HAMILTON, BERMUDA — (Marketwire) — 08/09/12 — 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) (NYSE: TOO), today reported the Partnership–s results for the quarter ended June 30, 2012. During the second quarter of 2012, the Partnership generated distributable cash flow(1) of $54.2 million, compared to $42.6 million in the same period of the prior year.
On July 13, 2012, a cash distribution of $0.5125 per common unit was declared for the quarter ended June 30, 2012. The cash distribution is payable on August 10, 2012 to all unit holders of record on July 25, 2012.
“The Partnership–s second quarter distributable cash flow was up 27 percent from the same quarter last year due primarily to higher revenues, including a $14.7 million charter termination fee received from Teekay Corporation, and lower operating and time-charter-in costs, as well as accretive acquisitions completed over the past year,” commented Peter Evensen, Teekay Offshore GP LLC–s Chief Executive Officer. “The extension of the Petrojarl Varg FPSO unit time-charter for an additional three years further enhances the Partnership–s cash flow stability and with several FPSO assets soon to be available for purchase from Teekay Corporation, the Partnership is also well-positioned for visible cash flow growth over the next several years. This includes an offer from Teekay Corporation to the Partnership to purchase the Voyageur Spirit FPSO unit, which offer was received in June and is currently being reviewed by the Conflicts Committee of the Partnership–s Board of Directors.”
“Furthermore, construction of the Partnership–s four newbuilding shuttle tankers is on schedule,” Mr. Evensen added. “Proceeds from the Partnership–s recently completed $46 million equity private placement will be used to partially finance upcoming shipyard installment payments on these vessels, which are expected to deliver from the shipyard between April and October 2013.”
Teekay Offshore–s Fleet
The following table summarizes Teekay Offshore–s fleet as of August 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 Corporation (Teekay) is obligated to offer to the Partnership its interest in certain shuttle tankers, floating storage and offtake (FSO) units and floating, production, storage and offloading (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 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). In June 2012, Teekay formally offered to sell the Voyageur Spirit FPSO unit to Teekay Offshore at fair market value and the offer is currently being reviewed by the Conflicts Committee of the Partnership–s Board of Directors. Pursuant to the omnibus agreement, Teekay is obligated to offer the Hummingbird Spirit FPSO unit to Teekay Offshore within approximately one year following commencement of a charter contract 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, 2013. 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 Cidade de Itajai. This FPSO unit is scheduled to deliver from the shipyard in the third quarter of 2012 and arrive in Brazilian waters in the fourth quarter of 2012, at 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 its 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 $20.6 million for the quarter ended June 30, 2012, compared to $26.2 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 decreasing net income by $32.8 million and $37.5 million for the quarters ended June 30, 2012 and June 30, 2011, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net loss attributable to the partners of $12.1 million for the second quarter of 2012, compared to $11.4 million in the same period of the prior year. Net revenues(2) for the second quarter of 2012 increased to $213.4 million, compared to $201.6 million in the same period of the prior year.
The Partnership reported adjusted net income attributable to the partners(1) (as detailed in Appendix A to this release) of $46.7 million for the six months ended June 30, 2012, compared to $48.3 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 decreasing net income by $6.2 million and $36.2 million for the six months ended June 30, 2012 and June 30, 2011, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $40.5 million for the six months ended June 30, 2012, compared to $12.0 million in the same period of the prior year. Net revenues(2) for the six months ended June 30, 2012 increased to $421.5 million, compared to $409.9 million in the same period of the prior year.
For accounting purposes, the Partnership is required to recognize, through the consolidated statements of (loss) 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 $54.3 million for the second quarter of 2012 compared to $44.6 million for the same period of the prior year, primarily due to decreases in vessel operating expenses and time-charter hire expense. Vessel operating expenses decreased due to lower repairs and maintenance and crewing costs, and due to the lay-ups of the shuttle tankers Navion Torinita and Basker Spirit commencing in the second quarter of 2012 and the third quarter of 2011, respectively. Time-charter hire expense decreased due to the redelivery of one in-chartered vessel in the fourth quarter of 2011 and fewer short-term chartered-in days.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership–s Conventional Tanker segment increased to $25.2 million in the second quarter of 2012 compared to $24.1 million for the same period of the prior year. In June 2012, the Partnership sold a 1997-built conventional Aframax tanker to a third party buyer for net proceeds of $8.7 million. As a result of the early termination of the time-charter for this vessel, the Partnership received a termination fee of $14.7 million from Teekay the charterer of the vessel. This is partially offset by the expiry of time-charter contracts on two conventional tankers during the fourth quarter of 2011, which are currently laid up, and the sale of a conventional Aframax tanker, the Scotia Spirit in the third quarter of 2011.
FSO Segment
Cash flow from vessel operations from the Partnership–s FSO segment increased to $8.0 million in the second quarter of 2012 compared to $6.5 million for the same period of the prior year, primarily due to a decrease in vessel operating expenses as a result of a decrease in the consumption and use of consumables.
FPSO Segment
Cash flow from vessel operations from the Partnership–s FPSO segment increased to $22.3 million for the second quarter of 2012 compared to $20.0 million for the same period of the prior year, primarily due to the acquisition of the Piranema Spirit FPSO unit on November 30, 2011. Vessel operating expenses for the Piranema Spirit FPSO unit in the second quarter of 2012 includes additional maintenance costs from a scheduled shutdown.
Liquidity
As of June 30, 2012, the Partnership had total liquidity of $327.5 million, which consisted of $179.5 million in cash and cash equivalents and $148.0 million in undrawn revolving credit facilities. Following the $45.9 million private placement completed in July 2012, the Partnership had total liquidity of $373.4 million.
Conference Call
The Partnership plans to host a conference call on Friday, August 10, 2012 at noon (ET) to discuss its results for the second 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:
– By dialing (866) 322-8032 or (416) 640-3406, if outside North America, and quoting conference ID code 4125062.
– By accessing the webcast, which will be available on Teekay Offshore–s website at (the archive will remain on the website for a period of 30 days).
The conference call will be recorded and made available until Friday August 17, 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 4125062.
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 nine 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 Bors: SEVAN). The Partnership has recently received an offer from Teekay Corporation to acquire the Voyageur Spirit FPSO unit which offer is currently being reviewed by the Conflicts Committee of the Partnership–s Board of Directors. 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”.
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 (loss) 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 loss 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 loss or any other indicator of the Partnership–s performance required by GAAP. The table below reconciles distributable cash flow to net loss for the quarters ended June 30, 2012 and June 30, 2011, respectively.
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 future growth and stability of the Partnership–s distributable cash flow; 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 Hummingbird Spirit and the newbuilding FPSO unit that will service the Knarr field under contract with BG Norge Limited; the potential for the Partnership to accept Teekay–s offer of the Voyageur Spirit FPSO unit; the timing of delivery of vessels under construction or conversion; 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, including the Voyageur Spirit FPSO unit; 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