HAMILTON, BERMUDA — (Marketwired) — 05/09/13 — Highlights
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO), today reported the Partnership–s results for the quarter ended March 31, 2013. During the first quarter of 2013, the Partnership generated distributable cash flow(1) of $41.8 million, compared to $42.4 million in the same period of the prior year.
On April 18, 2013, a cash distribution of $0.5253 per common unit was declared for the quarter ended March 31, 2013, an increase of $0.0128 per unit, or 2.5 percent, from the previous quarter. The cash distribution is payable on May 14, 2013 to all unitholders of record on April 30, 2013.
“We are pleased to have completed the accretive acquisition of the Voyageur Spirit FPSO last week, which brings the Partnership–s FPSO fleet to four units and will increase its distributable cash flow commencing in the second quarter,” commented Peter Evensen, Teekay Offshore GP LLC–s Chief Executive Officer. “As a result of this accretive acquisition, we have increased the Partnership–s first quarter distribution by 2.5 percent to $0.5253 per unit, payable in May 2013.”
Mr. Evensen continued, “We expect that the distributable cash flow accretion provided by the four BG shuttle tanker newbuildings, the Partnership–s expected acquisition of a 50 percent interest in the Cidade de Itajai FPSO, and the post-acquisition contribution from the Voyageur Spirit FPSO will enable us to further increase our quarterly distribution by a minimum of 2.5 percent later in 2013. With the recent completion of the $150 million Series A perpetual preferred unit public offering in April 2013, which represents a new source of equity financing that is non-dilutive to our existing common unitholders, and the Partnership–s recent $60 million common unit private placement, the equity requirements for the Cidade de Itajai FPSO and four BG shuttle tankers are now covered.”
“During the past year, we have seen an increase in the number of new offshore projects and Teekay Offshore is currently bidding on several new organic FPSO and FSO projects,” Mr. Evensen added. “This past week, we were successful in finalizing an agreement with Salamander Energy plc to convert one of our older shuttle tankers, the Navion Clipper, to an FSO unit that will operate offshore Thailand under a new 10-year charter contract commencing in the third quarter of 2014. The project–s fully-built-up capital cost is approximately $50 million and, upon commencement of the charter contract, the FSO unit is estimated to generate approximately $6.5 million in annual cash flow from vessel operations.”
Summary of Recent Transactions
Voyageur Spirit FPSO Acquisition
On May 2, 2013, the Partnership completed the acquisition of the Voyageur Spirit FPSO unit from Teekay Corporation at a purchase price of $540 million. The Voyageur Spirit FPSO operates on the Huntington Field in the North Sea under a five-year contract, plus up to 10 one-year extension options, with E.ON Ruhrgas UK E&P Limited. The acquisition was financed with a new $330 million debt facility secured by the unit, a portion of the proceeds from the public offering completed in September 2012 and a $40 million common unit private placement of common units to Teekay Corporation completed on May 2, 2013.
In anticipation of the Voyageur Spirit FPSO acquisition, in February 2013 the Partnership made a partial prepayment of $150 million to Teekay Corporation. The Partnership received interest at a rate of LIBOR plus a margin of 4.25 percent on the prepaid funds to Teekay Corporation until the Partnership acquired the FPSO unit on May 2, 2013.
Offer to Acquire a 50 Percent Interest in Cidade de Itajai FPSO
In April 2013, the Partnership received an offer from Teekay Corporation to acquire its 50 percent interest in the Cidade de Itajai (Itajai) FPSO unit at its fully built-up cost. The Itajai FPSO unit has been operating on the Bauna and Piracaba (previously named Tiro and Sidon) fields in the Santos Basin offshore Brazil since February 2013 under a nine-year time-charter contract (plus extension options) with Petroleo Brasileiro SA (Petrobras). The offer is currently being reviewed by the Partnership–s Conflicts Committee. The remaining 50 percent interest in the Itajai FPSO unit is owned by Brazilian-based Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) (Odebrecht).
Salamander Energy FSO Contract
In May 2013, the Partnership finalized the ten-year charter contract, plus extension options, with Salamander Energy plc (Salamander) to supply an FSO unit in Asia. The Partnership intends to convert its 1993-built shuttle tanker, the Navion Clipper, into an FSO unit for an estimated fully built-up cost of approximately $50 million. The unit is expected to commence its contract with Salamander in the third quarter of 2014.
Teekay Offshore–s Fleet
The following table summarizes Teekay Offshore–s fleet as of May 2, 2013.
Future Growth Opportunities
Pursuant to an omnibus agreement that the Partnership entered into in connection with our initial public offering in December 2006, Teekay Corporation is obligated to offer to the Partnership its interest in certain shuttle tankers, FSO units and FPSO units Teekay Corporation 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 Corporation may offer it from time to time and also 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, being constructed by Samsung Heavy Industries for an estimated total cost of approximately $446 million (excluding capitalized interest and miscellaneous construction costs). Shortly after their scheduled deliveries between May 2013 and November 2013, the shuttle tankers will commence operations under ten-year, fixed-rate time-charter-out contracts. The contracts with BG also include certain extension options and vessel purchase options exercisable by the charterer. This week, the Partnership expects to take delivery of the Samba Spirit, the first of the four shuttle tanker newbuildings, which is expected to commence its time-charter contract with BG in June 2013.
In November 2012, the Partnership agreed to acquire a 2010-built HiLoad Dynamic Positioning (DP) unit from Remora AS (Remora), a Norway-based offshore marine technology company, for a total purchase price of approximately $55 million, including modification costs. The acquisition of the HiLoad DP unit, which will operate under a ten-year time-charter contract with Petrobras in Brazil, is expected to be completed by June 30, 2013 and the unit is expected to commence operations at its full time-charter rate in early 2014 once modifications, delivery of the DP unit to Brazil, and operational testing have been completed. Under the terms of an agreement between Remora and Teekay Offshore, the Partnership has the right of first refusal to acquire any future HiLoad DP projects developed by Remora.
FPSO Units
In May 2011, Teekay Corporation entered into a joint venture agreement with Odebrecht 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 Cidade de Itajai FPSO project and Teekay Corporation is currently working with Odebrecht on other FPSO project opportunities that, if awarded, may result in the Partnership being able to acquire Teekay Corporation–s interests in such projects pursuant to the omnibus agreement. As discussed above, in April 2013, the Partnership received an offer from Teekay Corporation to acquire its 50 percent interest in the Cidade de Itajai FPSO unit at Teekay Corporation–s fully built-up cost. The offer is currently being reviewed by the Partnership–s Conflicts Committee.
Pursuant to the omnibus agreement and a subsequent agreement, Teekay Corporation is obligated to offer to sell to the Partnership the Petrojarl Foinaven FPSO unit, an existing unit owned by Teekay Corporation and operating under a long-term contract in the North Sea, prior to July 9, 2013. The purchase price for the Petrojarl Foinaven would be its fair market value plus any additional tax or other costs incurred by Teekay Corporation to transfer ownership of this FPSO unit to the Partnership.
In June 2011, Teekay Corporation entered into a contract with BG Norge Limited to provide a harsh weather FPSO unit to operate in the North Sea. The contract will be serviced by an FPSO unit being constructed by Samsung Heavy Industries for a fully built-up cost of approximately $1 billion. Pursuant to the omnibus agreement, Teekay Corporation is obligated to offer to the Partnership its interest in this FPSO project at Teekay Corporation–s fully built-up cost within a year after the commencement of the charter, which commencement is expected to occur during the first half of 2014.
In November 2011, Teekay Corporation acquired from Sevan Marine ASA, a Norway-based developer of cylindrical-shaped FPSO units, the Hummingbird Spirit FPSO unit, which is currently operating under a short-term charter contract. Pursuant to the omnibus agreement, Teekay Corporation is obligated to offer to the Partnership the Hummingbird Spirit FPSO unit within approximately one year following commencement of a charter contract with a firm period of greater than three years in duration.
Teekay Corporation owns two additional FPSO units, the Petrojarl Banff FPSO and the Petrojarl 1 FPSO, which may also be offered to the Partnership in the future pursuant to the omnibus agreement.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $18.9 million for the quarter ended March 31, 2013, compared to $26.1 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 $1.3 million and $26.5 million for the quarters ended March 31, 2013 and March 31, 2012, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $20.2 million for the first quarter of 2013, compared to net income of $52.6 million in the same period of the prior year. Net revenues(2) were $201.2 million for the first quarter of 2013, compared to $202.6 million in the same period of the prior year.
Adjusted net income attributable to the partners for the three months ended March 31, 2013 declined from the same period in the prior year, mainly due to the sale and lay-up of older shuttle and conventional tankers during 2012 as their related charter contracts expired or terminated. In addition, there was a higher level of maintenance activity in the FPSO fleet during the first quarter of 2013 compared to the same period in the prior year. Adjusted net income is expected to increase during the course of 2013 as a result of the acquisition of the Voyageur Spirit FPSO in May 2013 and the deliveries of the four shuttle tanker newbuildings during 2013
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 nor does it 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 FPSO segment, the Conventional Tanker segment and the FSO segment (please refer to the “Teekay Offshore–s Fleet” section of this release above and Appendix D for further details).
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership–s Shuttle Tanker segment decreased to $48.9 million for the first quarter of 2013 compared to $56.8 million for the same period of the prior year, primarily as a result of the lay-up of the Navion Torinita and the Navion Clipper upon expiration of their time-charter contracts in the second and fourth quarters of 2012, respectively, and the sale of the Navion Savonita in the fourth quarter of 2012.
FPSO Segment
Cash flow from vessel operations from the Partnership–s FPSO segment decreased to $22.3 million for the first quarter of 2013 compared to $27.6 million for the same period of the prior year. The decrease was primarily due to an increase in vessel operating expenses related to higher maintenance costs for the Petrojarl Varg FPSO and higher crewing and manning costs for the Petrojarl Varg and Piranema Spirit FPSO units.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership–s Conventional Tanker segment increased to $15.5 million in the first quarter of 2013 compared to $10.2 million for the same period of the prior year, primarily due to a $6.8 million termination fee received from Teekay Corporation in March 2013 for the early termination of the time-charter contract for the Poul Spirit.
FSO Segment
Cash flow from vessel operations from the Partnership–s FSO segment in the first quarter of 2013 of $7.4 million was consistent with the $7.5 million generated in the same period of the prior year.
Liquidity
As of March 31, 2013, the Partnership had total liquidity of $373.6 million, which consisted of $172.8 million in cash and cash equivalents and $200.8 million in undrawn revolving credit facilities. Giving affect for the $60 million common unit private placement and the $150 million preferred unit public offering completed in April 2013 and the Partnership–s acquisition of the Voyageur Spirit FPSO in May 2013 (net of the $150 million prepayment made in February 2013), the Partnership–s liquidity at March 31, 2013 would have been approximately $560 million.
2012 Audited Financial Statements
Teekay Offshore Partners L.P. filed its 2012 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 11, 2013. Copies are available on Teekay Offshore–s website, under “Investor Briefcase”, at . Unitholders may request a printed copy of this annual report, including the complete audited financial statements free of charge by contacting Teekay Offshore–s Investor Relations.
Conference Call
The Partnership also plans to host a conference call on Friday, May 10, 2013 at noon (ET) to discuss the results for the first quarter of 2013. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
A supporting First Quarter 2013 Earnings Presentation will also be available at in advance of the conference call start time.
The conference call will be recorded and available until Friday, May 17, 2013. This recording can be accessed following the live call by dialing 1-888-203-1112 or 647-436-0148, if outside North America, and entering access code 2708898.
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 is structured as a publicly-traded master limited partnership and owns interests in 36 shuttle tankers (including four chartered-in vessels and four committed newbuildings), four floating production, storage and offloading (FPSO) units, six floating storage and offtake (FSO) units (including one committed FSO conversion unit) and six conventional oil tankers. The majority of Teekay Offshore–s fleet is employed on long-term, stable contracts. In addition, 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 Bors: SEVAN).
Teekay Offshore–s common units trade on the New York Stock Exchange under the symbol “TOO.”
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.
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 installments, vessel acquisition costs, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, non-cash income taxes, loss on bond repurchase 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 quarters ended March 31, 2013 and March 31, 2012, respectively.
Description of Non-GAAP Financial Measure – Net Revenues
Net revenues represents revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies, however, it is not required by GAAP and should not be considered as an alternative to revenues or any other indicator of the Partnership–s performance required by GAAP.
Description of Non-GAAP Financial Measure – Cash Flow from Vessel Operations
Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense and amortization of in-process revenue contracts and write-down of vessel, but includes the realized gains (losses) on the settlement of foreign exchange forward contracts, cash flow from discontinued operations and adjusting for direct financing leases to a cash basis. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Cash flow from vessel operations is not required 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.
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: factors affecting the future growth of the Partnership–s distributable cash flow and adjusted net income, including expected contributions from the Voyageur Spirit FPSO, the shuttle tanker newbuildings expected to deliver in 2013 and the Partnership–s potential acquisition of a 50 percent interest in the Cidade de Itajai FSPO; the timing and certainty of the Partnership–s acquisition of a 50 percent interest in the Cidade de Itajai FPSO; the timing and certainty of the Partnership–s acquisition of a HiLoad DP unit from Remora and timing of the commencement of its 10-year time-charter contract with Petroleo Brasileiro SA; the potential for the Partnership to acquire future HiLoad projects developed by Remora; the timing of and cost of converting the Navion Clipper into an FSO unit and the timing of the commencement of its 10-year charter contract with Salamander; the potential for Teekay Corporation to offer additional vessels to the Partnership and the Partnership–s acquisition of any such vessels, including the Petrojarl Foinaven, the Hummingbird Spirit and the newbuilding FPSO unit that will service the Knarr field under contract with BG Norge Limited; the timing of delivery of vessels under construction or conversion; the timing, amount and certainty of future increases to the Partnership–s quarterly cash distribution, including the intention to increase the Partnership–s cash distribution by at least another 2.5 percent later in 2013; and the potential for the Partnership to acquire other vessels or offshore projects from Teekay Corporation 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; potential delays to the commencement of the BG shuttle tanker time-charters; failure of Teekay Corporation to offer to the Partnership additional vessels; the inability of the joint venture between Teekay Corporation and Odebrecht to secure new Brazil FPSO projects that may be offered for sale to the Partnership; the inability of Remora to develop future HiLoad DP units; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore–s general partner to approve the acquisition of vessels offered from Teekay Corporation, including the Cidade de Itajai FPSO, 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, 2012. 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