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.
HAMILTON, BERMUDA--(Marketwire - 08/16/10) - Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO - News) announced today that it plans to offer 5,000,000 common units, representing limited partner interests, in a public offering. Teekay Offshore expects to grant the underwriters a 30-day option to purchase an additional 750,000 common units to cover over-allotments, if any. The Partnership expects to use the net proceeds from the public offering for general partnership purposes, including funding the acquisitions of vessels that Teekay Corporation may offer to it. Pending the application of funds for these purposes, the Partnership expects to repay a portion of its outstanding debt under
Thanks for the post FauxCow. I have been a TOO buyer since early Sept. @ $22.41. It appears that Management is making strategic plays to capitalize on the NG/NGL phenomenon that we are currently witnessing.