HAMILTON, BERMUDA — (Marketwire) — 05/17/12 — Teekay Offshore Partners L.P. (NYSE: TOO) –
Highlights
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership), today reported the Partnership–s results for the quarter ended March 31, 2012. During the first quarter of 2012, the Partnership generated distributable cash flow(1) of $42.4 million, compared to $29.2 million in the same period of the prior year. The increase was mainly related to the Partnership–s acquisition from Teekay Corporation (Teekay) of the remaining 49 percent interest in Teekay Offshore Operating L.P. (OPCO) in March 2011 and the acquisition of the Piranema Spirit floating production storage and offloading (FPSO) unit on November 30, 2011.
On April 12, 2012, a cash distribution of $0.5125 per common unit was declared for the quarter ended March 31, 2012, an increase of 2.5 percent from the previous quarter. The cash distribution was paid on May 14, 2012 to all unit holders of record on April 23, 2012.
“As we previously announced, the Partnership increased its first quarter of 2012 cash distribution by 2.5 percent to $0.5125 per unit,” commented Peter Evensen, Teekay Offshore GP LLC–s Chief Executive Officer. “The Partnership–s distributable cash flow increased again this quarter with the positive impact from the Piranema Spirit FPSO unit acquired in November of last year, and a reduction in shuttle tanker operating and time-charter expenses.” Mr. Evensen continued, “Given the positive fundamentals in the offshore sector, we are confident in our ability to continue growing the Partnership–s asset base and distributable cash flow, both in the near-term and longer-term, through accretive acquisitions of suitable FPSO units owned by Teekay Corporation, direct acquisition of offshore assets from third parties, and/or new organic offshore projects.”
Summary of Recent Financings
In late January 2012, the Partnership issued in the Norwegian bond market NOK 600 million in senior unsecured bonds that mature in January 2017. The aggregate principal amount of the bonds is equivalent to approximately US$100 million and all interest and principal payments have been swapped into US dollars and fixed at an interest rate of 7.49 percent. The proceeds of the bonds have been used to reduce amounts outstanding under the Partnership–s revolving credit facilities and for general partnership purposes, which may be redrawn in the future to fund acquisitions. The Partnership will apply for listing of the bonds on the Oslo Stock Exchange.
In February 2012, the Partnership entered into a new 5-year $130 million debt facility secured by the Piranema Spirit FPSO unit.
Including these two recently completed financings, the Partnership–s total liquidity as of March 31, 2012 increased to $436.7 million, comprised of $234.7 million in cash and cash equivalents and $202.0 million in undrawn revolving credit facilities.
Teekay Offshore–s Fleet
The following table summarizes Teekay Offshore–s fleet as of May 1, 2012.
Future Growth Opportunities
Pursuant to an omnibus agreement that Teekay Offshore entered into in connection with its initial public offering in December 2006, Teekay is obligated to offer to the Partnership its interest in certain shuttle tankers, floating storage and offtake (FSO) units and FPSO units Teekay owns or may acquire in the future, provided the vessels are servicing contracts with remaining durations of greater than three years. The Partnership may also acquire other vessels that Teekay may offer it from time to time and intends to pursue direct acquisitions from third parties and new organic offshore projects.
Shuttle Tankers
In June 2011, the Partnership entered into a new long-term contract with a subsidiary of BG Group plc (BG) to provide shuttle tanker services in Brazil. The contract with BG will be serviced by four Suezmax newbuilding shuttle tankers under construction by Samsung Heavy Industries for an estimated total delivered cost of approximately $470 million. Upon their scheduled deliveries in mid- to late-2013, the vessels will commence operations under 10-year, fixed-rate time-charter contracts. The contract with BG also includes certain extension options and vessel purchase options.
FPSO Units
As previously announced, on November 30, 2011, Teekay acquired from Sevan Marine ASA (Sevan) the Hummingbird Spirit FPSO unit (which is currently operating under a short-term charter contract), and has agreed to acquire the Voyageur Spirit FPSO unit upon the completion of certain upgrades that are expected to be completed in the fourth quarter of 2012 (upon which time the unit is expected to commence operations under a 5-year charter contract, plus extension options). Pursuant to the omnibus agreement, Teekay will be obligated to offer both FPSO units to Teekay Offshore within approximately one year following commencement of charter contracts with a firm period of greater than three years in duration.
Pursuant to the omnibus agreement and a subsequent agreement, Teekay is obligated to offer to sell the Petrojarl Foinaven FPSO unit, an existing unit owned by Teekay and operating under a long-term contract in the North Sea, to Teekay Offshore prior to July 9, 2012. The purchase price for the Petrojarl Foinaven FPSO unit would be its fair market value plus any additional tax or other costs to Teekay that would be required to transfer the FPSO unit to the Partnership.
In October 2010, Teekay signed a long-term contract with Petroleo Brasileiro S.A. (or Petrobras) to provide an FPSO unit for the Tiro and Sidon fields located in the Santos Basin offshore Brazil. The contract with Petrobras will be serviced by a newly-converted FPSO unit named Petrojarl Cidade de Itajai. This FPSO unit is scheduled to deliver from the shipyard in the third quarter of 2012 and arrive in Brazilian waters early in the fourth quarter of 2012, upon which time the unit is expected to commence operations under a nine-year, fixed-rate time-charter contract with Petrobras with six additional one-year extension options. Pursuant to the omnibus agreement, Teekay is obligated to offer to the Partnership its 50 percent interest in this FPSO project at Teekay–s fully built-up cost, within approximately one year after the commencement of the charter with Petrobras.
In May 2011, Teekay entered into a joint venture agreement with Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) to jointly pursue FPSO projects in Brazil. Odebrecht is a well-established Brazil-based company that operates in the engineering and construction, petrochemical, bioenergy, energy, oil and gas, real estate and environmental engineering sectors, with over 120,000 employees and a presence in over 20 countries. As part of the joint venture agreement, Odebrecht is a 50 percent partner in the Tiro Sidon FPSO project and Teekay is currently working with Odebrecht on other FPSO project opportunities that, if awarded, may result in the Partnership being able to acquire Teekay–s interests in such projects pursuant to the omnibus agreement.
In June 2011, Teekay entered into a new contract with BG Norge Limited to provide a high-specification FPSO unit for the Knarr oil and gas field located in the North Sea. The contract will be serviced by a new FPSO unit to be constructed by Samsung Heavy Industries for a fully built-up cost of approximately $1 billion. Pursuant to the omnibus agreement, Teekay is obligated to offer to the Partnership its interest in this FPSO project at Teekay–s fully built-up cost, within approximately one year after the commencement of the charter, which is expected to commence in the first quarter of 2014.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) (as detailed in Appendix A to this release) of $26.1 million for the quarter ended March 31, 2012, compared to $22.1 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net income by $26.5 million and $1.3 million for the quarters ended March 31, 2012 and March 31, 2011, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $52.6 million for the first quarter of 2012, compared to $23.4 million in the same period of the prior year. Net revenues(2) of $208.1 million for the first quarter of 2012 was comparable to the same period of the prior year.
For accounting purposes, the Partnership is required to recognize, through the consolidated statements of income, changes in the fair value of certain derivative instruments as unrealized gains or losses. This revaluation does not affect the economics of any hedging transactions or have any impact on the Partnership–s actual cash flows or the calculation of its distributable cash flow.
Operating Results
The following table highlights certain financial information for Teekay Offshore–s four segments: the Shuttle Tanker segment, the Conventional Tanker segment, the FSO segment, and the FPSO segment (please refer to the “Teekay Offshore–s Fleet” section of this release above and Appendix C for further details).
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership–s Shuttle Tanker segment increased to $56.8 million for the first quarter of 2012 compared to $45.7 million for the same period of the prior year, primarily due to decreases in time-charter hire expense, vessel operating expenses and restructuring charges. Time-charter hire expense decreased due to the redelivery of one in-chartered vessel in the fourth quarter of 2011 and from fewer short-term chartered-in days. Vessel operating expenses decreased due to the lay-up of the Basker Spirit commencing in the third quarter of 2011 and from reduced crew costs.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership–s Conventional Tanker segment decreased to $10.2 million in the first quarter of 2012 compared to $22.0 million for the same period of the prior year, primarily due to the expiry of time-charter contracts on two tankers during the fourth quarter of 2011, which are now trading in the spot tanker market at lower rates, and the sale of the Scotia Spirit in the third quarter of 2011.
FSO Segment
Cash flow from vessel operations from the Partnership–s FSO segment increased to $7.5 million in the first quarter of 2012 compared to $4.8 million for the same period of the prior year, primarily due to restructuring costs associated with the termination of the employment of certain seafarers of the Karratha Spirit FSO unit during the first quarter of 2011.
FPSO Segment
Cash flow from vessel operations from the Partnership–s FPSO segment increased to $27.6 million for the first quarter of 2012 compared to $19.5 million for the same period of the prior year, primarily due to the acquisition of the Piranema Spirit FPSO unit on November 30, 2011 and a decrease in vessel operating expenses for the Rio das Ostras FPSO unit. The Rio das Ostras– vessel operating expenses decreased from the prior year mainly due to the higher maintenance work while the vessel was being upgraded for the Aruana field during the first quarter of 2011.
Liquidity
As of March 31, 2012, the Partnership had total liquidity of $436.7 million, which consisted of $234.7 million in cash and cash equivalents and $202.0 million in undrawn revolving credit facilities.
Conference Call
The Partnership plans to host a conference call on Friday, May 18, 2012 at 11:00 a.m. (ET) to discuss its results for the first quarter of 2012. An accompanying investor presentation will be available on Teekay Offshore–s website at prior to the start of the call. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
The conference call will be recorded and made available until Friday, May 25, 2012. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 5961264.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production and storage services to the offshore oil industry focusing on the fast-growing, deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore owns interests in 40 shuttle tankers (including four chartered-in vessels and four committed newbuildings), three floating production, storage and offloading (FPSO) units, five floating storage and offtake (FSO) units and ten conventional oil tankers. Teekay Offshore has rights to participate in certain other FPSO and shuttle tanker opportunities provided by Teekay Corporation (NYSE: TK) and Sevan Marine ASA (OSLO: SEVAN). A majority of Teekay Offshore–s fleet trades on long-term, stable contracts and it is structured as a publicly-traded master limited partnership.
Teekay Offshore Partners– common units trade on the New York Stock Exchange under the symbol “TOO”.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A – SPECIFIC ITEMS AFFECTING NET INCOME
(in thousands of U.S. dollars)
Set forth below is a reconciliation of the Partnership–s unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership–s financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership–s financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B – RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in thousands of U.S. dollars)
Description of Non-GAAP Financial Measure – Distributable Cash Flow (DCF)
Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interest, non-cash items, distributions relating to equity financing of newbuilding instalments, vessel acquisition costs, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, non-cash income taxes and unrealized foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership–s capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership–s ability to make quarterly cash distributions. Distributable cash flow is not defined by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership–s performance required by GAAP. The table below reconciles distributable cash flow to net income for the quarter.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management–s current views with respect to certain future events and performance, including statements regarding: the Partnership–s near-term and longer-term future growth prospects, asset base, and distributable cash flow; the timing of delivery of vessels under construction or conversion; the industry fundamentals for deepwater offshore oil production, storage and transportation; the potential for Teekay to offer additional vessels to the Partnership and the Partnership–s acquisition of any such vessels, including the Petrojarl Foinaven, the Petrojarl Cidade de Itajai, the Voyageur Spirit, the Hummingbird Spirit and the newbuilding FPSO unit that will service the Knarr field under contract with BG Norge Limited; and the potential for the Partnership to acquire other vessels or offshore projects from Teekay or directly from third parties. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea and Brazil offshore fields; potential early termination of contracts; failure of Teekay to offer to the Partnership additional vessels; the inability of the joint venture between Teekay and Odebrecht to secure new Brazil FPSO projects that may be offered for sale to the Partnership; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore–s general partner to acquire other vessels or offshore projects from Teekay or third parties; the Partnership–s ability to raise adequate financing to purchase additional assets; and other factors discussed in Teekay Offshore–s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2011. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership–s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts:
Teekay Offshore Partners L.P.
Kent Alekson
Investor Relations Enquiries
+1 (604) 609-6442