market or pursuant to time charters of less than ~~180 days unless otherwise agreed by all pool participants.~~one year. The Taurus Tankers LR2 Pool is indirectly owned by TTOL.

As of December 31, ~~2014,~~2016, the Taurus Tankers LR2 Pool consisted of 1811 LR2 product tankers, including ~~three~~five of our owned LR2 product tankers ~~and four chartered-in tankers.~~which have been deployed into the Aframax pools. A participating LR2 product tanker will no longer participate in the Taurus Tankers LR2 Pool if it becomes subject to a time charter with a term exceeding ~~180 days,~~one year, unless otherwise agreed by all pool participants. In addition, vessels will no longer participate in the pool if they suffer an actual or constructive total loss or if they are sold to or become controlled by a person who is not an affiliate of a party to the Taurus Pooling Agreement.

Vessel owners remain responsible for the technical management of their vessels in the Taurus Tankers LR2 Pool, and our Manager provides these technical services with respect our vessels pursuant to the Management Agreement.

Allocation of Taurus Pool Earnings.The Taurus Tankers LR2 Pool provides a revenue sharing mechanism whereby aggregate revenues and related expenses of the pool are distributed to pool participants based on an allocation formula. Revenues generated by vessels operating in the Taurus Tankers LR2 Pool less voyage expenses (such as fuel and port charges) incurred by these vessels and other applicable expenses are pooled and allocated according to a specified weighting system that recognizes each vessel’s earnings capability based on its characteristics, speed and bunker consumption, and actual on-hire performance. The allocation for each vessel participating in the pool is established based on observations and historical consumption and performance measures of the individual vessel. Payments based on net cash flow applicable to each tanker are made on a monthly basis to pool participants and adjusted ~~at regular intervals throughout the year~~every six months based on the weighting system.

Commercial Management Fee and Working Capital Payments. Taurus Tankers LR2 Pool provides commercial services to pool participants and otherwise administers the pool in exchange for a fee currently equal to $275 per vessel per day plus 1.25% of the gross revenues attributable to the participant’s vessels.

Upon delivery of each of our vessels to the Taurus Tankers LR2 Pool, we are required to advance ~~$250,000 for~~ working capital ~~purposes, plus approximately 2,000 metric tonnes~~in an aggregate amount of ~~bunkers.~~$1.0 million, subject to adjustments made at the discretion of the pool manager. We may be required to advance additional working capital funds from time to time. Working capital advances will be returned to us when a vessel no longer participates in the pool, less any set-offs for outstanding liabilities or contingencies. Please read Item 18 – Financial Statements: Note ~~13(h)~~15i – Related Party Transactions

Term and Termination. There is no specific expiration date for the Taurus Pooling Agreement. However, the pool may be wound up ~~upon unanimous agreement of all participants or upon 180 days advance notice by Taurus Tankers.~~if there are no participants. A pool participant may withdraw from the Taurus Tankers LR2 Pool upon at least 90 days’ notice and shall cease to participate in the Taurus Tankers LR2 Pool if, among other things, it materially breaches the Taurus Pooling Agreement and fails to resolve the breach within a specified cure period or experiences certain bankruptcy events.

~~Acquisition of~~

Teekay’s Commercial and Technical Operations (TTOL)

In August 1, 2014, we purchased from Teekay Corporation a 50% interest in TTOL, which owns conventional tanker commercial management and technical management operations, including direct ownership in three commercially managed tanker pools (as described above), for an aggregate price of approximately ~~$23.5~~$23.7 million, including net working capital. As consideration for this acquisition, we issued to Teekay Corporation 4.2 million Class B common shares, which had an approximate value of ~~$17~~$17.0 million, or $4.03 per share, on the acquisition closing date. In addition, we reimbursed Teekay Corporation for ~~$6.5~~$6.7 million of working capital we assumed from Teekay Corporation in connection with the purchase.

Investment in Tanker Investments Ltd. (TIL)

In January 2014, we and Teekay Corporation jointly created TIL, which seeks to opportunistically acquire, operate, and sell modern secondhand ~~tankers to benefit from an expected recovery of the tanker market.~~tankers. TIL completed a $250 million equity private placement in which we and Teekay Corporation co-invested $25 million each for a combined 20% initial ownership in the new company. In addition, each of we and Teekay Corporation received (a) a preferred share entitling it to appoint one TIL director and (b) a stock purchase warrant to acquire up to an additional 750,000 shares of TIL’s common stock, linked to TIL’s future share price performance. Please see Item 18 – Financial Statements: Note 9—11—Derivative Instruments, in our consolidated financial statements included in this Annual Report. In March 2014, TIL completed a $175 million initial public offering and listed its shares on the Oslo Stock Exchange, which reduced our ownership interest in TIL from 10.0% to 6.5%.

In October 2014, we purchased in the open market an additional 0.9 million common shares in ~~TIL, representing 2.43% of the then outstanding common shares of~~ TIL. We acquired these shares at a price of NOK 69 per share, or a purchase price of $10.0 million. Following completion of the purchase, we held 3.4 million common shares in TIL, representing 8.94% of the then outstanding common shares of TIL. As a result of a TIL share repurchase program, as of December 31, 2014, we owned 9.29% of TIL’s common stock.

As of December 31, 2014, TIL had completed the acquisition of two 2010-built VLCC vessels from us for an aggregate purchase price of $154 million plus related working capital on closing of $1.7 million, four 2009-built Suezmax tankers from Teekay Corporation and six 2009, 2010 and 2011-built Aframax tankers and two 2012-built coated Aframax vessels from third parties. ~~As of December 31, 2014,~~ TIL had also signed an agreement to acquire four 2009-built and two 2010-built Suezmax tankers from a third party, which ~~are expected to deliver~~delivered in the first half of ~~2015,~~2015. In the first quarter of 2016, TIL completed the sales of the two 2010-built VLCC vessels, which ~~will bring~~brought the total number of vessels owned by TIL to ~~20.~~

18.

In January 2014, TIL entered into a long-term management agreement with our Manager, pursuant to which the ~~manager~~Manager provides to TIL commercial, technical, administrative and corporate services and personnel, including TIL’s executive officers, in exchange for management services fees and reimbursement of expenses.

During 2015, TIL repurchased 3.3 million of its own shares on the open market. The common shares were repurchased at a weighted average price of NOK 105.2 per share, or a gross purchase price of $40.6 million. During 2016, TIL repurchased 3.3 million of its own shares in the open market. The common shares were repurchased at a weighted average price of NOK 80.2 per share, or a gross purchase of $31.8 million. As of December 31, 2016, our ownership interest in TIL was 11.3% (December 31, 2015 - 10.2%).

Item 8. Financial Information

~~Item 8.Financial Information~~

Consolidated Financial Statements and Notes

Please see Item 18 – Financial Statements for additional information required to be disclosed under this Item.

Legal Proceedings

From time to time we have been, and we expect to continue to be, subject to legal proceedings and claims in the ordinary course of our business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations. Please read Item 18 – Financial Statements: Note 1922 – Shipbuilding Contracts for a description of legal action we have commenced against STX.

Dividend Policy

Prior to the first quarter of 2013, we paid a variable quarterly cash dividend equal to our Cash Available for Distribution each quarter, subject to any reserves determined by our Board of Directors. Dividends ~~were~~are paid equally on a per-share basis between our Class A common stock and our Class B common stock. Cash Available for Distribution represented net income (loss), plus depreciation and amortization, unrealized losses from derivatives, non-cash items and any write-offs or other non-recurring items, less unrealized gains from derivatives and net income attributed to the historical results of vessels acquired by us from Teekay Corporation, prior to their acquisition by us, for the period these vessels were owned and operated by Teekay Corporation. On February 21, 2013, we announced that our Board of Directors elected to move to a fixed quarterly cash dividend of $0.03 per share, which commenced in the quarter ended March 31, 2013. ~~Subject~~On December 14, 2015, we announced our current dividend policy under which quarterly dividends are expected to ~~financial results and determination by~~range from 30% to 50% of our quarterly adjusted net income, subject to the discretion of our Board of Directors, ~~we currently intend to continue to declare and pay~~with a ~~regular fixed~~minimum quarterly dividend of $0.03 per share. Adjusted net income is a non-GAAP measure which excludes specific items affecting net income that are typically excluded by securities analysts in ~~such amount per share on~~their published estimates of our ~~Class A common stock and our Class B common stock.~~

financial results.

The timing and amount of dividends, if any, will depend, among other things, on our results of operations, financial condition, cash requirements, the requirements of Marshall Islands law, restrictions in financing agreements and other factors deemed relevant by our Board of Directors.

Significant Changes

Please read Item 5 – Operating and Financial Review and Prospects: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Developments in ~~2014~~2016 and ~~2015.~~

Early 2017.

~~Item 9.The Offer and Listing~~

Item 9. The Offer and Listing

Our Class A common stock is listed on the New York Stock Exchange (orNYSE) under the symbol “TNK”. The following table sets forth the high and low prices for our Class A common stock on the NYSE for each of the periods indicated.

Years Ended    Dec. 31,
2014    Dec. 31,
2013    Dec. 31,
2012    Dec. 31,
2011    Dec. 31,
2010
High
   $ 5.95       $ 4.02       $ 6.33       $ 12.99       $ 13.96
Low
   $ 3.18       $ 2.38       $ 2.38       $ 3.36       $ 8.50

Quarters Ended    Mar. 31,
2015    Dec. 31,
2014    Sept. 30,
2014    Jun. 30,
2014    Mar. 31,
2014    Dec. 31,
2013    Sept. 30,
2013    Jun. 30,
2013    Mar. 31,
2013
High
   $ 7.05       $ 5.95       $ 4.44       $ 4.50       $ 5.08       $ 4.02       $ 3.09       $ 3.06       $ 3.43
Low
   $ 4.82       $ 3.30       $ 3.55       $ 3.18       $ 3.18       $ 2.55       $ 2.49       $ 2.38       $ 2.40

Months Ended    Mar. 31,
2015    Feb. 28,
2015    Jan. 31,
2015    Dec. 31,
2014    Nov. 30,
2014    Oct. 31,
2014
High
   $ 5.93       $ 6.30       $ 7.05       $ 5.95       $ 4.56       $ 4.25
Low
   $ 5.05       $ 5.07       $ 4.82       $ 4.20       $ 4.04       $ 3.30



Years Ended	Dec 31, 2016		Dec 31, 2015		Dec 31, 2014		Dec 31, 2013		Dec 31, 2012
High	$	6.89	$	8.53	$	5.95	$	4.02	$	6.33
Low	$	1.90	$	4.82	$	3.18	$	2.38	$	2.38

Quarters Ended	Mar 31, 2017		Dec 31, 2016		Sept 30, 2016		Jun 30, 2016		Mar 31, 2016		Dec 31, 2015		Sept 30, 2015		Jun 30, 2015		Mar 31, 2015
High	$	2.70	$	2.85	$	3.28	$	4.16	$	6.89	$	8.53	$	7.88	$	7.88	$	7.05
Low	$	1.96	$	1.90	$	2.42	$	2.87	$	3.26	$	6.31	$	4.88	$	5.70	$	4.82

Months Ended	Mar 31, 2017		Feb 28, 2017		Jan 31, 2017		Dec 31, 2016		Nov 30, 2016		Oct 31, 2016
High	$	2.40	$	2.70	$	2.51	$	2.78	$	2.64	$	2.85
Low	$	1.96	$	2.26	$	2.21	$	2.21	$	1.90	$	2.10

Item 10. Additional Information

~~Item 10.Additional Information~~

Articles of Incorporation and Bylaws

Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws have been filed as Exhibits 3.1 and 3.2, respectively, to Amendment No. 1 to our Registration Statement on Form F-1 (File No. 333-147798), filed with the SEC on December 11, 2007, and are hereby incorporated by reference into this Annual Report.

The rights, preferences and restrictions attaching to each class of our capital stock are described in the section entitled “Description of Capital Stock” of our prospectus (File No. 333-196915), filed with the SEC on June 19, 2014, and hereby incorporated by reference into this Annual Report.

There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities imposed by the laws of the Republic of The Marshall Islands or by our Articles of Incorporation or Bylaws.

Material Contracts

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we or any of our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits in Item 19:


a)	Management Agreement dated December 18, 2007 between Teekay Tankers Ltd. and Teekay Tankers Management Services Ltd., as amended by Amendment No. 1 dated as of May 7, 2009, Amendment No. 2 dated as of September 21, 2010 and Amendment No. 3 dated as of January 1, 2011. Please read Item 4. – Information on the Company – B. Business Overview for a description of this Management Agreement.


b)	Addendum to Management Agreement dated March 23, 2016 between Teekay Tankers Ltd. and Teekay Tankers Management Services Ltd. This Addendum allows Teekay Tankers Management Services Ltd. to sub-contract commercial management of vessels to certain parties, subject to certain terms.


c)	Teekay Tankers Ltd. 2007 Long-Term Incentive Plan.

	c)
d)	Agreement dated November 28, 2007, for a U.S. $229,000,000 Secured Revolving Credit Facility between Teekay Tankers Ltd., Nordea Bank Finland PLC and various other banks.

	d)
e)	Registration Rights Agreement between Teekay Tankers Ltd. and Teekay Corporation.

	e)
f)	Shareholders Agreement dated September 30, 2010 for a U.S. $98,000,000 shipbuilding contract among Teekay Tankers Holding Ltd., Kriss Investment Company and High-Q Investment Ltd.

Purchase Agreement dated June 15, 2012 between Teekay Corporation and Teekay Tankers Ltd. For the sale and purchase of the entire membership interests in Godavari Spirit L.L.C., Axel Spirit L.L.C., Mahanadi Spirit L.L.C., Teesta Spirit L.L.C., Hugli Spirit L.L.C., Americas Spirit L.L.C., Australian Spirit L.L.C., Pinnacle Spirit L.L.C., Donegal Spirit L.L.C., Galway Spirit L.L.C., Limerick Spirit L.L.C., Summit Spirit L.L.C., and Zenith Spirit L.L.C.

	g)
h)	Non-competition Agreement dated June 15, 2012 between Teekay Corporation and Teekay Tankers Ltd. Please read Item 7 – Major Shareholders and Related Party Transaction: B. Related Party Transactions for a discussion on the agreement.


i)	Secured Term Loan and Revolving Credit Facility Agreement dated January 8, 2016 between Teekay Tankers Ltd., Nordea Bank Finland PLC and various other banks, for a $894.4 million long-term debt facility, consisting of both a term loan and a revolving credit facility, which is scheduled to mature in January 2021.

Secured Term Loan Facility Agreement dated August 28, 2015 between Teekay Tankers Ltd., ABN AMRO Capital USA LLC and various other banks for the principal amount of $397.2 million, which matured on January 29, 2016. The loan facility is secured by the 12 modern Suezmax tankers we acquired from Principal Maritime and has a variable interest rate of LIBOR plus a margin of 2.25%. Repayments are to be made in two equal quarterly installments of $10.0 million with a balloon repayment due at maturity. This loan facility was refinanced through the new loan agreement in January 2016, referred to above.

Secured Term Loan Facility Agreement dated January 30, 2015 between Teekay Tankers Ltd., ABN AMRO Capital USA LLC, DNB Capital LLC and DNB Markets, Inc., for the principal amount of approximately $126.6 million, which matured on January 29, 2016. The loan facility is secured by the four LR2 product tankers and one Aframax tanker we acquired during the quarter ended March 31, 2015, and has a variable interest rate of LIBOR plus a margin of 2.50% to 2.80%. Repayments are to be made in four equal quarterly installments of $3.0 million with a balloon repayment due at maturity. This loan facility was refinanced through the new loan agreement in January 2016, referred to above.


l)	Equity Distribution Agreement, dated November 18, 2015, between Teekay Tankers Ltd. and Evercore Group L.L.C. Under this Agreement, we implemented a continuous offering program through which we may, from time to time, issue Class A common stock with an aggregate offering price of up to $80.0 million, through Evercore, as sale agent.

Equity Distribution Agreement, dated June 4, 2015, between Teekay Tankers Ltd. and Evercore Group L.L.C. Under this Agreement, we implemented a continuous offering program through which we may, from time to time, issue Class A common stock with an aggregate offering price of up to $80.0 million, through Evercore, as sale agent. In September 2015, we concluded this COP after selling approximately 11.3 million shares for net proceeds of $78.2 million.

Registration Rights Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and Veritable Maritime Holdings, LLC. Under this Agreement, we agreed to prepare and file a shelf registration statement to register offers and sales of certain shares of our Class A Common Stock that we issued to Veritable Maritime Holdings, LLC and certain of its affiliates as partial consideration for our purchase of certain vessels from certain wholly owned indirect subsidiaries of Veritable Maritime Holdings, LLC.


o)	Common Stock Purchase Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and the purchasers named therein. Under this Agreement, we issued 9,118,797 shares of our Class A Common Stock to a group of institutional investors for $6.65 per share.

Exchange Controls and Other Limitations Affecting Security Holders

We are not aware of any governmental laws, decrees or regulations, including foreign exchange controls, in the Republic of The Marshall Islands that restrict the export or import of capital or that affect the remittance of dividends, interest or other payments to ~~non-resident~~ holders of our ~~securities.~~

securities that are non-resident and not citizens.

We are not aware of any limitations on the right of non-resident or foreign owners to hold or vote our securities imposed by the laws of the Republic of The Marshall Islands or our Articles of Incorporation and Bylaws.

Material U.S. Federal Income Tax Considerations

The following is a discussion of certain material U.S. federal income tax considerations that may be relevant to ~~stockholders.~~shareholders. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (or the Code), legislative history, applicable U.S. Treasury Regulations (or Treasury Regulations), judicial authority and administrative interpretations, all as in effect on the date of this Annual Report, and which are subject to change, possibly with retroactive effect, or are subject to different interpretations. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to Teekay Tankers Ltd.

This discussion is limited to ~~stockholders~~shareholders who hold their common stock as a capital asset for tax purposes. This discussion does not address all tax considerations that may be important to a particular ~~stockholder~~shareholder in light of the ~~stockholder’s~~shareholder’s circumstances, or to certain categories of ~~stockholders~~shareholders that may be subject to special tax rules, such as:

dealers in securities or currencies,

traders in securities that have elected the mark-to-market method of accounting for their securities,

persons whose functional currency is not the U.S. dollar,

persons holding our common stock as part of a hedge, straddle, conversion or other “synthetic security” or integrated transaction,

certain U.S. expatriates,

financial institutions,

insurance companies,

persons subject to the alternative minimum tax,

persons that actually or under applicable constructive ownership rules own 10% or more of our common ~~stock;~~stock, and

entities that are tax-exempt for U.S. federal income tax purposes.

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. Partners in partnerships holding our common stock should consult their ~~own~~ tax ~~advisor~~advisors to determine the appropriate tax treatment of the partnership’s ownership of our common ~~stocks.~~

stock.

This discussion does not address any U.S. estate tax considerations or tax considerations arising under the laws of any state, local or non-U.S. jurisdiction. Each ~~stockholder~~shareholder is urged to consult its ~~own~~ tax advisor regarding the U.S. federal, state, local, non-U.S. and other tax consequences of the ownership or disposition of our common stock.

United States Federal Income Taxation of U.S. Holders

As used herein, the term U.S. Holder means a beneficial owner of our common stock that is, for U.S. federal income tax purposes: (i) a U.S. citizen or U.S. resident alien (or aU.S. Individual ~~Holder~~)Holder), (ii) a corporation or other entity taxable as a corporation, that was created or organized under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source, or (iv) a trust that either is subject to the supervision of a court within the United States and has one or more U.S. persons with authority to control all of its substantial decisions or has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

Distributions

We are taxed as a corporation for U.S. federal income tax purposes. Subject to the discussion of passive foreign investment companies (orPFICs) below, any distributions made by us to a U.S. Holder generally will constitute dividends, which may be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the extent of our current and accumulated earnings and profits, ~~allocated to the U.S. Holder’s common stock,~~ as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits ~~allocated to the U.S. Holder’s common stocks~~ will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in ~~its~~our common stock and thereafter as capital gain, which will be either long term or short term capital gain depending upon whether the U.S. Holder has held the stock for more than one year. U.S. Holders that are corporations for U.S. federal income tax purposes generally will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. For purposes of computing allowable foreign tax credits for U.S. federal income tax purposes, dividends ~~paid~~received with respect to our common stock ~~generally~~ will be treated as foreign source income and generally will be treated as “passive category income.”

~~Dividends paid on~~

Subject to holding period requirements and certain other limitations, dividends received with respect to our common stock toby a U.S. Holder who is an individual, trust or estate (or aNon-Corporate U.S. Holder) will be treated as “qualified dividend income” that is taxable to such Non-Corporate U.S. Holder at preferential capital gain tax rates provided ~~that: (i) our common stock is readily tradable on an established securities market in the United States (such as the New York Stock Exchange on which our common stock is traded); (ii)~~that we are not classified as a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (we intend to take the position that we are not now and have never been classified as a PFIC, as discussed below); (iii) the Non-Corporate U.S. Holder has owned the common stock for more than 60 days in the 121–day period beginning 60 days before the date on which the common stock becomes ex–dividend; (iv) the Non-Corporate U.S. Holder is not under an obligation to make related payments. Any dividends received with respect to positions in substantially similar or related property; and (v) certain other conditions are met. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a Non-Corporate U.S. Holder. Any dividends paid on our common stock not eligible for these preferential rates will be taxed as ordinary income to a Non-Corporate U.S. Holder.

Special rules may apply to any “extraordinary dividend” paid by us. Generally, an extraordinary dividend is a dividend with respect to a share of common stock if the amount of the dividend is equal to or in excess of 10% of a common ~~stockholder’s~~shareholder’s adjusted tax basis (or fair market value in certain circumstances) in such common stock. In addition, extraordinary dividends include dividends received within a one year period that, in the aggregate, equal or exceed 20% of a shareholder’s adjusted tax basis (or fair market value in certain circumstances). If we pay an “extraordinary dividend” on our common stock that is treated as “qualified dividend income,” then any loss recognized by a Non-Corporate U.S. Holder from the sale or exchange of such common stock will be treated as long–term capital loss to the extent of the amount of such dividend.

Certain Non-Corporate U.S. Holders currently are subject to a 3.8% tax on certain investment income, including dividends. Non-Corporate U.S. Holders should consult their tax advisors regarding the effect, if any, of this tax on their ownership of our common stock.

Sale, Exchange or Other Disposition of Common Stock

Subject to the discussion of PFICs below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s tax basis in such stock. Subject to the discussion of extraordinary dividends above, such gain or loss generally will be treated as (a) long–term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition, or short term capital gain or loss otherwise and (b) U.S. source gain or loss, as applicable, for foreign tax credit purposes. Non-Corporate U.S. Holders may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. A U.S. Holder’s ability to deduct capital losses is subject to certain limitations.

Certain Non-Corporate U.S. Holders currently are subject to a 3.8% tax on certain investment income, including capital gains from the sale or other disposition of stock. Non-Corporate U.S. Holders should consult their tax advisors regarding the effect, if any, of this tax on their disposition of our common stock.

Consequences of Possible PFIC Classification

A non–U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a PFIC in any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to a “look through” rule, either: (i) at least 75% of its gross income is “passive” income; or (ii) at least 50% of the average value of its assets is attributable to assets that produce ~~passive income~~ or are held for the production of passive income. For purposes of these tests, “passive income” includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. By contrast, income derived from the performance of services does not constitute “passive income.”

There are legal uncertainties involved in determining whether the income derived from our time-chartering activities constitutes rental income or income derived from the performance of services, including legal uncertainties arising from the decision inTidewater Inc. v. United States , 565 F.3d 299 (5th Cir. 2009), which held that income derived from certain time-chartering activities should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of the Code. However, the Internal Revenue Service (orIRS) stated in an Action on Decision ~~(AOD 2010-01)~~(AOD 2010-01) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in theTidewater decision, and in its discussion stated that the time charters at issue inTidewater would be treated as producing services income for PFIC purposes. The IRS’s statement with respect toTidewater cannot be relied upon or otherwise cited as precedent by taxpayers. Consequently, in the absence of any binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court would not follow theTidewater decision in interpreting the PFIC provisions of the Code. Moreover, the market value of our stock may be treated as reflecting the value of our assets at any given time. Therefore, a decline in the market value of our stock (which is not within our control) may impact that determination of whether we are a PFIC. Nevertheless, based on our and our subsidiaries’ current assets and operations, we intend to take the position that we are not now and have never been a PFIC. No assurance can be given, however, that the IRS, or a court of law, will accept our position or that we would not constitute a PFIC for any future taxable year if there were to be changes in our or our subsidiaries’ assets, income or operations.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder generally would be subject to different taxation rules depending on whether the U.S. Holder makes a timely and effective election to treat us as a “Qualified Electing Fund” (a QEF ~~election)~~election). As an alternative to making a QEF election, a U.S. Holder should be able to make a “mark–to–market” election with respect to our common stock, as discussed below.

Taxation of U.S. Holders Making a Timely QEF Election. ~~If a~~ A U.S. Holder who makes a timely QEF election (anElecting Holder)~~, the Electing Holder~~ must report ~~each taxable year for U.S. federal income tax purposes~~ the Electing Holder’s pro rata share of our ordinary earnings and net capital gain, if any, for each taxable year for which we are a PFIC that ends with or within the Electing Holder’s taxable year, regardless of whether or not the Electing Holder received distributions from us in that year. Such income inclusions would not be eligible for the preferential tax rates applicable to qualified dividend income. The Electing Holder’s adjusted tax basis in our common stock will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holder’s adjusted tax basis in our common stock and will not be taxed again once distributed. An Electing Holder generally will recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with the U.S. Holder’s timely filed U.S. federal income tax return (including extensions).

If a U.S. Holder has not made a timely QEF election with respect to the first year in the U.S. Holder’s holding period of our common stock during which we qualified as a PFIC, the U.S. Holder may be treated as having made a timely QEF election by filing a QEF election with the U.S. Holder’s timely filed U.S. federal income tax return (including extensions) and, under the rules of Section 1291 of the Code, a “deemed sale election” to include in income as an “excess distribution” (described below) the amount of any gain that the U.S. Holder would otherwise recognize if the U.S. Holder sold the U.S. Holder’s common stock on the “qualification date.” The qualification date is the first day of our taxable year in which we qualified as a “qualified electing fund” with respect to such U.S. Holder. In addition to the above rules, under very limited circumstances, a U.S. Holder may make a retroactive QEF election if the U.S. Holder failed to file the QEF election documents in a timely manner. If a U.S. Holder makes a timely QEF election for one of our taxable years, but did not make such election with respect to the first year in the U.S. Holder’s holding period of our common stock during which we qualified as a PFIC and the U.S. Holder did not make the deemed sale election described above, the U.S. Holder also will be subject to the more adverse rules described below.

A U.S. Holder’s QEF election will not be effective unless we annually provide the U.S. Holder with certain information concerning our income and gain, calculated in accordance with the Code, to be included with the U.S. Holder’s U.S. federal income tax return. We have not provided our U.S. Holders with such information in prior taxable years and do not intend to provide such information in the current taxable year. Accordingly, U.S. Holders will not be able to make an effective QEF election at this time. If, contrary to our expectations, we determine that we are or will be a PFIC for any taxable year, we will provide U.S. Holders with the information necessary to make an effective QEF election with respect to our common stock.

Taxation of U.S. Holders Making a “Mark–to–Market” Election. If we were to be treated as a PFIC for any taxable year and, as we anticipate, our stock were treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a “mark–to–market” election with respect to our common stock, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made for the first year a U.S. Holder holds or is deemed to hold our common stock and for which we are a PFIC, the U.S. Holder generally would include as ordinary income in each taxable year that we are a PFIC the excess, if any, of the fair market value of the U.S. Holder’s common stock at the end of the taxable year over the U.S. Holder’s adjusted tax basis in the common stock. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common stock over the fair market value thereof at the end of the taxable year that we are a PFIC, but only to the extent of the net amount previously included in income as a result of the mark–to–market election. A U.S. Holder’s tax

basis in our common stock would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our common stock in taxable years that we are a PFIC would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of our common stock in taxable years that we are a PFIC would be treated as ordinary loss to the extent that such loss does

not exceed the net mark–to–market gains previously included in income by the U.S. Holder. Because the mark–to–market election only applies to marketable stock, however, it would not apply to a U.S. Holder’s indirect interest in any of our subsidiaries that were also determined to be PFICs.

If a U.S. Holder makes a mark-to-market election for one of our taxable years and we were a PFIC for a prior taxable year during which such U.S. Holder held our common stock and for which (i) we were not a QEF with respect to such U.S. Holder and (ii) such U.S. Holder did not make a timely mark-to-market election, such U.S. Holder would also be subject to the more adverse rules described below in the first taxable year for which the mark-to-market election is in effect and also to the extent the fair market value of the U.S. Holder’s common stock exceeds the U.S. Holder’s adjusted tax basis in the common stock at the end of the first taxable year for which the mark-to-market election is in effect.

Taxation of U.S. Holders Not Making a Timely QEF or Mark–to–Market Election. If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF election or a “mark–to–market” election for that year (aNon–Electing Holder) would be subject to special rules resulting in increased tax liability with respect to ~~(1)~~(i) any “excess distribution” (i.e., the portion of any distributions received by the Non–Electing Holder on our common stock in a taxable year in excess of 125% of the average annual distributions received by the Non–Electing Holder in the three preceding taxable years, or, if shorter, the Non–Electing Holder’s holding period for our common stock), and ~~(2)~~(ii) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:

the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for our common stock;

the amount allocated to the current taxable year and any taxable year prior to the taxable year we were first treated as a PFIC with respect to the Non-Electing Holder would be taxed as ordinary income in the current taxable year;

the amount allocated to each of the other taxable years would be subject to U.S. federal income tax at the highest rate of tax in effect for the applicable class of taxpayer for that year; and

an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

Additionally, for each year during which a U.S. Holder owns ~~shares,~~our common stock, we are a PFIC, and the total value of all PFIC stock that such U.S. Holder directly or indirectly owns exceeds certain thresholds, such U.S. Holder will be required to file IRS Form 8621 with its annual U.S. federal income tax return to report its ownership of our common stock. In addition, if a Non–Electing Holder who is an individual dies while owning our common stock, such Non-Electing Holder’s successor generally would not receive a step–up in tax basis with respect to such common stock.

U.S. Holders are urged to consult their ~~own~~ tax advisors regarding the PFIC rules, including the PFIC annual reporting requirements, as well as the applicability, availability and advisability of, and procedure for, making QEF, Mark-to-Market ~~Elections~~ and other available elections with respect to us, and the U.S. federal income tax consequences of making such elections.

Consequences of Possible Controlled Foreign Corporation Classification

If CFC Shareholders (generally, U.S. Holders who each own, directly, indirectly or constructively, 10% or more of the total combined voting power of our outstanding shares entitled to vote) own directly, indirectly or constructively more than 50% of either the total combined voting power of our outstanding shares entitled to vote or the total value of all of our outstanding shares, we generally would be treated as a controlled foreign corporation (or aCFC ).

CFC Shareholders are treated as receiving current distributions of their respective share of certain income of the CFC without regard to any actual distributions and are subject to other burdensome U.S. federal income tax and administrative requirements but generally are not also subject to the requirements generally applicable to shareholders of a PFIC. In addition, a person who is or has been a CFC Shareholder may recognize ordinary income on the disposition of shares of the CFC. Although we do not believe we are or will become a CFC, U.S. persons owning a substantial interest in us should consider the potential implications of being treated as a CFC Shareholder in the event we become a CFC in the future.

The U.S. federal income tax consequences to U.S. Holders who are not CFC Shareholders would not change in the event we become a CFC in the future.

U.S. Return Disclosure Requirements for U.S. Individual Holders

U.S. Individual Holders who hold certain specified foreign financial assets, including stock in a foreign corporation that is not held in an account maintained by a financial institution with an aggregate value in excess of $50,000 on the last day of a taxable year, or $75,000 at any time during that taxable year, may be required to report such assets on IRS Form 8938 with their U.S. federal income tax return for that taxable year. This reporting requirement does not apply to U.S. Individual Holders who report their ownership of our shares under the PFIC annual reporting rules described above. Penalties apply for failure to properly complete and file IRS Form 8938. U.S. Individual Holders are encouraged to consult with their ~~own~~ tax ~~advisor~~advisors regarding the possible application of this disclosure requirement.

United States Federal Income Taxation of Non-U.S. Holders

A beneficial owner of our common stock (other than a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is a Non–U.S. Holder.

Distributions

In general, a Non–U.S. Holder will not be subject to U.S. federal income tax on distributions received from us with respect to our common stock unless the distributions are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the Non-U.S. Holder maintains in the United

States). If a Non–U.S. Holder is engaged in a U.S. trade or business and the distributions are deemed to be effectively connected to that trade or business, the Non-U.S. Holder generally will be subject to U.S. federal income tax on those distributions in the same manner as if it were a U.S. Holder.

Sale, Exchange or Other Disposition of Common Stock

In general, a Non-U.S. Holder is not subject to U.S. federal income tax on any gain resulting from the disposition of our common stock unless (a) such gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the Non-U.S. Holder maintains in the United States) or (b) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year in which such disposition occurs and meets certain other requirements. If a Non-U.S. Holder is engaged in a U.S. trade or business and the disposition of our common stock is deemed to be effectively connected to that trade or business, the Non-U.S. Holder generally will be subject to U.S. federal income tax on the resulting gain in the same manner as if it were a U.S. Holder.

Information Reporting and Backup Withholding

In general, payments of distributions with respect to, or the proceeds of a disposition of, our common stock to a Non–Corporate U.S. Holder will be subject to information reporting requirements. These payments to a Non–Corporate U.S. Holder also may be subject to backup withholding if the Non–Corporate U.S. Holder:

fails to timely provide an accurate taxpayer identification number;

is notified by the IRS that it has failed to report all interest or distributions required to be shown on its U.S. federal income tax returns; or

in certain circumstances, fails to comply with applicable certification requirements.

Non–U.S. Holders may be required to establish their exemption from information reporting and backup withholding on payments made to them within the United States, or through a U.S. payor, by certifying their status on IRS Form W–8BEN, W-8BEN-E, W–8ECI, W-8EXP, or W–8IMY, as applicable.

Backup withholding is not an additional tax. Rather, a ~~stockholder~~shareholder generally may obtain a credit for any amount withheld against its liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by accurately completing and timely filing a U.S. federal income tax return with the IRS.

Non-United States Tax Considerations

Marshall Islands Tax Considerations

Because we and our subsidiaries do not, and we do not expect that we and our subsidiaries will, conduct business or operations in the Republic of The Marshall Islands, and because all documentation related to our initial public offering was executed outside of the Republic of The Marshall Islands, under current Marshall Islands law, no taxes or withholdings will be imposed by the Republic of the Marshall Islands on distributions, including upon a return of capital, made to ~~stockholders,~~shareholders, so long as such persons are not citizens of and do not reside in, maintain offices in, nor engage in business or transactions in the Republic of The Marshall Islands. Furthermore, no stamp, capital gains or other taxes will be imposed by the Republic of The Marshall Islands on the purchase, ownership or disposition by such persons of our common stock.

Documents on Display

Documents concerning us that are referred to herein may be inspected at our principal executive ~~headquarters~~offices at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08 Bermuda. Those documents electronically filed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval (orEDGAR) system may also be obtained from the SEC’s website at www.sec.gov, free of charge, or from the Public Reference Section of the SEC at 100F Street, N.E., Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330.

~~Item 11.Quantitative and Qualitative Disclosures About Market Risk~~

Item 11. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from foreign currency fluctuations, changes in interest rates, changes in spot tanker market rates and changes in the stock price of TIL in connection with our warrant to purchase TIL common shares. We have not used foreign currency forward contracts to manage foreign currency fluctuation, but we may do so in the future. We use interest rate swaps to manage interest rate risks. We do not use these financial instruments for trading or speculative purposes.

Foreign Currency Fluctuation Risk

Our primary economic environment is the international shipping market. Transactions in this market generally utilize the U.S. Dollars. Consequently, virtually all our revenues and the majority of our operating costs are in U.S. Dollars. We incur certain voyage expenses, vessel operating expenses, dry-docking expenditures and general and administrative expenses in foreign currencies, the most significant of which are Euro, Singaporean Dollar, Canadian Dollar and British Pound. There is a risk that currency fluctuations will have a negative effect on the value of cash flows. We did not enter into forward contracts as a hedge against changes in certain foreign exchange rates during ~~2014, 2013~~2016, 2015 or ~~2012.~~

2014.

Interest Rate Risk

We are exposed to the impact of interest rate changes primarily through our floating-rate borrowings that require us to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect operating margins, results of operations and our ability to service our debt. From time to time, we use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our floating-rate debt.

We are exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize counterparty risk, we only enter 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.

The table below provides information about financial instruments as at December 31, ~~2014,~~2016, that are sensitive to changes in interest rates, including our debt and interest rate swaps. For long-term debt, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by expected contractual maturity dates.

   2015    2016    2017    2018    2019    Thereafter    Total    Fair Value
Asset /
(Liability) Rate⁽¹⁾
   (in millions of U.S. dollars, except percentages)
Long-term debt:

Variable rate⁽²⁾
   32.2    72.8    406.4    45.2    21.9    39.8    618.3    (579.9 ) 0.83 %
Fixed-rate
   9.8    9.8    8.9    8.0    1.3    —      37.8    (37.9 ) 4.80 %
Interest Rate Swaps:

U.S. Dollar-denominated interest rate swap^{(2) (3)}
   —      200.0    —      —      —      —      200.0    (6.1 ) 2.61 %
U.S. Dollar-denominated interest rate swap^{(2) (3)}
   —      —      100.0    —      —      —      100.0    (12.1 ) 5.55 %



	2017	2018	2019	2020	2021	Total	Fair Value Asset / (Liability)		Rate ⁽¹⁾

	(in millions of U.S. dollars, except percentages)
Long-term debt:
Variable rate	171.4	175.6	110.0	110.0	374.7	941.7	(923.3	)	2.61	%

Interest Rate Swaps:
U.S. Dollar-denominated interest rate swap⁽²⁾	—	—	—	200.0	—	200.0	0.4		1.46	%
U.S. Dollar-denominated interest rate swap⁽²⁾	—	—	—	—	150.0	150.0	1.5		1.55	%
U.S. Dollar-denominated interest rate swap⁽²⁾	—	—	—	—	50.0	50.0	1.3		1.16	%


(1)	Rate refers to the weighted-average effective interest rate for our long-term debt as at December 31, ~~2014,~~2016, including the margin we pay on our variable-rate ~~and fixed-rate~~ debt. ~~The fixed rate we pay under our interest rate swap agreements, as shown above, excludes the margin we pay on our variable-rate debt.~~


(2)	Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR.

~~(3)~~

The average variable rate paid to us under our interest rate swaps is set quarterly at the ~~six-month and~~ three-month ~~LIBOR, respectively.~~

LIBOR.

Equity Price Risk

We are exposed to the changes in the stock price of TIL. We have a stock purchase warrant entitling us to purchase up to 750,000 shares of common stock of TIL at a fixed price of $10 per share. Alternatively, if the shares of TIL’s common stock trade on a National Stock Exchange or over-the-counter market denominated in Norwegian Kroner, the Company may also exercise the stock purchase warrant at 61.67 Norwegian Kroner (or ~~NOK)~~NOK) per share. The stock purchase warrant vests in four equally sized tranches. Each tranche will vest and become exercisable when and if the fair market value of a share of the TIL common stock equals or exceeds 77.08 NOK, 92.50 NOK, 107.91 NOK and ~~123.22~~123.33 NOK, respectively, for such tranche for any ten consecutive trading days. The stock purchase warrant expires on January 23, 2019. Please read Item 18 – Financial Statements: Note 911 – Derivative Instruments.

Spot Tanker Market Rate Risk

The cyclical nature of the tanker industry causes significant increases or decreases in the revenue that we earn from our vessels, particularly those that trade in the spot tanker market. From time to time we may use forward freight agreements as a hedge to protect against changes in spot tanker market rates. Forward freight agreements involve contracts to provide a fixed number of theoretical voyages along a specified route at a contracted charter rate. Forward freight agreements settle in cash based on the difference between the contracted charter rate and the average rate of an identified index.

To reduce our exposure, in June 2016 we entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels for a period of 11 months plus an additional two months at the counterparty’s option. The fair value of this derivative agreement is the estimated amount that we would receive or pay to terminate the agreement at the reporting date, based on the present value of our projection of future Aframax spot market tanker rates, which have been derived from current Aframax spot market tanker rates and estimated future rates. As at ~~March~~December 31, ~~2015, we had not entered into any forward freight agreements, although we may do so in~~2016, the ~~future.~~

fair value of the time-charter swap agreement was positive $0.9 million.

~~Item 12.Description of Securities Other than Equity Securities~~

Item 12. Description of Securities Other than Equity Securities

Not applicable.

Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

~~Item 13.Defaults, Dividend Arrearages and Delinquencies~~

~~None.~~

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

~~Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds~~

~~None.~~

~~Item 15.Controls and Procedures~~

Item 15. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (or theExchange Act)) that are designed to ensure that (i) information required to be disclosed in our reports that are filed or submitted under the Exchange Act, are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We conducted an evaluation of our disclosure controls and procedures under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, ~~2014.~~

2016.

The Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all ~~error~~errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining for us adequate internal controls over financial reporting.

Our internal controls were designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal controls over financial reporting include those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and our directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

We conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included

review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements even when determined to be effective and can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Based on the evaluation, management determined that internal controls over financial reporting were effective as of December 31, ~~2014.~~

2016.

Our independent auditors, KPMG LLP, an independent registered public accounting firm, has audited the accompanying consolidated financial statements and our internal control over financial reporting. Their attestation report on the effectiveness of our internal control over financial reporting can be found on page F-2 of this Annual Report.

There were no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a – 15 (f) under the Exchange Act) that occurred during the year ended December 31, ~~2014.~~

2016.

~~Item 16A.Audit Committee Financial Expert~~

Item 16A. Audit Committee Financial Expert

The Board of Directors has determined that director and Chair of the Audit Committee, William Lawes, qualifies as an audit committee financial expert and is independent under applicable NYSE and SEC standards.

~~Item 16B.Code of Ethics~~


Item 16B.	Code of Ethics

We have adopted a Standards of Business Conduct Policy for all our employees and directors. This document is available under “Investors – Teekay Tankers Ltd. - Governance” from the ~~Home Page~~home page of our web site (www.teekay.com). We also intend to disclose, under the “Investors – Teekay Corporation – Governance” section of our web site, any waivers to or amendments of our Standards of Business Conduct Policy for the benefit of our directors and executive officers.

~~Item 16C.Principal Accountant Fees and Services~~


Item 16C.	Principal Accountant Fees and Services

Our principal accountant for ~~2014~~2016 and ~~2013~~2015 was KPMG LLP, Chartered Accountants. The following table shows the fees we paid or accrued for audit services provided by KPMG LLP.

Fees(in thousands of U.S. dollars)    2014    2013
Audit Fees⁽¹⁾
   275    225
Audit-related Fees⁽²⁾
   5    —




280 225



Fees (in thousands of U.S. dollars)	2016	2015
Audit Fees ⁽¹⁾	408	294
Tax Fees ⁽²⁾	24	—
	432	294


(1)	Audit fees represent fees for professional services provided in connection with the audit of our consolidated financial statements, review of our quarterly consolidated financial statements, as well as other professional services in connection with the review of our regulatory filings.


(2)	~~Audit-related~~For 2016, tax fees ~~relate primarily to assistance with general accounting issues.~~ principally included corporate tax compliance fees.

No ~~fees for~~ tax orservices were provided to us by the auditors during the term of their appointment in 2015. No other services were provided to ~~the Company~~us by the auditors during ~~the terms of their appointment in 2014 and 2013.~~

2016 or 2015.

The Audit Committee of our Board of Directors has the authority to pre-approve permissible audit-related and non-audit services not prohibited by law to be performed by our independent auditors and any associated fees. Engagements for proposed services either may be separately pre-approved by the Audit Committee or entered into pursuant to detailed pre-approval policies and procedures established by the Audit Committee, as long as the Audit Committee is informed on a timely basis of any engagement entered into on that basis. The Audit Committee separately pre-approved all engagements and fees paid to our principal accountants in ~~2014~~2016 and ~~2013.~~

2015.

~~Item 16D.Exemptions from the Listing Standards for Audit Committees~~


Item 16D.	Exemptions from the Listing Standards for Audit Committees

Not applicable.

~~Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~


Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

~~Item 16F.Change in Registrant’s Certifying Accountant~~


Item 16F.	Change in Registrant’s Certifying Accountant

Not applicable.

~~Item 16G.Corporate Governance~~


Item 16G.	Corporate Governance

The following are the significant ways in which our corporate governance practices differ from those followed by domestic companies:

~~In lieu~~

Our Board of ~~obtaining~~Directors is not comprised of a majority of independent directors, as required for domestic companies under the New York Stock Exchange listing requirements.

As a foreign private issuer, we are not required to obtain shareholder approval prior to the adoption of equity compensation plans ~~the Board~~or certain equity issuances, including, among others, issuing 20% or more of ~~Directors approves such adoption, as permitted by New York Stock Exchange rules for foreign private issuers.~~

our outstanding common shares or voting power in a transaction.

There are no other significant ways in which our corporate governance practices differ from those followed by controlled domestic companies under the listing requirements of the New York Stock Exchange. See Item 6 – Directors, Senior Management and Employees: Board Practices.

~~Item 16H.Mine Safety Disclosure~~


Item 16H.	Mine Safety Disclosure

Not applicable

Part III

~~Item 17.Financial Statements~~

Item 17. Financial Statements

Not applicable.

~~Item 18.Financial Statements~~

Item 18. Financial Statements

The following financial statements, together with the related reports of KPMG LLP, Independent Registered Public Accounting Firm, thereon are filed as part of this Annual Report:



	Page
Reports of Independent Registered Public Accounting Firm	F-1 – F-2
Consolidated Financial Statements		~~F-1 – F-2~~

~~Consolidated Financial Statements~~

Consolidated Statements of Income (Loss) ~~Income~~		F-3

Consolidated Balance Sheets		F-4

Consolidated Statements of Cash Flows		F-5

Consolidated Statements of Changes in Equity		F-6

Notes to the Consolidated Financial Statements		F-7 – ~~F-22~~	F-29

All schedules for which provision is made in the applicable accounting regulations of the SEC are not required, are inapplicable or have been disclosed in the Notes to the Consolidated Financial Statements and therefore have been omitted.


Item 19.	Exhibits

The following exhibits are filed as part of this Annual Report:



1.1		Amended and Restated Articles of Incorporation of Teekay Tankers Ltd. ⁽¹⁾

1.2		Amended and Restated Bylaws of Teekay Tankers Ltd. ⁽¹⁾

4.1		Contribution, Conveyance and Assumption Agreement ⁽¹⁾

4.2		Management Agreement, as amended by Amendment No. 1 dated as of May 7, 2009, Amendment No. 2 dated as of September 21, 2010 and Amendment No. 3 dated as of January 1, 2011, Addendum to Management Agreement dated March 23, 2016. ⁽⁸⁾

4.3		Gross Revenue Sharing Pool Agreement ⁽¹⁾

4.4		Teekay Tankers Ltd. 2007 Long-Term Incentive Plan ⁽¹⁰⁾

4.5		Agreement dated November 28, 2007, for a U.S. $229,000,000 Secured Revolving Credit Facility between Teekay Tankers Ltd., Nordea Bank Finland PLC and various other banks. ⁽¹⁾

4.6		Registration Rights Agreement between Teekay Tankers Ltd. and Teekay Corporation. ⁽¹⁾

4.7		Purchase Agreement dated April 7, 2008, for the purchase of Ganges Spirit L.L.C (formerly Delaware Shipping L.L.C) between Teekay Tankers Ltd., and Teekay Corporation. ⁽²⁾

4.8		Purchase Agreement dated April 7, 2008, for the purchase of Narmada Spirit L.L.C (formerly Adair Shipping L.L.C) between Teekay Tankers Ltd., and Teekay Corporation. ⁽²⁾

4.9		Purchase Agreement dated June 12, 2009 for the purchase of Ashkini Spirit L.L.C (formerly Ingeborg Shipping L.L.C) between Teekay Tankers Ltd., and Teekay Corporation. ⁽³⁾

4.10		Purchase Agreement dated April 6, 2010 between Teekay Corporation and Teekay Tankers Ltd. for the sale and purchase of the entire membership interests in Yamuna Spirit L.L.C., Kaveri Spirit L.L.C., and Helga Spirit L.L.C. ⁽⁴⁾

4.11		Facility Agreement dated July 5, 2010 for a U.S. $57,500,000 loan facility among Alpha Elephant Inc, Solar VLCC Corporation, Deutsche Bank Luxembourg S.A. and Deutsche Bank AG, London Branch.⁽⁵⁾

4.12		Facility Agreement dated July 5, 2010 for a U.S. $57,500,000 loan facility among Beta Elephant Inc, Solar VLCC Corporation, Deutsche Bank Luxembourg S.A. and Deutsche Bank AG, London Branch. ⁽⁵⁾

4.13		Transfer Certificate dated July 15, 2010 among Deutsche Bank Luxembourg S.A., Deutsche Bank AG, London Branch and VLCC A Investment L.L.C. ⁽⁵⁾

4.14		Transfer Certificate dated July 15, 2010 among Deutsche Bank Luxembourg S.A., Deutsche Bank AG, London Branch and VLCC B Investment L.L.C.⁽⁵⁾

4.15		Shareholders Agreement dated September 30, 2010 for a U.S. $98,000,000 shipbuilding contract among Teekay Tankers Holding Ltd., Kriss Investment Company and High-Q Investment Ltd. ⁽⁶⁾

4.16		Purchase Agreement dated November 1, 2010 between Teekay Corporation and Teekay Tankers Ltd. For the sale and purchase of the entire membership interests in Esther Spirit L.L.C., and Iskmati Spirit L.L.C. ⁽⁷⁾

4.17		Purchase Agreement dated June 15, 2012 between Teekay Corporation and Teekay Tankers Ltd. For the sale and purchase of the entire membership interests in Godavari Spirit L.L.C., Axel Spirit L.L.C., Mahanadi Spirit L.L.C., Teesta Spirit L.L.C., Hugli Spirit L.L.C., Americas Spirit L.L.C., ~~Australian~~Australia Spirit L.L.C., Pinnacle Spirit L.L.C., Donegal Spirit L.L.C., Galway Spirit L.L.C., Limerick Spirit L.L.C., Summit Spirit L.L.C., and Zenith Spirit ~~L.L.C..~~ L.L.C. ⁽⁹⁾

4.18		Non-competition Agreement dated June 15, 2012 between Teekay Corporation and Teekay Tankers Ltd. ⁽¹¹⁾
4.19	Secured Term Loan and Revolving Credit Facility Agreement dated January 8, 2016 between Teekay Tankers Ltd., Nordea Bank Finland PLC and various other banks, for a $894.4 million long-term debt facility. ⁽¹⁷⁾
4.20	Secured Term Loan Facility Agreement dated August 28, 2015 between Teekay Tankers Ltd., ABN AMRO Capital USA LLC and various other banks for the principal amount of $397.2 million. ⁽¹⁷⁾
4.21	Secured Term Loan Facility Agreement dated January 30, 2015 between Teekay Tankers Ltd., ABN AMRO Capital USA LLC, DNB Capital LLC and DNB Markets, Inc., for the principal amount of approximately $126.6 million. ⁽¹⁷⁾
4.22	Registration Rights Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and the persons set forth on Schedule I thereto. ⁽¹²⁾
4.23	Common Stock Purchase Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and the purchasers named therein. ⁽¹³⁾
8.1		List of Subsidiaries of Teekay Tankers Ltd.
10.1	Equity Distribution Agreement, dated November 18, 2015, between Teekay Tankers Ltd. and Evercore Group L.L.C. ⁽¹⁴⁾
10.2	Memorandum of Agreement, dated August 4, 2015, by and between Courage Holdings, LLC and Rio Spirit L.L.C. and related Schedule of Agreements Substantially Identical to that Memorandum of Agreement. ⁽¹⁵⁾
10.3	Equity Distribution Agreement, dated June 4, 2015, between Teekay Tankers Ltd. and Evercore Group L.L.C. ⁽¹⁶⁾
12.1		Rule 13a-14(a)/15d-14(a) Certification of Teekay Tankers Ltd.’s Chief Executive Officer.

12.2		Rule 13a-14(a)/15d-14(a) Certification of Teekay Tankers Ltd.’s Chief Financial Officer.

13.1		Teekay Tankers Ltd. Certification of Kevin Mackay, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



13.2		Teekay Tankers Ltd. Certification of Vincent Lok, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

23.1		Consent of KPMG LLP, as independent registered public accounting firm.

101		The following materials for the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, ~~2014~~2016 formatted in XBRL: (1) the Consolidated Statements of Income (Loss); (2) the Consolidated Balance Sheets; (3) the Consolidated Statements of Cash Flows; (4) the Consolidated Statements of Changes in Equity; and (5) Notes to Consolidated Financial Statements.
	101.INS XBRL Instance Document
	101.SCH XBRL Taxonomy Extension Schema
	101.CAL XBRL Taxonomy Extension Calculation Linkbase
	101.DEF XBRL Taxonomy Extension Definition Linkbase
	101.LAB XBRL Taxonomy Extension Label Linkbase
	101.PRE XBRL Taxonomy Extension Presentation Linkbase

___________________________


(1)	Previously filed as an exhibit to the Company’s Amendment No. 1 to the Registration Statement on Form F-1 (Registration No. 33-147798), filed with the SEC on December 11, 2007, and hereby incorporated by reference to such Amendment No. 1 to Registration Statement.


(2)	Previously filed as an exhibit to the Company’s Report on Form 6-K furnished to the SEC on May 28, 2008, and hereby incorporated by reference to such Report.


(3)	Previously filed as an exhibit to the Company’s Report on Form 6-K furnished to the SEC on September 30, 2009, and hereby incorporated by reference to such Report.


(4)	Previously filed as an exhibit to the Company’s Report on Form 6-K furnished to the SEC on June 1, 2010 and hereby incorporated by reference to such Report.


(5)	Previously filed as an exhibit to the Company’s Report on Form 6-K furnished to the SEC on September 10, 2010 and hereby incorporated by reference to such Report.

(6)
Previously filed as Exhibit 4.11 to the Company’s Report on Form 6-K furnished to the SEC on November 30, 2010 and hereby incorporated by reference to such Report.
(7)
Previously filed as Exhibit 4.12 to the Company’s Report on Form 6-K furnished to the SEC on November 30, 2010 and hereby incorporated by reference to such Report.
(8)
Previously filed as an exhibit to the Company’s Report on Form 20-F filed with the SEC on April ~~12, 2011~~27, 2016 and hereby incorporated by reference to such Report.
(9)
Previously filed as Exhibit 4.17 to the Company’s Report on Form 6-K furnished to the SEC on September 17, 2012 and hereby incorporated by reference to such Report.
(10)
Previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form, S-8 filed with the SEC on March 7, 2014 and hereby incorporated by reference to such Registration Statement.
(11)
Previously filed as Exhibit 4.18 to the Company’s Report on Form 20-F filed with the SEC on April 30, 2013 and hereby incorporated by reference to such Report.

(12) Previously filed as Exhibit 10.2 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.
(13) Previously filed as Exhibit 10.1 to the Company’s Report on Form 6-K furnished to the SEC on August 7, 2015 and hereby incorporated by reference to such Report.
(14) Previously filed as Exhibit 1.1 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.
(15) Previously filed as Exhibits 10.3 and 10.4 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.
(16) Previously filed as Exhibit 1.1 to the Company’s Report on Form 6-K furnished to the SEC on June 4, 2015 and hereby incorporated by reference to such Report.
(17) Previously filed as an exhibit to the Company's Report on Form 20-F filed with the SEC on April 27, 2016 and hereby incorporated by reference to such Report.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



		TEEKAY TANKERS LTD.

Date: April ~~28, 2015~~ 26, 2017	~~By:~~	By:	/s/ Vincent Lok
			Vincent Lok
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and ~~Stockholders~~

Shareholders

Teekay Tankers Ltd.

We have audited the accompanying consolidated balance sheets of Teekay Tankers Ltd. and subsidiaries (the “Company”) as of December 31, ~~2014~~2016 and ~~2013,~~2015, and the related consolidated statements of income, ~~(loss),~~ cash flows, and changes in equity for each of the years in the three-year period ended December 31, ~~2014.~~2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2014~~2016 and ~~2013,~~2015, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2014,~~2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, ~~2014,~~2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated April ~~28, 2015~~26, 2017 expressed an unqualified opinion on the effectiveness of the ~~Company’s~~Company's internal control over financial reporting.

/s/ KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

April ~~28, 2015~~

26, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and ~~Stockholders~~

Shareholders

Teekay Tankers Ltd.

We have audited Teekay Tankers Ltd.~~’s (“the Company”~~ and subsidiaries (the “Company") internal control over financial reporting as of December 31, ~~2014,~~2016, based on the criteria established in Internal ~~Control—Integrated~~Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting in the accompanying Form 20-F. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2014~~2016, based on the criteria established in Internal ~~Control—Integrated~~Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as atof December 31, ~~2014~~2016 and ~~2013,~~2015, and the related consolidated statements of income, ~~(loss),~~ cash flows, and changes in equity for each of the years in the three-year period ended December 31, ~~2014,~~2016, and our report dated April ~~28, 2015,~~26, 2017, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

April ~~28, 2015~~

26, 2017

TEEKAY TANKERS LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS) (note 1)~~

(notes 1 and 3)

(in thousands of U.S. dollars, except share and per share amounts)

   Year Ended
December 31,
2014
$ Year Ended
December 31,
2013
$ Year Ended
December 31,
2012
$
REVENUES

Time charter revenues (note 13e)
   79,804 88,320 123,364
Net pool revenues (note 13e and 13h)
   138,631 69,675 62,328
Voyage charter revenues
   8,040 4,415 238
Interest income from investment in term loans (note 5)
   9,118 7,677 11,499


Total revenues
235,593 170,087 197,429
Voyage expenses (note 13e)
(9,984 ) (8,337 ) (4,618 )
Vessel operating expenses (notes 13e and 13f)
(93,022 ) (91,667 ) (96,160 )
Time-charter hire expense (note 15)
(22,160 ) (6,174 ) (3,950 )
Depreciation and amortization
(50,152 ) (47,833 ) (72,365 )
General and administrative (notes 13e and 13g)
(11,959 ) (12,594 ) (7,985 )
Gain (loss) on sale of vessels (note 18)
9,955 (71 ) —
Vessel impairment (note 18)
—   —   (352,546 )


Income (loss) from operations
58,271 3,411 (340,195 )
Interest expense (note 13e)
(8,741 ) (10,023 ) (20,009 )
Interest income
287 158 50
Realized and unrealized loss on derivative instruments (note 9)
(1,712 ) (1,524 ) (7,963 )
Equity income (loss) (note 6)
5,228 854 (1 )
Other income (expenses) (note 14)
3,809 (1,014 ) (2,063 )


Net income (loss)
57,142 (8,138 ) (370,181 )


Per common share amounts
• Basic earnings (loss) per share (note 17)
$ 0.67 $ (0.10 ) $ (4.54 )
• Diluted earnings (loss) per share (note 17)
$ 0.66 $ (0.10 ) $ (4.54 )
• Cash dividends declared
$ 0.12 $ 0.12 $ 0.40
Weighted-average number of Class A and Class B common shares outstanding
• Basic (note 17)
85,882,685 83,591,030 79,539,605
• Diluted (note 17)
86,247,137 83,591,030 79,539,605



	Year Ended December 31, 2016 $			Year Ended December 31, 2015 $			Year Ended December 31, 2014 $
REVENUES
Net pool revenues (notes 15f and 15i)	300,295			370,583			138,631
Time charter revenues (note 15f)	97,374			75,375			94,213
Voyage charter revenues	90,032			41,283			8,040
Interest income from investment in term loans (note 6)	—			—			9,118
Other revenues (note 23)	39,195			26,952			—
Total revenues	526,896			514,193			250,002

Voyage expenses	(55,241		)	(19,816		)	(11,223		)
Vessel operating expenses (notes 15f and 15g)	(182,598		)	(137,164		)	(98,403		)
Time-charter hire expense (note 17)	(59,647		)	(74,898		)	(22,160		)
Depreciation and amortization	(104,149		)	(73,760		)	(53,292		)
General and administrative expenses (note 15f)	(18,211		)	(17,354		)	(12,821		)
(Loss) gain on sale of vessels (note 21)	(20,594		)	771			9,955
Restructuring charges (note 23)	—			(4,772		)	—
Income from operations	86,456			187,200			62,058

Interest expense	(29,784		)	(17,389		)	(9,128		)
Interest income	117			107			287
Realized and unrealized loss on derivative instruments (note 11)	(964		)	(1,597		)	(1,712		)
Equity income (note 8)	13,101			14,411			5,228
Other (expense) income (note 16)	(6,071		)	(3,097		)	3,805
Net income	62,855			179,635			60,538

Per common share amounts (note 20)
• Basic earnings per share		$0.40			$1.36			$0.67
• Diluted earnings per share		$0.40			$1.35			$0.66
• Cash dividends declared		$0.18			$0.24			$0.12

Weighted-average number of Class A and Class B common stock outstanding (note 20)
• Basic	156,323,348			130,136,228			85,882,685
• Diluted	156,565,415			130,717,709			86,247,137

Related party transactions (note ~~13)~~

15)

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

TEEKAY TANKERS LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(notes 1 and 3)

(in thousands of U.S. dollars)

   As at
December 31,
2014
$ As at
December 31,
2013
$
ASSETS

Current

Cash and cash equivalents
   162,797 25,646
Pool receivables from affiliates, net (note 13h)
   35,254 10,765
Accounts receivable
   4,178 4,247
Due from affiliates (note 13f)
   42,502 27,991
Prepaid expenses
   8,883 10,361
Investment in term loans (note 5)
   —   136,061


Total current assets
253,614 215,071


Vessels and equipment
At cost, less accumulated depreciation of $301.6 million (2013 - $251.4 million) (note 18)
828,291 859,308
Investment in and advances to equity accounted investments (note 6)
73,397 18,196
Derivative asset (note 9)
4,657 —
Other non-current assets (note 18)
5,400 4,954


Total assets
1,165,359 1,097,529


LIABILITIES AND EQUITY
Current
Accounts payable
1,899 2,251
Accrued liabilities (notes 7 and 13f)
17,565 21,069
Current portion of long-term debt (note 8)
41,959 25,246
Current portion of derivative liabilities (note 9)
7,263 7,344
Deferred revenue
637 2,961
Due to affiliates (note 13f)
10,395 11,323


Total current liabilities
79,718 70,194


Long-term debt (note 8)
614,104 719,388
Derivative liabilities (note 9)
10,962 17,924
Other long-term liabilities (note 10)
4,852 5,351


Total liabilities
709,636 812,857


Commitments and contingencies (notes 6, 9, 15 and 18)
Equity
Common stock and additional paid-in capital (300 million shares authorized, 95.3 million Class A and 16.7 million class B shares issued and outstanding as of December 31, 2014 (2013 - 71.1 million Class A and 12.5 million Class B shares issued and outstanding) (notes 3 and 12)
802,650 673,217
Accumulated deficit
(346,927 ) (388,545 )


Total equity
455,723 284,672


Total liabilities and equity
1,165,359 1,097,529

As at
December 31, 2016
$ As at
December 31, 2015
$
ASSETS
Current
Cash and cash equivalents 68,108
96,417
Restricted cash 750
870
Pool receivables from affiliates, net (note 15i)
24,598
62,735
Accounts receivable 30,247
28,313
Vessels held for sale (note 21)
33,802
—
Due from affiliates (note 15g)
41,420
67,159
Current portion of derivative asset (note 11)
875
—
Prepaid expenses 15,684
24,320
Total current assets 215,484

279,814
Vessels and equipment
At cost, less accumulated depreciation of $459.3 million (2015 - $391.0 million) (note 21)
1,605,372
1,767,925
Investment in and advances to equity accounted investments (note 8)
81,273
86,808
Derivative assets (note 11)
4,538
5,164
Intangible assets - net (note 24)
17,658
29,619
Goodwill (note 24)
8,059
—
Other non-current assets 41
146
Total assets 1,932,425

2,169,476
LIABILITIES AND EQUITY
Current
Accounts payable 12,265
16,717
Accrued liabilities (notes 9 and 15g)
27,224
62,029
Current portion of long-term debt (note 10)
171,019
174,047
Current portion of derivative liabilities (note 11)
1,108
6,330
Current portion of in-process revenue contracts —
1,223
Deferred revenue 4,394
2,676
Due to affiliates (note 15g)
20,912
26,630
Total current liabilities 236,922

289,652
Long-term debt (note 10)
761,997
990,558
Derivative liabilities (note 11)
—
4,208
Other long-term liabilities (note 12)
12,882
7,597
Total liabilities 1,011,801

1,292,015
Commitments and contingencies (notes 8,11 and 17)

Equity
Common stock and additional paid-in capital (300 million shares authorized, 136.1 million Class A and 23.2 million class B shares issued and outstanding as of December 31, 2016 (2015 - 132.8 million Class A and 23.2 million Class B shares issued and outstanding) (notes 4 and 14)
1,103,304
1,094,874
Accumulated deficit (182,680 ) (217,413 )
Total equity 920,624

877,461
Total liabilities and equity 1,932,425

2,169,476

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

TEEKAY TANKERS LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(note 1)~~

(notes 1 and 3)

(in thousands of U.S. dollars)

   Year Ended
December 31,
2014
$ Year Ended
December 31,
2013
$ Year Ended
December 31,
2012
$
Cash and cash equivalents provided by (used for)

OPERATING ACTIVITIES

Net income (loss)
   57,142 (8,138 ) (370,181 )
Non-cash items:

Depreciation and amortization
   50,152 47,833 72,365
Unrealized gain on derivative instruments
   (8,281 ) (8,363 ) (1,580 )
Equity (income) loss
   (5,228 ) (854 ) 1
(Gain) loss on sale of vessels (note 18)
   (9,955 ) 71 —
Vessel impairment (note 18)
   —   —   352,546
Other
   (1,476 ) 1,484 1,188
Change in operating assets and liabilities (note 16)
   (51,679 ) (6,586 ) (19,794 )
Expenditures for dry docking
   (17,072 ) (19,245 ) (7,003 )


Net operating cash flow
13,603 6,202 27,542


FINANCING ACTIVITIES
Proceeds from long-term debt
98,796 59,179 32,226
Repayments of long-term debt
(20,367 ) (25,246 ) (13,522 )
Prepayment of long-term debt
(167,000 ) (25,000 ) (60,000 )
Proceeds from issuance of common stock, net of share issuance costs (note 3)
111,190 —   65,771
Equity contribution from Teekay Corporation (note 13c)
1,267 —   —
Cash dividends paid
(10,165 ) (10,030 ) (32,231 )
Proceeds from long-term debt of Dropdown Predecessor (note 1)
—   —   2,312
Repayment from long-term debt of Dropdown Predecessor (note 1)
—   —   (10,372 )
Prepayment of long-term debts of Dropdown Predecessor(note 1)
—   —   (15,000 )
Acquisition of 13 vessels from Teekay Corporation (note 1)
—   —   (9,509 )
Contribution of capital from Teekay Corporation to
Dropdown Predecessor (note 1)
—   —   9,507
Net advances from affiliates (note 1)
—   —   16,913


Net financing cash flow
13,721 (1,097 ) (13,905 )


INVESTING ACTIVITIES
Proceeds from the sale of vessels and equipment (note 18)
154,000 9,114 —
Expenditures for vessels and equipment
(2,063 ) (1,904 ) (2,518 )
Investment in and advances from (to) High-Q joint venture (note 6)
1,950 (3,890 ) (3,344 )
Investment in and advances to TTOL (note 6)
(6,494 ) —   —
Investment in and advances to TIL (note 6)
(35,045 ) —   —
Deposit for vessel purchase (note 18)
(3,700 ) —   —
Investment in term loans (note 5)
1,179 (9,120 ) —


Net investing cash flow
109,827 (5,800 ) (5,862 )


Increase (decrease) in cash and cash equivalents
137,151 (695 ) 7,775
Cash and cash equivalents, beginning of the year
25,646 26,341 18,566


Cash and cash equivalents, end of the year
162,797 25,646 26,341



	Year Ended December 31, 2016 $		Year Ended December 31, 2015 $		Year Ended December 31, 2014 $
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income	62,855		179,635		60,538
Non-cash items:
Depreciation and amortization	104,149		73,760		53,292
Loss (gain) on sale of vessels (note 21)	20,594		(771	)	(9,955	)
Unrealized gain on derivative instruments (note 11)	(9,679	)	(8,193	)	(8,281	)
Equity income (note 8)	(13,101	)	(14,411	)	(5,228	)
Other	9,270		2,266		(1,450	)
Change in operating assets and liabilities (note 18)	44,496		(25,880	)	(50,904	)
Expenditures for dry docking	(8,608	)	(39,617	)	(17,072	)
Net operating cash flow	209,976		166,789		20,940
FINANCING ACTIVITIES
Proceeds from long-term debt, net of issuance costs	906,149		688,695		98,796
Repayments of long-term debt	(162,092	)	(40,029	)	(20,367	)
Prepayment of long-term debt	(979,877	)	(191,592	)	(167,000	)
Proceeds from long-term debt of Entities under Common Control (note 3)	—		—		10,368
Repayment from long-term debt of Entities under Common Control (note 3)	—		(4,632	)	(3,309	)
Net advances from affiliates (note 3)	—		(825	)	(17,376	)
Equity contribution from Teekay Corporation to Entities under Common Control (note 3)	—		1,928		3,001
Equity contribution from Teekay Corporation (note 15e)	—		—		1,267
Acquisition of the Explorer Spirit and Navigator Spirit from Teekay Offshore Partners L.P. (note 3)	—		(31,870	)	—
Cash dividends paid	(46,847	)	(15,139	)	(10,165	)
Proceeds from equity offerings, net of offering costs (note 4)	7,558		242,264		111,190
Net financing cash flow	(275,109	)	648,800		6,405
INVESTING ACTIVITIES
Proceeds from the sale of vessels and equipment (note 21)	27,550		11,080		154,000
Expenditures for Principal Maritime Vessel acquisitions (note 21)	—		(612,000	)	—
Expenditures for vessels and equipment	(9,226	)	(236,229	)	(2,084	)
Loan repayments from High-Q joint venture (note 8)	3,500		1,000		1,950
Return of capital from (investment in) TTOL (note 8)	15,000		(239	)	(6,494	)
Investment in and advances to TIL (note 8)	—		—		(35,045	)
Deposit for vessel purchase (note 21)	—		—		(3,700	)
Investment in term loans (note 6)	—		—		1,179
Acquisition of SPT (note 24)	—		(45,581	)	—
Net investing cash flow	36,824		(881,969	)	109,806
(Decrease) increase in cash and cash equivalents	(28,309	)	(66,380	)	137,151
Cash and cash equivalents, beginning of the year	96,417		162,797		25,646
Cash and cash equivalents, end of the year	68,108		96,417		162,797

Supplemental cash flow information (note ~~16)~~

18)

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

TEEKAY TANKERS LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(notes 1 and 3)

(in thousands of U.S. dollars, except share amounts)

   STOCKHOLDERS’ EQUITY
   Common Stock and Paid-in Capital

Dropdown
Predecessor
Equity
$

Thousands
of
Common
Shares
#

Class A
$
   Class B
$
Accumulated
Deficit
$

Total
$

   (note 1 )








Balance as at December 31, 2011
88,793 61,877 588,316 125 (99,070 ) 578,164








Net loss
(9,163 ) —   —   —   (361,018 ) (370,181 )
Net change in parent’s equity from Dropdown Predecessor (note 1)
70,404 —   —   —   —   70,404
Proceeds from issuance of Class A common shares, net of offering costs of $3.3 million (note 3)
—   17,250 65,771 —   —   65,771
Acquisition of interest in 13 vessels from Teekay Corporation (note 1)
(150,034 ) 4,464 18,348 —   121,942 (9,744 )
Dividends declared
—   —   —   —   (32,231 ) (32,231 )








Balance as at December 31, 2012
—   83,591 672,435 125 (370,377 ) 302,183








Net loss
—   —   —   —   (8,138 ) (8,138 )
Dividends declared
—   —   —   —   (10,030 ) (10,030 )
Equity-based compensation(note 12)
—   —   657 —   —   657








Balance as at December 31, 2013
—   83,591 673,092 125 (388,545 ) 284,672








Net income
—   —   —   —   57,142 57,142
Proceeds from issuance of Class A common shares, net of offering costs of $4.8 million (note 3)
—   24,167 111,190 —   —   111,190
Value assigned to share issuance to Teekay Corporation for purchase of TTOL (note 3)
—   4,221 —   17,010 —   17,010
Purchase of TTOL from Teekay Corporation (note 6)
—   —   —   —   (6,626 ) (6,626 )
Equity contribution form Teekay Corporation (note 13c)
—   —   —   —   1,267 1,267
Dividends declared
—   —   —   —   (10,165 ) (10,165 )
Equity-based compensation(note 12)
—   85 1,233 —   —   1,233








Balance as of December 31, 2014
—   112,064 785,515 17,135 (346,927 ) 455,723

EQUITY
Equity of Entities under Common Control
$ Common Stock and Paid-in Capital
Thousands of Common Stock
# Class A
$ Class B
$ Accumulated Deficit
$ Total
$
Balance as at December 31, 2013 16,158

83,591

673,092

125

(388,545 )
300,830
Net income 3,396
—
—
—
57,142
60,538
Proceeds from issuance of Class A common stock, net of offering costs of $4.8 million (note 4)
—
24,167
111,190
—
—
111,190
Value assigned to share issuance to Teekay Corporation for purchase of TTOL (note 4)
—
4,221
—
17,010
—
17,010
Purchase of TTOL from Teekay Corporation (note 8)
—
—
—
—
(6,626 ) (6,626 )
Equity contribution from Teekay Corporation (note 15e)
—
—
—
—
1,267
1,267
Net change in parent's equity from Entities under Common Control (note 3)
3,001
—
—
—
—
3,001
Dividends declared —
—
—
—
(10,165 ) (10,165 )
Equity-based compensation (note 14)
—
85
1,233
—
—
1,233
Balance as at December 31, 2014 22,555

112,064

785,515

17,135

(346,927 )
478,278
Net income 2,708
—
—
—
176,927
179,635
Proceeds from issuance of Class A common stock, net of offering costs (note 4)
—
37,201
246,032
—
—
246,032
Proceeds from issuance of Class B common stock, net of offering costs (note 4)
—
6,512
—
45,500
—
45,500
Value adjustment to share issuance to Teekay Corporation for purchase of TTOL (note 8)
—
—
—
—
(239 ) (239 )
Net change in parent's equity from Entities under Common Control (note 3)
1,928
—
—
—
—
1,928
Acquisition of SPT Explorer and Navigator Spirit from Teekay Offshore Partners L.P. (note 3)
(27,191 ) —
—
—
(13,311 ) (40,502 )
Dividends declared —
—
—
—
(33,863 ) (33,863 )
Equity-based compensation (note 14)
—
254
692
—
—
692
Balance as at December 31, 2015 —

156,031

1,032,239

62,635

(217,413 )
877,461
Net income —
—
—
—
62,855
62,855
Proceeds from issuance of Class A common stock, net of offering costs (note 4)
—
3,020
7,558
—
—
7,558
Dividends declared —
—
—
—
(28,122 ) (28,122 )
Equity-based compensation (note 14)
—
253
872
—
—
872
Balance as at December 31, 2016 —
159,304
1,040,669
62,635
(182,680 ) 920,624

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

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)


1.	Summary of Significant Accounting Policies

Nature of operations

The Company (as defined below) is engaged in the international marine transportation of crude oil and refined petroleum products through the operation of its oil and product ~~tankers.~~tankers as well as providing ship-to-ship transfer services. The Company’s revenues are earned in international markets.

Basis of presentation and consolidation principles

During October 2007, Teekay Corporation (Teekay) formed Teekay Tankers Ltd., a Marshall Islands corporation (together with its ~~wholly-owned~~wholly owned subsidiaries and the ~~Dropdown Predecessor,~~Entities under Common Control, as described ~~below,~~in note 3, collectively theCompany), to acquire from Teekay a fleet of nine double-hull Aframax-class oil tankers in connection with the Company’s initial public offering (orIPO). As of December 31, ~~2014,~~2016, the Company’s fleet included a total of 4051 vessels, of which 12seven were chartered-in and one was 50%-owned through the High-Q Investment Ltd. joint ~~venture.~~

venture (or High-Q).

The consolidated financial statements reflect the financial position, results of operations and cash flows of Teekay Tankers Ltd., its wholly-owned subsidiaries, equity accounted investments and the ~~Dropdown Predecessor.~~Entities under Common Control. The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (GAAP) and all significant intercompany balances and transactions have been eliminated upon consolidation.

~~Dropdown Predecessor~~

The Company accounts for the acquisition of interests in vessels from Teekay as a transfer of a business between entities under common control. The method of accounting for such transfers is similar to the pooling of interests method of accounting. Under this method, the carrying amount of net assets recognized in the balance sheets of each combining entity are carried forward to the balance sheet of the combined entity, and no other assets or liabilities are recognized as a result of the combination. The proceeds paid by the Company over or under Teekay’s historical cost in the acquired vessels are accounted for as a return of capital to or contribution of capital from Teekay. In addition, transfers of net assets between entities under common control are accounted for as if the transfer occurred from the date that the Company and the acquired vessels were both under the common control of Teekay and had begun operations. As a result, the Company’s financial statements prior to the date the interests in these vessels were actually acquired by the Company are retroactively adjusted to reflect these vessels and their related operations and cash flows (referred to herein, collectively, as the~~Dropdown Predecessor) during the periods under common control of Teekay.~~

During June 2012, the Company acquired from Teekay seven conventional oil tankers and six product tankers and related time-charter contracts, debt facilities and an interest rate swap, for an aggregate price of approximately $454.2 million, including the assumption of outstanding debt of approximately $428.1 million (or the~~2012 Acquired Business~~). Ten of the vessels were acquired on June 15, 2012 and the remaining three were acquired on June 26, 2012. As consideration for this acquisition, the Company issued to Teekay 4.5 million Class A common shares and made a cash payment of $1.1 million to Teekay. The 4.5 million Class A common shares had an approximate value of $25.0 million, or $5.60 per share, when the purchase price was agreed to between the parties and a value of $18.3 million, or $4.11 per share, on the acquisition closing date. The purchase price, for accounting purposes, is based upon the value of the Class A common shares on the acquisition closing date. Consequently, common stock and additional paid in capital and accumulated deficit are both $6.7 million lower than if the value of the shares had remained unchanged from when the purchase price was agreed to between the parties. In addition, the Company reimbursed Teekay for $8.4 million of working capital it assumed from Teekay in connection with the 2012 Acquired Business. Teekay has granted the Company a right of first refusal on certain conventional tanker opportunities Teekay may develop prior to June 15, 2015. Teekay prepaid $106.9 million of long term debt of the 2012 Acquired Business on the date of acquisition. The acquisition of the 2012 Acquired Business was accounted for as a reorganization between entities under common control. As a result, the Company’s consolidated statements of loss, cash flows and changes in equity for the year ended December 31, 2012 reflect the 2012 Acquired Business as if the Company had acquired the 2012 Acquired Business when the 13 vessels began their respective operations under the ownership of Teekay. All 13 vessels began operations prior to the periods covered by these consolidated financial statements and, consequently, are reflected in all periods presented.

The effect of adjusting the Company’s financial statements to account for these common control exchanges decreased the Company’s net income for the year ended December 31, 2012 by $9.2 million. The adjustments for the Dropdown Predecessor increased the Company’s revenues for the year ended December 31, 2012 by $42.2 million.

In the preparation of these consolidated financial statements, general and administrative expenses, cost of ship management services and interest expense of the Dropdown Predecessor were not identifiable as relating solely to the each specific vessel. General and administrative expenses (consisting primarily of salaries, share-based compensation, and other employee-related costs, office rent, legal and professional fees, and travel and entertainment) were allocated based on the Dropdown Predecessor’s proportionate share of Teekay’s total ship-operating (calendar) days for the period presented. During the year ended December 31, 2012, $2.6 million of ship management services costs were attributable to the Dropdown Predecessor. In addition, the Dropdown Predecessor includes debt of Teekay which was recorded on a pushed-down basis in the amount of $108.7 million as at December 31, 2012. This debt was assumed by the Company concurrently with the dropdown transaction. Interest expense includes the allocation of interest to the Dropdown Predecessor from Teekay based upon the weighted-average outstanding balance of the push-down debt and the weighted-average interest rate outstanding on Teekay’s loan facilities that were used to finance these loans. During the year ended December 31, 2012, $11.7 million of interest expense was attributable to the Dropdown Predecessor. Management believes these allocations reasonably present the interest expense and the general and administrative expenses of the Dropdown Predecessor.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In addition, estimates have been made when allocating expenses from Teekay to the ~~Dropdown Predecessor~~Entities under Common Control and such estimates may not be reflective of what actual results would have been if the ~~Dropdown Predecessor~~Entities under Common Control had operated independently.

Currency translation

The Company’s functional currency is the U.S. ~~Dollar.~~dollar. Transactions involving other currencies during the year are converted into U.S. ~~Dollars~~dollars using the exchange rates in effect at the time of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the U.S. ~~Dollar~~dollar are translated to reflect the year-end exchange rates. Resulting gains or losses are reflected in other ~~expenses~~(expenses) income in the accompanying consolidated statements of ~~income (loss).~~

income.

Operating revenues and expenses

The Company recognizes revenues from time charters daily over the term of the charter as the applicable vessel operates under the charter. The Company does not recognize revenues during days that the vessel is off hire. When the time charter contains a profit-sharing agreement, the Company recognizes the profit-sharing or contingent revenues when the contingency is resolved. All revenues from voyage charters are recognized on a proportionate performance method. The Company uses a discharge-to-discharge basis in determining proportionate performance for all spot voyages. The Company does not begin recognizing revenue until a charter has been agreed to by the customer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage. The consolidated balance sheets reflect the deferred portion of revenues and expenses, which will be earned in subsequent periods.

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. The Company, as shipowner, pays voyage expenses under voyage charters, its customers pay voyage expenses under time charters. Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. The Company pays vessel operating expenses under both voyage and time charters and for vessels which earn net pool revenue, as described below. Voyage expenses and vessel operating expenses are recognized when incurred.

Revenues and voyage expenses of the vessels operating in pool arrangements are pooled and the resulting net pool revenues, calculated on a time charter equivalent basis, are allocated to the pool participants according to an agreed formula. The agreed formula used to allocate net pool revenues varies between pools; however, the formula generally allocates revenues to pool participants on the basis of the number of days a vessel operates in the pool with weighting adjustments made to reflect vessels’ differing capacities and performance capabilities. The same revenue and expense recognition principles stated above are applied in determining the net pool revenues of the pool. The pools are responsible for paying voyage expenses and distribute net pool revenues to the participants. The Company accounts for the net allocation from the pool as revenues and amounts due from the pool are included in pool receivables from affiliates, net.

Other revenues are earned from the offshore ship-to-ship transfer of commodities, primarily crude oil and refined oil products, but also liquid gases and various other products which are referred to as support operations. In addition, other revenues are also earned from other technical activities such as terminal management, consultancy, procurement and equipment rental. Other revenues from short-term contracts are recognized as services are completed based on percentage of completion or in the case of long-term contracts, are recognized over the duration of the contract period.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

pay voyage expenses under time charters. Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. The Company pays vessel operating expenses under both voyage and time charters and for vessels which earn net pool revenue, as described below. Voyage expenses and vessel operating expenses are recognized when incurred.

Share-based compensation

The Company grants stock options and restricted stock units as incentive-based compensation to certain employees of Teekay who support the operations of the Company. The Company measures the cost of such awards using the grant date fair value of the award and recognizes that cost, net of estimated forfeitures, over the requisite service period, which generally equals the vesting period. For stock-based compensation awards subject to graded vesting, the Company calculates the value for the award as if it is a single award with one expected life and amortizes the calculated expense for the entire award on a straight-line basis over the vesting period of the award. The Company also grants common stock and fully vested stock options as incentive-based compensation to non-management directors, which are expensed immediately (see note ~~12)~~14).

Cash and cash equivalents

The Company classifies all highly liquid investments with an original maturity date of three months or less as cash and cash equivalents.

Restricted Cash

The Company maintains restricted cash deposits relating to certain contracts which were assumed as part of the acquisition of the ship-to-ship transfer business in 2015 (note 24). Attached to these contracts are certain performance guarantees required by the Company.

Accounts receivable, allowance for doubtful accounts, and investment in term loans and other loan receivables

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines the allowance based on historical write-off experience and customer economic data. The Company reviews the allowance for doubtful accounts regularly and past due balances are reviewed for collectability. Account balances are ~~charged~~written off against the allowance when the Company believes that the receivable will not be recovered. There are no significant amounts recorded as allowance for doubtful accounts as at December 31, ~~2014, 2013~~2016 and ~~2012.~~

2015.

The Company’s investment in term loans and advances to equity accounted investments are recorded at cost. The premium paid over the outstanding principal amount was amortized to interest income over the term of the loan using the effective interest rate method. The Company analyzes its loans for collectability during each reporting period. A loan provision is recorded, based on current information and events, if it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors the Company considers in determining that a loan provision is required include, among other things, an assessment of the financial condition of the debtor, payment history of the debtor, general economic conditions, the credit rating of the debtor (when available), any information provided by the debtor regarding their ability to repay the loan, and the fair value of the underlying collateral. When a loan provision is recorded, the Company measures the amount of the provision based on the present value of expected future cash flows discounted at the loan’s effective interest rate

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

and recognizes the resulting provision in the ~~statement~~consolidated statements of ~~income (loss).~~income. The carrying value of the loans is adjusted each subsequent period to reflect any changes in the present value of the expected future cash flows, which may result in increases or decreases to the loan provision.

The following table contains a summary of the Company’s financing receivables by type and the method by which the Company monitors the credit quality of its financing receivables on a quarterly basis.

      December 31, 2014    December 31, 2013
Class of Financing Receivable    Credit Quality Indicator    Grade $    $
Investment in term loans and interest receivable
   Collateral    Non-performing⁽¹⁾ —      136,061
Advances to equity accounted investments
   Other internal metrics    Performing 14,980    16,930




14,980 152,991

~~(1)~~

The borrowers under the term loans had been in default on their interest payment obligations since the first quarter of 2013, and subsequently, in default of the repayment of the loan principal from the loan maturity date in July 2013. On March 21, 2014, the Company took ownership of the vessels held as collateral in satisfaction of the loans and accrued interest (see note 5).



Class of Financing Receivable	Credit Quality Indicator	Grade	December 31, 2016 $	December 31, 2015 $
Advances to equity accounted investments	Other internal metrics	Performing	10,480	13,980
			10,480	13,980

Equity accounted investments

The Company’s ~~has~~ investments in the High-Q joint venture, Teekay Tanker Operations Ltd. (orTTOL) and Tanker Investments Ltd. (orTIL) ~~all of which~~ are accounted for using the equity method of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. The Company evaluates its equity accounted investment for impairment when events or circumstances indicate that the carrying value of such investment may have experienced an other-than-temporary decline in value below its carrying value. If the estimated fair value is less than the carrying value, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Company’s ~~statement~~consolidated statements of income. The Company’s maximum exposure to loss is the amount it has invested in its equity accounted ~~investments.~~

investments, including stock purchase warrants of TIL.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Vessels and equipment

All 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 Company to the standard required to properly service the Company’s customers are capitalized.

Depreciation is calculated on a straight-line basis over a vessel’s estimated useful life, less an estimated residual value. Depreciation is calculated using an estimated useful life of 25 years, or a shorter period if regulations prevent the Company from operating the vessels for 25 years. Depreciation of vessels and equipment (including depreciation attributable to the ~~Dropdown Predecessor~~Entities under Common Control and excluding amortization of dry-docking ~~costs)~~costs and intangible assets) for the years ended December 31, 2016, 2015 and 2014 ~~2013 and 2012~~ totaled ~~$39.4~~$81.5 million, ~~$39.2~~$59.5 million, and ~~$63.4~~$42.5 million, respectively.

Vessel capital modifications include the addition of new equipment or can encompass various modifications to the vessel which are aimed at improving or increasing the operational efficiency and functionality of the asset. This type of expenditure is capitalized and depreciated over the estimated useful life of the modification. Expenditures covering recurring routine repairs or maintenance are expensed as incurred.

Generally, the Company dry docks each vessel every two and a half to five years. The Company capitalizes a substantial portion of the costs incurred during dry docking and amortizes those costs on a straight-line basis over its estimated useful life, which typically is from the completion of a dry docking or intermediate survey to the estimated completion of the next dry docking. The Company includes in capitalized dry docking those costs incurred as part of the dry dock to meet classification and regulatory requirements. The Company expenses costs related to routine repairs and maintenance performed during dry docking that do not improve or extend the useful lives of the assets. When significant dry-docking expenditures occur prior to the expiration of the original amortization period, the remaining unamortized balance of the original dry-docking cost is expensed in the month of the subsequent dry docking.

The following table summarizes the change in the Company’s capitalized dry docking costs, from January 1, ~~2012~~2014 to December 31, ~~2014:~~

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Balance at the beginning of the year
   29,269    18,672    20,945
Cost incurred for dry docking
   17,072    19,245    7,003
Dry-dock amortization
   (10,832 )    (8,648 )    (8,959 )
Vessel sales/held for sale (note 18)
   —      —      (317 )






Balance at the end of the year
35,509 29,269 18,672

2016:



	Year Ended December 31,
	2016 $		2015 $		2014 $
Balance at the beginning of the year	62,146		35,509		29,269
Cost incurred for dry docking	9,340		39,617		17,072
Dry-dock amortization	(18,736	)	(12,866	)	(10,832	)
Vessel sales	(3,452	)	(114	)	—
Balance at the end of the year	49,298		62,146		35,509

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. In cases where an active second hand sale and purchase market does not exist, the Company

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

uses a discounted cash flow approach to estimate the fair value of an impaired vessel. In cases where an active second hand sale and purchase market exists, an appraised value is generally used to estimate the amount the Company would expect to receive if it were to sell the vessel. Such appraisal is normally completed by the Company.

Goodwill and intangible assets

Goodwill is not amortized, but reviewed for impairment at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. When goodwill is reviewed for impairment, the Company may elect to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, the Company may bypass this step and use a fair value approach to identify potential goodwill impairment and, when necessary, measure the amount of impairment. The Company uses a discounted cash flow model to determine the fair value of reporting units, unless there is a readily determinable fair market value.

Customer related intangible assets are amortized over the expected life of a customer contract or the expected duration that the customer relationships are estimated to contribute to the cash flows of the Company. The amount amortized each year is weighted based on the projected revenue to be earned under the contracts or projected revenue to be earned as a result of the customer relationships. 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.

Debt issuance costs

Debt issuance costs related to loan facilities, including fees, commissions and legal expenses, are ~~capitalized and presented as other non-current assets.~~directly deducted from the carrying amount of that loan facility. Debt issuance costs of revolving credit facilities and 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.~~

expense in the consolidated statements of income.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Income taxes

The Company recognizes the tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Company’s consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

~~Excluding freight taxes, the~~ The Company ~~incurred no~~recognizes interest and penalties related to uncertain tax positions in income ~~taxes for the years ended December 31, 2014, 2013 and 2012.~~ tax expense.

The Company believes that it and its subsidiaries are not subject to income taxation under the laws of the Republic of The Marshall Islands or Bermuda, or that distributions by its subsidiaries to the Company will be subject to any income taxes under the laws of such countries, and ~~qualify~~that it qualifies for the Section 883 exemption under U.S. federal income tax purposes.

~~Ship management fees~~

In order to more closely align the Company’s presentation to that of many of its peers, the cost of ship management activities of $5.6 million for year ended December 31, 2014 has been presented in vessel operating expenses. Prior to 2013, the Company included these amounts in general and administrative expenses. All such costs incurred in comparative periods have been reclassified from general and administrative expenses to vessel operating expenses to conform to the presentation adopted in the current period. The amounts reclassified for the years ended December 31, 2013 and 2012 were $5.6 million and $6.9 million, respectively (see note 13e).

Derivative instruments

All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently remeasured to fair value each quarter, regardless of the purpose or intent for holding the derivative. The method of recognizing the resulting gains or losses are dependent on whether the derivative contracts are designed to hedge a specific risk and whether the contracts qualify for hedge accounting. The Company does not apply hedge accounting to its derivative instruments, ~~except~~however it could for certain types of interest rate swaps that it may enter into in the future.

When a derivative is designated as a cash flow hedge, the Company 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 Company 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.

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 total equity. In the periods when the hedged items affect earnings, the associated fair value changes on the hedging derivatives are transferred from total equity to the corresponding earnings line item in the consolidated statements of ~~loss.~~income. The ineffective portion of the change in fair value of the derivative financial instruments is immediately recognized in earnings in the consolidated statements of ~~loss.~~income. If a cash flow hedge is terminated and the originally hedged item is still considered possible of occurring, the gains and losses initially recognized in total equity remain there until the hedged item impacts earnings, at which point they are transferred to the corresponding earnings line item in the consolidated statements of ~~loss.~~income. If the hedged items are no longer possible of occurring, amounts recognized in total equity are immediately transferred to the earnings item in the consolidated statements of ~~loss.~~

income.

For derivative financial instruments that are not designated or that do not qualify as hedges under Financial Accounting Standards Board (or~~FASB)~~ FASB) ASC 815, Derivatives and Hedging,, the changes in the fair value of the derivative financial instruments are recognized in earnings. Gains and losses from the Company’s non-designated derivatives are recorded in realized and unrealized loss on derivative instruments in the Company’s consolidated statements of ~~income (loss).~~

income.

Earnings ~~(loss)~~ per share

Earnings ~~(loss)~~ per share is determined by dividing (a) net income ~~(loss)~~ of the Company after ~~(deducting) adding~~deducting the amount of net income ~~(loss)~~ attributable to the ~~Dropdown Predecessor~~Entities under Common Control by (b) the weighted-average number of shares outstanding during the applicable period. The calculation of weighted-average number of shares includes the total Class A and total Class B shares outstanding during the applicable period. The computation of diluted earnings per share assumes the exercise of all dilutive stock options and restricted stock units using the treasury stock method. The computation of diluted loss per share does not assume such exercises.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~


2.	Recent Accounting Pronouncements ~~Not Yet Adopted~~

In May 2014, the Financial Accounting Standards Board (or ~~FASB)~~FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, (or ASU ~~2014-09)~~2014-09). ASU 2014-09 will require ~~companies~~an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the ~~company~~entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires ~~companies~~entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue ~~when~~as each performance obligation is satisfied. ASU 2014-09 is effective for ~~interim and annual periods beginning after December 15, 2016~~the Company January 1, 2018 and shall be applied, at the Company’s option, retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. ~~Early~~The Company expects that the adoption of ASU 2014-09 may result in a change in the method of recognizing revenue from voyage charters, whereby the Company’s method of determining proportional performance will change from discharge-to-discharge to load-to-discharge. This will result in no revenue being recognized from discharge of the prior voyage to loading of the current voyage and all revenue being recognized from loading of the current voyage to discharge of the current voyage. This change will result in revenue being recognized later in the voyage which may cause additional volatility in revenue and earnings between periods. The Company is ~~not~~in the process of validating aspects of its preliminary assessment of ASU 2014-09, determining the transitional impact and completing other items required for the adoption of ASU 2014-09.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (or ASU 2016-02). ASU 2016-02 establishes a right-of-use model that requires a lessee to record a right of use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company expects to adopt ASU 2016-02 effective January 1, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company expects that the adoption of ASU 2016-02 will result in a change in accounting method for the lease portion of the daily charter hire for the Company’s chartered-in vessels accounted for as operating leases with firm periods of greater than one year. Under ASU 2016-02, the Company will recognize a right of use asset and a lease liability on the balance sheet for these charters, whereas currently no right of use asset or lease liability is recognized. This will have the result of increasing the Company’s assets and liabilities. The pattern of expense recognition of chartered-in vessel is expected to remain substantially unchanged, unless the right of use asset becomes impaired. The Company is in the process of validating aspects of its preliminary assessment of ASU 2016-02, determining the transitional impact and completing other items required for the adoption of ASU 2016-02.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (or ASU 2016-09). ASU 2016-09 simplifies aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for the Company January 1, 2017 with early adoption permitted. The Company expects the impact of adopting this new accounting guidance will result in a change in presentation of cash payments for tax withholdings on share settled equity awards from an operating cash outflow to financing cash outflow on the Company's statements of cash flows.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. This update replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for the Company January 1, 2020, with a modified-retrospective approach. The Company is currently evaluating the effect of adopting this new ~~accounting~~ guidance.

In ~~April 2014,~~August 2016, the FASB issued Accounting Standards Update ~~2014-08, Reporting Discontinued Operations~~2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and ~~Disclosures~~Cash Payments, which, among other things, provides guidance on two acceptable approaches of ~~Disposals~~classifying distributions received from equity method investees in the statement of Components of an Entity (or ASU 2014-08) which raises the threshold for disposals to qualify as discontinued operations. A discontinued operation is defined now as: (i) a component of an entity or group of components that has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results; or (ii) an acquired business that is classified as held for sale on the acquisition date. ASU 2014-08 also requires additional disclosures regarding discontinued operations, as well as material disposals that do not meet the definition of discontinued operations. ASU 2014-08cash flows. This update is effective for ~~fiscal years beginning~~the Company January 1, 2018, with a retrospective approach. The Company is currently evaluating the effect of adopting this new guidance.


3.	Acquisition of Entities under Common Control

On December 18, 2015, the Company acquired from Teekay Offshore Partners L.P. (or TOO), which is an entity controlled by Teekay Corporation (or Teekay), two conventional oil tankers (the Explorer Spirit, formerly known as the SPT Explorer, and the Navigator Spirit), associated working capital and debt facilities, for an aggregate price of $39.0 million, including working capital of approximately $8.6 million and net of outstanding debt of approximately $49.6 million (or the 2015 Acquired Business). Of this net amount, $30.4 million was paid on ~~or after~~closing of the transaction in December ~~15, 2014,~~2015 and ~~interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported~~the remaining $8.6 million was settled in the first quarter of 2016. As part of this acquisition Teekay paid the Company $2.9 million to terminate the existing time-charters for the Explorer Spirit and Navigator Spirit. Subsequent to the acquisition, Teekay entered into a contract with the Company to guarantee commitments under the existing credit facilities related to the two vessels for a payment of $1.5 million. As a result of the 2015 Acquired Business, the Company's consolidated financial statements ~~previously issued or available~~prior to the date of the Company acquired interests in the vessels are retroactively adjusted to include the results of these vessels during the periods they were under common control of Teekay and had begun operations. The effect of adjusting such information to account for ~~issuance. The impact, if any,~~the 2015 Acquired Business in periods prior to the Company's acquisition thereof is referred to as the Entities under Common Control.

Assets and liabilities of ~~adopting ASU 2014-08~~the vessels the Company acquired from TOO were reflected on the Company's consolidated balance sheet at TOO’s historical carrying values. The amount of the net purchase price of $39.0 million that was in excess of TOO’s historical carrying value of the net assets acquired of $25.0 million was accounted for as a $14.0 million return of capital to Teekay.

All periods prior to the acquisition of these vessels from TOO have been retroactively adjusted to include the results of these vessels, as is required for a reorganization of entities under common control. All intercorporate transactions relating to these vessels between the Company and Teekay that occurred prior to the vessels’ acquisition by the Company have been eliminated upon consolidation.

The effect of adjusting the Company’s consolidated financial statements ~~will depend~~to account for these common control exchanges increased the Company’s net income for the years ended December 31, 2015 and 2014 by $2.7 million and $3.4 million, respectively. The adjustments for the Entities under Common Control increased the Company’s revenues for the years ended December 31, 2015 and 2014 by $9.8 million and $14.4 million, respectively.

In the preparation of the comparative amounts in these consolidated financial statements, shore-based costs for commercial management services (voyage expenses), ship management services (vessel operating expenses) and corporate/administrative services (general and administrative) were not identifiable as relating solely to each specific vessel. Costs for commercial management services were allocated based on the ~~occurrence~~rates charged by Teekay to third parties to provide such services. Costs for ship management services were allocated based on internal estimates of the cost to provide this function. Costs for corporate/administrative services were allocated based on the actual per day costs incurred for the Company’s other conventional tankers. Management believes these allocations reasonably present the interest expense and ~~nature~~the general and administrative expenses of ~~disposals that occur after ASU 2014-08 is adopted.~~

the Entities under Common Control.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

3.
4.	Public Offerings and Private Placements

The following table summarizes the issuances of common shares over the three years ending December 31, ~~2014:~~

Date
   Number of
Common
Shares
Issued Offering
Price
(Per Share)    Gross
Proceeds    Net
Proceeds    Teekay’s
Ownership
After the
Offering
Use of Proceeds
February 2012
   17,250,000 $ 4.00    69,000    65,771    20.4 % Prepayment of revolving credit facilities
June 2012
   4,464,286 ⁽¹⁾ $ 4.11    18,348    18,348    24.6 % Acquisition of conventional tankers
August 2014
   4,220,945 ⁽²⁾ $ 4.03    17,010    17,010    28.7 % Acquisition of interest in TTOL
December 2014
   24,166,666 ⁽³⁾ $ 4.80    116,000    111,190    26.2 % Acquisition of conventional tankers

2016:



Date	Number of Common Stock Issued		Offering Price (Per Share)		Gross Proceeds	Net Proceeds	Teekay's Ownership After the Offering		Use of Proceeds
August 2014	4,220,945	⁽¹⁾		$4.03	17,010	17,010	28.7	%	Acquisition of interest in TTOL
December 2014	24,166,666	⁽²⁾		$4.80	116,000	111,190	26.2	%	Acquisition of conventional tankers
January 2015	3,000,000	⁽³⁾		$4.57	13,716	13,685	25.5	%	Acquisition of conventional tankers
July 2015	6,511,812	⁽⁴⁾		$6.99	45,500	45,500	28.3	%	Acquisition of the ship-to-ship business
August 2015	13,630,075	⁽⁵⁾		$6.65	90,640	90,640	28.8	%	Acquisition of conventional tankers
August - October 2015	7,180,083	⁽⁵⁾	$6.12 - $7.92		49,268	49,268	26.2	%	Acquisition of conventional tankers
Continuous offering program during 2015	13,391,100	⁽⁶⁾	$6.04 - $7.70		94,594	92,439	⁽⁶⁾		General purposes including acquisitions of conventional tankers
Continuous offering program during 2016	3,020,000	⁽⁷⁾	$2.38 - $2.75		7,747	7,558	⁽⁷⁾		General corporate purposes


(1)	Represents Class A common shares issued to Teekay as partial consideration for the Company’s acquisition of the 2012 Acquired Business, which shares had an approximate value of $25.0 million, or $5.60 per share when the purchase price was agreed between the parties.

~~(2)~~

Represents Class B common shares issued to Teekay as partial consideration for the Company’s acquisition of the 50% interest in TTOL, which shares had an approximate value of $15.6 million, or $3.70 per share when the purchase price was agreed between the parties.

~~(3)~~

(2)

Represents 20.0 million shares of Class A common ~~shares~~stock issued to the public and 4.2 million shares of Class A common ~~shares~~stock issued to Teekay in a concurrent private placement. The proceeds from the issuance ~~will be~~was used to acquire modern second hand tankers (see note ~~18)~~21) and for general corporate purposes. ~~The portion of the Company’s voting power held by Teekay at December 31, 2014 was 53.8%.~~ Please refer to Item 7 – Major Shareholders and Related Parties. ~~Subsequent to~~


(3)	In December ~~31,~~ 2014, the Company ~~issued~~granted the underwriters a 30-day option to purchase up to an additional 33.0 million shares of the Company’s Class A common stock from the December 2014 offering. The underwriters exercised this option and on January 2, 2015, the Company issued 3.0 million shares of Class A common stock ~~upon~~for net proceeds of $13.7 million.


(4)	Represents Class B common shares issued to Teekay as consideration for the ~~exercise by~~Company’s acquisition of the ~~underwriters’~~ship-to-ship transfer business. The shares had an approximate value of ~~an option~~$45.5 million, or $6.99 per share, when the purchase price was agreed between the parties.

(5)

Represents 9.1 million shares of Class A common stock issued to the public and 4.5 million shares of Class A common stock issued to Teekay in a concurrent private placement. The proceeds from the issuances were used to acquire ~~additional shares~~12 modern Suezmax tankers from ~~the December 2014 public offering~~Principal Maritime Tankers (or PrincipalMaritime) (see note ~~20b)~~21).

The Company also issued approximately 7.2 million shares of Class A common stock to Principal Maritime as partial consideration for the vessels acquired. The shares had an approximate value of $49.3 million and are based on market prices at the time each vessel was delivered.

(6)

In June 2015, the Company implemented a continuous offering program (or COP) under which the Company may issue shares of its Class A common stock at market prices up to a maximum aggregate amount of $80.0 million. The initial $80.0 million program was concluded in September 2015. The Company re-launched another $80.0 million COP in November 2015. The portion of the Company’s voting power and ownership held by Teekay at December 31, 2015 was 53.6% and 25.9%, respectively.


(7)	In December 2016, the Company re-opened its $80.0 million COP. The portion of the Company's voting power and ownership held by Teekay at December 31, 2016 was 52.9% and 25.4%, respectively.


5.	Business Operations

Significant Customers

The following table presents ~~consolidated~~total revenues and percentage of ~~consolidated~~total revenues for customers that accounted for more than 10% of the Company’s ~~consolidated~~total revenues ~~for its sole operating segment~~ during the periods presented. ~~Revenues~~Total revenues from customers attributable to the ~~Dropdown Predecessor~~Entities under Common Control are included in the table.

   Year Ended December 31,
   2014    2013    2012






Statoil ASA
$ 32.4 million    $ 33.7 million    $ 27.3 million
ConocoPhillips
(1)    $ 18.1 million    $ 31.8 million



	Year Ended December 31,
	2016	2015	2014
Statoil ASA ⁽²⁾	⁽¹⁾	⁽¹⁾	$	38.3	million


(1)	Less than 10% of the ~~consolidated~~total revenues

(2) Conventional tanker segment

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

Concentration of Credit Risk

There is a concentration of credit risk with respect to the total amounts due from affiliates and pool receivables from affiliates with these amounts being due from affiliates of Teekay as at December 31, ~~2014~~2016 (see note ~~13h)~~15i). The Company also relies on Teekay Chartering Ltd., a wholly-owned subsidiary of Teekay, to actively manage and administer all voyage-related functions for vessels on time charter contracts and for vessels trading in the Teekay Aframax RSA Pool (a vessel pooling arrangement of Aframax tankers), the Teekay Classic Aframax Pool (a vessel pooling arrangement for Aframax tankers older than 15 years), the ~~Gemini~~ Suezmax RSA Pool (a vessel pooling arrangement of Suezmax tankers), and the Taurus ~~Tankers LR2~~RSA Pool (a vessel pooling arrangement of product tankers).

5.
6.	Investment in Term Loans

In July 2010, the Company invested in two term loans for a total cost of $115.6 million (or the ~~Loans)~~Loans) which were scheduled to mature in July 2013. The Loans were secured by first priority mortgages registered on two 2010-built Very Large Crude Carriers (or ~~VLCCs)~~VLCCs). The Loans had an annual interest rate of 9% per annum and included a repayment premium feature that was to provide a total investment yield of approximately 10% per annum.

The borrowers under the Loans had been in default on their interest payment obligations since the first quarter of 2013, and subsequently, in default of the repayment of the loan principal from the loan maturity date in July 2013. On March 21, 2014, the Company took ownership of the VLCCs and the Loans were concurrently discharged. The VLCCs had an estimated fair value of ~~$144~~$144.0 million on that date, which approximated all amounts owing under the Loans, including $9.1 million of accrued interest. The transfer of ownership of the VLCCs and concurrent discharging of the Loans ~~has been~~was treated as a non-cash transaction in the Company’s 2014 consolidated statement of cash flows.

In May 2014, the Company sold the two wholly-owned subsidiaries, each of which ~~owns~~owned one VLCC, to TIL (see note ~~18)~~21).

6.
7.	Segment Reporting

On July 31, 2015, the Company acquired a ship-to-ship transfer business (or SPT) from a company jointly-owned by Teekay and a Norway-based marine transportation company, I.M. Skaugen SE (see note 24). Following the acquisition, the Company has two reportable segments, its conventional tanker segment and its ship-to-ship transfer segment. The Company’s conventional tanker segment consists of the operation of all of its tankers, including those employed on full service lightering contracts. The Company’s ship-to-ship transfer segment consists of the Company’s lightering support services, including those provided to the Company’s conventional tanker segment as part of full service lightering operations and other related services. Segment results are evaluated based on income from operations. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Company’s consolidated financial statements.

The following table includes results for the Company’s revenue and income from operations by segment for the years ended December 31, 2016 and 2015. Prior to 2015, the Company had one operating segment.



Year Ended December 31, 2016	Conventional Tanker Segment $		Ship-to-Ship Transfer Segment $		Inter-segment Adjustment ⁽¹⁾$		Total $
Revenues	488,961		41,136		(3,201	)	526,896
Voyage expenses	(58,442	)	—		3,201		(55,241	)
Vessel operating expenses	(150,100	)	(32,498	)	—		(182,598	)
Time-charter hire expense	(57,368	)	(2,279	)	—		(59,647	)
Depreciation and amortization	(99,024	)	(5,125	)	—		(104,149	)
General and administrative expenses	(14,444	)	(3,767	)	—		(18,211	)
(Loss) gain on sale of vessels	(20,926	)	332		—		(20,594	)
Income (loss) from operations ⁽²⁾	88,657		(2,201	)	—		86,456
Equity income	13,101		—		—		13,101


(1)	The ship-to-ship transfer segment provides lightering support services to the conventional tanker segment for full service lightering operations and the pricing for such services is based on estimated costs incurred of approximately $25,000 per voyage.


(2)	Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)



Year Ended December 31, 2015	Conventional Tanker Segment $		Ship-to-Ship Transfer Segment $		Inter-segment Adjustment ⁽¹⁾$		Total $
Revenues	496,455		18,587		(849	)	514,193
Voyage expenses	(19,468	)	(348	)	—		(19,816	)
Vessel operating expenses	(123,572	)	(14,441	)	849		(137,164	)
Time-charter hire expense	(74,860	)	(38	)	—		(74,898	)
Depreciation and amortization	(72,118	)	(1,642	)	—		(73,760	)
General and administrative expenses	(15,369	)	(1,985	)	—		(17,354	)
Gain on sale of vessel	771		—		—		771
Restructuring charge	(4,445	)	(327	)	—		(4,772	)
Income (loss) from operations ⁽²⁾	187,394		(194	)	—		187,200
Equity income	14,411		—		—		14,411


(1)	The ship-to-ship transfer segment provides lightering support services to the conventional tanker segment for full service lightering operations and the pricing for such services is based on estimated costs incurred of approximately $25,000 per voyage.


(2)	Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

A reconciliation of total segment assets to total assets presented in the accompanying consolidated balance sheets is as follows:



	As at December 31, 2016 $	As at December 31, 2015 $
Conventional Tanker	1,807,602	2,020,317
Ship-to-Ship Transfer	26,468	24,429
Cash and cash equivalents	68,108	96,417
Accounts receivable	30,247	28,313
Total assets	1,932,425	2,169,476


8.	Investments in and advances to Equity Accounted Investments

   Year Ended December 31,
   2014    2013
   $    $
High-Q Joint Venture (High-Q)
   18,948    18,196
Tanker Investments Ltd. (TIL)
   36,915    —
Teekay Tanker Operations Ltd. (TTOL)
   17,534    —




Total
73,397 18,196



	Year Ended December 31,
	2016 $	2015 $
High-Q Joint Venture	22,025	21,166
Tanker Investments Ltd.	47,710	44,195
Teekay Tanker Operations Ltd.	11,538	21,447
Total	81,273	86,808

The Company has a joint venture arrangement with Wah Kwong Maritime Transport Holdings Limited (orWah ~~Kwong~~)Kwong), whereby the Company has a 50% economic interest in the High-Q joint venture, which is jointly controlled by the Company and Wah Kwong. The High-Q joint venture owns one VLCC, which is trading on a fixed time charter-out contract expiring in 2018. Under the contract, the vessel earns a fixed daily rate and an additional amount if the daily rate of any sub-charter earned exceeds a certain threshold.

~~In March 2012, the joint venture entered into a $68.6 million loan with a financial institution.~~

As at December 31, ~~2014,~~2016, the High-Q joint venture has a loan ~~had an~~ outstanding with a financial institution with a balance of ~~$60.0~~$48.5 million (December 31, ~~2013~~2015 - ~~$64.7~~$54.2 million). The loan is secured by a first-priority mortgage on the VLCC owned by the High-Q joint venture and 50% of the outstanding loan balance is guaranteed by the Company. The High-Q joint venture has an interest rate swap agreement with a notional amount of ~~$60.0~~$48.5 million that expires in June 2018, 50% of which is guaranteed by the Company. The interest rate swap exchanges a receipt of floating interest based on 3-months LIBOR for a payment of a fixed rate of 1.47% every three months.

In January 2014, the Company and Teekay formed TIL, which seeks to opportunistically acquire, operate and sell modern second-hand ~~tankers to benefit from an expected recovery of the tanker market.~~tankers. The Company purchased 2.5 million shares of common stock for $25.0 million and received a stock purchase warrant entitling it to purchase up to 750,000 additional shares of common stock of TIL (see note 9)11). The stock purchase warrant is a derivative ~~instrument,~~asset which had aan estimated fair value of ~~$3.4~~$0.3 million ~~on issuance which is reflected in the other income (expenses) in the Company’s consolidated statements of income (loss) for the year ended~~as at December 31, ~~2014.~~2016 (December 31, 2015 - $5.2 million). The Company also received one preferred share, which entitles the Company to elect one Board member of TIL. The preferred share does not give the Company a right to any dividends or distributions of TIL. ~~The Company accounts for its investment in TIL using the equity method.~~ In October 2014, the Company purchased an additional 0.9 million common shares of TIL on the open market. The common shares were acquired at a price of NOK 69 per share, or a purchase price of $10.0 million.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

In May 2014, the Company sold two wholly-owned subsidiaries, each of which owns one VLCC, to TIL (see note ~~18)~~21).

In 2015, TIL had repurchased 3.3 million of its own shares on the open market. The common shares were repurchased at a weighted average price of NOK 105.2 per share, or a gross purchase price of $40.6 million. In 2016, TIL repurchased 3.3 million of its own shares in the open market. The common shares were repurchased at a weighted average price of NOK 80.2 per share, or a gross purchase of $31.8 million. As of December 31, 2016, the Company’s ownership interest in TIL was 11.3% (December 31, 2015 - 10.2%). As of December 31, 2016, the value of the Company's 3.4 million shares of common stock of TIL was $14.3 million (December 31, 2015 - $42.1 million).


c.	OnIn August 1, 2014, the Company purchased from Teekay a 50% interest in TTOL, which owns conventional tanker commercial management and technical management operations, including the direct ownership in ~~three~~five commercially managed tanker pools, for an aggregate price of approximately ~~$23.5~~$23.7 million, including net working capital. Teekay retained the remaining 50% interest in TTOL.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

As consideration for this acquisition, the Company issued to Teekay 4.2 million Class B common shares. The 4.2 million Class B common shares had an approximate value of $15.6 million, or $3.70 per share, when the purchase price was agreed to between the parties and a value of $17.0 million, or $4.03 per share, on the acquisition closing date. The purchase price, for accounting purposes, is based upon the value of the Class B common shares on the acquisition closing date. In addition, the Company reimbursed Teekay for ~~$6.5~~$6.7 million of working capital it assumed from Teekay in connection with the purchase. The book value of the assets acquired, including working capital, was $16.9 million on the date of acquisition. The excess of the purchase price over the Company’s proportionate interest in the book value of the net assets acquired, which amounted to ~~$6.6~~$6.9 million, is accounted for as an equity distribution to Teekay. The portion of the purchase price paid with the 4.2 million of Class B common shares is reflected in the statement of cash ~~flow~~flows as a non-cash transaction. The Company accounts for its ownership interest in TTOL using the equity method.

In January 2016, the Company received $15.0 million as a return of capital from TTOL.

A condensed summary of the Company’s financial information for equity accounted investments ~~(9.29%~~(11.3% to ~~50%~~50.0% owned) shown on a 100% basis are as follows:

   As at December 31,
   2014    2013
   $    $
Cash and restricted cash
   97,758    2,897
Other assets- current
   66,473    270
Vessels and equipment
   715,360    99,526
Other assets - non-current
   26,446    1,001
Current portion of long-term debt
   33,992    5,750
Other liabilities – current
   47,275    1,387
Long-term debt
   359,980    59,975
Other liabilities - non-current
   31,787    35,000

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Revenues
   94,244    7,325    —
Income from vessel operations
   16,460    3,256    (3 )
Realized and unrealized loss on derivative instruments
   (831 )    —         —
Net income (loss)
   3,598    1,686    (3 )



	As at December 31,
	2016 $	2015 $
Cash and cash equivalents	62,817	97,933
Other current assets	33,321	206,460
Vessels and equipment	816,943	855,232
Other non-current assets	20,558	25,304

Current portion of long-term debt	43,677	149,301
Other current liabilities	32,840	41,321
Long-term debt	367,201	485,627
Other non-current liabilities	26,341	31,269



	Year Ended December 31,
	2016 $		2015 $		2014 $
Revenues	169,601		225,596		94,244
Income from operations	73,782		109,253		16,460
Realized and unrealized loss on derivative instruments	(244	)	(689	)	(831	)
Net income	50,313		90,059		3,598

For the year ended December 31, ~~2014,~~2016, the Company recorded equity income ~~(loss)~~ of ~~$5.2~~$13.1 million ~~(2013~~(2015 - ~~$0.9~~$14.4 million and ~~2012~~2014 – ~~$(1) thousand)~~$5.2 million). ~~The~~Equity income ~~or loss was primarily~~is comprised of the Company’s share of net income ~~(loss)~~ from the High-Q joint venture, TIL, and TTOL.

7.
9.	Accrued Liabilities

   Year Ended
December 31,
   2014    2013
   $    $
Voyage and vessel
   7,358    10,692
Corporate accruals
   366    528
Interest
   3,947    3,999
Payroll and benefits to related parties
   5,894    5,850




Total
17,565 21,069

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)



	Year Ended December 31,
	2016 $	2015 $
Voyage and vessel	15,631	30,112
Corporate accruals	504	19,255
Interest	2,527	4,742
Payroll and benefits to related parties	8,562	7,920
Total	27,224	62,029

8.
10.	Long-Term Debt

   Year Ended December 31,
   2014    2013
   $    $
Revolving Credit Facilities due through 2018
   508,593    580,593
Term Loans due through 2021
   147,470    164,041




656,063 744,634
Current portion
(41,959 ) (25,246 )




Total
614,104 719,388



	Year Ended December 31,
	2016 $		2015 $
Revolving credit facilities due through 2021	466,195		530,971
Term loans due through 2021	475,466		635,330
Total principal	941,661		1,166,301
Less: unamortized discount and debt issuance costs	(8,645	)	(1,696	)
Total debt	933,016		1,164,605
Less: current portion	(171,019	)	(174,047	)
Non-current portion of long-term debt	761,997		990,558

As at December 31, ~~2014,~~2016, the Company had three revolving credit facilities (or theRevolvers), which, as at such date provided for aggregate borrowings of up to ~~$634.8~~$500.5 million, of which ~~$126.2~~$34.3 million was undrawn (December 31, ~~2013~~2015 - ~~$728.8~~$545.5 million, of which ~~$148.2~~$14.6 million was undrawn). Interest payments are based on LIBOR plus margins, which at December 31, ~~2014,~~2016 ranged between 0.45% and ~~0.60%~~2.00% (December 31, ~~2013:~~2015 - 0.45% and 0.60%). The total amount available under the Revolvers reduces by ~~$120.9~~$64.1 million ~~(2015)~~(2017), ~~$89.1 million (2016), $395.9 million (2017) and $28.9~~$67.3 million (2018), and $369.1 million (2021). As at December 31, ~~2014,~~2016 the ~~Revolvers were~~Company also had two term loans outstanding, which totaled $475.5 million (December 31, 2015 - $635.3 million). Interest payments on the term loans are based on LIBOR plus margins, which at December 31, 2016, the margin ranged from 0.30% to 2.00% (December 31, 2015 - 0.30% to 2.80%). The term loan repayments are made in quarterly or semi-annual payments. One term loan also has a balloon or bullet repayment due at maturity in 2021. These revolving credit facilities and term loans are further described below.

In January 2016, the Company entered into a $894.4 million long-term debt facility (or the New Debt Facility), consisting of both a term loan and a revolving credit component, which are both scheduled to mature in January 2021. In January 2016, $845.8 million of the New Debt Facility was used to repay the Company’s two bridge loan facilities, which matured in late January 2016, and a portion of the Company’s corporate revolving credit facility, which was scheduled to mature in 2017. As at December 31, 2016 the corporate revolving credit facility had an outstanding balance of $55.1 million (December 31, 2015 - $447.0 million). The New Debt Facility is collateralized by 2136 of the Company's vessels, together with other related security. The New Debt Facility also requires that the Company maintain a minimum hull coverage ratio of 125% of the total outstanding drawn balance for the facility period. Such requirement is assessed on a semi-annual basis with reference to vessel valuations compiled by two or more agreed upon third parties. Should the ratio drop below the required amount, the lender may request the Company either prepay a portion of the loan in the amount of the shortfall or provide additional collateral in the amount of the shortfall, at the Company's option. As at December 31, 2016, this ratio was 140%. The vessel values used in this ratio are appraised values prepared by the Company based on second-hand sale and purchase market data. A decline in the tanker market could negatively affect the ratio. In addition, the Company is required to maintain a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million and at least 5% of the Company's total consolidated debt.

The Company's two remaining Revolvers are collateralized by five of the Company’s vessels, together with other related security. One of the Revolvers requires that the Company’s applicable subsidiary maintain a minimum hull coverage ratio of 105% of the total outstanding drawn balance for the facility period. Such requirement is assessed on an annual basis, with reference to vessel valuations compiled by one or more agreed upon third parties. Should the ratio drop below the required amount, the lender may request the Company to either prepay a portion of the loan in the amount of the shortfall or provide additional collateral in the amount of the shortfall, at the Company's option. As at December 31, ~~2014, this~~2016, such revolver, with a minimum hull coverage ratio ~~was 153%~~requirement, had an outstanding balance of $72.0 million (December 31, 2015 - $84.0 million) and a hull coverage ratio of 117% (December 31, 2015 - 138%). The vessel value used in this ratio is an appraised value prepared by the Company based on second-hand sale and purchase market data. A decline in the tanker market could negatively affect the ratio. One of the Revolvers is guaranteed by Teekay and contains covenants that require Teekay to maintain the greater of free cash (cash and cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $50.0 million and at least 5.0% of Teekay’s total consolidated debt which has recourse to Teekay. In addition, one of the Revolvers requires the Company and certain of its subsidiaries to maintain a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million and at least 5.0% of the Company’s total consolidated debt.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

The Company's remaining term loan is collateralized by two ~~Revolvers are~~of the Company’s vessels, together with certain other related security. The term loan is guaranteed by Teekay and ~~contain~~contains covenants that require Teekay to maintain the greater of (a) free cash (cash and cash equivalents) of at least ~~$100.0~~$50.0 million and (b) an aggregate of free cash and undrawn committed revolving credit lines with at least six months to maturity of at least ~~7.5%~~5.0% of Teekay’s total consolidated debt which has recourse to Teekay.

As at December 31, ~~2014,~~2016, the Company ~~and Teekay were~~was in compliance with all ~~their~~ covenants in respect ofto the ~~Revolvers.~~

~~As at December 31, 2014,~~Revolvers and term loans. Teekay has also advised the Company had three term loans outstanding, which totaled $147.5 million (December 31, 2013—$164.0 million). Interest payments on the term loans are based on a combination of fixed and variable rates where fixed rates range from 4.06% to 4.90% and variable rates are based on LIBOR plus a margin. At December 31, 2014, the margins ranged from 0.30% to 1.0% (December 31, 2013 - 0.30% to 1.0%). The term loan repayments are made in quarterly or semi-annual payments and two of the term loans have balloon or bullet repayments due at maturity in 2019 and 2021. The term loans are collateralized by first-priority mortgages on six of the Company’s vessels, together with certain other related security. Two of the term loans require that the Company’s subsidiaries maintain minimum hull coverage ratios of 120% and 130%, respectively, of the total outstanding balance for the facility period. As at December 31, 2014, the loan to value ratios ranged from 212% to 676%. The vessel values used in these ratios are appraised values prepared by the Company based on second-hand sale and purchase market data. A decline in the tanker market could negatively affect the ratios. The term loans are guaranteed by Teekay and contain covenants that require Teekay to maintain the greater of free cash (cash and cash equivalents) of at least $100.0 million and an aggregate of free cash and undrawn committed revolving credit lines with at least six months to maturity of at least 7.5% of Teekay’s total consolidated debt which has recourse to Teekay. As at December 31, 2014, the Company and Teekay wereis in compliance with all ~~their~~ covenants ~~in respect of these~~relating to the revolving credit facilities and term ~~loans.~~

loans to which the Company is a party.

The Company and certain other subsidiaries of Teekay are borrowers under one term loan ~~arrangement and one revolving credit facility.~~arrangement. Under ~~these arrangements,~~this arrangement, each of the borrowers is obligated on a joint and several basis. For accounting purposes, obligations resulting from long-term debt joint and several liability arrangements are measured at the sum of the amount the Company agreed to pay, on the basis of its arrangement with its co-obligor, and any additional amount the Company expects to pay on behalf of its co-obligor. As of December 31, ~~2014,~~2016, the term loan arrangement had an outstanding balance of $188.3 million, of which $92.8 million was the Company’s share. As of December 31, 2014, the revolving credit facility had an outstanding balance of $89.3 million, of which $35.0 million was the Company’s share.$nil from its co-obligor. The Company does not expect to pay any amount on behalf of its ~~co-obligors.~~co-obligor. Teekay has agreed to indemnify the Company in respect of any losses and expenses arising from any breach by the co-obligors of the terms and conditions of the term ~~loan or revolving credit facility.~~

loan.

The weighted-average effective interest rate on the Company’s long-term debt as at December 31, ~~2014~~2016 was ~~1.1%~~2.4% (December 31, ~~2013~~2015 – ~~1.1%~~1.6%). This rate does not reflect the effect of the Company’s interest rate swap agreements (see note 9)11).

The aggregate annual long-term principal repayments required to be made by the Company under the Revolvers and term loans subsequent to December 31, ~~2014~~2016 are ~~$42.0 million (2015), $82.6 million (2016), $415.3~~$171.4 million (2017), ~~$53.2~~$175.6 million (2018), ~~$23.2~~$110.0 million (2019), $110.0 million (2020), and ~~$39.8~~$374.7 million ~~(thereafter)~~(2021).

9.
11.	Derivative Instruments

Interest rate swaps

The Company uses interest rate swaps in accordance with its overall risk management policies. The Company enters into interest rate swap agreements which exchange a receipt of floating interest for a payment of fixed interest to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company has not designated, for accounting purposes, its interest rate swaps as cash flow hedges of its U.S. Dollar denominated LIBOR borrowings.

~~Realized and unrealized gains or losses relating to~~

In February 2016, in connection with the Company’s new long-term debt facility, the Company entered into nine interest rate swaps. Four of the interest rate swaps commenced and are scheduled to terminate in October 2016 and December 2020, respectively, and have ~~been reported in realized and unrealized loss on non-designated derivative instruments~~notional amounts of $50.0 million each with fixed rates of 1.462%. The remaining five interest rate swaps commenced in the ~~consolidated statements~~first quarter of ~~income (loss). During the year ended~~2016 and are scheduled to terminate in January 2021, of which one swap has a notional amount of $75.0 million, one swap has a notional amount of $50.0 million, and three swaps have notional amounts of $25.0 million each with fixed rates of 1.549%, 1.155% and 1.549%, respectively.

As at December 31, ~~2014,~~2016, the Company ~~recognized a realized loss of $10.0 million and an unrealized gain of $7.1 million relating~~was committed to ~~its interest rate swaps. During~~ the year ended December 31, 2013, the Company recognized a realized loss of $9.9 million and an unrealized gain of $8.4 million relating to its interest rate swaps. During the year ended December 31, 2012, the Company recognized a realized loss of $9.6 million and an unrealized gain of $1.6 million relating to its interest rate swaps.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

~~The~~ following ~~summarizes the Company’s~~ interest rate swap ~~positions as at December 31, 2014:~~

Interest Rate
Index
   Principal
Amount
$    Fair Value /
Carrying Amount of
Asset (Liability)
$ Remaining
Term
(years)    Fixed Interest
Rate
(%)⁽¹⁾
LIBOR-Based Debt:

U.S. Dollar-denominated interest rate swap⁽¹⁾
   USD LIBOR 6M    200,000    (6,160 ) 1.8    2.61
U.S. Dollar-denominated interest rate swap⁽¹⁾
   USD LIBOR 3M    100,000    (12,065 ) 2.8    5.55

agreements:



	Interest Rate Index	Principal Amount $	Fair Value / Carrying Amount of Asset (Liability) $	Remaining Term (years)	Fixed Interest Rate ⁽¹⁾
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps	LIBOR	200,000	397	4.0	1.46%
U.S. Dollar-denominated interest rate swaps	LIBOR	150,000	1,479	4.0	1.55%
U.S. Dollar-denominated interest rate swaps	LIBOR	50,000	1,267	4.0	1.16%


(1)	Excludes the margin the Company pays on its variable-rate debt, which, as of December 31, ~~2014~~2016 ranged from ~~0.3%~~0.30% to ~~1.0%~~2.00%.

The Company is potentially exposed to credit loss in the event of non-performance by the counterparty to the interest rate swap agreements in the event that the fair value results in an asset being recorded. In order to minimize counterparty risk, the Company only enters into interest rate swap agreements with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time transactions are entered into.

Stock purchase warrant

The Company has aone stock purchase warrant entitling it to purchase up to 750,000 shares of common stock of TIL at a fixed price of $10 per share. Alternatively, if the shares of TIL’s common stock trade on a National Stock Exchange or over-the-counter market denominated in Norwegian Kroner, the Company may also exercise the stock purchase warrant at 61.67 Norwegian Kroner (or ~~NOK)~~NOK) per share. The stock

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

purchase warrant expires on January 23, 2019. For purposes of vesting, the stock purchase warrant is divided into four equally sized tranches. If the shares of TIL’s common stock trade on a National Stock Exchange or over-the-counter market denominated in Norwegian Kroner, each tranche will vest and become exercisable when and if the fair market value of a share of the TIL common stock equals or exceeds ~~77.08~~$77.08 NOK, ~~92.50~~$92.50 NOK, ~~107.91~~$107.91 NOK and ~~123.33~~$123.33 NOK, respectively, for such tranche for any ~~ten~~10 consecutive trading days, subject to certain trading value requirements. As ofat December 31, ~~2014,~~2016, the first two tranches have vested.

Time-charter swap

Effective June 1, 2016, the Company entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels. Under such agreement, the Company will receive $27,776 per day, less a 1.25% brokerage commission, and pay 55% of the net revenue distribution of two Aframax equivalent vessels employed in the Company’s Aframax revenue sharing pooling arrangement, less $500 per day, for a period of 11 months plus an additional two months at the counterparty’s option. The purpose of the agreement is to reduce the Company’s exposure to spot tanker market rate variability for certain of its vessels that are employed in the Aframax revenue sharing pooling arrangement. The Company has not designated, for accounting purposes, the time-charter swap as a cash flow hedge.

The following table presents the location and fair value amounts of ~~the stock purchase warrant was $4.7 million, which is reflected in~~ derivative ~~assets~~instruments, segregated by type of contract, on the Company’s consolidated balance ~~sheet. The~~sheets.



	Current portion of derivative asset $	Derivative assets $	Accrued liabilities $		Current portion of derivative liabilities $		Derivative liabilities $
As at December 31, 2016
Interest rate swap agreements	—	4,251	(254	)	(1,108	)	—
Stock purchase warrant	—	287	—		—		—
Time-charter swap agreement	875	—	(667	)	—		—
	875	4,538	(921	)	(1,108	)	—

As at December 31, 2015
Interest rate swap agreements	—	—	(2,359	)	(6,330	)	(4,208	)
Stock purchase warrant	—	5,164	—		—		—
Time-charter swap agreement	—	—	—		—		—
	—	5,164	(2,359	)	(6,330	)	(4,208	)

Realized and unrealized (losses) gains relating to interest rate swaps, stock purchase warrant ~~had a value of $3.4 million on issuance~~and the time-charter swap are recognized in ~~January 2014~~earnings and such amount is reflected in the other income (expenses) in the Company’s consolidated statements of income (loss). During the year ended December 31, 2014, the Company also recognized an unrealized gain of $1.2 million relating to the changes in the value of the warrant. Unrealized gains and losses are reflectedreported in realized and unrealized loss on derivative instruments in the Company’s consolidated statements of income ~~(loss).~~

as follows:



	Year Ended December 31, 2016 $		Year Ended December 31, 2015 $		Year Ended December 31, 2014 $
Realized (losses) gains relating to:
Interest rate swaps agreements	(12,797	)	(9,790	)	(9,993	)
Time-charter swap agreement	2,154		—		—
	(10,643	)	(9,790	)	(9,993	)

Unrealized gains (losses) relating to:
Interest rate swaps agreements	13,681		7,686		7,044
Stock purchase warrant	(4,877	)	507		1,237
Time-charter swap agreement	875		—		—
	9,679		8,193		8,281
Total realized and unrealized loss on derivatives	(964	)	(1,597	)	(1,712	)

~~10.~~
12.	Other Long-Term Liabilities

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

The ~~Company recognizes~~following is a roll-forward of the Company’s freight tax ~~expenses in other income (expenses)~~liabilities which are recorded in its consolidated ~~statements of income (loss).~~ balance sheets in other long-term liabilities, from January 1, 2015 to December 31, 2016:



	Year Ended December 31,
	2016 $		2015 $
Balance of unrecognized tax benefits as at January 1	7,597		4,852
Increases for positions related to the current year	6,777		3,294
Changes for positions taken in prior years	(800	)	42
Decreases related to statute of limitations	(692	)	(591	)
Balance of unrecognized tax benefits as at December 31	12,882		7,597

The Company does not presently anticipate its uncertain tax positions will significantly increase or decrease in the next 12 months; however, actual developments could differ from those currently expected.

The ~~following is a roll-forward~~tax years 2010 through 2016 remain open to examination by some of the ~~Company’s~~major jurisdictions in which the Company is subject to tax.

The Company recognizes freight tax expenses ~~which are recorded~~in other expenses in its consolidated ~~balance sheets~~statements of income. Interest and penalties on freight tax expenses are included in ~~other long-term liabilities, from January 1, 2012 to~~the roll-forward schedule above and are approximately $0.8 million and $1.3 million for the years ended December 31, ~~2014:~~

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Balance at the beginning of the year
   5,351    4,757    5,449
Freight tax (recovery) expense
   (499 )    594    (692 )






Balance at the end of the year
4,852 5,351 4,757

2016 and 2015, respectively.

~~11.~~
13.	Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents and restricted cash– The fair value of the Company’s cash and cash equivalents and restricted cash approximates its carrying amounts reported in the consolidated balance sheets.

~~Investment in term loans and interest receivable~~– The fair value of the Company’s investment in term loans and interest receivable is estimated using a discounted cash flow analysis, based on current rates currently available for debt with similar terms and remaining maturities. In addition, the value of the collateral and an assessment of the credit worthiness of the borrower is taken into account when determining the fair value.

Long-term debt – The fair values of the Company’s fixed-rate and variable-rate long-term debt is 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 Company.

Derivative instruments

The fair value of the Company’s interest rate swap agreements are the estimated amounts that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, and if the swap is not collateralized, the current credit worthiness of either the Company or the swap counterparties. The estimated amount is the present value of future cash flows. The inputs used to determine the future cash flows include the fixed interest rate of the swaps and market interest rates. Given the current volatility in the credit markets, it is reasonably possible that the amounts recorded as derivative assets and liabilities could vary by material amounts in the near term.

The Company has entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels (see note 11). The fair value of this derivative agreement is the estimated amount that the Company would receive or pay to terminate the agreement at the reporting date, based on the present value of the Company's projection of future Aframax spot market tanker rates, which have been derived from current Aframax spot market tanker rates and estimated future rates.

The estimated fair value of the time-charter swap agreement as of December 31, 2016 is based upon an estimated average daily tanker rate of approximately $18,000 over the remaining duration of the contract. In developing and evaluating this estimate, the Company considers the current tanker market fundamentals as well as the short and long-term outlook. A higher or lower average daily tanker rate would result in a higher or lower fair value liability.

Changes in fair value during the year ended December 31, 2016 for the Company's time-charter swap agreement are as follows:



	Year Ended December 31, 2016 $
Fair value at the beginning of the year	—
Settlements	(2,154	)
Realized and unrealized gain included in earnings	3,029
Fair value at the end of the year	875

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

~~Derivative instruments~~ – The fair value of the Company’s interest rate swap agreements are the estimated amounts that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, and if the swap is not collateralized, the current credit worthiness of either the Company or the swap counterparties. The estimated amount is the present value of future cash flows. The inputs used to determine the future cash flows include the fixed interest rate of the swaps and market interest rates. Given the current volatility in the credit markets, it is reasonably possible that the amounts recorded as derivative assets and liabilities could vary by material amounts in the near term.

During January 2014, the Company received a stock purchase warrant entitling it to purchase up to 750,000 shares of the common stock of TIL (see note 9). The estimated fair value of the stock purchase warrant was determined using a Monte-Carlo simulation and is based, in part, on the historical price of common shares of TIL, the risk-free interest rate, vesting conditions and the historical volatility of comparable companies. The estimated fair value of the stock purchase warrant as of December 31, 2014 is based on the historical volatility of comparable companies of 61.54%. A higher or lower volatility would result in a higher or lower fair value of this derivative asset.

During January 2014, the Company received a stock purchase warrant entitling it to purchase up to 750,000 shares of the common stock of TIL (see note 11). The estimated fair value of the stock purchase warrant was determined using a Monte-Carlo simulation and is based, in part, on the historical price of common shares of TIL, the risk-free interest rate, vesting conditions and the historical volatility of comparable companies. The estimated fair value of the stock purchase warrant as of December 31, 2016 is based on the historical volatility of comparable companies of 47.83%. A higher or lower volatility would result in a higher or lower fair value of this derivative asset.

Changes in fair value during the ~~year~~years ended December 31, ~~2014~~2016 and 2015 for the TIL stock purchase warrant isare as follows:


	~~Year Ended~~ ~~December 31,~~ ~~2014~~ $
~~Fair value at the beginning of the period~~		—
~~Fair value on issuance~~		~~3,420~~
~~Unrealized gain included in earnings~~		~~1,237~~

~~Fair value at the end of the period~~		~~4,657~~



	Year Ended December 31, 2016 $		Year Ended December 31, 2015 $
Fair value at the beginning of the year	5,164		4,657
Unrealized (loss) gain included in earnings	(4,877	)	507
Fair value at the end of the year	287		5,164

The Company 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:

~~Level 1. Observable inputs such as quoted prices in active markets;~~

~~Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and~~

~~Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.~~


Level 1.	Observable inputs such as quoted prices in active markets;


Level 2.	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and


Level 3.	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table includes the estimated fair value, carrying value and categorization using the fair value hierarchy of those assets and liabilities that are measured at their estimated fair value on a recurring and non-recurring basis, as well as certain financial instruments that are not measured at fair value.

   December 31, 2014 December 31, 2013
   Fair Value
Hierarchy
Level    Carrying Amount
Asset/ (Liability)
$ Fair Value Asset/
(Liability)
$ Carrying Amount
Asset/ (Liability)
$ Fair Value Asset/
(Liability)
$
Recurring:

Cash and cash equivalents
   Level 1       162,797 162,797 25,646 25,646
Derivative instruments

Interest rate swap agreements (note 9)
   Level 2       (18,225 ) (18,225 ) (25,268 ) (25,268 )
Stock purchase warrant (note 9)
   Level 3       4,657 4,657 —   —
Other:

Investment in term loans and

interest receivable (note 5)
   Level 3       —   —   136,061 134,857
Advances to equity accounted investments
   Note (1)       14,980 Note (1)    16,930 Note (1)
Long-term debt, including current portion
   Level 2       (656,063 ) (617,761 ) (744,634 ) (679,910 )



	December 31, 2016					December 31, 2015
	Fair Value Hierarchy Level	Carrying Amount Asset/ (Liability) $		Fair Value Asset/ (Liability) $		Carrying Amount Asset/ (Liability) $		Fair Value Asset/ (Liability) $
Recurring:
Cash and cash equivalents and restricted cash	Level 1	68,858		68,858		97,287		97,287
Derivative instruments (note 11)
Interest rate swap agreements ⁽¹⁾	Level 2	3,143		3,143		(10,538	)	(10,538	)
Time-charter swap agreement ⁽¹⁾	Level 3	875		875		—		—
Stock purchase warrant	Level 3	287		287		5,164		5,164

Non-recurring:
Vessels held for sale (note 21)	Level 2	33,802		33,802		—		—

Other:
Advances to equity accounted investments	Note (2)	10,480		Note (2)		13,980		Note (2)
Long-term debt, including current portion	Level 2	(933,016	)	(923,306	)	(1,164,605	)	(1,140,135	)


(1)	The fair value of the Company's interest rate swap agreements and time-charter swap agreement at December 31, 2016 excludes accrued interest expense which is recorded in accrued liabilities in these consolidated financial statements.


(2)	The advances to equity accounted investments together with the Company’s investments in the equity accounted investments form the net aggregate carrying value of the Company’s interests in the equity accounted investments in these consolidated financial statements. The fair values of the individual components of such aggregate interests are not determinable.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

~~12.~~
14.	Capital Stock

The authorized capital stock of Teekay Tankers Ltd. at December 31, ~~2014~~2016 and ~~2013,~~2015, was 100,000,000 shares of ~~preferred stock,~~Preferred Stock, with a par value of $0.01 per share, 200,000,000 shares of Class A common stock, with a par value of $0.01 per share, and 100,000,000 shares of Class B common stock, with a par value of $0.01 per share. The shares of Class A common stock entitle the holder to one vote per share while the shares of Class B common stock entitle the holder to five votes per share, subject to a 49% aggregate Class B common stock voting

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

power maximum. As at December 31, ~~2014,~~2016, the Company had ~~95.3~~136.1 million shares of Class A common stock ~~(2013~~(2015 – ~~71.1~~132.8 million), ~~16.7~~23.2 million shares of Class B common stock ~~(2013~~(2015 – ~~12.5~~23.2 million) and no shares of Preferred Stock issued and outstanding ~~(2013~~(2015 – nil). ~~Subsequent to December 31, 2014, the Company issued an additional 3 million shares of Class A common stock (see note 20b).~~

Commencing in ~~2013,~~December 2015, the Company adopted a new dividend policy under which quarterly dividends were set to range from 30% to 50% of its quarterly adjusted net income, subject to the discretion of its Board of Directors, with a minimum quarterly dividend of $0.03 per share. Adjusted net income is a non-GAAP measure which excludes specific items affecting net income that are typically excluded by securities analysts in their published estimates of the Company's financial results. Prior to the change, the Company had a fixed dividend ~~policy. The~~policy whereby annual ~~dividend was~~dividends were set at an amount of $0.12 per share, payable quarterly. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Class A common stock and Class B common stock are entitled to share equally in any dividends that the Board of Directors declares from time to time out of funds legally available for dividends.

Upon the Company’s liquidation, dissolution or winding-up, the holders of Class A common stock and Class B common stock shall be entitled to share equally in all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock. Shares of the Company’s Class A common stock are not convertible into any other shares of the Company’s capital stock. Each share of Class B common stock is convertible at any time at the option of the holder thereof into one share of Class A common stock. Upon any transfer of shares of Class B common stock to a holder other than Teekay (or any of its affiliates or any successor to Teekay’s business or to all or substantially all of its assets), such shares of Class B common stock shall automatically convert into Class A common stock upon such transfer. In addition, all shares of Class B common stock will automatically convert into shares of Class A common stock if the aggregate number of outstanding shares of Class A common stock and Class B common stock beneficially owned by Teekay and its affiliates falls below 15% of the aggregate number of outstanding shares of common stock. All such conversions will be effected on a one-for-one basis.

Stock-based compensation

As at December 31, ~~2014,~~2016, the Company had reserved under its 2007 Long-Term Incentive Plan a total of 4,000,000 shares of Class A common stock for issuance pursuant to awards to be granted ~~(2013~~(2015 – ~~1,000,000~~4,000,000 Class A common stock). For the year ended December 31, ~~2014,~~2016, a total of 9,358 shares (2015 – 51,948 shares, 2014 – 17,073 ~~shares~~shares) of Class A common stock were granted and issued to the Company’s non-management directors as part of their annual compensation. For the years ended December 31, 2013 and 2012, 142,157 shares and 82,573 shares of Class A common stock, respectively, have been granted and delivered to non-management Directors as part of the Directors’ annual compensation. These Class A common shares were purchased on the open market rather than issuing shares from authorized capital. The compensation relating to the granting of such stock has been included in general and administrative expenses in the amounts of ~~$0.1 million, $0.4~~$35.0 thousand, $0.3 million, and ~~$0.4~~$0.1 million for the years ended December 31, 2016, 2015, and 2014, ~~2013, and 2012,~~ respectively.

The Company also grants options and restricted stock units as incentive-based compensation under the Teekay Tankers Ltd. 2007 Long-Term Incentive Plan to certain non-management directors of the Company and to certain employees of Teekay subsidiaries that provide services to the Company. The Company measures the cost of such awards using the grant date fair value of the award and recognizes that cost, net of estimated forfeitures, over the requisite service period. The requisite service period consists of the period from the grant date of the award to the earlier of the date of vesting or the date the recipient becomes eligible for retirement. For stock-based compensation awards subject to graded vesting, the Company calculates the value for the award as if it was one single award with one expected life and amortizes the calculated expense for the entire award on astraight-line basis over the requisite service period. The compensation cost of the Company‘s stock-based compensation awards is reflected in general and administrative expenses in the Company’s consolidated statements of ~~income (loss).~~

~~In June 2014,~~income.

During 2016, the Company granted ~~0.1~~0.3 million (2015 - nil; 2014 - 0.2 million) stock options with an exercise price of ~~$4.25~~$3.74 per share (2014 - $4.10) to ~~an officer of~~ the ~~Company.~~Company’s non-management directors. These stock options have a ten-year term and vest immediately. The Company also granted 0.2 million (2015 - 58 thousand; 2014 - 0.1 million) stock options with an exercise price of $3.74 per share (2015 - $5.39; 2014 - $4.25) to an officer of the Company. Each stock option granted has a ten-year term and vests equally over three years from the grant date. ~~In March 2014,~~

The weighted-average fair value of the ~~Company granted 0.2 million~~ stock options ~~with an exercise price of $4.10~~granted during 2016 was $0.87 per ~~share to non-management directors~~option (2015 - $1.97 per option), estimated on the grant date using the Black-Scholes option pricing model. The following assumptions were used in computing the fair value of the ~~Company. These~~ stock options ~~have a ten-year term~~granted: expected volatility of 51.3% (2015 - 49.0%); expected life of five years (2015 - five years); dividend yield of 7.8% (2015 - 2.1%); and ~~vest immediately.~~

risk-free interest rate of 1.2% (2015 - 1.4%). The expected life of the stock options granted was estimated using the historical exercise behavior of employees of Teekay that receive stock options from Teekay. The expected volatility was based on historical volatility as calculated using historical data during the five years prior to the grant date.

The weighted-average grant-date fair value of stock options granted in June 2014 and March 2014 was $1.38 per option and $1.37 per option, respectively, estimated on the grant date using the Black-Scholes option pricing model. The following assumptions were used in computing the fair value of the stock options granted: expected volatility of 46.0% for the June 2014 grant and 47.7% for the March 2014 grant; expected life of five years; dividend yield of 2.8% for the June 2014 grant and 2.9% for the March 2014 grant; and risk-free interest rate of 1.6%. The expected life of the stock options granted was estimated using the historical exercise behavior of employees of Teekay that receive stock options from Teekay. The expected volatility was based on historical volatility as calculated using historical data during the five years prior to the grant date.

A summary of the Company’s stock option information for the years ended December 31, 2016, 2015, and 2014 is as follows:

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

~~A summary of the Company’s stock option information for the year ended December 31, 2014 is as follows:~~

   December 31, 2014
   Options (#)    Weighted-Average
Exercise Price ($)
Outstanding - beginning of year
   —         —
Granted
   263,175    4.16




Outstanding - end of year
263,175 4.16




Exercisable - end of year
152,346 4.10



	December 31, 2016		December 31, 2015		December 31, 2014
	Options (#)	Weighted-Average Exercise Price ($)	Options (#)	Weighted-Average Exercise Price ($)	Options (#)	Weighted-Average Exercise Price ($)
Outstanding - beginning of year	321,609	4.39	263,175	4.16	—	—
Granted	500,736	3.74	58,434	5.39	263,175	4.16
Outstanding - end of year	822,345	3.99	321,609	4.39	263,175	4.16

Exercisable - end of year	530,034	3.97	188,920	4.13	152,346	4.10

A summary of the Company’s non-vested stock option activity and related information for the ~~year~~years ended December 31, 2016, 2015 and 2014 is as follows:

   December 31, 2014
   Options (#)    Weighted-Average
Grant Date Fair
Value ($)
Outstanding non-vested stock options - beginning of year
   —         —
Granted
   110,829    4.25




Outstanding non-vested stock options - end of year
110,829 4.25



	December 31, 2016			December 31, 2015			December 31, 2014
	Options (#)		Weighted-Average Grant Date Fair Value ($)	Options (#)		Weighted-Average Grant Date Fair Value ($)	Options (#)	Weighted-Average Grant Date Fair Value ($)
Outstanding non-vested stock options - beginning of year	132,689		4.75	110,829		4.25	—	—
Granted	216,043		3.74	58,434		5.39	110,829	4.25
Vested	(56,421	)	4.64	(36,574	)	4.25	—	—
Outstanding non-vested stock options - end of year	292,311		4.02	132,689		4.75	110,829	4.25

As of December 31, ~~2014,~~2016, there was $0.2 million (2015 - $0.2 million, 2014 - $0.1 ~~million~~million) of total unrecognized compensation cost related to non-vested stock options ~~granted during the year.~~granted. During the year ended December 31, ~~2014,~~2016, the Company recognized $0.1 million (2015 - $0.1 million, 2014 - $0.2 ~~million (2013 - $nil,2012 - $nil)~~million) of expenses related to the stock ~~options.~~

options granted to an officer of the Company.

As at December 31, ~~2014,~~2016, the intrinsic value of the outstanding in-the-money stock options was ~~$0.2 million~~$nil (2015 - $0.8 million) and the intrinsic value of the exercisable stock options was ~~$0.1 million.~~$nil (2015 - $0.5 million). As at December 31, ~~2014,~~2016, the weighted-average remaining life of options vested and expected to vest was ~~9.2~~8.5 years (2015 - 8.6 years) and the weighted-average remaining life of the ~~152,346~~ exercisable stock options was ~~9.2~~8.3 years ~~and the weighted-average exercise price was $4.10.~~

(2015 - 8.2 years).

During ~~2014,~~2016, the Company granted 0.3 million (2015 - 0.2 million; 2014 - 0.6 ~~million~~million) restricted stock units to ~~an officer~~the officers of the Company and to certain employees of Teekay subsidiaries that provide services to the Company, with an aggregate fair value of $1.0 million (2015 - $1.0 million; 2014 - $2.3 million. During 2013, the Company granted 0.4 million restricted stock units to certain employees of Teekay subsidiaries that provide services to the Company with an aggregate fair value of $1.0 million.million). Each restricted stock unit is equal in value to one share of the Company’s common shares plus reinvested dividends from the grant date to the vesting date. The restricted stock units vest equally over three years from the grant date. Any portion of a restricted stock unit award that is not vested on the date of a recipient’s termination of service is cancelled, unless their termination arises as a result of the recipient’s retirement and, in that case, the restricted stock unit award will continue to vest in accordance with the vesting schedule. Upon vesting, the value of the restricted stock unit awards, net of withholding taxes, is paid to each recipient in the form of common shares.

For the year ended December 31, ~~2014,~~2016, the Company recorded an expense of $1.4 million (2015 - $1.4 million, 2014 - $1.2 ~~million (2013 - $0.7 million, 2012 - $nil)~~million) related to the restricted stock ~~units.~~units in general and administrative expenses. During the year ended December 31, ~~2014, 122,146~~2016, 0.4 million restricted stock units (2015 - 0.4 million) with a market value of ~~$0.6~~$1.5 million (2015 - $2.3 million) vested and that amount, net of withholding taxes, was paid to the grantees by issuing ~~68,322~~0.2 million shares (2015 - 0.2 million shares) of Class A common stock.

~~13.~~
15.	Related Party Transactions

Acquisitions and ~~Dropdown Acquisitions~~

Acquisition of Entities under Common Control


a.	On July 31, 2015, the Company acquired SPT (see note 24) and on December 18, 2015 the Company acquired the Explorer Spirit and Navigator Spirit (see note 3).


b.	In August 2014, the Company purchased from Teekay a 50% ownership in TTOL, which owns conventional tanker commercial management and technical management operations, including the direct ownership in three commercially managed tanker pools, for an aggregate price of ~~$23.5~~$23.7 million, including ~~$6.5~~$6.7 million in net working capital (seenote 6c)8c).

	b.
c.	In January 2014, the Company and Teekay formed TIL. The Company ~~purchase~~purchased 2.5 million shares of common stock of TIL for $25.0 million and received a stock purchase warrant. In October 2014, the Company purchased an additional 0.9 million common shares of TIL on the open market for a purchase price of $10.0 million USD (see~~note 6b~~) notes 8b and 11).

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)


d.	In May 2014, the Company sold two wholly-owned subsidiaries, each of which ~~owns~~owned one VLCC, to TIL for the aggregate proceeds of ~~$154~~$154.0 million plus related working capital on closing of $1.7 million (seenote 18)21).

In April 2010, when the Company purchased theKaveri SpiritSuezmax tanker from Teekay, Teekay provided indemnification to the Company for the costs required to repair heating coils on the ~~Suezmax tanker.~~vessel. During the first quarter of 2014, the repairs were performed to coincide with the scheduled ~~drydocking~~dry docking of the vessel. The Company received a $1.3 million indemnification payment from Teekay, which was treated as a reduction to the purchase price originally paid by the Company for the vessel.

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

During June 2012, the Company acquired from Teekay a fleet of 13 double-hull conventional oil and product tankers and related time-charter contracts, debt facilities and other assets and rights, for an aggregate purchase price of approximately $454.2 million (see~~note 1~~).

Management Fee – Related and Other

~~Prior to 2015, the Company chartered two vessels to Teekay. In addition,~~

Teekay and its wholly owned subsidiary and the Company’s manager, Teekay Tankers Management Services Ltd. (the Manager), provide commercial, technical, strategic and administrative services to the Company pursuant to a long-term management agreement (theManagement Agreement). In addition, certain of the Company’s vessels participate in pooling arrangements that, with the exception of a Medium Range pool, are managed by entities owned in whole or in part by subsidiaries of Teekay (collectively thePool Managers). Such related party transactions were as follows:

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Time-charter revenues⁽ⁱ⁾
   13,728    13,506    14,604
Pool management fees and commissions⁽ⁱⁱ⁾
   (5,292 )    (4,043 )    (3,565 )
Commercial management fees⁽ⁱⁱⁱ⁾
   (1,117 )    (1,079 )    (1,118 )
Vessel operating expenses - crew training
   (1,757 )    (1,163 )    (2,870 )
Vessel operating expenses - technical management fee^(iv)
   (5,613 )    (5,637 )    (4,379 )
Strategic and administrative service fees^(v)
   (8,676 )    (10,783 )    (5,492 )
Vessel operating expenses - technical management fee - Dropdown Predecessor^{(note 1)}
   —      —      (2,566 )
Interest expense - Dropdown Predecessor^{(note 1)}
   —      —      (11,660 )



	Year Ended December 31,
	2016 $		2015 $		2014 $
Time-charter revenues ⁽ⁱ⁾	5,404		392		13,728
Lay-up services revenues ⁽ⁱⁱ⁾	302		—		—
LNG terminal services revenues ⁽ⁱⁱⁱ⁾	70		—		—
Pool management fees and commissions ^(iv)	(9,813	)	(10,445	)	(5,292	)
Commercial management fees ^(v)	(1,870	)	(1,236	)	(1,117	)
Vessel operating expenses - technical management fee ^(vi)	(9,155	)	(7,039	)	(5,613	)
Strategic and administrative service fees ^(vii⁾	(10,122	)	(8,356	)	(8,676	)
Entities under Common Control (note 3)
Time-charter revenues^(viii)	—		4,558		6,572
Bareboat charter revenues^(ix)	—		—		1,156
Commercial management fees	—		(246	)	(226	)
Vessel operating expenses - technical management fee	—		(430	)	(399	)
Strategic and administrative service fees	—		(660	)	(861	)

(i)

In December 2015, immediately after the completion of the 2015 Acquired Business, the Company chartered-out the Navigator Spirit to Teekay under a fixed-rate time-charter contract, which was due to expire in July 2016. On May 18, 2016, the contract was transferred to the Americas Spirit, which subsequently expired on July 15, 2016. The Company also had chartered-out thePinnacle Spirit andSummit Spirit to Teekay under fixed-rate time-charter contracts, which expired in the fourth quarter of 2014.


(ii)	The Company recorded revenue of $0.3 million for the year ended December 31, 2016 to provide lay-up services to Teekay for two of its in-chartered vessels.

(iii)

In November 2016, the Company's ship-to-ship transfer business signed an operational and maintenance subcontract with Teekay LNG Bahrain Operations L.L.C., an entity wholly owned by Teekay LNG Partners L.P. (or TGP), for the Bahrain LNG Import Terminal (or the Terminal). The Terminal is owned by Bahrain LNG W.I.L., a joint venture for which Teekay LNG Operating L.L.C., an entity wholly owned by TGP, has a 30% interest.


(iv)	The Company’s share of the Pool Managers’ fees are reflected as a reduction to net pool revenues from affiliates on the Company’s consolidated statements of ~~income (loss).~~ income.

	~~(iii)~~
(v)	The Manager’s commercial management fees for vessels on time-charter out contracts and spot-traded vessels not included in the pooling arrangement, which are reflected in voyage expenses on the Company’s consolidated statements of ~~income (loss).~~ income.

	~~(iv)~~
(vi)	The cost of ship management services provided by the Manager has been presented as vessel operating expenses on the Company’s consolidated statements of ~~income (loss).~~ income.

~~(v)~~

(vii)

The Manager’s strategic and administrative service fees have been presented in general and administrative fees on the Company’s consolidated statements of ~~income (loss).~~income. The Company’s executive officers are employees of Teekay or subsidiaries thereof, and their compensation (other than any awards under the Company’s long-term incentive plan described in note ~~12)~~14) is set and paid by Teekay or such other subsidiaries. The Company reimburses Teekay for time spent by its executive officers on the Company’s management matters through the strategic portion of the management fee.

	f.
(viii)	The Company recorded $4.6 million and $6.6 million related to a time-charter out contract for the Explorer Spirit for the years ended December 31, 2015 and 2014, respectively, associated with the Entities under Common Control. The vessel was under a fixed-rate time-charter contract with SPT which expired in September 2015.

(ix)

The Company recorded $0.9 million related to a bareboat charter contract for the Explorer Spirit for the year ended December 31, 2014, associated with the Entities under Common Control. The vessel was under a fixed-rate bareboat contract with SPT which expired in March 2014. The Company also recorded $0.3 million related to a bareboat charter contract for the Navigator Spirit for the year ended December 31, 2014, associated with the Entities under Common Control. The vessel was under a fixed-rate bareboat charter contract with SPT which expired in January 2014.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

The Manager and other subsidiaries of Teekay collect revenues and remit payments for expenses incurred by the Company’s vessels. Such amounts, which are presented in the consolidated balance sheets in due from affiliates or due to affiliates, are without interest or stated terms of repayment. In addition, ~~$5.9~~$8.6 million and ~~$5.8~~$7.9 million were payable to the Manager as at December 31, ~~2014~~2016 and ~~December 31, 2013,~~2015, respectively, for reimbursement of the Manager’s crewing and manning costs to operate the Company’s vessels and such amounts are included in accrued liabilities in the consolidated balance sheets. The amounts owing from the Pool Managers, which are reflected in the consolidated balance sheets as pool receivables from affiliates, are without interest and are repayable upon the terms contained within the applicable pool agreement. In addition, the Company had advanced ~~$36.2~~$35.7 million and ~~$20.3~~$46.8 million as at December 31, ~~2014~~2016 and ~~December 31, 2013,~~2015, respectively, to the Pool Managers for working capital purposes. The Company may be required to advance additional working capital funds from time to time. Working capital advances will be returned to the Company when a vessel no longer participates in the applicable pooling arrangement, less any set-offs for outstanding liabilities or contingencies. These activities, which are reflected in the consolidated balance sheets as due from affiliates, are without interest or stated terms of repayment.

The Management Agreement provides for payment to the Manager of a performance fee in certain circumstances. If Gross Cash Available for Distribution for a given fiscal year exceeds $3.20 per share of the Company’s weighted average outstanding common stock (or theIncentive Threshold), the Company is generally required to pay a performance fee equal to 20% of all Gross Cash Available for Distribution for such year in excess of the Incentive Threshold. The Company did not incur any performance fees for the years ended December 31, ~~2014, 2013~~2016, 2015 and ~~2012.~~2014. Cash Available for Distribution represents net income ~~(loss)~~ plus depreciation and amortization, unrealized losses from derivatives, non-cash items and any write-offs or other non-recurring items, less unrealized gains from derivatives and net income attributable to the historical results of vessels acquired by the Company from Teekay, prior to their acquisition by us, for the period when these vessels were owned and operated by Teekay.Gross Cash Available for Distribution represents Cash Available for Distribution without giving effect to any deductions for performance fees and reduced by the amount of any reserves the Company’s Board of Directors may establish during the applicable fiscal period that have not already reduced the Cash Available for ~~Distribution.~~

Distribution.

Pursuant to certain pooling arrangements (see ~~Note 4)~~note 5), the Pool Managers provide certain commercial services to the pool participants and administer the pools in exchange for a fee currently equal to 1.25% of the gross revenues attributable to each pool participant’s vessels and a fixed amount per vessel per day which ranges from $275 to $350. Voyage revenues and voyage expenses of the Company’s vessels operating in these pool arrangements are pooled with the voyage revenues and voyage expenses of other pool participants. The resulting net pool revenues, calculated on a time-charter equivalent basis, are allocated to the pool participants according

~~TEEKAY TANKERS LTD. AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)~~

to an agreed formula. The Company accounts for the net allocation from the pools as “net pool ~~revenues from affiliates”~~revenue” on the consolidated statements of income. The pool receivable from affiliates as at December 31, ~~2014~~2016 and ~~December 31, 2013 were $35.3~~2015 was $24.6 million and ~~$10.8~~$62.7 million, respectively.

~~14.~~
16.	Other (Expense) Income ~~(Expense)~~

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Freight tax recovery (expense)
   154    (594 )    (1,530 )
Gain on initial recognition of stock purchase warrant^{(Note 6b)}
   3,420    —      —
Foreign exchange gain (loss)
   138    (107 )    (428 )
Other
   97    (313 )    (105 )






Total
3,809 (1,014 ) (2,063 )



	Year Ended December 31,
	2016 $		2015 $		2014 $
Income tax (expense) recovery	(7,511	)	(3,339	)	154
Gain on initial recognition of stock purchase warrant	—		—		3,420
Foreign exchange gain	1,449		252		138
Other (expense) income	(9	)	(10	)	93
Total	(6,071	)	(3,097	)	3,805

~~15.~~
17.	Operating Leases

Charters-in

As at December 31, ~~2014,~~2016, minimum commitments to be incurred by the Company under vessel operating leases by which the Company charters-in 12nine vessels, including two workboats for the lightering support services, were approximately ~~$49.0~~$26.8 million ~~(2015)~~(2017), ~~$8.5~~$8.3 million ~~(2016)~~(2018), $8.3 million (2019), $8.3 million (2020), and ~~$4.8~~$1.4 million ~~(2017)~~(2021). The Company 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.

Charters-out

As at December 31, ~~2014, eight~~2016, 13 of the Company’s vessels and one in-chartered vessel operated under fixed-rate time charter contracts with the Company’s customers, of which ~~five~~seven contracts are scheduled to expire in ~~2015 and three~~2017, six contracts are scheduled to expire in ~~2016.~~2018 and one contract is scheduled to expire in 2019. As at December 31, ~~2014,~~2016, minimum scheduled future revenues to be received by the Company under time charters then in place were approximately ~~$44.5~~$136.5 million, comprised of ~~$36.3~~$93.4 million ~~(2015)~~(2017), $40.5 million (2018) and ~~$8.2~~$2.6 million ~~(2016)~~(2019). The carrying amount of the Company's owned vessels which are employed on these time charters as at December 31, ~~2014,~~2016, was ~~$224.8~~$471.7 million ~~(2013~~(2015 - ~~$431.1~~$442.5 million). The cost and accumulated depreciation of the vessels employed on these time charters as at December 31, ~~2014~~2016 were ~~$352.4~~$683.2 million ~~(2013~~(2015 - ~~$598.1~~$596.7 million) and ~~$127.6~~$211.5 million ~~(2013~~(2015 - ~~$167.0~~$154.2 million), respectively.

The minimum scheduled future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimum scheduled future revenues do not include revenue generated from new contracts entered into after December 31, ~~2014,~~2016, revenue from unexercised option periods of contracts that existed on December 31, ~~2014,~~2016, or variable or contingent revenues. In addition, minimum scheduled future revenues

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

presented above have been reduced by estimated off-hire time for period maintenance. Actual amounts may vary given unscheduled future events such as vessel maintenance.

~~16.~~
18.	Supplemental Cash Flow Information


a.	The changes in non-cash working capital items related to operating activities for the years ended December 31, ~~2014, 2013,~~2016, 2015, and ~~2012~~2014 are as follows:

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Accounts receivable and interest receivable
   (9,049 )    (9,150 )    (3,317 )
Pool receivables from affiliates
   (24,489 )    (1,664 )    (4,741 )
Due from affiliates
   (14,511 )    (3,204 )    (12,177 )
Prepaid expenses and other current assets
   1,478    (647 )    (3,147 )
Accounts payable and accrued liabilities
   (3,856 )    2,092    2,337
Due to affiliates
   (928 )    7,731    (1,204 )
Deferred revenue
   (2,324 )    (1,603 )    855
Other
   2,000    (141 )    1,600






(51,679 ) (6,586 ) (19,794 )


��



	Year Ended December 31,
	2016 $		2015 $		2014 $
Accounts receivable and interest receivable	(2,128	)	(13,506	)	(8,464	)
Pool receivables from affiliates	38,137		(27,481	)	(24,489	)
Due from affiliates	25,501		12,361		(14,511	)
Prepaid expenses and other current assets	8,251		(11,400	)	987
Accounts payable and accrued liabilities	(21,265	)	32,876		(3,174	)
Due to affiliates	(5,718	)	(12,181	)	(928	)
Deferred revenue	1,718		2,039		(2,324	)
Other	—		(8,588	)	1,999
Change in operating assets and liabilities	44,496		(25,880	)	(50,904	)

~~Cash interest paid for the year ended December 31, 2014 was $17.9 million (2013 - $18.9 million).~~ Cash interest paid (including interest paid by the ~~Dropdown Predecessor)~~Entities under Common Control) during the ~~year~~years ended December 31, ~~2012~~2016, 2015, and 2014 totalled ~~$29.3~~$38.5 million, ~~including realized loss of $1.8~~$22.8 million, ~~on the interest rate swaps agreements relating to the 2012 Acquired Business.~~

and $18.3 million, respectively.


c.	The portion of the consideration paid to Teekay for the acquisition of a 50% interest in TTOL in 2014 consisting of 4.2 million of Class B common shares was treated as a non-cash transaction in the Company’s consolidated statements of cash flows ~~(see note 6c).~~

~~Increases and decreases in the amount of debt allocated to Dropdown Predecessor from Teekay have been treated as non-cash transactions in the Company’s statement of cash flows. Such repayments~~ for the year ended December 31, ~~2012 were $108.7 million.~~

2016 (see note 8c).


19.	Liquidity

As of December 31, 2016, the Company adopted the new accounting standard ASC-205-40, Presentation of Financial Statements - Going Concern, which requires management to assess if the Company will have sufficient liquidity to continue as a going concern for the one-year period following the issuance of its financial statements. The Company has a portion of a loan facility that is maturing in the first quarter of 2018 and expects that spot tanker rates in 2017 will be lower than those of 2016, resulting in lower cash flow from vessel operations.

Based on these factors, over the one-year period following the issuance of its financial statements, the Company expects it will need to obtain additional sources of financing, in addition to amounts generated from operations, to meet its minimum liquidity requirements under its financial covenants. These anticipated sources of financing include the refinancing of the loan facility maturing in the first quarter of 2018 as well as obtaining other debt financing.

The Company is actively pursuing the alternatives described above, which it considers probable of completion based on the Company’s history of being able to refinance loan facilities for similar types of vessels and Teekay’s history of being able to obtain additional debt financing for existing vessels.

Based on the Company’s liquidity at the date these consolidated financial statements were issued, the liquidity it expects to generate from operations over the following year, and by incorporating the Company’s plans to raise additional liquidity that it considers probable of completion, the Company estimates that it will have sufficient liquidity to continue as a going concern for at least the one-year period following the issuance of these consolidated financial statements.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

~~17.~~
20.	Earnings ~~(Loss)~~ Per Share

The net income ~~(loss)~~ available for common ~~stockholders~~shareholders and earnings ~~(loss)~~ per common share presented in the table below excludes the results of operations of the ~~Dropdown Predecessor~~Entities under Common Control (seenote 1)3).

   Year Ended December 31,
   2014    2013    2012
   $    $    $
Net income (loss)
   57,142    (8,138 )    (370,181 )
Net loss attributable to the Dropdown Predecessor(note 1)
   —      —      9,163






Net income (loss) available for common stockholders
57,142 (8,138 ) (361,018 )






Weighted-average number of common shares—basic
85,882,685 83,591,030 79,539,605
Dilutive effect of stock-based compensation
364,452 —   —






Weighted average number of common shares—diluted
86,247,137 83,591,030 79,539,605






Earnings (loss) per common share:
- Basic
0.67 (0.10 ) (4.54 )
- Diluted
0.66 (0.10 ) (4.54 )



	Year Ended December 31,
	2016 $	2015 $		2014 $
Net income	62,855	179,635		60,538
Less: Net income attributable to the Entities under Common Control	—	(2,708	)	(3,396	)
Net income available for common shareholders	62,855	176,927		57,142
Weighted-average number of common shares - basic	156,323,348	130,136,228		85,882,685
Dilutive effect of stock-based awards	242,067	581,481		364,452
Weighted average number of common shares - diluted	156,565,415	130,717,709		86,247,137
Earnings per common share:
- Basic	0.40	1.36		0.67
- Diluted	0.40	1.35		0.66

Stock-based awards, which have an anti-dilutive effect on the calculation of diluted earnings per common share, are excluded from this calculation. For the years ended December 31, 2016, 14 thousand restricted stock units (2015 - nil, 2014 - nil) had an anti-dilutive effect on the calculation of diluted earnings per common share. For the years ended December 31, 2016, 2015, and 2014, options to acquire 0.7 million shares, 44 thousand shares, and 0.1 million shares of the Company’s Class A common stock, respectively, had an anti-dilutive effect on the calculation of diluted earnings per common share.

~~18.~~
21.	Vessel Sales ~~Vessel Acquisitions~~ and Vessel ~~Impairments~~ Acquisitions

Vessel Sales

The Company's consolidated statement of income for the year ended December ~~2014,~~31, 2016 includes an aggregate loss on sale of vessels of $20.6 million of two Medium Range (or MR) tankers and two Suezmax tankers. One MR tanker was sold in November 2016 for a sales price of $13.2 million, and the Company ~~signed an agreement~~recognized a loss on sale of the vessel of $8.1 million. The vessel was previously written down to ~~acquire one 2008-built Aframax~~its agreed sales price in the third quarter of 2016. The other MR tanker was sold in August 2016 for a ~~purchase~~sales price of ~~$37.0~~$14.0 million, and ~~placed $3.7 million~~the Company recognized a loss on sale of the vessel of $6.6 million. The vessel was previously written down to its agreed sales price in ~~an escrow fund~~the second quarter of 2016.

In November 2016, the Company sold two lightering support vessels related to ~~this purchase, which is recorded in other non-current assets in~~ the ~~Company’s~~ship-to-ship transfer business for an aggregate sales price of $0.4 million, and recognized a gain on sale of the vessels of $0.3 million.

In October 2016, the Company entered into agreements to sell two Suezmax tankers, for an aggregate sales price of $33.8 million. The two vessels have been classified as vessels held for sale on the consolidated balance ~~sheet~~sheets as of December 31, ~~2014.~~ 2016 and were written down to their agreed sales price. The Company recognized a loss on sale of vessels of $6.2 million in 2016. The two Suezmax tankers were delivered to their respective buyers in January 2017 and March 2017 (note 25).

In ~~December 2014,~~November 2015, the Company ~~also signed agreements to acquire four modern LR2 vessels~~sold one conventional tanker for a ~~total purchase~~sales price of ~~$193.3~~$11.2 million. The Company ~~took delivery~~recognized a gain on sale of ~~three and two~~the vessel of ~~these vessels~~$0.8 million in ~~February and March 2015, respectively (~~~~see note 20~~).

the year ended December 31, 2015.

In May 2014, the Company sold two wholly-owned subsidiaries, each of which owned one VLCC, to TIL for aggregate proceeds of ~~$154~~$154.0 million plus related working capital on closing of $1.7 million. The Company used ~~$152~~$152.0 million of the sale proceeds to prepay one of the Company’s revolving credit facilities and the remainder of the proceeds for general corporate purposes. The Company recognized a $10.0 million gain on the sale of the two subsidiaries to TIL for the year ended December 31, 2014, which is reflected in the Company’s consolidated statements of ~~income (loss).~~

income.

Vessel Acquisitions

In ~~January 2013,~~August 2015, the Company ~~sold~~agreed to acquire 12 modern Suezmax tankers from Principal Maritime. As of December 31, 2015, all 12 of the vessels had been delivered for a total purchase price of $661.3 million, consisting of $612.0 million in cash and approximately 7.2 million shares of the Company’s Class A common stock which were directly issued to Principal Maritime and which are treated as a non-cash transaction in the consolidated statements of cash flow. The value of these shares was approximately $49.3 million. To finance the cash portion of the acquisition price, the Company secured a $397.2 million loan facility with a maturity date of January 29, 2016. The loan was fully drawn as of December 31, 2015. In addition, the Company issued approximately 13.6 million shares of its Class A common stock for net proceeds of $90.6 million, including approximately 4.5 million shares which were issued to Teekay (see note 4). The Company financed the remainder of the cash purchase price with existing liquidity. The loan facility was refinanced in January 2016 (see note 10).

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

In December 2014, the Company signed an agreement to acquire one 2008-built Aframax tanker for ~~aggregate proceeds~~a purchase price of ~~$9.1 million. The Company recognized a loss on sale of the vessel of $0.1~~$37.0 million and placed $3.7 million in an escrow fund related to this purchase, which was recorded in other non-current assets in the ~~year ended~~Company’s consolidated balance sheets as of December 31, ~~2013.~~

~~The Company’s consolidated statement~~2014. In December 2014, the Company also signed agreements to acquire four modern LR2 vessels for a total purchase price of ~~loss for~~$193.3 million. In January 2015, the ~~year ended December 31, 2012 includes~~Company secured a $352.5 million write down of seven Suezmax tankers ($305.6 million), four Aframax tankers ($44.5 million), and one product tanker ($2.4 million). When comparing the seven Suezmax tankers to each other, the vessels have a similar age, a similar carrying value and were all being employedloan facility in the ~~spot market or on short term time-charters.~~amount of $126.6 million with a maturity date of January 30, 2016. The ~~primary factors that caused~~loan facility was fully drawn in March 2015 and was secured by the ~~write downs were a delay in the expected timing of a recovery of the crude~~Aframax tanker ~~market~~ and the ~~expected discrimination impact from more fuel efficient~~four modern LR2 vessels ~~being constructed. One of the four Aframax tankers~~which delivered in February and March 2015. The loan facility was ~~held for sale at December 31, 2012 and was subsequently sold~~refinanced in January ~~2013. All of the vessels were written down to their estimated fair values, using an internally appraised value based on second hand sale and purchase market data.~~

2016 (see note 10).

~~19.~~
22.	Shipbuilding Contracts

In April 8, 2013, four special purpose subsidiary companies of the Company entered into agreements with STX Offshore & Shipbuilding Co., Ltd (orSTX) of South Korea to construct four, fuel-efficient 113,000 dead-weight tonne ~~Long Range 2 (or~~LR2) product tanker ~~newbuildings plus options~~newbuildings. At the same time, the Company entered an Option Agreement with STX allowing the Company to order up to an additional 12 vessels. The payment of the Company’s first shipyard installment was contingent on the Company receiving acceptable refund guarantees for the shipyard installment payments. ~~In May 2013,~~At around the same time, however, STX commenced a voluntary financial restructuring with its lenders, and as a result, STX’s ability to obtain the necessary refund ~~guarantee applications were temporarily suspended.~~guarantees in respect of the four firm shipbuilding contracts was severely affected. In October and November 2013, the Company exercised its ~~options~~rights under the Option Agreement to order eight additional ~~newbuildings, in aggregate, under option agreements relating to the original STX LR2 shipbuilding agreements signed in April 2013. STX did not produce~~newbuildings. The further required shipbuilding contracts were not entered into by STX within the timeframe specified ~~timeframe of~~in the ~~option declarations and informed~~Option Agreement. By December 2013, the Company had determined that there was no prospect of the refund guarantees being provided under any of the firm ~~or option agreements. Therefore, STX is in breach~~shipbuilding contracts, and by February 2014 determined there was no prospect of the ~~option agreements.~~same in respect of the further contracts to be entered pursuant to the Option Agreement or of that agreement being otherwise performed by STX. In December 2013, the ~~Company terminated the newbuilding agreements and in February 2014,~~subsidiaries of the Company ~~terminated~~gave STX notice that they were treating STX as having repudiated the ~~option agreements.~~four firm shipbuilding contracts. In February 2014, the Company gave STX notice that it was treating STX as having repudiated the Option Agreement. In February and March 2014, the Company and its subsidiaries commenced a legal ~~action~~proceedings against STX for damages. This involved arbitration proceedings in London in respect of the four firm shipbuilding contracts and English High Court proceedings in respect of the Option Agreement. In November 2014, the Company, on behalf of the subsidiaries, placed $0.6 million in an escrow account as cash security ~~pending~~in respect of STX’s legal costs relating to the ~~resolution of this matter.~~arbitration proceedings. These funds ~~are~~were classified as cash and cash equivalents in the Company’s consolidated balance ~~sheets~~sheet as of December 31, ~~2014.~~

2015.

On February 15, 2016, the Company’s subsidiaries had successfully obtained an English Court Order requiring STX to pay a total of $32.4 million in respect of the four firm shipbuilding contracts. As a result, the Company’s subsidiaries have exercised their rights under English law to seek the assistance of the English court in the enforcement of the arbitration awards. The Company and its subsidiaries are also pursuing other routes to enforce the awards against STX. Additionally, the $0.6 million cash deposit was refunded to the Company in March 2016.

STX has filed for bankruptcy protection and as of December 31, 2016, all Korean enforcement actions are stayed. STX has had that protection recognized in England and Wales. The Company will not be in a position to take any further action on enforcement and recognition of its award in the UK or Korea while the bankruptcy protection remains in place. No amounts have been recorded as receivable in respect of these awards due to uncertainty of their collection.

The Option Agreement case has gone through trial and, despite finding that the Company had valid option agreements, the judgment was ruled against the Company due to uncertainty of delivery dates. The Company is considering whether to appeal this ruling.


23.	Other Revenues and Restructuring Charges

For the year ended December 31, 2016, the Company recognized $37.9 million (2015 - $17.7 million) of revenue from its lightering support operations (see note 7) and amortized $1.2 million (2015 - $4.8 million) of its in-process revenue contracts which is included in other revenues on the consolidated statements of income.

For the year ended December 31, 2015, the Company recognized $4.7 million of restructuring charges, of which $4.4 million related to the termination of the employment of certain seafarers upon the expiration of a time-charter out contract. This $4.4 million termination charge was recovered from the customer and the recovery is reflected in other revenues on the consolidated statements of income. The remaining $0.3 million of restructuring costs related to severance payments made in relation to the acquisition of the ship-to-ship business (see note 24).


24.	Acquisition of SPT

On July 31, 2015, the Company acquired SPT from a company jointly-owned by Teekay and a Norway-based marine transportation company, I.M. Skaugen SE, for a cash purchase price of $47.3 million (including $1.8 million for working capital). To finance this acquisition, Teekay subscribed for approximately 6.5 million shares of the Company’s Class B common stock at a subscription price of approximately $6.99 per share. SPT provides a full suite of ship-to-ship transfer services in the oil, gas and dry bulk industries. In addition to full service lightering and lightering support, it also provides consultancy and LNG terminal management services. This acquisition establishes the Company as a global company in the ship-to-ship transfer business, which is expected to increase the Company’s fee-based revenue and its overall fleet utilization. As at July 31, 2015, SPT owned and operated a fleet of six ship-to-ship support vessels and had one chartered-in Aframax tanker. See note (3) to the table below.

The acquisition of SPT was accounted for using the acquisition method of accounting, based upon estimates of fair value as at December 31, 2016.

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)

The following table summarizes the final estimates of fair values of the SPT assets acquired and liabilities assumed by the Company on the acquisition date. Such estimates of fair value were finalized in the first quarter of 2016 and resulted in an increase in goodwill of $8.1 million and a decrease in intangible assets by $8.4 million from preliminary estimates. Such changes did not have a material impact to the Company's consolidated statements of income for 2016.

~~20.~~
	~~Subsequent Events~~

	a. As at July 31, 2015 $
ASSETS	In
Cash, cash equivalents and short-term restricted cash	1,292
Accounts receivable	10,332
Prepaid expenses and other current assets	3,763
Vessels and equipment	6,475
Other assets	143
Intangible assets subject to amortization
Customer relationships ⁽¹⁾	17,901
Customer contracts ⁽¹⁾	4,599
Goodwill ⁽²⁾	8,059
Total assets acquired	52,564
LIABILITIES
Accounts payable	(3,650	)
Accrued liabilities	(3,276	)
Total liabilities assumed	(6,926	)
Net assets acquired ⁽³⁾	45,638

(1)

The customer relationships and customer contracts are being amortized over a weighted average amortization period of 10 years and 7.6 years, respectively. As at December ~~2014,~~31, 2016, the gross carrying amount, accumulated amortization and net carrying amount were $22.5 million, $4.8 million and $17.7 million (December 31, 2015 - $30.9 million, $1.3 million and $29.6 million), respectively. Amortization of intangible assets for the five fiscal years subsequent to 2016 is expected to be $3.2 million (2017), $2.9 million (2018), $2.2 million (2019), $2.0 million (2020), $1.8 million (2021) and $5.6 million (thereafter).


(2)	Goodwill recognized from this acquisition attributed $1.9 million to the Company's conventional tanker segment and $6.2 million to the Company's ship-to-ship transfer segment.

(3)

Prior to the SPT acquisition date, SPT had in-chartered the Explorer Spirit (formerly known as the SPT Explorer) from Teekay, which was acquired by the Company ~~signed an agreement to acquire one 2008-built Aframax tanker~~in December 2015. Retroactively adjusting the Company’s consolidated financial statements for athe acquisition of the Explorer Spirit has resulted in $1.4 million of the SPT acquisition purchase price being characterized as the settlement of ~~$37.0 million~~a pre-existing relationship. Such amount has been accounted for as a reduction to revenue on the SPT acquisition date.

Operating results of SPT are reflected in the Company’s consolidated financial statements commencing July 31, 2015, the effective date of acquisition. The following table provides comparative summarized consolidated pro forma financial information for the Company for the year ended December 31, 2015, giving effect to the Company’s acquisition of SPT as if it had taken place on January 1, 2014:



	Unaudited Pro Forma Year ended December 31, 2015 $	Unaudited Pro Forma Year ended December 31, 2014 $
Revenues	549,893	304,523
Net income	174,275	53,269
Earnings per common share:
Basic	1.30	0.58
Diluted	1.30	0.57

TEEKAY TANKERS LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)


25.	Subsequent Events

In late October 2016, the Company entered into agreements to sell two Suezmax tankers, the Ganges Spirit and ~~placed $3.7~~the Yamuna Spirit, for an aggregate sales price of $33.8 million. These vessels were classified as held for sale on the consolidated balance sheets as at December 31, 2016 and their net book values were written down to their sales prices. The Ganges Spirit completed its sale in January 2017 and the Company expects to recognize a loss on sale of this vessel of approximately $0.3 million in ~~an escrow fund related to this purchase.~~ the quarter ended March 31, 2017 (see note 21).

In February 2017, the date of delivery of the Yamuna Spirit to its new owner was extended, and as a result the sales price was reduced by $1.3 million. The sale was completed in March 2017 and the Company expects to recognize a loss on the sale of this vessel of $1.5 million in the quarter ended March 31, 2017.


b.	In ~~December 2014,~~January 2017, the Company ~~also signed agreements to acquire four modern LR2 vessels for a total purchase price~~sold approximately 3.8 million shares of ~~$193.3 million. The Company took delivery of three and two of these vessels in February and March 2015, respectively (see note 20c).~~

~~In December 2014, the Company granted the underwriters for~~ its ~~follow-on public offering of~~ Class A common stock ~~a 30-day option to purchase up to an additional 3~~under its COP for net proceeds of $8.6 million, net of issuance costs. In addition, the Company issued 2.2 million new shares of its Class A common stock ~~(see note 3). The underwriters exercised this option~~to Teekay in a private placement for gross proceeds of $5.0 million, and ~~on January 2, 2015,~~ the ~~Company issued 3 million shares~~price per share was set to equal the weighted average price of the Company's Class A common stock for ~~net proceeds~~the ten trading days ending on the date of ~~$13.7 million.~~

issuance.

In ~~January 2015,~~March 2017, the Company ~~secured~~entered into an agreement to sell one Aframax Tanker, the Kyeema Spirit. The Company expects to recognize a ~~loan facility~~loss on sale of this vessel of approximately $2.6 million in the ~~amount of $126.6 million with a maturity date of January 30, 2016, which was fully drawn in~~quarter ended March ~~2015. This loan facility is secured by the Aframax tanker and the four modern LR2 vessels which delivered in February and March 2015.~~

31, 2017.

~~F-22~~

F-29



		Board Practices	63
	44

		Crewing and Staff	64
	45

		Share Ownership		46	64

Item 7.		Major Shareholders and Related Party Transactions	64
	46

		A. Major Shareholders	64
	46

		B. Related Party Transactions		47	65

Item 8.		Financial Information	71
	52

		Consolidated Financial Statements and Notes	71
	52

		Legal Proceedings	71
	52

		Dividend Policy	71
	52

		Significant Changes		52	71

Item 9.		The Offer and Listing		52	71

Item 10.		Additional Information	72
	53

		Articles of Incorporation and Bylaws	72
	53

		Material Contracts	72
	53

		Exchange Controls and Other Limitations Affecting Security Holders	73
	53

		Material U.S. Federal Income Tax Considerations	73
	53

		Non-United States Tax Considerations	77
	57

		Documents on Display		57	77

Item 11.		Quantitative and Qualitative Disclosures About Market Risk	78
	57

		Foreign Currency Fluctuation Risk	78
	57

		Interest Rate Risk	78
	58

		Spot Tanker Market Rate Risk		58	78

Item 12.		Description of Securities Other than Equity Securities	79
PART II		58

~~PART II.~~

Item 13.		Defaults, Dividend Arrearages and Delinquencies		58	79

Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds		58	79

Item 15.		Controls and Procedures	79
	59

		Management’s Report on Internal Control over Financial Reporting		59	79

Item 16A.		Audit Committee Financial Expert		59	80

Item 16B.		Code of Ethics		59	80

Item 16C.		Principal Accountant Fees and Services		59	80

Item 16D.		Exemptions from the Listing Standards for Audit Committees		60	81

Item 16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers		60	81

Item 16F.		Change in Registrant’s Certifying Accountant	81
Item 16G.	Corporate Governance	81
Item 16H.	Mine Safety Disclosure	81
PART III		60
Item 17.
~~Item 16G.~~		~~Corporate Governance~~Financial Statements		60


	Owned Vessels		Chartered-in Vessels		Total
Fixed-rate:
Aframax Tankers		7		—		7
Medium Range Product Tankers		1		—		1
VLCC Tankers⁽¹⁾		1		—		1

Total Fixed-Rate Fleet⁽²⁾		9		—		9

Spot-rate:
Suezmax Tankers		10		—		10
Aframax Tankers		4		8		12
Long Range 2 Product Tankers		3		4		7
Medium Range Product Tankers		2		—		2

Total Spot Fleet⁽³⁾		19		12		31

Total Teekay Tankers Fleet		28		12		40


Vessel	Capacity (dwt)		Built		Employment	Daily Rate		Expiration of Charter
Ashkini Spirit		165,200		2003	Pool		—		—
Ganges Spirit		159,500		2002	Pool		—		—
Godavari Spirit		159,100		2004	Pool		—		—
Iskmati Spirit		165,300		2003	Pool		—		—
Kaveri Spirit		159,100		2004	Pool		—		—
Pinnacle Spirit		160,400		2008	Pool		—		—
Narmada Spirit		159,200		2003	Pool		—		—
Summit Spirit		160,500		2008	Pool		—		—
Yamuna Spirit		159,400		2002	Pool		—		—
Zenith Spirit		160,500		2009	Pool		—		—

Total Capacity		1,608,200


	Year Ended December 31, 2014						Year Ended December 31, 2013
	Net Revenues⁽¹⁾⁽²⁾ (in thousands)		Revenue Days		Average TCE per Revenue Day		Net Revenues⁽²⁾⁽³⁾ (in thousands)		Revenue Days		Average TCE per Revenue Day
Voyage-charter contracts - Suezmax	$	67,221		2,926	$	22,976	$	38,659		2,817	$	13,550
Voyage-charter contracts - Aframax	$	37,777		1,692	$	22,321	$	14,472		1,183	$	12,063
Voyage-charter contracts - LR2	$	30,294		1,698	$	17,842	$	14,633		1,094	$	13,164
Voyage-charter contracts - MR	$	9,828		697	$	14,108	$	7,474		555	$	13,414
Voyage-charter contracts - VLCC	$	1,323		96	$	13,805		—		—		—
Time-charter contracts - Suezmax	$	13,727		676	$	20,292	$	13,560		680	$	19,875
Time-charter contracts - Aframax	$	51,761		2,928	$	17,676	$	57,226		3,314	$	17,140
Time-charter contracts - MR	$	13,170		365	$	36,081	$	16,599		517	$	32,008

Total	$	225,101		11,078	$	20,319	$	162,623		10,160	$	15,861


	Year Ended December 31, 2013						Year Ended December 31, 2012
	Net Revenues⁽¹⁾⁽²⁾ (in thousands)		Revenue Days		Average TCE per Revenue Day		Net Revenues⁽²⁾⁽³⁾ (in thousands)		Revenue Days		Average TCE per Revenue Day
Voyage-charter contracts - Suezmax	$	38,659		2,817	$	13,550	$	32,983		1,865	$	17,688
Voyage-charter contracts - Aframax	$	14,472		1,183	$	12,063	$	19,279		1,583	$	12,179
Voyage-charter contracts - LR2	$	14,633		1,094	$	13,164	$	13,568		1,098	$	12,357
Voyage-charter contracts - MR	$	7,474		555	$	13,414		—		—		—
Time-charter contracts - Suezmax	$	13,560		680	$	19,875	$	37,529		1,682	$	22,311
Time-charter contracts - Aframax	$	57,226		3,314	$	17,140	$	56,039		3,043	$	18,418
Time-charter contracts - MR	$	16,599		517	$	32,008	$	28,063		1,092	$	25,711

Total	$	162,623		10,160	$	15,861	$	187,461		10,363	$	18,091


Aframax, Suezmax and Product Tankers (in thousands of USD, except number of vessels)	# Vessels		Market Values⁽¹⁾		Carrying Values
Conventional Tankers⁽²⁾		3	$	40,800	$	55,331
Conventional Tankers⁽³⁾		17	$	487,400	$	584,617
Total		20	$	528,200	$	639,948


Identity of Person or Group	Class A Common Stock		Percent of Class A Common Stock Owned			Percent of Total Class A and Class B Common Stock Owned⁽¹⁾
All directors and executive officers as a group (7 persons)⁽¹⁾		390,368		0.4	%		0.3	%


Identity of Person or Group	Class A Common Stock		Percent of Class A Common Stock Owned			Class B Common Stock		Percent of Class B Common Stock Owned			Percent of Total Class A and Class B Common Stock Owned
Teekay Corporation⁽¹⁾		12,643,196		12.9	%		16,720,945		100.0	%		25.5	%
T. Rowe Price Associates, Inc., T. Rowe Price Small-Cap Values Fund, Inc., as a group⁽²⁾		8,654,323		8.8	%		—		0.0	%		7.5	%
Huber Capital Management, LLC⁽³⁾		5,421,092		5.5	%		—		0.0	%		4.7	%

	b)
(b)	providing ship management services relating to conventional oil or product tankers; or


Years Ended	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
High	$	5.95	$	4.02	$	6.33	$	12.99	$	13.96
Low	$	3.18	$	2.38	$	2.38	$	3.36	$	8.50


Quarters Ended	Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2013		Sept. 30, 2013		Jun. 30, 2013		Mar. 31, 2013
High	$	7.05	$	5.95	$	4.44	$	4.50	$	5.08	$	4.02	$	3.09	$	3.06	$	3.43
Low	$	4.82	$	3.30	$	3.55	$	3.18	$	3.18	$	2.55	$	2.49	$	2.38	$	2.40


Months Ended	Mar. 31, 2015		Feb. 28, 2015		Jan. 31, 2015		Dec. 31, 2014		Nov. 30, 2014		Oct. 31, 2014
High	$	5.93	$	6.30	$	7.05	$	5.95	$	4.56	$	4.25
Low	$	5.05	$	5.07	$	4.82	$	4.20	$	4.04	$	3.30


Fees(in thousands of U.S. dollars)	2014		2013
Audit Fees⁽¹⁾		275		225
Audit-related Fees⁽²⁾		5		—

		280		225


(6)	Previously filed as Exhibit 4.11 to the Company’s Report on Form 6-K furnished to the SEC on November 30, 2010 and hereby incorporated by reference to such Report.


(7)	Previously filed as Exhibit 4.12 to the Company’s Report on Form 6-K furnished to the SEC on November 30, 2010 and hereby incorporated by reference to such Report.


(9)	Previously filed as Exhibit 4.17 to the Company’s Report on Form 6-K furnished to the SEC on September 17, 2012 and hereby incorporated by reference to such Report.


(10)	Previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form, S-8 filed with the SEC on March 7, 2014 and hereby incorporated by reference to such Registration Statement.


(11)	Previously filed as Exhibit 4.18 to the Company’s Report on Form 20-F filed with the SEC on April 30, 2013 and hereby incorporated by reference to such Report.


(12)	Previously filed as Exhibit 10.2 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.


(13)	Previously filed as Exhibit 10.1 to the Company’s Report on Form 6-K furnished to the SEC on August 7, 2015 and hereby incorporated by reference to such Report.


(14)	Previously filed as Exhibit 1.1 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.


(15)	Previously filed as Exhibits 10.3 and 10.4 to the Company’s Report on Form 6-K filed with the SEC on November 18, 2015 and hereby incorporated by reference to such Report.


(16)	Previously filed as Exhibit 1.1 to the Company’s Report on Form 6-K furnished to the SEC on June 4, 2015 and hereby incorporated by reference to such Report.


(17)	Previously filed as an exhibit to the Company's Report on Form 20-F filed with the SEC on April 27, 2016 and hereby incorporated by reference to such Report.


	Year Ended December 31, 2014 $			Year Ended December 31, 2013 $			Year Ended December 31, 2012 $
REVENUES
Time charter revenues (note 13e)		79,804			88,320			123,364
Net pool revenues (note 13e and 13h)		138,631			69,675			62,328
Voyage charter revenues		8,040			4,415			238
Interest income from investment in term loans (note 5)		9,118			7,677			11,499

Total revenues		235,593			170,087			197,429
Voyage expenses (note 13e)		(9,984	)		(8,337	)		(4,618	)
Vessel operating expenses (notes 13e and 13f)		(93,022	)		(91,667	)		(96,160	)
Time-charter hire expense (note 15)		(22,160	)		(6,174	)		(3,950	)
Depreciation and amortization		(50,152	)		(47,833	)		(72,365	)
General and administrative (notes 13e and 13g)		(11,959	)		(12,594	)		(7,985	)
Gain (loss) on sale of vessels (note 18)		9,955			(71	)		—
Vessel impairment (note 18)		—			—			(352,546	)

Income (loss) from operations		58,271			3,411			(340,195	)
Interest expense (note 13e)		(8,741	)		(10,023	)		(20,009	)
Interest income		287			158			50
Realized and unrealized loss on derivative instruments (note 9)		(1,712	)		(1,524	)		(7,963	)
Equity income (loss) (note 6)		5,228			854			(1	)
Other income (expenses) (note 14)		3,809			(1,014	)		(2,063	)

Net income (loss)		57,142			(8,138	)		(370,181	)

Per common share amounts
• Basic earnings (loss) per share (note 17)	$	0.67		$	(0.10	)	$	(4.54	)
• Diluted earnings (loss) per share (note 17)	$	0.66		$	(0.10	)	$	(4.54	)
• Cash dividends declared	$	0.12		$	0.12		$	0.40
Weighted-average number of Class A and Class B common shares outstanding
• Basic (note 17)		85,882,685			83,591,030			79,539,605
• Diluted (note 17)		86,247,137			83,591,030			79,539,605


	As at December 31, 2014 $			As at December 31, 2013 $
ASSETS
Current
Cash and cash equivalents		162,797			25,646
Pool receivables from affiliates, net (note 13h)		35,254			10,765
Accounts receivable		4,178			4,247
Due from affiliates (note 13f)		42,502			27,991
Prepaid expenses		8,883			10,361
Investment in term loans (note 5)		—			136,061

Total current assets		253,614			215,071

Vessels and equipment
At cost, less accumulated depreciation of $301.6 million (2013 - $251.4 million) (note 18)		828,291			859,308
Investment in and advances to equity accounted investments (note 6)		73,397			18,196
Derivative asset (note 9)		4,657			—
Other non-current assets (note 18)		5,400			4,954

Total assets		1,165,359			1,097,529

LIABILITIES AND EQUITY
Current
Accounts payable		1,899			2,251
Accrued liabilities (notes 7 and 13f)		17,565			21,069
Current portion of long-term debt (note 8)		41,959			25,246
Current portion of derivative liabilities (note 9)		7,263			7,344
Deferred revenue		637			2,961
Due to affiliates (note 13f)		10,395			11,323

Total current liabilities		79,718			70,194

Long-term debt (note 8)		614,104			719,388
Derivative liabilities (note 9)		10,962			17,924
Other long-term liabilities (note 10)		4,852			5,351

Total liabilities		709,636			812,857

Commitments and contingencies (notes 6, 9, 15 and 18)
Equity
Common stock and additional paid-in capital (300 million shares authorized, 95.3 million Class A and 16.7 million class B shares issued and outstanding as of December 31, 2014 (2013 - 71.1 million Class A and 12.5 million Class B shares issued and outstanding) (notes 3 and 12)		802,650			673,217
Accumulated deficit		(346,927	)		(388,545	)

Total equity		455,723			284,672

Total liabilities and equity		1,165,359			1,097,529


	STOCKHOLDERS’ EQUITY
				Common Stock and Paid-in Capital
	Dropdown Predecessor Equity $			Thousands of Common Shares #		Class A $		Class B $		Accumulated Deficit $			Total $
		(note 1	)

Balance as at December 31, 2011		88,793			61,877		588,316		125		(99,070	)		578,164

Net loss		(9,163	)		—		—		—		(361,018	)		(370,181	)
Net change in parent’s equity from Dropdown Predecessor (note 1)		70,404			—		—		—		—			70,404
Proceeds from issuance of Class A common shares, net of offering costs of $3.3 million (note 3)		—			17,250		65,771		—		—			65,771
Acquisition of interest in 13 vessels from Teekay Corporation (note 1)		(150,034	)		4,464		18,348		—		121,942			(9,744	)
Dividends declared		—			—		—		—		(32,231	)		(32,231	)

Balance as at December 31, 2012		—			83,591		672,435		125		(370,377	)		302,183

Net loss		—			—		—		—		(8,138	)		(8,138	)
Dividends declared		—			—		—		—		(10,030	)		(10,030	)
Equity-based compensation(note 12)		—			—		657		—		—			657

Balance as at December 31, 2013		—			83,591		673,092		125		(388,545	)		284,672

Net income		—			—		—		—		57,142			57,142
Proceeds from issuance of Class A common shares, net of offering costs of $4.8 million (note 3)		—			24,167		111,190		—		—			111,190
Value assigned to share issuance to Teekay Corporation for purchase of TTOL (note 3)		—			4,221		—		17,010		—			17,010
Purchase of TTOL from Teekay Corporation (note 6)		—			—		—		—		(6,626	)		(6,626	)
Equity contribution form Teekay Corporation (note 13c)		—			—		—		—		1,267			1,267
Dividends declared		—			—		—		—		(10,165	)		(10,165	)
Equity-based compensation(note 12)		—			85		1,233		—		—			1,233

Balance as of December 31, 2014		—			112,064		785,515		17,135		(346,927	)		455,723



	EQUITY
	Equity of Entities under Common Control $		Common Stock and Paid-in Capital
	Equity of Entities under Common Control $		Thousands of Common Stock #	Class A $	Class B $	Accumulated Deficit $		Total $
Balance as at December 31, 2013	16,158		83,591	673,092	125	(388,545	)	300,830
Net income	3,396		—	—	—	57,142		60,538
Proceeds from issuance of Class A common stock, net of offering costs of $4.8 million (note 4)	—		24,167	111,190	—	—		111,190
Value assigned to share issuance to Teekay Corporation for purchase of TTOL (note 4)	—		4,221	—	17,010	—		17,010
Purchase of TTOL from Teekay Corporation (note 8)	—		—	—	—	(6,626	)	(6,626	)
Equity contribution from Teekay Corporation (note 15e)	—		—	—	—	1,267		1,267
Net change in parent's equity from Entities under Common Control (note 3)	3,001		—	—	—	—		3,001
Dividends declared	—		—	—	—	(10,165	)	(10,165	)
Equity-based compensation (note 14)	—		85	1,233	—	—		1,233
Balance as at December 31, 2014	22,555		112,064	785,515	17,135	(346,927	)	478,278
Net income	2,708		—	—	—	176,927		179,635
Proceeds from issuance of Class A common stock, net of offering costs (note 4)	—		37,201	246,032	—	—		246,032
Proceeds from issuance of Class B common stock, net of offering costs (note 4)	—		6,512	—	45,500	—		45,500
Value adjustment to share issuance to Teekay Corporation for purchase of TTOL (note 8)	—		—	—	—	(239	)	(239	)
Net change in parent's equity from Entities under Common Control (note 3)	1,928		—	—	—	—		1,928
Acquisition of SPT Explorer and Navigator Spirit from Teekay Offshore Partners L.P. (note 3)	(27,191	)	—	—	—	(13,311	)	(40,502	)
Dividends declared	—		—	—	—	(33,863	)	(33,863	)
Equity-based compensation (note 14)	—		254	692	—	—		692
Balance as at December 31, 2015	—		156,031	1,032,239	62,635	(217,413	)	877,461
Net income	—		—	—	—	62,855		62,855
Proceeds from issuance of Class A common stock, net of offering costs (note 4)	—		3,020	7,558	—	—		7,558
Dividends declared	—		—	—	—	(28,122	)	(28,122	)
Equity-based compensation (note 14)	—		253	872	—	—		872
Balance as at December 31, 2016	—		159,304	1,040,669	62,635	(182,680	)	920,624


			December 31, 2014		December 31, 2013
Class of Financing Receivable	Credit Quality Indicator	Grade	$		$
Investment in term loans and interest receivable	Collateral	Non-performing⁽¹⁾		—		136,061
Advances to equity accounted investments	Other internal metrics	Performing		14,980		16,930

				14,980		152,991


Date	Number of Common Shares Issued			Offering Price (Per Share)		Gross Proceeds		Net Proceeds		Teekay’s Ownership After the Offering			Use of Proceeds
February 2012		17,250,000		$	4.00		69,000		65,771		20.4	%	Prepayment of revolving credit facilities
June 2012		4,464,286	⁽¹⁾	$	4.11		18,348		18,348		24.6	%	Acquisition of conventional tankers
August 2014		4,220,945	⁽²⁾	$	4.03		17,010		17,010		28.7	%	Acquisition of interest in TTOL
December 2014		24,166,666	⁽³⁾	$	4.80		116,000		111,190		26.2	%	Acquisition of conventional tankers