HAMILTON, BERMUDA--(Marketwire -02/23/12)- Teekay Offshore Partners L.P. (NYSE: TOO - News) -
Highlights
-- Generated distributable cash flow(1) of $41.6 million in the fourth
quarter of 2011, up approximately 55 percent from the same period of the
prior year.
-- Paid cash distribution of $0.50 per unit for the fourth quarter of 2011.
-- Completed acquisitions of the Piranema Spirit FPSO unit from Sevan
Marine ASA and the Scott Spirit shuttle tanker from Teekay Corporation
in November and October 2011, respectively.
-- Current liquidity of approximately $430 million including proceeds from
a Norwegian bond offering completed in January 2012 and a new $130
million debt facility secured by the Piranema Spirit FPSO completed in
February 2012.
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO - News), today reported the Partnership's results for the quarter ended December 31, 2011. During the fourth quarter of 2011, the Partnership generated distributable cash flow(1) of $41.6 million, compared to $26.9 million in the same period of the prior year. The increase is mainly related to the Partnership's acquisition from Teekay Corporation (Teekay) of the remaining 49 percent interest in Teekay Offshore Operating L.P. (OPCO) in March 2011, the acquisition of the Cidade de Rio Das Ostras floating production storage and offloading (FPSO) unit in October 2010, the acquisition of three newbuilding shuttle tankers since December 2010 and the acquisition of the Piranema Spirit FPSO on November 30, 2011.
On January 19, 2012, a cash distribution of $0.50 per common unit was declared for the quarter ended December 31, 2011. The cash distribution was paid on February 14, 2012, to all unitholders of record on February 1, 2012.
"The Partnership reported another quarter of strong operating results," commented Peter Evensen, Teekay Offshore GP LLC's Chief Executive Officer. "In particular, during the fourth quarter we were successful in reducing our operating expenses despite adding new vessels to our fleet. The completion of the Piranema Spirit FPSO acquisition from Sevan Marine and the acquisition of the Scott Spirit shuttle tanker from Teekay Corporation will add to the Partnership's large portfolio of fixed-rate cash flows." Mr. Evensen continued, "We have also been successful in further enhancing the Partnership's liquidity through the issuance of another unsecured Norwegian bond offering in January 2012 and the completion of a new debt facility secured by the Piranema Spirit FPSO in February 2012. With approximately $430 million of liquidity, the Partnership is well-positioned to take advantage of further growth opportunities that may be presented to us in the near future, including FPSO units which may be offered by our sponsor, Teekay Corporation."
(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 United States generally accepted accounting principles (GAAP).
Summary of Recent Transactions
In late January 2012, the Partnership issued in the Norwegian bond market NOK 600 million in senior unsecured bonds that mature in January 2017. The aggregate principal amount of the bonds is equivalent to approximately 100 million U.S. dollars (USD) and all interest and principal payments have been swapped into USD and fixed at an interest rate of 7.49%. The proceeds of the bonds have been used to reduce amounts outstanding under the Partnership's revolving credit facilities and for general partnership purposes. The Partnership will apply for listing of the bonds on the Oslo Stock Exchange.
On November 30, 2011, in connection with Teekay's previously-announced transaction to acquire FPSO units from Sevan Marine ASA (Sevan), the Partnership completed the acquisition of the Piranema Spirit FPSO unit directly from Sevan for $165 million, which was financed through a $170 million equity private placement. The 2007-built Piranema Spirit FPSO is currently operating under a long-term charter to Petrobras S.A. (Petrobras) on the Piranema field located offshore Brazil. The charter includes a firm contract period through March 2018, with up to 11 one-year extension options and includes cost escalation clauses.
On October 1, 2011, the Partnership completed the acquisition from Teekay of another newbuilding shuttle tanker, the Scott Spirit, for a cost of $116 million, including $93.3 million of debt which was assumed by Teekay Offshore. The purchase price is subject to adjustment for up to an additional $12 million based upon incremental shuttle tanker revenues secured during the two years following the acquisition.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of February 1, 2012.
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Number of Vessels
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Owned Chartered- Committed
Vessels in Vessels Newbuildings Total
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Shuttle Tanker Segment 32(i) 4 4(ii) 40
Conventional Tanker Segment 10 - - 10
FSO Segment 5 - - 5
FPSO Segment 3 - - 3
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Total 50 4 4 58
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(i) Includes six shuttle tankers in which Teekay Offshore's interest is 50
percent and three shuttle tankers in which Teekay Offshore's ownership
is 67 percent.
(ii) Includes four shuttle tanker newbuildings expected to deliver in mid-
to late-2013 and commence operations under contracts with a subsidiary
of BG Group plc in Brazil.
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, floating storage and offtake (FSO) units and 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 or third parties may offer it from time to time.
Shuttle Tankers
In June 2011, the Partnership entered into a new long-term contract with a subsidiary of BG Group plc to provide shuttle tanker services in Brazil. The contract with BG will be serviced by four Suezmax newbuilding shuttle tankers to be constructed by Samsung Heavy Industries for an estimated total delivered cost of approximately $470 million. Upon their scheduled delivery 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 the Hummingbird Spirit FPSO (which is currently operating under a short-term charter contract), and has agreed to acquire the Voyageur Spirit FPSO upon the completion of certain upgrades that are currently expected to be completed in the third quarter of 2012. Both FPSO units would be eligible pursuant to the omnibus agreement to be acquired by Teekay Offshore within approximately a year following commencement of charter contracts 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, 2012. 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 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. This 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, 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 harsh weather 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 365 days after the commencement of the charter, which is expected to commence 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 $22.3 million for the quarter ended December 31, 2011, compared to $13.8 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 loss by $63.5 million and increasing net income by $36.2 million for the quarters ended December 31, 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 $41.2 million for the fourth quarter of 2011, compared to net income attributable to the partners of $50.0 million in the same period of the prior year. Net revenues(3) for the fourth quarter of 2011 increased to $205.1 million compared to $203.1 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 $102.2 million for the year ended December 31, 2011, compared to $65.3 million for the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net loss by $206.4 million and decreasing net income by $7.1 million for the year ended December 31, 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 $104.3 million for the year ended December 31, 2011 and net income attributable to the partners of $58.2 million for the year ended December 31, 2010. Net revenues(3) for the year ended December 31, 2011 increased to $823.6 million compared to $775.4 million in the same period of the prior year.
Due to the significant reduction in spot conventional tanker rates and asset values during the past several quarters, a change in the operating plans for certain older shuttle tankers, and escalating drydock costs, for accounting purposes, the Partnership recorded non-cash impairment charges of $57.9 million in the fourth quarter of 2011 associated with seven of the Partnership's older vessels. These non-cash charges do not affect the Partnership's operations, cash flows, liquidity or any of the Partnership's loan covenants. The Partnership intends to sell two of its conventional tankers which are currently on time - charter to Teekay, and expects to receive an early termination fee from Teekay upon the sale of the vessels.
For accounting purposes, the Partnership is required to recognize, through the consolidated statements of 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 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, the Cidade de Rio das Ostras (Rio das Ostras) FPSO unit and the Amundsen Spirit and Scott Spirit shuttle tankers relating to the periods prior to their acquisition by the Partnership from Teekay when they were under common control, 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; 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; the Amundsen Spirit was under common control by Teekay from July 30, 2010 to October 1, 2010, when it was sold to the Partnership; and the Scott Spirit was under common control by Teekay from July 22, 2011 to October 1, 2011, 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 was 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 on August 2, 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 www.teekayoffshore.com 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).
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Three Months Ended
December 31, 2011
(unaudited)
Shuttle Conventional FPSO
(in thousands of U.S. Tanker Tanker FSO Segment
dollars) Segment Segment Segment (3) Total
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Net revenues(1) 122,117 21,265 14,804 46,925 205,111
Vessel operating
expenses 37,527 5,297 6,747 19,494 69,065
Time-charter hire
expense 17,406 - - - 17,406
Depreciation and
amortization 29,519 5,394 2,892 10,389 48,194
Cash flow from vessel
operations(2) 58,190 14,664 7,870 20,869 101,593
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Three Months Ended
December 31, 2010
(unaudited)
Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment Segment Segment Segment Total
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Net revenues(1) 119,134 25,478 17,889 40,611 203,112
Vessel operating
expenses 42,993 6,224 10,093 18,034 77,344
Time-charter hire
expense 20,981 - - - 20,981
Depreciation and
amortization 29,353 8,620 3,537 8,720 50,230
Cash flow from vessel
operations(2) 49,392 18,125 7,394 19,490 94,401
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(1) 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 www.teekayoffshore.com for a
reconciliation of this non-GAAP measure as used in this release to the
most directly comparable GAAP financial measure.
(2) Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense, write-down of
vessels and amortization of deferred gains, includes the realized
gains (losses) on the settlement of foreign exchange forward contracts
and excludes the cash flow from vessel operations relating to the
Partnership's Dropdown Predecessor and adjusting for direct financing
leases to a cash basis. Cash flow from vessel operations 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 www.teekayoffshore.com for a reconciliation of this non-GAAP
measure as used in this release to the most directly comparable GAAP
financial measure.
(3) Net revenues from the Piranema Spirit FPSO unit acquired in November
2011 include non-cash revenue of $1.1 million.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's Shuttle Tanker segment increased to $58.2 million for the fourth quarter of 2011 compared to $49.4 million for the same period of the prior year, primarily due to a decrease in vessel operating costs, lower time-charter hire expense, and a full quarter's contribution from the Nansen Spirit and Peary Spirit. Vessel operating costs decreased due to a temporary lay-up of the Basker Spirit commencing in the first quarter of 2011 and from unexpected repair costs incurred on certain shuttle tankers in the fourth quarter of 2010.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $14.7 million in the fourth quarter of 2011 compared to $18.1 million for the same period of the prior year, primarily due to the sale of the Scotia Spirit in the third quarter of 2011 and the expiry of time-charter contracts on two of the tankers during the fourth quarter of 2011.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO segment increased to $7.9 million in the fourth quarter of 2011 compared to $7.4 million for the same period of the prior year, primarily due to increased revenues from favorable foreign exchange rate differences and lower vessel operating costs, partially offset by the sale of the Karratha Spirit FSO unit during the first quarter of 2011.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO segment increased to $20.9 million for the fourth quarter of 2011 compared to $19.5 million for the same period of the prior year, primarily due to the acquisition of the Piranema Spirit FPSO unit on November 30, 2011 and increased revenues from the Rio das Ostras and Petrojarl Varg. Revenues increased from the Rio das Ostras effective April 2011 as provided in its new charter contract servicing the Aruana field. Revenues increased from the Petrojarl Varg from favorable foreign exchange rate differences, partially offset by lower oil production.
Liquidity
As of December 31, 2011, the Partnership had total liquidity of $202.3 million, which consisted of $179.9 million in cash and cash equivalents and $22.4 million in undrawn revolving credit facilities. Subsequent to December 31, 2011, the Partnership's liquidity balance increased by approximately $230 million due to (a) the NOK 600 million (approximately USD 100 million equivalent) Norwegian bond offering completed in late January 2012 and (b) a new $130 million debt facility secured by the Piranema Spirit FPSO completed in late February 2012.
Conference Call
The Partnership plans to host a conference call on February 24, 2012 at 12:30 p.m. (ET) to discuss its results for the fourth quarter of 2011. An accompanying investor presentation will be available on Teekay Offshore's website at www.teekayoffshore.com 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 3063466.
-- By accessing the webcast, which will be available on Teekay Offshore's
website at www.teekayoffshore.com (the archive will remain on the
website for a period of 30 days).
The conference call will be recorded and made available until Friday March 2, 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 3063466.
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 ten conventional oil tankers. Teekay Offshore has rights to participate in certain other FPSO and shuttle tanker opportunities provided by Teekay Corporation (NYSE: TK - News) and Sevan Marine ASA (Oslo Bors: SEVAN). 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".
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands of U.S. dollars, except unit data)
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Three Months Ended Year Ended
December September December December December
31, 2011 30, 2011(1) 31, 2010 31, 2011(1) 31, 2010(2)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUES 238,122 243,023 229,263 949,061 900,546
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OPERATING
EXPENSES
Voyage expenses 33,011 34,404 26,151 125,452 125,101
Vessel operating
expenses(3) 69,065 72,783 77,344 292,175 268,876
Time-charter
hire expense 17,406 18,620 20,981 74,478 89,795
Depreciation and
amortization 48,194 47,783 50,230 187,710 190,341
General and
administrative(3) 18,780 17,862 13,394 73,529 63,214
Write-down of
vessels 57,882 23,961 9,441 91,108 9,441
Restructuring
charge(4) - - - 3,924 119
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244,338 215,413 197,541 848,376 746,887
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(Loss) income
from vessel
operations (6,216) 27,610 31,722 100,685 153,659
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OTHER ITEMS
Interest expense (9,804) (9,734) (8,553) (36,897) (37,411)
Interest income 199 181 200 659 842
Realized and
unrealized
(loss) gain on
derivative
instruments(5) (19,179) (112,685) 63,863 (159,744) (55,666)
Foreign exchange
gain (loss)(6) 2,247 (316) (348) 1,499 911
Income tax
(expense)
recovery (4,517) 3,528 1,133 (6,679) 9,718
Other income - net 171 966 1,296 3,606 6,810
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Net (loss) income (37,099) (90,450) 89,313 (96,871) 78,863
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Net (loss) income
attributable to:
Non-controlling
interests 4,094 (296) 39,332 22,454 37,378
Dropdown
Predecessor(1)(2) - (15,075) - (15,075) (16,685)
Partners (41,193) (75,079) 49,981 (104,250) 58,170
Limited
partners' units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 65,910,343 63,459,310 50,547,500 62,362,072 44,278,158
Total units
outstanding at
end of period 70,626,554 63,513,580 55,237,500 70,626,554 55,237,500
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(1) Results for the Scott Spirit shuttle tanker for the period beginning
in July 2011 prior to its acquisition by the Partnership in October
2011 when it was owned and operated by Teekay Corporation, are
included in the Dropdown Predecessor. The amounts included in this
release related to the Dropdown Predecessor are preliminary, and will
be finalized for inclusion in the Partnership's Form 20-F filing for
the year ended December 31, 2011. Any revisions to the preliminary
Scott Spirit shuttle tanker Dropdown Predecessor figures are only
expected to impact the accounting for periods prior to the date the
Scott Spirit shuttle tanker was acquired by the Partnership, and
therefore will have no effect on the adjusted net income attributable
to the partners or distributable cash flow of the Partnership for any
period, including the fourth quarter of 2011.
(2) Results for (a) the Rio das Ostras FPSO unit for the period beginning
in April 2008 prior to its acquisition by the Partnership in October
2010, (b) the Amundsen Spirit shuttle tanker for the period beginning
in July 2010 prior to its acquisition by the Partnership in October
2010, and (c) for the Falcon Spirit FSO unit for the period beginning
in December 2009 prior to its acquisition by the Partnership in April
2010, when such vessels were owned and operated by Teekay Corporation,
are included in the Dropdown Predecessor.
(3) The Partnership has entered into foreign exchange forward contracts,
which are economic hedges for certain vessel operating expenses and
general and administrative expenses. Certain of these forward
contracts have been designated as cash flow hedges pursuant to GAAP.
Unrealized (losses) gains arising from hedge ineffectiveness from such
forward contracts, including forward contracts relating to the
Dropdown Predecessor, are reflected in vessel operating expenses, and
general and administrative expenses in the above Summary Consolidated
Statements of (Loss) Income as detailed in the table below:
Three Months Ended Year Ended
December September December December December
31, 2011 30, 2011 31, 2010 31, 2011 31, 2010
Vessel operating expenses - (33) (69) (300) (2,819)
General and administrative (96) (109) (272) (6) (1,416)
(4) Restructuring charges for the year ended December 31, 2011 were incurred
in connection with the sale of an FSO unit and the termination of the
charter contract of one of the Partnership's shuttle tankers.
Restructuring charges for the year ended December 31, 2010 were incurred
in connection with the re-flagging of certain of the Partnership's
shuttle tankers.
(5) The realized (losses) gains on derivative instruments relate to the
amounts the Partnership actually paid or received to settle such
derivative instruments and the unrealized (losses) gains on derivative
instruments relate to the change in fair value of such derivative
instruments as detailed in the table below:
Three Months Ended Year Ended
December September December December December
31, 2011 30, 2011 31, 2010 31, 2011 31, 2010
----------------------------------------------------
Realized (losses) gains
relating to:
Interest rate swaps (16,115) (14,889) (12,993) (58,475) (49,224)
Foreign currency
forward contract 1,132 1,950 (384) 4,704 (1,029)
----------------------------------------------------
(14,983) (12,939) (13,377) (53,771) (50,253)
----------------------------------------------------
Unrealized (losses)
gains relating to:
Interest rate swaps (1,214) (92,888) 76,368 (100,306) (10,408)
Foreign currency
forward contracts (2,982) (6,858) 872 (5,667) 4,995
----------------------------------------------------
(4,196) (99,746) 77,240 (105,973) (5,413)
----------------------------------------------------
Total realized and
unrealized (losses)
gains on non-designated
derivative instruments (19,179) (112,685) 63,863 (159,744) (55,666)
----------------------------------------------------
(6) Foreign exchange gain (loss) includes realized gains of $0.7 million and
$2.9 million, for the three months and year ended December 31, 2011,
respectively, relating to the amounts the Partnership received to settle
the Partnership's non-designated cross currency swap that was entered
into as an economic hedge in relation to the Partnership's 2010 issuance
of NOK 600 million unsecured bonds maturing in 2013. Foreign exchange
gain (loss) also includes unrealized losses of ($1.2) million and ($1.6)
million for the three months and year ended December 31, 2011,
respectively, relating to the change in fair value of such derivative
instrument, offset by $1.9 million and $2.6 million in unrealized gains
on the revaluation of the NOK bond for the three months and year ended
December 31, 2011, respectively.
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
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As at As at As at
December September December
31, 2011(1) 30, 2011(2) 31, 2010
(unaudited) (unaudited) (unaudited)
ASSETS
Cash and cash equivalents 179,934 160,935 166,483
Vessels held for sale (3) 19,000 - -
Other current assets 148,825 140,385 142,493
Vessels and equipment 2,539,949 2,365,267 2,247,323
Advances on newbuilding contracts 45,637 44,947 52,184
Other assets 62,627 56,516 78,267
Intangible assets 21,644 23,423 28,763
Goodwill 127,113 127,113 127,113
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Total Assets 3,144,729 2,918,586 2,842,626
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LIABILITIES AND EQUITY
Accounts payable and
accrued liabilities 99,220 95,686 101,287
Other current liabilities 99,624 120,159 113,183
Current portion of long-term debt 229,365 152,884 152,096
Long-term debt 1,799,711 1,865,628 1,565,044
Other long-term liabilities 393,769 260,887 140,842
Redeemable non-controlling interest 38,307 39,147 41,725
Equity:
Dropdown predecessor equity - (37,097) -
Non-controlling interest 40,622 39,203 170,876
Partners' equity 444,111 382,089 557,573
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Total Liabilities and Equity 3,144,729 2,918,586 2,842,626
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(1) The balance sheet at December 31, 2011, includes the fair values of
asset acquired and liabilities assumed as a result of the acquisition of
the Piranema Spirit FPSO unit on November 30, 2011. Certain of these
estimates of fair value are preliminary and are subject to further
adjustment. Any revisions to the fair values are expected to have no
effect on the distributable cash flow of the Partnership for any period.
(2) In accordance with GAAP, the balance sheet at September 30, 2011
includes the Dropdown Predecessor as it relates to the Scott Spirit
shuttle tanker, which the Partnership acquired on October 1, 2011, to
reflect ownership of this asset from the time it began operations when
owned by Teekay Corporation on July 22, 2011. The amounts included in
this release related to the Dropdown Predecessor are preliminary, and
will be finalized for inclusion in the Partnership's Form 20-F filing
for the year ended December 31, 2011. Any revisions to the preliminary
Scott Spirit Dropdown Predecessor figures are expected only to impact
the accounting for periods prior to the date the Scott Spirit shuttle
tanker was acquired by the Partnership, and are expected to have no
effect on the adjusted net income attributable to the partners or
distributable cash flow of the Partnership for any period, including the
fourth quarter of 2011.
(3) In the fourth quarter of 2011, the Partnership approved a plan to sell
two of its conventional tankers and concurrently agreed with Teekay
Corporation to terminate their existing time-charter-out contracts upon
the sale of the vessels in exchange for an early termination fee to be
paid to the Partnership. As at December 31, 2011 these vessels were
classified as held-for-sale and their carrying value had been written
down to fair value, which is equal to their estimated selling prices.
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
Year Ended December 31,
December 31,
2011(1) 2010(2)
(unaudited) (unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
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Net operating cash flow 254,162 286,585
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FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt 457,530 355,678
Repayments of long-term debt (110,694) (90,835)
Repayments of long-term debt relating to
Dropdown Predecessors - (41,909)
Prepayments of long-term debt (125,562) (568,236)
Repayments of joint venture partner advances (14,500) -
Joint venture partner advances 14,500 -
Equity contribution from joint venture partner 3,750 633
Purchase of 49% interest in Teekay Offshore
Operating L.P. (386,267) -
Purchase of Piranema Spirit (net of cash acquired) (161,851) -
Purchase of vessels from Teekay Corporation (60,683) (107,051)
Contribution from Teekay Corporation
relating to Rio das Ostras 2,000 -
Contribution of capital from Teekay Corporation
relating to Dropdown Predecessors 2,305 4,313
Proceeds from equity offerings 420,146 419,989
Expenses of equity offerings (222) (18,498)
Cash distributions paid by the Partnership (129,323) (85,077)
Cash distributions paid by subsidiaries to
non-controlling interests (36,980) (77,236)
Other (682) (3,371)
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Net financing cash flow (126,533) (211,600)
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INVESTING ACTIVITIES
Expenditures for vessels and equipment (148,796) (39,759)
Proceeds from sale of vessels and equipment 13,354 -
Investment in direct financing lease assets 316 (886)
Direct financing lease payments received 20,948 22,736
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Net investing cash flow (114,178) (17,909)
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Increase in cash and cash equivalents 13,451 57,076
Cash and cash equivalents, beginning of the year 166,483 109,407
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Cash and cash equivalents, end of the year 179,934 166,483
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(1) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows for the year ended December 31, 2011 includes the cash flows
relating to the Scott Spirit shuttle tanker unit, for the period from
July 22, 2011 to October 1, 2011, when the vessel was under the common
control of Teekay Corporation, but prior to its acquisition by the
Partnership.
(2) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows for the year ended December 31, 2010 includes the cash flows
relating to: the Falcon Spirit FSO unit, for the period from December
15, 2009 to April 1, 2010; the Rio das Ostras FPSO unit, for the period
from April 1, 2008 to October 1, 2010; and the Amundsen Spirit shuttle
tanker unit, for the period from July 30, 2010 to October 1, 2010, when
the vessels were under the common control of Teekay Corporation, but
prior to their acquisition by the Partnership.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET (LOSS) INCOME
(in thousands of U.S. dollars)
(unaudited)
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.
Three Months Ended Year Ended
--------------------------------------------------
December December December December
31, 2011 31, 2010 31, 2011 31, 2010
(unaudited) (unaudited) (unaudited) (unaudited)
Net (loss) income -
GAAP basis (37,099) 89,313 (96,871) 78,863
Adjustments:
Net income attributable to
non-controlling interests (4,094) (39,332) (22,454) (37,378)
Net loss attributable to
Dropdown Predecessor - - 15,075 16,685
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Net (loss) income attributable
to the partners (41,193) 49,981 (104,250) 58,170
Add (subtract) specific items
affecting net (loss) income:
Foreign exchange (gains)
losses(1) (1,587) 546 1,382 (631)
Foreign currency exchange
losses resulting from
hedging ineffectiveness(2) 96 341 306 4,236
Deferred income tax expense
relating to unrealized
foreign exchange gains(3) - 1,178 10,096 146
Unrealized losses (gains) on
derivative instruments(4) 4,196 (77,240) 93,787 (1,036)
Write-down of vessels(5) 57,882 9,441 91,108 9,441
Restructuring charges
and other(6) 2,463 (2,978) 2,097 30
Non-controlling interests'
share of items above 431 32,491 7,662 (5,038)
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Total adjustments 63,481 (36,221) 206,438 7,148
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Adjusted net income
attributable to the partners 22,288 13,760 102,188 65,318
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(1) Foreign exchange losses primarily relate to the Partnership's
revaluation of all foreign currency-denominated monetary assets and
liabilities based on the prevailing exchange rate at the end of each
reporting period, excluding amounts related to Dropdown Predecessor, and
the realized gains relating to the cross currency swap for outstanding
Norwegian bonds of the Partnership.
(2) Foreign currency exchange losses resulting from hedging ineffectiveness
include the unrealized losses arising from hedge ineffectiveness from
foreign exchange forward contracts that are or have been designated as
hedges for accounting purposes.
(3) Portion of deferred income tax expense related to unrealized foreign
exchange gains and losses. There is no adjustment for this item for the
three months ended December 31, 2011, as a full valuation allowance was
taken starting in the third quarter of 2011 against the deferred tax
recovery.
(4) Reflects the unrealized losses due to changes in the mark-to-market
value of interest rate swaps and foreign exchange forward contracts that
are not designated as hedges for accounting purposes, excluding
unrealized losses of $12.2 million and $6.5 million relating to the
Dropdown Predecessors for the years ended December 31, 2011 and 2010,
respectively.
(5) Write-down of vessels for the year ended December 31, 2011 relates to
the valuation impairment of five older conventional tankers, three older
shuttle tankers, and one older FSO unit, which were written down to
their estimated fair values. For the year ended December 31, 2010, one
older shuttle tanker was written down to its estimated fair value.
(6) Restructuring charges of $3.9 million for the year ended December 31,
2011 were incurred in connection with the sale of an FSO unit and the
termination of the charter contract of one of the Partnership's shuttle
tankers. Restructuring charges of $0.1 million for the year ended
December 31, 2010 were incurred in connection with the re-flagging of
certain of the Partnership's vessels. Other items for the year ended
December 31, 2011 include ($3.1) million related to the tax recovery on
the loss on sale and ($2.1) million related to the cancellation fee
received, both associated with the sale of the Scotia Spirit in the
third quarter of 2011, $1.7 million related to a one-time success fee
relating to the purchase of the Piranema Spirit, $0.9 million related to
a one-time management fee associated with the portion of stock-based
compensation grants of Teekay's former Chief Executive Officer that had
not yet vested prior to the date of his retirement on March 31, 2011,
and $0.8 million related to a fair value adjustment of contingent
consideration liability associated with the purchase of the Scott
Spirit. Other items for the year ended December 31, 2010 include ($0.1)
million relating to adjustments to the carrying value of certain
capitalized drydocking expenditures and non-recurring adjustments to
pension and tax accruals.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in thousands of U.S. dollars)
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, gains and losses on vessel sales, unrealized gains and losses from derivatives, non-cash income taxes, loss on write-down of vessels 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 cas h 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 quarter.
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Three Months Ended
December 31, 2011
(unaudited)
----------------------------------------------------------------------------
Net loss (37,099)
Add (subtract):
Write-down of vessels 57,882
Depreciation and amortization 48,194
Unrealized losses on non-designated derivative instruments(1) 4,196
Foreign exchange and other, net 2,444
Distributions relating to equity financing of
newbuilding instalments 914
Estimated maintenance capital expenditures (26,970)
Deferred income tax recovery (541)
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Distributable Cash Flow before Non-Controlling Interest 49,020
Non-controlling interests' share of DCF (7,464)
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Distributable Cash Flow 41,556
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(1) Derivative instruments include interest rate swaps and foreign exchange
forward contracts.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
Three Months Ended December 31, 2011
------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
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Net revenues(1) 122,117 21,265 14,804 46,925 205,111
Vessel operating expenses 37,527 5,297 6,747 19,494 69,065
Time-charter hire expense 17,406 - - - 17,406
Depreciation and
amortization 29,519 5,394 2,892 10,389 48,194
General and administrative 11,098 1,304 800 5,578 18,780
Write-down of vessels 19,951 29,333 8,598 - 57,882
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Income (loss) from vessel
operations 6,616 (20,063) (4,233) 11,464 (6,216)
----------------------------------------------------------------------------
Three Months Ended December 31, 2010
------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 119,134 25,478 17,889 40,611 203,112
Vessel operating expenses 42,993 6,224 10,093 18,034 77,344
Time-charter hire expense 20,981 - - - 20,981
Depreciation and
amortization 29,353 8,620 3,537 8,720 50,230
General and administrative 8,217 1,129 943 3,105 13,394
Write-down of vessels 9,441 - - - 9,441
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Income from vessel
operations 8,149 9,505 3,31 10,752 31,722
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(1) 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 www.teekayoffshore.com for a reconciliation of
this non-GAAP measure as used in this release to the most directly
comparable GAAP financial measure.
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 vessels under construction or conversion; 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, the Petrojarl Cidade de Itajai, the Voyageur Spirit, the Hummingbird Spirit 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 and Brazil 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 other vessels or offshore projects from Teekay or third parties; the Partnership's ability to raise 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, 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.
Teekay Offshore Partners L.P.
Kent Alekson
Investor Relations Enquiries
+1 (604) 609-6442
www.teekayoffshore.com
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