TGP Teekay Lng Partners LP

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TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands of U.S. Dollars)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	$			$			$			$
Net income	54,853			10,309			66,596			140,395
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications
Unrealized gain (loss) on qualifying cash flow hedging instruments,   net of tax (note 10)	2,517			(4,829	)		(15,689	)		(5,474	)
Amounts reclassified from accumulated other comprehensive income (loss)
To equity income:
Realized loss on qualifying cash flow hedging instruments	868			585			2,591			1,538
Other comprehensive income (loss)	3,385			(4,244	)		(13,098	)		(3,936	)
Comprehensive income	58,238			6,065			53,498			136,459
Non-controlling interest in comprehensive income	4,999			2,811			7,954			11,736
General and limited partners' interest in comprehensive income	53,239			3,254			45,544			124,723

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TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. Dollars)

	As at September 30, 2016			As at December 31, 2015
	$			$
ASSETS
Current
Cash and cash equivalents	268,395			102,481
Restricted cash – current  (notes 7 and 10)	5,296			6,600
Accounts receivable, including non-trade of $11,915 (2015 – $7,058)	16,175			22,081
Prepaid expenses	4,501			4,469
Current portion of derivative assets  (note 10)	21			—
Current portion of net investments in direct financing leases  (note 5)	18,788			20,606
Advances to affiliates  (note 9b)	15,568			13,026
Total current assets	328,744			169,263
Restricted cash – long-term  (notes 7, 10 and 11b)	94,931			104,919
Vessels and equipment
At cost, less accumulated depreciation of $678,728 (2015 – $666,710)	1,417,825			1,595,077
Vessels under capital leases, at cost, less accumulated depreciation of $64,971 (2015 – $56,316)  (note 5)	488,245			88,215
Advances on newbuilding contracts  (note 9d)	314,766			424,868
Total vessels and equipment	2,220,836			2,108,160
Investments in and advances to equity accounted joint ventures  (notes 6   and 9a)	935,246			883,731
Net investments in direct financing leases  (note 5)	629,608			646,052
Other assets	6,954			20,811
Derivative assets (note 10)	2,397			5,623
Intangible assets – net	72,148			78,790
Goodwill – liquefied gas segment	35,631			35,631
Total assets	4,326,495			4,052,980
LIABILITIES AND EQUITY
Current
Accounts payable	2,934			2,770
Accrued liabilities  (note 10)	31,431			37,456
Unearned revenue	16,613			19,608
Current portion of long-term debt  (note 7)	168,927			197,197
Current obligations under capital lease  (note 5)	67,669			4,546
Current portion of in-process contracts	15,384			12,173
Current portion of derivative liabilities  (note 10)	87,381			52,083
Advances from affiliates  (notes 9b and 10)	13,053			22,987
Total current liabilities	403,392			348,820
Long-term debt  (note 7)	1,797,270			1,802,012
Long-term obligations under capital lease  (note 5)	329,287			54,581
Long-term unearned revenue	10,657			30,333
Other long-term liabilities  (note 5)	62,166			71,152
In-process contracts	10,903			20,065
Derivative liabilities  (note 10)	149,871			182,338
Total liabilities	2,763,546			2,509,301
Commitments and contingencies  (notes 5, 7, 10, and 11)
Equity
Limited Partners	1,494,846			1,472,327
General Partner	49,246			48,786
Accumulated other comprehensive loss	(12,547	)		(2,051	)
Partners' equity	1,531,545			1,519,062
Non-controlling interest	31,404			24,617
Total equity	1,562,949			1,543,679
Total liabilities and total equity	4,326,495			4,052,980

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TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. Dollars)

	Nine Months Ended September 30, 2016			Nine Months Ended September 30, 2015
	$			$
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income	66,596			140,395
Non-cash items:
Unrealized loss on non-designated derivative instruments (note 10)	31,276			7,879
Depreciation and amortization	70,521			69,251
Loss on sale of vessels	27,439			—
Unrealized foreign currency exchange gain (loss) and other (notes 7 and 10)	(4,476	)		(10,837	)
Equity income, net of dividends received of $32,851 (2015 – $89,041)	(19,728	)		28,458
Ineffective portion on qualifying cash flow hedging instruments included in interest expense	1,044			—
Change in operating assets and liabilities	(15,177	)		(26,766	)
Expenditures for dry docking	(6,574	)		(4,182	)
Net operating cash flow	150,921			204,198
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	259,922			314,412
Debt issuance costs	(562	)		(1,796	)
Scheduled repayments of long-term debt	(141,505	)		(88,562	)
Prepayments of long-term debt	(195,789	)		(90,000	)
Scheduled repayments of capital lease obligations	(17,477	)		(3,305	)
Decrease (increase) in restricted cash	13,086			(24,616	)
Proceeds from equity offerings, net of offering costs	—			34,548
Cash distributions paid	(34,099	)		(191,094	)
Dividends paid to non-controlling interest	(1,167	)		(1,612	)
Net financing cash flow	(117,591	)		(52,025	)
INVESTING ACTIVITIES
Capital contributions to equity accounted joint ventures	(32,994	)		(25,719	)
Loan repayments from equity accounted joint ventures	—			23,744
Receipts from direct financing leases	18,262			10,877
Proceeds from sale of vessels	94,311			—
Proceeds from sale-leaseback of vessels	355,306			—
Expenditures for vessels and equipment	(302,301	)		(166,541	)
Net investing cash flow	132,584			(157,639	)
Increase (decrease) in cash and cash equivalents	165,914			(5,466	)
Cash and cash equivalents, beginning of the period	102,481			159,639
Cash and cash equivalents, end of the period	268,395			154,173

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TEEKAY LNG PARTNERS L.P. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

(in thousands of U.S. Dollars and units)

	TOTAL EQUITY
	Partners’ Equity
	Limited Partners						General Partner			Accumulated Other Comprehensive Loss			Non- controlling Interest			Total
	Number of Common  Units			$			$			$			$			$
Balance as at December 31, 2015	79,551			1,472,327			48,786			(2,051	)		24,617			1,543,679
Net income	—			54,919			1,121			—			10,556			66,596
Other comprehensive loss	—			—			—			(10,496	)		(2,602	)		(13,098	)
Cash distributions	—			(33,417	)		(682	)		—			—			(34,099	)
Dividends paid to non-controlling interest	—			—			—			—			(1,167	)		(1,167	)
Equity based compensation, net of tax of $210 (note 13)	21			1,017			21			—			—			1,038
Balance as at September 30, 2016	79,572			1,494,846			49,246			(12,547	)		31,404			1,562,949

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1.	Basis of Presentation

3.	Financial Instruments

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(i)	The advances to equity accounted joint ventures together with the Partnership’s equity investments in the joint ventures form the net aggregate carrying value of the Partnership’s interests in the joint ventures in these consolidated financial statements. The fair values of the individual components of such aggregate interests are not determinable.

(ii)

As described in Note 3 to the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year-ended December 31, 2015 , the estimated fair value of the non-interest bearing receivable from BG International Limited (or BG ) is based on the remaining future fixed payments as well as an estimated discount rate. The estimated fair value of this receivable as of September 30, 2016 was $12.2 million ( December 31, 2015 – $16.4 million ) using a discount rate of 8.0% . As there is no market rate for the equivalent of an unsecured non-interest bearing receivable from BG, the discount rate is based on unsecured debt instruments of similar maturity held, adjusted for a liquidity premium. A higher or lower discount rate would result in a lower or higher fair value asset.

		Nine Months Ended September 30,
		2016			2015
		$			$
Fair value at beginning of period		(6,296	)		(2,137	)
Realized and unrealized gains (losses) included in earnings		4,550			(3,624	)
Settlement payments		2,556			1,207
Fair value at end of period		810			(4,554	)

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4.	Segment Reporting

		Three Months Ended September 30,
		2016									2015
		Liquefied  Gas Segment $			Conventional Tanker Segment $			Total $			Liquefied  Gas Segment $			Conventional Tanker Segment $			Total $
Voyage revenues		87,260			13,398			100,658			75,142			23,273			98,415
Voyage expenses		(175	)		(180	)		(355	)		—			(240	)		(240	)
Vessel operating expenses		(16,751	)		(5,304	)		(22,055	)		(16,260	)		(8,059	)		(24,319	)
Depreciation and amortization		(19,317	)		(4,724	)		(24,041	)		(17,268	)		(5,205	)		(22,473	)
General and administrative expenses (i)		(3,008	)		(565	)		(3,573	)		(3,916	)		(1,760	)		(5,676	)
Restructuring charges		—			—			—			—			(3,510	)		(3,510	)
Income from vessel operations		48,009			2,625			50,634			37,698			4,499			42,197
Equity income		13,514			—			13,514			13,523			—			13,523

		Nine Months Ended September 30,
		2016									2015
		Liquefied  Gas Segment $			Conventional Tanker Segment $			Total $			Liquefied  Gas Segment $			Conventional Tanker Segment $			Total $
Voyage revenues		250,342			45,328			295,670			228,542			65,807			294,349
Voyage expenses		(418	)		(936	)		(1,354	)		—			(931	)		(931	)
Vessel operating expenses		(48,717	)		(17,603	)		(66,320	)		(46,693	)		(23,362	)		(70,055	)
Depreciation and amortization		(58,476	)		(12,045	)		(70,521	)		(53,578	)		(15,673	)		(69,251	)
General and administrative expenses (i)		(12,049	)		(2,816	)		(14,865	)		(14,755	)		(4,697	)		(19,452	)
Loss on sale of vessels		—			(27,439	)		(27,439	)		—			—			—
Restructuring charges		—			—			—			—			(3,510	)		(3,510	)
Income (loss) from vessel operations		130,682			(15,511	)		115,171			113,516			17,634			131,150
Equity income		52,579			—			52,579			60,583			—			60,583

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(i)	Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

		September 30, 2016			December 31, 2015
		$			$
Total assets of the liquefied gas segment		3,813,347			3,550,396
Total assets of the conventional tanker segment		208,509			360,527
Unallocated:
Cash and cash equivalents		268,395			102,481
Accounts receivable and prepaid expenses		20,676			26,550
Advances to affiliates		15,568			13,026
Consolidated total assets		4,326,495			4,052,980

5.	Vessel Charters

	Remainder of 2016		2017		2018		2019		2020
Vessel Charters (i)	$		$		$		$		$
Charters-in – capital leases (ii)	9,485		61,019		57,361		30,065		30,147
Charters-out – operating leases   (iii)	109,164		337,105		372,902		404,480		393,827
Charters-out – direct financing leases (iv)	19,435		218,386		187,977		53,341		53,487
	128,599		555,491		560,879		457,821		447,314

(i)

The Partnership owns 69% of Teekay BLT Corporation (or Teekay Tangguh Joint Venture ) and the Teekay Tangguh Joint Venture is a party to operating leases whereby it is leasing the Tangguh Hiri and Tangguh Sago liquefied natural gas (or LNG ) carriers (or the Tangguh LNG Carriers ) to a third party, which is in turn leasing the vessels back to the joint venture. The table does not include the Partnership’s minimum charter hire payments to be paid and received under these leases, which are described in more detail in Note 5 to the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year ended December 31, 2015 . Under the terms of the leasing arrangement for the Tangguh LNG Carriers, whereby the Teekay Tangguh Joint Venture is the lessee, the lessors claim tax depreciation on its lease of these vessels. As is typical in these types of leasing arrangements, tax and change of law risks are assumed by the lessee. Lease payments under the lease arrangements are based on certain tax and financial assumptions at the commencement of the leases. If an assumption proves to be incorrect, the lessor is entitled to increase the lease payments to maintain its agreed after-tax margin.

(ii)

As at September 30, 2016 , the Partnership was a party, as lessee, to capital leases on two Suezmax tankers, the Teide Spirit and Toledo Spirit . Under these capital leases, the owner has the option to require the Partnership to purchase the two vessels. The charterer, who is also the owner, also has the option to cancel the charter contracts. The amounts in the table assume the owner will not exercise its options to require the Partnership to purchase either of the vessels from the owner, but rather it assumes the owner will cancel the charter contracts when the cancellation right is first exercisable, which is the thirteenth anniversary of each respective contract in 2017 and 2018 .

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(iii)

Minimum scheduled future operating lease revenues do not include revenue generated from new contracts entered into after September 30, 2016 , revenue from unexercised option periods of contracts that existed on September 30, 2016 , revenues from vessels in the Partnership's equity accounted investments, or variable or contingent revenues. Therefore, the minimum scheduled future operating lease revenues should not be construed to reflect total charter hire revenues that may be recognized for any of the years.

(iv)	As described in Note 5 to the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year ended December 31, 2015 , the Tangguh LNG Carriers’ time-charter contracts and the two bareboat charter contracts to Awilco LNG ASA are accounted for as direct financing leases.

7. Long-Term Debt

	September 30, 2016		December 31, 2015
	$		$
U.S. Dollar-denominated Revolving Credit Facilities due from 2016 to 2018	390,583		329,222
U.S. Dollar-denominated Term Loans due from 2018 to 2026	1,023,153		1,150,436
Norwegian Kroner-denominated Bonds due from 2017 to 2020	325,627		294,016
Euro-denominated Term Loans due from 2018 to 2023	238,652		241,798
Total principal	1,978,015		2,015,472
Unamortized discount and debt issuance costs	(11,818	)	(16,263	)
Total debt	1,966,197		1,999,209
Less current portion	(168,927	)	(197,197	)
Long-term debt	1,797,270		1,802,012

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8.	Income Tax

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9.	Related Party Transactions

		Three Months Ended						Nine Months Ended
		September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
		$			$			$			$
Revenues (i)		9,429			7,727			28,075			27,735
Vessel operating expenses		(5,107	)		(4,714	)		(15,023	)		(14,337	)
General and administrative expenses (ii)		(3,437	)		(3,658	)		(8,666	)		(11,326	)
General and administrative expenses deferred and capitalized  (iii)		(116	)		—			(442	)		—

10.	Derivative Instruments and Hedging Activities

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					Floating Rate Receivable
Principal Amount NOK			Principal Amount $		Reference Rate		Margin			Fixed Rate Payable			Fair Value / Carrying Amount of (Liability) $			Weighted- Average Remaining Term (Years)
700,000			125,000		NIBOR		5.25	%		6.88	%		(39,059	)		0.6
900,000			150,000		NIBOR		4.35	%		6.43	%		(41,722	)		1.9
1,000,000			134,000		NIBOR		3.70	%		5.92	%		(12,826	)		3.6
													(93,607	)

Interest Rate Risk

The Partnership enters into interest rate swaps which exchange a receipt of floating interest for a payment of fixed interest to reduce the Partnership’s exposure to interest rate variability on certain of its outstanding floating-rate debt. As at September 30, 2016 , the Partnership was committed to the following interest rate swap agreements:

		Interest Rate Index		Principal Amount $			Fair Value / Carrying Amount of (Liability) $			Weighted- Average Remaining Term (years)		Fixed Interest Rate (%) (i)
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps		LIBOR		90,000			(7,151	)		1.9		4.9
U.S. Dollar-denominated interest rate swaps		LIBOR		100,000			(2,356	)		0.3		5.3
U.S. Dollar-denominated interest rate swaps (ii)		LIBOR		156,250			(34,865	)		12.3		5.2
U.S. Dollar-denominated interest rate swaps (ii)		LIBOR		53,557			(2,079	)		4.8		2.8
U.S. Dollar-denominated interest rate swaps (iii)		LIBOR		320,000			(30,358	)		1.3		3.4
U.S. Dollar-denominated interest rate swaps (iv)		LIBOR		110,500			(1,708	)		2.3		1.7
U.S. Dollar-denominated interest rate swaps (v)		LIBOR		197,629			(9,718	)		9.2		2.3
EURIBOR-Based Debt:
Euro-denominated interest rate swaps (vi)		EURIBOR		238,652			(40,913	)		4.2		3.1
							(129,148	)

(i)	Excludes the margins the Partnership pays on its floating-rate term loans, which, at September 30, 2016 , ranged from 0.30% to 2.80% .

(ii)	Principal amount reduces semi-annually.

(iii)	These interest rate swaps are being used to economically hedge expected interest payments on future debt that is planned to be outstanding from 2017 to 2024 . These interest rate swaps are subject to mandatory early termination in 2017 and 2018 whereby the swaps will be settled based on their fair value at that time.

(iv)	Principal amount reduces quarterly.

(v)	Principal amount reduces quarterly commencing December 2017.

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(vi)	Principal amount reduces monthly to 70.1 million Euros ( $78.8 million ) by the maturity dates of the swap agreements.

		Interest Rate Index		Principal Amount $		Start Date		Carrying Amount of Assets (Liability) $			Remaining Term (Years)		Fixed Interest Rate (%)
Interest rate swaption - Call Option		LIBOR		155,000 (i)		April 28, 2017		21			7.5		3.3
Interest rate swaption - Put Option		LIBOR		155,000 (i)		April 28, 2017		(7,268	)		7.5		2.2
Interest rate swaption - Call Option		LIBOR		160,000 (ii)		January 31, 2018		458			8.0		3.1
Interest rate swaption - Put Option		LIBOR		160,000 (ii)		January 31, 2018		(6,291	)		8.0		2.0
Interest rate swaption - Call Option		LIBOR		160,000 (iii)		July 16, 2018		919			8.0		2.9
Interest rate swaption - Put Option		LIBOR		160,000 (iii)		July 16, 2018		(5,387	)		8.0		1.8

(i)	Amortizing every three months from $155.0 million in April 2017 to $85.4 million in October 2024.

(ii)	Amortizing every three months from $160.0 million in January 2018 to $82.5 million in January 2026.

(iii)	Amortizing every three months from $160.0 million in July 2018 to $82.5 million in July 2026.

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		Three Months Ended September 30,
		2016									2015
		Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
		$			$			$			$			$			$
Interest rate swap agreements		(6,494	)		8,436			1,942			(7,232	)		(12,232	)		(19,464	)
Interest rate swaption agreements		—			1,992			1,992			—			(5,927	)		(5,927	)
Toledo Spirit time-charter derivative		(10	)		1,080			1,070			326			(1,770	)		(1,444	)
		(6,504	)		11,508			5,004			(6,906	)		(19,929	)		(26,835	)

 

		Nine Months Ended September 30,
		2016									2015
		Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
		$			$			$			$			$			$
Interest rate swap agreements		(19,750	)		(18,441	)		(38,191	)		(21,856	)		835			(21,021	)
Interest rate swaption agreements		—			(16,765	)		(16,765	)		—			(5,334	)		(5,334	)
Toledo Spirit time-charter derivative		620			3,930			4,550			(244	)		(3,380	)		(3,624	)
		(19,130	)		(31,276	)		(50,406	)		(22,100	)		(7,879	)		(29,979	)

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(i)	Effective portion of designated and qualifying cash flow hedges recognized in other comprehensive income (loss).

(ii)	Effective portion of designated and qualifying cash flow hedges recorded in accumulated other comprehensive loss (or AOCI ) during the term of the hedging relationship and reclassified to earnings.

(iii)	Ineffective portion of designated and qualifying cash flow hedges.

11.	Commitments and Contingencies

(i)	As at September 30, 2016 , the Partnership had nine LNG carrier newbuildings on order which are scheduled for delivery between 2017 and 2019. These commitment amounts are described in more detail in Note 14 of the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year-ended December 31, 2015 .

(ii)

The commitment amounts relating to the Partnership’s share of costs for newbuilding and other construction contracts in the Partnership’s equity accounted joint ventures are based on the Partnership’s ownership percentage in each respective joint venture as of September 30, 2016 . These commitments are described in more detail in Note 14 of the Partnership’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year-ended December 31, 2015 . As of September 30, 2016 , based on the Partnership's ownership percentage in each respective joint venture, the Partnership's equity accounted joint ventures has secured $269 million of financing related to $236 million of LNG and LPG carrier newbuilding commitments included in the table above.

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12.	Total Capital and Net Income Per Unit

13.	Unit-Based Compensation

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14.	Restructuring Charges

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(in thousands of U.S. Dollars, except revenue days, calendar-ship-days and percentages)	Three Months Ended September 30,				% Change
	2016		2015
Voyage revenues	87,260		75,142		16.1
Voyage expenses	(175	)	—		100.0
Net voyage revenues	87,085		75,142		15.9
Vessel operating expenses	(16,751	)	(16,260	)	3.0
Depreciation and amortization	(19,317	)	(17,268	)	11.9
General and administrative expenses (1)	(3,008	)	(3,916	)	(23.2	)
Income from vessel operations	48,009		37,698		27.4
Operating Data:
Revenue Days (A)	1,893		1,721		10.0
Calendar-Ship-Days (B)	1,916		1,748		9.6
Utilization (A)/(B)	98.8	%	98.5	%

(in thousands of U.S. Dollars, except revenue days, calendar-ship-days and percentages)	Nine Months Ended September 30,				% Change
	2016		2015
Voyage revenues	250,342		228,542		9.5
Voyage expenses	(418	)	—		100.0
Net voyage revenues	249,924		228,542		9.4
Vessel operating expenses	(48,717	)	(46,693	)	4.3
Depreciation and amortization	(58,476	)	(53,578	)	9.1
General and administrative expenses (1)	(12,049	)	(14,755	)	(18.3	)
Income from vessel operations	130,682		113,516		15.1
Operating Data:
Revenue Days (A)	5,466		5,160		5.9
Calendar-Ship-Days (B)	5,508		5,187		6.2
Utilization (A)/(B)	99.2	%	99.5	%

(1)	Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of resources).

•	increases of $7.7 million and $18.0 million for the three and nine months ended September 30, 2016 , respectively, as a result of the Creole Spirit charter contract commencing on February 29, 2016;

•	an increase of $5.2 million for the three and nine months ended September 30, 2016 as a result of the Oak Spirit charter contract commencing on August 1, 2016; and

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•	an increase of $1.3 million for the three and nine months ended September 30, 2016 due to the Polar Spirit being off-hire for 27 days in the third quarter of 2015 for a scheduled dry docking.

•	increases of $1.2 million and $2.7 million for the three and nine months ended September 30, 2016 , respectively, due to the delivery of the Creole Spirit on February 18, 2016;

•

decreases of $1.0 million and $2.3 million for the three and nine months ended September 30, 2016 , respectively, due to the charterer, Teekay Corporation, not being able to find employment for the Arctic Spirit and Polar Spirit for a portion of 2016, which permitted us to operate the vessels with a reduced average number of crew on board and reduce the amount of repair and maintenance activities performed.

(in thousands of U.S. Dollars, except revenue days, calendar-ship-days and percentages)	Three Months Ended September 30,				% Change
	2016		2015
Voyage revenues	13,398		23,273		(42.4	)
Voyage expenses	(180	)	(240	)	(25.0	)
Net voyage revenues	13,218		23,033		(42.6	)
Vessel operating expenses	(5,304	)	(8,059	)	(34.2	)
Depreciation and amortization	(4,724	)	(5,205	)	(9.2	)
General and administrative expenses (1)	(565	)	(1,760	)	(67.9	)
Restructuring charges	—		(3,510	)	(100.0	)
Income from vessel operations	2,625		4,499		(41.7	)
Operating Data:
Revenue Days (A)	552		702		(21.4	)
Calendar-Ship-Days (B)	552		736		(25.0	)
Utilization (A)/(B)	100.0	%	95.4	%

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(in thousands of U.S. Dollars, except revenue days, calendar-ship-days and percentages)	Nine Months Ended September 30,				% Change
	2016		2015
Voyage revenues	45,328		65,807		(31.1	)
Voyage expenses	(936	)	(931	)	0.5
Net voyage revenues	44,392		64,876		(31.6	)
Vessel operating expenses	(17,603	)	(23,362	)	(24.7	)
Depreciation and amortization	(12,045	)	(15,673	)	(23.1	)
General and administrative expenses (1)	(2,816	)	(4,697	)	(40.0	)
Loss on sale of vessels	(27,439	)	—		100.0
Restructuring charges	—		(3,510	)	(100.0	)
(Loss) income from vessel operations	(15,511	)	17,634		(188.0	)
Operating Data:
Revenue Days (A)	1,887		2,148		(12.2	)
Calendar-Ship-Days (B)	1,887		2,184		(13.6	)
Utilization (A)/(B)	100.0	%	98.4	%

(1)	Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

•	decreases of $5.3 million and $9.0 million for the three and nine months ended September 30, 2016 , respectively, due to the sales of the Bermuda Spirit and Hamilton Spirit in April 2016 and May 2016, respectively;

•

a decrease of $3.5 million for the three and nine months ended September 30, 2016 due to our recovery during the corresponding periods of 2015 of crew restructuring charges in that amount from the charterer of the Alexander Spirit , who had requested we change the crew nationality on board the vessel (however, because we had a corresponding increase in our restructuring charges, this increase in revenue did not affect our cash flow or net income);

•	decreases of $0.8 million and $3.5 million for the three and nine months ended September 30, 2016 , respectively, in pass-through vessel operating expenses due to the change in crew nationality on board the Alexander Spirit in September 2015 (however, we had corresponding decreases in vessel operating expenses); and

•	decreases of $1.0 million and $3.1 million for the three and nine months ended September 30, 2016 , respectively, relating to the European Spirit , African Spirit and Asian Spirit upon the charterer exercising its one-year options in September 2015, November 2015 and January 2016, respectively, at lower charter rates than the original charter rates.

•	decreases of $1.2 million and $3.8 million for the three and nine months ended September 30, 2016 , respectively, in crew wages due to the change in crew nationality on board the Alexander Spirit in September 2015; and

•	decreases of $1.5 million and $2.2 million for the three and nine months ended September 30, 2016 , respectively, due to the sales of the Bermuda Spirit and Hamilton Spirit in April 2016 and May 2016, respectively.

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(in thousands of U.S. Dollars)	Three Months Ended
	Angola LNG Carriers		Exmar LNG Carriers		Exmar LPG Carriers		MALT LNG Carriers		RasGas 3 LNG Carriers		Other		Total Equity Income
Three months ended September 30, 2016	7,007		2,536		2,978		(4,232	)	5,424		(199	)	13,514
Three months ended September 30, 2015	(2,709	)	2,222		9,325		(840	)	5,561		(36	)	13,523
Difference	9,716		314		(6,347	)	(3,392	)	(137	)	(163	)	(9	)

(in thousands of U.S. Dollars)	Nine Months Ended
	Angola LNG Carriers		Exmar LNG Carriers		Exmar LPG Carriers		MALT LNG Carriers		RasGas 3 LNG Carriers		Other		Total Equity Income
Nine months ended September 30, 2016	5,241		6,718		14,796		9,912		16,329		(417	)	52,579
Nine months ended September 30, 2015	9,389		6,506		25,863		3,057		15,944		(176	)	60,583
Difference	(4,148	)	212		(11,067	)	6,855		385		(241	)	(8,004	)

•	increases of $2.3 million and $5.7 million for the three and nine months ended September 30, 2016 , respectively, relating to interest incurred on the capital lease obligation for the Creole Spirit commencing upon its delivery in February 2016;

•	an increase of $1.8 million for the three and nine months ended September 30, 2016 relating to interest incurred on the capital lease obligation for the Oak Spirit commencing upon its delivery in July 2016;

•	increases of $0.2 million and $1.9 million for the three and nine months ended September 30, 2016 , respectively, due to an increase in LIBOR on our floating-rate debt, net of debt repayments during 2016 and 2015; and

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•	increases of $0.1 million and $1.0 million for the three and nine months ended September 30, 2016 , respectively, relating to the ineffective portion of unrealized losses recognized for hedge-accounted swaps entered in January 2016.

(in thousands of U.S. Dollars)	Three Months Ended September 30,
	2016						2015
	Realized gains (losses)		Unrealized gains (losses)		Total		Realized gains (losses)		Unrealized gains (losses)		Total
Interest rate swap agreements	(6,494	)	8,436		1,942		(7,232	)	(12,232	)	(19,464	)
Interest rate swaption agreements	—		1,992		1,992		—		(5,927	)	(5,927	)
Toledo Spirit time-charter derivative	(10	)	1,080		1,070		326		(1,770	)	(1,444	)
	(6,504	)	11,508		5,004		(6,906	)	(19,929	)	(26,835	)

 

(in thousands of U.S. Dollars)	Nine Months Ended September 30,
	2016						2015
	Realized gains (losses)		Unrealized gains (losses)		Total		Realized gains (losses)		Unrealized gains (losses)		Total
Interest rate swap agreements	(19,750	)	(18,441	)	(38,191	)	(21,856	)	835		(21,021	)
Interest rate swaption agreements	—		(16,765	)	(16,765	)	—		(5,334	)	(5,334	)
Toledo Spirit time-charter derivative	620		3,930		4,550		(244	)	(3,380	)	(3,624	)
	(19,130	)	(31,276	)	(50,406	)	(22,100	)	(7,879	)	(29,979	)

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(in thousands of U.S. Dollars)	Nine Months Ended September 30,
	2016		2015
Net cash flow from operating activities	150,921		204,198
Net cash flow used for financing activities	(117,591	)	(52,025	)
Net cash flow from (used for) investing activities	132,584		(157,639	)

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Contractual Obligations and Contingencies

The following table summarizes our contractual obligations as at September 30, 2016 :

		Total			Remainder of 2016			2017			2018			2019			2020		Beyond 2020
		(in millions of U.S. Dollars)
U.S. Dollar-Denominated Obligations:
Long-term debt (1)
Scheduled repayments		500.3			21.1			102.0			98.6			54.9			52.7		171.0
Repayments at maturity (2)		913.4			—			150.0			436.9			31.5			—		295.0
Commitments under capital leases (3)		545.8			9.5			61.0			57.4			30.1			30.1		357.7
Commitments under operating leases (4)		301.5			6.0			24.1			24.1			24.1			24.1		199.1
Newbuilding installments/shipbuilding supervision (5)		3,044.6			158.4			1,054.6			1,072.8			558.9			199.9		—
Total U.S. Dollar-Denominated obligations		5,305.6			195.0			1,391.7			1,689.8			699.5			306.8		1,022.8
Euro-Denominated Obligations (6) :
Long-term debt (7)		238.7			4.0			16.6			133.3			9.5			10.3		65.0
Total Euro-Denominated obligations		238.7			4.0			16.6			133.3			9.5			10.3		65.0
Norwegian Kroner-Denominated Obligations (6) :
Long-term debt  (8)		325.6			—			51.2			112.7			—			125.2		36.5
Total Norwegian Kroner-Denominated obligations		325.6			—			51.2			112.7			—			125.2		36.5
Totals		5,869.9			199.0			1,459.5			1,935.8			709.0			442.3		1,124.3

(1)

Excludes expected interest payments of $9.8 million (remainder of 2016 ), $28.9 million ( 2017 ), $20.1 million ( 2018 ), $12.7 million ( 2019 ), $11.6 million ( 2020 ) and $38.0 million (beyond 2020 ). Expected interest payments reflect the refinancing completed in November 2016 of one of our revolving credit facilities and are based on the existing interest rates (fixed-rate loans) and LIBOR at September 30, 2016 , plus margins on debt that has been drawn that

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(2)	The repayment amounts reflect the November 2016 refinancing of one of our revolving credit facilities maturing in 2016 with a new $170.0 million revolving credit facility maturing in November 2017.

(3)

Includes, in addition to lease payments, amounts we may be or are required to pay to purchase the leased vessels at the end of their respective lease terms. For two of our four capital lease obligations, the lessor has the option to sell two Suezmax tankers under capital lease to us at any time during the remaining lease terms; however, in this table we have assumed the lessor will not exercise its right to sell the two Suezmax tankers to us until after the lease term expire, which is during the years 2017 to 2018 . The purchase price for any Suezmax tanker we are required to purchase would be based on the unamortized portion of the vessel construction financing costs for the vessels, which are included in the table above. We expect to satisfy any such purchase price by assuming the existing vessel financing, although we may be required to obtain separate debt or equity financing to complete any purchases if the lenders do not consent to our assuming the financing obligations. Please read “Item 1 - Financial Statements: Note 5 - Vessel Charters”.

(4)	We have corresponding leases whereby we are the lessor and expect to receive approximately $265.6 million under these leases from the remainder of 2016 to 2029.

(5)	As of September 30, 2016 , we have agreements for the construction of nine wholly-owned LNG carrier newbuildings, of which the estimated remaining costs for these newbuildings totaled $1,537.4 million , including estimated interest and construction supervision fees.

(6)	Euro-denominated and NOK-denominated obligations are presented in U.S. Dollars and have been converted using the prevailing exchange rate as of September 30, 2016 .

(7)

Excludes expected interest payments of $0.7 million (remainder of 2016 ), $2.7 million ( 2017 ), $1.4 million ( 2018 ), $0.2 million ( 2019 ), $0.2 million ( 2020 ) and $0.4 million (beyond 2020 ). Expected interest payments are based on EURIBOR at September 30, 2016 , plus margins that range up to 2.25%, as well as the prevailing U.S. Dollar/Euro exchange rate as of September 30, 2016 . The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our variable-rate debt.

(8)

The repayment amounts reflect the October 2016 refinancing of a portion of our NOK-denominated bonds maturing in May 2017, with the issuance of a new NOK 900 million ($110 million) of senior unsecured bonds that mature in October 2021 and excludes expected interest payments of $4.4 million (remainder of 2016 ), $15.5 million ( 2017 ), $12.4 million ( 2018 ), $8.3 million ( 2019 ), $5.3 million ( 2020 ), and $1.2 million (beyond 2020 ). Expected interest payments are based on NIBOR at September 30, 2016 , plus margins that range up to 5.25%, as well as the prevailing U.S. Dollar/NOK exchange rate as of September 30, 2016 . The expected interest payments do not reflect the effect of the related cross-currency swaps that we have used as an economic hedge of our foreign exchange and interest rate exposure associated with our NOK-denominated long-term debt.

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•	our distribution policy and our ability to make cash distributions on our units or any increases in quarterly distributions, the temporary nature of our current reduced distribution level and the impact of cash distribution reductions on our financial position;

•	the stability and growth of our business and future cash flows;

•	our future financial condition and results of operations and our future revenues, expenses and capital expenditures, and our expected financial flexibility to pursue capital expenditures, acquisitions and other expansion opportunities;

•	our liquidity needs, anticipated funds for liquidity needs and the sufficiency of cash flows;

•	our expected sources of funds for liquidity and working capital needs, our ability to enter into new bank financings and to refinance existing indebtedness and our expected uses of the proceeds from financing transactions;

•	growth prospects and future trends of the markets in which we operate;

•	LNG, LPG and tanker market fundamentals, including the balance of supply and demand in the LNG, LPG and tanker markets and spot LNG, LPG and tanker charter rates;

•	our ability to conduct and operate our business and the business of our subsidiaries in a manner that minimizes taxes imposed upon us and our subsidiaries;

•	the expected lifespan of our vessels, including our expectations as to any impairment of our vessels;

•	our expectations and estimates regarding future charter business, including with respect to minimum charter hire payments, revenues and our vessels’ ability to perform to specifications and maintain their hire rates in the future;

•	our expectations on our customers’ ability to pay for our services, specifically for our six LPG carriers on charter to Skaugen;

•	our ability to maximize the use of our vessels, including the redeployment or disposition of vessels no longer under long-term charter;

•	the future resumption of a LNG plant in Yemen operated by YLNG and expected repayment of deferred hire amounts on our two 52% owned vessels, the Marib Spirit and Arwa Spirit , on charter to YLNG;

•	expected purchases and deliveries of newbuilding vessels, and the newbuildings’ commencement of service under charter contracts;

•	expected financing, deliveries, and charter contract commencement dates with respect to the LPG carrier newbuildings in Exmar LPG BVBA;

•	expected financing for the Yamal LNG Joint Venture;

•	our expectations regarding the financing, schedule and performance of the Bahrain LNG Joint Venture, and our expectations regarding the supply, modification and charter of the FSU vessel for the project;

•	expected funding of our proportionate share of the remaining shipyard installment payments for the BG Joint Venture;

•	the cost of supervision and crew training in relation to the BG Joint Venture, and our expected recovery of a portion of those costs;

•	the expected technical and operational capabilities of newbuildings, including the benefits of the MEGI twin engines in certain LNG carrier newbuildings;

•	our ability to maintain long-term relationships with major LNG and LPG importers and exporters and major crude oil companies;

•	our ability to leverage to our advantage Teekay Corporation’s relationships and reputation in the shipping industry;

•	our continued ability to enter into long-term, fixed-rate time-charters with our LNG and LPG customers;

•	obtaining LNG and LPG projects that we or Teekay Corporation bid on;

•	the expected timing, amount and method of financing for our newbuilding vessels and the possible purchase of two of our leased Suezmax tankers, the Teide Spirit and the Toledo Spirit ;

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•	our expectations regarding whether the UK taxing authority can successfully challenge the tax benefits available under certain of our former and current leasing arrangements, and the potential financial exposure to us if such a challenge is successful;

•	our hedging activities relating to foreign exchange, interest rate and spot market risks, and the effects of fluctuations in foreign exchange, interest rate and spot market rates on our business and results of operations;

•	the potential impact of new accounting guidance;

•	our expectations regarding the possibility of goodwill impairment;

•	anticipated taxation of our partnership and its subsidiaries; and

•	our business strategy and other plans and objectives for future operations.

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		Expected Maturity Date
		Remainder of 2016																					Fair Value Liability
																	There-after
					2017			2018			2019			2020						Total						Rate (1)
		(in millions of U.S. Dollars, except percentages)
Long-Term Debt:
Variable Rate ($U.S.) (2)		21.1			252.0			535.5			86.4			52.7			466.0			1,413.7			(1,361.8	)		2.2	%
Variable Rate (Euro) (3)(4)		4.0			16.6			133.3			9.5			10.3			65.0			238.7			(228.0	)		1.2	%
Variable Rate (NOK) (4)(5)		—			51.2			112.7			—			125.2			36.5			325.6			(318.5	)		5.4	%
Capital Lease Obligations
Fixed-Rate ($U.S.) (6)		4.1			40.3			39.1			13.5			14.3			285.7			397.0			(397.0	)		5.5	%
Average Interest Rate (7)		5.5	%		4.9	%		6.1	%		5.5	%		5.5	%		5.5	%		5.5	%
Interest Rate Swaps : (8)
Contract Amount ($U.S.) (9)		2.1			324.5			232.9			155.8			35.3			277.3			1,027.9			(88.2	)		3.5	%
Average Fixed Pay Rate (2)		1.6	%		4.1	%		3.6	%		2.7	%		3.5	%		3.4	%		3.5	%
Contract Amount (Euro) (4)(10)		4.0			16.7			133.3			9.5			10.2			65.0			238.7			(40.9	)		3.1	%
Average Fixed Pay Rate (3)		3.1	%		3.1	%		2.6	%		3.7	%		3.7	%		3.9	%		3.1	%

(1)

Rate refers to the weighted-average effective interest rate for our long-term debt and capital lease obligations, including the margin we pay on our floating-rate debt and the average fixed pay rate for our interest rate swap agreements. The average interest rate for our capital lease obligations is the weighted-average interest rate implicit in our lease obligations at the inception of the leases. The average fixed pay rate for our interest rate swaps excludes the margin we pay on our floating-rate term loans, which as of September 30, 2016 ranged from 0.30% to 2.80%. Please read “Item 1 – Financial Statements: Note 7 – Long-Term Debt”.

(2)	Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR. The repayment amounts reflect the refinancing completed in November 2016 of one of our revolving credit facility scheduled to mature in 2016 with a new $170.0 million revolving credit facility maturing in November 2017.

(3)	Interest payments on Euro-denominated debt and interest rate swaps are based on EURIBOR.

(4)	Euro-denominated and NOK-denominated amounts have been converted to U.S. Dollars using the prevailing exchange rate as of September 30, 2016 .

(5)

Interest payments on our NOK-denominated debt and on our cross-currency swaps are based on NIBOR. Our NOK 700 million, NOK 900 million, and NOK 1,000 million bonds have been economically hedged with cross-currency swaps, to swap all interest and principal payments into U.S. Dollars, with the respective interest payments fixed at a rate of 6.88%, 6.43%, and 5.92%, respectively, and the transfer of principal locked in at $125.0 million, $150.0 million, and $134.0 million, respectively, upon maturity. The repayment amounts reflect the October 2016 refinancing of a portion of our NOK-denominated bonds maturing in May 2017, with the issuance of a new NOK 900 million ($110 million) of senior unsecured bonds that mature in October 2021. Please see below in the foreign currency fluctuation section and read “Item 1 – Financial Statements: Note 10 – Derivative Instruments and Hedging Activities”.

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(6)	The amount of capital lease obligations represents the present value of minimum lease payments together with our purchase obligation, as applicable.

(7)	The average interest rate is the weighted-average interest rate implicit in the capital lease obligations at the inception of the leases. Interest rate adjustments on these leases have corresponding adjustments in charter receipts under the terms of the charter contracts to which these leases relate.

(8)

Interest rate swaps does not reflect our swaption agreements, whereby we have a one-time option to enter into an interest rate swap at a fixed rate with a third party, and the third party has a one-time option to require us to enter into an interest rate swap at a fixed rate. If we or the third party exercises its option, there will be cash settlements for the fair value of the interest rate swap in lieu of taking delivery of the actual interest rate swap. The net fair value of the interest rate swaption agreements as at September 30, 2016 was a liability of $17.5 million . Please read “Item 1 - Financial Statements: Note 10 - Derivative Instruments and Hedging Activities”.

(9)	The average variable receive rate for our U.S. Dollar-denominated interest rate swaps is set at 3-month or 6-month LIBOR.

(10)	The average variable receive rate for our Euro-denominated interest rate swaps is set at 1-month EURIBOR.

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•	REGISTRATION STATEMENT ON FORM S-8 (NO.333-124647) FILED WITH THE SEC ON MAY 5, 2005

•	REGISTRATION STATEMENT ON FORM F-3 (NO.333-170838) FILED WITH THE SEC ON NOVEMBER 24, 2010

•	REGISTRATION STATEMENT ON FORM F-3 (NO.333-190783) FILED WITH THE SEC ON AUGUST 22, 2013

•	REGISTRATION STATEMENT ON FORM F-3ASR (NO.333-197479) FILED WITH THE SEC ON JULY 17, 2014

•	REGISTRATION STATEMENT ON FORM F-3 (NO.333-197651) FILED WITH THE SEC ON JULY 25, 2014

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				TEEKAY LNG PARTNERS L.P.
				By:	Teekay GP L.L.C., its General Partner
Date: November 28, 2016				By:	/s/ Peter Evensen
				Peter Evensen
				Chief Executive Officer and Chief Financial Officer
				(Principal Financial and Accounting Officer)

37