HAMILTON, BERMUDA — (Marketwire) — 02/21/13 — 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 December 31, 2012. During the fourth quarter of 2012, the Partnership generated distributable cash flow(1) of $45.9 million, compared to $41.6 million in the same period of the prior year.
On January 18, 2013, a cash distribution of $0.5125 per common unit was declared for the quarter ended December 31, 2012. The cash distribution was paid on February 14, 2013 to all unit-holders of record on February 4, 2013.
“We are pleased to be able to broaden our offshore loading service offering with the intended acquisition of Remora–s HiLoad DP unit and the associated omnibus agreement with Remora, which provides the Partnership with another potential avenue of growth,” commented Peter Evensen, Teekay Offshore GP LLC–s Chief Executive Officer. Mr. Evensen continued, “As part of our current fleet renewal process, during the past several quarters, the Partnership has sold a number of its older conventional tankers and shuttle tankers, which has resulted in a reduction in our cash flow from vessel operations. However, the bulk of the current fleet renewal process is completed and the cash flows from our upcoming fully-financed acquisition of the Voyageur Spirit FPSO and the delivery of the four newbuilding shuttle tankers to BG will more than offset the reduction in cash flows from the sale of our older vessels. In addition, if finalized, the new FSO project in Asia will enable us to successfully extend the life of one of our remaining older shuttle tankers under a long-term fixed-rate contract. As a result, despite the delay to the acquisition of the Voyageur Spirit FPSO to March 2013, we still intend to increase the Partnership–s first quarter distribution to be paid in May 2013.”
Mr. Evensen continued, “We believe the Partnership is well-positioned to continue growing its distributable cash flow through FPSO acquisition opportunities from Teekay Corporation, new organic offshore projects and third-party acquisitions. Notably, the Cidade de Itajai FPSO, which is 50 percent owned by Teekay, commenced oil production for Petrobras in Brazil last week and we are also currently pursuing several large FSO projects in the North Sea.”
Summary of Recent Transactions
In November 2012, the Partnership agreed to acquire a 2010-built HiLoad Dynamic Positioning (DP) unit from Remora AS, a Norway-based offshore marine technology company, for a total purchase price of approximately $55 million, including modification costs. The HiLoad DP unit is a self-propelled dynamic positioning system that attaches to and keeps conventional tankers in position when loading from offshore installations. The transaction is subject to finalizing a 10-year time-charter contract with Petroleo Brasileiro SA (Petrobras) in Brazil. The acquisition of the HiLoad DP unit is expected to be completed in the second quarter of 2013 and the unit is expected to commence operating at its full time-charter rate in early 2014 once modifications, delivery of the DP unit to Brazil, and operational testing have been completed. As part of the transaction, Teekay Corporation (Teekay) has also agreed to invest approximately $4.4 million to acquire a 49.9 percent ownership interest in a recapitalized Remora. In addition, Teekay Offshore will enter into an omnibus agreement with Remora which will provide the Partnership with the right of first refusal to acquire future HiLoad projects developed by Remora.
In January 2013, the Partnership issued NOK 1,300 million in new senior unsecured bonds in the Norwegian bond market, issued in two tranches that mature in January 2016 (NOK 500 million) and January 2018 (NOK 800 million). The aggregate principal amount of the bonds is equivalent to approximately USD 233 million and all payments under the two tranches have been swapped into US dollars, at fixed interest rates of 4.80 percent for the tranche maturing in January 2016 and 5.93 percent for the tranche maturing in January 2018. In connection with the new issuances, the Partnership repurchased NOK 388.5 million of its existing NOK 600 million bonds maturing in November 2013. The net proceeds of approximately USD 167 million from the new bond issuance and repurchase of existing notes were used to reduce amounts outstanding under Teekay Offshore–s revolving credit facilities and for general corporate purposes. The Partnership will apply for listing the new bonds on the Oslo Stock Exchange.
In January 2013, the Partnership signed a letter of intent with Salamander Energy plc to supply a floating storage and offtake (FSO) unit in Asia for a firm charter period of 10 years commencing in mid-2014. The Partnership intends to convert its existing 1993-built shuttle tanker, the Navion Clipper, to an FSO for an estimated cost of approximately $50 million. The Partnership is in the process of finalizing the contract terms with the charterer.
Teekay Offshore–s Fleet
The following table summarizes Teekay Offshore–s fleet as of February 1, 2013.
In January 2013, Teekay Offshore sold a 1992-built conventional tanker, the Leyte Spirit, and a 1992-built shuttle tanker, the Basker Spirit, to third party buyers for total net proceeds of $13.3 million.
In December 2012, Teekay Offshore sold a 1992-built conventional tanker, the Luzon Spirit, and a 1994-built conventional tanker, the Torben Spirit, to third party buyers for total net proceeds of $12.7 million.
In November 2012, Teekay Offshore sold a 1992-built shuttle tanker, the Navion Savonita, to a third party buyer for total net proceeds of $6.1 million.
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, 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 also 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 contracts with BG also include certain extension options and vessel purchase options.
As discussed above, the Partnership has agreed to acquire a 2010-built HiLoad DP unit from Remora AS for approximately $55 million, including modification costs. The acquisition is subject to finalizing a 10-year time-charter contract with Petrobras, which is expected to commence in early 2014. Under the terms of an omnibus agreement between Remora and Teekay Offshore, the Partnership has the right of first refusal to acquire any future HiLoad projects developed by Remora.
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 agreed to acquire the Voyageur Spirit FPSO unit, which is currently expected to occur in the first quarter of 2013. In the third quarter of 2012, Teekay Offshore agreed to acquire the Voyageur Spirit FPSO unit from Teekay for $540 million upon commencement of the unit–s charter contract with E.ON. 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 would be its fair market value plus any additional tax or other costs incurred by Teekay to transfer ownership of this FPSO unit to the Partnership.
In October 2010, Teekay signed a long-term contract with Petrobras to provide an FPSO unit for the Tiro and Sidon fields located in the Santos Basin offshore Brazil. The contract with Petrobras is being serviced by a newly-converted FPSO unit named Cidade de Itajai in which Teekay owns a 50 percent interest. This FPSO unit delivered from the shipyard in mid-November 2012 and achieved first oil in mid-February 2013, at which time the unit commenced 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 Cidade de Itajai 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 second 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 $29.1 million for the quarter ended December 31, 2012, compared to $22.3 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 increasing net income by $39.6 million and decreasing net income by $63.5 million for the quarters ended December 31, 2012 and December 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 $68.7 million for the fourth quarter of 2012, compared to a net loss of $41.2 million in the same period of the prior year. Net revenues(2) for the fourth quarter of 2012 increased to $211.4 million, compared to $196.5 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 $100.1 million for the year ended December 31, 2012, compared to $102.2 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 increasing net income by $22.8 million and decreasing net income by $206.4 million for the year ended December 31, 2012 and December 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 $123.0 million for the year ended December 31, 2012, compared to a net loss of $104.3 million in the same period of the prior year. Net revenues(2) for the year ended December 31, 2012 increased to $810.0 million, compared to $767.1 million in the prior year.
For accounting purposes, the Partnership is required to recognize, through the consolidated statements of income (loss), 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 C for further details).
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership–s Shuttle Tanker segment increased slightly to approximately $58.5 million for the fourth quarter of 2012 compared to $58.2 million for the same period of the prior year, due to decreases in vessel operating expenses and time-charter hire expense, partially offset by lower net revenues. Vessel operating expenses decreased due to the sale of two 1992-built shuttle tankers, the Navion Fennia and Navion Savonita in the second and fourth quarter of 2012, respectively, and the lay-up of the shuttle tanker Navion Torinita upon expiration of its time-charter contract in the second quarter of 2012. Time-charter hire expense decreased due to the redelivery of one in-chartered vessel in the fourth quarter of 2011. Net revenues decreased due to the lay-up of the Navion Torinita and the sale of the Navion Savonita, partially offset by increased revenue from the acquisition of the volatile organic compound (VOC) abatement equipment from Teekay, which included catch up revenue of $4.0 million relating to voyages prior to the fourth quarter of 2012.
FPSO Segment
Cash flow from vessel operations from the Partnership–s FPSO segment increased to $24.5 million for the fourth quarter of 2012 compared to $20.9 million for the same period of the prior year, primarily due to the acquisition of the Piranema Spirit FPSO unit on November 30, 2011.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership–s Conventional Tanker segment decreased to $9.2 million in the fourth quarter of 2012 compared to $14.7 million for the same period of the prior year, primarily due to the sale of the 1997-built Hamane Spirit in the second quarter of 2012, the sale of the 1994-built Torben Spirit and the 1992-built Luzon Spirit in the fourth quarter of 2012, and the lay-up of the Leyte Spirit commencing during the second quarter of 2012. For accounting purposes, the results of the Conventional Tanker segment exclude five tankers that have been determined to constitute discontinued operations; however, the results of these five tankers are included in the Conventional Tanker segment–s cash flow from vessel operations.
FSO Segment
Cash flow from vessel operations from the Partnership–s FSO segment decreased to $5.6 million in the fourth quarter of 2012 compared to $7.9 million for the same period of the prior year, primarily as a result of costs incurred for business development and engineering studies relating to two North Sea FSO projects that the Partnership is currently pursuing.
Liquidity
As of December 31, 2012, the Partnership had total liquidity of $419.8 million, which consisted of $206.3 million in cash and cash equivalents and $213.5 million in undrawn revolving credit facilities. The Partnership–s liquidity balance as of December 31, 2012 increased on a pro forma basis by approximately $167 million to $587 million giving effect to the NOK 1,300 million Norwegian bond offering completed in January 2013 net of the repurchase of NOK 388.5 million of bonds that mature in November 2013 at a price of 102.5 percent of the principal amount. The Partnership intends to use approximately $170 million of this liquidity to complete the acquisition of the Voyageur Spirit FPSO unit, which is expected to be completed in March 2013.
Conference Call
The Partnership plans to host a conference call on Friday, February 22, 2013 at noon (ET) to discuss the results for the fourth quarter and fiscal year 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:
A supporting Fourth Quarter and Fiscal Year 2012 Earnings Presentation will also be available at in advance of the conference call start time.
The conference call will be recorded and made available until Friday March 1, 2013. 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 4374144.
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 37 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 six 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). In addition, the Partnership has agreed to acquire the Voyageur Spirit FPSO unit from Teekay Corporation upon commencement of its charter contract. Teekay Offshore–s operating fleet primarily operates under long-term, stable contracts and Teekay Offshore 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 income (loss) 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 (loss) 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 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 income (loss) for the quarters ended December 31, 2012 and December 31, 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: factors affecting the Partnership–s future growth prospects and stability of its distributable cash flow, including the timing of the acquisition of the Voyageur Spirit FPSO from Teekay; the impact of the Voyageur Spirit FPSO acquisition and BG shuttle tanker newbuildings on the Partnership–s cash flows; the potential acquisition of a HiLoad Dynamic Positioning unit from Remora AS and associated 10-year time-charter contract with Petroleo Brasileiro SA; the potential for the Partnership to acquire future HiLoad projects developed by Remora AS; the potential conversion of the Navion Clipper into an FSO and associated 10-year charter contract; 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 Cidade de Itajai, 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 and amount of future increases to the Partnership–s quarterly cash distribution, including the cash distribution for the first quarter of 2013 to be paid in May 2013; preliminary results of discontinued operation; 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; potential delays to the commencement of the Voyageur Spirit FPSO charter contract or the BG time charters; 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; 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 acquire other vessels or offshore projects from Teekay or third parties; the Partnership–s ability to raise adequate financing to purchase additional assets; finalization of the time-charter contract relating to the HiLoad DP unit and of negotiations and documentation relating to the proposed FSO project; 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