Teekay Offshore Partners
L.P. (NYSE: TOO) -
Highlights
-- Generated distributable cash flow of $28.1 million in the second quarter
of 2010, up from $27.6 million in the first quarter of 2010 and up from
$9.0 million in the second quarter of 2009.
-- Declared a cash distribution of $0.475 per unit for the second quarter
of 2010.
-- Completed acquisition of the Falcon Spirit FSO unit in April 2010.
Teekay Offshore GP LLC, the general partner of Teekay Offshore
Partners L.P.
(Teekay Offshore or the Partnership) (NYSE: TOO), today reported
the
Partnership's results for the quarter ended June 30, 2010.
During the second
quarter of 2010, the Partnership generated distributable cash
flow(1) of $28.1
million, an increase from $27.6 million in the quarter ended
March 31, 2010,
primarily as a result of lower operating costs and higher
revenues generated
from our shuttle tanker fleet.
On July 28, 2010, the Partnership declared a cash distribution
of $0.475 per
unit for the quarter ended June 30, 2010. The cash distribution
will be paid
on August 13, 2010, to all unitholders of record on August 6,
2010.
"The Partnership's strong financial performance during what is
typically
considered to be the seasonally weaker second quarter largely
reflects the
progress we have made on our initiatives to reduce operating
expenses and
enhance the profitability of our shuttle tanker fleet,"
commented Peter
Evensen, Chief Executive Officer of Teekay Offshore GP L.L.C.
"In addition,
incremental cash flow as a result of the acquisition of the
Falcon Spirit FSO
in April and repayment of vendor financing associated with the
2009 Petrojarl
Varg FPSO acquisition enabled the Partnership to generate higher
distributable
cash flow in the second quarter, building on the strong results
experienced in
the first quarter. While we expect our distributable cash flow
to decline in
the third quarter primarily as a result of lower voyage revenues
due to
scheduled seasonal maintenance in the North Sea fields, we
anticipate higher
levels of fleet utilization leading to stronger results in the
fourth quarter
of 2010 and first quarter of 2011."
Mr. Evensen continued, "We continue to be optimistic about our
growth
prospects and profitability outlook in the offshore sector.
During the
quarter, we redeployed two of our shuttle tankers from the North
Sea to Brazil
on fixed-rate charters and made progress towards negotiating
amendments to
several of our other North Sea shuttle tanker contracts. Our
sponsor, Teekay
Corporation, also recently amended the contract for the Foinaven
FPSO,
increasing its profitability, extended the contract for the
Cidade de Rio das
Ostras FPSO in Brazil for an additional seven years, and is in
the process of
negotiating contracts for its four Aframax newbuilding shuttle
tankers. These
assets provide us with a pipeline of potential accretive
growth
opportunities."
(1) Distributable cash flow is a non-GAAP financial measure used
by certain
investors to measure the financial performance of the
Partnership and other
master limited partnerships. Please see Appendix B for a
reconciliation of
distributable cash flow to the most directly comparable
financial measure
under U.S. generally accepted accounting principles (GAAP).
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of
July 31, 2010,
including vessels owned by Teekay Offshore Operating L.P. (or
OPCO), of which
the Partnership owns a 51 percent interest:
-------------------------------------------------------------------------
Number of Vessels
Owned Vessels Chartered-in Vessels Total
--------------------------------------------
Shuttle Tanker Segment 28(i) 6 34
Conventional Tanker Segment 11 - 11
FSO Segment 6 - 6
FPSO Segment 1 - 1
-------------------------------------------------------------------------
Total 46 6 52
-------------------------------------------------------------------------
(i) Includes five shuttle tankers in which OPCO's ownership interest is
50 percent, three shuttle tankers in which OPCO's ownership is 67
percent and one shuttle tanker in which Teekay Offshore's direct
ownership interest is 50 percent.
OPCO's fleet includes 32 shuttle tankers including six
chartered-in vessels, 4
FSO units, and 11 conventional oil tankers.
On April 1, 2010, Teekay Offshore purchased Teekay Corporation's
(Teekay)
interest in the Falcon Spirit floating storage and offloading
(FSO) unit for
$44.1 million. The Falcon Spirit operates in the Qatar offshore
region under a
7.5 year fixed-rate time charter contract, which began in
December 2009, with
an option for the charterer to extend the contract for an
additional 1.5
years.
Future Growth Opportunities
Pursuant to an omnibus agreement that Teekay Offshore entered
into in
connection with its initial public offering in December 2006,
Teekay is
obligated to offer to the Partnership its interest in certain
shuttle tankers,
FSO units, floating production storage and offloading (FPSO)
units and joint
ventures it may acquire in the future, provided the vessels are
servicing
contracts in excess of three years in length. Teekay Offshore
also may acquire
additional limited partner interests in OPCO or other vessels
that Teekay may
offer the Partnership from time to time in the future. Teekay
currently owns
49 percent of OPCO and Teekay Offshore owns the remaining 51
percent,
including the general partner interest.
Shuttle Tankers
Teekay recently took delivery of one Aframax shuttle tanker
newbuilding and
has three additional Aframax shuttle tanker newbuildings that
are scheduled to
deliver in late 2010 and 2011, for a delivered total cost of
approximately
$480 million. Pursuant to the omnibus agreement, Teekay is
obligated to offer
its interest in these vessels to Teekay Offshore within 365 days
of their
delivery, provided the vessels are servicing charter contracts
in excess of
three years in length. Teekay is currently in negotiations with
respect to the
long-term employment of these four newbuilding shuttle
tankers.
FPSO Units
Teekay recently changed the contract for an existing FPSO unit,
the Cidade de
Rio das Ostras (previously known as the Siri) FPSO, to provide
for an
additional seven year term in Brazil at an increased charter
rate. The
Partnership anticipates that Teekay will offer to sell this FPSO
unit to it as
a re-chartered FPSO under the omnibus agreement in the fourth
quarter of 2010
or the first quarter of 2011. The purchase price for the Cidade
de Rio das
Ostras FPSO would be at its fair market value plus any
additional tax or other
similar costs to Teekay that would be required to transfer the
FPSO unit to
the Partnership.
Pursuant to the omnibus agreement and a subsequent agreement,
Teekay was
obligated to offer to Teekay Offshore, prior to July 9, 2010,
the Foinaven
FPSO, an existing FPSO unit of Teekay Petrojarl AS (Teekay
Petrojarl), a
wholly-owned subsidiary of Teekay. The Partnership agreed to
waive Teekay's
obligation to offer the FPSO unit to Teekay Offshore by July 9,
2010; however,
Teekay is now obligated to offer the FPSO unit to Teekay
Offshore prior to
July 9, 2012. The purchase price for the Foinaven FPSO would be
at its fair
market value plus any additional tax or other similar costs to
Teekay
Petrojarl that would be required to transfer the FPSO unit to
the Partnership.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1)
(as detailed in Appendix A to this release) of $18.9 million for
the quarter
ended June 30, 2010, compared to $20.1 million for the quarter
ended March 31,
2010. Adjusted net income attributable to the partners excludes
a number of
specific items that had the net effect of decreasing net income
by $21.7
million and $5.3 million for the quarters ended June 30, 2010
and March 31,
2010, respectively, as detailed in Appendix A. Including these
items, the
Partnership reported, on a GAAP basis, net loss attributable to
the partners
of $2.8 million (as detailed in Appendix A to this release) for
the second
quarter of 2010, compared to net income of $14.9 million in the
previous
quarter. Net revenues(2) for the second quarter of 2010 were
$181.0 million
compared to $186.5 million in the previous quarter.
For accounting purposes, the Partnership is required to
recognize, through the
consolidated statements of income, changes in the fair value of
certain
derivative instruments as unrealized gains or losses. This
revaluation does
not affect the economics of any hedging transactions or have any
impact on the
Partnership's actual cash flows or the calculation of its
distributable cash
flow.
The Partnership has recast its historical financial results to
include the
results of the Falcon Spirit FSO and Petrojarl Varg FPSO
relating to the
periods prior to their acquisition by the Partnership from
Teekay, and for
which pre-acquisition results are referred to in this release as
the Dropdown
Predecessor. In accordance with GAAP, business acquisitions of
entities under
common control that have begun operations are required to be
accounted for in
a manner whereby the Partnership's financial statements are
retroactively
adjusted to include the historical results of the acquired
vessels from the
date the vessels were originally under the control of
Teekay.
(1) Adjusted net income attributable to the partners is a
non-GAAP financial
measure. Please refer to Appendix A included in this release for
a
reconciliation of this non-GAAP measure to the most directly
comparable
financial measure under GAAP and information about specific
items affecting
net income that are typically excluded by securities analysts in
their
published estimates of the Partnership's financial results.
(2) Net revenues represents revenues less voyage expenses, which
comprise all
expenses relating to certain voyages, including bunker fuel
expenses, port
fees, canal tolls and brokerage commissions. Net revenues is a
non-GAAP
financial measure used by certain investors to measure the
financial
performance of shipping companies. Please see the Partnership's
web site at
www.teekayoffshore.com for a reconciliation of this non-GAAP
measure as used
in this release to the most directly comparable GAAP financial
measure.
Operating Results
The following table highlights certain financial information for
Teekay
Offshore's four main segments: the Shuttle Tanker segment, the
Conventional
Tanker segment, the FSO segment, and the FPSO segment (please
refer to the
"Teekay Offshore's Fleet" section of this release above and
Appendix C for
further details).
----------------------------------------------------------------------------
Three Months Ended
June 30, 2010
(unaudited)
-----------------------------------------------------------
Shuttle Conventional
(in thousands of Tanker Tanker FSO FPSO
U.S. dollars) Segment Segment Segment(2) Segment Total
----------------------------------------------------------------------------
Net revenues 114,264 21,589 18,343 26,815 181,011
Vessel operating
expenses 32,346 5,657 8,420 10,190 56,613
Time-charter
hire expense 23,424 - - - 23,424
Depreciation and
amortization 29,280 5,921 3,829 5,121 44,151
Cash flow from
vessel
operations(1) 49,343 14,793 9,404 15,513 89,053
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended
March 31, 2010
(unaudited)
-----------------------------------------------------------
Shuttle Conventional
(in thousands of Tanker Tanker FSO FPSO
U.S. dollars) Segment Segment Segment(2) Segment Total
----------------------------------------------------------------------------
Net revenues 112,939 25,914 20,401 27,222 186,476
Vessel operating
expenses 34,163 5,714 8,405 10,126 58,408
Time-charter
hire expense 25,038 - - - 25,038
Depreciation and
amortization 24,955 5,742 5,417 5,121 41,235
Cash flow from
vessel
operations(1) 44,804 19,007 9,534 15,768 89,113
----------------------------------------------------------------------------
(1) Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense and amortization
of deferred gains, includes the realized gains (losses) on the
settlements foreign exchange forward contracts and excludes the cash
flow from vessel operations relating to the Dropdown Predecessor and
adjusting for direct financing leases to a cash basis. Cash flow from
vessel operations is a non-GAAP financial measure used by certain
investors to measure the financial performance of shipping companies.
Please see the Partnership's web site at www.teekayoffshore.com for a
reconciliation of this non-GAAP measure as used in this release to the
most directly comparable GAAP financial measure.
(2) Cash flow from vessel operations for the FSO segment reflects only the
cash flow generated by the Falcon Spirit FSO subsequent to its
acquisition by the Partnership on April 1, 2010. Results for the Falcon
Spirit FSO for the periods prior to its acquisition by the Partnership
when it was owned and operated by Teekay are referred to as the Dropdown
Predecessor. The amounts included related to the Dropdown Predecessor
are preliminary, and will be finalized for inclusion in the
Partnership's Form 6-K filing for the second quarter of 2010. Any
revisions to the preliminary Dropdown Predecessor figures are only
expected to impact the accounting for periods prior to the date the
Falcon Spirit FSO was acquired by the Partnership, and therefore will
have no effect on the adjusted net income attributable to the partners
or distributable cash flow of the Partnership for any period, including
the second quarter of 2010.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's shuttle
tanker segment
increased to $49.3 million for the second quarter of 2010,
compared to $44.8
million for the first quarter of 2010, primarily due to lower
vessel operating
expenses primarily relating to crewing costs, higher fleet
utilization, and an
increase in net revenues due to charter rate adjustments.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
conventional tanker
segment amounted to $14.8 million in the second quarter of 2010
compared to
$19.0 million in the first quarter of 2010, primarily due to an
increase in
scheduled drydocking days in the second quarter. In the second
quarter of
2010, two onventional tankers were drydocked compared to none in
the first
quarter. Three of the Partnership's conventional tankers are
scheduled to be
drydocked in the third quarter of 2010.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment decreased
to $9.4 million in the second quarter of 2010 from $9.5 million
in the first
quarter of 2010, primarily due to a reduction in the charter
rate for the
Navion Saga FSO (in accordance with its charter contract)
effective May 1,
2010, partially offset by the acquisition of the Falcon Spirit
FSO in April
2010.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment decreased
slightly to $15.5 million for the second quarter of 2010 from
$15.8 million
for the first quarter of 2010, primarily due to lower revenue as
a result of a
change in foreign currency rates, partially offset by lower
general and
administrative expenses. The oil production level on the Varg
FPSO continues
to remain strong.
Liquidity
As of June 30, 2010, the Partnership had total liquidity of
$246.1 million,
which consisted of $102.0 million in cash and cash equivalents
and $144.1
million in undrawn revolving credit facilities.
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, oil production and storage services to the
offshore oil
industry. Teekay Offshore owns a 51 percent interest in and
controls Teekay
Offshore Operating L.P., a Marshall Islands limited partnership
with a fleet
of thirty two shuttle tankers including six chartered-in
vessels, four FSO
units, and eleven conventional oil tankers. In addition, Teekay
Offshore has
direct ownership interests in two shuttle tankers, two FSO
units, and one FPSO
unit. Teekay Offshore also has rights to participate in certain
other FPSO and
shuttle tanker opportunities.
Teekay Offshore's common units trade on the New York Stock
Exchange under the
symbol "TOO".
---------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands of U.S. dollars, except unit data)
---------------------------------------------------------------------------
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010(1) 2009(2) 2010(1) 2009(2)
-----------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-----------------------------------------------------------
REVENUES 215,960 221,430 197,113 437,390 403,950
---------------------------------------------------------------------------
OPERATING
EXPENSES
Voyage expenses 34,949 34,954 22,229 69,903 47,042
Vessel
operating
expenses(3) 56,613 58,408 58,306 115,021 118,929
Time-charter
hire expense 23,424 25,038 29,144 48,462 61,289
Depreciation
and
amortization 44,151 41,235 40,221 85,386 80,385
General and
administrative
(3) 14,879 14,809 13,466 29,688 26,153
Restructuring
charge(4) - 119 1,481 119 3,682
---------------------------------------------------------------------------
174,016 174,563 164,847 348,579 337,480
---------------------------------------------------------------------------
Income from
vessel
operations 41,944 46,867 32,266 88,811 66,470
---------------------------------------------------------------------------
OTHER ITEMS
---------------------------------------------------------------------------
Interest
expense (7,318) (8,333) (10,993) (15,651) (24,385)
Interest income 235 163 129 398 957
Realized and
unrealized
(loss) gain
on derivative
instruments
(5) (56,036) (22,124) 54,000 (78,160) 75,017
Foreign
exchange
(loss) gain(3) (1,200) 636 (1,881) (564) (3,629)
Income tax
recovery
(expense) 10,378 7,087 1,147 17,465 (6,694)
Other income -
net 1,590 2,354 1,910 3,944 4,988
---------------------------------------------------------------------------
Net (loss)
income (10,407) 26,650 76,578 16,243 112,724
---------------------------------------------------------------------------
Net (loss)
income
attributable
to:
Non-
controlling
interests (7,572) 10,849 30,715 3,277 45,391
Dropdown
Predecessor
(1)(2) - 921 12,398 921 16,928
Partners (2,835) 14,880 33,465 12,045 50,405
Limited
partners'
units
outstanding:
Weighted-
average number
of common
units
outstanding
- Basic and
diluted 42,760,000 38,206,000 20,425,000 40,495,580 20,425,000
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 42,760,000 38,206,000 30,225,000 40,495,580 30,225,000
(1) Results for the Falcon Spirit FSO and Petrojarl Varg FPSO for the
periods prior to their acquisition by the Partnership when they were
owned and operated by Teekay Corporation are referred to as the Dropdown
Predecessor. The amounts included in this release related to the Falcon
Spirit FSO Dropdown Predecessor are preliminary, and will be finalized
for inclusion in the Partnership's Form 6-K filing for the second
quarter of 2010. Any revisions to the preliminary Falcon Spirit FSO
Dropdown Predecessor figures are only expected to impact the accounting
for periods prior to the date the Falcon Spirit FSO was acquired by the
Partnership, and therefore will have no effect on the adjusted net
income attributable to the partners or distributable cash flow of the
Partnership for any period, including the second quarter of 2010.
(2) Results for the Petrojarl Varg FPSO for the periods prior to its
acquisition by the Partnership in September 2009 when it was owned and
operated by Teekay Corporation, are referred to as the Dropdown
Predecessor.
(3) The Partnership has entered into foreign exchange forward contracts,
which are economic hedges for certain vessel operating expenses and
general and administrative expenses. Certain of these forward contracts
have been designated as cash flow hedges pursuant to GAAP. Unrealized
gains (losses) arising from hedge ineffectiveness from such forward
contracts, including forward contracts relating to the Dropdown
Predecessor, are reflected in vessel operating expenses, and general and
administrative expenses in the above Summary Consolidated Statements of
Income as detailed in the table below:
Three Months Ended Six Months Ended
-------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
-------------------------------------------------
Vessel operating expenses (1,198) (1,125) 697 (2,322) 1,467
General and administrative (854) (735) 756 (1,589) 2,102
(4) Restructuring charges were incurred in connection with the re-flagging
of certain of the Partnership's vessels, which are expected to result in
lower future crewing costs.
(5) The realized losses relate to the amounts the Partnership actually paid
or received to settle such derivative instruments and the unrealized
(losses) gains relate to the change in fair value of such derivative
instruments as detailed in the table below:
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
-----------------------------------------------------------
Realized losses
relating to:
Interest rate
swaps (10,934) (10,819) (11,915) (21,753) (21,878)
Foreign
currency
forward
contract (340) (155) (830) (495) (3,978)
-----------------------------------------------------------
(11,274) (10,974) (12,745) (22,248) (25,856)
-----------------------------------------------------------
Unrealized
(losses) gains
relating to:
Interest rate
swaps (41,486) (10,566) 65,244 (52,052) 96,479
Foreign
currency
forward
contracts (3,276) (584) 1,501 (3,860) 4,394
-----------------------------------------------------------
(44,762) (11,150) 66,745 (55,912) 100,873
-----------------------------------------------------------
Total realized
and unrealized
(losses) gains
on non-
designated
derivative
instruments (56,036) (22,124) 54,000 (78,160) 75,017
-----------------------------------------------------------
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
As at As at As at
June 30, March 31, December 31,
2010 2010(1) 2009(1)
-----------------------------------------
(unaudited) (unaudited) (unaudited)
-----------------------------------------
ASSETS
Cash and cash equivalents 101,953 136,565 101,747
Other current assets 146,238 152,160 149,659
Vessels and equipment 1,885,335 1,913,927 1,917,248
Other assets 87,649 130,351 94,845
Intangible assets 32,826 34,749 36,885
Goodwill 127,113 127,113 127,113
--------------------------------------------------------------------------
Total Assets 2,381,114 2,494,865 2,427,497
--------------------------------------------------------------------------
LIABILITIES AND EQUITY
Accounts payable and accrued
liabilities 75,786 65,998 74,514
Other current liabilities 46,294 51,645 40,220
Current portion of long-term debt 161,228 120,143 108,159
Current portion of derivative
instruments 36,268 32,954 31,852
Long-term debt 1,461,590 1,592,128 1,672,300
Other long-term liabilities 114,299 72,913 73,247
Redeemable non-controlling
interest 42,676 43,132 -
Equity:
Non-controlling interest 174,691 206,847 219,692
Partners' equity 268,282 309,105 207,513
--------------------------------------------------------------------------
Total Liabilities and Equity 2,381,114 2,494,865 2,427,497
--------------------------------------------------------------------------
(1) In accordance with GAAP, the balance sheets at March 31, 2010 and
December 31, 2009 include the Dropdown Predecessor for the Falcon Spirit
FSO, which was acquired by the Partnership on April 1, 2010, to reflect
ownership of the vessel from the time it began operations as an FSO when
owned by Teekay Corporation on December 15, 2009. The amounts included
in this release related to the Falcon Spirit FSO Dropdown Predecessor
are preliminary, and will be finalized for inclusion in the
Partnership's Form 6-K filing for the second quarter of 2010. Any
revisions to the preliminary Falcon Spirit FSO Dropdown Predecessor
figures are only expected to impact the accounting for periods prior to
the date the Falcon Spirit FSO was acquired by the Partnership, and
therefore will have no effect on the adjusted net income attributable to
the partners or distributable cash flow of the Partnership for any
period, including the second quarter of 2010.
---------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Six Months Ended
June 30,
--------------------------
2010 (2) 2009 (1)
--------------------------
(unaudited) (unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
---------------------------------------------------------------------------
Net operating cash flow 136,103 104,931
---------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt 81,600 -
Scheduled repayments of long-term debt (44,348) (18,917)
Prepayments of long-term debt (150,048) (185,641)
Prepayments of joint venture partner advances - (2,237)
Equity contribution from joint venture partner 333 -
Proceeds from equity offering 100,581 -
Expenses from equity offering (5,043) (12)
Contribution of capital from Teekay Corporation
to Dropdown Predecessor relating to Petrojarl
Varg - 119,280
Distribution to Teekay Corporation relating to
Falcon Spirit (43,324) -
Cash distributions paid by the Partnership (39,125) (28,609)
Cash distributions paid by subsidiaries to non-
controlling interest (42,969) (27,487)
Other (523) (644)
---------------------------------------------------------------------------
Net financing cash flow (142,866) (144,267)
---------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (3,752) (5,227)
Investment in direct financing lease assets (886) -
Direct financing lease payments received 11,607 11,200
---------------------------------------------------------------------------
Net investing cash flow 6,969 5,973
---------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 206 (33,363)
Cash and cash equivalents, beginning of the
period 101,747 132,348
---------------------------------------------------------------------------
Cash and cash equivalents, end of the period 101,953 98,985
---------------------------------------------------------------------------
(1) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows includes the cash flows relating to the Petrojarl Varg FPSO, for
the period from October 1, 2006 to September 10, 2009, when the vessel
was under the common control of Teekay Corporation, but prior to its
acquisition by the Partnership.
(2) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows includes the cash flows relating to the Falcon Spirit FSO, for the
period from December 15, 2009 to April 1, 2010, when the vessel was
under the common control of Teekay Corporation, but prior to its
acquisition by the Partnership. The amounts included in this release
related to the Dropdown Predecessor are preliminary, and will be
finalized for inclusion in the Partnership's Form 6-K filing for the
second quarter of 2010. Any revisions to the preliminary Dropdown
Predecessor figures are only expected to impact the accounting for
periods prior to the date the Falcon Spirit FSO was acquired by the
Partnership, and therefore will have no effect on the adjusted net
income attributable to the partners or distributable cash flow of the
Partnership for any period, including the second quarter of 2010.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET (LOSS) INCOME
(in thousands of U.S. dollars)
Set forth below is a reconciliation of the Partnership's
unaudited adjusted
net income attributable to the partners, a non-GAAP financial
measure, to net
(loss) income attributable to the partners as determined in
accordance with
GAAP. The Partnership believes that, in addition to conventional
measures
prepared in accordance with GAAP, certain investors use this
information to
evaluate the Partnership's financial performance. The items
below are also
typically excluded by securities analysts in their published
estimates of the
Partnership's financial results. Adjusted net income
attributable to the
partners is intended to provide additional information and
should not be
considered a substitute for measures of performance prepared in
accordance
with GAAP.
-----------------------------------------------------------------------
Three Months Ended
June 30, 2010 March 31, 2010
------------------------------
(unaudited) (unaudited)
------------------------------
Net (loss) income - GAAP basis (10,407) 26,650
Adjustments:
Net loss (income) attributable to
Dropdown Predecessor - (921)
Net loss (income) attributable to
non-controlling interests 7,572 (10,849)
-----------------------------------------------------------------------
Net (loss) income attributable to the
partners (2,835) 14,880
Add (subtract) specific items affecting
net income:
Restructuring charges(1) - 119
Foreign exchange loss (gains)(2) 1,200 (636)
Foreign currency exchange losses
resulting from hedging ineffectiveness(3) 2,052 1,860
Deferred income tax recovery relating to
unrealized foreign exchange
gains and losses(4) (10,997) (3,209)
Unrealized losses on derivative
instruments(5) 44,762 11,150
Other(6) 3,634 -
Non-controlling interests' share of
items above (18,924) (4,019)
-----------------------------------------------------------------------
Total adjustments 21,727 5,265
-----------------------------------------------------------------------
Adjusted net income attributable to the
partners 18,892 20,145
-----------------------------------------------------------------------
(1) Restructuring charges were incurred in connection with the re-
flagging of certain of the Partnership's vessels, which are
expected to result in lower future crewing costs.
(2) Foreign exchange gains primarily relate to the Partnership's
revaluation of all foreign currency-denominated monetary assets
and liabilities based on the prevailing exchange rate at the end
of each reporting period.
(3) Foreign currency exchange losses resulting from hedging
ineffectiveness includes the unrealized losses arising from
hedge ineffectiveness from foreign exchange forward contracts that
are or have been designated as hedges for accounting purposes.
(4) Portion of deferred income tax recovery related to unrealized
foreign exchange gains and losses.
(5) Reflects the unrealized gain or loss due to changes in the mark-to-
market value of derivative instruments that are not designated as
hedges for accounting purposes.
(6) Primarily relates to adjustments to the carrying value of certain
capitalized drydocking expenditures and non-recurring adjustments to
tax accruals.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in thousands of U.S. dollars)
Description of Non-GAAP Financial Measure - Distributable Cash
Flow (DCF)
Distributable cash flow represents net income adjusted for
depreciation and
amortization expense, non-controlling interest, non-cash items,
estimated
maintenance capital expenditures, gains and losses on vessel
sales, unrealized
gains and losses from derivatives, non-cash income taxes,
unrealized foreign
exchange related items. Maintenance capital expenditures
represent those
capital expenditures required to maintain over the long-term the
operating
capacity of, or the revenue generated by, the Partnership's
capital assets.
Distributable cash flow is a quantitative standard used in the
publicly-traded
partnership investment community to assist in evaluating a
partnership's
ability to make quarterly cash distributions. Distributable cash
flow is not
defined by GAAP and should not be considered as an alternative
to net income
or any other indicator of the Partnership's performance required
by GAAP. The
table below reconciles distributable cash flow to net income for
the quarter.
--------------------------------------------------------------------------
Three Months Ended
June 30, 2010
(unaudited)
--------------------------------------------------------------------------
Net loss (10,407)
Add:
Depreciation and amortization 44,151
Unrealized losses on non-designated derivative
instruments 44,762
Foreign exchange and other, net 5,414
Less:
Deferred income tax recovery (12,394)
Estimated maintenance capital expenditures (23,242)
--------------------------------------------------------------------------
Distributable Cash Flow before Non-Controlling Interest 48,284
Non-controlling interests' share of DCF (20,227)
--------------------------------------------------------------------------
Distributable Cash Flow 28,057
--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
Three Months Ended June 30, 2010
--------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
------------------------------------------------------------------------
Net revenues(1) 114,264 21,589 18,343 26,815 181,011
Vessel operating
expenses 32,346 5,657 8,420 10,190 56,613
Time-charter
hire expense 23,424 - - - 23,424
Depreciation and
amortization 29,280 5,921 3,829 5,121 44,151
General and
administrative 11,603 1,139 1,009 1,128 14,879
------------------------------------------------------------------------
Income from
vessel
operations 17,611 8,872 5,085 10,376 41,944
------------------------------------------------------------------------
Three Months Ended March 31, 2010
---------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment(2) Segment Total
------------------------------------------------------------------------
Net revenues(1) 112,939 25,914 20,401 27,222 186,476
Vessel operating
expenses 34,163 5,714 8,405 10,126 58,408
Time-charter
hire expense 25,038 - - - 25,038
Depreciation and
amortization 24,955 5,742 5,417 5,121 41,235
General and
administrative 11,260 1,193 1,010 1,346 14,809
Restructuring
charges 119 - - - 119
------------------------------------------------------------------------
Income from
vessel
operations 17,404 13,265 5,569 10,629 46,867
------------------------------------------------------------------------
(1) Net revenues represents revenues less voyage expenses, which
comprise all expenses relating to certain voyages, including bunker
fuel expenses, port fees, canal tolls and brokerage commissions. Net
revenues is a non-GAAP financial measure used by certain investors
to measure the financial performance of shipping companies. Please
see the Partnership's web site at www.teekayoffshore.com for a
reconciliation of this non-GAAP measure as used in this release to
the most directly comparable GAAP financial measure.
(2) Income from operations for the Falcon Spirit FSO for the periods
prior to its April 1, 2010 acquisition by the Partnership when it
was owned and operated by Teekay Corporation, are required by GAAP
to be included in Teekay Offshore's results for such prior periods.
The amounts included in this release related to the Falcon Spirit
FSO Dropdown Predecessor are preliminary, and will be finalized for
inclusion in the Partnership's Form 6-K filing for the second
quarter of 2010. Any revisions to the preliminary Falcon Spirit
FSO Dropdown Predecessor figures are only expected to impact the
accounting for periods prior to the date the Falcon Spirit FSO was
acquired by the Partnership, and therefore will have no effect on
the adjusted net income attributable to the partners or
distributable cash flow of the Partnership for any period,
including the second quarter of 2010.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements (as defined in
Section 21E of
the Securities Exchange Act of 1934, as amended) which reflect
management's
current views with respect to certain future events and
performance, including
statements regarding: the Partnership's future growth prospects
and the impact
on the Partnership's future cash flows and distributions to
unitholders;
future profitability of the Partnership, including the third and
fourth
quarters of 2010 and first quarter of 2011; the potential for
Teekay to offer
additional vessels to the Partnership and the Partnership's
acquisition of any
such vessels, particularly Teekay offering and the Partnership's
acquisition
of the Cidade de Rio das Ostras and Foinaven FPSOs and the
newbuilding Aframax
shuttle tankers; cash flows that might result from the
acquisition of
additional vessels; new contracts for Teekay's newbuilding
Aframax shuttle
tankers; the potential for Teekay to offer to the Partnership
additional
limited partner interests in OPCO; and the acquisition of new
offshore
projects. The following factors are among those that could cause
actual
results to differ materially from the forward-looking
statements, which
involve risks and uncertainties, and that should be considered
in evaluating
any such statement: vessel operations and production volumes;
different levels
of field maintenance than expected; increased operating
expenses; failure of
Teekay to offer to the Partnership additional vessels or
ownership interests
in OPCO; failure to acquire additional vessels because Teekay
Offshore
determine that they are unsuitable or not sufficiently
profitable to the
Partnership; required approvals by the Conflicts Committee of
Teekay
Offshore's general partner to acquire from Teekay vessels or
ownership
interests in OPCO; the Partnership's ability to raise financing
to purchase
additional vessels or interests in OPCO; failure to complete
negotiations for
new contracts for Teekay's Aframax shuttle tanker newbuildings;
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, 2009.
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.
Alana Duffy Media Enquiries +1 (604) 844-6605
www.teekayoffshore.com
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