Teekay Offshore Partners L.P. (NYSE: TOO) -
Highlights
-- Generated distributable cash flow of $20.8 million in the third quarter
of 2010.
-- Declared cash distribution of $0.475 per unit for the third quarter of
2010.
-- In August 2010, signed new shuttle tanker Master Agreement with Statoil
ASA.
-- In October 2010, acquired one FPSO unit and one newbuilding shuttle
tanker for total cost of $286 million; agreed to acquire two additional
newbuilding shuttle tankers for approximately $260 million for delivery
in January and July 2011.
Teekay Offshore GP L.L.C., 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 September 30, 2010. During the third quarter of 2010, the
Partnership generated distributable cash flow(1) of $20.8 million,
compared to $28.1 million in the quarter ended June 30, 2010,
primarily as a result of seasonal factors associated with the
scheduled maintenance of North Sea oil fields during the summer
months.
On October 25, 2010, the Partnership declared a cash
distribution of $0.475 per unit for the quarter ended September 30,
2010. The cash distribution will be paid on November 12, 2010, to
all unitholders of record on November 5, 2010.
Acquisition of FPSO and Shuttle Tankers
On October 18, 2010, the Partnership announced that it had
completed the acquisition of the Cidade de Rio das Ostras (Rio das
Ostras) floating production storage and offloading (FPSO) unit from
Teekay Corporation (Teekay), which is on a long-term charter with
Petroleo Brasileiro SA (Petrobras), for a purchase price of
approximately $158 million. In addition, Teekay Offshore announced
that its 51 percent-owned subsidiary, Teekay Offshore Operating
L.P. (OPCO), had acquired a newbuilding shuttle tanker, the
Amundsen Spirit, from Teekay for approximately $128 million and had
agreed to acquire two additional newbuilding shuttle tankers, the
Nansen Spirit and the Peary Spirit, from Teekay for a total
purchase price of approximately $260 million. The acquisitions of
the two newbuilding shuttle tankers are expected to coincide with
the commencement of their time-charter contracts under a Master
Agreement with Statoil in January 2011 and July 2011, respectively.
The Partnership financed the acquisition of the Rio das Ostras FPSO
unit and the Amundsen Spirit newbuilding shuttle tanker through the
assumption of $187 million of debt secured by these assets, with
the remainder of the purchase price financed from available
capacity under the Partnership's revolving credit facilities.
These transactions are expected to increase the Partnership's
cash flow from vessel operations(2) by approximately $60 million in
2011, and distributable cash flow(1), which includes only 51
percent of OPCO's cash flow, by approximately $20 million in
2011.
"As expected, the Partnership's cash flow declined in the third
quarter primarily due to the scheduled seasonal maintenance of the
North Sea oil fields, which typically occur during the summer
months, and the concurrent planned maintenance shutdown of the
Petrojarl Varg FPSO unit," commented Peter Evensen, Chief Executive
Officer of Teekay Offshore GP L.L.C. "With the completion of the
North Sea field maintenance, our shuttle tanker fleet and our
Petrojarl Varg FPSO unit have returned to normal production levels
in the fourth quarter. In addition, the recently signed Master
Agreement with Statoil, initially for seven shuttle tankers, which
replaces volume-dependent contracts of affreightment with
fixed-rate, time-charter contracts effective September 1, 2010,
should reduce the seasonal variability in the Partnership's cash
flows going forward."
Mr. Evensen continued, "Teekay Offshore's FPSO and shuttle
tanker businesses have experienced several exciting developments
during the past three months. The accretive acquisition of the Rio
das Ostras FPSO unit, located in the opportunity-rich Brazil
offshore market, provides us with a second FPSO unit and
compliments our fleet of 13 shuttle tankers operating in Brazil. In
addition, we acquired the first of three shuttle tanker
newbuildings, all of which will operate under the new Master
Agreement with Statoil."
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of
November 1, 2010, including vessels owned by OPCO, of which the
Partnership owns a 51 percent interest:
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Number of Vessels
Chartered-in
Owned Vessels Vessels Total
--------------------------------------
Shuttle Tanker Segment 29(i) 6 35
Committed Shuttle Tanker Newbuildings 2 - 2
Conventional Tanker Segment 11 - 11
FSO Segment 6 - 6
FPSO Segment 2 - 2
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Total 50 6 56
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(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 33 shuttle tankers, including six
chartered-in vessels, 4 FSO units, and 11 conventional oil
tankers.
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, 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
As described above, OPCO recently acquired one Aframax shuttle
tanker newbuilding (the Amundsen Spirit) and has committed to
acquire two additional Aframax shuttle tanker newbuildings (the
Nansen Spirit and the Peary Spirit) that are scheduled to deliver
to OPCO in January and July 2011. Teekay is obligated to offer to
sell to the Partnership its interest in a fourth shuttle tanker
newbuilding within 365 days after its delivery, provided the vessel
is servicing a charter contract in excess of three years in
length.
FPSO Units
Pursuant to the omnibus agreement and a subsequent agreement,
Teekay is obligated to offer to sell the Petrojarl Foinaven FPSO
unit, an existing FPSO unit of Teekay operating under a long-term
contract in the North Sea, to Teekay Offshore prior to July 9,
2012. The purchase price for the Petrojarl Foinaven FPSO unit 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.
On October 19, 2010, Teekay announced that it had signed a
contract with Petrobras to provide a FPSO unit for the Tiro and
Sidon fields located in the Santos Basin offshore Brazil. The
contract with Petrobras will be serviced by a new converted FPSO
unit, to be named the Petrojarl Cidade de Itajai, which is
currently under conversion from an existing Aframax tanker at
Sembcorp Marine's Jurong Shipyard in Singapore for a total
estimated cost of approximately $370 million. The new FPSO unit is
scheduled to deliver in the second quarter of 2012, when it will
commence operations under a nine-year, fixed-rate time-charter
contract to Petrobras with six additional one-year extension
options. Pursuant to the omnibus agreement, Teekay is obligated to
offer to the Partnership its interest in this FPSO project at
Teekay's fully built-up cost, within 365 days after the
commencement of the charter to Petrobras.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1) (as detailed in Appendix A to this release) of $12.9
million for the quarter ended September 30, 2010, compared to $18.9
million for the quarter ended June 30, 2010. Adjusted net income
attributable to the partners excludes a number of specific items
that had the net effect of decreasing net income by $16.8 million
and $21.7 million for the quarters ended September 30, 2010 and
June 30, 2010, respectively, as detailed in Appendix A. Including
these items, the Partnership reported, on a GAAP basis, net loss
attributable to the partners of $3.9 million (as detailed in
Appendix A to this release) for the third quarter of 2010, compared
to net loss of $2.8 million in the previous quarter. Net
revenues(2) for the third quarter of 2010 were $172.7 million
compared to $181.0 million in the previous quarter.
For accounting purposes, the Partnership is required to
recognize, through the consolidated statements of (loss) 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 unit and Petrojarl
Varg FPSO unit 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. For these
purposes, the Falcon Spirit was under common control by Teekay from
December 15, 2009 until April 1, 2010, when it was sold to the
Partnership, and the Petrojarl Varg FPSO unit was under common
control by Teekay from October 1, 2006 to September 10, 2009, when
it was sold to the Partnership.
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).
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Three Months Ended
-----------------------------------------------------------
September 30, 2010
-----------------------------------------------------------
(unaudited)
-----------------------------------------------------------
Shuttle Conventional
(in thousands of Tanker Tanker FSO FPSO
U.S. dollars) Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues 110,068 22,116 16,777 23,726 172,687
Vessel operating
expenses 33,442 6,144 8,296 13,223 61,105
Time-charter hire
expense 20,352 - - - 20,352
Depreciation and
amortization 26,786 7,239 3,479 5,119 42,623
Cash flow from
vessel
operations(1) 45,636 14,932 8,161 9,162 77,891
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----------------------------------------------------------------------------
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 9,405 15,513 89,054
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(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 unit subsequent to its
acquisition by the Partnership on April 1, 2010. Results for the
Falcon Spirit FSO unit for the periods prior to its acquisition by the
Partnership when it was owned and operated by Teekay are included in
the Dropdown Predecessor.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's shuttle
tanker segment decreased to $45.6 million for the third quarter of
2010, compared to $49.3 million for the second quarter of 2010,
primarily due to reduced revenues as a result of reduced oil
production in the North Sea due to seasonal oil field
maintenance.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
conventional tanker segment of $14.9 million in the third quarter
of 2010 was consistent with the $14.8 million generated in the
second quarter of 2010.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment decreased to $8.2 million in the third quarter of 2010 from
$9.4 million in the second quarter of 2010, primarily due to a
contractual reduction in the charter rate on the Navion Saga FSO
unit effective May 1, 2010.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment decreased to $9.2 million for the third quarter of 2010,
compared to $15.5 million for the second quarter of 2010, primarily
due to a planned maintenance shutdown of the Petrojarl Varg FPSO
unit during the third quarter, resulting in lower production tariff
revenue and higher vessel operating expenses.
Liquidity
As of September 30, 2010, the Partnership had total liquidity of
$448.0 million, which consisted of $158.5 million in cash and cash
equivalents and $289.5 million in undrawn revolving credit
facilities. Total liquidity increased from $246.1 million as at
June 30, 2010, primarily as a result of the Partnership's follow-on
equity offering completed in August 2010, which provided net
proceeds to the Partnership of $130.4 million, cash flow from
operations and the completion of a new $32 million debt facility
secured by Falcon Spirit FSO in September 2010.
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-three shuttle tankers, including two newbuildings to be
acquired, 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 two
FPSO units. 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)
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Three Months Ended Nine Months Ended
------------------------------------------------------------
September June 30, September September September
30, 2010 2010(1) 30, 2009(2) 30, 2010(1) 30, 2009(2)
------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------
REVENUES 200,379 215,960 204,509 637,769 608,460
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OPERATING
EXPENSES
Voyage expenses 27,692 34,949 29,363 97,595 76,405
Vessel operating
expenses(3) 61,105 56,613 55,837 176,126 174,766
Time-charter
hire expense 20,352 23,424 27,772 68,814 89,061
Depreciation and
amortization 42,623 44,151 40,981 128,009 121,366
General and
administrative(3) 14,450 14,879 12,840 44,138 38,993
Restructuring
charge(4) - - 371 119 4,053
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166,222 174,016 167,164 514,801 504,644
----------------------------------------------------------------------------
Income from
vessel
operations 34,157 41,944 37,345 122,968 103,816
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OTHER ITEMS
----------------------------------------------------------------------------
Interest expense (7,308) (7,318) (9,147) (22,959) (33,532)
Interest income 235 235 141 633 1,098
Realized and
unrealized
(loss) gain
on derivative
instruments(5) (30,769) (56,036) (37,302) (108,929) 37,716
Foreign exchange
gain (loss)(3) 1,737 (1,200) (4,359) 1,173 (7,988)
Income tax
(expense)
recovery (8,779) 10,378 (20,234) 8,686 (26,928)
Other income -
net 1,636 1,590 2,068 5,580 7,055
----------------------------------------------------------------------------
Net (loss)
income (9,091) (10,407) (31,488) 7,152 81,237
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Net (loss)
income
attributable
to:
Non-controlling
interests (5,231) (7,572) (12,560) (1,954) 32,831
Dropdown
Predecessor(1)(2) - - (5,551) 921 11,378
Partners (3,860) (2,835) (13,377) 8,185 37,028
Limited
partners' units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 45,450,625 42,760,000 25,056,250 42,165,412 21,985,714
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 45,450,625 42,760,000 34,856,250 42,165,412 31,785,714
Total common
units
outstanding at
end of period 48,797,500 42,760,000 37,700,000 48,797,500 37,700,000
(1) Results for the Falcon Spirit FSO unit for the periods prior to its
acquisition by the Partnership in April 2010 when it was owned and
operated by Teekay Corporation, are included in the Dropdown
Predecessor.
(2) Results for the Petrojarl Varg FPSO unit for the periods prior to its
acquisition by the Partnership in September 2009 when it was owned and
operated by Teekay Corporation, are included in 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 (Loss) Income as detailed in the table below:
Three Months Ended Nine Months Ended
------------------------------------------------------------
September September September September
30, June 30, 30, 30, 30,
2010 2010 2009 2010 2009
------------------------------------------------------------
Vessel operating
expenses (428) (1,198) 1,404 (2,750) 2,871
General and
administrative 444 (854) 1,382 (1,145) 3,484
(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 Nine Months Ended
------------------------------------------------------------
September June 30, September September September
30, 2010 2010 30, 2009 30, 2010 30, 2009
------------------------------------------------------------
Realized losses
relating to:
Interest rate
swaps (10,327) (10,934) (12,743) (32,080) (34,621)
Foreign
currency
forward
contract (150) (340) (93) (645) (4,071)
------------------------------------------------------------
(10,477) (11,274) (12,836) (32,725) (38,692)
------------------------------------------------------------
Unrealized
(losses) gains
relating to:
Interest rate
swaps (28,275) (41,486) (24,942) (80,327) 71,538
Foreign
currency
forward
contracts 7,983 (3,276) 476 4,123 4,870
------------------------------------------------------------
(20,292) (44,762) (24,466) (76,204) 76,408
------------------------------------------------------------
Total realized
and unrealized
(losses) gains
on non-
designated
derivative
instruments (30,769) (56,036) (37,302) (108,929) 37,716
------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
As at As at As at
------------------------------------------------------------
September 30, 2010 June 30, 2010 December 31, 2009(1)
------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
------------------------------------------------------------
ASSETS
Cash and cash
equivalents 158,466 101,953 101,747
Other current
assets 111,268 146,238 149,659
Vessels and
equipment 1,851,239 1,885,335 1,917,248
Other assets 76,932 87,649 94,845
Intangible
assets 30,793 32,826 36,885
Goodwill 127,113 127,113 127,113
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Total Assets 2,355,811 2,381,114 2,427,497
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LIABILITIES AND
EQUITY
Accounts payable
and accrued
liabilities 82,182 75,786 74,514
Other current
liabilities 34,717 46,294 40,220
Current portion
of long-term
debt 152,562 161,228 108,159
Current portion
of derivative
instruments 32,153 36,268 31,852
Long-term debt 1,339,981 1,461,590 1,672,300
Other long-term
liabilities 136,813 114,299 73,247
Redeemable non-
controlling
interest 43,330 42,676 -
Equity:
Non-
controlling
interest 156,632 174,691 219,692
Partners'
equity 377,441 268,282 207,513
----------------------------------------------------------------------------
Total
Liabilities and
Equity 2,355,811 2,381,114 2,427,497
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(1) In accordance with GAAP, the balance sheet at December 31, 2009
includes the Dropdown Predecessor as it relates to the Falcon Spirit
FSO unit , 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 unit when owned by Teekay Corporation on December 15, 2009.
TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
Nine Months Ended
----------------------------------------
September 30,
----------------------------------------
2010 (1) 2009 (2)
----------------------------------------
(unaudited) (unaudited)
Cash and cash equivalents provided
by (used for)
OPERATING ACTIVITIES
----------------------------------------------------------------------------
Net operating cash flow 225,528 140,606
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FINANCING ACTIVITIES
Proceeds from drawdown of long-term
debt 119,400 119,575
Scheduled repayments of long-term
debt (53,236) (24,124)
Prepayments of long-term debt (309,235) (241,090)
Prepayments of long-term debt
relating to Dropdown Predecessor
Falcon Spirit (33,634) -
Distribution to Teekay Corporation
for the acquisition of Falcon
Spirit (10,495) -
Prepayments of joint venture partner
advances - (20,775)
Joint venture partner advances - 474
Equity contribution from joint
venture partner 233 4,772
Proceeds from equity offerings 237,041 109,227
Expenses from equity offerings (11,117) (4,945)
Contribution of capital from Teekay
Corporation to Dropdown
Predecessor relating to
Petrojarl Varg - 110,386
Purchase of Petrojarl Varg from
Teekay Corporation - (100,000)
Equity contribution from Teekay
Corporation to Dropdown Predecessor - -
relating to Falcon Spirit 805 -
Cash distributions paid by the
Partnership (60,579) (42,788)
Cash distributions paid by
subsidiaries to non-controlling
interest (58,969) (44,093)
Other (1,025) (1,114)
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Net financing cash flow (180,811) (134,495)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and
equipment (4,292) (11,726)
Investment in direct financing lease
assets (887) -
Direct financing lease payments
received 17,181 17,013
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Net investing cash flow 12,002 5,287
----------------------------------------------------------------------------
Increase in cash and cash
equivalents 56,719 11,398
Cash and cash equivalents, beginning
of the period 101,747 132,348
----------------------------------------------------------------------------
Cash and cash equivalents, end of
the period 158,466 143,746
----------------------------------------------------------------------------
(1) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows includes the cash flows relating to the Falcon Spirit FSO unit,
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.
(2) In accordance with GAAP, the Summary Consolidated Statements of Cash
Flows includes the cash flows relating to the Petrojarl Varg FPSO
unit, 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.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET LOSS
(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 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.
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Three Months Ended
------------------------------------
September 30, 2010 June 30, 2010
------------------------------------
(unaudited) (unaudited)
Net loss - GAAP basis (9,091) (10,407)
Adjustments:
Net loss attributable to non-
controlling interests 5,231 7,572
----------------------------------------------------------------------------
Net loss attributable to the partners (3,860) (2,835)
Add (subtract) specific items affecting
net income:
Foreign exchange (gains) loss (1) (1,737) 1,200
Foreign currency exchange (losses)
gains resulting from hedging
ineffectiveness (2) (16) 2,052
Deferred income tax expense (recovery)
relating to unrealized foreign
exchange
gains and losses (3) 13,174 (10,997)
Unrealized losses on derivative
instruments (4) 20,292 44,762
Other (5) - 3,634
Non-controlling interests' share of
items above (14,956) (18,924)
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Total adjustments 16,757 21,727
----------------------------------------------------------------------------
Adjusted net income attributable to the
partners 12,897 18,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) 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.
(2) Foreign currency exchange losses resulting from hedging
ineffectiveness include the unrealized losses arising from hedge
ineffectiveness from foreign exchange forward contracts that are or
have been designated as hedges for accounting purposes.
(3) Portion of deferred income tax (expense) recovery related to
unrealized foreign exchange gains and losses.
(4) Reflects the unrealized loss due to changes in the mark-to-market
value of derivative instruments that are not designated as hedges for
accounting purposes.
(5) 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 (loss) 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 loss for the quarter.
----------------------------------------------------------------------------
Three Months Ended
------------------
September 30, 2010
------------------
(unaudited)
----------------------------------------------------------------------------
Net loss (9,091)
Add:
Depreciation and amortization 42,623
Unrealized losses on non-designated derivative
instruments 20,292
Deferred income tax expense 8,405
Less:
Estimated maintenance capital expenditures 23,242
Foreign exchange and other, net 345
----------------------------------------------------------------------------
Distributable Cash Flow before Non-Controlling Interest 38,642
Non-controlling interests' share of DCF (17,862)
----------------------------------------------------------------------------
Distributable Cash Flow 20,780
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
Three Months Ended September 30, 2010
---------------------------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues (1) 110,068 22,116 16,777 23,726 172,687
Vessel operating
expenses 33,442 6,144 8,296 13,223 61,105
Time-charter hire
expense 20,352 - - - 20,352
Depreciation and
amortization 26,786 7,239 3,479 5,119 42,623
General and
administrative 11,212 1,040 837 1,361 14,450
----------------------------------------------------------------------------
Income from vessel
operations 18,276 7,693 4,165 4,023 34,157
----------------------------------------------------------------------------
Three Months Ended June 30, 2010
---------------------------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment(2) 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
----------------------------------------------------------------------------
(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 unit 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.
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, cash flows and distributions
to unitholders; the expected reduction in the seasonal variability
of the Partnership's future cash flows resulting from the new
Master Agreement with Statoil; shuttle tanker and FPSO unit
production in the North Sea during the fourth quarter of 2010; the
effect of the acquisition of the Rio das Ostras FPSO unit and three
newbuilding shuttle tankers (the Amundsen Spirit, the Nansen Spirit
and the Peary Sprit) on the Partnership's future results and in
particular, the estimated increase to the Partnership's 2011 cash
flow from vessel operations and distributable cash flow; the
purchase price and the timing of delivery and commencement of
time-charter contracts for the Nansen Spirit and the Peary Spirit;
the potential for Teekay to offer additional vessels to the
Partnership and the Partnership's acquisition of any such vessels,
particularly the Petrojarl Foinaven FPSO unit, the Petrojarl Cidade
de Itajai FPSO unit and the fourth newbuilding Aframax shuttle
tanker; the potential for Teekay to offer to the Partnership
additional limited partner interests in OPCO; and the potential
acquisition of other 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
oil production volumes; different levels of field maintenance than
expected; increased operating expenses; variability in shuttle
tanker tonnage requirements under the Statoil Master Agreement;
different-than-expected levels of oil production in the North Sea
offshore fields where the Amundsen Spirit, Nansen Spirit and Peary
Spirit operate; potential delays in the commencement of the Nansen
Spirit and Peary Spirit time-charters; potential early termination
of contracts, including the Rio das Ostras FPSO time-charter
contract and the Statoil Master Agreement; potential delays and/or
cost over-runs relating to the conversion of the Petrojarl Cidade
de Itajai FPSO unit; failure of Teekay to offer to the Partnership
additional vessels or ownership interests in OPCO; failure to
acquire additional vessels due to Teekay Offshore determining 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 secure a new contract in excess of three years for
Teekay's fourth Aframax shuttle tanker newbuilding; 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.
(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).
(2) 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 (defined in this release under "Financial
Summary") 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.
(3) 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.
(4) 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.
Contacts: Teekay Offshore Partners L.P. Kent Alekson Investor
Relations +1 (604) 609-6442 www.teekayoffshore.com
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