HAMILTON, BERMUDA — (Marketwire) — 08/11/11 — Teekay Offshore Partners L.P. (NYSE: TOO) –
Highlights
Teekay Offshore GP L.L.C., 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, 2011. During the second quarter of 2011, the Partnership generated distributable cash flow(1) of $42.6 million, compared to $28.1 million in the same period of the prior year.
On July 22, 2011, the Partnership declared a cash distribution of $0.50 per unit for the quarter ended June 30, 2011. The cash distribution is payable on August 12, 2011 to all unitholders of record on August 5, 2011.
“The Partnership–s strong second quarter cash flow reflects the full quarter benefit of our acquisition of the remaining 49 percent interest in Teekay Offshore Operating L.P. in March 2011,” commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. “The fundamentals for deepwater offshore oil production, storage and transportation continue to be favorable and we are encouraged by the high level of recent tendering activity in the sector. Our business development efforts have been yielding results and recently resulted in the award of a new long-term shuttle tanker contract from a subsidiary of BG Group plc in Brazil. This contract will be serviced by four newbuilding shuttle tankers, scheduled to deliver in mid- to late-2013.”
Mr. Evensen added, “Our sponsor, Teekay Corporation, was recently awarded a significant new North Sea FPSO contract also with BG. This is positive for our future cash flow growth as the newbuilding FPSO unit should become eligible to be acquired by Teekay Offshore once operations under its charter contract commence in early 2014. In addition to our ability to secure projects or acquire vessels directly from third parties, the Partnership–s sponsor, Teekay Corporation, also provides us with an important pipeline of future growth opportunities.”
(1) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B for a reconciliation of distributable cash flow to the most directly comparable financial measure under U.S. generally accepted accounting principles (GAAP).
Summary of Recent Transactions
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. As previously announced, the contract with BG will be serviced by four Suezmax newbuilding shuttle tankers to be constructed by Samsung Heavy Industries for a total delivered cost of approximately $480 million. Upon their scheduled delivery in mid- to late-2013, the vessels will commence operations under ten-year, fixed-rate time-charter contracts. The contract with BG also includes certain extension options and vessel purchase options.
During July 2011, the Partnership sold 0.7 million common units through a private placement for net proceeds of $20.4 million (including the general partner–s contribution). The net proceeds from the offering were used to partially finance the shipyard installments for the four Suezmax newbuilding shuttle tankers.
Teekay Offshore–s Fleet
The following table summarizes Teekay Offshore–s fleet as of August 10, 2011.
In early August 2011, the Partnership sold its 1993-built conventional Aframax tanker, the Scotia Spirit, to a third party buyer for net proceeds of $8.3 million. As a result of the early termination of the time-charter for this vessel, the Partnership will receive a termination fee of $2.1 million in the third quarter of 2011.
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, FSO units, floating production, storage and offloading (FPSO) units and joint ventures it may acquire in the future, provided the vessels are servicing contracts with remaining durations of three years or greater. The Partnership may also acquire other vessels that Teekay may offer it from time to time.
Shuttle Tankers
Teekay Offshore recently acquired two Aframax shuttle tanker newbuildings (the Amundsen Spirit and the Nansen Spirit) and committed to acquire one additional Aframax shuttle tanker newbuilding (the Peary Spirit) that delivered to the Partnership in early August 2011. Teekay is obligated to offer the Partnership a fourth shuttle tanker newbuilding (the Scott Spirit) within 365 days after its delivery, provided the vessel is servicing a charter contract with remaining durations of three years or greater.
FPSO Units
Pursuant to the omnibus agreement and a subsequent agreement, Teekay is obligated to offer to sell the Petrojarl Foinaven FPSO unit, an existing FPSO unit, which is 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 at 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 Petrobras to provide a 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. The new FPSO unit is scheduled to deliver in mid-2012, when it will commence operations under a nine-year, fixed-rate time-charter contract to 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 365 days 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 which, pursuant to the omnibus agreement, may result in the future sale of new FPSO units to the Partnership.
In June 2011, Teekay entered into a new contract with BG Norge Limited to provide a harsh weather FPSO unit for the Knarr oil and gas field located in the North Sea. The contract will be serviced by a newly-built 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 365 days after the commencement of the charter, which is expected to be during the first quarter of 2014.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(2) (as detailed in Appendix A to this release) of $26.2 million for the quarter ended June 30, 2011, compared to $18.9 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 $37.5 million and $21.7 million for the quarters ended June 30, 2011 and 2010, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net loss attributable to the partners of $11.4 million for the second quarter of 2011, compared to a net loss of $2.8 million in the same period of the prior year. Net revenues(3) for the second quarter of 2011 increased to $201.6 million compared to $191.9 million in the same period of the prior year.
The Partnership reported adjusted net income attributable to the partners(2) (as detailed in Appendix A to this release) of $48.3 million for the six months ended June 30, 2011, compared to $39.0 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 $36.2 million and $27.0 million for the six months ended June 30, 2011 and 2010, respectively, as detailed in Appendix A. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $12.0 million for the six months ended June 30, 2011 and 2010. Net revenues(3) for the six months ended June 30, 2011 increased to $409.9 million compared to $390.5 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.
The Partnership has recast its historical financial results to include the results of the Falcon Spirit FSO unit and the Cidade de Rio das Ostras (Rio das Ostras) FPSO unit relating to the periods prior to their acquisition by the Partnership from Teekay, and for which pre-acquisition results are referred to in this release as the Dropdown Predecessor. In accordance with GAAP, business acquisitions of entities under common control that have begun operations are required to be accounted for in a manner whereby the Partnership–s financial statements are retroactively adjusted to include the historical results of the acquired vessels from the date the vessels were originally under the control of Teekay. For these purposes, the Falcon Spirit was under common control by Teekay from December 15, 2009 until April 1, 2010, when it was sold to the Partnership and the Rio das Ostras FPSO unit was under common control by Teekay from April 1, 2008 to October 1, 2010, when it was sold to the Partnership.
On October 1, 2010, Teekay Offshore agreed to acquire Teekay–s interest in the newbuilding shuttle tanker Peary Spirit. Prior to its acquisition by the Partnership, this entity is considered a variable interest entity for accounting purposes. As a result, the Partnership–s consolidated financial statements include the financial position, operating results and cash flow contribution of the Peary Spirit subsequent to October 1, 2010. The Peary Spirit was acquired by the Partnership in early August 2011.
(2) Adjusted net income attributable to the partners is a non-GAAP financial measure. Please refer to Appendix A included in this release for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under GAAP and information about specific items affecting net income that are typically excluded by securities analysts in their published estimates of the Partnership–s financial results.
(3) 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. Please see the Partnership–s web site at for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.
Operating Results
The following table highlights certain financial information for Teekay Offshore–s four main 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 decreased to $44.6 million for the second quarter of 2011 compared to $49.3 million for the same period of the prior year, primarily due to higher vessel operating expenses mainly relating to higher crewing and repairs and maintenance costs, the termination of the time-charter of the Basker Spirit in the first quarter of 2011, and lower revenue as a result of fewer revenue days from vessels operating under contracts of affreightment. This was partially offset by an increase in revenues due to the September 2010 amended master agreement with Statoil, which includes the contribution from the two newbuilding shuttle tankers, the Amundsen Spirit and Nansen Spirit (which were acquired during the fourth quarter of 2010) and lower time-charter hire expense due to the redelivery of two in-chartered vessels.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership–s conventional tanker segment increased to $24.1 million in the second quarter of 2011 compared to $14.8 million for the same period of the prior year, primarily due to higher than normal net bunker revenues as a result of increases in bunker prices and a decrease in the number of off-hire days due to scheduled drydocking days.
FSO Segment
Cash flow from vessel operations from the Partnership–s FSO segment decreased to $6.5 million in the second quarter of 2011 compared to $9.4 million for the same period of the prior year, primarily due to the sale of the Karratha Spirit FSO unit during the first quarter of 2011, and a lower charter rate for the Navion Saga that took effect in the second quarter of 2010 in accordance with its charter contract.
FPSO Segment
Cash flow from vessel operations from the Partnership–s FPSO segment increased to $20.0 million for the second quarter of 2011 compared to $15.5 million for the same period of the prior year, primarily due to the acquisition of the Rio das Ostras FPSO unit in October 2010, partially offset by higher vessel operating expenses.
Liquidity
As of June 30, 2011, the Partnership had total liquidity of $294.0 million, which consisted of $158.6 million in cash and cash equivalents and $135.4 million in undrawn revolving credit facilities.
Conference Call
The Partnership plans to host a conference call on August 12, 2011 at 1:00 p.m. (ET) to discuss its results for the second quarter of 2011. An accompanying investor presentation will be available on Teekay Offshore–s website at prior to the start of the call. All shareholders 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 available until August 19, 2011. 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 4969510.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK), is an international provider of marine transportation, oil production and storage services to the offshore oil industry. Teekay Offshore owns 40 shuttle tankers (including five chartered-in vessels and four committed newbuildings), five FSO units, 10 conventional oil tankers, and two FPSO units. Teekay Offshore also has rights to participate in certain other FPSO and shuttle tanker opportunities provided by its sponsor, Teekay Corporation.
Teekay Offshore–s common units trade on the New York Stock Exchange under the symbol “TOO”.
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 prospects, cash flows and distributions to unitholders; the timing of delivery of the four newbuilding shuttle tankers and expected future increase in the Partnership–s distributable cash flow as a result of the new long-term contract with BG in Brazil; 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 FPSO unit, the Petrojarl Cidade de Itajai FPSO unit, the Scott Spirit newbuilding Aframax shuttle tanker, 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 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; variability in shuttle tanker tonnage requirements under the Statoil master agreement; different-than-expected levels of oil production in the North Sea offshore fields; potential early termination of contracts, including the Rio das Ostras FPSO time-charter contract and the Statoil master agreement; 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 to acquire other vessels or offshore projects from from Teekay or third parties; the Partnership–s ability to raise financing for the BG newbuilding shuttle tankers and/or to purchase additional assets; failure to secure a new contract in excess of three years for the Scott Spirit shuttle tanker newbuilding; 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, 2010. 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