TOO Teekay Offshore Partners LP

Teekay Offshore GP L.L.C. (TOO GP), the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership), today reported the Partnership’s results for the quarter and year ended December 31, 2019.

Consolidated Financial Summary

		Three Months Ended								Year Ended
		December 31,			September 30,			December 31,		December 31,			December 31,
(in thousands of U.S. Dollars, except per unit data)		2019			2019 (2)			2018		2019			2018
		(unaudited)			(unaudited)			(unaudited)		(unaudited)			(unaudited)
GAAP FINANCIAL RESULTS
Revenues		312,142			299,447			445,213		1,268,000			1,416,424
Net (loss) income		(285,549	)		(34,769	)		67,842		(350,895	)		(123,945	)
Limited partners' interest in net (loss) income per
common unit - basic		(0.71	)		(0.10	)		0.14		(0.92	)		(0.36	)
NON-GAAP FINANCIAL RESULTS
Adjusted EBITDA (1)		167,147			157,660			289,548		671,898			782,521
Adjusted net income attributable to the partners
preferred unitholders (1)		19,796			4,659			130,463		58,696			149,587
Limited partners' interest in adjusted net income
per common unit (1)		0.03			(0.01	)		0.30		0.06			0.29

1. These are non-GAAP financial measures. Please refer to "Definitions and Non-GAAP Financial Measures" and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).
2. Please refer to Appendices to the release announcing the results for the third quarter of 2019 attached as Exhibit 1 to the Form 6-K filed with the Securities and Exchange Commission on November 7, 2019 for a reconciliation of these non-GAAP measures to the most directly comparable financial measures under GAAP.

Fourth Quarter of 2019 Compared to Fourth Quarter of 2018

Revenues were $312 million in the fourth quarter of 2019, a decrease of $133 million, compared to $445 million in the same quarter of the prior year, primarily due to $91 million of revenue related to the positive settlement with Petróleo Brasileiro S.A. and certain of its subsidiaries (together Petrobras) recorded during the fourth quarter of 2018, a decrease of $21 million due to the amortization of non-cash deferred revenue relating to the Piranema Spirit FPSO unit during the fourth quarter of 2018, a $12 million decrease due to fewer vessels in our CoA shuttle tanker fleet during the fourth quarter of 2019 and the redelivery of an older shuttle tanker in August 2019 and an $8 million decrease due to the completion of the Ostras FPSO charter contract in March 2019.

Net loss increased to $286 million in the fourth quarter of 2019 compared to net income of $68 million in the same quarter of the prior year. A $326 million increase in the net write-down of vessels and the decrease in revenues described above was partially offset by a $61 million increase in unrealized fair value gains mainly related to interest rate swap derivative instruments, reflecting increased interest rate levels in the fourth quarter of 2019 compared to decreased interest rate levels in the fourth quarter of 2018, a $21 million increase in equity income, a $10 million increase in foreign currency exchange gains, a $6 million decrease in depreciation and amortization expense due to the sale of certain shuttle tankers and a $5 million decrease in interest expense.

Non-GAAP Adjusted EBITDA was $167 million in the fourth quarter of 2019, representing a decrease of $123 million, compared to $290 million in the fourth quarter of 2018. This decrease was primarily due to the decrease in revenues, as explained above, partially offset by a $9 million increase in earnings from equity-accounted joint ventures.

Non-GAAP Adjusted Net Income was $20 million in the fourth quarter of 2019, a decrease of $110 million compared to $130 million in the fourth quarter of 2018, primarily due to the $123 million decrease in Non-GAAP Adjusted EBITDA, partially offset by a $6 million decrease in depreciation and amortization expense and a $5 million decrease in interest expense.

Fourth Quarter of 2019 Compared to Third Quarter of 2019

Revenues increased by $13 million to $312 million for the fourth quarter of 2019, compared to $299 million for the third quarter of 2019, mainly due to increased utilization and rates in the shuttle tanker and towage fleets, and net loss increased by $251 million in the fourth quarter of 2019, compared to the prior quarter. The net loss during the fourth quarter of 2019 was impacted by a $342 million write-down of vessels. This was partially offset by the increase in revenues, as explained above, a $39 million increase in the consolidated unrealized fair value gains mainly related to interest rate swap derivative instruments, a $23 million increase in equity income due to the recognition of a maintenance bonus during the fourth quarter of 2019 and unrealized fair value gains on derivative instruments within the equity-accounted joint ventures, and an $11 million increase in foreign currency exchange gains.

Non-GAAP Adjusted EBITDA was $167 million in the fourth quarter of 2019, representing an increase of $9 million compared to $158 million in the third quarter of 2019. The increase was primarily due to an $8 million increase in earnings in the FPSO segment mainly from the recognition of the maintenance bonus during the fourth quarter of 2019 in the Pioneiro de Libra FPSO equity-accounted joint venture.

Non-GAAP Adjusted Net Income was $20 million in the fourth quarter of 2019, an increase of $15 million compared to $5 million in the third quarter of 2019 due to the increase in Non-GAAP Adjusted EBITDA and a $6 million decrease in interest expense.

Fiscal Year 2019 Compared to Fiscal Year 2018

Revenues were $1,268 million for the year ended December 31, 2019, compared to $1,416 million for the prior fiscal year. The decrease in revenues was primarily due to $91 million of revenue related to the positive settlement with Petrobras recorded during the fourth quarter of 2018, a $33 million decrease due to reduced charter rates under the Piranema Spirit FPSO contract extension and the amortization of non-cash deferred revenue in 2018, and a $30 million decrease due to the expiration of the Ostras FPSO charter contract in March 2019.

Net loss increased by $227 million for the year ended December 31, 2019 compared to the prior fiscal year mainly due to the $148 million decrease in revenues explained above, a $109 million increase in the net write-down of vessels and a $98 million increase in realized and unrealized losses on derivative instruments, partially offset by the absence in 2019 of $55 million of losses on debt repurchases, a $30 million decrease in operating expenses, a $23 million decrease in depreciation and amortization expense, a $15 million decrease in income tax expense and a $12 million increase in foreign currency exchange gains.

Non-GAAP Adjusted EBITDA was $672 million for the year ended December 31, 2019, compared to $783 million in the prior fiscal year, representing a decrease of $111 million. This decrease was due to the decrease in revenues, as explained above, in particular the absence of the $91 million Petrobras settlement, partially offset by a $30 million decrease in operating expenses.

Non-GAAP Adjusted Net Income was $59 million for the year ended December 31, 2019, a decrease of $91 million compared to $150 million for 2018, primarily due to the decrease in Non-GAAP Adjusted EBITDA, partially offset by a $23 million decrease in depreciation and amortization expense.

Please refer to “Operating Results” for additional information on variances by segment and Appendices A and B for reconciliations between GAAP net (loss) income and Non-GAAP Adjusted EBITDA and Adjusted Net Income, respectively.

Summary of Recent Events

Delivery of Shuttle Tanker Newbuilding

In January 2020, the Partnership took delivery of one LNG-fueled Aframax shuttle tanker newbuilding, the Aurora Spirit. The vessel was constructed based on the Partnership's E-shuttle design, which incorporates technologies intended to increase fuel efficiency and reduce emissions, including LNG fuel and recovered volatile organic compounds (VOCs) as secondary fuel, as well as battery packs for flexible power distribution and blackout prevention. The vessel will commence operations under an existing master agreement with Equinor in the North Sea.

Completion of Brookfield Acquisition by Merger

On January 22, 2020, Brookfield Business Partners L.P., together with certain of its affiliates and institutional partners (collectively, Brookfield), completed its acquisition by merger (the Merger) of all of the outstanding publicly held and listed common units representing limited partner interests of the Partnership (common units) held by parties other than Brookfield (unaffiliated unitholders) pursuant to the agreement and plan of merger (the Merger Agreement) among the Partnership, TOO GP and certain members of Brookfield.

Under the terms of the Merger Agreement, common units held by unaffiliated unitholders were converted into the right to receive $1.55 in cash per common unit (the cash consideration), other than common units held by unaffiliated unitholders who elected to receive the equity consideration (as defined below). As an alternative to receiving the cash consideration, each unaffiliated unitholder had the option to elect to forego the cash consideration and instead receive one newly designated unlisted Class A Common Unit of the Partnership per common unit (the equity consideration). The Class A Common Units are economically equivalent to the common units held by Brookfield following the Merger, but have limited voting rights and limited transferability.

As a result of the Merger, Brookfield owns 100% of the Class B Common Units, representing approximately 98.7% of the outstanding common units of the Partnership. All of the Class A Common Units, representing approximately 1.3% of the outstanding common units of the Partnership as of the closing of the Merger, are held by the unaffiliated unitholders who elected to receive the equity consideration in respect of their common units.

As a result of the Merger, and that the exercise price of each of the outstanding warrants exceeded the cash consideration, the warrants were automatically canceled and ceased to exist. No consideration was delivered in respect thereof. Pursuant to the terms of the Merger Agreement, the Partnership’s outstanding preferred units were unchanged and remain outstanding following the Merger.

Trading of the Partnership's common units was suspended on the New York Stock Exchange (the NYSE) before the beginning of trading on January 23, 2020. The Partnership requested that the NYSE file a Form 25 with the United States Securities and Exchange Commission (the SEC) notifying the SEC of the delisting of its common units on the NYSE and the deregistration of the common units. The deregistration of the common units will become effective 90 days after the filing of the Form 25 or such shorter period as may be determined by the SEC.

Plan to Rebrand as Altera Infrastructure

In January 2020, following the closing of the Merger, the Partnership announced that it intends to change its name in due course to Altera Infrastructure L.P. and, effective from March 24, 2020, to rebrand the consolidated group of companies under the new umbrella of Altera Infrastructure.

Changes to Board of Directors

In January 2020, the Partnership announced the following changes to the Board of Directors of TOO GP:

• The retirement of David L. Lemmon as a TOO GP Director and a member of the Audit, Compensation and Conflicts Committees, effective January 23, 2020, after 14 years with the TOO GP’s Board of Directors.
• Mr. Lemmon's replacement on the Audit Committee by Bill Utt, who is Chairman of the Board and Chairman of the Governance Committee.
• The prospective retirement of Kenneth Hvid, CEO of Teekay Corporation, as a TOO GP Director effective June 17, 2020, after nine years with TOO GP's Board of Directors.

Financing

In October 2019, a subsidiary of the Partnership, Teekay Shuttle Tankers L.L.C., successfully placed $125 million of senior unsecured green floating-rate bonds due in October 2024. The bonds carry a coupon of three-month LIBOR plus 6.50%. The proceeds from the bonds will be to partially fund four LNG-fueled shuttle tankers, one of which delivered to the Partnership in January 2020, and the remaining of which vessels are currently under construction with expected deliveries through 2021.

In October 2019, the Partnership secured a $100 million bridge term loan to provide pre- and post-delivery financing for a shuttle tanker newbuilding to operate on the East Coast of Canada, which matures in August 2022. The debt facility bears interest at a rate of LIBOR plus 250 basis points until March 2020 and increases by 25 basis points per quarter thereafter. The Partnership intends to refinance the bridge loan into the existing East Coast Canada shuttle financing secured by the three vessels in operation. The facility remains undrawn.

Økokrim Investigation

In January 2020, Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) and the local Stavanger police raided Teekay Shipping Norway AS' (a subsidiary of the Partnership) premises, based on a search warrant issued pursuant to suspected violations of Norwegian pollution and export laws in connection with the export of the Navion Britannia shuttle tanker from the Norwegian Continental Shelf in March 2018. The Partnership has not identified such violations but continues to evaluate any potential liabilities together with advisors.

Liquidity Update

As of December 31, 2019, the Partnership had total liquidity of $304 million, including $105 million undrawn on a revolving credit facility, an increase of $33 million compared to September 30, 2019. The increase in liquidity was primarily due to the Partnership's issuance of $125 million of senior unsecured green bonds during the fourth quarter of 2019.

Operating Results

The commentary below compares certain results of our operating segments (including the non-GAAP measure of Adjusted EBITDA) for the three months ended December 31, 2019 to the same period of the prior year, unless otherwise noted.

FPSO Segment

	Three Months Ended
	December 31,		September 30,		December 31,
	2019		2019		2018
(in thousands of U.S. Dollars)	(unaudited)		(unaudited)		(unaudited)
Revenues	115,258		113,362		143,651
Adjusted EBITDA	81,739		73,550		108,543

Adjusted EBITDA (including Adjusted EBITDA from equity-accounted vessels) decreased by $27 million primarily due to the absence of $21 million in the amortization of non-cash deferred revenue relating to the Piranema Spirit FPSO unit and a decrease of $8 million due to the expiration of the charter contract of the Ostras FPSO unit in March 2019.

Adjusted EBITDA for the fourth quarter of 2019 increased by $8 million, compared to the third quarter of 2019, primarily due the recognition of a maintenance bonus during the fourth quarter of 2019 relating to the Libra FPSO unit in an equity-accounted joint venture.

Shuttle Tanker Segment

	Three Months Ended
	December 31,		September 30,		December 31,
	2019		2019 (2)		2018
(in thousands of U.S. Dollars)	(unaudited)		(unaudited)		(unaudited)
Revenues	141,541		133,659		206,212
Adjusted EBITDA	65,339		64,421		124,038

Adjusted EBITDA decreased by $59 million mainly due to $55 million of revenues related to the positive settlement with Petrobras received in the fourth quarter of the prior year and a $5 million decrease due to the redelivery of the Stena Sirita from its charter contract in August 2019, which had reached the end of its estimated useful life.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

FSO Segment

	Three Months Ended
	December 31,		September 30,		December 31,
	2019		2019		2018
(in thousands of U.S. Dollars)	(unaudited)		(unaudited)		(unaudited)
Revenues	35,690		35,168		36,734
Adjusted EBITDA	22,415		23,703		25,508

Adjusted EBITDA decreased by $3 million mainly due to higher repair and maintenance expenses.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

UMS Segment

	Three Months Ended
	December 31,			September 30,			December 31,
	2019			2019			2018
(in thousands of U.S. Dollars)	(unaudited)			(unaudited)			(unaudited)
Revenues	446			441			36,536
Adjusted EBITDA	(2,310	)		(1,574	)		35,011

Adjusted EBITDA decreased by $37 million due to the absence of $37 million of revenues related to the positive settlement with Petrobras received in the same quarter of the prior year.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

Towage Segment

	Three Months Ended
	December 31,		September 30,			December 31,
	2019		2019			2018
(in thousands of U.S. Dollars)	(unaudited)		(unaudited)			(unaudited)
Revenues	19,207		16,817			15,252
Adjusted EBITDA	1,467		(1,198	)		(1,202	)

Adjusted EBITDA increased by $3 million compared to both prior periods presented due to higher utilization.

Conventional Tanker Segment

	Three Months Ended
	December 31,		September 30,		December 31,
	2019		2019		2018
(in thousands of U.S. Dollars)	(unaudited)		(unaudited)		(unaudited)
Revenues	—		—		6,828
Adjusted EBITDA	—		—		(880	)

The Partnership redelivered the two in-chartered vessels to their owners in March and April 2019, respectively, and no longer has activity in the conventional tanker segment.

Teekay Offshore’s Fleet

The following table summarizes Teekay Offshore’s fleet as of February 6, 2020. In comparison to the previously-reported fleet table in the release for the third quarter of 2019, Teekay Offshore's fleet decreased by two vessels due to the sale of the Navion Hispania and Stena Sirita shuttle tankers in January 2020, both of which vessels had reached the end of their estimated useful lives.

	Number of Vessels
	Owned Vessels			Chartered-in Vessels			Committed Newbuildings			Total
FPSO Segment	8		(i)	—			—			8
Shuttle Tanker Segment	24		(ii)	2			6		(iii)	32
FSO Segment	5			—			—			5
UMS Segment	1			—			—			1
Towage Segment	10			—			—			10
Total	48			2			6			56

1. Includes two FPSO units, the Cidade de Itajai and Libra, in which Teekay Offshore’s ownership interest is 50 percent.
2. Includes four shuttle tankers in which Teekay Offshore’s ownership interest is 50 percent and one HiLoad DP unit.
3. Includes six DP2 shuttle tanker newbuildings scheduled for delivery through early-2022, one of which will operate under Teekay Offshore's master agreement with Equinor in the North Sea, four of which will join Teekay Offshore's CoA portfolio in the North Sea and one which will operate under Teekay Offshore's existing contracts on the East Coast of Canada.

Conference Call

The Partnership plans to host a conference call on Thursday, February 6, 2020 at 12:00 p.m. (ET) to discuss the results for the fourth quarter of 2019. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

• By dialing 1-800-367-2403 or +1 (647) 490-5367, if outside North America, and quoting conference ID code 3380755
• 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 one year).

An accompanying Fourth Quarter 2019 Earnings Presentation will also be available at www.teekayoffshore.com in advance of the conference call start time.

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, among others: the timing and certainty of the delisting and deregistration of the Partnership's common units; the timing of the retirement of Kenneth Hvid from TOO GP's Board of Directors; the expected use of proceeds from the Partnership's issuance of green bonds; the intended refinancing of the Partnership's bridge loan; and the timing of shuttle tanker newbuilding deliveries and the commencement of related contracts. 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: changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth, particularly in or related to North Sea, Brazil and East Coast of Canada offshore fields; shipyard delivery delays and cost overruns; delays in the commencement of charter contracts; 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, 2018. 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.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P. is a leading international midstream services provider to the offshore oil production industry, primarily focused on the ownership and operation of critical infrastructure assets in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay Offshore has consolidated assets of approximately $4.9 billion, comprised of 56 offshore assets, including floating production, storage and offloading (FPSO) units, shuttle tankers (including six newbuildings), floating storage and offtake (FSO) units, long-distance towing and offshore installation vessels and a unit for maintenance and safety (UMS). The majority of Teekay Offshore’s fleet is employed on medium-term, stable contracts. Brookfield owns 100 percent of Teekay Offshore’s general partner.

Teekay Offshore's preferred units trade on the New York Stock Exchange under the symbols "TOO PR A", "TOO PR B" and "TOO PR E", respectively.

For Investor Relations enquiries contact:

Jan Rune Steinsland, Chief Financial OfficerTel:  +47 51 44 27 00Website: www.teekayoffshore.com

Teekay Offshore Partners L.P.Summary Consolidated Statements of (Loss) Income

		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(in thousands of U.S. Dollars, except per unit data)		2019			2019			2018			2019			2018
		(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues		312,142			299,447			445,213			1,268,000			1,416,424
Voyage expenses		(32,314	)		(30,906	)		(39,402	)		(129,910	)		(151,808	)
Vessel operating expenses		(107,614	)		(99,400	)		(108,592	)		(426,951	)		(437,671	)
Time-charter hire expenses		(10,236	)		(11,119	)		(13,281	)		(44,427	)		(52,616	)
Depreciation and amortization		(84,911	)		(86,336	)		(91,023	)		(349,379	)		(372,290	)
General and administrative		(25,094	)		(16,947	)		(14,335	)		(76,245	)		(65,427	)
(Write-down) and gain on sale of vessels		(342,383	)		(1,498	)		(16,414	)		(332,125	)		(223,355	)
Restructuring recovery (charge)		—			—			379			—			(1,520	)
Operating (loss) income		(290,410	)		53,241			162,545			(91,037	)		111,737
Interest expense		(48,085	)		(53,767	)		(53,424	)		(205,709	)		(199,395	)
Interest income		1,012			1,776			1,215			5,111			3,598
Realized and unrealized gain (loss)
	on derivative instruments	14,634			(27,600	)		(40,465	)		(85,195	)		12,808
Equity income		26,135			3,385			5,237			32,794			39,458
Foreign currency exchange gain (loss)		6,359			(5,387	)		(3,344	)		2,193			(9,413	)
Losses on debt repurchases		—			—			—			—			(55,479	)
Other income (expense) - net		870			(101	)		(40	)		(1,225	)		(4,602	)
(Loss) income before income tax expense		(289,485	)		(28,453	)		71,724			(343,068	)		(101,288	)
Income tax recovery (expense)		3,936			(6,316	)		(3,882	)		(7,827	)		(22,657	)
Net (loss) income		(285,549	)		(34,769	)		67,842			(350,895	)		(123,945	)
Non-controlling interests in net (loss) income		147			(1,817	)		1,476			(1,384	)		(7,161	)
Preferred unitholders' interest in net (loss) income		8,038			8,038			8,038			32,150			31,485
General partner’s interest in net (loss) income		(2,223	)		(311	)		443			(2,891	)		(1,128	)
Limited partners’ interest in net (loss) income		(291,511	)		(40,679	)		57,885			(378,770	)		(147,141	)
Limited partner's interest in net (loss) income per
	common unit
	- basic	(0.71	)		(0.10	)		0.14			(0.92	)		(0.36	)
	- diluted	(0.71	)		(0.10	)		0.12			(0.92	)		(0.36	)
Weighted-average number of common units
	- basic	411,158,400			410,801,717			410,314,977			410,727,035			410,261,239
	- diluted	411,158,400			410,801,717			475,565,613			410,727,035			410,261,239
Total number of common units outstanding
	at end of period	411,148,991			411,188,338			410,314,977			411,148,991			410,314,977

Teekay Offshore Partners L.P.Consolidated Balance Sheets

		As at		As at		As at
		December 31, 2019		September 30, 2019		December 31, 2018
(in thousands of U.S. Dollars)		(unaudited)		(unaudited)		(unaudited)
ASSETS
Current
Cash and cash equivalents		199,388		270,827		225,040
Restricted cash		17,798		17,961		8,540
Accounts receivable		204,020		168,593		141,903
Vessels held for sale		15,374		19,756		12,528
Prepaid expenses		29,887		28,136		32,199
Due from related parties		—		—		58,885
Other current assets		7,467		5,830		11,879
Total current assets		473,934		511,103		490,974
Restricted cash - long-term		89,070		—		—
Vessels and equipment
At cost, less accumulated depreciation		3,511,758		3,929,521		4,196,909
Advances on newbuilding contracts		257,017		220,186		73,713
Investment in equity-accounted joint ventures		234,627		212,589		212,202
Deferred tax asset		7,000		2,146		9,168
Due from related parties		—		—		949
Other assets		220,716		205,775		198,992
Goodwill		129,145		129,145		129,145
Total assets		4,923,267		5,210,465		5,312,052
LIABILITIES AND EQUITY
Current
Accounts payable		56,699		105,377		16,423
Accrued liabilities		140,976		111,861		129,896
Deferred revenues		53,728		57,735		55,750
Due to related parties		20,000		—		183,795
Current portion of derivative instruments		18,956		18,061		23,290
Current portion of long-term debt		353,238		358,781		554,336
Other current liabilities		14,793		4,198		15,062
Total current liabilities		658,390		656,013		978,552
Long-term debt		2,825,712		2,704,685		2,543,406
Derivative instruments		143,222		168,965		94,354
Due to related parties		—		125,000		—
Other long-term liabilities		223,877		188,147		236,616
Total liabilities		3,851,201		3,842,810		3,852,928
Equity
Limited partners - common units		505,394		796,815		883,090
Limited partners - preferred units		384,274		384,274		384,274
General Partner		12,164		14,385		15,055
Warrants		132,225		132,225		132,225
Accumulated other comprehensive income		4,410		6,504		7,361
Non-controlling interests		33,599		33,452		37,119
Total equity		1,072,066		1,367,655		1,459,124
Total liabilities and total equity		4,923,267		5,210,465		5,312,052

Teekay Offshore Partners L.P.Consolidated Statements of Cash Flows

	Year Ended
	December 31, 2019			December 31, 2018
(in thousands of U.S. Dollars)	(unaudited)			(unaudited)
Cash, cash equivalents and restricted cash provided by (used for)
OPERATING ACTIVITIES
Net loss	(350,895	)		(123,945	)
Adjustments to reconcile net loss to net operating cash flow:
Unrealized loss (gain) on derivative instruments	50,956			(53,419	)
Equity income, net of dividends received of $17,655 (2018 - $6,200)	(15,139	)		(33,258	)
Depreciation and amortization	349,379			372,290
Write-down and (gain) on sale of vessels	332,125			223,355
Deferred income tax expense	3,161			18,606
Amortization of in-process revenue contracts	(15,062	)		(35,219	)
Expenditures for dry docking	(15,890	)		(21,411	)
Other	(31,142	)		16,871
Change in non-cash working capital items related to operating activities	12,416			(83,227	)
Net operating cash flow	319,909			280,643
FINANCING ACTIVITIES
Proceeds from long-term debt	492,517			734,698
Scheduled repayments of long-term debt and settlement of related swaps	(410,429	)		(567,298	)
Prepayments of long-term debt and settlement of related swaps	—			(457,426	)
Financing issuance costs	(23,755	)		(14,128	)
Proceeds from financing related to sales and leaseback of vessels	23,800			—
Proceeds from issuance of preferred units	—			120,000
Expenses relating to equity offerings	—			(3,997	)
Proceeds from credit facility due to related parties	95,000			125,000
Prepayments of credit facility due to related parties	(200,000	)		—
Cash distributions paid by the Partnership	(32,150	)		(46,675	)
Cash distributions paid by subsidiaries to non-controlling interests	(3,636	)		(12,048	)
Cash contributions paid from non-controlling interests to subsidiaries	1,500			1,500
Other	(865	)		(964	)
Net financing cash flow	(58,018	)		(121,338	)
INVESTING ACTIVITIES
Net payments for vessels and equipment, including advances on newbuilding
contracts and conversion costs	(214,670	)		(233,736	)
Proceeds from sale of vessels and equipment	33,341			30,049
Investment in equity-accounted joint ventures	(7,886	)		(3,000	)
Direct financing lease payments received	—			5,414
Acquisition of companies from Teekay Corporation (net of cash acquired of $26.6	—			25,254
million)
Net investing cash flow	(189,215	)		(176,019	)
Increase (decrease) in cash, cash equivalents and restricted cash	72,676			(16,714	)
Cash, cash equivalents and restricted cash, beginning of the year	233,580			250,294
Cash, cash equivalents and restricted cash, end of the year	306,256			233,580

Definitions and Non-GAAP Financial Measures

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the U.S. Securities and Exchange Commission (SEC). These non-GAAP financial measures, including Consolidated Adjusted EBITDA, Adjusted EBITDA and Adjusted Net Income, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings, and may not be comparable to similar measures presented by other companies. These non-GAAP measures are used by management, and the Partnership believes that these supplementary metrics assist investors and other users of its financial reports in comparing financial and operating performance of the Partnership across reporting periods and with other companies.

Non-GAAP Financial Measures

Consolidated Adjusted EBITDA represents net (loss) income before interest, taxes, and depreciation and amortization and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include vessel write-downs, gains or losses on the sale of vessels, unrealized gains or losses on derivative instruments, foreign exchange gains or losses, losses on debt repurchases, and certain other income or expenses. Consolidated Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Partnership's performance, views these gains or losses as an element of interest expense, and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments.  Consolidated Adjusted EBITDA also excludes equity income as the Partnership does not control its equity-accounted investments, and as a result, the Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted investments is retained within the entity in which the Partnership holds the equity-accounted investment or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of any such distributions to the Partnership and other owners.

Adjusted EBITDA represents Consolidated Adjusted EBITDA further adjusted to include the Partnership's proportionate share of consolidated adjusted EBITDA from its equity-accounted joint ventures and to exclude the non-controlling interests' proportionate share of the consolidated adjusted EBITDA from the Partnership's consolidated joint ventures. Readers are cautioned when using Adjusted EBITDA as a liquidity measure as the amount contributed from Adjusted EBITDA from the equity-accounted investments may not be available or distributed to the Partnership in the periods such Adjusted EBITDA is generated by the equity-accounted investments. Please refer to Appendices A and C of this release for reconciliations of Adjusted EBITDA to net (loss) income and equity income, respectively, the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.

Adjusted Net Income represents net (loss) income adjusted to exclude the impact of certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance consistent with the calculation of Adjusted EBITDA. Adjusted Net Income includes realized gains or losses on interest rate swaps as an element of interest expense and excludes income tax expenses or recoveries from changes in valuation allowance or uncertain tax provisions. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net (loss) income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.

Teekay Offshore Partners L.P.Appendix A - Reconciliation of Non-GAAP Financial Measures Adjusted EBITDA

			Three Months Ended						Year Ended
			December 31,						December 31,
			2019			2018			2019			2018
(in thousands of U.S. Dollars)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net (loss) income			(285,549	)		67,84			(350,895	)		(123,945	)
	Depreciation and amortization		84,911			91,023			349,379			372,290
	Interest expense, net of interest income		47,073			52,209			200,598			195,797
	Income tax (recovery) expense		(3,936	)		3,882			7,827			22,657
EBITDA			(157,501	)		214,956			206,909			466,799
Add (subtract) specific income statement items affecting EBITDA:
	Write-down and (gain) on sale of vessels		342,383			16,414			332,125			223,355
	Realized and unrealized (gain) loss on derivative instruments		(14,634	)		40,465			85,195			(12,808	)
	Equity income		(26,135	)		(5,237	)		(32,794	)		(39,458	)
	Foreign currency exchange (gain) loss		(6,359	)		3,344			(2,193	)		9,413
	Losses on debt repurchases		—			—			—			55,479
	Other (income) expense - net		(870	)		40			1,225			4,602
	Realized loss on foreign currency forward contracts		(1,495	)		(1,470	)		(5,054	)		(1,228	)
Total adjustments			292,890			53,556			378,504			239,355
Consolidated Adjusted EBITDA			135,389			268,512			585,413			706,154
	Add: Adjusted EBITDA from equity-accounted vessels (See Appendix C)		34,198			25,270			97,849			92,637
	Less: Adjusted EBITDA attributable to non-controlling interests (1)		(2,440	)		(4,234	)		(11,364	)		(16,270	)
Adjusted EBITDA			167,147			289,548			671,898			782,521

(1)    Adjusted EBITDA attributable to non-controlling interests is summarized in the table below.  

			Three Months Ended						Year Ended
			December 31,						December 31,
			2019			2018			2019			2018
(in thousands of U.S. Dollars)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net (loss) income attributable to non-controlling interests			147			1,476			(1,384	)		(7,161	)
	Depreciation and amortization		2,006			2,809			10,525			14,617
	Interest expense, net of interest income		308			439			1,470			2,064
EBITDA attributable to non-controlling interests			2,461			4,724			10,611			9,520
Add (subtract) specific income statement items affecting EBITDA:
	(Gain) on sale and write-down of vessels		—			(500	)		746			6,711
	Foreign currency exchange (gain) loss		(21	)		10			7			39
Total adjustments			(21	)		(490	)		753			6,750
Adjusted EBITDA attributable to non-controlling interests			2,440			4,234			11,364			16,270

Teekay Offshore Partners L.P.Appendix B - Reconciliation of Non-GAAP Financial MeasuresAdjusted Net Income

			Three Months Ended					Year Ended
			December 31,					December 31,
			2019			2018		2019			2018
(in thousands of U.S. Dollars, except per unit data)			(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net (loss) income			(285,549	)		67,842		(350,895	)		(123,945	)
Adjustments:
	Net (loss) income attributable to non-controlling interests		147			1,476		(1,384	)		(7,161	)
Net (loss) income attributable to the partners and preferred unitholders			(285,696	)		66,366		(349,511	)		(116,784	)
Add (subtract) specific items affecting net (loss) income:
	Write-down and (gain) on sale of vessels		342,383			16,414		332,125			223,355
	Unrealized (gain) loss on derivative instruments		(25,970	)		34,719		50,956			(52,047	)
	Realized loss on interest rate swap amendments		5,000			—		14,000			16,250
	Foreign currency exchange (gain) loss (1)		(6,359	)		3,201		(2,629	)		6,532
	Losses on debt repurchases		—			—		—			55,479
	Other (income) expense - net		(870	)		40		1,225			4,602
	Deferred income tax (recovery) expense relating to Norwegian tax structure		(4,900	)		2,719		2,126			18,822
	Other adjustments (2)		—			—		—			2,164
	Adjustments related to equity-accounted vessels (3)		(3,813	)		6,514		11,157			(2,036	)
	Adjustments related to non-controlling interests (4)		21			490		(753	)		(6,750	)
Total adjustments			305,492			64,097		408,207			266,371
Adjusted net income attributable to the partners and preferred			19,796			130,463		58,696			149,587
	unitholders
Preferred unitholders' interest in adjusted net income			8,038			8,038		32,150			31,485
General Partner's interest in adjusted net income			89			931		202			898
Limited partners' interest in adjusted net income			11,669			121,494		26,344			117,204
Limited partners' interest in adjusted net income per common unit, basic			0.03			0.30		0.06			0.29
Weighted-average number of common units outstanding, basic			411,158,400			410,314,977		410,727,035			410,261,239

1. Foreign currency exchange (gain) loss primarily relates to the Partnership's revaluation of all foreign currency-denominated assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized gain or loss related to the Partnership's cross-currency swaps related to the Partnership's Norwegian Krone (NOK) bonds, and excludes the realized gain or loss relating to the Partnership's cross-currency swaps and NOK bonds.
2. Other adjustments primarily reflects voyage expenses, vessel operating expense, depreciation and amortization expense and general and administrative expenses relating to vessels undergoing upgrades or newbuilding vessels prior to the commencement of their respective charter contracts.
3. Reflects the Partnership's proportionate share of specific items affecting the net income of the Cidade de Itajai FPSO unit and Libra FPSO unit equity-accounted joint ventures, including the unrealized gain or loss on derivative instruments and the foreign exchange gain or loss.
4. Items affecting net (loss) income include amounts attributable to the Partnership’s consolidated non-wholly-owned subsidiaries. Each item affecting net (loss) income is analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests’ percentage share in this subsidiary to arrive at the non-controlling interests’ share of the amount. The adjustments relate to the gain on sale or write-down of vessels and foreign currency exchange gain or loss within the Partnership's consolidated non-wholly-owned subsidiaries.

Teekay Offshore Partners L.P.Appendix C - Reconciliation of Non-GAAP Financial Measures Adjusted EBITDA From Equity-Accounted Vessels

		Three Months Ended						Three Months Ended
		December 31, 2019						December 31, 2018
(in thousands of U.S. Dollars)		(unaudited)						(unaudited)
		At 100%			Partnership's 50%			At 100%			Partnership's 50%
Revenues		84,543			42,272			77,566			38,783
Vessel and other operating expenses		(16,148	)		(8,074	)		(27,026	)		(13,513	)
Depreciation and amortization		(15,670	)		(7,835	)		(15,905	)		(7,952	)
Operating income of equity-accounted vessels		52,725			26,363			34,635			17,318
Net interest expense		(6,870	)		(3,435	)		(11,441	)		(5,721	)
Realized and unrealized gain (loss) on derivative instruments (1)		6,307			3,154			(13,325	)		(6,663	)
Foreign currency exchange gain		406			203			314			157
Total other items		(157	)		(78	)		(24,452	)		(12,227	)
Net income / equity income of equity-accounted vessels		52,568			26,285			10,183			5,09
	before income tax (expense) recovery
Income tax (expense) recovery		(300	)		(150	)		291			146
Net income / equity income of equity-accounted vessels		52,268			26,135			10,474			5,237
	Depreciation and amortization	15,670			7,835			15,905			7,952
	Net interest expense	6,870			3,435			11,441			5,721
	Income tax expense (recovery)	300			150			(291	)		(146	)
EBITDA		75,108			37,555			37,529			18,764
Add (subtract) specific items affecting EBITDA:
	Realized and unrealized (gain) loss on derivative instruments (1)	(6,307	)		(3,154	)		13,325			6,663
	Foreign currency exchange gain	(406	)		(203	)		(314	)		(157	)
Adjusted EBITDA from equity-accounted vessels		68,395			34,198			50,540			25,270

1. Realized and unrealized (loss) gain on derivative instruments includes an unrealized gain of $7.2 million ($3.6 million at the Partnership’s 50% share) for the three months ended December 31, 2019 and an unrealized loss of $13.3 million ($6.7 million at the Partnership’s 50% share) for the three months ended December 31, 2018 related to interest rate swaps for the Cidade de Itajai and Libra FPSO units.

		Year Ended						Year Ended
		December 31, 2019						December 31, 2018
(in thousands of U.S. Dollars)		(unaudited)						(unaudited)
		At 100%			Partnership's 50%			At 100%			Partnership's 50%
Revenues		261,574			130,787			262,205			131,103
Vessel and other operating expenses		(65,877	)		(32,938	)		(76,931	)		(38,466	)
Depreciation and amortization		(65,067	)		(32,534	)		(61,893	)		(30,947	)
Operating income of equity-accounted vessels		130,630			65,315			123,381			61,690
Net interest expense (1)		(39,499	)		(19,749	)		(37,166	)		(18,585	)
Realized and unrealized loss on derivative instruments(2)		(25,053	)		(12,527	)		(7,047	)		(3,523	)
Foreign currency exchange gain		10			5			636			318
Total other items		(64,542	)		(32,271	)		(43,577	)		(21,790	)
Net income / equity income of equity-accounted vessels		66,088			33,044			79,804			39,900
	before income tax expense
Income tax expense		(501	)		(250	)		(883	)		(442	)
Net income / equity income of equity-accounted vessels		65,587			32,794			78,921			39,458
	Depreciation and amortization	65,067			32,534			61,893			30,947
	Net interest expense(1)	39,499			19,749			37,166			18,585
	Income tax expense	501			250			883			442
EBITDA		170,654			85,327			178,863			89,432
Add (subtract) specific items affecting EBITDA:
	Realized and unrealized loss on derivative instruments(2)	25,053			12,527			7,047			3,523
	Foreign currency exchange gain	(10	)		(5	)		(636	)		(318	)
Adjusted EBITDA from equity-accounted vessels		195,697			97,849			185,274			92,637

1. Net interest expense for the year ended December 30, 2018 includes an unrealized gain of $9.7 million ($4.9 million at the Partnership's 50% share) related to interest rate swaps designated and qualifying as cash flow hedges for the Libra FPSO unit.
2. Realized and unrealized loss on derivative instruments includes an unrealized loss of $22.4 million ($11.2 million at the Partnership’s 50% share) for the year ended December 31, 2019 and an unrealized loss of $6.3 million ($3.1 million at the Partnership’s 50% share) for the year ended December 31, 2018 related to interest rate swaps for the Cidade de Itajai FPSO unit.