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Teekay Offshore Partners LP Message Board

  • FauxCow FauxCow Nov 17, 2010 4:43 PM Flag

    C on TOO

    Teekay Offshore Partners LP (TOO)
    Bumping Distribution Estimate & Target, Expect Strong 4Q After
    3Q Maintenance Season, Buy
     Increasing Distribution Est. — We are increasing our 2012 distribution est. to
    $2.18 ($2.10 previously), but believe that there could be additional upside as we
    estimate recent transactions are ~6% accretive. TOO recently completed the
    acquisition of the Rio Das Ostras FPSO for $158 mil, while OPCO acquired a
    shuttle tanker for $128 mil with plans to acquire two more shuttle tankers for
    ~$260 mil in 2011. Along with a strengthening shuttle tanker market these
    transactions should support distribution increases over the next 12 to 18 months.
     Growth Opportunities — Further growth opportunities for TOO include additional
    drop-downs of new build shuttle tankers, FPSOs, and/or additional ownership of
    OPCO. Currently TOO's GP has three FPSOs operating outside of TOO and a fourth
    one that will be delivered in early 2012.
     Improvement Expected — TOO reported 3Q:10 results that were only slightly below
    our est. but ahead of the street cons. Adjusted EBITDA of $78.4 mil was ~1.3%
    lower than our $79.4 mil est. and 4.4% higher than the consensus est. of $75.1
    mil. DCF of $20.8 mil covered distribution by 0.92x. Low coverage for the quarter
    was the result of seasonal maintenance activity and we expect 4Q performance to
    be significantly better on higher fleet utilization and lower expenses. TOO kept its
    quarterly distribution at $0.475/unit ($1.90/unit annualized) up 5.6% y-o-y.
     Maintain Buy, TP To $31.50 — We are maintaining our Buy/High Risk rating and
    increasing the TP to $31.50. Our TP is based on the assumption that TOO will be
    able to raise distributions to an annualized rate of $2.20/unit over the next 12
    months and that the units should trade at a 7.00% yield (8.00% previously). Our
    reduced yield expectation is based on the current low interest rate environment,
    which has driven strong fund flows into midstream MLPs.

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