Teekay Offshore Partners L.P. (NYSE: TOO) -
Highlights
-- Generated distributable cash flow of $26.9 million in the fourth quarter
of 2010, up approximately 30 percent from the previous quarter.
-- Paid cash distribution of $0.475 per unit for the fourth quarter of
2010.
-- In the fourth quarter of 2010, acquired one FPSO unit and two
newbuilding shuttle tankers; agreed to acquire one additional
newbuilding shuttle tanker for delivery in July 2011.
-- In November 2010, issued NOK 600 million in senior unsecured bonds that
mature in November 2013.
-- In December 2010, completed equity offering of 6.44 million common
units, raising net proceeds of $175.2 million.
-- Partnership's total liquidity increased to $558 million as at December
31, 2010.
-- In January 2011, received offer from Teekay Corporation to acquire the
remaining 49 percent interest in Teekay Offshore Operating L.P. (OPCO).
Teekay Offshore GP L.L.C., the general partner of Teekay
Offshore Partners L.P. (Teekay Offshore or the Partnership), today
reported the Partnership's results for the quarter ended December
31, 2010. During the fourth quarter of 2010, the Partnership
generated distributable cash flow(1) of $26.9 million, compared to
$20.8 million in the quarter ended September 30, 2010.
(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).
On January 26, 2011, a cash distribution of $0.475 per unit was
declared for the quarter ended December 31, 2010. The cash
distribution was paid on February 14, 2011, to all unitholders of
record on February 7, 2011.
"The Partnership's cash flow increased significantly in the
fourth quarter, compared to the third quarter, due to a full
quarter of earnings from the amended Statoil shuttle tanker master
agreement and a return to normal production for the Petrojarl Varg
FPSO unit," commented Peter Evensen, Chief Executive Officer of
Teekay Offshore GP L.L.C. "The Partnership's fourth quarter cash
flow also benefited from the completion of the acquisition of the
Cidade de Rio das Ostras FPSO unit and two shuttle tanker
newbuildings, the second of which delivered ahead of schedule in
December 2010." Mr. Evensen continued, "However, shuttle tanker
operating costs increased during the fourth quarter primarily due
to the acquisition of the newbuildings Amundsen Spirit and Nansen
Spirit, unexpected repair costs relating to certain shuttle
tankers, and the delayed completion of certain seasonal repair and
maintenance activities. We expect shuttle tanker operating costs to
decline next quarter as the seasonal and non-recurring expenditures
are reduced. We are pleased to have the opportunity to acquire the
remaining 49 percent ownership interest in Teekay Offshore
Operating L.P., a transaction which we expect will be accretive to
the Partnership's distributable cash flow per unit and will also
simplify its ownership structure. In addition, the bond and equity
financings we completed during the fourth quarter have further
strengthened the Partnership's financial position which has enabled
us to pursue such acquisition opportunities."
Summary of OPCO Offer and Other Recent Transactions
In January 2011, the Partnership received an offer to acquire
from Teekay Corporation (Teekay) the remaining 49 percent interest
in Teekay Offshore Operating L.P. which the Partnership does not
currently own. OPCO currently operates a fleet of 34 shuttle
tankers, four Floating Storage and Offtake (FSO) units, nine
double-hull conventional oil tankers and two lightering vessels.
The offer is currently being reviewed by the Board of Directors of
the Partnership's general partner and its Conflicts Committee. If
accepted, the Partnership anticipates financing the acquisition
through a combination of $175 million in cash, which approximates
the proceeds raised in the Partnership's December 2010 equity
offering, and the remainder in the form of new limited partner and
general partner units to be issued to Teekay.
During December 2010, the Partnership completed a follow-on
equity offering of 6.44 million common units, which provided net
proceeds to the Partnership of $175.2 million (including 840,000
units from the underwriters' over-allotment option exercised in
full and the general partner's contribution). The net proceeds from
the offering were applied towards repaying a portion of outstanding
debt under the Partnership's revolving credit facilities, which can
be later redrawn for general partnership purposes, including
funding acquisitions.
During November 2010, the Partnership issued NOK 600 million in
senior unsecured bonds that mature in November 2013. All interest
and principal payments relating to the bond have been swapped into
U.S. dollars. The aggregate principal amount of the bonds is
equivalent to approximately USD 98.5 million and the interest rate
is at LIBOR + 5.04 percent.
On October 1, 2010, the Partnership completed the acquisition of
the Cidade de Rio das Ostras (Rio das Ostras) FPSO unit from
Teekay, which is on a long-term charter with Petroleo Brasileiro SA
(Petrobras), for a purchase price of $158 million. In addition,
OPCO, the 51 percent-owned subsidiary of Teekay Offshore, acquired
on October 1, 2010 and December 10, 2010, respectively, the
newbuilding shuttle tankers, the Amundsen Spirit and the Nansen
Spirit for a cost of $129 million per vessel. OPCO also agreed to
acquire an additional newbuilding shuttle tanker, the Peary Spirit,
for approximately $133 million, concurrent with the commencement of
its time-charter contract in July 2011.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of
February 1, 2011, including vessels owned by OPCO, of which the
Partnership currently owns a 51 percent interest. OPCO's fleet
includes 34 shuttle tankers (including five chartered-in vessels
and one committed newbuilding under construction), four FSO units,
and 11 conventional oil tankers.
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Number of Vessels
Owned Chartered-in Committed
Vessels Vessels Newbuildings Total
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Shuttle Tanker Segment 30(i) 5 1 36
Conventional Tanker Segment 11 - - 11
FSO Segment 6 - - 6
FPSO Segment 2 - - 2
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Total 49 5 1 55
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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.
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 may also acquire other vessels that Teekay may offer the
Partnership from time to time.
Shuttle Tankers
As described above, the Partnership recently received an offer
from Teekay to acquire the remaining 49 percent limited partner
interest in OPCO which is currently being reviewed by the Board of
Directors of the Partnership's general partner and its Conflicts
Committee. OPCO recently acquired two Aframax shuttle tanker
newbuildings (the Amundsen Spirit and the Nansen Spirit) and has
committed to acquire one additional Aframax shuttle tanker
newbuilding (the Peary Spirit) that is scheduled to deliver to OPCO
in July 2011. Teekay is obligated to offer the Partnership a fourth
shuttle tanker newbuilding (the Scott Spirit) 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's 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
long-term 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 newly converted
FPSO unit, named Petrojarl Cidade de Itajai. 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 with Petrobras.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1) (as detailed in Appendix A to this release) of $13.8
million for the quarter ended December 31, 2010, compared to $12.9
million for the quarter ended September 30, 2010. Adjusted net
income attributable to the partners excludes a number of specific
items that had the net effect of increasing net income by $36.2
million and decreasing net income by $16.8 million for the quarters
ended December 31, 2010 and September 30, 2010, respectively, as
detailed in Appendix A. Including these items, the Partnership
reported, on a GAAP basis, net income attributable to the partners
of $50.0 million (as detailed in Appendix A to this release) for
the fourth quarter of 2010, compared to a net loss of $3.9 million
in the previous quarter. Net revenues(2) for the fourth quarter of
2010 were $203.1 million compared to $181.8 million in the previous
quarter.
(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.
For accounting purposes, the Partnership is required to
recognize, through the consolidated statements of income (loss),
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, Petrojarl Varg
FPSO unit, Rio das Ostras FPSO unit and the Amundsen Spirit
newbuilding shuttle tanker 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, 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, the Rio das Ostras FPSO unit was
under common control by Teekay from April 1, 2008 to October 1,
2010, when it was sold to the Partnership and the Amundsen Spirit
newbuilding shuttle tanker was under common control by Teekay from
July 30, 2010 to October 1, 2010.
On October 1, 2010, OPCO agreed to acquire Teekay Corporation's
interests in two entities, which owned the newbuilding shuttle
tankers, the Nansen Spirit and the Peary Spirit, respectively.
Prior to their acquisition by OPCO, these entities are considered
variable interest entities. The Nansen Spirit was acquired on
December 10, 2010 and the Peary Spirit is expected to be acquired
in July 2011. As a result, the Partnership's consolidated financial
statements reflect the financial position, results of operations
and cash flows of the Peary Spirit from October 1, 2010 to the end
of the quarter, and the Nansen Spirit from October 1, 2010 to
December 10, 2010, the date the Nansen Spirit was acquired from
Teekay Corporation.
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
December 31, 2010
(unaudited)
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Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment(2) Segment Segment Segment Total
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Net revenues 119,134 25,478 17,889 40,611 203,112
Vessel operating expenses 42,993 6,224 10,093 18,034 77,344
Time-charter hire expense 20,981 - - - 20,981
Depreciation and
amortization 29,353 8,620 3,537 8,720 50,230
Cash flow from vessel
operations(1) 49,392 18,125 7,394 19,490 94,401
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Three Months Ended
September 30, 2010
(unaudited)
--------------------------------------------------
Shuttle Conventional FPSO
(in thousands of U.S. Tanker Tanker FSO Segment
dollars) Segment(2) Segment Segment (2) Total
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Net revenues 108,750 22,116 16,777 34,176 181,819
Vessel operating expenses 34,263 6,144 8,296 18,333 67,036
Time-charter hire expense 20,352 - - - 20,352
Depreciation and
amortization 27,569 7,239 3,479 8,892 47,179
Cash flow from vessel
operations(1) 45,636 14,932 8,161 9,162 77,891
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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 Partnership's Variable
Interest Entities and 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 Shuttle Tanker segment and FPSO
segment reflects only the cash flow generated by the Amundsen Spirit
newbuilding shuttle tanker and Rio das Ostras FPSO unit subsequent to
their acquisition by the Partnership on October 1, 2010 and the cash
flow generated by the Nansen Spirit subsequent to its acquisition by the
Partnership on December 10, 2010. Results for the Amundsen Spirit
newbuilding shuttle tanker and the Rio das Ostras FPSO unit for the
periods prior to their acquisition by the Partnership when they were
owned and operated by Teekay are included in the Dropdown Predecessor.
The amounts included related to the Dropdown Predecessor and Variable
Interest Entity are preliminary, and will be finalized for inclusion in
the Partnership's Form 20-F filing for the year ended December 31, 2010.
Any revisions to the preliminary Dropdown Predecessor figures are only
expected to impact the accounting for periods prior to the date the
Amundsen Spirit newbuilding shuttle tanker and the Rio das Ostras FPSO
were 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 fourth
quarter of 2010.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's shuttle
tanker segment increased to $49.4 million for the fourth quarter of
2010, compared to $45.6 million for the third quarter of 2010,
primarily due to the acquisition of the Amundsen Spirit on October
1, 2010 and higher revenue generated by five vessels which
commenced operating under the amended Statoil master agreement
effective September 2010, partially offset by higher vessel
operating expenses. Shuttle tanker vessel operating costs increased
during the fourth quarter due to the delivery of the Amundsen
Spirit and Nansen Spirit, unexpected repair costs incurred on
certain shuttle tankers, and the delayed completion of certain
seasonal repair and maintenance activities.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
conventional tanker segment increased to $18.1 million in the
fourth quarter of 2010, compared to $14.9 million for the third
quarter of 2010, primarily due to fewer scheduled drydocking days
in the fourth quarter compared to the third quarter.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment decreased to $7.4 million in the fourth quarter of 2010,
compared to $8.2 million for the third quarter of 2010, due
primarily to higher vessel operating expenses in the fourth
quarter.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment increased to $19.5 million for the fourth quarter of 2010,
compared to $9.2 million for the third quarter of 2010, primarily
due to the acquisition of the Rio das Ostras FPSO unit on October
1, 2010 and the completion of the planned maintenance shutdown of
the Petrojarl Varg FPSO unit in the third quarter.
Liquidity
As of December 31, 2010, the Partnership had total liquidity of
$557.6 million, which consisted of $166.5 million in cash and cash
equivalents and $391.1 million in undrawn revolving credit
facilities.
Conference Call
The Partnership plans to host a conference call on February 25,
2011 at 1:00 p.m. (ET) to discuss its results for the fourth
quarter and fiscal year 2010. An accompanying investor presentation
will be available on Teekay Offshore's Web site at
www.teekayoffshore.com prior to the start of the call. All
shareholders and interested parties are invited to listen to the
live conference call by choosing from the following options:
-- By dialing (800) 711-9538 or (416) 640-5925, if outside North
America, and quoting conference ID code 6874409.
-- By accessing the webcast, which will be available on Teekay
Offshore's Web site at www.teekayoffshore.com (the archive will
remain on the Web site for a period of 30 days).
The conference call will be recorded and available until Friday,
March 4, 2011. This recording can be accessed following the live
call by dialing (888) 203-1112 or (647) 436-0148, if outside North
America, and entering access code 6874409.
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 34
shuttle tankers (including one newbuilding to be acquired and five
chartered-in vessels), four FSO units, and 11 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".
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. dollars, except unit data)
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Three Months Ended Twelve Months Ended
------------------------------------------------------------
December December
September December 31, 31,
December 30, 31, 2010 2009
31, 2010 2010(1)(2) 2009(1)(3) (1)(2)(3) (1)(3)(4)
------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
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REVENUES 229,263 210,866 225,516 900,546 871,112
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OPERATING
EXPENSES
Voyage expenses 26,151 29,047 34,621 125,101 111,026
Vessel operating
expenses(5) 77,344 67,036 68,926 268,876 260,977
Time-charter
hire expense 20,981 20,352 28,141 89,795 117,202
Depreciation and
amortization 50,230 47,179 48,769 190,341 166,351
General and
administrative
(5) 13,394 16,838 16,978 63,214 61,761
Write-down of
vessel 9,441 - - 9,441 -
Restructuring
charge(6) - - 955 119 5,008
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197,541 180,452 198,390 746,887 722,325
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Income from
vessel
operations 31,722 30,414 27,126 153,659 148,787
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OTHER ITEMS
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Interest expense (8,553) (9,652) (11,603) (37,411) (50,798)
Interest income 200 240 138 842 1,239
Realized and
unrealized gain
(loss)
on derivative
instruments (7) 63,863 (37,191) 15,411 (55,666) 51,944
Foreign exchange
(loss) gain(8) (348) (2,615) 2,592 911 (11,242)
Income tax
recovery
(expense) 1,133 (8,779) 13,588 9,718 (13,792)
Other income -
net 1,296 1,623 2,012 6,810 9,489
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Net income
(loss) 89,313 (25,960) 49,264 78,863 135,627
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Net income
(loss)
attributable
to:
Non-controlling
interests 39,332 (5,231) 24,659 37,378 57,490
Dropdown
Predecessor(1)
(2)(3)(4) - (16,869) (2,098) (16,685) (419)
Partners 49,981 (3,860) 26,703 58,170 63,731
Limited
partners' units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 50,547,500 45,450,625 27,900,000 44,278,158 23,476,438
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 50,547,500 45,450,625 37,700,000 44,278,158 33,276,438
Total units
outstanding at
end of period 55,237,500 48,797,500 37,700,000 55,237,500 37,700,000
(1) Results for the Rio das Ostras FPSO unit for the period beginning April
2008 prior to its acquisition by the Partnership in October 2010 when it
was owned and operated by Teekay Corporation, are included in the
Dropdown Predecessor. The amounts included in this release related to
the Dropdown Predecessor are preliminary, and will be finalized for
inclusion in the Partnership's Form 20-F filing for the year ended
December 31, 2010. Any revisions to the preliminary Rio das Ostras FPSO
Dropdown Predecessor figures are only expected to impact the accounting
for periods prior to the date the Rio das Ostras FPSO unit 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 fourth quarter of 2010.
(2) Results for the Amundsen Spirit newbuilding shuttle tanker for the
period beginning July 2010 prior to its acquisition by the Partnership
in October 2010 when it was owned and operated by Teekay Corporation,
are included in the Dropdown Predecessor. The amounts included in this
release related to the Amundsen Spirit newbuilding shuttle tanker
Dropdown Predecessor are preliminary, and will be finalized for
inclusion in the Partnership's Form 20-F filing for the year ended
December 31, 2010. Any revisions to the preliminary Amundsen Spirit
newbuilding shuttle tanker Dropdown Predecessor figures are only
expected to impact the accounting for periods prior to the date the
Amundsen Spirit newbuilding shuttle tanker 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 fourth quarter of 2010.
(3) Results for the Falcon Spirit FSO unit for the period beginning December
2009 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.
(4) Results for the Petrojarl Varg FPSO unit for the period beginning
October 2006 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.
(5) 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 (Loss) as detailed in the table below:
Three Months Ended Twelve Months Ended
--------------------------------------------------
December September December December December
31, 2010 30, 2010 31, 2009 31, 2010 31, 2009
--------------------------------------------------
Vessel operating expenses (69) (428) (379) (2,819) 2,492
General and administrative (272) 410 (161) (1,416) 3,854
(6) Restructuring charges were incurred in connection with the re-flagging
of certain of the Partnership's vessels, which resulted in lower crewing
costs.
(7) The realized losses relate to the amounts the Partnership actually paid
or received to settle such derivative instruments and the unrealized
gains (losses) relate to the change in fair value of such derivative
instruments as detailed in the table below:
Three Months Ended Twelve Months Ended
--------------------------------------------------
December September December December December
31, 2010 30, 2010 31, 2009 31, 2010 31, 2009
--------------------------------------------------
Realized losses relating
to:
Interest rate swaps (12,993) (11,387) (13,122) (49,224) (51,084)
Foreign currency forward
contract (384) (150) (125) (1,029) (4,196)
--------------------------------------------------
(13,377) (11,537) (13,247) (50,253) (55,280)
--------------------------------------------------
Unrealized gains (losses)
relating to:
Interest rate swaps 76,368 (33,637) 28,966 (10,408) 102,662
Foreign currency forward
contracts 872 7,983 (308) 4,995 4,562
--------------------------------------------------
77,240 (25,654) 28,658 (5,413) 107,224
--------------------------------------------------
Total realized and
unrealized gains (losses)
on non-designated
derivative instruments 63,863 (37,191) 15,411 (55,666) 51,944
--------------------------------------------------
(8) Foreign exchange (loss) gain includes realized gains of $0.2 million for
the three and twelve months ended December 31, 2010 relating to the
amounts the Partnership received to settle the Partnership's non-
designated cross currency swap that was entered into as an economic
hedge in relation to the Partnership's NOK 600 million unsecured bond.
Foreign exchange (loss) gain also includes unrealized gains of $4.0
million for the three and twelve months ended December 31, 2010 relating
to the change in fair value of such derivative instrument.
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
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As at As at As at
December 31, September 30, December 31,
2010 2010(1) 2009(2)
(unaudited) (unaudited) (unaudited)
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ASSETS
Cash and cash equivalents 166,483 176,125 109,407
Other current assets 142,493 120,340 161,375
Vessels and equipment 2,299,507 2,166,333 2,120,688
Other assets 78,267 79,019 95,529
Intangible assets 28,763 30,865 36,957
Goodwill 127,113 127,113 127,113
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Total Assets 2,842,626 2,699,795 2,651,069
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LIABILITIES AND EQUITY
Accounts payable and accrued
liabilities 101,287 88,676 76,853
Other current liabilities 67,390 93,205 40,220
Current portion of long-term debt 152,096 172,435 120,259
Current portion of derivative
instruments 48,484 35,436 35,389
Long-term debt 1,565,044 1,507,160 1,924,796
Other long-term liabilities 138,151 169,221 82,681
Redeemable non-controlling
interest 41,725 43,330 -
Equity:
Non-controlling interest 170,876 156,632 219,692
Partners' equity 557,573 433,700 151,179
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Total Liabilities and Equity 2,842,626 2,699,795 2,651,069
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(1) In accordance with GAAP, the balance sheet at September 30, 2010
includes the Dropdown Predecessor as it relates to the Rio das Ostras
FPSO unit and the Amundsen Spirit newbuilding shuttle tanker, which were
both acquired by the Partnership on October 1, 2010 to reflect ownership
of these assets from the time they began operations as a FPSO unit and a
shuttle tanker, when owned by Teekay Corporation on April 1, 2008 and
July 31, 2010, respectively. The amounts included in this release
related to the Rio das Ostras FPSO unit and Amundsen Spirit newbuilding
shuttle tanker are preliminary, and will be finalized for inclusion in
the Partnership's Form 20-F filing for the year ended December 31, 2010.
Any revisions to the preliminary Dropdown Predecessor figures are only
expected to impact the accounting for periods prior to the date the Rio
das Ostras FPSO unit and Amundsen Spirit newbuilding shuttle tanker were
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 fourth quarter of
2010.
(2) In accordance with GAAP, the balance sheet at December 31, 2009 includes
the Dropdown Predecessor as it relates to the Falcon Spirit FSO unit and
the Rio das Ostras FPSO unit which were acquired by the Partnership on
April 1, 2010 and October 1, 2010, respectively, to reflect ownership of
these vessels from the time they began operations as a FSO unit and a
FPSO unit, when owned by Teekay Corporation on December 15, 2009 and
April 1, 2008, respectively. The amounts included in this release
related to the Rio das Ostras FPSO unit are preliminary, and will be
finalized for inclusion in the Partnership's Form 20-F filing for the
year ended December 31, 2010. Any revisions to the preliminary Dropdown
Predecessor figures are only expected to impact the accounting for
periods prior to the date the Rio das Ostras FPSO unit 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 fourth quarter of 2010.
----------------------------------------------------------------------------
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Twelve Months Ended
December 31,
2010 (1) 2009 (2)
--------------------------
(unaudited) (unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
----------------------------------------------------------------------------
Net operating cash flow 286,585 177,186
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt 355,678 279,575
Repayments of long-term debt (90,835) (34,948)
Repayments of long-term debt relating to Dropdown
Predecessors (41,909) (12,100)
Prepayments of long-term debt (568,236) (426,090)
Repayments of joint venture partner advances - (21,532)
Joint venture partner advances - 477
Equity contribution from joint venture partner 633 4,772
Distribution to Teekay Corporation for the
acquisition of Falcon Spirit (14,099) -
Distribution to Teekay Corporation for the
acquisition of Rio das Ostras (58,721) -
Distribution to Teekay Corporation for the
acquisition of Amundsen Spirit (17,671) -
Purchase from Teekay Corporation of Nansen Spirit (16,560) -
Contribution of capital from Teekay Corporation to
Dropdown Predecessor relating to Falcon Spirit 3,608 104
Equity (Distribution) Contribution (to) from
Teekay Corporation relating to Dropdown Predecessor
Rio das Ostras (2,791) 21,475
Contribution of capital from Teekay Corporation
relating to Dropdown Predecessor Amundsen Spirit 3,496 -
Purchase from Teekay Corporation of Petrojarl Varg - (100,000)
Contribution of capital from Teekay Corporation to
Dropdown Predecessor relating to Petrojarl Varg - 110,386
Proceeds from equity offerings 419,989 109,227
Expenses of equity offerings (18,497) (5,100)
Cash distributions paid by the Partnership (85,077) (60,452)
Cash distributions paid by subsidiaries to non-
controlling interests (77,236) (61,065)
Other (3,371) (5,089)
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Net financing cash flow (211,600) (200,360)
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INVESTING ACTIVITIES
Expenditures for vessels and equipment (39,759) (13,681)
Investment in direct financing lease assets (886) (579)
Direct financing lease payments received 22,736 23,045
----------------------------------------------------------------------------
Net investing cash flow (17,909) 8,785
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Increase (decrease) in cash and cash equivalents 57,076 (14,389)
Cash and cash equivalents, beginning of the year 124,232 138,621
----------------------------------------------------------------------------
Cash and cash equivalents, end of the year 181,308 124,232
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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, the Rio das
Ostras FPSO unit, for the period from April 1, 2008 to October 1, 2010
and the Amundsen Spirit newbuilding shuttle tanker, for the period from
July 30, 2010 to October 1, 2010, when the vessels were 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 unit,
for the period from December 15, 2009 to April 1, 2010, the Rio das
Ostras FPSO unit, for the period from April 1, 2008 to October 1, 2010
and the Petrojarl Varg FPSO unit, for the period from October 1, 2006 to
September 10, 2009, when the vessels were under the common control of
Teekay Corporation, but prior to its acquisition by the Partnership.
----------------------------------------------------------------------------
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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET INCOME (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 income (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.
----------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
------------------------------------------------
December September December December
31, 2010 30, 2010 31, 2010 31, 2009
------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Net income (loss) - GAAP
basis 89,313 (25,960) 78,863 135,627
Net (income) loss
attributable to non-
controlling interests (39,332) 5,231 (37,378) (57,490)
Net (income) loss
attributable to Dropdown
Predecessor - 16,869 16,685 419
----------------------------------------------------------------------------
Net income (loss)
attributable to the
partners 49,981 (3,860) 58,170 78,556
Add (subtract) specific
items affecting net
income (loss):
Restructuring charges (1) - - 119 5,008
Foreign exchange losses
(gains)(2) 546 (1,737) (631) 5,178
Foreign currency exchange
losses (gains) resulting
from hedging
ineffectiveness (3) 341 (16) 4,236 (5,319)
Deferred income tax
expense relating to
unrealized foreign
exchange gains (4) 1,178 13,174 146 24,384
Unrealized (gains) losses
on derivative instruments
(5) (77,240) 20,292 (1,036) (91,224)
Write-down of vessel (6) 9,441 - 9,441 -
Other (7) (2,978) - (89) 9,230
Non-controlling interests'
share of items above 32,491 (14,956) (5,038) 26,600
----------------------------------------------------------------------------
Total adjustments (36,221) 16,757 7,148 (26,143)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted net income
attributable to the
partners 13,760 12,897 65,318 52,413
----------------------------------------------------------------------------
(1) Restructuring charges were incurred in connection with the re-flagging
of certain of the Partnership's vessels, which resulted in lower crewing
costs.
(2) Foreign exchange losses (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, excluding amounts related to Dropdown Predecessor.
(3) Foreign currency exchange losses (gains) resulting from hedging
ineffectiveness include the unrealized losses (gains) arising from hedge
ineffectiveness from foreign exchange forward contracts that are or have
been designated as hedges for accounting purposes. This excludes foreign
currency exchange losses (gains) resulting from hedging ineffectiveness
relating to the Dropdown Predecessors of $0.03 million for the three
months ended September 30, 2010 and $1.1 million for the twelve months
ended December 31 2009.
(4) Portion of deferred income tax (expense) recovery related to unrealized
foreign exchange gains and losses.
(5) Reflects the unrealized losses (gains) due to changes in the mark-to-
market value of interest rate swaps and foreign exchange forward
contracts that are not designated as hedges for accounting purposes,
excluding unrealized losses (gains) of $5.3 million, $6.4 million and
($16.0) million relating to the Dropdown Predecessors for the three
months ended September 30, 2010, twelve months ended December 31, 2010
and 2009 respectively.
(6) Write-down of vessels during the three months ended December 31, 2010 is
related to the valuation impairment of one shuttle tanker, as the
shuttle tanker's carrying value exceeded its estimated fair value due to
the termination of its existing charter contract. The fair value of the
shuttle tanker was written-down based on the value of its projected
discounted cash flows.
(7) Primarily relates to non-recurring adjustments to pension and tax
accruals, and adjustments to the carrying value of certain capitalized
drydocking expenditures.
----------------------------------------------------------------------------
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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 (loss) 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, income (loss) from variable interest
entities, non-cash income taxes, loss on write down of vessels and
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
December 31, 2010
--------------------
(unaudited)
----------------------------------------------------------------------------
Net income 89,313
Add (subtract):
Depreciation and amortization 50,230
Write-down of vessel 9,441
Foreign exchange and other, net 2,550
Deferred income tax recovery (3,078)
Estimated maintenance capital expenditures (25,208)
Unrealized gains on non-designated derivative
instruments (1) (77,240)
----------------------------------------------------------------------------
Distributable Cash Flow before Non-Controlling Interest 46,008
Non-controlling interests' share of DCF (19,081)
----------------------------------------------------------------------------
Distributable Cash Flow 26,927
----------------------------------------------------------------------------
(1) Derivative instruments include interest rate swaps and foreign exchange
forward contracts.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended December 31, 2010
--------------------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues (1) 119,134 25,478 17,889 40,611 203,112
Vessel operating expenses 42,993 6,224 10,093 18,034 77,344
Time-charter hire expense 20,981 - - - 20,981
Depreciation and
amortization 29,353 8,620 3,537 8,720 50,230
General and administrative 8,217 1,129 943 3,105 13,394
Write-down of vessel 9,441 - - - 9,441
----------------------------------------------------------------------------
Income from vessel
operations 8,149 9,505 3,316 10,752 31,722
----------------------------------------------------------------------------
Three Months Ended September 30, 2010
--------------------------------------------------
(unaudited)
Shuttle Conventional FPSO
Tanker Tanker FSO Segment
Segment(2) Segment Segment (2) Total
----------------------------------------------------------------------------
Net revenues(1) 108,750 22,116 16,777 34,176 181,819
Vessel operating expenses 34,263 6,144 8,296 18,333 67,036
Time-charter hire expense 20,352 - - - 20,352
Depreciation and
amortization 27,569 7,239 3,479 8,892 47,179
General and administrative 11,447 1,040 837 3,514 16,838
----------------------------------------------------------------------------
Income from vessel
operations 15,119 7,693 4,165 3,437 30,414
----------------------------------------------------------------------------
(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 Amundsen Spirit newbuilding shuttle
tanker and the Rio das Ostras FPSO unit for the periods prior to their
October 1, 2010 acquisition by the Partnership when they were 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 Amundsen Spirit newbuilding shuttle
tanker Dropdown Predecessor and the Rio das Ostras FPSO Dropdown
Predecessor figures are only expected to impact the accounting for
periods prior to the date the Amundsen Spirit newbuilding shuttle tanker
and the Rio das Ostras FPSO were 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 fourth 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, cash flows and distributions
to unitholders; the expected impact on the Partnership's future
cash flow as a result of the new Master Agreement with Statoil and
the addition of three newbuilding shuttle tankers on time-charter
under this agreement; 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 timing and certainty of the
Partnership's acceptance of an offer to acquire the remaining 49
percent interest in OPCO and the expected impact on the
Partnership's future distributable cash flow per unit; and the
potential for the Partnership to acquire other vessels or offshore
projects from Teekay or third parties. 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; variations
in expected levels of field maintenance; 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 early
termination of contracts, including the Rio das Ostras FPSO
time-charter contract and the Statoil Master Agreement; failure of
Teekay to offer to the Partnership additional vessels; 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.
Contacts: Teekay Offshore Partners L.P. Kent Alekson Investor
Relations Enquiries +1 (604) 609-6442 www.teekayoffshore.com
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