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

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:

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.

Set forth below is selected consolidated financial and other data of Teekay Tankers Ltd. and its subsidiaries for fiscal years ~~2010~~2013 through ~~2014,~~2017, 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~~2017, 2016 and ~~2012.~~

~~From time to time~~2015.

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.

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.

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:

Crude oil prices have declined 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.

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.

During ~~2014~~2017 and ~~2013,~~2016, we derived approximately ~~65.1%~~51.0% and ~~46.3%~~71.9%, 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~~load 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.

Participants in the ~~Gemini~~Teekay Suezmax ~~Pool,~~RSA, including third parties, have each agreed to include in the ~~pool~~RSA certain qualifying Suezmax-class crude tankers of the ~~pool~~RSA 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~~RSA certain qualifying 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,~~RSA, including third parties, have each agreed to include in the ~~pool~~RSA 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.

As of December 31, ~~2014,~~2017, a total of ~~eight~~16 of our tankers and one jointly-owned vessel operated under fixed-rate time-charter contracts, ~~five~~16 of which are scheduled to expire in ~~2015, three in 2016,~~2018 (including the jointly-owned vessel time-charter contract) and one in ~~2018, respectively.~~2019. 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.

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 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.

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 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.

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.

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:

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.

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:

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.

For example, in November 2017, we acquired Tanker Investments Ltd. (or TIL) by way of a share-for-share exchange of 3.3 shares of our Class A common stock for each share of TIL common stock, and as a result, TIL became a wholly-owned subsidiary. We completed the merger with the expectation that it would result in various benefits, including, among other things, the creation of the world’s largest publicly-listed mid-sized conventional tanker company that would be more attractive to investors, an increased total liquidity position, and a larger and younger fleet with which to service customers globally. The success of the merger will depend, in part, on our ability to realize such anticipated benefits from combining our business with TIL’s. The anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected. Failure to achieve anticipated benefits could result in increased costs and decreases in the amounts of expected revenues or our results of operations.

Although our Manager (defined below) already provided the commercial and technical management to the majority of TIL’s vessels and substantially all of the corporate and administrative services for TIL prior to the merger, it is possible that the integration process could result in the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures or policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. Integration efforts between us and TIL may also divert management attention and resources. These integration matters could have an adverse effect on both us and TIL during the transition period. The integration may take longer than anticipated and may have unanticipated adverse results relating to our or TIL’s existing business.

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,~~As of December 31, 2017, three of our credit facilities and four of our obligations related to capital leases contain loan-to-value financial covenants tied to the value of the ~~vessel~~vessels that ~~collateralizes~~collateralize these credit ~~facilities.~~facilities and the vessels related to the capital leases. 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.~~facilities and obligations related to capital leases. We are required to maintain vessel value to outstanding loan principal balance ratios ranging from ~~105%-130%~~90%-125%. At December 31, ~~2014,~~2017, 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 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:

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.

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:

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.

As of December 31, ~~2014,~~2017, our long-term debt was approximately ~~$656.1~~$963.2 million and an additional ~~$126.2~~$88.6 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 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.

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 and the current or future conflicts in the Middle East West Africa (Nigeria), Libya 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 especially among Qatar, Saudi Arabia, the United Arab Emirates, Yemen 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 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~~are 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.

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.

We rely on information technology systems and networks in our operations and the administration of our business. Cyber-attacks have increased in number and sophistication in recent years. Our operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information on our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business and results of operations.

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

In addition, any damage to, or environmental contamination involving, oil production facilities serviced by our vessels could result in the suspension or curtailment of operations by our customer, which would in turn result in loss of revenues.

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—~~Overview – Regulations.

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~~Our 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.

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.

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 Manager then subcontracts the commercial management and technical management services to TTOL, our wholly-owned subsidiary. 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 and 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:

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.

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.

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 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, effective December 31, 2017, and may not be able to terminate the agreement until December 31, 2022, 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.

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.

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 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 or directors 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 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.

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.

In addition to the following risk factors, you should read ~~“Item 4E.~~Item 4E – Information on the Company – Taxation of the ~~Company” and “Item 10.~~Company, Item 10 - Additional ~~Information—~~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.

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.”

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 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~~we would ~~become~~be subject to ~~taxation under Section 887~~U.S. federal income tax on shipping income attributable to our transportation of cargoes to or from the ~~Code. The amount of such tax would depend upon~~United Sates, 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.

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.

In November 2017 we completed a merger with TIL by acquiring all of the ~~last five years, we have sold three~~remaining 27.0 million issued and outstanding common shares of TIL, by way of a share-for-share exchange resulting in TIL becoming a wholly-owned subsidiary. At the time of the merger, TIL owned a modern fleet of 10 Suezmax tankers, six Aframax tankers and two ~~VLCC~~LR2 product tankers. Please read Item 18 - Financial Statements: Note 22 - Acquisition of Tanker Investments Ltd.

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 raising new debt, 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

We incorporated 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~~17, 2007 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.

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~~a portion 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~~parties. In addition, Teekay Corporation’s day-to-day focus on cost control is applied to our operations. Teekay Corporation ~~may offer to us~~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 ~~time to time. These tankers may include crude oil and product tankers.~~

~~Since~~this purchasing alliance.

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, we owned 27 vessels, in-chartered 12 vessels and owned 50% of a VLCC held by our joint venture with Wah Kwong Maritime Transport Holdings Limited.~~ Please refer to the “Our Fleet” table below. We employ our vessels on fixed rate time-charter out contracts and in various ~~pooling arrangements,~~RSAs, the majority of which are managed by ~~wholly or partially owned subsidiaries of Teekay Corporation~~TTOL, which employ vessels on the spot market. By employing some of our vessels in these ~~pooling arrangements with Teekay,~~RSAs, we believe we benefit from ~~Teekay Corporation’s~~TTOL’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.~~

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

2017:

The following table provides additional information about our ~~owned~~ Suezmax-class oil tankers, including tankers that are owned and related to capital leases, as of December 31, ~~2014, all~~2017, of which 28 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

The following table provides additional information about our owned Aframax-class oil tankers as of December 31, ~~2014,~~2017, 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

The following table provides additional information about our owned LR2 product-class oil tankers as of December 31, ~~2014, all~~2017, of which seven are Bahamian flagged and two are Marshall Islands 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 VLCC-class oil tanker as of December 31, ~~2014,~~2017, 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

Please read Note 8 - Long-Term Debt included in Item 18 – Financial Statements included in this Annual Report for information with respect to major encumbrances against our vessels.

Our primary business strategies include the following:

the vessel becomes available again for service. In addition, if the vessel is “off hire” while trading in a commercial ~~pooling arrangement,~~RSA, the vessel will have those off hire days deducted from its monthly calculation of available days for the purpose of ~~pool~~RSA 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.

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.

vessels), and the Navig8 Pool (approximately ~~26 vessels), and the Sigma Pool (approximately 26~~17 vessels). Other large operators of Suezmax tonnage (including newbuildings on order) as of such date included ~~the Stena Sonangol Pool (approximately 22 vessels),~~ Nordic American Tankers (approximately 2433 vessels), the Blue Fin Pool (approximately 1923 vessels), Euronav (approximately 2322 vessels), ~~Scorpio~~the Stena Sonangol Pool (approximately 2318 vessels), Navig8 (approximately 16 vessels), and Sovcomflot (approximately 1615 vessels).

As of December 31, 2017, the largest operators of LR2 tonnage (including newbuildings on order) included Scorpio Tankers (approximately 23 vessels), the Navig8 LR2 pool (approximately 2616 vessels), the Sigma Pool (approximately 15 vessels), Torm Tankers (approximately 14 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~~markets 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~~short 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 support 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 TNK, we look to increase our presence further through our intended business development.

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.

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~~Other factors that ~~affects~~affect tanker supply isare the ~~available~~availability of financing and 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.

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.

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:

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

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 two and a half to 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 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.

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.

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.

As of March 1, 2018, amendments to Annex VI impose new requirements on ships of 5,000 gross tonnage and above to collect consumption data for each type of fuel oil they use, as well as certain other data including proxies for transport work.

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

~~In addition,~~

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. Amendments to Annex I expand on the requirements for discharge connections and piping to ensure residues are properly disposed of. Annex I is applicable for existing vessels with a first renewal survey beginning on or after January 1, 2017.

MSC 91 adopted amendments to SOLAS ~~in relation~~Regulation II-2/10 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 ~~while~~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 ~~IMO’s Marine Environment Protection Committee (or~~~~MEPC~~~~) is expected to adopt~~time of delivery.

As per MSC. 338(91), requirements have been highlighted for audio and visual indicators for breathing apparatus which will alert the ~~environmental provisions~~user before the volume of the ~~Polar Code~~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.

The IMO continues to review and ~~associated amendments~~introduce new regulations; as such, it is impossible to ~~MARPOL at its next session in 2015. Once~~predict what additional requirements, if any, may be adopted by the ~~Polar Code is to enter into force~~IMO and what effect, if any, such regulations might have on ~~January 1, 2017.~~

our operations.

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:

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 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:

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.

As of December 31, ~~2014,~~2017, Teekay Corporation (NYSE: TK), through its 100%-owned subsidiary Teekay Holdings Ltd., had a ~~26.2%~~28.8% economic interest in us through its ownership of ~~12.6~~40.3 million of our shares of Class A common stock and ~~16.7~~37.0 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~~subsidiary Teekay LNG Partners L.P. (NYSE: TGP) and has significant influence over its publicly traded equity-accounted investment, Teekay Offshore Partners L.P. (NYSE: TOO).

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

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.

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~~for 2018 onwards is ~~35%~~21%), 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.

Because we and our controlled affiliates do not, and we do not expect that we ~~and our controlled affiliates~~or they will, conduct business, operations, or ~~operations~~transactions 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, fines, or fees due to (i) the incorporation, dissolution, continued existence, merger, domestication (or similar concepts) of legal entities registered in the Republic of the Marshall Islands, (ii) filing certificates (such as certificates of incumbency, merger, or re-domiciliation) with the Marshall Islands registrar, (iii) obtaining certificates of good standing from, or certified copies of documents filed with, the Marshall Islands registrar, or (iv) compliance with Marshall Islands law concerning vessel ownership, such as tonnage tax, or (v) non-compliance with requests made by the Marshall Islands registrar of corporations relating to our books and records and the books and records of our subsidiaries. As a result, distributions by our controlled affiliates to us are not subject to any taxes under the laws of Marshall ~~Islands taxation.~~

Islands.

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.

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.

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

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.

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:

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”~~.

In accordance with GAAP, we report gross revenues in our consolidated statements of (loss) 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.~~cost (as is also described in "Our Charters" above). Accordingly, the discussion of revenue below focuses on net revenues and TCE rates where applicable.

Our consolidated income from vessel operations decreased to $1.4 million for the year ended December 31, 2017, compared to $96.8 million in the prior year. The primary reasons for this decrease are as follows:

partially offset by

We manage our business and analyze and report our results of operations on the basis of two reportable segments: the conventional tanker segment and the STS transfer segment. Please refer to Item 18 - Financial Statements: Note 5 - Segment Reporting. Details of the changes to our results of operations for each of our segments for the years ended December 31, 2017, 2016 and 2015 are provided below.

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). Our conventional tanker commercial management and technical management operations results are also included in our conventional tanker segment.

The following table presents our operating results for the years ended December 31, ~~2014~~2017 and ~~2013~~2016 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 )

Looking ahead to 2018, there are signs of improving fundamentals on both the supply and demand fronts. First, tanker fleet growth is expected to moderate due to a combination of lower deliveries and higher scrapping. Tanker scrapping for the global fleet totaled 11.5 mdwt in 2017, the highest level of tanker scrapping since 2012, and has remained firm with 1.6 mdwt scrapped in January 2018. The ~~majority~~level of newbuild tanker deliveries is expected to reduce during 2018, particularly during the second half of the year, and is set to fall further in 2019 as the orderbook rolls off. As such, we estimate that world tanker fleet growth ~~during the year was~~will fall to approximately 3% in ~~the product sectors, whereas the crude tanker fleet grew by just 2.2 mdwt, or 0.7%. The global Suezmax~~2018 and ~~uncoated Aframax fleets reduced~~2% in ~~size by three vessels, or 0.6%, and 19 vessels, or 2.9%, respectively. Looking ahead, the global tanker fleet~~2019.

Global oil demand is ~~forecasted~~estimated to grow by ~~only 1.7%~~1.5 mb/d in ~~2015, with growth again weighted towards the product sectors and another year~~2018 (average of ~~negative fleet growth expected for the Suezmax and uncoated Aframax sectors.~~

~~Global oil demand, based on an average of forecasts from the International Energy Agency, the Energy Information Administration,~~IEA, EIA and OPEC ~~is forecasted to grow by 1.0 mb/d in 2015,~~forecasts), which is ~~0.1 mb/d higher~~above long-term average growth levels. This strong level of demand, combined with OPEC supply cuts, is leading to a rapid decline in global oil inventories back towards five-year average levels. Inventory drawdowns are negative for tanker demand in the short-term; however, a rebalancing in oil markets could lead OPEC to exit its supply agreement sooner 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” is expected to grow by 0.1 mb/d in 2015,~~ which ~~could~~would be positive for the mid-size tanker ~~tonne-mile demand in 2015.~~

~~The outlook for crude tanker fleet utilization~~market as it would draw VLCC tankers away from the Atlantic and ~~spot tanker rates is expected~~back to ~~remain positive in 2015 based on a shrinking mid-size crude tanker fleet and~~the Middle East, thus reducing competition between the asset classes. Finally, a continued increase in U.S. crude oil production, which recently hit 10 mb/d for the first time since 1970, will likely lead to higher U.S. crude oil exports, which is positive for mid-size tanker ~~tonne-mile~~ demand as ~~more~~well as U.S. Gulf lightering demand.

Overall, the Company expects the tanker market to remain challenging over the near-term as ongoing OPEC supply cuts and the need to absorb recent fleet growth will likely keep the market subdued through the first few quarters of 2018. However, we expect that lower fleet growth, an expected increase in U.S. crude ~~oil moves on long-haul trades from~~exports, and the ~~Atlantic to the Pacific basins. The impact of low oil prices, high refinery throughput, and increased onshore stockpiling~~potential for an increase in OPEC supply later in the ~~first quarter~~year should lead to a tanker market recovery during the latter part of ~~2015 are also expected to support positive tanker demand in the first half of 2015.~~

2018 and into 2019.

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~~2017 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

2016:

partially offset by

The loss on sale of vessels for the year ended December 31, 2016 primarily relates to the sale of the two MR tankers and the two held for sale Suezmax tankers which were written down to their respective agreed sales prices in the fourth quarter of 2016 and which sales were completed in the first quarter of 2017. Please refer to Item 18 – Financial Statements: Note 19 – Vessel Sales and Vessel Acquisitions.

Equity (loss) income decreased to $(25.4) million in 2017 from $7.7 million for 2016 primarily due to:

Please refer to Item 18 – Financial Statements: Note 6 – Investments in and advances to Equity Accounted Investments.

Our STS 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;~~lightering support services.

The following table presents our operating results for the years ended December 31, 2017 and

The following table compares our other operating results for the years ended December 31, ~~2013. During 2014~~2017 and ~~2013,~~2016:

As at December 31, 2017, we had interest rate swap agreements with aggregate ~~average~~ outstanding notional amounts of ~~approximately $300~~$338.8 million ~~and $322.9 million, respectively, and~~ with ~~weighted average~~a weighted-average fixed ~~rates~~rate of ~~approximately 3.59% and 3.42%, respectively. Short term variable benchmark interest rates during these periods were generally less than 1.0%~~1.46%. ~~As a result, we incurred realized~~Realized losses ~~of $10.0 million and $9.9 million for the years ended December 31, 2014 and 2013, respectively, under~~on the interest rate swaps decreased to $1.0 million in 2017 compared to $12.8 million in 2016 primarily due to the termination of an interest rate swap ~~agreements.~~

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 ~~$7.1~~$2.1 million and ~~$8.4~~$13.7 million for the years ended December 31, ~~2014~~2017 and ~~2013,~~2016, respectively, and were primarily due to ~~an increase~~the nine interest rate swaps we entered into in the first quarter of 2016, partially offset by increases in our long-term benchmark interest rates and the termination of an interest rate swap in ~~both years.~~

the first quarter of 2016.

Effective June 1, 2016, we also entered into a time-charter swap for 55% of two Aframax equivalent vessels. Under such agreement, we received $27,776 per day, less a 1.25% brokerage commission, and paid 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, 2017, the counter party option was not exercised resulting in the expiration of the time-charter swap. We have recognized an unrealized loss of $0.9 million in the year ended December 31, 2017, compared to an unrealized gain of $0.9 million for the same period in the prior year.

In addition, ~~to our interest rate swaps,~~ we ~~have~~had a stock purchase warrant ~~entitling~~which had entitled us to purchase up to 750,000 shares of common stock of TIL. The stock purchase warrant ~~had a fair value~~was not exercised and was canceled upon completion of ~~$4.7 million as of December 31, 2014 and we recognized an unrealized gain of $1.2 million for~~the TIL merger in November 2017. For the year ended December 31, ~~2014.~~

2017, we recognized an unrealized loss in respect of the stock purchase warrant of $0.3 million compared to an unrealized loss of $4.9 million in 2016.

Please see ~~Item~~"Item 5 - Operating and Financial Review and Prospects –- Commitments and Contingencies - Valuation of Derivative ~~Instruments,~~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.~~

   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

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, 2016 and 2015 and compares net revenues, a non-GAAP financial measure, for those periods to revenues, the most directly comparable GAAP financial measure.

As at December 31, 2016, we owned 43 double-hulled conventional oil tankers, time-chartered in six Aframax tankers and one LR2 product tanker from third parties and owned a 50% interest in one VLCC, the results of which are included in equity income. The number of vessels we own, as well as our financial and operational results, include the Entities under Common Control in all relevant periods presented. Please read Item 18 – Financial Statements: Note 3 – Acquisition of Entities under Common Control 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 2016 and 2015:

partially offset by

Equity income decreased to $7.7 million in 2016 from $11.5 million for 2015 primarily due to:

Please refer to Item 18 – Financial Statements: Note 6 – Investments 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~~

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 as compared to~~2015, include five months of operations of this segment, from the ~~prior year.~~

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

~~Year Ended December~~SPT 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~~

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:

partially offset by

Net cash provided by investing activities ~~increased to $109.8~~was $78.8 million in ~~2014,~~2017, compared to ~~net cash used for investing activities of $5.8~~$21.8 million in the prior year, primarily as a result of the following:

Net cash provided by investing activities increased to $21.8 million in 2016, compared to net cash used for investing activities of $880.9 million in the prior year, primarily 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 cash outflows of $612.0 million related to the cash consideration paid in 2015 to acquire the 12 modern Suezmax vessels from Principal Maritime Tankers;

a decrease of cash outflows of $227.0 million related to the 2015 acquisition of four LR2 product tankers and 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~~other capital expenditures made during the year;

a decrease of cash outflows of $45.6 million, net of working capital adjustments, related to the ~~VLCCs then trading under our management in the spot tanker market; and~~

2015 acquisition of SPT;

an increase of ~~$0.5~~cash inflows of $16.5 million ~~primarily as a result~~related to gross proceeds received in the second half of ~~our funding~~2016 from the sales of two MR tankers and two lightering support vessels; and

an increase of cash inflows of $2.5 million related to ~~our 50/50 joint venture to meet shipyard obligations for~~ the ~~construction~~2016 repayment of a ~~VLCC newbuilding, which was completed in June~~loan to us from our High-Q joint venture;

partially offset by

a decrease of ~~2013.~~

cash inflows of $1.1 million related to the 2015 return of capital received from our equity accounted investments.

Please read Item 18 – Financial Statements: Note 56 – ~~Investment in Term Loans and Note 6 -~~ Investments in and advances to ~~equity accounted investments~~Equity Accounted Investments for specific details on our equity accounted investment ~~in term loans and 50/50 joint venture~~ activities included in the notes to our consolidated financial statements ~~attached~~included 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

2017:



	Total	2018	2019	2020	2021	2022	Beyond 2022
(in millions of U.S. dollars)
U.S. Dollar-Denominated Obligations
Scheduled repayments of revolving facilities, term loans and other debt ⁽¹⁾	435.7	103.4	105.7	131.9	72.1	22.6	—
Repayments at maturity of revolving facilities, term loans and other debt ⁽¹⁾	527.5	63.8	—	—	330.8	132.9	—
Scheduled repayments of obligations related to capital leases ⁽²⁾	148.9	7.2	7.7	8.2	8.7	9.3	107.8
Chartered-in vessels (operating leases)	29.7	11.7	8.3	8.3	1.4	—	—
Total	1,141.8	186.1	121.7	148.4	413.0	164.8	107.8

(1)

Excludes all expected interest payments of ~~$6.5~~$31.7 million ~~(2015)~~(2018), ~~$9.0~~$27.5 million ~~(2016~~(2019), $23.3 million (2020), $13.9 million (2021) and ~~2017), $1.6~~$3.4 million ~~(2018 and 2019), and $0.6 million (beyond 2019)~~(2022). Expected interest payments are based on the existing interest rates for fixed-rate loans ~~that range from 4.06% to 4.90%~~of 5.4% and existing interest rates for variable-rate loans at LIBOR ~~plus margins that range from 0.3% to 1.0% at December 31, 2014.~~

plus margins that range from 0.30% to 2.75% at December 31, 2017. 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 imputed interest payments ~~do not reflect the effect~~ of ~~related interest rate swaps that we have used to hedge certain of our floating-rate debt.~~ $9.0 million (2018), $8.5 million (2019), $8.1 million (2020), $7.5 million (2021), $7.0 million (2022) and $29.1 million (thereafter).

~~(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 million (2015), $32.3 million (2016), $7.4 million (2017) and $5.6 million (2018).

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~~load-to-discharge or discharge-to-discharge basis. ~~This means that voyage~~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,~~discharged if using a load-to-discharge basis, or from when product is discharged (unloaded) at the end of ~~one~~the prior voyage to when it is discharged after the ~~next voyage.~~

~~Judgments and Uncertainties.~~ ~~In applying the proportionate performance method, we believe that in most cases the~~current voyage, if using a 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.

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. Whether to use the load-to-discharge basis or the discharge-to-discharge basis depends on whether the customer directs the use of the vessel throughout the period of use, pursuant to the terms of the voyage charter. This is a matter of judgement. However, we believe that if the customer has the right to direct the vessel to different load and discharge ports, among other things, a voyage charter contract contains a lease, and the lease term begins on the later of the vessel’s last discharge or inception of the voyage charter contract. As such, in this case revenue is recognized on a discharge-to-discharge basis. Otherwise, it is recognized on a load-to-discharge basis.

Effect if Actual Results Differ from Assumptions. If ~~actual results are~~our assessment of whether the customer directs the use of the vessel through-out the period of use is not consistent with ~~our estimates in applying~~actual results, then the ~~proportionate performance method,~~period over which voyage revenue is recognized would be different and as such 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. Vessels acquired from third parties are initially recorded at their acquisition value. 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 below 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.~~2018. While the market values of these vessels are below their carrying values, no impairment

has been recognized on any of these vessels in ~~2014~~2017 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~~do 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⁾	11	153,500	293,088
Conventional Tankers ⁽³⁾	27	706,300	1,195,837
Total	38	859,800	1,488,925


(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~~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.~~ 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 and a stock purchase warrant.~~

agreements.

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 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 ~~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 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 910 – Derivative Instruments for the effects on the change in fair value of our derivative instruments on our consolidated statements of ~~loss.~~

(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~~Stewart Andrade, 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~~as Vice President, Strategy and ~~Chief Financial Officer,~~Business Development, respectively. The amount of time Messrs. Mackay and ~~Lok~~Andrade 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:~~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.~~

2017.



Name	Age	Position
~~Arthur Bensler~~ Stewart Andrade	5745	Chief Financial Officer ⁽¹⁾
Arthur Bensler	60	Chairman of the Board of Directors
~~Kevin Mackay~~ Richard J.F. Bronks	4652	Director⁽²⁾
Richard T. du Moulin	71	Director ⁽²⁾
Kenneth Hvid	49	Director ⁽³⁾
William Lawes	74	Director ⁽²⁾
Kevin Mackay	49	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~~	5760	Director
Richard ~~T. du Moulin~~ Paterson	6866	Director⁽²⁾⁽⁴⁾


(1)	~~Effective June 20, 2014.~~ Appointed December 7, 2017.


(2)	Member of Audit Committee, Conflicts Committee, and Nominating and Governance Committee.

(3) Appointed February 22, 2017.
(4) Appointed August 1, 2017.

Certain biographical information about each of these individuals is set forth below.

Stewart Andrade was appointed Chief Financial Officer of Teekay Tankers on December 7, 2017. He joined Teekay in 2002 and has worked in a variety of roles at Teekay and has been responsible for executing a number of strategic transactions, including acquisitions and the establishment of joint ventures, to grow Teekay Tankers into one of the world’s leading tanker companies. Mr. Andrade is Vice President of Strategy and Business Development responsible for Teekay’s tanker business, a role he has held since 2015. Prior to joining Teekay, Mr. Andrade worked in Ernst and Young’s consulting practice providing advisory services to a variety of Canadian and international organizations. Mr. Andrade is a Canadian Chartered Professional Accountant.

Arthur Bensler ~~joined our Board~~ was appointed Chairman and Director of ~~Directors as Chairman on June 12,~~Teekay Tankers Ltd. in 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~~also is Executive Vice President and General Counsel of Teekay Corporation and President of Teekay Shipping (Canada) Ltd. He has ~~more than 15~~20 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 was appointed Corporate Secretary of Teekay Tankers in 2007 and has served as General Counsel to the Company since its inception. In addition to his role as General Counsel, he serves as Assistant Corporate Secretary of Teekay Offshore GP L.L.C., the general partner of Teekay Offshore Partner L.P. and Teekay GP L.L.C, the general partner of Teekay LNG Partners L.P. 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 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~~

Richard T. du Moulin joined ~~our~~the Board of Directors of Teekay Tankers 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 Seamen’s Church Institute of New York and New Jersey. Mr. du Moulin currently serves as an advisor to Hudson Structured Capital Management, a private equity firm 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. and Tidewater, Inc.

Kenneth Hvid joined the board of Teekay Tankers in February 2017. He was appointed President and CEO of Teekay Corporation in February 2017 and has served as a director of Teekay Offshore GP L.L.C., 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 its Teekay Navion Shuttle Tankers and Offshore division. In that role he was responsible for Teekay’s global shuttle tanker business as well as initiatives in the floating storage and offtake business and related offshore activities. Mr. Hvid served as Chief Strategy Officer and Executive Vice President from 2011 to 2015, as director of Teekay GP L.L.C. from 2011 to 2015 and as President and CEO of Teekay Offshore Group Ltd., from 2015 until January 2017. 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 the Board of Directors of Teekay Tankers in 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 has served as Chairman of ~~the~~its Audit Committee from 2014 until its merger with Teekay Tankers Ltd. in ~~2014.~~November 2017. 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~~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~~He was ~~a trustee~~appointed as Trustee and ~~Chairman~~Member of the Finance and ~~Audit~~Investment Committee of ~~Care International~~Seafarers UK in 2016.

Kevin Mackay was appointed President and Chief Executive Officer of Teekay Tankers in 2014 and leads a global ~~humanitarian charity,~~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 ~~12 years.~~

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.

Bjorn Moller served as ~~our~~Teekay Tankers’ 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., the general partner of Teekay LNG Partners L.P., from when it was formed in ~~November~~ 2004, and Vice Chairman and Director of Teekay Offshore GP L.L.C., the general partner of Teekay Offshore Partners L.P., 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.

Mr. Moller is also a director of Kattegat Limited, the parent company of Resolute Investments, Ltd., the largest shareholder of Teekay Corporation.

Richard ~~T. du Moulin~~Paterson joined ~~our Board~~the board of ~~Directors~~Teekay Tankers on August 1, 2017. He is a Certified Public Accountant who retired from PriceWaterhouseCoopers LLP (PwC) in ~~December 2007.~~2011 after 37 years of service. At the time of his retirement, 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~~Paterson served as ~~Chairman~~the global leader of PwC’s Consumer, Industrial Products and ~~Chief Executive Officer~~Services Practices comprising the automotive, consumer and retail, energy utilities and mining, industrial products, pharmaceutical and health industry sectors. Mr. Paterson also served as Managing Partner of ~~Marine Transport~~PwC’s Houston Office and U.S. Energy Practice and supervised audits of ExxonMobil Corporation from 2002 to 2006. Previous to this position, Mr. Paterson lived in Moscow, Russia where he led PwC’s Energy Practice for Europe, Middle East and Asia and also supervised the audits of OAO Gazprom. Mr. Paterson is a member of the National Association of Corporate Directors and serves on the boards of Parker Drilling Company and Eclipse Resources Corporation. ~~Mr. du Moulin~~He is a past board member of Zaff GP LLC, the U.S./Russia Business Council and the U.S. Energy Association and stepped down on July 31, 2017, from the Board and Chairmanship of the Audit Committee of Tidewater, the leading offshore vessel service provider to the oil and gas industry. He also resigned as 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~~Saipem Canada, 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.~~

private company, on September 30, 2017.

Compensation of Directors and Senior Management

Executive Compensation

~~Our~~

The compensation of 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, 2017, 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~~$1.3 million ~~(2013: $1.4~~(2016: $0.9 million; and ~~2012: $1.1~~2015: $1.4 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,~~2017, our ~~four~~five non-employee directors (one of whom joined in August) and one board observer, David A. Hollander (who joined in that capacity in November upon completion of the TIL merger), received an aggregate of ~~$260,000~~$303,125 in cash fees for their services as directors ~~(2013: $301,250; 2012: $342,500)~~(2016: $260,000; 2015: $260,000). In addition, each non-employee director received a $70,000 annual award for ~~2014~~2017 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 2017, we granted 396,412 options ~~to purchase up to 152,346 shares of Class A Common Stock at an exercise price of $4.10~~(2016: 284,693; 2015: nil) and ~~17,073~~nil restricted stock units ~~(2013: 142,157; and 2012: 82,573)~~(2016: 9,358; 2015: 51,948) to non-employee directors. The stock options and restricted stock units vest immediately.

Long-Term Incentive Program

In the year ended December 31, ~~2014,~~2017, we granted under our 2007 Long-Term Incentive Plan options to acquire up to ~~110,829~~486,329 shares of Class A ~~Common~~common stock (2016: 216,043; 2015: 58,434) and ~~586,014~~382,437 restricted stock units (2016: 279,980; 2015:192,387) to officers of the Company and certain employees of ~~Teekay’s~~Teekay Corporation’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 Class A common ~~shares~~stock 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 1213 – Capital ~~Stock.~~

Stock and Note 23 – Subsequent Events.

Board Practices

Our Board of Directors (or theBoard) currently consists of ~~five~~seven 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~~the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with ~~Teekay Tankers)~~the Company) and is independent within the meaning of ~~Teekay Tankers’~~the Company’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 “Corporate Governance” in the ~~“About Us—Corporate Governance”~~Investor Centre 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~~2017 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~~“Corporate Governance” in the Investor Centre of our ~~Web site~~web-site atwww.teekay.com. During ~~2014,~~2017, the Board held ~~six~~nine meetings. Directors attended all board ~~meetings, with the exception of two board members who did not attend one meeting. There were three committee member absences from a total of 16 committee meetings in 2014.~~

meetings.

Our Audit Committee is composed entirely of directors who satisfy applicable NYSE and SEC audit committee independence standards. Our Audit Committee is comprised of Richard Paterson (newly appointed Chair effective March 15, 2018), William Lawes ~~(Chair)~~(previous Chair), Richard J.F. Bronks and Richard du Moulin. All members of the committee are financially literate and the Board has determined that both Mr. Lawes ~~qualifies~~and Mr. Paterson qualify as an audit committee financial ~~expert.~~

experts.

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, William Lawes and ~~William Lawes.~~Richard Paterson. 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), William Lawes, Richard du Moulin and ~~William Lawes.~~

Richard Paterson.

The Nominating and Governance Committee:

identifies individuals qualified to become Board members;

selects and recommends ~~to the Board~~ director and committee member ~~candidates;~~

candidates to the Board;

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,~~2017, approximately ~~1,239~~2,200 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,~~2017, 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~~2018 (60 days after December 31, ~~2014)~~2017) 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
All directors and executive officers as a group (9 persons) ⁽¹⁾	1,792,970	0.8	%	0.7	%

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 Chief Financial Officer, Vincent Lok, who retired from the position in December 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, 2018, 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~~2018 (60 days after ~~April~~March 1, ~~2015)~~2018) 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⁾	40,290,460	17.4	%	37,007,981	100.0	%	28.8	%
BlueMountain Capital Management, LLC ⁽²⁾	17,485,057	7.6	%	—	—		6.5	%
Huber Capital Management, LLC ⁽³⁾	16,259,924	7.0	%	—	—		6.1	%
Azvalor Asset Management, SGIIC, SA ⁽⁴⁾	12,150,631	5.3	%	—	—		4.5	%

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%~~9.7% for its Class A common stock, ~~45.9%~~44.5% for its Class B common stock and ~~52.9%~~54.1% for its total Class A and Class B common stock.

(2)

According to the Schedule 13G filed with the SEC on February ~~10, 2015, T. Rowe Price Associates, Inc.~~14, 2018, BlueMountain Capital Management, LLC has ~~sole~~shared 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~~shared dispositive power as to ~~all of the~~17,485,057 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,~~BlueMountain Capital Management, LLC is ~~8.8%~~4.2% for its Class A common ~~stock and 7.5% for total Class A and Class B common~~ stock.

(3)
According to the Schedule ~~13G~~13G/A filed with the SEC on February ~~12, 2015,~~13, 2018, Huber Capital Management, LLC has sole voting power and sole dispositive power as to ~~3,386,992~~9,446,248 and 16,259,924 of the ~~shares.~~shares, respectively. The voting power represented by shares beneficially owned by Huber Capital Management, LLC is ~~5.5%~~3.9% for its Class A common ~~stock~~stock.
(4) According to the Schedule 13G filed with the SEC on January 22, 2018, Azvalor Asset Management, SGIIC, SA has sole and ~~4.7%~~shared voting power as to 12,150,631 shares. The voting power represented by shares beneficially owned by Azvalor Asset Management, SGIIC, SA is 2.9% for ~~total~~its Class A ~~and Class B~~ common stock.

As of March 22, 2018, we had 16 shareholders of record located in the United States, one of which is Cede & Co., a nominee of The Depository Trust Company, which held an aggregate of 216,618,998 shares of our Class A common stock, representing approximately 94% of our outstanding shares of Class A common stock. We believe that the Class A common stock held by Cede & Co. includes shares beneficially owned by both holders in the United States and non-U.S. beneficial owners.

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~~40,290,460 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~~

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 1314 – 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~~affiliates' 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)

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)
~~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,~~

Stewart Andrade, our Chief Financial Officer, is also ~~the Chief Financial Officer~~an executive officer of our Manager and ~~the Executive~~a Vice President, Strategy and ~~Chief Financial Officer~~Business Development 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.

Bjorn Moller, a member of our Board of Directors is a Director of Teekay Corporation and is also a director of Kattegat Limited, the parent company of Resolute Investments, Ltd., the largest shareholder of Teekay Corporation.

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~~

(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. 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 and spot-traded vessels, our Manager commercially manages for us (excluding vessels participating in the ~~Gemini~~Teekay Suezmax ~~Pool,~~RSA, Teekay Aframax ~~Pools~~RSA or the Taurus Tankers LR2 ~~Pool)~~RSA). We paid commercial service fees of ~~$1.1~~$1.2 million for ~~2014, $1.1~~2017, $1.9 million for ~~2013,~~2016, and ~~$1.1~~$1.2 million for ~~2012.~~

2015. Subsequent to our acquisition of the remaining 50% interest in TTOL in May 2017, our share of the Manager's commercial management fees has been eliminated.

Technical services ~~fee.~~fee. We pay a fee, equal to the average rate Teekay Corporation charges third parties to technically manage their Tankers of a similar size, as determined on a quarterly basis, to our Manager for technical services ~~fees,~~it provides to us. For 2017, the technical services fee we paid was $8.8 million, $9.2 million for 2016 and ~~we paid~~$7.0 million for 2015. Subsequent to our acquisition of the remaining 50% interest in TTOL, our share of the Manager's technical services fees ~~of $5.6 million~~has been eliminated. TTOL also received reimbursements for ~~2014, $5.6 million for 2013,~~technical services from our Manager. These reimbursements are further described in the Commercial and $6.9 million for 2012 including the technical management fees of $2.6 million 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.

Technical Management Services Agreements described below.

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 ~~$8.7~~$21.2 million for ~~2014, $10.8~~2017, $10.1 million for ~~2013,~~2016 and ~~$5.5~~$8.4 million for ~~2012.~~

2015 excluding administrative and strategic services fees of $7.0 million for 2017, $15.5 million for 2016 and $14.7 million for 2015 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 14e – 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,~~2017, 2016 or ~~2012.~~

2015.

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 had an option to terminate the Management Agreement in the fourth quarter of 2017, which we did not exercise.

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;

or

we provide notice in the fourth quarter of ~~2016~~2021 after two-thirds of our Board of Directors elects to terminate the Management Agreement, ~~which termination would be effective on December 31, 2017; 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~~

TIL Management Agreement

Our Manager has waived the management services fees payable under the long-term management agreement it has with TIL to the extent such fees exceed the fees payable under the existing Management Agreement between us and the Manager, but the Manager did not waive the transaction fee that is payable in the event of any sale of vessels owned by TIL subsidiaries as of the date of the Merger, which fee is equal to 1.0% of the aggregate consideration payable to us, TIL or its subsidiaries pursuant to a sale contract.

Commercial and Technical Management Services Agreements

~~Gemini Suezmax Pool~~

~~We along~~

Our Manager has agreed to use its best efforts to provide services, as defined under the Management Agreement, 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. For the years ended December 31, 2017, 2016 and 2015, our Manager has subcontracted Teekay Shipping Ltd. (or TSL), a subsidiary of Teekay Corporation, and TTOL and its affiliates, our wholly-owned subsidiaries, to provide certain commercial and technical services to us. These subcontracts are further described below.

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.

Commercial Management Services Agreement

In connection with the Management Agreement, our Manager entered into a long-term Commercial Management Services Agreement (or Commercial Agreement) with Teekay Chartering Ltd. (or TCL), a subsidiary of TTOL, to provide certain commercial services to us on behalf of our Manager.

Compensation for Commercial Services. In return for the services provided under the Commercial Agreement, our Manager will reimburse TCL a fee currently equal to 1.25% of the gross revenue attributable to the vessels, on time charter and spot-traded vessels, our Manager commercially manages for us (excluding vessels participating in the Teekay Suezmax RSA, Teekay Aframax RSA or the Taurus Tankers LR2 RSA).

Termination Rights. Parties to the Commercial Agreement may terminate the agreement upon giving to the other party at least 60 days' prior written notice of the effective date of termination.

The Commercial Agreement will also automatically terminate:

if the Management Agreement is terminated;

at the option of the party not in breach of the Commercial Agreement (and the matter is unresolved after a 30-day dispute resolution period);

at the option of the other party, if a party experiences certain bankruptcy events (and the matter is unresolved after a 60-day dispute resolution period); or

if a final judgment, order or decree which materially and adversely affects the ability of either party to perform its obligations.

Technical Management Services Agreement

In connection with the Management Agreement, our Manager entered into a long-term Technical Management Services Agreement (or Technical Agreement) with TSL to provide certain technical services to us on behalf of our Manager. In addition, TSL has entered into a long-term Master Ship Management Agreement (or Shipman Agreement) with TTOL and its affiliates, to provide certain technical services on behalf of TSL.

Compensation for Technical Services. In return for the technical services provided to us, our Manager pays TSL a technical management fee equal to the average rate Teekay Corporation charges third parties to technically manage their Tankers of a similar size, as determined on a quarterly basis. At the same time, TSL will pay a fee to TTOL and its affiliates for certain vessels it technically manages. TTOL and its affiliates received technical management fees of $7.7 million for 2017 excluding reimbursements for technical services of $4.9 million for 2017, $11.7 million for 2016 and $10.4 million for 2015 attributable to the Entities under Common Control.

Termination Rights. Parties to the Technical Agreement may terminate the agreement upon giving to the other party at least 60 days' prior written notice of the effective date of termination.

The Technical Agreement will also automatically terminate:

if the Management Agreement is terminated;

at the option of the party not in breach of the Technical Agreement (and the matter is unresolved after a 30-day dispute resolution period);

at the option of the other party, if a party experiences certain bankruptcy events (and the matter is unresolved after a 60-day dispute resolution period); or

if a final judgment, order or decree which materially and adversely affects the ability of either party to perform its obligations.

Parties to the Shipman Agreement may be terminated by either party in certain circumstances, including, among others, if:

any license or permit required to enable any party to perform any of its obligations is wholly or partially revoked, withdrawn, sustained or terminated or expires and is not renewed or otherwise fails to remain in full force; or

either party ceases to carry on business, or a substantial part of the business properties or assets of either party are seized or appropriated.

Revenue Sharing Pooling Agreements

Teekay Suezmax RSA

In November 2015, we and certain third-party vessel owners ~~and operators are parties to~~entered into a new revenue sharing ~~pool~~arrangement (or RSA) agreement (the~~Gemini Pooling~~Suezmax RSA Agreement) ~~pursuant~~with Teekay Chartering Limited, a wholly-owned subsidiary of TTOL. Pursuant to ~~which these pool participants~~this agreement, we have ~~each~~ agreed ~~to procure~~ to include in the ~~pool~~RSA certain qualifying Suezmax-class crude tankers ~~of the pool participants~~that are employed and ~~their respective affiliates, including us, that~~ operate in the spot market or pursuant to time charters of less than one year. ~~The Gemini Suezmax Pool is 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,~~2017, the ~~Gemini~~Teekay Suezmax ~~Pool~~RSA consisted of 2527 Suezmax tankers ~~including ten~~(including 24 of our ~~tankers.~~ owned and leased tankers).

A participating Suezmax tanker will no longer participate in the ~~Gemini~~Teekay Suezmax ~~Pool~~RSA if it becomes subject to a time charter with a term exceeding one year, unless otherwise agreed by all ~~pool~~RSA participants. In addition, vessels no longer participate in the ~~pool~~RSA 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 Pooling~~Suezmax RSA Agreement.

Vessel owners remain responsible for the technical management of their vessels in the ~~Gemini~~Teekay Suezmax ~~Pool,~~RSA, and our Manager provides these technical services with respect our vessels pursuant to the Management Agreement.

Allocation of ~~Gemini Pool~~Suezmax RSA Earnings.The ~~Gemini~~Teekay Suezmax ~~Pool~~RSA provides a revenue sharing mechanism whereby aggregate revenues and related expenses of the ~~pool~~RSA are distributed to ~~pool~~RSA participants based on an allocation formula. Revenues generated by vessels operating in the ~~Gemini~~ Suezmax ~~Pool~~RSA 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~~RSA 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~~RSA 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~~us, via our Manager, and otherwise administers the ~~pool~~RSA 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~~RSA, 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 RSA 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,~~RSA, 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)~~14f – Related Party Transactions.

Term and Termination. There is no specific expiration date for the ~~Gemini Pooling~~Suezmax RSA Agreement. However, the ~~Gemini~~Teekay Suezmax ~~Pool~~RSA 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~~RSA participant may withdraw from the ~~Gemini Pool~~Teekay Suezmax RSA upon at least 3090 days’ notice and shall cease to participate in the ~~Gemini Pool~~Suezmax RSA if, among other things, it materially breaches the ~~Gemini Pooling~~Suezmax RSA Agreement and fails to resolve the breach within a specified cure period or experiences certain bankruptcy events.

Teekay Aframax ~~Pools~~

RSA

We entered into ~~revenue sharing pool~~RSA agreements (theTeekay ~~Pooling~~RSA Agreements) with Teekay Corporation and Teekay Chartering Limited, a subsidiary of TTOL. Pursuant to the Teekay ~~Pooling~~RSA Agreements, we and Teekay Corporation have agreed to include in the Teekay Aframax ~~Pools~~RSA 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,~~2017, one of the Teekay Aframax ~~Pools~~RSAs consisted of 3431 Aframax tankers, which included ~~three~~seven of our owned tankers and ~~seven~~six of our ~~in-chartered tankers.~~owned LR2 product tankers which are commercially managed by and cross trading from the Taurus Tankers LR2 RSA. Vessels trading in the other Teekay Aframax RSA completed their respective voyages in 2017, and upon completion, were sold to third parties. 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,~~RSA, unless otherwise agreed by Teekay Corporation and us. In addition, vessels will no longer participate in the ~~pool~~RSAs 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~~RSA Agreements.

Under the Teekay ~~Pooling~~RSA Agreements, Teekay Chartering Limited commercially manages the Teekay Aframax ~~Pools~~RSA 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,~~RSAs, and our Manager provides these technical services to us pursuant to the Management Agreement.

Allocation of Teekay Aframax ~~Pools’~~RSA's Earnings. The Teekay Aframax ~~Pools~~RSAs provide a revenue sharing mechanism whereby aggregate revenues and related expenses of the ~~pools~~RSAs are distributed to ~~pools’~~RSA participants based on an allocation formula. Revenues generated by vessels operating in the Teekay Aframax ~~Pools~~RSAs 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~~RSAs 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’~~RSA 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, via our Manager, and otherwise administers the ~~pools~~RSAs 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,~~RSAs, 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,~~RSAs, less any set-offs for outstanding liabilities or contingencies. Please read Item 18 – Financial Statements: Note ~~13(h)~~14f – Related Party Transactions.

Term and Termination Rights. Subject to certain termination rights, the initial term of the Teekay ~~Pooling Agreement~~RSA Agreements expires on December 31, 2022. If not terminated, the Teekay ~~Pooling Agreement~~RSA Agreements 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~~RSA Agreements in certain other circumstances, including, among others, if:

Teekay Chartering Limited or Teekay Corporation materially breaches the Teekay ~~Pooling Agreement~~RSA Agreements (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~~RSA Agreements 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~~RSA Agreements 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~~

RSA

We along with ~~Teekay Corporation and~~ certain third party vessel owners and operators are parties to a ~~revenue sharing pool~~RSA agreement (theTaurus ~~Pooling~~RSA Agreement) pursuant to which these ~~pool~~RSA participants have each agreed to include in the ~~pool~~RSA certain qualifying LR2-class product tankers of the ~~pool~~RSA 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. The Taurus Tankers LR2 Pool is indirectly owned by TTOL.~~

one year.

As of December 31, ~~2014,~~2017, the Taurus Tankers LR2 ~~Pool~~RSA consisted of 18nine LR2 product tankers, including ~~three~~six of our owned LR2 product tankers, ~~and four chartered-in tankers.~~of which all have been deployed into the Aframax RSA. A participating LR2 product tanker will no longer participate in the Taurus Tankers LR2 ~~Pool~~RSA if it becomes subject to a time charter with a term exceeding ~~180 days,~~one year, unless otherwise agreed by all ~~pool~~RSA participants. In addition, vessels will no longer participate in the ~~pool~~RSA 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~~RSA Agreement.

Vessel owners remain responsible for the technical management of their vessels in the Taurus Tankers LR2 ~~Pool,~~RSA, and our Manager provides these technical services with respect our vessels pursuant to the Management Agreement.

Allocation of Taurus ~~Pool~~RSA Earnings.The Taurus Tankers LR2 ~~Pool~~RSA provides a revenue sharing mechanism whereby aggregate revenues and related expenses of the ~~pool~~RSA are distributed to ~~pool~~RSA participants based on an allocation formula. Revenues generated by vessels operating in the Taurus Tankers LR2 ~~Pool~~RSA 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~~RSA 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~~RSA 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 RSA provides commercial services to ~~pool participants~~us, via our Manager, and otherwise administers the ~~pool~~RSA 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,~~RSA, 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 RSA 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,~~RSA, less any set-offs for outstanding liabilities or contingencies. Please read Item 18 – Financial Statements: Note ~~13(h)~~14f – Related Party ~~Transactions~~

Transactions.

Term and Termination. There is no specific expiration date for the Taurus ~~Pooling~~RSA Agreement. However, the ~~pool~~RSA 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~~RSA participant may withdraw from the Taurus Tankers LR2 ~~Pool~~RSA upon at least 90 days’ notice and shall cease to participate in the Taurus Tankers LR2 ~~Pool~~RSA if, among other things, it materially breaches the Taurus ~~Pooling~~RSA 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)

On ~~August 1, 2014,~~May 31, 2017, we ~~purchased~~acquired from Teekay ~~Corporation~~Holdings Ltd., a wholly-owned subsidiary of Teekay, the remaining 50% interest in TTOL for $39.0 million, which ~~owns conventional tanker commercial management and technical management operations, including direct ownership in three commercially managed tanker pools (as described above),~~included $13.1 million for ~~an aggregate price of approximately $23.5 million, including net~~assumed working capital. ~~As consideration for this acquisition, we~~We issued ~~to Teekay Corporation 4.2~~approximately 13.8 million shares of our Class B common ~~shares, which had an approximate value of $17 million, or $4.03 per share, on~~stock to Teekay as consideration in addition to the ~~acquisition closing date. In addition, we reimbursed Teekay Corporation for $6.5 million of~~ working capital consideration of $13.1 million. Prior to May 31, 2017, we ~~assumed from Teekay Corporation in connection with~~owned 50% of TTOL and accounted for this investment using the ~~purchase.~~

equity method of accounting. Since we acquired the remaining 50% of TTOL on May 31, 2017, we own 100% of TTOL and now consolidate it.

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. 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—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.

On November 27, 2017, we completed a merger with TIL by acquiring all of the remaining 27.0 million issued and outstanding common shares of TIL, by way of a share-for-share exchange of 3.3 shares of our Class A common stock for each share of TIL common stock, and as a result, TIL became a wholly-owned subsidiary. As consideration for the merger, we issued 88,977,544 Class A common shares to the TIL shareholders, including 8,250,000 shares to Teekay.

Our Manager has waived the management services fees payable under the long-term management agreement it has with TIL to the extent such fees exceed the fees payable under the existing Management Agreement between us and the Manager, but the Manager did not waive the transaction fee that is payable in the event of any sale of vessels owned by TIL subsidiaries as of the date of the Merger, which fee is equal to 1.0% of the aggregate consideration payable to us, TIL or its subsidiaries pursuant to a sale contract.

Commencing on November 27, 2017, we consolidate the results of TIL. Prior to the completion of the merger, we equity-accounted for our 11.3% interest in TIL (December 31, 2016 - 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 19 – Shipbuilding Contracts for a description of legal action we have commenced against STX.~~

Dividend Policy

~~Prior to~~

Commencing with the dividend paid in the first quarter of ~~2013,~~2016, we ~~paid~~adopted a ~~variable~~dividend policy under which quarterly ~~cash dividend equal~~dividends are expected to range from 30% to 50% of our ~~Cash Available for Distribution each quarter,~~quarterly adjusted net income, subject to ~~any reserves determined by our Board~~the discretion of Directors. Dividends were 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~~with a ~~fixed~~minimum quarterly ~~cash~~ dividend of $0.03 per share under the current policy. Adjusted net (loss) income is a non-GAAP measure which ~~commenced~~excludes specific items affecting net (loss) income that are typically excluded by securities analysts in ~~the quarter ended March 31, 2013. Subject~~their published estimates of our financial results. Prior to ~~financial results and determination~~this change, our dividend policy was to distribute to our shareholder a fixed quarterly dividend of $0.03 per share ($0.12 per share annually). Our dividend policy is reviewed by ~~the~~our Board of Directors ~~we currently intend~~from time to ~~continue~~time and subject to ~~declare and pay a regular fixed quarterly dividend in such amount per share on our Class A common stock and our Class B common stock.~~

change.

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~~2017 and ~~2015.~~

2018.

~~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, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014		Dec 31, 2013
High	$	2.70	$	6.89	$	8.53	$	5.95	$	4.02
Low	$	1.30	$	1.90	$	4.82	$	3.18	$	2.38

Quarters Ended	Mar 31, 2018		Dec 31, 2017		Sept 30, 2017		Jun 30, 2017		Mar 31, 2017		Dec 31, 2016		Sept 30, 2016		Jun 30, 2016		Mar 31, 2016
High	$	1.43	$	1.95	$	1.91	$	2.20	$	2.70	$	2.85	$	3.28	$	4.16	$	6.89
Low	$	1.08	$	1.30	$	1.37	$	1.65	$	1.96	$	1.90	$	2.42	$	2.87	$	3.26

Months Ended	Mar 31, 2018		Feb 28, 2018		Jan 31, 2018		Dec 31, 2017		Nov 30, 2017		Oct 31, 2017
High	$	1.27	$	1.29	$	1.43	$	1.63	$	1.95	$	1.72
Low	$	1.11	$	1.08	$	1.24	$	1.30	$	1.40	$	1.47

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)	Technical Services Agreement dated December 18, 2007 between Teekay Tankers Management Services Ltd. and Teekay Shipping Limited. Please read Item 4. – Information on the Company – B. Business Overview for a description of this Technical Services Agreement.


d)	Commercial Management Services Agreement dated February 29, 2008 between Teekay Tankers Management Services Ltd. and Teekay Chartering Limited. Please read Item 4. – Information on the Company – B. Business Overview for a description of this Commercial Management Agreement.


e)	Teekay Tankers Ltd. 2007 Long-Term Incentive Plan.

	c)
f)	~~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)

Registration Rights Agreement between Teekay Tankers Ltd. and Teekay Corporation.

	e)
g)	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.

	f)
h)	Master Ship Management Agreement dated August 31, 2012 between Teekay Shipping Limited and Teekay Marine Ltd. Please read Item 4. – Information on the Company – B. Business Overview for a description of this Master Ship Management 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.

j)

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.

k)

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.


m)	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.

n)

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 ~~June 15, 2012~~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.


p)	Secured Revolving Credit Facility Agreement dated December 18, 2017 between Teekay Tankers Ltd., Nordea Bank AB and various other banks, for a $270.0 million long-term debt facility which is scheduled to mature in December 2022.

q)

Agreement and Plan of Merger, dated as of May 31, 2017, by and among Teekay Tankers Ltd., Royal 2017 Ltd. and Tanker Investments Ltd. (or TIL) under which we completed a merger with TIL by acquiring all of the remaining 27.0 million issued and outstanding common shares of TIL, by way of a share-for-share exchange of 3.3 shares of our Class A common stock for each share of TIL common stock, and as a result, TIL became a wholly-owned subsidiary.

r)

Voting and Support Agreement, dated as of May 31, 2017, between Teekay Corporation, Teekay Holdings Limited, Teekay Finance Limited, Tanker Investments Ltd. and Teekay Tankers Ltd. ~~For~~, providing, among other things, that Teekay Corporation will support 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.

Merger with TIL.

g)

s)

~~Non-competition~~

Purchase Agreement, dated ~~June 15, 2012~~as of May 31, 2017, 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~~Teekay Holdings Limited (or THL), under which we purchased the ~~agreement.~~

remaining 50% of the issued and outstanding shares of Teekay Tanker Operations Ltd. from THL.

t) Voting and Support Agreement, dated as of September 14, 2017, by and among Teekay Tankers Ltd., Huber Capital Management, LLC and Joseph R. Huber, providing, among other things, that Huber Capital Management, LLC and Joseph R. Huber would vote certain shares of the Company's Class A Common Stock in favor of a charter amendment in connection with our merger with TIL.
u) Share Subscription Agreement, dated January 13, 2017, between Teekay Tankers Ltd. and THL, under which we agreed to issue a total of 2,155,172 shares of our Class A common stock for an aggregate purchase price of $5,000,000.

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 (by vote or value), 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~~short-term capital gain depending upon whether the U.S. Holder has held the common 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~~income.

Subject to holding period requirements and ~~generally will be treated as “passive category income.”~~

~~Dividends paid on~~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 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~~stockholder’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 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 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.~~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 the 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~~Election. 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 Class A common 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”~~“mark-to-market” election with respect to our Class A 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 Class A 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 Class A common stock at the end of the taxable year over the U.S. Holder’s adjusted tax basis in the Class A 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 Class A 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~~mark-to-market election. A U.S. Holder’s tax basis in our Class A common stock would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our Class A 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 Class A 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~~mark-to-market gains previously included in income by the U.S. Holder. Because the ~~mark–to–market~~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 Class A 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 Class A common stock exceeds the U.S. Holder’s adjusted tax basis in the Class A 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 (a~~Non–Electing~~Non-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 a~~CFC~~ ).

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~~common stock 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.~~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 within the United States 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 inwithin 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 within the United States 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~~or they will, conduct business, operations, or ~~operations~~transactions 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, operations, 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 and changes in spot tanker market ~~rates and changes in the stock price of TIL in connection with our warrant to purchase TIL common shares.~~rates. 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, ~~Canadian~~Singaporean 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~~2017, 2016 or ~~2012.~~

2015.

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,~~2017, that are sensitive to changes in interest rates, including our debt, obligations related to capital leases and interest rate swaps. For long-term debt and obligations related to capital leases, 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 %



	2018		2019		2020		2021		2022		Thereafter		Total		Fair Value Asset / (Liability)		Rate ⁽¹⁾

	(in millions of U.S. dollars, except percentages)
Long-term debt:
Variable rate	(157.2	)	(95.7	)	(121.9	)	(365.7	)	(155.5	)	—		(896.0	)	(879.9	)	3.40	%
Fixed-rate	(10.0	)	(10.0	)	(10.0	)	(37.2	)	—		—		(67.2	)	(66.2	)	5.37	%

Obligation related to capital leases	(7.2	)	(7.7	)	(8.2	)	(8.7	)	(9.3	)	(107.8	)	(148.9)		(147.4)		6.20%

Interest Rate Swaps:
U.S. Dollar-denominated interest rate swap⁽²⁾	46.3		46.3		46.2		—		—		—		138.8		1.3		1.46	%
U.S. Dollar-denominated interest rate swap⁽²⁾	—		—		—		150.0				—		150.0		2.5		1.55	%
U.S. Dollar-denominated interest rate swap⁽²⁾	—		—		—		50.0				—		50.0		1.4		1.16	%


(1)	Rate refers to the weighted-average ~~effective~~ interest rate for our long-term debt as at December 31, ~~2014,~~2017, 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~~

Prior to our acquisition of TIL, we were exposed to the changes in the stock price of TIL. We ~~have~~had 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 had the option to exercise the stock purchase warrant at 61.67 Norwegian Kroner (or ~~NOK)~~NOK) per share. The stock purchase warrant ~~vests~~vested in four equally sized tranches. Each tranche ~~will~~would 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~~was scheduled to expire on January 23, ~~2019.~~2019; however, upon completing the merger with TIL on November 27, 2017, the stock purchase warrant was canceled. Please read Item 18 – Financial Statements: Note 910 – 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~~tool to protect against changes in spot tanker market rates. Forward freight agreements ~~involve~~are contracts used to ~~provide~~buy or sell a fixed ~~number~~volume of ~~theoretical voyages along a~~freight on specified ~~route at a contracted charter rate.~~trade routes. Forward freight agreements settle in cash based on the difference between the contracted charter rate and the average rate of an identified index. ~~As at March 31, 2015,~~

To reduce our exposure, in the second quarter of 2016 we ~~had not~~ entered into ~~any forward freight agreements, although~~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 was the estimated amount that we ~~may do so in~~would receive or pay to terminate the ~~future.~~

agreement at the reporting date, based on the present value of our projection of future Aframax spot market tanker rates, which was derived from current Aframax spot market tanker rates and estimated future rates. As of May 1, 2017, the time-charter swap counter party did not exercise the two-month option and as such, the agreement was completed as of June 30, 2017.

~~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 have concluded that our disclosure controls and procedures are effective as of December 31, ~~2014.~~

2017.

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~~control over financial reporting.

Our internal controls ~~were~~are 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~~control 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 U.S. generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and ~~our~~the 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~~control 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.~~

2017.

Our independent auditors, KPMG LLP, an independent registered public accounting firm, ~~has~~have 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)~~15(f) under the Exchange Act) that occurred during the year ended December 31, ~~2014.~~

2017.

~~Item 16A.Audit Committee Financial Expert~~

Item 16A. Audit Committee Financial Expert

The Board of Directors has determined that director and former Chair of the Audit Committee during 2017, William Lawes, qualifies as an audit committee financial expert and is independent under applicable NYSE and SEC standards.

The Board of Directors has determined that director and current Chair of the Audit Committee (effective March 15, 2018), Richard Paterson, 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 –~~Tankers Ltd. - Governance” section of our web site (www.teekay.com), any waivers to or amendments of our Standards of Business Conduct Policy ~~for the~~that 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~~2017 and ~~2013~~2016 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)	2017	2016
Audit Fees ⁽¹⁾	545	408
Tax Fees ⁽²⁾	34	24
	579	432


(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 2017 and 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 2017. No other services were provided to ~~the Company~~us by the auditors during ~~the terms of their appointment in 2014 and 2013.~~

2017 or 2016.

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~~2017 and ~~2013.~~

2016.

~~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 (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-31

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
~~1.2~~		Amended and Restated Bylaws of Teekay Tankers Ltd. ⁽¹⁾
4.1
~~4.1~~		Contribution, Conveyance and Assumption Agreement ⁽¹⁾
4.2
~~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
~~4.3~~		Gross Revenue Sharing Pool Agreement ⁽¹⁾
4.4
~~4.4~~		Teekay Tankers Ltd. 2007 Long-Term Incentive Plan ⁽¹⁰⁾
4.5
~~4.5~~		Technical Services Agreement dated ~~November 28,~~as of December 18, 2007, ~~for a U.S. $229,000,000 Secured Revolving Credit Facility~~ between Teekay Tankers Management Services Ltd.~~, Nordea Bank Finland PLC~~ and ~~various other banks. (1)~~ Teekay Shipping Limited.
4.6
~~4.6~~		Registration Rights Agreement between Teekay Tankers Ltd. and Teekay Corporation. ⁽¹⁾
4.7	Commercial Management Services Agreement dated as of February 29, 2008, between Teekay Tankers Management Services Ltd. and Teekay Chartering Limited.
~~4.7~~ 4.8		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⁾
4.9
~~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⁾
4.10
~~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⁾
4.11
~~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⁾
4.12
~~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⁾
4.13
~~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⁾
4.14
~~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⁾
4.15
~~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⁾
4.16
~~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⁾
4.17
~~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⁾
4.18
~~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⁾
4.19	Master Ship Management Agreement dated August 31, 2012, between Teekay Shipping Limited and Teekay Marine Ltd.
4.20	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. ⁽⁸⁾
4.21	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. ⁽⁸⁾
4.22	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. ⁽⁸⁾
4.23	Registration Rights Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and the persons set forth on Schedule I thereto. ⁽¹¹⁾
4.24	Common Stock Purchase Agreement, dated August 4, 2015, by and among Teekay Tankers Ltd. and the purchasers named therein. ⁽¹²⁾
4.25	Share Subscription Agreement, dated January 13, 2017, between Teekay Tankers Ltd. and Teekay Holdings Limited.
4.26	Agreement and Plan of Merger, dated as of May 31, 2017, by and among Teekay Tankers Ltd., Royal 2017 Ltd. and Tanker Investments Ltd. ⁽¹³⁾



~~4.18~~ 4.27		~~Non-competition~~ Voting and Support Agreement, dated ~~June 15, 2012~~as of May 31, 2017, between Teekay Corporation, Teekay Holdings Limited, Teekay Finance Limited, Tanker Investments Ltd. and Teekay Tankers Ltd. ~~(11)~~ ⁽¹³⁾
4.28	Purchase Agreement, dated as of May 31, 2017, between Teekay Tankers Ltd. and Teekay Holdings Limited ⁽¹³⁾
~~8.1~~ 4.29	Voting and Support Agreement, dated as of September 14, 2017, by and among Teekay Tankers Ltd., Huber Capital Management LLC and Joseph R. Huber⁽¹⁶⁾
4.30	Secured Revolving Credit Facility Agreement dated December 18, 2017 between Teekay Tankers Ltd., Nordea Bank AB and various other banks, for the principal amount of $270.0 million.
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⁾
~~12.1~~ 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. ⁽¹⁴⁾
10.3	Equity Distribution Agreement, dated June 4, 2015, between Teekay Tankers Ltd. and Evercore Group L.L.C. ⁽¹⁵⁾
12.1	Rule 13a-14(a)/15d-14(a) Certification of Teekay Tankers Ltd.’s Chief Executive Officer.
12.2
~~12.2~~		Rule 13a-14(a)/15d-14(a) Certification of Teekay Tankers Ltd.’s Chief Financial Officer.
13.1
~~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
~~13.2~~		Teekay Tankers Ltd. Certification of ~~Vincent Lok,~~Stewart Andrade, 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
~~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~~2017 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~~Exhibits 3.1, 3.2, 10.1, 10.3, 10.5 and 4.1 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~~Exhibits 4.1 and 4.2 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~~Exhibit 4.19, 4.20, 4.21 and 10.4 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~~10.2 to the Company’s Report on Form ~~20-F~~6-K filed with the SEC on ~~April 30, 2013~~November 18, 2015 and hereby incorporated by reference to such Report.

(12) 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.


(13)	Previously filed as Exhibits 1.1, 1.2, and 1.3 to the Company’s Report on Form 6-K filed with the SEC on June 1, 2017 and hereby incorporated by reference to such Report.


(14)	Previously filed as Exhibits 1.1, 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.


(15)	Previously filed as Exhibit 1.1 to the Company’s Report on Form 6-K filed with the SEC on June 4, 2015 and hereby incorporated by reference to such Report.


(16)	Previously filed as Exhibits 99.1 to the Company's Report on Form 6-K filed with the SEC on October 25, 2017 and hereby incorporated by reference to such Report.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant 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~~ 24, 2018	~~By:~~	By:	/s/ ~~Vincent Lok~~ Stewart Andrade
		~~Vincent Lok~~	Stewart Andrade
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~

To the Board of Directors and ~~Stockholders~~

Shareholders

Teekay Tankers Ltd.

:

Opinion on the ConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of Teekay Tankers Ltd. andsubsidiaries (the ~~“Company”)~~Company) as of December 31, ~~2014~~2017 and ~~2013, and~~2016, the related consolidated statements of (loss) income, ~~(loss),~~ cash flows, and changes in equity for each of the years in the ~~three-year~~three‑year period ended December 31, ~~2014.~~ 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2017, 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) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 24, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for Business Combinations as of October 1, 2017, due to the adoption of Accounting Standards Update 2017-01 Clarifying the Definition of a Business.

Basis for Opinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB and in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material ~~misstatement. An audit includes~~misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the consolidated financial statements. ~~An audit~~Our audits also ~~includes assessing~~included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial ~~statement presentation.~~statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2011.

/s/ KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

April 24, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Teekay Tankers Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Teekay Tankers Ltd. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the ~~consolidated financial statements referred to above present fairly,~~Company maintained, in all material respects, ~~the~~effective internal control over financial ~~position of the Company~~reporting as of December 31, ~~2014 and 2013, and~~2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the ~~results~~Committee of ~~its operations and its cash flows for each~~Sponsoring Organizations of the ~~years in the three-year period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.~~

Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~Company’s internal control over financial reporting~~consolidated balance sheets of the Company as of December 31, ~~2014, based on criteria established~~2017 and 2016, the related consolidated statements of (loss) income, cash flows, and changes in ~~Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations~~equity for each of the ~~Treadway Commission (COSO)~~years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements), and our report dated April ~~28, 2015~~24, 2018 expressed an unqualified opinion on ~~the effectiveness of the Company’s internal control over~~those consolidated financial ~~reporting.~~

~~/s/ KPMG LLP~~

~~Chartered Accountants~~

~~Vancouver, Canada~~

~~April 28, 2015~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~The Board of Directors and Stockholders~~

~~Teekay Tankers Ltd.~~

We have audited Teekay Tankers Ltd.’s (“the Company”) internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). statements.

Basis for Opinion

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 the accompanying Management’s Report on Internal Control over Financial ~~Reporting in the accompanying Form 20-F.~~Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB and in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. 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 of internal control over financial reporting 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.

Definition and Limitations of Internal Control Over Financial Reporting

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 based on the criteria established in Internal 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 at December 31, 2014 and 2013, 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, and our report dated April 28, 2015, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Chartered Professional Accountants

Vancouver, Canada

April ~~28, 2015~~

24, 2018

TEEKAY TANKERS LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF (LOSS) 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, 2017 $			Year Ended December 31, 2016 $			Year Ended December 31, 2015 $
REVENUES
Net pool revenues (notes 14e and 14h)	139,936			310,108			381,028
Time-charter revenues (note 14e)	112,100			97,374			75,375
Voyage charter revenues	125,774			90,032			41,874
Other revenues (note 20)	53,368			53,029			36,404
Total revenues	431,178			550,543			534,681

Voyage expenses (note 14e)	(77,368		)	(53,604		)	(18,727		)
Vessel operating expenses (notes 14e and 14f)	(175,389		)	(182,598		)	(137,164		)
Time-charter hire expense (note 9)	(30,661		)	(59,647		)	(74,898		)
Depreciation and amortization	(100,481		)	(104,149		)	(73,760		)
General and administrative expenses (note 14e)	(32,879		)	(33,199		)	(30,403		)
(Loss) gain on sale of vessels (note 19)	(12,984		)	(20,594		)	771
Restructuring charges (note 20)	—			—			(6,795		)
Income from operations	1,416			96,752			193,705

Interest expense	(31,294		)	(29,784		)	(17,389		)
Interest income	907			117			122
Realized and unrealized gain (loss) on derivative instruments (note 10)	1,319			(964		)	(1,597		)
Equity (loss) income (note 6)	(25,370		)	7,680			11,528
Other expense (note 15)	(5,001		)	(5,978		)	(2,743		)
Net (loss) income	(58,023		)	67,823			183,626

Per common share amounts (note 18)
• Basic (loss) earnings per share		($0.31	)		$0.40			$1.26
• Diluted (loss) earnings per share		($0.31	)		$0.40			$1.25
• Cash dividends declared		$0.12			$0.18			$0.24

Weighted-average number of Class A and Class B common stock outstanding (note 18)
• Basic	187,235,377			170,098,572			143,911,452
• Diluted	187,235,377			170,340,639			144,492,933

Related party transactions (note ~~13)~~

14)

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, 2017
$ As at
December 31, 2016
$
ASSETS
Current
Cash and cash equivalents 71,439
94,157
Restricted cash 1,599
750
Pool receivables from affiliates, net (note 14h)
15,550
24,598
Accounts receivable, including affiliate balances of $0.8 million (2016 - $0.8 million) 19,288
33,789
Vessels held for sale (note 19)
—
33,802
Due from affiliates (note 14f)
49,103
48,714
Current portion of derivative assets (note 10)
1,016
875
Prepaid expenses 18,690
21,300
Total current assets 176,685

257,985
Restricted cash - long-term 2,672
—
Vessels and equipment
At cost, less accumulated depreciation of $512.0 million (2016 - $459.3 million) 1,737,792
1,605,372
Vessels related to capital leases
At cost, less accumulated depreciation of $25.4 million (2016 - $nil) (note 9)
227,722
—
Investment in and advances to equity accounted investments (note 6)
25,460
70,651
Derivative assets (note 10)
4,226
4,538
Intangible assets - net (note 21 and 22)
14,605
17,658
Other non-current assets 127
107
Goodwill (note 21)
8,059
8,059
Total assets 2,197,348

1,964,370
LIABILITIES AND EQUITY
Current
Accounts payable, including affiliate balances of $nil (2016 - $1.1 million) 7,860
14,406
Accrued liabilities (notes 7, 10 and 14f)
34,608
28,663
Current portion of long-term debt (note 8)
166,745
171,019
Current portion of derivative liabilities (note 10)
—
1,108
Current obligation related to capital leases (note 9)
7,227
—
Deferred revenue 557
4,455
Due to affiliates (note 14f)
19,717
36,299
Total current liabilities 236,714

255,950
Long-term debt (note 8)
785,557
761,997
Long-term obligation related to capital leases (note 9)
141,681
—
Other long-term liabilities (note 11)
26,795
13,683
Total liabilities 1,190,747

1,031,630
Commitments and contingencies (notes 6, 9 and 10)

Equity
Common stock and additional paid-in capital (385 million shares authorized, 231.2 million Class A and 37.0 million class B shares issued and outstanding as of December 31, 2017) (2016 - 300 million shares authorized, 136.1 million Class A and 23.2 million Class B shares issued and outstanding) (notes 4 and 13)
1,294,998
1,103,304
Accumulated deficit (288,397 ) (182,680 )
Entities under Common Control equity —
12,116
Total equity 1,006,601

932,740
Total liabilities and equity 2,197,348

1,964,370

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, 2017 $		Year Ended December 31, 2016 $		Year Ended December 31, 2015 $
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net (loss) income	(58,023	)	67,823		183,626
Non-cash items:
Depreciation and amortization	100,481		104,149		73,760
Loss (gain) on sale of vessels (note 19)	12,984		20,594		(771	)
Unrealized gain on derivative instruments (note 10)	(937	)	(9,679	)	(8,193	)
Equity loss (income) (note 6)	25,370		(7,680	)	(11,528	)
Other	8,093		10,063		3,034
Change in operating assets and liabilities (note 16)	5,741		30,004		1,655
Expenditures for dry docking	(14,069	)	(8,608	)	(39,617	)
Net operating cash flow	79,640		206,666		201,966
FINANCING ACTIVITIES
Proceeds from long-term debt, net of issuance costs	232,825		906,149		688,695
Repayments of long-term debt	(109,006	)	(162,092	)	(40,029	)
Prepayment of long-term debt	(443,796	)	(979,877	)	(191,592	)
Repayment from long-term debt of Entities under Common Control (note 3)	—		—		(4,632	)
Proceeds from financing related to sale and leaseback (note 9)	153,000		—		—
Scheduled repayments of obligations related to capital leases (note 9)	(4,090	)	—		—
Net advances from affiliates (note 3)	—		—		(825	)
Equity contribution from Teekay Corporation to Entities under Common Control (note 3)	—		—		1,928
Increase in restricted cash - long-term	(2,672	)	—		—
Return of capital to Teekay Corporation (note 3)	—		(15,000	)	—
Acquisition of the Explorer Spirit and Navigator Spirit from Teekay Offshore Partners L.P. (note 3)	—		—		(31,870	)
Cash dividends paid	(20,679	)	(46,847	)	(15,139	)
Proceeds from equity offerings, net of offering costs (note 4)	8,521		7,558		242,264
Proceeds from issuance of common stock, net of share issuance costs (note 4)	5,000		—		—
Other	(241	)	(744	)	(1,122	)
Net financing cash flow	(181,138	)	(290,853	)	647,678
INVESTING ACTIVITIES
Proceeds from the sales of vessels and equipment (note 19)	52,131		27,550		11,080
Expenditures for Principal Maritime Vessel acquisitions (note 19)	—		—		(612,000	)
Expenditures for vessels and equipment	(4,732	)	(9,226	)	(236,229	)
Loan repayments from High-Q joint venture (note 6)	550		3,500		1,000
Adjustment to investment in TTOL prior to 100% acquisition	—		—		(239	)
Return of capital from equity accounted investments	—		—		1,088
Acquisition of SPT (note 21)	—		—		(45,581	)
Cash acquired in TIL acquisition, net of transaction fees (note 22)	30,831		—		—
Net investing cash flow	78,780		21,824		(880,881	)
Decrease in cash and cash equivalents	(22,718	)	(62,363	)	(31,237	)
Cash and cash equivalents, beginning of the year	94,157		156,520		187,757
Cash and cash equivalents, end of the year	71,439		94,157		156,520

Supplemental cash flow information (note 16)

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, 2014 40,961

112,064

785,515

17,135

(346,927 )
496,684
Net income 6,699
—
—
—
176,927
183,626
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 the initial 50% of TTOL (note 6)
—
—
—
—
(239 ) (239 )
Net change in parent's equity from Entities under Common Control (note 3)
1,549
—
—
—
—
1,549
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 13)
—
254
692
—

692
Balance as at December 31, 2015 22,018

156,031

1,032,239

62,635

(217,413 )
899,479
Net income 4,968
—
—
—
62,855
67,823
Proceeds from issuance of Class A common stock, net of offering costs (note 4)
—
3,020
7,558
—
—
7,558
Net change in parent's equity from Entities under Common Control (note 3)
130
—
—
—
—
130
Return of capital from Entities under Common Control (note 3)
(15,000 ) —
—
—
—
(15,000 )
Dividends declared —
—
—
—
(28,122 ) (28,122 )
Equity-based compensation (note 13)
—
253
872
—
—
872
Balance as at December 31, 2016 12,116
159,304
1,040,669
62,635
(182,680 ) 932,740
Net income (loss) 1,304
—
—
—
(59,327 ) (58,023 )
Proceeds from issuance of Class A common stock, net of offering costs (note 4)
—
5,955
13,521
—
—
13,521
Acquisition of the remaining 50% of TTOL (note 4)
(13,420 ) 13,775
—
25,897
(25,711 ) (13,234 )
Acquisition of TIL (note 4)
—
88,978
151,262
—
—
151,262
Dividends declared —
—
—
—
(20,679 ) (20,679 )
Equity-based compensation (note 13)
—
190
1,014
—
—
1,014
Balance as at December 31, 2017 —
268,202
1,206,466
88,532
(288,397 ) 1,006,601

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 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,~~2017, the Company’s fleet included a total of 4058 vessels, of which 12four were party to long-term bareboat leases, one was 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, the Entities under Common Control and any variable interest entities (or VIEs) of which it is the ~~Dropdown Predecessor.~~primary beneficiary. 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~~businesses 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~~entity. The amount by which the ~~combination. The~~ proceeds paid by the Company ~~over or under Teekay’s~~differs from Teekay's historical ~~cost in~~carrying value of the acquired ~~vessels are~~business is 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~~business were both under the common control of Teekay and had begun operations.

On May 31, 2017, the Company acquired from Teekay Holdings Ltd., a wholly-owned subsidiary of Teekay, the remaining 50% interest in Teekay Tanker Operations Ltd. (or TTOL). As a result of the ~~Company’s~~acquisition, the Company's consolidated financial statements prior to the date the ~~interests~~Company acquired a controlling interest in ~~these vessels were actually acquired by the Company are~~TTOL have been retroactively adjusted to ~~reflect these vessels~~eliminate the use of the equity method of accounting for the original 50% interest in TTOL and ~~their related operations~~to include 100% of the assets and ~~cash flows (referred to herein, collectively, as the~~~~Dropdown Predecessor~~)liabilities and results of TTOL during the periods they were under common control of ~~Teekay.~~

~~During June 2012,~~Teekay and had begun operations. All intercorporate transactions between 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 operationsTTOL that occurred prior to the ~~periods covered by these consolidated financial statements and, consequently, are reflected~~acquisition of a controlling interest 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 assumedTTOL by the Company ~~concurrently~~have been eliminated upon consolidation (note 3).

In July 2017, the Company completed sales-lease back financing arrangements with four lessor entities established by a financial institution. The Company is considered to be the ~~dropdown transaction. Interest expense includes~~primary beneficiary of the ~~allocation~~lessor entities under the arrangements and has since consolidated these VIEs (note 9).

On November 27, 2017, the Company completed its merger with Tanker Investments Ltd. (TIL), as a result of ~~interest~~which TIL became a wholly-owned subsidiary of the Company. Prior to the ~~Dropdown Predecessor from Teekay based upon~~merger, the ~~weighted-average outstanding balance of~~Company accounted for its 11.3% interest in TIL using the ~~push-down debt~~equity method (notes 6 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)~~

22).

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

Revenues and voyage expenses of the vessels operating in revenue sharing 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

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 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 below 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.

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.

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 activities such as the commercial and technical management of vessels, 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.

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,~~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.~~above. 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.

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)~~(note 13).

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 21) and for certain freight forward agreements (note 10). Attached to these contracts are certain performance guarantees required by the Company.

Restricted Cash - Long-term

The Company maintains restricted cash deposits for the purposes of the margin requirements of the Company's capital lease obligations (note 9).

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~~2017 and ~~2012.~~

2016.

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

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)

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, 2017 $	December 31, 2016 $
Advances to equity accounted investment	Other internal metrics	Performing	9,930	10,480
			9,930	10,480

Equity accounted investments

The Company’s ~~has~~ investments in ~~the High-Q~~ joint ~~venture, Teekay Tanker Operations Ltd. (or~~~~TTOL~~~~) and Tanker Investments Ltd. (or~~~~TIL~~~~) all of which~~ventures 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~~investments 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 (loss) income. The Company’s maximum exposure to loss is the amount it has invested in its equity accounted investments.

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 and excluding amortization of dry-docking costs) for the years ended December 31, 2014, 2013 and 2012 totaled $39.4 million, $39.2 million, and $63.4 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.

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 Entities under Common Control and excluding amortization of dry-docking costs and intangible assets) for the years ended December 31, 2017, 2016 and 2015 totaled $80.1 million, $81.5 million, and $59.5 million, respectively.

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~~dry-docking costs, from January 1, ~~2012~~2015 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

2017:



	Year Ended December 31,
	2017 $		2016 $		2015 $
Balance at the beginning of the year	49,298		62,146		35,509
Cost incurred for dry docking	16,239		9,340		39,617
Dry-dock amortization	(17,077	)	(18,736	)	(12,866	)
Vessel sales (note 19)	—		(3,452	)	(114	)
Balance at the end of the year	48,460		49,298		62,146

Vessels and equipment that are “held ~~and used”~~for use” 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

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 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.

Vessels and equipment that are “held for sale” are measured at the lower of their carrying amount or fair value less costs to sell and are not depreciated while classified as held for sale. Interest and other expenses attributable to vessels and equipment classified as held for sale, or to their related liabilities, continue to be recognized as incurred.

Vessels related to capital leases that are treated as VIEs, whereby the Company is the primary beneficiary, are accounted for on a consolidated basis.

Goodwill and intangible assets

Goodwill is not amortized but is 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~~presented as a direct deduction from the carrying amount of the debt liability with the exception of debt issuance costs which are not attributable to a specific debt liability or where the debt issuance costs exceed the carrying value of the related debt liability, and in those cases the debt issuance costs are deferred and presented as other non-current ~~assets.~~assets in the Company's consolidated balance sheets. 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 (loss) income.

Fees paid to amend revolving credit facilities are deferred and amortized over the term of the modified credit facility. If the borrowing capacity is increased as a result of the amendment, unamortized debt issuance costs of the original facility are deferred and amortized over the term of the modified debt facility. If the borrowing capacity is decreased as a result of the amendment, a proportionate amount (based on the reduction in borrowing capacity) of the unamortized issuance costs of the original facility is written off and the remaining amount is deferred and amortized over the term of the modified credit facility.

Fees paid to substantially amend a non-revolving credit facility are included in determining the debt extinguishment gain or loss and any unamortized debt issuance costs are written off. If the amendment is considered not be a substantial amendment (in accordance with the criteria contained in ASC 470-50-40), then any fees paid are amortized as an adjustment of interest expense over the remaining term of the replacement or modified debt using the effective interest method, or straight-line method, as appropriate. Other related costs incurred with third parties directly related to the modification (other than the loan amendment fee) such as legal fees are expensed as incurred.

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~~of 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.

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)

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.~~(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.~~(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.~~(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.~~

(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~~gain (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 which were purchased solely with cash by (b) the weighted-average number of shares outstanding during the applicable ~~period.~~period and the equivalent shares outstanding that are attributable to the Entities under Common Control. 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 this date. The Company has elected to apply ASU 2014-09 only to those contracts that are not completed as of January 1, 2018. The Company will adopt ASU 2014-09 as a cumulative-effect adjustment as of the date of adoption. ~~Early adoption is not permitted.~~ The Company has identified the following differences based on the work performed to date:

The Company currently presents the net allocation for its vessels participating in revenue sharing arrangements as revenues. The Company has determined that it is ~~evaluating~~ the ~~effect of adopting~~principal in voyages its vessels perform that are included in the revenue sharing arrangements. As such, the revenue from those voyages will be presented in voyage revenues and the difference between this ~~new accounting guidance.~~

amount and the Company's net allocation from the revenue sharing arrangement will be presented as voyage expenses. There will be no cumulative impact to opening equity as at January 1, 2018.

In ~~April 2014,~~February 2016, the FASB issued Accounting Standards Update ~~2014-08, Reporting Discontinued Operations~~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 ~~Disclosures of Disposals of Components of an Entity (or ASU 2014-08) which raises~~a lease liability on the ~~threshold~~balance sheet 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~~all leases with terms longer than 12 months. For lessees, leases will be classified as ~~held for sale~~either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all of the risks and ~~represents~~benefits of the underlying asset to the lessee and a ~~strategic shift~~third party, the lease is a direct financing lease. All leases that ~~has~~are not sales-type leases 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.~~direct financing leases are operating leases. 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 2014-08~~2016-02 is effective January 1, 2019, with early adoption permitted. The Company currently intends to adopt ASU 2016-02 effective January 1, 2018 using a transition approach whereby a cumulative effect adjustment is made as of the effective date of January 1, 2018, with no retrospective effect. To determine the cumulative effect adjustment, the Company has not reassessed whether any expired or existing contracts are or contain leases, has not reassessed lease classification, and has not reassessed initial direct costs for ~~fiscal years beginning on or after December 15, 2014,~~any existing leases. The quarter in which the Company adopts ASU 2016-02 and ~~interim periods within those years. Early~~the estimated impact from adoption contained below are based upon the expectation that FASB will issue an additional ASU prior to the filing of the Company's consolidated financial statements for the first quarter of 2018. The Company is ~~permitted, but only for disposals (or classifications as held for sale) that have not been reported~~currently considering the potential impact of a delay in the ~~financial statements previously issued or available~~finalization of this additional ASU on its adoption date. The adoption of ASU-02 will result in a change in accounting method for ~~issuance. The impact, if any, of adopting ASU 2014-08 on~~ the ~~Company’s financial statements will depend on the occurrence and nature of disposals that occur after ASU 2014-08 is adopted.~~

3.	~~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

~~(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)~~

Represents 20.0 million Class A common shares issued to the public and 4.2 million common shares issued to Teekay in a concurrent private placement. The proceeds from the issuance will be used to acquire modern second hand tankers (see note 18) 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 December 31, 2014, the Company issued an additional 3 million shares of Class A common stock upon the exercise by the underwriters’ of an option to acquire additional shares from the December 2014 public offering (see note 20b).

4.	~~Business Operations~~

~~Significant Customers~~

The following table presents consolidated revenues and percentage of consolidated revenues for customers that accounted for more than 10% of the Company’s consolidated revenues for its sole operating segment during the periods presented. Revenues from customers attributable to the Dropdown Predecessor 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

~~(1)~~

~~Less than 10% of the consolidated revenues~~

lease porti

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~~

on 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 based on the present value of future minimum lease payments, 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 expects that the cumulative right-of-use asset and corresponding lease liability to be recognized on January 1, 2018 will be approximately $16.0 million, based on the work performed to date.

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 became effective for the Company January 1, 2017. The impact of adopting this new accounting guidance resulted 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, and this change was applied retrospectively.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses: Measurement of Credit ~~Risk~~

~~There~~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 guidance.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which, among other things, provides guidance on two acceptable approaches of classifying distributions received from equity method investees in the statement of cash flows. This update is effective for the Company January 1, 2018, with a retrospective approach. The Company is currently evaluating the effect of adopting this new guidance.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash, (or ASU 2016-18). ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. ASU 2016-18 is effective for the Company on January 1, 2018. Adoption of ASU 2016-18 will result in the Company’s cash flow statement to be modified to include changes in restricted cash in addition to changes in cash and cash equivalents.

In January 2017, the FASB issued Accounting Standards Update 2017-01, Clarifying the Definition of a Business, (or ASU 2017-01). ASU 2017-01 changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a ~~concentration~~business. ASU 2017-01 requires an entity to evaluate if substantially all of ~~credit risk~~the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. ASU 2017-01 also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with ~~respect~~how outputs are described in ASC 606. Unlike a business combination, no goodwill or bargain purchase gain is recognized as part of an asset acquisition. ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years. The Company adopted this standard effective October 1, 2017, and this standard was applied to the ~~total amounts due~~acquisition of TIL (note 22).


3.	Acquisition of Entities under Common Control

From time to time the Company has acquired from ~~affiliates~~Teekay, or other entities controlled by Teekay, vessels or interests in businesses. These acquisitions (including, among others, the 2015 Acquired Business (as defined below) and ~~pool receivables from affiliates with~~the remaining 50% interest in TTOL in May 2017) were deemed to be vessel or business acquisitions between entities under common control. Accordingly, the Company has accounted for these ~~amounts being due from affiliates~~transactions in a manner similar to the pooling of interests method. Under this method of accounting, the Company’s consolidated financial statements, for periods prior to the respective dates the interests in the vessels or applicable businesses were actually acquired by the Company, are retroactively adjusted to include the results of the acquired vessels and businesses. The periods retroactively adjusted include all periods that the Company and the acquired vessels or businesses were both under common control of Teekay ~~as at December 31, 2014 (see note 13h). The~~and had begun operations. All financial or operational information contained in these financial statements for the periods prior to the respective dates the interests in the vessels and businesses were actually acquired by the Company, ~~also relies on Teekay Chartering Ltd., a wholly-owned subsidiary~~and during which the Company and the applicable vessels or businesses were under common control of Teekay, are retroactively adjusted to ~~actively manage~~include the results of these acquired vessels and ~~administer all voyage-related functions for vessels on time charter contracts~~businesses and ~~for vessels trading in~~are collectively referred to as the “Entities under Common Control”.

2015 Acquired Business

On December 18, 2015, the Company acquired from Teekay ~~Aframax Pool (a vessel pooling arrangement of Aframax tankers)~~Offshore Partners L.P. (or TOO), which is an entity that was controlled by Teekay at that date, two conventional oil tankers (the Explorer Spirit, formerly known as the ~~Teekay Classic Aframax Pool (a vessel pooling arrangement for Aframax tankers older than 15 years), the Gemini Suezmax Pool (a vessel pooling arrangement of Suezmax tankers),~~SPT Explorer, and the ~~Taurus Tankers LR2 Pool (a vessel pooling arrangement~~Navigator Spirit) and associated working capital and debt facilities, for an aggregate price of ~~product tankers).~~

5.	~~Investment in Term Loans~~

~~In July 2010, the Company invested in two term loans for a total cost~~$39.0 million, including working capital of ~~$115.6~~approximately $8.6 million and net of outstanding debt of approximately $49.6 million (or the ~~Loans) which were scheduled to mature~~2015 Acquired Business). Of this net amount, $30.4 million was paid on closing of the transaction in ~~July 2013. The Loans were secured by first priority mortgages registered on two 2010-built Very Large Crude Carriers (or VLCCs). The Loans had an annual interest rate of 9% per annum~~December 2015 and ~~included a repayment premium feature that~~the remaining $8.6 million was ~~to provide a total investment yield of approximately 10% per annum.~~

~~The borrowers under the Loans had been~~settled in ~~default on their interest payment obligations since~~ the first quarter of ~~2013, and subsequently, in default~~2016. As part of ~~the repayment of the loan principal from the loan maturity date in July 2013. On March 21, 2014,~~this acquisition, Teekay paid the Company ~~took ownership of~~$2.9 million to terminate the ~~VLCCs~~existing time-charters for the Explorer Spirit and Navigator Spirit. Subsequent to the Loans were concurrently discharged. The VLCCs had an estimated fair value of $144 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 treated as a non-cash transaction in the Company’s consolidated statement of cash flows.

~~In May, the Company sold the two wholly-owned subsidiaries, each of which owns one VLCC, to TIL (see note 18).~~

6.	~~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

a.

~~The Company has a joint venture arrangement with Wah Kwong Maritime Transport Holdings Limited (or~~~~Wah 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~~acquisition, Teekay entered into a ~~$68.6 million loan~~contract with ~~a financial institution. As at December 31, 2014,~~ the ~~loan had an outstanding balance of $60.0 million (December 31, 2013 - $64.7 million). The loan is secured by a first-priority mortgage on~~Company to guarantee commitments under the ~~VLCC owned by~~existing credit facilities related to the joint venture and 50% of the outstanding loan balance is guaranteed by the Company. The joint venture has an interest rate swap agreement with a notional amount of $60.0 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 LIBORtwo vessels for a payment of $1.5 million. As a ~~fixed rate~~result of ~~1.47% every three months.~~

b.

~~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~~the 2015 Acquired Business, the Company's consolidated financial statements prior to the date of the tanker market. 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). The stock purchase warrant is a derivative instrument, which had a value of $3.4 million on issuance which is reflected in the other income (expenses) in the Company’s consolidated statements of income (loss) for the year ended December 31, 2014. 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.

~~In May 2014,~~ the Company ~~sold two wholly-owned subsidiaries, each~~acquired interests in the vessels have been retroactively adjusted to include the results of ~~which owns one VLCC, to TIL (see note 18).~~

c.

On 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 commercially managed tanker pools, for an aggregate price of approximately $23.5 million, including net working capital. Teekay retained the remaining 50% interest in TTOL.

these vessels during the periods they

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)

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 the Company's acquisition thereof is included in the Entities under Common Control.

Assets and liabilities of the vessels the Company acquired from TOO as part of the 2015 Acquired Business 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 and related assets and liabilities 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 to account for these common control transactions increased the Company’s revenues and net income for the year ended December 31, 2015 by $9.8 million and $2.7 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 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 general and administrative expenses of the Entities under Common Control related to the 2015 Acquired Business.

TTOL Transactions

On May 31, 2017, the Company acquired from Teekay Holdings Ltd., a wholly-owned subsidiary of Teekay, the remaining 50% interest in TTOL for $39.0 million, which included $13.1 million for working capital. TTOL owns conventional tanker commercial management and technical management operations. The Company issued approximately 13.8 million shares of the Company's Class B common stock to Teekay as consideration in addition to the working capital consideration of $13.1 million. In August 2014, the Company purchased from Teekay its initial 50% interest in TTOL for an aggregate price of approximately $23.7 million, including net working capital. As consideration for ~~this~~the 2014 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, iswas 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 2014 purchase. ~~The book value~~

As a result of the Company's acquisition of a controlling interest in TTOL in May 2017, the Company's consolidated financial statements prior to the date the Company acquired the controlling interest have been retroactively adjusted to eliminate the equity method of accounting previously used for the original 50% interest owned and to include 100% of the assets ~~acquired, including working capital, was $16.9 million~~and liabilities and results of TTOL on a consolidated basis during the periods TTOL and the Company were under common control of Teekay and had begun operations. The effect of adjusting such information to accounts in periods prior to the Company's acquisition of the remaining 50% thereof is included in the Entities under Common Control. All intercorporate transactions between the Company and TTOL that occurred prior to the acquisition by the Company have been eliminated upon consolidation.

Assets and liabilities of TTOL are reflected on the ~~date~~Company’s consolidated balance sheets at TTOL’s historical carrying values. The amount of ~~acquisition. The~~the net consideration of $39.0 million that was in excess of ~~the purchase price over the Company’s proportionate interest in the book~~TTOL’s historical carrying value of the net assets acquired ~~which amounted to $6.6~~of $13.3 million ishas been accounted for as ~~an equity distribution~~a $25.7 million return of capital to Teekay.

The ~~portion~~effect of the purchase price paid with the 4.2 million of Class B common shares is reflected in the statement of cash flow as a non-cash transaction. The Company accounts for its ownership interest in TTOL using the equity method.

~~A condensed summary of~~adjusting the Company’s consolidated financial ~~information~~statements to account for ~~equity accounted investments (9.29% to 50% 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 )

~~For~~the TTOL common control transaction decreased the Company’s net loss for the year ended December 31, ~~2014,~~2017 by $1.3 million and increased the Company's net income for the years ended December 31, 2016 and 2015 by $5.0 million and $4.0 million, respectively. The adjustments for the Entities under Common Control related to the TTOL transaction increased the Company’s revenues for the years ended December 31, 2017, 2016 and 2015 by $8.6 million, $23.6 million and $20.5 million, respectively.

In addition, prior to the acquisition TTOL had paid dividends to the Company ~~recorded equity income (loss)~~and Teekay, which have now been accounted for as a return of ~~$5.2 million (2013 - $0.9~~capital on the consolidated statements of cash flows. The effect of adjusting for the TTOL common control transaction decreased the Company's inflow of cash from investing activities by $15.0 million and ~~2012 – $(1) thousand). The income or loss was primarily comprised~~increased the Company's outflow of cash from financing activities by $15.0 million, for the ~~Company’s share of net income (loss) from High-Q joint venture, TIL, and TTOL.~~

year ended December 31, 2016.

7.	~~Accrued Liabilities~~
4.	Public Offerings and Private Placements

   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

The following table summarizes the issuances of common shares over the three years ending December 31, 2017:

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)



Date	Number of Common Stock Issued		Offering Price (Per Share)		Gross Proceeds	Net Proceeds	Teekay's Ownership After the Offering		Use of Proceeds
January 2015	3,000,000	⁽¹⁾		$4.57	13,716	13,685	25.5	%	Acquisition of conventional tankers
July 2015	6,511,812	⁽²⁾		$6.99	45,500	45,500	28.3	%	Acquisition of the ship-to-ship transfer business
August 2015	13,630,075	⁽³⁾		$6.65	90,640	90,640	28.8	%	Acquisition of conventional tankers
August - October 2015	7,180,083	⁽³⁾	$6.12 - $7.92		49,268	49,268	26.2	%	Acquisition of conventional tankers
Continuous offering program during 2015	13,391,100	⁽⁴⁾	$6.04 - $7.70		94,594	92,439	⁽⁴	⁾	General purposes including acquisitions of conventional tankers
Continuous offering program during 2016	3,020,000	⁽⁵⁾	$2.38 - $2.75		7,747	7,558	⁽⁵	⁾	General corporate purposes
January 2017	2,155,172	⁽⁶⁾		$2.32	5,000	5,000	25.7	%	General corporate purposes
May 2017	13,775,224	⁽⁷⁾		$1.88	25,897	25,897	31.4	%	Acquisition of controlling interest in TTOL
November 2017	88,977,544	⁽⁸⁾		$1.70	151,262	151,262	24.1	%	TIL Merger
Continuous offering program during 2017	3,800,000	⁽⁹⁾	$2.26 - $2.41		8,826	8,521	⁽⁹	⁾	General corporate purposes

8.	~~Long-Term Debt~~
(1)	In December 2014, the Company granted the underwriters a 30-day option to purchase up to an additional 3.0 million shares of the Company’s Class A common stock from a 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 for net proceeds of $13.7 million.

   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

(2) Represents Class B common shares issued to Teekay as consideration for the Company’s acquisition of the ship-to-ship transfer business. The shares had an approximate value of $45.5 million, or $6.99 per share, when the purchase price was agreed between the parties.
(3)
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 12 modern Suezmax tankers from Principal Maritime Tankers (or PrincipalMaritime) (note 19). 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 were based on market prices of the shares at the time each vessel was delivered.
(4)
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.
(5) 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.
(6) Represents Class A common shares issued in a private placement to Teekay. The gross proceeds were used for general corporate purposes, including to strengthen the Company's liquidity position and to delever its balance sheet.
(7)
Represents Class B common shares issued to Teekay as consideration for the Company's acquisition of the remaining 50% interest in TTOL, which shares had an approximate value of $25.9 million, or $1.88 per share, on the closing date of the transaction (note 6).
(8)
Represents Class A common shares issued to the shareholders of Tanker Investment Ltd. (TIL) as consideration for the Company's acquisition of the remaining 88.7% interest in TIL. The shares had an approximate value of $151.3 million, or $1.70 per share, on the closing date of the transaction (notes 6 and 22).
(9)
In January 2017, 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, 2017 was 54.1% and 28.8% respectively.


5.	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 (note 21). 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 the operations from TTOL and TIL, which were acquired during the year (notes 6 and 22) and 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.

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 includes results for the Company’s revenue and income from operations by segment for the years ended December 31, 2017, 2016 and 2015.



Year Ended December 31, 2017	Conventional Tanker Segment $		Ship-to-Ship Transfer Segment $		Inter-segment Adjustment ⁽¹⁾$		Total $
Revenues ⁽²⁾	391,267		50,422		(10,511	)	431,178
Voyage expenses	(87,879	)	—		10,511		(77,368	)
Vessel operating expenses	(135,740	)	(39,649	)	—		(175,389	)
Time-charter hire expense	(25,666	)	(4,995	)	—		(30,661	)
Depreciation and amortization	(95,433	)	(5,048	)	—		(100,481	)
General and administrative expenses ⁽³⁾	(29,539	)	(3,340	)	—		(32,879	)
(Loss) gain on sale of vessels	(13,034	)	50		—		(12,984	)
Income (loss) from operations	3,976		(2,560	)	—		1,416
Equity loss	(25,370	)	—		—		(25,370	)



Year Ended December 31, 2016	Conventional Tanker Segment $		Ship-to-Ship Transfer Segment $		Inter-segment Adjustment ⁽¹⁾$		Total $
Revenues ⁽²⁾	512,608		41,136		(3,201	)	550,543
Voyage expenses	(56,805	)	—		3,201		(53,604	)
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 ⁽³⁾	(29,432	)	(3,767	)	—		(33,199	)
(Loss) gain on sale of vessel	(20,926	)	332		—		(20,594	)
Income (loss) from operations	98,953		(2,201	)	—		96,752
Equity income	7,680		—		—		7,680



Year Ended December 31, 2015	Conventional Tanker Segment $		Ship-to-Ship Transfer Segment $		Inter-segment Adjustment ⁽¹⁾$		Total $
Revenues ⁽²⁾	516,943		18,587		(849	)	534,681
Voyage expenses	(18,379	)	(348	)	—		(18,727	)
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 ⁽³⁾	(28,418	)	(1,985	)	—		(30,403	)
Gain on sale of vessel	771		—		—		771
Restructuring charge	(6,468	)	(327	)	—		(6,795	)
Income (loss) from operations	193,899		(194	)	—		193,705
Equity income	11,528		—		—		11,528


(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 actual costs incurred per voyage commencing January 1, 2017 (2016 - based on estimated costs of approximately $25,000 per voyage).


(2)	Revenues, net of the inter-segment adjustment, earned from the ship-to-ship transfer segment are reflected in Other Revenues in the Company's consolidated statements of (loss) income.


(3)	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)

A reconciliation of total segment assets to total assets presented in the accompanying consolidated balance sheets is as follows:



	As at December 31, 2017 $	As at December 31, 2016 $
Conventional Tanker	2,089,099	1,828,550
Ship-to-Ship Transfer	36,810	41,663
Cash and cash equivalents	71,439	94,157
Total assets	2,197,348	1,964,370


6.	Investments in and advances to Equity Accounted Investments



	Year Ended December 31,
	2017 $	2016 $
High-Q Joint Venture	24,546	22,025
Tanker Investments Ltd.	—	47,710
Gemini Tankers L.L.C.	914	916
Total	25,460	70,651

a.

The Company has a joint venture arrangement with Wah Kwong Maritime Transport Holdings Limited (or Wah 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 the second quarter of 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.

As at December 31, 2017, the High-Q joint venture has a loan outstanding with a financial institution with a balance of $42.7 million (December 31, 2016 - $48.5 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 $42.7 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.

b.

In January 2014, the Company and Teekay formed TIL, a company whose shares were publicly traded on the Oslo Stock Exchange. TIL's primary business was to own and operate modern second-hand 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 (note 10 and 12c). The Company also received one preferred share, which entitled the Company to elect one Board member of TIL. The preferred share did not give the Company a right to any dividends or distributions of TIL.

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.

On May 31, 2017, the Company entered into a Merger Agreement to acquire the remaining 27.0 million issued and outstanding common shares of TIL, by way of a share-for-share exchange of 3.3 shares of Class A common stock of the Company for each of TIL common stock. Prior to the completion of the merger, the Company accounted for its 11.3% investment in TIL using the equity method. As the Company then accounted for its investment in TIL under the equity method, the Company was required to remeasure its previously held equity investment to fair value at the acquisition date. Based on the then pending transaction, the Company recognized an other than temporary impairment and remeasured its investment in TIL to fair value during the second quarter of 2017 based on the TIL share price at June 30, 2017, resulting in a write-down of $28.1 million presented in equity (loss) income on the consolidated statements of (loss) income. On November 27, 2017, the Company completed the merger with TIL and the Company remeasured its equity investment in TIL to fair value based on the relative share exchange value at the date of the acquisition, which resulted in the recognition of a gain of $1.4 million presented in equity (loss) income on the consolidated statements of (loss) income.

The stock purchase warrant was cancelled on completion of the merger. The stock purchase warrant was a derivative asset which had an estimated fair value of $nil as at December 31, 2017 (December 31, 2016 - $0.3 million).


c.	In August 2014, the Company purchased from Teekay a 50% interest in TTOL, which owns conventional tanker commercial management and technical management operations and directly administers four commercially managed tanker revenue sharing arrangements. Teekay retained the remaining 50% interest in TTOL.

On May 31, 2017, the Company acquired from Teekay Holdings Ltd., a wholly-owned subsidiary of Teekay, the remaining 50% interest in TTOL for $39.0 million, which included $13.1 million for assumed working capital (note 3). The Company issued approximately 13.8 million shares of the Company's Class B common stock to Teekay as consideration in addition to the working capital consideration of $13.1 million. As a result, the Company now consolidates TTOL and thus, all comparative periods have been retroactively adjusted to include TTOL on a consolidated basis (note 3) and TTOL's results are not included in the summary of equity accounted investment results below.

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 condensed summary of the Company’s financial information for equity accounted investments (11.3% to 50.0% owned) shown on a 100% basis are as follows:



	As at December 31,
	2017 $	2016 $
Cash and cash equivalents	2,231	38,987
Other current assets	4,774	18,760
Vessels and equipment	83,417	815,961
Other non-current assets	—	20,558

Current portion of long-term debt	5,616	43,677
Other current liabilities	572	10,442
Long-term debt	36,645	367,201
Other non-current liabilities	19,207	25,540



��	Year Ended December 31,
	2017 $		2016 $		2015 $
Revenues	107,691		169,631		234,398
Income from operations	11,640		62,998		112,542
Realized and unrealized gain (loss) on derivative instruments	26		(244	)	(689	)
Net (loss) income	(8,967	)	39,536		85,647

For the year ended December 31, 2017, the Company recorded equity (loss) income of $(25.4) million (2016 - $7.7 million and 2015 – $11.5 million). Equity loss for the year ended December 31, 2017 is comprised of the Company’s share of net (loss) income from the High-Q joint venture, Gemini Tankers L.L.C. and from TIL for the period from January 1, 2017 until November 27, 2017, which includes an other than temporary impairment write-down of the investment in TIL (note 22). Equity income for the years ended December 31, 2016 and 2015 is comprised of the Company's share of net income from the High-Q joint venture, TIL and Gemini Tankers L.L.C.


7.	Accrued Liabilities



	Year Ended December 31,
	2017 $	2016 $
Voyage and vessel	19,404	16,341
Corporate accruals	1,244	1,233
Interest and dividends	3,984	2,527
Payroll and benefits (note 14h)	9,976	8,562
Total	34,608	28,663


8.	Long-Term Debt



	Year Ended December 31,
	2017 $		2016 $
Revolving credit facilities due through 2022	539,735		466,195
Term loans due through 2021	423,512		475,466
Total principal	963,247		941,661
Less: unamortized discount and debt issuance costs	(10,945	)	(8,645	)
Total debt	952,302		933,016
Less: current portion	(166,745	)	(171,019	)
Non-current portion of long-term debt	785,557		761,997

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 at December 31, 2017, the Company had three revolving credit facilities (or theRevolvers), which, as at such date, provided for available aggregate borrowings of up to ~~$634.8~~$628.3 million, of which ~~$126.2~~$88.6 million was undrawn (December 31, ~~2013~~2016 - ~~$728.8~~$500.5 million, of which ~~$148.2~~$34.3 million was undrawn). Interest payments are based on LIBOR plus margins, which at December 31, ~~2014,~~2017 ranged between 0.45% and ~~0.60%~~2.75% (December 31, ~~2013:~~2016 - 0.45% and ~~0.60%~~2.00%). The total amount available under the Revolvers reduces by ~~$120.9~~$89.5 million ~~(2015)~~(2018), ~~$89.1~~$30.2 million ~~(2016)~~(2019), ~~$395.9~~$30.2 million ~~(2017)~~(2020), $322.9 million (2021) and ~~$28.9~~$155.5 million ~~(2018)~~(2022). As at December 31, ~~2014,~~2017 the ~~Revolvers~~Company also had three term loans outstanding, which totaled $423.5 million (December 31, 2016 - $475.5 million). Interest payments on the term loans are based on a combination of a fixed rate of 5.4% and variable rates based on LIBOR plus margins. As at December 31, 2017, the margin ranged from 0.30% to 2.00% (December 31, 2016 - 0.30% to 2.00%). The term loan repayments are made in quarterly or semi-annual payments. Two of the term loans also have a balloon or bullet repayment due at maturity in 2021. These revolving credit facilities and term loans are further described below.

In December 2017, the Company entered into a $270.0 million long-term debt facility (or the 2017 Revolver), which is scheduled to mature in December 2022. In December 2017, $215.8 million of the 2017 Revolver was used to refinance two of the Company's debt facilities that were assumed in the merger with TIL (note 22). These debt facilities were scheduled to mature in April 2019 and June 2020. The 2017 Revolver is collateralized by 2114 of the ~~Company’s~~Company's vessels, together with other related security. ~~One of the Revolvers~~The 2017 Revolver also requires that the ~~Company’s applicable subsidiary~~Company maintain a minimum hull coverage ratio of ~~105%~~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 provided additional collateral in the amount of the shortfall, at the Company's option. As atof December 31, ~~2014,~~2017, this ratio was ~~153%~~191%. The vessel ~~value~~values used in this ratio ~~is an~~are appraised ~~value~~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, ~~one of the Revolvers requires~~ the Company ~~and certain of its subsidiaries~~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 ~~5.0%~~5% of the Company's total consolidated debt.

In January 2016, the Company entered into a $894.4 million long-term debt facility (or the 2016 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 2016 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 total debt. The remaining two Revolvers 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 committedcorporate revolving credit ~~lines with at least six months~~facility, which was scheduled to ~~maturity of at least 7.5% of Teekay’s total consolidated debt which has recourse to Teekay.~~mature in 2017. As at December 31, ~~2014,~~2017 the ~~Company and Teekay were in compliance with all their covenants in respect~~corporate revolving credit facility had no outstanding balance (December 31, 2016 - $55.1 million). The 2016 Debt Facility is collateralized by 29 of the ~~Revolvers.~~

As at December 31, 2014, 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’sCompany's vessels, together with ~~certain~~ other related security. ~~Two of the term loans require~~The 2016 Debt Facility also requires that the ~~Company’s subsidiaries~~Company maintain a minimum hull coverage ~~ratios~~ratio of ~~120% and 130%, respectively,~~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, ~~2014, the loan to value ratios ranged from 212% to 676%~~2017, this ratio was 145%. The vessel values used in ~~these ratios~~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 ~~ratios.~~ 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 ~~term loans~~Company's remaining Revolver is collateralized by three of the Company’s vessels, together with other related security, and 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, 2017, such revolver, with a minimum hull coverage ratio requirement, had an outstanding balance of $65.6 million (December 31, 2016 - $72.0 million) and a hull coverage ratio of 118% (December 31, 2016 - 117%). 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. The revolver is guaranteed by Teekay and ~~contain~~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.

The Company's remaining two term loans are guaranteed by Teekay and are collateralized by six of the Company’s vessels, together with certain other related security. One of the term loans contain covenants that require Teekay to maintain the greater of (a) free cash (cash and cash equivalents) of at least $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 5.0% of Teekay’s total consolidated debt which has recourse to Teekay. The other term loan requires Teekay to maintain the greater of (a) free cash (cash and cash equivalents) of at least $100.0 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% of ~~Teekay’s~~Teekay's total consolidated debt which has recourse to Teekay.

As at December 31, ~~2014,~~2017, the Company ~~and Teekay were~~was in compliance with all ~~their~~ covenants in respect ~~of these~~to the Revolvers and term loans.

~~The Company and certain other subsidiaries of~~ Teekay are borrowers under one term loan arrangement and one revolving credit facility. Under these arrangements, 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 amounthas also advised the Company ~~agreed~~that Teekay is in compliance with all covenants relating 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, 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~~facilities and term loans to which ~~$35.0 million was the Company’s share. The Company does not expect to pay any amount on behalf of its co-obligors. 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.~~

is a party.

The weighted-average ~~effective~~ interest rate on the Company’s long-term debt as at December 31, ~~2014~~2017 was ~~1.1%~~3.5% (December 31, ~~2013~~2016 – ~~1.1%~~2.4%). This rate does not reflect the effect of the Company’s interest rate swap agreements ~~(see note 9)~~(note 10).

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~~2017 are ~~$42.0 million (2015), $82.6 million (2016), $415.3 million (2017), $53.2~~$167.2 million (2018), ~~$23.2~~$105.7 million (2019), $131.9 million (2020), $402.9 million (2021), and ~~$39.8~~$155.5 million ~~(thereafter)~~(2022).

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)


9.	Leases and Restricted Cash

Operating Leases

Charters-in

As at December 31, 2017, minimum commitments to be incurred by the Company under vessel operating leases by which the Company charters-in four vessels, including three workboats for the lightering support services, were approximately $11.7 million (2018), $8.3 million (2019), $8.3 million (2020) and $1.4 million (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, 2017, 16 of the Company’s vessels operated under fixed-rate time charter contracts with the Company’s customers, of which 15 contracts are scheduled to expire in 2018, and one contract is scheduled to expire in 2019. As at December 31, 2017, minimum scheduled future revenues to be received by the Company under time charters then in place were approximately $54.5 million, comprised of $51.9 million (2018) and $2.6 million (2019). The carrying amount of the Company's owned vessels which are employed on these time charters as at December 31, 2017, was $517.9 million (2016 - $471.7 million). The cost and accumulated depreciation of the vessels employed on these time charters as at December 31, 2017 were $754.2 million (2016 - $683.2 million) and $236.3 million (2016 - $211.5 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, 2017, revenue from unexercised option periods of contracts that existed on December 31, 2017, or variable or contingent revenues. In addition, minimum scheduled future revenues 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.

Capital Lease Obligations



	As at
	December 31, 2017
	$
Total obligations related to capital leases	148,908
Less: current portion	(7,227	)
Long-term obligations related to capital leases	141,681

In July 2017, the Company completed a $153.0 million sale-leaseback financing transaction with a financial institution relating to four of the Company's Suezmax tankers, the Athens Spirit, Beijing Spirit, Moscow Spirit and Sydney Spirit. Under this arrangement, the Company transferred the vessels to subsidiaries of the financial institution (or collectively, the Lessors) and leased the vessels back from the Lessors on bareboat charters for 12-year terms. The Company has the option to purchase each of the four vessels at any point between July 2020 and July 2029.

The Company understands that these vessels and lease operations are the only assets and operations of the Lessors. The Company operates the vessels during the lease term and as a result is considered to be, under US GAAP, the Lessors' primary beneficiary and therefore the Company consolidates the Lessors for financial reporting purposes.

The liabilities of the Lessors are loans and are non-recourse to the Company. The amounts funded to the Lessors in order to purchase the vessels materially match the funding to be paid by the Company's subsidiaries under the lease-back transaction. As a result, the amounts due by the Company's subsidiaries to the Lessors have been included in obligations related to capital leases as representing the Lessor's loans.

The bareboat charters also require that the Company maintain a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least 6 months to maturity) of $35.0 million and at least 5.0% of the Company's consolidated debt and obligations related to capital leases (excluding applicable security deposits reflected in restricted cash - long-term on the Company's consolidated balance sheets). In addition, the Company is required for each vessel to maintain a hull coverage ratio of 90% of the total outstanding principal balance during the first three years of the lease period and 100% of the total outstanding principal balance thereafter. Such requirement is assessed annually with reference to vessel valuations compiled by one or more agreed upon third parties. As at December 31, 2017, this ratio was approximately 105%. As at December 31, 2017, the Company was in compliance with all covenants in respect of the obligations related to capital leases.

As at December 31, 2017, the remaining commitments under the four capital leases for Suezmax tankers was approximately $218.1 million, including imputed interest of $69.2 million, repayable from 2018 through 2029, as indicated below:

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	Commitment
2018	$	16,237
2019	$	16,236
2020	$	16,279
2021	$	16,233
2022	$	16,232
Thereafter	$	136,846

Restricted Cash

The Company maintains restricted cash deposits relating to certain freight forward agreements (note 10) and leasing arrangements, which cash totaled $4.3 million and $0.8 million as at December 31, 2017 and 2016, respectively.


10.	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 long-term debt facility entered into at that time, the Company entered into nine interest rate swaps. Four of the interest rate swaps commenced in October 2016, are scheduled to terminate in December 2020 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,~~2017, 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	Notional Amount $	Fair Value / Carrying Amount of Asset $	Remaining Term (years)	Fixed Interest Rate ⁽¹⁾
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps ⁽²⁾	LIBOR	138,844	1,258	3.0	1.46%
U.S. Dollar-denominated interest rate swaps	LIBOR	150,000	2,548	3.0	1.55%
U.S. Dollar-denominated interest rate swaps	LIBOR	50,000	1,436	3.0	1.16%


(1)	Excludes the margin the Company pays on its variable-rate debt, which, as of December 31, ~~2014~~2017 ranged from ~~0.3%~~0.30% to ~~1.0%~~2.75%.

(2) Notional amount reduces quarterly.

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 a~~had one stock purchase warrant ~~entitling~~which had entitled it to purchase up to 750,000 shares of common stock of TIL under certain conditions 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) per share.pre-determined prices. The stock 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 vestwas not exercised and ~~become exercisable when and if the fair market value of a share~~was canceled upon completion of the TIL ~~common stock equals~~merger in November 2017 (notes 6 and 22) and as a result, no value was recorded for this warrant on the Company's consolidated balance sheet at December 31, 2017 (note 12).

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 received $27,776 per day, less a 1.25% brokerage commission, and paid 55% of the net revenue distribution of

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 ~~exceeds 77.08 NOK, 92.50 NOK, 107.91 NOK~~per share data)

two Aframax equivalent vessels employed in the Company’s Aframax revenue sharing arrangement (or RSA), 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 was to reduce the Company’s exposure to spot tanker market rate variability for certain of its vessels that are employed in the Aframax RSA. The Company did not designate, for accounting purposes, the time-charter swap as a cash flow hedge. As of May 1, 2017, the time-charter swap counter-party did not exercise the two-month option and ~~123.33 NOK, respectively, for~~as such, ~~tranche for any ten consecutive trading days, subject~~the agreement was completed as of June 30, 2017.

Forward freight agreements

The Company uses forward freight agreements (or FFAs) in non-hedge-related transactions to ~~certain trading value requirements.~~increase or decrease its exposure to spot market rates, within defined limits. Net gains and losses from FFAs are recorded within realized and unrealized gain (loss) on derivative instruments in the Company's consolidated statements of (loss) income. As of December 31, ~~2014,~~2017, the Company had settled all outstanding FFAs.

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 assets $	Derivative assets $	Accrued liabilities $		Current portion of derivative liabilities $
As at December 31, 2017
Interest rate swap agreements	1,016	4,226	(39	)	—
	1,016	4,226	(39	)	—

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	)

Realized and unrealized gains (losses) relating to interest rate swaps, stock purchase warrant, ~~had a value of $3.4 million on issuance~~the time-charter swap and FFAs 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~~gain (loss) on derivative instruments in the Company’s consolidated statements of (loss) income ~~(loss).~~

as follows:



	Year Ended December 31, 2017 $		Year Ended December 31, 2016 $		Year Ended December 31, 2015 $
Realized gains (losses) relating to:
Interest rate swaps agreements	(994	)	(12,797	)	(9,790	)
Stock purchase warrant	—		—		—
Time-charter swap agreement	1,106		2,154		—
Forward freight agreements	270		—		—
	382		(10,643	)	(9,790	)

Unrealized gains (losses) relating to:
Interest rate swaps agreements	2,099		13,681		7,686
Stock purchase warrant	(287	)	(4,877	)	507
Time-charter swap agreement	(875	)	875		—
	937		9,679		8,193
Total realized and unrealized gain (loss) on derivatives	1,319		(964	)	(1,597	)

~~10.~~
11.	Other Long-Term Liabilities

~~The Company recognizes~~

Other long-term liabilities primarily consists of freight tax ~~expenses~~liabilities and long-term deferred gains attributable to 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 ~~income (expenses)~~than share or per share data)

The following is a roll-forward of the Company’s freight tax liabilities which are recorded in its consolidated ~~statements of income (loss).~~ balance sheets in other long-term liabilities, from January 1, 2016 to December 31, 2017:



	Year Ended December 31,
	2017 $		2016 $
Balance of unrecognized tax benefits as at January 1	12,882		7,597
Increases related to the TIL merger (note 22)	8,528		—
Increases for positions related to the current year	1,910		6,777
Changes for positions taken in prior years	3,641		(800	)
Decreases related to statute of limitations	(907	)	(692	)
Balance of unrecognized tax benefits as at December 31	26,054		12,882

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 2011 through 2017 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 (loss) 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 $4.2 million and $0.8 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

2017 and 2016, respectively.

~~11.~~
12.	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.

Long-term obligation related to capital leases - The fair values of the Company's long-term obligation related to capital leases is 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

a.

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.

b.

The Company entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels (note 10). The fair value of this derivative agreement was 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 were derived from current Aframax spot market tanker rates and estimated future rates, as well as an estimated discount rate.

Changes in fair value during the years ended December 31, 2017 and 2016 for the Company's time-charter swap agreement, which is described below and was measured at fair value on the recurring basis using significant unobservable inputs (Level 3), are as follows:



	Year Ended December 31, 2017 $		Year Ended December 31, 2016 $
Fair value asset - beginning of the year	875		—
Settlements	(1,106	)	(2,154	)
Realized and unrealized gain	231		3,029
Fair value asset - 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 warranttime-charter swap agreement as of December 31, ~~2014 is~~2016 was based onupon an estimated average daily tanker rate of approximately $18,000 over the ~~historical volatility~~remaining duration of ~~comparable companies of 61.54%.~~the contract. In developing and evaluating this estimate, the Company considered the tanker market fundamentals at the time, as well as the short and long-term outlook. A higher or lower ~~volatility~~average daily tanker rate would result in a higher or lower fair value liability. The time-charter agreement was completed as of ~~this derivative asset.~~

December 31, 2017.

c.

During January 2014, the Company received a stock purchase warrant which entitled it to purchase up to 750,000 shares of the common stock of TIL (note 10). The estimated fair value of the stock purchase warrant was determined using a Monte-Carlo simulation and was 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 was based on the historical volatility of comparable companies of 47.83%. On November 27, 2017, the merger of TIL was completed, resulting in TIL becoming a wholly-owned subsidiary of the Company. Under the terms of the agreement, warrants to purchase or acquire shares of common stock of TIL that had not been exercised as of the effective time of the merger, were canceled. As a result, no value was recorded for this warrant in the Company's consolidated balance sheets at December 31, 2017 (notes 6b and 10).

Changes in fair value during the ~~year~~years ended December 31, ~~2014~~2017 and 2016 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, 2017 $		Year Ended December 31, 2016 $
Fair value at the beginning of the year	287		5,164
Unrealized loss included in earnings	(287	)	(4,877	)
Fair value at the end of the year	—		287

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, 2017					December 31, 2016
	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	75,710		75,710		94,907		94,907
Derivative instruments (note 10)
Interest rate swap agreements ⁽¹⁾	Level 2	5,242		5,242		3,143		3,143
Time-charter swap agreement ⁽¹⁾	Level 3	—		—		875		875
Stock purchase warrant	Level 3	—		—		287		287

Non-recurring:
Vessels held for sale (note 19)	Level 2	—		—		33,802		33,802

Other:
Advances to equity accounted investments	Note (2)	9,930		Note (2)		10,480		Note (2)
Long-term debt, including current portion	Level 2	(952,302	)	(946,105	)	(933,016	)	(923,306	)
Obligations related to capital leases, including current portion	Level 2	(148,908	)	(147,401	)


(1)	The fair value of the Company's interest rate swap agreements and time-charter swap agreement at December 31, 2017 and 2016 exclude accrued interest expense which is recorded in accrued liabilities in 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)


(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.~~
13.	Capital Stock

The authorized capital stock of Teekay Tankers Ltd. at December 31, ~~2014 and 2013,~~2017 was 100,000,000 shares of ~~preferred stock,~~Preferred Stock (2016 - 100,000,000 shares of Preferred Stock), with a par value of $0.01 per share (2016 - $0.01 per share), 285,000,000 shares of Class A common stock (2016 - 200,000,000 shares of Class A common ~~stock,~~stock), with a par value of $0.01 per share (2016 - $0.01 per share), and 100,000,000 shares of Class B common stock (2016 - 100,000,000 shares of Class B common stock), with a par value of $0.01 per ~~share.~~share (2016 - $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 power maximum. As at December 31, ~~2014,~~2017, the Company had ~~95.3~~231.2 million shares of Class A common stock ~~(2013~~(2016 – ~~71.1~~136.1 million), ~~16.7~~37.0 million shares of Class B common stock ~~(2013~~(2016 – ~~12.5~~23.2 million) and no shares of Preferred Stock issued and outstanding ~~(2013~~(2016 – 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 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 under the Company's current policy, which is subject to change. Adjusted net (loss) income is a non-GAAP measure which excludes specific items affecting net (loss) income that are typically excluded by securities analysts in their published estimates of the Company's financial results. Prior to December 2015, 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,~~2017, 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~~(2016 – ~~1,000,000~~4,000,000 Class A common stock). For the year ended December 31, ~~2014,~~2017, a total of ~~17,073~~nil shares (2016 – 9,358 shares, 2015 – 51,948 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 million~~nil, $35.0 thousand, and ~~$0.4~~$0.3 million for the years ended December 31, ~~2014, 2013,~~2017, 2016, and ~~2012,~~2015, 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 2017, the Company granted ~~0.1~~0.4 million (2016 - 0.3 million; 2015 - nil) stock options with an exercise price of ~~$4.25~~$2.23 per share (2016 - $3.74) 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 0.5 million (2016 - 0.2 million; 2015 - 58 thousand) stock options with an exercise price of $2.23 per share (2016 - $3.74; 2015 - $5.39) to an officer of the Company and to certain employees of Teekay subsidiary that provide services to 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 Company granted 0.2 million stock options with an exercise price of $4.10 per share to non-management directors of the Company. These stock options have a ten-year term and vest immediately.

The weighted-average ~~grant-date~~ fair value of the stock options granted ~~in June 2014 and March 2014~~during 2017 was ~~$1.38~~$0.67 per option ~~and $1.37~~(2016 - $0.87 per ~~option, respectively,~~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 stock options granted: expected volatility of ~~46.0% for the June 2014 grant and 47.7% for the March 2014 grant;~~50.2% (2016 - 51.3%; 2015 - 49%); expected life of five years (2016 - five years; 2015 - five years); dividend yield of ~~2.8% for the June 2014 grant and 2.9% for the March 2014 grant;~~5.0% (2016 - 7.8%; 2015 - 2.1%); and risk-free interest rate of ~~1.6%~~2.1% (2016 - 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.

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~~years ended December 31, ~~2014~~2017, 2016, and 2015 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, 2017			December 31, 2016		December 31, 2015
	Options (#)		Weighted-Average Exercise Price ($)	Options (#)	Weighted-Average Exercise Price ($)	Options (#)	Weighted-Average Exercise Price ($)
Outstanding - beginning of year	822,345		3.99	321,609	4.39	263,175	4.16
Granted	882,741		2.23	500,736	3.74	58,434	5.39
Forfeited / expired	(34,781	)	2.23	—	—	—	—
Outstanding - end of year	1,670,305		3.10	822,345	3.99	321,609	4.39

Exercisable - end of year	1,055,250		3.34	530,034	3.97	188,920	4.13

A summary of the Company’s non-vested stock option activity and related information for the ~~year~~years ended December 31, ~~2014~~2017, 2016 and 2015 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, 2017			December 31, 2016			December 31, 2015
	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	292,311		4.02	132,689		4.75	110,829		4.25
Granted	486,329		2.23	216,043		3.74	58,434		5.39
Vested	(128,804	)	4.14	(56,421	)	4.64	(36,574	)	4.25
Forfeited / expired	(34,781	)	2.23	—		—	—		—
Outstanding non-vested stock options - end of year	615,055		2.68	292,311		4.02	132,689		4.75

As of December 31, ~~2014,~~2017, there was ~~$0.1~~$0.3 million (2016 - $0.2 million, 2015 - $0.2 million) of total unrecognized compensation cost related to non-vested stock options ~~granted during the year.~~granted. During the year ended December 31, ~~2014,~~2017, the Company recognized $0.2 million ~~(2013~~(2016 - ~~$nil,2012~~$0.1 million, 2015 - ~~$nil)~~$0.1 million) of expenses related to the stock ~~options.~~

options granted to an officer of the Company and to certain employees of Teekay subsidiaries that provide services to the Company.

As at December 31, ~~2014,~~2017, the intrinsic value of the outstanding in-the-money stock options was ~~$0.2 million~~$nil (2016 - $nil; 2015 - $0.8 million) and the intrinsic value of the exercisable stock options was ~~$0.1 million.~~$nil (2016 - $nil; 2015 - $0.5 million). As at December 31, ~~2014,~~2017, the weighted-average remaining life of options vested and expected to vest was ~~9.2~~8.3 years (2016 - 8.5 years; 2015 - 8.6 years) and the weighted-average remaining life of the ~~152,346~~ exercisable stock options was ~~9.2~~8.0 years ~~and the weighted-average exercise price was $4.10.~~

(2016 - 8.3 years; 2015 - 8.2 years).

During ~~2014,~~2017, the Company granted ~~0.6~~0.4 million (2016 - 0.3 million; 2015 - 0.2 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 ~~$2.3 million. During 2013, the Company granted 0.4~~$0.8 million ~~restricted stock units to certain employees of Teekay subsidiaries that provide services to the Company with an aggregate fair value of~~(2016 - $1.0 ~~million.~~million; 2015 - $1.0 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,~~2017, the Company recorded an expense of ~~$1.2~~$0.8 million ~~(2013~~(2016 - ~~$0.7~~$1.4 million, ~~2012~~2015 - ~~$nil)~~$1.4 million) related to the restricted stock ~~units.~~units in general and administrative expenses. During the year ended December 31, ~~2014, 122,146~~2017, 0.3 million restricted stock units (2016 - 0.4 million; 2015 - 0.4 million) with a market value of $0.6 million (2016 - $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 (2016 - 0.2 million shares; 2015 - 0.2 million shares) of Class A common stock.

~~13.~~

~~Related Party Transactions~~

~~Acquisitions and Dropdown Acquisitions~~

a.

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 million, including $6.5 million in net working capital (see~~note 6c~~).

b.

In January 2014, the Company and Teekay formed TIL. The Company purchase 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~~).

~~In May 2014, the Company sold two wholly-owned subsidiaries, each of which owns one VLCC, to TIL for the aggregate proceeds of $154 million plus related working capital on closing of $1.7 million (see~~~~note 18~~).

c.

~~In April 2010, when the Company purchased the~~~~Kaveri Spirit~~Suezmax tanker from Teekay, Teekay provided indemnification to the Company for the costs required to repair heating coils on the Suezmax tanker. During the first quarter of 2014, the repairs were performed to coincide with the scheduled drydocking 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)

	d.
14.	~~During June 2012,~~Related Party Transactions


a.	On November 27, 2017, the Company completed its merger with TIL. As consideration for the merger, the Company issued 88,977,544 Class A common shares to the TIL shareholders (other than the Company and its subsidiaries), including 8,250,000 shares to Teekay, for $151.3 million, or $1.70 per share (notes 4 and 22).

b.

On May 31, 2017, the Company acquired from Teekay Holdings Ltd., a ~~fleet~~wholly-owned subsidiary of ~~13 double-hull~~Teekay, the remaining 50% of TTOL which owns conventional ~~oil~~tanker commercial management and ~~product tankers~~technical management operations and ~~related time-charter contracts, debt facilities~~directly administers four commercially-managed tanker revenue sharing arrangements (notes 3 and ~~other assets and rights, for an aggregate purchase~~6c). In August 2014, the Company purchased from Teekay its initial 50% ownership in TTOL.

c.

In January 2017, the Company issued 2,155,172 shares of Class A common stock in a private placement to Teekay at a price of ~~approximately $454.2~~$2.32 per share for gross proceeds of $5.0 million ~~(see~~~~note 1~~)(note 4).

In August 2015, the Company also issued 4.5 million shares of Class A common stock to Teekay in a private placement at a price of $6.65 per share for gross proceeds of $30.0 million (note 4).

d.
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 (note 21) and on December 18, 2015 the Company acquired the Explorer Spirit and Navigator Spirit from TOO (note 3).

Management Fee – Related and Other

e.

~~Prior to 2015, the Company chartered two vessels to Teekay. In addition,~~

Teekay and its ~~wholly owned~~wholly-owned subsidiary and the Company’s manager, Teekay Tankers Management Services Ltd. ((or the Manager), provide commercial, technical, strategic and administrative services to the Company pursuant to a long-term management agreement (theManagement Agreement). In addition, the Manager has subcontracted with TTOL and its affiliates to provide certain commercial and technical services to the Company, except for certain vessels acquired in the merger with TIL as they are technically managed by a third-party. Certain of the Company’s vessels participate in ~~pooling~~revenue sharing arrangements that, with the exception of a Medium Range ~~pool,~~revenue sharing arrangement, are managed by ~~entities owned in whole or in part~~TTOL (or the Pool Manager). Amounts received and paid by ~~subsidiaries of Teekay (collectively~~ the~~Pool Managers). Such~~ Company for such related party transactions for the periods indicated 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,
	2017 $		2016 $		2015 $
Time-charter revenues ⁽ⁱ⁾	—		5,404		392
RSA pool management fees and commissions ⁽ⁱⁱ⁾	(2,799	)	(9,813	)	(10,445	)
Commercial management fees ⁽ⁱⁱⁱ⁾	(1,187	)	(1,870	)	(1,236	)
Vessel operating expenses - technical management fee ^(iv)	(8,775	)	(9,155	)	(7,039	)
Strategic and administrative service fees ^(v⁾	(21,185	)	(10,122	)	(8,356	)
Secondment fees ^(vi)	(382	)	—		—
Lay-up services revenues ^(vii)	33		302		—
LNG terminal services revenues ^(viii)	388		70		—
Technical management fee revenue ^(ix)	7,666		—		—
Service revenues ^(x)	1,939		—		—
Entities under Common Control (note 3)
Time-charter revenues^(xi)	—		—		4,558
RSA pool management fees and commissions ⁽ⁱⁱ⁾	2,799		9,813		10,445
Commercial management fees ⁽ⁱⁱⁱ⁾	1,187		1,870		1,236
Vessel operating expenses - technical management fee ^(iv)	—		—		(430	)
Strategic and administrative servicefees ^(v)	(7,026	)	(15,508	)	(14,701	)
Secondment fees ^(vi)	(248	)	(644	)	(675	)
Technical management fee revenues ^(ix)	4,890		11,742		10,413
Service revenues ^(x)	1,772		5,482		4,023

~~(i)~~

i

~~The~~

In December 2015, immediately after the completion of the 2015 Acquired Business, the Company ~~had~~ chartered-out the~~Pinnacle~~Navigator Spirit ~~and~~~~Summit Spirit~~to Teekay under a fixed-rate time-charter ~~contracts,~~contract, which was due to expire in July 2016. On May 18, 2016, the contract was transferred to the Americas Spirit, which subsequently expired ~~in the fourth quarter of 2014.~~

on July 15, 2016.

~~(ii)~~

ii.

The Company’s share of ~~the Pool Managers’~~TTOL’s fees for revenue sharing arrangements are reflected as a reduction to net pool revenues from affiliates on the Company’s consolidated statements of ~~income~~ (loss) income. The Company acquired the remaining 50% interest in TTOL on May 31, 2017 (notes 3 and note 6c).

Subsequent to the acquisition, the Company's share of TTOL's fees has been eliminated.

~~(iii)~~

iii.

The Manager’s commercial management fees for vessels on time-charter out contracts and spot-traded vessels are not included in the ~~pooling~~revenue sharing arrangement, which are reflected in voyage expenses on the Company’s consolidated statements of ~~income~~ (loss).

income. Subsequent to the Company's acquisition of the remaining 50% interest in TTOL, the Company's share of the Manager's commercial management fees has been eliminated.

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)

	~~(iv)~~
iv.	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)~~

v.

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)~~13) 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.


vi.	The Company pays secondment fees for services provided by some employees of Teekay. Secondment fees have been presented in general and administrative expenses on the Company's consolidated statements of (loss) income.


vii.	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.

viii.

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. 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.


ix.	The Company receives reimbursements from Teekay who subcontracts technical management services from the Manager. These reimbursements have been presented in general and administrative expenses on the Company's consolidated statements of (loss) income.

x.

The Company recorded revenue of $1.9 million for the year ended December 31, 2017 relating to TTOL's administration of certain revenue sharing arrangements and provision of certain commercial services to participants in the arrangements. The Company also recorded revenue of $1.8 million, $5.5 million and $4.0 million for the years ended December 31, 2017, 2016, and 2015, respectively, associated with the Entities under Common Control.


xi.	The Company recorded $4.6 million related to a time-charter out contract for the Explorer Spirit for the years ended December 31, 2015, associated with the Entities under Common Control. The vessel was under a fixed-rate time-charter contract with SPT which expired in September 2015.

f.

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~~$8.7 million and ~~$5.8~~$8.6 million were payable to the Manager as at December 31, ~~2014~~2017 and ~~December 31, 2013,~~2016, 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,~~revenue sharing arrangements (or RSAs), 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~~revenue sharing agreement. In addition, the Company had advanced ~~$36.2~~$45.1 million and ~~$20.3~~$35.7 million as at December 31, ~~2014~~2017 and ~~December 31, 2013,~~2016, respectively, to the ~~Pool Managers~~RSAs 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,~~RSA, 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.

g.

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~~2017, 2016 and ~~2012.~~2015. 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.

h.

Pursuant to certain ~~pooling arrangements (see Note 4), the Pool Managers provide~~RSAs, TTOL provides certain commercial services to the ~~pool~~RSA participants and ~~administer~~administers the ~~pools~~RSAs in exchange for a fee currently equal to 1.25% of the gross revenues attributable to each ~~pool~~RSA 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~~RSAs are pooled with the voyage revenues and voyage expenses of other ~~pool~~RSA participants. The resulting net pool revenues, calculated on a time-charter equivalent basis, are allocated to the ~~pool~~RSA 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 (loss) income. The pool receivable from affiliates as at December 31, ~~2014~~2017 and ~~December 31, 2013 were $35.3~~2016 was $15.6 million and ~~$10.8~~$24.6 million, respectively.

~~14.~~	~~Other Income (Expense)~~
i.	During 2017, 2016 and 2015, the Company incurred expenses of $14.1 million, $13.1 million and $2.1 million, respectively, to hire vessels from the Teekay Aframax RSA to perform full service lightering operations.

   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 )

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)


15.	~~Operating Leases~~ Other Expense

~~Charters-in~~

As at December 31, 2014, minimum commitments to be incurred by the Company under vessel operating leases by which the Company charters-in 12 vessels were approximately $49.0 million (2015), $8.5 million (2016) and $4.8 million (2017). 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 of the Company’s vessels operated under fixed-rate time charter contracts with the Company’s customers, of which five contracts are scheduled to expire in 2015 and three contracts are scheduled to expire in 2016. As at December 31, 2014, minimum scheduled future revenues to be received by the Company under time charters then in place were approximately $44.5 million, comprised of $36.3 million (2015) and $8.2 million (2016). The carrying amount of the vessels employed on these time charters at December 31, 2014, was $224.8 million (2013 - $431.1 million). The cost and accumulated depreciation of the vessels employed on these time charters as at December 31, 2014 were $352.4 million (2013 - $598.1 million) and $127.6 million (2013 - $167.0 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, revenue from unexercised option periods of contracts that existed on December 31, 2014, or variable or contingent revenues. In addition, minimum scheduled future revenues 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.



	Year Ended December 31,
	2017 $		2016 $		2015 $
Income tax expense	(5,330	)	(7,511	)	(3,406	)
Foreign exchange gain	79		1,413		613
Other income	250		120		50
Total	(5,001	)	(5,978	)	(2,743	)


16.	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,~~2017, 2016, and ~~2012~~2015 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,
	2017 $		2016 $		2015 $
Accounts receivable	14,353		(108	)	(5,765	)
Pool receivables from affiliates	16,193		38,137		(27,448	)
Due from affiliates	17,562		18,371		32,801
Prepaid expenses and other current assets	8,767		2,313		(6,267	)
Accounts payable and accrued liabilities	(13,996	)	(26,821	)	27,473
Due to affiliates	(32,641	)	(3,606	)	(12,735	)
Deferred revenue	(3,898	)	1,718		2,039
Other	(599	)	—		(8,443	)
Change in operating assets and liabilities	5,741		30,004		1,655

b.

~~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 totalled $29.3~~2017, 2016, and 2015 totaled $26.4 million, ~~including realized loss of $1.8~~$38.5 million, ~~on the interest rate swaps agreements relating to the 2012 Acquired Business.~~

and $22.8 million, respectively.


c.	~~The portion~~In November 2017, the Company acquired the outstanding shares of ~~the consideration paid to Teekay for the acquisition of a 50% interest in TTOL consisting of 4.2~~TIL through issuing 89.0 million of Class BA common shares, which was treated as a non-cash transaction in the ~~Company’s statements of cash flows (see note 6c).~~

d.

~~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~~Company's consolidated statement of cash flows. ~~Such repayments for~~As a result of this transaction, the ~~year ended December 31, 2012 were $108.7 million.~~

Company acquired $37.6 million in cash and paid $6.8 million in transaction costs (note 22).


17.	Liquidity

Accounting standard ASC-205-40, Presentation of Financial Statements - Going Concern, 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 loan facility that is maturing in the third quarter of 2018 and expects that spot tanker rates in 2018 will be lower than those of 2017, 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 third quarter of 2018.

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.~~
18.	(Loss) Earnings ~~(Loss)~~ Per Share

The net (loss) income ~~(loss)~~ available for common ~~stockholders~~shareholders and (loss) earnings ~~(loss)~~ per common share presented in the table below excludes the results of operations of the ~~Dropdown Predecessor (see~~~~note 1~~)Entities under Common Control which were purchased solely with cash (note 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,
	2017 $		2016 $	2015 $
Net (loss) income	(58,023	)	67,823	183,626
Less: Net income attributable to the Entities under Common Control ⁽¹⁾	—		—	(2,708	)
Net (loss) income available for common shareholders	(58,023	)	67,823	180,918
Weighted-average number of common shares - basic ⁽²⁾	187,235,377		170,098,572	143,911,452
Dilutive effect of stock-based awards	—		242,067	581,481
Weighted average number of common shares - diluted ⁽²⁾	187,235,377		170,340,639	144,492,933
(Loss) earnings per common share:
- Basic	(0.31	)	0.40	1.26
- Diluted	(0.31	)	0.40	1.25

~~18.~~	~~Vessel Sales, Vessel Acquisitions and Vessel Impairments~~
(1)	Includes net income of the 2015 Acquired Business of $2.7 million for the year ended December 31, 2015.

(2) The weighted-average number of common shares outstanding for periods prior to May 2017 has been retroactively adjusted to include the approximately 13.8 million shares of the Company's Class B common stock issued to Teekay as consideration for the acquisition of 50% of TTOL in May 2017.

Stock-based awards, which have an anti-dilutive effect on the calculation of diluted earnings per common share, are excluded from this calculation. In the years where a loss attributable to shareholders has been incurred, all stock-based awards are anti-dilutive. For the years ended December ~~2014,~~31, 2016 and 2015, 14 thousand and nil restricted stock units, respectively, had an anti-dilutive effect on the ~~Company signed an agreement~~calculation of diluted earnings per common share. For the years ended December 31, 2016 and 2015, options to acquire ~~one 2008-built Aframax tanker for a purchase price of $37.0~~0.7 million shares, and placed $3.7 million in an escrow fund related to this purchase, which is recorded in other non-current assets in the Company’s consolidated balance sheet as of December 31, 2014. In December 2014, the Company also signed agreements to acquire four modern LR2 vessels for a total purchase price of $193.3 million. The Company took delivery of three and two of these vessels in February and March 2015, respectively (~~see note 20~~).

In May 2014, the Company sold two wholly-owned subsidiaries, each of which owned one VLCC, to TIL for aggregate proceeds of $154 million plus related working capital on closing of $1.7 million. The Company used $152 million of the sale proceeds to prepay one44 thousand shares of the Company’s ~~revolving credit facilities~~Class A common stock, respectively, had an anti-dilutive effect on the calculation of diluted earnings per common share.


19.	Vessel Sales and Vessel Acquisitions

Vessel Sales

During 2017, the Company completed the sales of three Aframax tankers which were delivered to their respective buyers in June 2017, September 2017 and ~~the remainder of the proceeds for general corporate purposes.~~November 2017. The Company recognized ~~a $10.0 million gain~~an aggregate loss on ~~the~~ sale of the ~~two subsidiaries~~vessels of $11.2 million.

In July 2017, the Company completed a $153.0 million sale-leaseback financing transaction relating to ~~TIL~~four of the Company's Suezmax tankers (note 9).

The Company's consolidated statement of (loss) income for the year ended December 31, ~~2014, which is reflected~~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 ~~the Company’s consolidated statements~~November 2016 for a sales price of ~~income (loss).~~

~~In January 2013,~~$13.2 million, and the ~~Company sold one Aframax tanker for aggregate proceeds of $9.1 million. The~~ Company recognized a loss on sale of the vessel of ~~$0.1~~$8.1 million. The other MR tanker was sold in August 2016 for a sales price of $14.0 million, and the Company recognized a loss on sale of the vessel of $6.6 million.

In November 2016, the Company sold two lightering support vessels related to the 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 had been classified as vessels held for sale on the consolidated balance sheets as of December 31, 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. One Suezmax tanker was delivered to its respective buyer in January 2017. The Company recognized a loss on the sale of the vessel of $0.3 million in the three months ended March 31, 2017. In February 2017, the date of delivery of the other Suezmax tanker to its owner was extended, and as a result, the sales price was reduced by $1.3 million. The vessel sale was completed in March 2017, and the Company recognized a loss on sale of the vessel of $1.5 million in the three months ended March 31, 2017.

In November 2015, the Company sold one conventional tanker for a sales price of $11.2 million. The Company recognized a gain on sale of the vessel of $0.8 million in the year ended December 31, ~~2013.~~

~~The Company’s consolidated statement~~2015.

Vessel Acquisitions

In August 2015, the Company agreed to acquire 12 modern Suezmax tankers from Principal Maritime. As of ~~loss for the year ended~~ December 31, 2012 includes 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 were2015, all being employed in the spot market or on short term time-charters. The primary factors that caused the write downs were 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. One of the four Aframax tankers was held for sale at December 31, 2012 and was subsequently sold in January 2013. All12 of the vessels ~~were written down to their estimated fair values, using an internally appraised value based on second hand sale~~had been delivered for a total purchase price of $661.3 million, consisting of $612.0 million in cash and ~~purchase market data.~~

~~19.~~

~~Shipbuilding Contracts~~

~~On April 8, 2013, the Company entered into agreements with STX Offshore & Shipbuilding Co., Ltd (or~~~~STX~~~~) of South Korea to construct four, fuel-efficient 113,000 dead-weight tonne Long Range 2 (or~~~~LR2~~~~) product tanker newbuildings plus options to order up to an additional 12 vessels. The payment~~approximately 7.2 million shares of the Company’s first shipyard installment was contingent on the Company receiving acceptable refund guarantees for the shipyard installment payments. In May 2013, STX commenced a voluntary financial restructuring with its lenders,Class A common stock which were directly issued to Principal Maritime and which are treated as a result, STX’s refund guarantee applications were temporarily suspended. In October and November 2013, the Company exercised its options 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 shipbuilding contracts within the specified timeframe of the option declarations and informed the Company that there was no prospect of the refund guarantees being provided under any of the firm or option agreements. Therefore, STX is in breach of the option agreements. In December 2013, the Company terminated the newbuilding agreements and in February 2014, the Company terminated the option agreements. In February 2014, the Company commenced a legal action against STX for damages. In November 2014, the Company placed $0.6 million in an escrow account as cash security pending the resolution of this matter. These funds are classified as cash and cash equivalents in the Company’s consolidated balance sheets as of December 31, 2014.

non-cash

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)

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 (note 4). The Company financed the remainder of the cash purchase price with existing liquidity. The loan facility was refinanced in January 2016 (note 8).


20.	~~Subsequent Events~~ Other Revenues and Restructuring Charges

For the year ended December 31, 2017, the Company recognized $39.9 million (2016 - $37.9 million; 2015 - $17.7 million) of revenue from its lightering support operations (note 5), $12.9 million (2016 - $13.8 million; 2015 - $9.5 million) of revenue related to its commercial ship management services and $0.6 million related to a profit-sharing arrangement with a in-chartered vessel. In addition, for the year ended December 31, 2016, the Company 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 (loss) income.

For the year ended December 31, 2015, the Company recognized $6.8 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 and $2.0 million related to cancellation fees paid to Anglo-Eastern during the first quarter of 2015 in connection with the acquisition of its 49% share in Teekay Marine Ltd. The $4.4 million termination charge was recovered from the customer and the recovery is reflected in other revenues on the consolidated statements of (loss) income. In addition, $0.3 million of restructuring charges related to severance payments made by the Company in relation to the acquisition of the ship-to-ship business (see note 21).


21.	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 established the Company as a global company in the ship-to-ship transfer business, which increases 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 following table summarizes the final estimates of fair values of the SPT assets acquired and liabilities assumed by the Company on the acquisition date. The acquisition of SPT was accounted for using the acquisition method of accounting, based upon estimates of fair value at the acquisition date as finalized in the final purchase price allocation in the first quarter of 2016. Such estimates of fair value 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 (loss) income for 2016.



	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, 2017, the gross carrying amount, accumulated amortization and net carrying amount were $22.5 million, $8.0 million and $14.5 million (2016 - $22.5 million, $4.8 million and $17.7 million; 2015 - $30.9 million, $1.3 million and $29.6 million), respectively. Amortization of intangible assets for the five fiscal years subsequent to 2017 is expected to be $2.9 million (2018), $2.2 million (2019), $2.0 million (2020), $1.8 million (2021), $1.6 million (2022) and $4.0 million (thereafter).

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)	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 and placed $3.7 million in an escrow fund related~~a pre-existing relationship. Such amount was accounted for as a reduction to ~~this purchase. In December 2014,~~revenue on the Company also signed agreements to acquire four modern LR2 vessels for a total purchase price of $193.3 million. The Company took delivery of three and two of these vessels in February and March 2015, respectively (see note 20c).

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, 2015:



	b. Unaudited Pro Forma Year ended December 31, 2015 $
Revenues	~~In December 2014, the Company granted the underwriters for its follow-on public offering of Class A~~570,381
Net income	178,266
Earnings per common stock a 30-day option to purchase up to an additional 3 million shares of Class A common stock (see note 3). The underwriters exercised this option and on January 2, 2015, the Company issued 3 million shares of Class A common stock for net proceeds of $13.7 million. share:
Basic	1.33
Diluted	1.33

	c.
22.	~~In January 2015, the Company secured a loan facility in the amount~~Acquisition of $126.6 million with a maturity date of January 30, 2016, which was fully drawn in March 2015. This loan facility is secured by the Aframax tanker and the four modern LR2 vessels which delivered in February and March 2015. Tanker Investments Ltd.

~~F-22~~

On May 31, 2017, the Company entered into a Merger Agreement to acquire the remaining 27.0 million issued and outstanding common shares of TIL, by way of a share-for-share exchange of 3.3 shares of Class A common stock of the Company for each TIL common stock. On November 17, 2017, the Company's shareholders voted in favor of increasing the authorized number of its Class A common shares to permit the issuance of Class A common shares as consideration for the merger with TIL. Concurrently, the merger was approved by the shareholders of TIL. The Company amended its amended and restated articles of incorporation and completed the merger on November 27, 2017, as a result of which TIL became a wholly-owned subsidiary of the Company. As consideration for the merger, the Company issued 88,977,544 Class A common shares to the TIL shareholders (other than the Company and its subsidiaries) for $151.3 million, or $1.70 per share.

Pursuant to this acquisition, the Company acquired a modern fleet of 10 Suezmax tankers, six Aframax tankers and two Long Range 2 (or LR2) product tankers with an average age of 7.3 years, assumed $47.1 million of net working capital and other long-term liabilities and assumed long-term debt with a principal balance outstanding of $338.9 million. The merger with TIL was accounted for as an acquisition of assets. The purchase price of the acquisition consisted of the fair value of the Company's shares issued on the merger date ($151.3 million), the transaction costs associated with the merger ($6.8 million) and the fair value of the Company's 11.3% pre-existing ownership in TIL at the close of the merger ($19.2 million), for a total acquisition cost of $177.3 million. Net working capital and other long-term liabilities of $47.1 million and $337.1 million of long-term debt assumed were recognized at their fair values on November 27, 2017. The remaining amount of the purchase price was allocated to vessels ($467.1 million) and existing time-charter contracts ($0.2 million), on a relative fair value basis.


23.	Subsequent Events

On March 21, 2018, the Company increased the authorized number of Class A common stock issuable under its 2007 Long-Term Incentive Plan by 6.0 million shares.

F-31



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


~~Item 16G.~~		~~Corporate Governance~~		60

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

~~PART III.~~
Item 18.
~~Item 17.~~		Financial Statements	81
Item 19.	Exhibits	82
Signature		60 85

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

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

~~Signature~~				63



Number of outstanding shares of common stock at the end of the year	268,201,638		159,304,136		156,030,618		112,064,036		83,591,030
Other Financial Data:
Net revenues ⁽⁷⁾	353,810		496,939		515,954		266,225		210,074
EBITDA ⁽⁸⁾	72,845		201,639		274,653		130,627		34,752
Adjusted EBITDA⁽⁸⁾	120,413		234,100		283,711		119,567		41,866
Capital expenditures
Expenditures for vessels and equipment ⁽⁹⁾	(4,732	)	(9,226	)	(848,229	)	(2,084	)	(1,904	)
Expenditures for dry docking	(16,239	)	(9,340	)	(39,617	)	(17,072	)	(19,245	)
Fleet Data:
Average number of tankers ⁽¹⁰⁾
Suezmax	21.1		22.0		13.4		10.0		10.0
Aframax	17.3		21.8		22.0		15.4		14.6
Product	7.5		9.2		12.2		7.6		6.0
VLCC	0.5		0.5		0.5		0.8		0.5


	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

¨

¨	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

¨

¨	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



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



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

Item 2.		Offer Statistics and Expected Timetable	7	4

Item 3.		Key Information	7
		4

		Selected Financial Data	7
		4

		Risk Factors	11
		7

		Tax Risks	22	16

Item 4.		Information on the Company	23
		17

		A. History and Development of the Company	23
		17

		B. Business Overview	23
		17

		Our Fleet	24
		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~~Vessel Revenue Sharing Arrangements	27
		19

		Industry and Competition	28
		20

		Safety, Management of Ship Operations and Administration	30
		22

		Risk of Loss, Insurance and Risk Management	31
		22

		Flag, Classification, Audits and Inspections	31
	Regulations	23 32

		~~Regulations~~		23

		C. Organizational Structure	36
		27

		D. Property, Plant and Equipment	36
		27

		E. Taxation of the Company	37
		27

		United States Taxation	37
		27

		Marshall Islands Taxation	38	28

Item 4A.		Unresolved Staff Comments	38	28

Item 5.		Operating and Financial Review and Prospects	38
	General	28 38

		~~General~~		29

		Significant Developments in ~~2014~~2017 and ~~2015~~Early 2018	39
		29

		Our Charters	41
		30

		Important Financial and Operational Terms and Concepts	40
		30

		Items You Should Consider When Evaluating Our Results	41
		31

		Results of Operations	42
		32

		Liquidity and Capital Resources	53
		37

		Commitments and Contingencies	56
		40

		Off-Balance Sheet Arrangements	57
		40

		Critical Accounting Estimates	57	40

Item 6.		Directors, Senior Management and Employees	59
		43

		Directors and Executive Officers of Teekay Tankers Ltd.	59

43

	Compensation of Directors and Senior Management	61
	44

	Long-Term Incentive Program	62
	44



		Board Practices	62
	44

		Crewing and Staff	63
	45

		Share Ownership	63	46

Item 7.		Major Shareholders and Related Party Transactions	64
	46

		A. Major Shareholders	64
	46

		B. Related Party Transactions	64	47

Item 8.		Financial Information	71
	52

		Consolidated Financial Statements and Notes	71
	52

		Legal Proceedings	71
	52

		Dividend Policy	71
	52

		Significant Changes	71	52

Item 9.		The Offer and Listing	71	52

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	77	57

Item 11.		Quantitative and Qualitative Disclosures About Market Risk	77
	57

		Foreign Currency Fluctuation Risk	77
	57

		Interest Rate Risk	78
	58 Equity Price Risk	78

		Spot Tanker Market Rate Risk	78	58

Item 12.		Description of Securities Other than Equity Securities	79
PART II		58

~~PART II.~~

Item 13.		Defaults, Dividend Arrearages and Delinquencies	79	58

Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds	79	58

Item 15.		Controls and Procedures	79
	59

		Management’s Report on Internal Control over Financial Reporting	79	59

Item 16A.		Audit Committee Financial Expert	80	59

Item 16B.		Code of Ethics	80	59

Item 16C.		Principal Accountant Fees and Services	80	59

Item 16D.		Exemptions from the Listing Standards for Audit Committees	81	60

Item 16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers	81	60

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.	Financial Statements	81


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


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


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


(9)	Excludes vessels purchased in connection with our acquisition of Tanker Investments Ltd. (or TIL). Please read Item 18. Financial Statements: Note 22 - Acquisition of Tanker Investments Ltd.


(10)	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~~our High-Q Investment Ltd. (or High-Q) joint venture with Wah Kwong Maritime Transport Holdings Ltd. and vessels of the ~~Dropdown Predecessor.~~ Entities under Common Control.


	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



	Owned and Capital Lease Vessels	Chartered-in Vessels	Total
Fixed-rate:
Suezmax Tankers	6	—	6
Aframax Tankers	8	—	8
Long Range 2 Product Tankers	2	—	2
VLCC Tankers ⁽¹⁾	1	—	1
Total Fixed-Rate Fleet ⁽²⁾	17	—	17
Spot-rate:
Suezmax Tankers	24	—	24
Aframax Tankers	9	1	10
Long Range 2 Product Tankers	7	—	7
Total Spot Fleet ⁽³⁾	40	1	41
Total Conventional Fleet	57	1	58
Ship-to-Ship Support Vessels	3	3	6
Total Teekay Tankers Fleet	60	4	64


(1)	~~Includes a~~We own one VLCC ~~that we own~~ through a 50/50 joint venture with Wah Kwong Maritime Transport Holdings Limited (please refer to Note 6 - 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~~16 in ~~2015, and three in 2016, respectively, and~~2018 (including one jointly owned VLCC time-charter out ~~contract is scheduled to expire~~contract) and one in ~~2018.~~ 2019.


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	RSA	—	—
Aspen Spirit	156,800	2009	RSA	—	—
Athens Spirit	158,500	2012	RSA	—	—
Atlanta Spirit	158,700	2011	RSA	—	—
Baker Spirit	156,900	2009	RSA	—	—
Barcelona Spirit	158,500	2011	RSA	—	—
Beijing Spirit	156,500	2010	RSA	—	—
Cascade Spirit	156,900	2009	RSA	—	—
Copper Spirit	156,800	2010	RSA	—	—
Dilong Spirit	159,000	2009	RSA	—	—
Godavari Spirit	159,100	2004	RSA	—	—
Iskmati Spirit	165,300	2003	RSA	—	—
Jiaolong Spirit	159,000	2009	RSA	—	—
Kaveri Spirit	159,100	2004	RSA	—	—
London Spirit ⁽¹⁾	158,500	2011	Time charter	$21,000	Jan-18
Los Angeles Spirit ⁽¹⁾	159,200	2007	Time charter	$22,500	Jan-18
Montreal Spirit ⁽²⁾	150,000	2006	Time charter	$22,000	Feb-18
Moscow Spirit	156,500	2010	RSA	—	—
Narmada Spirit	159,200	2003	RSA	—	—
Pinnacle Spirit	160,400	2008	RSA	—	—
Rio Spirit ⁽³⁾	158,400	2013	RSA	—	—
Seoul Spirit	160,000	2005	RSA	—	—
Shenlong Spirit ⁽²⁾	159,000	2009	Time charter	$19,750	Feb-18
Summit Spirit	160,500	2008	Time Charter	$26,200	Aug-18
Sydney Spirit	158,500	2012	RSA	—	—
Tahoe Spirit ⁽²⁾	156,900	2010	Time charter	$19,750	Feb-18
Tianlong Spirit	159,000	2009	RSA	—	—
Tokyo Spirit	150,000	2006	RSA	—	—
Vail Spirit	157,000	2009	RSA	—	—
Zenith Spirit	160,500	2009	RSA	—	—
Total Capacity	4,749,900


(1)	The Suezmax tankers London Spirit and Los Angeles Spirit completed their respective time-charter out contracts and joined the Teekay Suezmax RSA in January 2018.


(2)	The Suezmax tankers Montreal Spirit, Shenlong Spirit and Tahoe Spirit completed their respective time-charter out contracts and joined the Teekay Suezmax RSA in February 2018.


(3)	The Suezmax tanker Rio Spirit entered into a time-charter out contract, which commenced in January 2018.


(1)	The Aframax ~~tanker~~~~Erik~~tankers Axel Spirit and Tarbet Spirit completed atheir respective time-charter out ~~contract~~contracts and joined the Teekay Aframax RSA ~~pool~~ in January ~~2015.~~ 2018 and February 2018, respectively.


(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.


	~~Voyage Charter~~	~~Time Charter~~
~~Typical contract length~~	~~Single voyage~~	~~One year or more~~
~~Hire rate basis~~⁽¹⁾	~~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~~



	Voyage Charter	Time Charter
Typical contract length	Single voyage	One year or more
Hire rate basis ⁽¹⁾	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” rate refers to the basic payment from the charterer for the use of the vessel.


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


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


(1)	Includes $10.5 million and $3.2 million of voyage expenses for the years ended December 31, 2017 and 2016, respectively, relating to lightering support services which the ship-to-ship transfer segment provided to the conventional tanker segment for full service lightering operations.