Highlights
- Teekay Offshore has completed its previously announced
financial restatement.
- As anticipated, there is no impact on the Partnership's
previously reported distributable cash flow, liquidity or cash
distributions in any period.
- All restatement adjustments are non-cash in nature and do not
affect the economics of the Partnership.
- The Partnership will host a conference call on Tuesday,
November 25, 2008 to discuss its restated results and key elements
of its financial position and outlook.
Teekay Offshore Partners L.P. (Teekay Offshore or the
Partnership) (NYSE: TOO) today reported that it has restated its
previously reported financial results, including results for fiscal
years 2003 through 2007 and the first and second quarters of 2008,
to adjust its accounting treatment for:
- certain derivative transactions under the Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging (SFAS 133), as more fully discussed below
under "Restatement for Accounting under SFAS 133 and Other";
- certain vessels it acquired from Teekay Corporation (Teekay)
subsequent to the Partnership's December 2006 initial public
offering, whereby the Partnership's financial statements have been
retroactively adjusted to include the historical results of the
vessels from the date they were originally acquired by Teekay and
began operating, as more fully discussed below under "Restatement
for Changes to Accounting for Dropdown Transactions"; and
- a subsidiary, Navion Shipping Ltd., which was disposed of on
July 1, 2006 prior to the Partnership's initial public offering and
which has been reflected as a discontinued operation for all
periods prior to its disposition. The reclassification of the
operations of this subsidiary as discontinued operations for 2006
and prior periods does not affect total assets, total partners'
equity, net income, earnings per unit or cash flows for any
period.
"It is important to emphasize that all of the restatement
adjustments have no impact on the Partnership's distributable cash
flow(1), liquidity or cash distributions in any period," stated
Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC,
the Partnership's general partner. "Any adjustments to the
Partnership's financial statements are due to changes in accounting
treatment only and have no impact on the economics of the
Partnership or its actual cash flows."
Mr. Evensen continued, "Any adjustments to net income resulting
from the change in the Partnership's accounting treatment for hedge
transactions are exclusively due to unrealized gains or losses as a
result of the change in the mark-to-market value of our hedging
instruments at the end of each reporting period, which have no cash
impact. Additional adjustments, which came into scope as a result
of the Partnership's detailed and thorough restatement audit, also
have no cash impact. The change to our accounting treatment for
vessel dropdowns simply means that vessels acquired from Teekay are
now reflected in the Partnership's comparative historical financial
statements for periods prior to the Partnership's actual
acquisition of the vessels as if they had been acquired by the
Partnership at the time of their original purchase by Teekay. This
adjustment has no impact on the Partnership's financial results
subsequent to the date the vessels were acquired by the
Partnership."
(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 refer to
Appendix A to this release for a reconciliation of this non-GAAP
measure to the most directly comparable GAAP financial measure.
A summary of financial information reflecting the restatement
adjustments for the three and six months ended June 30, 2008 and
2007 and the three months ended March 31, 2008 is presented below.
Appendix B to this release provides a summary of the impact of the
restatements on reported net income for the fiscal years ended
December 31, 2003 through 2007. Please see "Information on SEC
Filings" below for information about the Partnership's upcoming
filings with the U.S. Securities and Exchange Commission (SEC)
relating to the restatements.
Summary of Restated Second Quarter 2008 Results
Since the restatement adjustments are all non-cash in nature,
they have not impacted the Partnership's distributable cash flow(1)
or cash distributions. During the three months ended June 30, 2008,
the Partnership generated $10.5 million of distributable cash flow,
an increase from $6.8 million for the quarter ended March 31, 2008,
primarily as a result of higher shuttle tanker utilization, fewer
drydockings performed during the second quarter and increased cash
flow as a result of the acquisition of an additional 25 percent
interest in Teekay Offshore Operating L.P. (OPCO) and OPCO's
acquisition of two Aframax lightering vessels on June 18, 2008. On
August 1, 2008, the Partnership declared a cash distribution of
$0.40 per unit for the quarter ended June 30, 2008. The cash
distribution was paid on August 14, 2008 to all unitholders of
record on August 7, 2008.
On November 3, 2008, the Partnership declared a cash
distribution of $0.45 per unit for the quarter ended September 30,
2008, an increase of $0.05 per unit, or 12.5 percent, from the
previous quarter. This distribution increase reflects the
acquisitions completed on June 18, 2008. This cash distribution was
paid on November 14, 2008 to all unitholders of record on November
7, 2008.
The effect of the accounting adjustments noted above on
previously reported net income for the three and six months ended
June 30, 2008 and 2007 and for the three months ended March 31,
2008 is summarized in the table below. The results of vessels
acquired from Teekay relating to the periods prior to their
acquisition by the Partnership are referred to herein as the
Dropdown Predecessor.
--------------------------------------------------------------------------
Net Income (Loss)
--------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands
of U.S. June 30, March 31, June 30, June 30, June 30,
dollars) 2008 2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------------------- ----------------------
As Previously
Reported $ 19,234 $ 480 $ 3,714 $ 19,714 $ 10,546
Adjustments:
Derivative
Instruments
and Other (2) 5,143 (13,714) 7,531 (8,571) 7,164
Dropdown
Predecessor (3) 848 485 509 1,333 1,278
-------------------------------------------------- ----------------------
As Restated $ 25,225 $ (12,749) $ 11,754 $ 12,476 $ 18,988
-------------------------------------------------- ----------------------
For the three months ended June 30, 2008, the Partnership now
reports net income of $25.2 million, compared to net income of
$11.8 million for the same period last year. In the second quarter
of 2008, net income before non-controlling interest includes a
non-cash net gain of $48.9 million relating primarily to unrealized
gains on derivative instruments not qualifying for hedge accounting
and deferred income tax recoveries, net of foreign currency
translation losses. In the second quarter of 2007, net income
before non-controlling interest includes a non-cash net gain
totaling $23.0 million relating primarily to unrealized gains on
derivative instruments not qualifying for hedge accounting, net of
foreign currency translation losses and deferred income tax
expenses. Net voyage revenues(4) for the three months ended June
30, 2008 increased to $164.7 million from $156.4 million in the
same period last year.
(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 refer to
Appendix A to this release for a reconciliation of this non-GAAP
measure to the most directly comparable GAAP financial measure.
(2) Please refer to "Restatement for Accounting under SFAS 133
and Other" included in this release.
(3) Please refer to "Restatement for Changes to Accounting for
Dropdown Transactions" included in this release.
(4) Net voyage revenues represents voyage revenues less voyage
expenses, which comprise all expenses relating to certain voyages,
including bunker fuel expenses, port fees, canal tolls and
brokerage commissions. Net voyage 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.
Net income for the six months ended June 30, 2008 is now $12.5
million, compared to net income of $19.0 million for the same
period last year. For the six months ended June 30, 2008, net
income before non-controlling interest includes a non-cash net gain
of $0.6 million relating primarily to deferred income tax
recoveries, net of unrealized losses on derivative instruments not
qualifying for hedge accounting and foreign currency translation
losses. In the six months ended June 30, 2007, net income before
non-controlling interest includes a non-cash net gain totaling
$21.1 million relating primarily to unrealized gains on derivative
instruments not qualifying for hedge accounting and deferred income
tax recoveries, net of foreign currency translation losses. Net
voyage revenues(1) for the six months ended June 30, 2008 increased
to $318.2 million from $314.1 million for the same period last
year.
Further Information Regarding Restatement Items
Restatement for Accounting under SFAS 133 and Other
On August 7, 2008, the Partnership announced that it would
restate its historical financial statements to adjust its
accounting treatment for certain derivative transactions under SFAS
133. This restatement adjusts for certain interest rate swap
agreements and foreign exchange forward contracts that did not
qualify for hedge accounting treatment under SFAS 133 as aspects of
the Partnership's hedge documentation did not meet the strict
technical requirements of the standard.
Accordingly, the Partnership has now recognized the changes in
the fair value of these derivatives through the statement of income
(loss) rather than directly to partners' equity on the balance
sheet. This restatement, which is non-cash in nature, has resulted
in adjustments to Teekay Offshore's previously reported net income,
but does not affect the economics of any hedging transactions or
have any impact on the Partnership's previously reported
distributable cash flow, liquidity or cash distributions. The
Partnership believes that the applicable derivative transactions
were consistent with its risk management policies and that its
overall hedging strategy continues to be sound.
The Partnership has discontinued the use of hedge accounting for
its interest rate swap agreements. As a result, the unrealized
gains and losses due to the change in the fair values of these
derivative instruments will be reflected as increases or decreases
to the Partnership's interest expense going forward. This change
will not impact the economics of hedging transactions, nor the
Partnership's distributable cash flow, liquidity or cash
distributions in any future period.
The Partnership has also restated certain other items primarily
relating to amounts attributable to non-controlling interests.
Restatement for Changes to Accounting for Dropdown
Transactions
Subsequent to the release of its preliminary second quarter
financial results, the Partnership reviewed and revised its
accounting treatment for certain vessels it acquired through
dropdown transactions from Teekay. The Partnership has historically
accounted for the acquisition of vessel interests from Teekay as
asset acquisitions (rather than business acquisitions) and recorded
the financial results of these vessels commencing from the date the
vessels were acquired by Teekay Offshore.
Although substantially all of the value relating to these
transactions is attributable to the vessels and associated
time-charters, the Partnership has now determined that these
related-party vessel acquisitions should have been accounted for as
business acquisitions (rather than asset acquisitions) under the
provision of the Statement of Financial Accounting Standards No.
141, Business Combinations (SFAS 141). Under SFAS 141, business
acquisitions for entities under common control which 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.
(1) Net voyage revenues represents voyage revenues less voyage
expenses, which comprise all expenses relating to certain voyages,
including bunker fuel expenses, port fees, canal tolls and
brokerage commissions. Net voyage 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.
Accordingly, the Partnership has recast its historical financial
results, including results for the quarters ended June 30, 2008 and
March 31, 2008 and the fiscal years ended December 31, 2003 through
2007. The table below lists the four vessels acquired by Teekay
Offshore from Teekay subsequent to the Partnership's December 2006
initial public offering that were formerly operated by Teekay. A
fifth vessel, the Navion Gothenburg, has not been included as part
of the Dropdown Predecessor as it began operations concurrently
with the Partnership's acquisition of a 50 percent interest in this
vessel from Teekay on July 24, 2007.
----------------------------------------------------------------
Vessel Dropdown Predecessor Period
----------------------------------------------------------------
Dampier Spirit March 15, 1998 to September 30, 2007
Navion Bergen April 16, 2007 to June 30, 2007
SPT Explorer January 7, 2008 to June 17, 2008
SPT Navigator March 28, 2008 to June 17, 2008
----------------------------------------------------------------
The retroactive adjustments to reflect the results of the
Dropdown Predecessor have resulted in changes to Teekay Offshore's
previously reported net income and total partners' equity. As they
are non-cash in nature, these adjustments have not resulted in
changes to the Partnership's previously reported distributable cash
flow, liquidity or cash distributions. The effects of these
adjustments relating to the Dropdown Predecessor on the
Partnership's previously reported net income for the three and six
months ended June 30, 2008 are increases of $0.8 million and $1.3
million, respectively. The Dropdown Predecessor adjustments have no
effect on the previously reported partners' equity as at June 30,
2008.
Information on SEC Filings
More detailed financial information relating to the restatements
will be included in the amended Form 20-F/A for the fiscal year
ended December 31, 2007 (certain financial information will be
included for annual fiscal periods from 2003 through 2007), in the
amended Form 6-K/A for the quarter ended March 31, 2008 and in the
Form 6-K for the quarter ended June 30, 2008, which the Partnership
expects to file with or furnish to, as applicable, the SEC and make
available on the its web site at www.teekayoffshore.com no later
than December 5, 2008. For a summary of the impact of the
restatements on reported net income for the fiscal years ended
December 31, 2003 through 2007, please refer to Appendix B of this
release.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P., a publicly-traded master limited
partnership formed by Teekay Corporation (NYSE: TK), is an
international provider of marine transportation and storage
services to the offshore oil industry. Teekay Offshore Partners
owns a 51 percent interest in and controls Teekay Offshore
Operating L.P., a Marshall Islands limited partnership with a fleet
of 34 shuttle tankers (including nine chartered-in vessels), four
FSO units, nine double-hull conventional oil tankers and two
lightering vessels. In addition, Teekay Offshore Partners L.P. has
direct ownership interests in two shuttle tankers and one FSO unit.
Teekay Offshore Partners also has rights to participate in certain
FPSO opportunities.
Teekay Offshore Partners' common units trade on the New York
Stock Exchange under the symbol "TOO".
Conference Call
Teekay Offshore plans to host a conference call at 3:00 p.m. ET
on Tuesday, November 25, 2008, to discuss the Partnership's
restated results. In addition, the Partnership will take the
opportunity to discuss key elements of its financial position and
outlook. All unitholders and interested parties are invited to
listen to the live conference call at www.teekayoffshore.com or by
dialing (866) 322-1159, or (416) 640-3404 if outside North America,
and quoting confirmation code 2910084. The Partnership plans to
make available a recording of the conference call until midnight
December 2, 2008 by dialing (888) 203-1112 or (647) 436-0148, and
entering access code 2910084, or via the Partnership's web site
until December 24, 2008.
An investor presentation to accompany this conference call will
be made available on the Partnership's web site at
www.teekayoffshore.com prior to the start of the call.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Three Months Ended June 30, 2008
--------------------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
VOYAGE REVENUES 222,282 - 2,202 224,484
--------------------------------------------------------------------------
OPERATING EXPENSES
Voyage expenses 59,811 - - 59,811
Vessel operating
expenses (3) 45,970 (463) - 45,507
Time-charter hire expense 32,262 - - 32,262
Depreciation and
amortization 35,747 - 700 36,447
General and
administrative (3) 15,869 (185) - 15,684
--------------------------------------------------------------------------
189,659 (648) 700 189,711
--------------------------------------------------------------------------
Income from vessel
operations 32,623 648 1,502 34,773
--------------------------------------------------------------------------
OTHER ITEMS
Interest (expense)
gain (4)(5) 17,860 5,947 (654) 23,153
Interest income 1,051 - - 1,051
Income tax recovery 5,942 1,600 - 7,542
Foreign exchange loss (3) (533) (577) - (1,110)
Other income - net 2,314 - - 2,314
--------------------------------------------------------------------------
Net income before
non-controlling interest 59,257 7,618 848 67,723
Non-controlling interest (40,023) (2,475) - (42,498)
--------------------------------------------------------------------------
Net income 19,234 5,143 848 25,225
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners'
units outstanding:
Weighted-average number
of common units
outstanding
- Basic and diluted 11,151,648 11,151,648
Weighted-average number
of subordinated units
outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of total units
outstanding
- Basic and diluted 20,951,648 20,951,648
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
SPT Explorer and the SPT Navigator, from April 1, 2008 to June 17,
2008, when these vessels were operating and under the common control of
Teekay prior to their acquisition by Teekay Offshore. Please refer to
"Restatement for Changes to Accounting for Dropdown Transactions"
included in this release.
(3) Adjustments to vessel operating expenses, general and administrative
and foreign exchange loss reflect the unrealized gains and losses from
the change in fair value of certain foreign exchange forward contracts
that do not qualify as effective hedges for accounting purposes.
(4) Interest (expense) gain has been restated to reflect the unrealized
gains and losses on interest rate swap agreements that do not qualify
as effective hedges for accounting purposes.
(5) Restated interest (expense) gain includes $41.9 million of unrealized
gains for the three months ended June 30, 2008 relating to the change
in fair value of interest rate swap agreements.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME (LOSS)
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Three Months Ended March 31, 2008
---------------------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
VOYAGE REVENUES 203,786 - 1,146 204,932
--------------------------------------------------------------------------
OPERATING EXPENSES
Voyage expenses 51,377 - - 51,377
Vessel operating
expenses (3) 41,486 445 - 41,931
Time-charter hire expense 33,646 - - 33,646
Depreciation and
amortization 32,546 - 366 32,912
General and
administrative (3) 15,594 (276) - 15,318
--------------------------------------------------------------------------
174,649 169 366 175,184
--------------------------------------------------------------------------
Income (loss) from vessel
operations 29,137 (169) 780 29,748
--------------------------------------------------------------------------
OTHER ITEMS
Interest expense (4)(5) (23,967) (42,927) (295) (67,189)
Interest income 1,249 - - 1,249
Income tax expense (197) - - (197)
Foreign exchange
(loss) gain (3) (3,338) 875 - (2,463)
Other income - net 2,626 - - 2,626
--------------------------------------------------------------------------
Net income (loss) before
non-controlling interest 5,510 (42,221) 485 (36,226)
Non-controlling interest (5,030) 28,507 - 23,477
--------------------------------------------------------------------------
Net income (loss) 480 (13,714) 485 (12,749)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners'
units outstanding:
Weighted-average number
of common units
outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of subordinated
units outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of total units
outstanding
- Basic and diluted 19,600,000 19,600,000
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to the results of the Dropdown Predecessor (as at June 30,
2008) for two vessels, the SPT Explorer and the SPT Navigator, from
January 7, 2008 and March 28, 2008, respectively, to March 31, 2008,
when these vessels were operating and under the common control of
Teekay prior to their acquisition by Teekay Offshore. Please refer
to "Restatement for Changes to Accounting for Dropdown Transactions"
included in this release.
(3) Adjustments to vessel operating expenses, general and administrative
and foreign exchange (loss) gain reflect the unrealized gains and
losses from the change in fair value of certain foreign exchange
forward contracts that do not qualify as effective hedges for
accounting purposes.
(4) Interest expense has been restated to reflect the unrealized gains and
losses on interest rate swap agreements that do not qualify as
effective hedges for accounting purposes.
(5) Restated interest expense includes $45.4 million of unrealized losses
for the three months ended March 31, 2008 relating to the change in
fair value of interest rate swap agreements.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Three Months Ended June 30, 2007
--------------------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
VOYAGE REVENUES 189,189 - 4,025 193,214
--------------------------------------------------------------------------
OPERATING EXPENSES
Voyage expenses 36,805 - 54 36,859
Vessel operating
expenses (3) 33,559 11 2,566 36,136
Time-charter hire expense 36,473 - - 36,473
Depreciation and
amortization 29,033 - 1,095 30,128
General and administrative 16,248 - 342 16,590
--------------------------------------------------------------------------
152,118 11 4,057 156,186
--------------------------------------------------------------------------
Income (loss) from vessel
operations 37,071 (11) (32) 37,028
--------------------------------------------------------------------------
OTHER ITEMS
Interest (expense)
gain (4)(5) (17,553) 29,485 (1,338) 10,594
Interest income 1,347 - 97 1,444
Income tax (expense) recovery (532) - 559 27
Foreign exchange
(loss) gain (3) (5,797) (4) 1,223 (4,578)
Other income - net 2,582 - - 2,582
--------------------------------------------------------------------------
Net income before
non-controlling interest 17,118 29,470 509 47,097
Non-controlling interest (13,404) (21,939) - (35,343)
--------------------------------------------------------------------------
Net income 3,714 7,531 509 11,754
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners'
units outstanding:
Weighted-average number
of common units
outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of subordinated
units outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of total units
outstanding
- Basic and diluted 19,600,000 19,600,000
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
Dampier Spirit and the Navion Bergen, from April 1, 2007 and April 16,
2007, respectively, to June 30, 2007, when these vessels were operating
and under the common control of Teekay prior to their acquisition by
Teekay Offshore. Please refer to "Restatement for Changes to Accounting
for Dropdown Transactions" included in this release.
(3) Adjustments to vessel operating expenses and foreign exchange (loss)
gain reflect the unrealized gains and losses from the change in fair
value of certain foreign exchange forward contracts that do not qualify
as effective hedges for accounting purposes.
(4) Interest (expense) gain has been restated to reflect the unrealized
gains and losses on interest rate swap agreements that do not qualify
as effective hedges for accounting purposes.
(5) Restated interest (expense) gain includes $30.1 million of unrealized
gains for the three months ended June 30, 2007 relating to the change
in fair value of interest rate swap agreements.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Six Months Ended June 30, 2008
------------------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
VOYAGE REVENUES 426,068 - 3,348 429,416
--------------------------------------------------------------------------
OPERATING EXPENSES
Voyage expenses 111,188 - - 111,188
Vessel operating
expenses (3) 87,456 (18) - 87,438
Time-charter hire expense 65,908 - - 65,908
Depreciation and
amortization 68,293 - 1,066 69,359
General and
administrative (3) 31,463 (461) - 31,002
--------------------------------------------------------------------------
364,308 (479) 1,066 364,895
--------------------------------------------------------------------------
Income from vessel
operations 61,760 479 2,282 64,521
--------------------------------------------------------------------------
OTHER ITEMS
Interest expense (4)(5) (6,107) (36,980) (949) (44,036)
Interest income 2,300 - - 2,300
Income tax recovery 5,745 1,600 - 7,345
Foreign exchange
(loss) gain (3) (3,871) 298 - (3,573)
Other income - net 4,940 - - 4,940
--------------------------------------------------------------------------
Net income (loss) before
non-controlling
interest 64,767 (34,603) 1,333 31,497
Non-controlling interest (45,053) 26,032 - (19,021)
--------------------------------------------------------------------------
Net income (loss) 19,714 (8,571) 1,333 12,476
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners' units
outstanding:
Weighted-average number
of common units
outstanding
- Basic and diluted 10,475,824 10,475,824
Weighted-average number
of subordinated
units outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of total units
outstanding
- Basic and diluted 20,275,824 20,275,824
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
SPT Explorer and the SPT Navigator, from January 7, 2008 and March 28,
2008, respectively, to June 17, 2008, when these vessels were operating
and under the common control of Teekay prior to their acquisition by
Teekay Offshore. Please refer to "Restatement for Changes to Accounting
for Dropdown Transactions" included in this release.
(3) Adjustments to vessel operating expenses, general and administrative
and foreign exchange (loss) gain reflect the unrealized gains and
losses from the change in fair value of certain foreign exchange
forward contracts that do not qualify as effective hedges for
accounting purposes.
(4) Interest expense has been restated to reflect the unrealized gains and
losses on interest rate swap agreements that do not qualify as
effective hedges for accounting purposes.
(5) Restated interest expense includes $3.5 million of unrealized losses
for the six months ended June 30, 2008 relating to the change in fair
value of interest rate swap agreements.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Six Months Ended June 30, 2007
------------------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
VOYAGE REVENUES 379,941 - 5,573 385,514
--------------------------------------------------------------------------
OPERATING EXPENSES
Voyage expenses 71,340 - 54 71,394
Vessel operating
expenses (3) 63,778 22 3,694 67,494
Time-charter hire expense 74,588 - - 74,588
Depreciation and
amortization 57,624 - 1,328 58,952
General and administrative 31,422 - 637 32,059
--------------------------------------------------------------------------
298,752 22 5,713 304,487
--------------------------------------------------------------------------
Income (loss) from vessel
operations 81,189 (22) (140) 81,027
--------------------------------------------------------------------------
OTHER ITEMS
Interest (expense)
gain (4)(5) (36,062) 27,985 (1,344) (9,421)
Interest income 2,484 - 97 2,581
Income tax recovery 3,374 - 1,254 4,628
Foreign exchange
(loss) gain (3) (9,957) (4) 1,411 (8,550)
Other income - net 5,301 - - 5,301
--------------------------------------------------------------------------
Net income before
non-controlling interest 46,329 27,959 1,278 75,566
Non-controlling interest (35,783) (20,795) - (56,578)
--------------------------------------------------------------------------
Net income 10,546 7,164 1,278 18,988
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners'
units outstanding:
Weighted-average number
of common units
outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of subordinated
units outstanding
- Basic and diluted 9,800,000 9,800,000
Weighted-average number
of total units
outstanding
- Basic and diluted 19,600,000 19,600,000
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
Dampier Spirit and the Navion Bergen, from January 1, 2007 and April
16, 2007, respectively, to June 30, 2007, when these vessels were
operating and under the common control of Teekay prior to their
acquisition by Teekay Offshore. Please refer to "Restatement for
Changes to Accounting for Dropdown Transactions" included in this
release.
(3) Adjustments to vessel operating expenses and foreign exchange (loss)
gain reflect the unrealized gains and losses from the change in fair
value of certain foreign exchange forward contracts that do not qualify
as effective hedges for accounting purposes.
(4) Interest (expense) gain has been restated to reflect the unrealized
gains and losses on interest rate swap agreements that do not qualify
as effective hedges for accounting purposes.
(5) Restated interest (expense) gain includes $28.6 million of unrealized
gains for the six months ended June 30, 2007 relating to the change in
fair value of interest rate swap agreements.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
As at June 30, 2008
-------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Reported
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
ASSETS
Cash and cash equivalents 113,021 - - 113,021
Other current assets 112,456 - - 112,456
Vessels and equipment 1,751,281 - - 1,751,281
Other assets 80,379 - - 80,379
Intangible assets 50,323 - - 50,323
Goodwill 127,113 - - 127,113
--------------------------------------------------------------------------
Total Assets 2,234,573 - - 2,234,573
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND
PARTNERS' EQUITY
Accounts payable and
accrued liabilities 56,596 - - 56,596
Advances from affiliates 9,472 - - 9,472
Current portion of
long-term debt 96,988 - - 96,988
Current portion of
derivative instruments 17,377 - - 17,377
Long-term debt 1,521,519 - - 1,521,519
Other long-term liabilities 111,168 - - 111,168
Non-controlling interest 244,219 2,365 - 246,584
Partners' equity 177,234 (2,365) - 174,869
--------------------------------------------------------------------------
Total Liabilities and
Partners' Equity 2,234,573 - - 2,234,573
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) There is no balance sheet impact at June 30, 2008 due to the results of
the Dropdown Predecessor for the SPT Explorer and the SPT Navigator, as
these vessels were acquired by the Partnership on June 18, 2008. Please
refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
As at December 31, 2007
-----------------------
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Restated
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
ASSETS
Cash and cash equivalents 121,224 - - 121,224
Other current assets 107,172 - - 107,172
Vessels and equipment 1,662,865 - - 1,662,865
Other assets 92,622 - - 92,622
Intangible assets 55,355 - - 55,355
Goodwill 127,113 - - 127,113
--------------------------------------------------------------------------
Total Assets 2,166,351 - - 2,166,351
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND
PARTNERS' EQUITY
Accounts payable and
accrued liabilities 50,540 - - 50,540
Current portion of
long-term debt 64,060 - - 64,060
Current portion of
derivative instruments 5,277 - - 5,277
Long-term debt 1,453,407 - - 1,453,407
Other long-term liabilities 120,453 2,600 - 123,053
Non-controlling interest 391,645 968 - 392,613
Partners' equity 80,969 (3,568) - 77,401
--------------------------------------------------------------------------
Total Liabilities and
Partners' Equity 2,166,351 - - 2,166,351
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) There is no balance sheet impact at December 31, 2007 due to the
results of the Dropdown Predecessor for the Dampier Spirit and the
Navion Bergen, as these vessels were acquired by the Partnership on
July 1, 2007 and October 1, 2007, respectively. Please refer to
"Restatement for Changes to Accounting for Dropdown Transactions"
included in this release.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
Six Months Ended June 30, 2008
------------------------------
Adjustments
-----------
Derivative
Prior to Instru- Dropdown
Retroactive ments and Predec- As
Adjustment Other (1) essor (2) Reported
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ---------- ---------- ----------
Cash and cash equivalents
provided by (used for)
OPERATING ACTIVITIES
-------------------------------------------------------------------------
Net operating cash flow 52,946 - 2,493 55,439
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from
long-term debt 67,000 - 44,338 111,338
Scheduled repayments of
long-term debt (14,298) - - (14,298)
Prepayments of
long-term debt (41,000) - - (41,000)
Net advances to affiliates - - (46,544) (46,544)
Proceeds from issuance
of common units 209,184 - - 209,184
Expenses from issuance
of common units (5,431) - - (5,431)
Distribution to Teekay
Corporation relating to
the purchase of
SPT Explorer L.L.C.
and SPT Navigator L.L.C. (16,661) - - (16,661)
Excess of purchase price
over the contributed basis
of a 25% interest in Teekay
Offshore Operating L.P. (93,782) - - (93,782)
Cash distribution paid (16,000) - - (16,000)
Other (1,032) (287) (1,319)
-------------------------------------------------------------------------
Net financing cash flow 87,980 - (2,493) 85,487
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels
and equipment (49,055) - - (49,055)
Investment in direct
financing lease assets (29) - - (29)
Direct financing lease
payments received 11,701 - - 11,701
Purchase of a 25% interest
in Teekay Offshore
Operating L.P. (111,746) - - (111,746)
-------------------------------------------------------------------------
Net investing cash flow (149,129) - - (149,129)
-------------------------------------------------------------------------
Decrease in cash and
cash equivalents (8,203) - - (8,203)
Cash and cash equivalents,
beginning of the period 121,224 - - 121,224
-------------------------------------------------------------------------
Cash and cash equivalents,
end of the period 113,021 - - 113,021
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Please refer to "Restatement for Accounting under SFAS 133 and Other"
included in this release.
(2) Relates to classification adjustments for the Dropdown Predecessor for
two vessels, the SPT Explorer and the SPT Navigator, from January 7,
2008 and March 28, 2008, respectively, to June 17, 2008, when these
vessels were operating and under the common control of Teekay prior to
their acquisition by Teekay Offshore. Please refer to "Restatement for
Changes to Accounting for Dropdown Transactions" included in this
release.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - RESTATED 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 income adjusted for
depreciation and amortization expense, non-controlling interest,
non-cash items, estimated maintenance capital expenditures, gains
and losses on vessel sales, income taxes and foreign exchange
related items. Unrealized gains and losses on derivative
instruments that do not qualify for hedge accounting and cash flow
attributable to the Dropdown Predecessor are non-cash items to the
Partnership and thus, have no impact on the Partnership's
distributable cash flow. 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 cash flow is not required by United
States generally accepted accounting principles and should not be
considered as an alternative to net income or any other indicator
of the Partnership's performance required by United States
generally accepted accounting principles. The table below
reconciles distributable cash flow to net income.
--------------------------------------------------------------------------
Three Months Ended June 30, 2008
Adjustments
-----------
Derivative
As Prev- Instru- Dropdown
iously ments and Predec- As
Reported Other (1) essor (2) Reported
(unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
Net Income 19,234 5,143 848 25,225
Add:
Depreciation and
amortization 35,747 - 700 36,447
Non-controlling interest 40,023 2,475 - 42,498
Foreign exchange
and other, net 680 133 - 813
Less:
Unrealized gain on
interest rate swaps (35,976) (5,947) - (41,923)
Unrealized gain on
forward contracts - (204) - (204)
Income tax recovery (5,942) (1,600) - (7,542)
Cash flow attributable
to the Dropdown
Predecessor - - (1,548) (1,548)
Estimated maintenance
capital expenditures (19,951) - - (19,951)
--------------------------------------------------------------------------
Distributable Cash Flow
before Non-Controlling
Interest 33,815 - - 33,815
Non-controlling interests'
share of DCF (23,319) - - (23,319)
--------------------------------------------------------------------------
Distributable Cash Flow 10,496 - - 10,496
--------------------------------------------------------------------------
(1) Results are net of non-controlling interest. Please refer to
"Restatement for Accounting under SFAS 133 and Other" included in this
release.
(2) Relates to the results of the Dropdown Predecessor for activities
related to the SPT Explorer and the SPT Navigator from April 1, 2008 to
June 17, 2008, when these vessels were operating and under the common
control of Teekay prior to their acquisition by Teekay Offshore.
Please refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B - SUMMARY OF RESTATED AND RETROACTIVELY
ADJUSTED FINANCIAL RESULTS
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
The table below summarizes the impact on the Partnership's
previously reported net income for fiscal years ended December 31,
2003 through 2007, as a result of the restatements described in
this release under "Restatement for Accounting under SFAS 133 and
Other" and "Restatement for Changes to Accounting for Dropdown
Transactions". Retroactive adjustments in the table below to
reflect the results of the Dropdown Predecessor are based on
acquisitions completed by the Partnership as of December 31, 2007.
The restatement for discontinued operations did not impact net
income (loss) in any period.
--------------------------------------------------------------------------
Net Income (Loss)
--------------------------------------------------------------------------
(in thousands Year Ended December 31,
of U.S. 2007 2006 2005 2004 2003
dollars) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
As Previously
Reported $ 19,672 $ (32,715) $ 84,747 $ 213,772 $ 63,513
Adjustments:
Derivative
Instruments
and Other (1) (17,014) 3,306 756 (648) (1,178)
Dropdown
Predecessor (2) 1,300 3,211 2,910 4,076 6,768
--------------------------------------------------------------------------
As Restated $ 3,958 $ (26,198) $ 88,413 $ 217,200 $ 69,103
--------------------------------------------------------------------------
(1) Relates to unrealized gains (losses) as a result of the change in fair
value of certain derivative instruments. Results are net of non-
controlling interest. Please refer to "Restatement for Accounting under
SFAS 133 and Other" included in this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
Dampier Spirit from January 1, 2003 to September 30, 2007 and the
Navion Bergen from April 16, 2007 to June 30, 2007, when the vessels
were operating and under the common control of Teekay but prior to
their acquisition by Teekay Offshore. Please refer to "Restatement for
Changes to Accounting for Dropdown Transactions" included in this
release.
Contacts: Teekay Offshore Partners L.P. Kent Alekson Investor
Relations Enquiries (604) 609-6442 Teekay Offshore Partners L.P.
Alana Duffy Media Enquiries (604) 844-6605 Website:
www.teekayoffshore.com
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