Teekay Offshore Partners to Acquire Petrojarl Varg FPSO for $320 Million
September 08 2009 - 8:45AM
Marketwired
Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership)
(NYSE: TOO) announced today that it has agreed to acquire the
Petrojarl Varg Floating Production Storage and Offloading unit
(Petrojarl Varg FPSO) from Teekay Corporation (Teekay) (NYSE: TK)
for a purchase price of $320 million. The Partnership also
announced today that Teekay has agreed to provide vendor financing
in the amount of $220 million which, together with the $104 million
of equity raised by the Partnership in August 2009, will enable
Teekay Offshore to complete the acquisition by mid-September 2009.
The Petrojarl Varg FPSO recently commenced a new a four-year
fixed-rate contract extension with Talisman Energy (Talisman) on
the Varg oil field in the North Sea, where the FPSO has been
operating for over ten years. Talisman also has options to extend
the new contract for up to an additional nine years. The contract
is comprised of a daily base rate plus an incentive component based
on the operational performance of the FPSO, a tariff component
based on the volume of oil produced and an annual adjustment for
cost escalations. There is potential for additional upside from the
tariff component if, as expected, nearby oil fields become
operational and are tied into the Petrojarl Varg FPSO.
During the four-year firm contract period, the Petrojarl Varg
FPSO is expected to generate average annual cash flow from vessel
operations of approximately $55 million and distributable cash flow
(DCF) of approximately $30 million, which represents a significant
increase to Teekay Offshore's DCF generated over the last twelve
months of $48.2 million(1).
The $220 million vendor financing is comprised of two tranches.
The first tranche is a $160 million short-term debt facility, which
will be repaid upon the completion of a new $260 million revolving
credit facility that is currently in syndication. The $260 million
revolving credit facility, which will be secured by the Petrojarl
Varg FPSO and its contract with Talisman, is expected to be
completed by the end of October 2009. The second tranche of the
vendor financing is a $60 million unsecured subordinated debt
facility with a maximum term of five years and bears an interest
rate of 10 percent per annum. Upon the completion of the
acquisition and the $260 million revolving credit facility,
together with the equity proceeds raised in August 2009, the
Partnership's liquidity will increase by approximately $100
million.
The Board of Directors of the Partnership's General Partner and
its Conflicts Committee have both approved the transaction. The
Conflicts Committee retained independent legal and financial
advisors to assist it in evaluating the transaction. In approving
the transaction, the Committee obtained the views of its financial
advisor as to the fairness of the purchase price.
"We are excited about this strategic acquisition which moves us
further upstream in our customers' oil production chain, making us
a complete 'wellhead to refinery' provider," commented Peter
Evensen, Chief Executive Officer of Teekay Offshore GP LLC, the
Partnership's General Partner. "This accretive acquisition will
further enhance our financial strength and flexibility by adding
significant stable cash flow, with upside potential, from a strong
counterparty and upon completion of the external financing,
increase the Partnership's liquidity by $100 million. We are also
pleased to complete the first FPSO acquisition from our sponsor,
Teekay Corporation, from whom we have the right to acquire up to
four additional FPSO units in the future."
(1) Distributable cash flow is a non-GAAP financial measure used
by certain investors to measure the financial performance of the
Partnership and other master limited partnerships. Please see
Appendix B included in the Partnership's earnings releases for each
of the four quarters ended June 30, 2009 on its website
www.teekayoffshore.com for a reconciliation of this non-GAAP
measure to the most directly comparable GAAP financial measure.
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 currently
owns a 51 percent interest in and controls Teekay Offshore
Operating L.P., a Marshall Islands limited partnership with a fleet
of 33 shuttle tankers (including eight chartered-in vessels), four
floating storage and offloading (FSO) units, nine double-hull
conventional oil tankers and two lightering vessels. In addition,
Teekay Offshore has direct ownership interests in two shuttle
tankers and one FSO unit. Teekay Offshore also has rights to
participate in certain FPSO opportunities.
Teekay Offshore's common units trade on the New York Stock
Exchange under the symbol "TOO".
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of U.S. federal securities laws, which reflect management's
current views with respect to certain future events and
performance, including statements regarding: the expected timing of
completing the acquisition of the Petrojarl Varg FPSO; the expected
annual cash flow from vessel operations and distributable cash flow
from the Petrojarl Varg FPSO; the expected timing of completing the
$260 million revolving credit facility; the expected increase in
the Partnership's liquidity upon the completion of the acquisition
and the $260 million revolving credit facility; the potential
upside from the tariff component of the charter if nearby oil
fields become operational; and the potential for Teekay Offshore to
acquire up to four additional FPSOs from Teekay in the future. 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: any unforeseen delays or failure to
complete the steps required for Teekay to transfer the Petrojarl
Varg FPSO to the Partnership; any failure to generate the expected
cash flow from operations or distributable cash flow; a failure to
syndicate and complete the $260 million revolving credit facility;
any unforeseen operational difficulties, such as unanticipated
repairs or accidents; higher than anticipated level of operating
costs; lower than anticipated level of oil production on the Varg
field; the failure of nearby oil fields to become operational
and/or to be tied into the Petrojarl Varg FPSO; any changes in
applicable industry laws and regulations; early termination of the
long-term contract with Talisman; the failure of Teekay to offer
additional FPSOs to Teekay Offshore; the required approvals by the
Board of Directors of Teekay Offshore's general partner, as well as
its Conflicts Committee to acquire additional FPSOs from Teekay;
the Partnership's ability to finance, and the cost of financing the
purchase of additional FPSOs; 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, 2008.
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.
Contacts: Teekay Offshore Partners L.P. Kent Alekson Investor
Relations enquiries + 1 (604) 609-6442 Teekay Offshore Partners
L.P. Nicole Breuls Media enquiries + 1 (604) 844-6631
www.teekayoffshore.com
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