Teekay Offshore GP L.L.C. (NYSE: TOO) -
Highlights
-- Generated distributable cash flow of $29.2 million in the first quarter
of 2011, up 5.8 percent from the same period of the prior year.
-- Increased quarterly cash distribution by 5.3 percent to $0.50 per unit
for the first quarter of 2011.
-- On March 8, 2011, acquired the remaining 49 percent interest in Teekay
Offshore Operating L.P. from Teekay Corporation.
-- Partnership's total liquidity was $382 million as at March 31, 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 March 31, 2011. During the first quarter of 2011, the
Partnership generated distributable cash flow(1) of $29.2 million,
compared to $27.6 million in the same period of the prior year.
On April 21, 2011, a cash distribution of $0.50 per unit was
declared for the quarter ended March 31, 2011. The cash
distribution is payable on May 13, 2011 to all unitholders of
record on May 6, 2011.
"Our acquisition of the remaining 49 percent interest in Teekay
Offshore Operating L.P., or OPCO, in March was a key milestone for
the Partnership," commented Peter Evensen, Chief Executive Officer
of Teekay Offshore GP LLC. "It significantly simplified our
ownership structure and provided a substantial increase to our
distributable cash flow, allowing us to increase the distribution
paid to unitholders by 5.3 percent in the first quarter of 2011.
The Partnership's distributable cash flow is expected to increase
further in the second quarter of 2011, reflecting the full quarter
benefit from the OPCO transaction on March 8th, 2011." Mr. Evensen
continued, "The attractive fundamentals for deepwater offshore oil
production are creating more growth opportunities for the
Partnership, many of which we are currently evaluating. With over
$380 million of available liquidity, the Partnership is well
positioned to continue its track record of accretive growth."
(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).
Summary of Recent Transaction
On March 8, 2011, the Partnership acquired from Teekay
Corporation (Teekay) the remaining 49 percent interest in OPCO that
it did not already own. At the time of the transaction, OPCO
operated a fleet of 34 shuttle tankers, three Floating Storage and
Offtake (FSO) units, nine double-hull conventional oil tankers and
two lightering vessels. The Partnership financed the acquisition
through a combination of $175 million in cash (less $15 million in
distributions made by OPCO to Teekay between December 31, 2010 and
the date of acquisition) and the issuance of 7.6 million common
units to Teekay.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of May
1, 2011.
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Number of Vessels
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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 5(ii) - - 5
FPSO Segment 2 - - 2
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Total 48 5 1 54
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i. Includes six shuttle tankers in which Teekay Offshore's interest is 50
percent and three shuttle tankers in which Teekay Offshore's ownership
is 67 percent.
ii. As a result of the charterer exercising its purchase option in
accordance with the terms of the charter contract, Teekay Offshore sold
the Karratha Spirit FSO for sales proceeds of $5.1 million during the
first quarter of 2011.
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 with
remaining durations of three years or greater. The Partnership may
also acquire other vessels that Teekay may offer it from time to
time.
Shuttle Tankers
Teekay Offshore 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 the
Partnership 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 with remaining durations of three
years or greater.
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, which is owned by Teekay and 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 costs to Teekay that would be required to
transfer the FPSO unit to the Partnership.
In October 2010, Teekay 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.
Teekay recently entered into a joint venture agreement with
Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) to
jointly pursue FPSO projects in Brazil. Teekay intends for
Odebrecht to be a 50 percent partner in the Tiro Sidon FPSO project
and is currently working with Odebrecht on potential FPSO project
opportunities which, pursuant to the omnibus agreement, may result
in the future sale of new FPSO units to the Partnership. Odebrecht
is a well-established Brazil-based company that operates in the
engineering and construction, petrochemical, bioenergy, energy, oil
and gas, real estate and environmental engineering sectors, with
over 120,000 employees and a presence in over 20 countries.
In addition, Teekay has signed a Letter of Intent with a major
oil and gas company to provide a new harsh weather FPSO which will
operate in the North Sea. Teekay has been involved in the front-end
engineering and design (FEED) study for this project over the past
several months, and is currently working towards finalizing a
contract with the customer. In connection with this project, Teekay
recently signed a conditional contract with Samsung Heavy
Industries (Samsung) to construct a newbuilding FPSO unit. If
Teekay is awarded an operating contract that is three years or
greater in duration, pursuant to the omnibus agreement, Teekay
would be 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.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1) (as detailed in Appendix A to this release) of $22.1
million for the quarter ended March 31, 2011, compared to $20.1
million for the same period of the prior year. Adjusted net income
attributable to the partners excludes a number of specific items
that had the net effect of increasing net income by $1.3 million
and decreasing net income by $5.3 million for the quarters ended
March 31, 2011 and March 31, 2010, respectively, as detailed in
Appendix A. Including these items, the Partnership reported, on a
GAAP basis, net income attributable to the partners of $23.4
million for the first quarter of 2011, compared to $14.9 million in
the same period of the prior year. Net revenues(2) for the first
quarter of 2011 increased to $208.3 million compared to $198.6
million in the same period of the prior year.
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 unit and the Cidade de
Rio das Ostras (Rio das Ostras) 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 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.
On October 1, 2010, Teekay Offshore agreed to acquire Teekay's
interests in the newbuilding shuttle tanker Peary Spirit. Prior to
its acquisition by the Partnership, this entity is considered a
variable interest entity for accounting purposes. The Peary Spirit
is expected to be acquired by the Partnership 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.
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
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March 31, 2011
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(unaudited)
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Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment Segment Segment Segment Total
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Net revenues 119,204 29,617 17,200 42,285 208,306
Vessel operating
expenses 40,785 5,825 9,148 19,372 75,130
Time-charter hire
expense 20,270 - - - 20,270
Depreciation and
amortization 27,432 6,045 3,181 8,912 45,570
Cash flow from vessel
operations(1) 45,652 22,043 4,804 19,496 91,995
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Three Months Ended
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March 31, 2010
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(unaudited)
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Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment Segment Segment(2) Segment(2) Total
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Net revenues 112,939 25,914 20,401 39,371 198,625
Vessel operating
expenses 34,163 5,714 8,405 15,106 63,388
Time-charter hire
expense 25,038 - - - 25,038
Depreciation and
amortization 24,955 5,742 5,417 8,894 45,008
Cash flow from vessel
operations(1) 44,804 19,007 9,534 15,768 89,113
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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 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 and FPSO segment
excludes the cash flow generated by the Falcon Spirit FSO unit and the
Rio das Ostras FPSO unit until their acquisition by the Partnership on
April 1, 2010 and October 1, 2010, respectively. Results for the Falcon
Spirit FSO unit 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.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's shuttle
tanker segment increased to $45.7 million for the first quarter of
2011, compared to $44.8 million for the same period of the prior
year, primarily due to the acquisition of the Amundsen Spirit and
Nansen Spirit during the fourth quarter of 2010, higher revenues
relating to the amended Statoil master agreement effective
September 2010, and lower time-charter hire expenses resulting from
the redelivery of two in-chartered vessels. This was partially
offset by lower revenue resulting from fewer revenue days from
vessels operating under contracts of affreightment, and higher
vessel operating expenses and restructuring costs incurred during
the current quarter.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
conventional tanker segment increased to $22.0 million in the first
quarter of 2011, compared to $19.0 million for the same period of
the prior year, primarily due to higher than normal net bunker
revenues due to changes in bunker prices and bunker consumption
during the first quarter of 2011.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment decreased to $4.8 million in the first quarter of 2011,
compared to $9.5 million for the same period of the prior year, due
primarily to the sale of the FSO unit Karratha Spirit and
associated restructuring charges of $2.7 million incurred during
the quarter, and a lower time-charter rate on the Navion Saga in
accordance with the charter contract that took effect in the second
quarter of 2010, partially offset by the acquisition of the Falcon
Spirit FSO unit on April 1, 2010.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment increased to $19.5 million for the first quarter of 2011,
compared to $15.8 million for the same period of the prior year,
primarily due to the acquisition of the Rio das Ostras FPSO unit on
October 1, 2010.
Liquidity
As of March 31, 2011, the Partnership had total liquidity of
$381.9 million, which consisted of $123.4 million in cash and cash
equivalents and $258.5 million in undrawn revolving credit
facilities.
2010 Audited Financial Statements
Teekay Offshore Partners L.P. filed its 2010 Annual Report on
Form 20-F with the U.S. Securities and Exchange Commission (SEC) on
April 12, 2011. Copies are available on Teekay Offshore's web site,
under "Investor Briefcase", at www.teekayoffshore.com. Unitholders
may request a printed copy of this annual report, including the
complete audited financial statements free of charge by contacting
Teekay Offshore's Investor Relations.
Conference Call
The Partnership plans to host a conference call on May 13, 2011
at 1:00 p.m. (ET) to discuss its results for the first quarter
2011. 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 (866) 322-8032 or (416) 640-3406, if outside North America,
and quoting conference ID code 5531030.
-- 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 May 20,
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 5531030.
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
36 shuttle tankers (including five chartered-in vessels and one
committed newbuilding), five FSO units, 11 conventional oil
tankers, 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
(in thousands of U.S. dollars, except unit data)
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Three Months Ended
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March 31, December March 31,
2011 31, 2010(1) 2010(1)(2)
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(unaudited) (unaudited) (unaudited)
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REVENUES 233,771 229,263 233,579
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OPERATING EXPENSES
Voyage expenses 25,465 26,151 34,954
Vessel operating expenses (3) 75,130 77,344 63,388
Time-charter hire expense 20,270 20,981 25,038
Depreciation and amortization 45,570 50,230 45,008
General and administrative (3) 18,730 13,394 16,634
Loss on sale of vessel 171 - -
Write-down of vessels 900 9,441 -
Restructuring charge (4) 3,924 - 119
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190,160 197,541 185,141
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Income from vessel operations 43,611 31,722 48,438
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OTHER ITEMS
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Interest expense (8,469) (8,553) (9,880)
Interest income 129 200 165
Realized and unrealized gain (loss) on
derivative instruments (5) 10,840 63,863 (24,475)
Foreign exchange (loss) gain (6) (799) (348) 1,622
Income tax (expense) recovery (2,653) 1,133 6,911
Other income - net 1,310 1,296 2,481
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Net income 43,969 89,313 25,262
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Net income attributable to:
Non-controlling interests 20,593 39,332 10,849
Dropdown Predecessor (1) (2) - - (467)
Partners 23,376 49,981 14,880
Limited partners' units outstanding:
Weighted-average number of common units
outstanding
- Basic and diluted 57,170,219 50,547,500 38,206,000
Total units outstanding at end of period 62,800,314 55,237,500 42,760,000
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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.
2. 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.
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
---------------------------------
March 31, December March 31,
2011 31, 2010 2010
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Vessel operating expenses (184) (69) (1,125)
General and administrative 130 (272) (712)
4. Restructuring charges for the three months ended March 31, 2011 were
incurred in connection with the sale of a FSO unit and the termination
of the charter contract of one of the Partnership's shuttle tankers.
Restructuring charges for the three months ended March 31, 2010 were
incurred in connection with the re-flagging of certain of the
Partnership's vessels.
5. The realized (losses) gains 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
---------------------------------
March 31, December March 31,
2011 31, 2010 2010
---------------------------------
Realized (losses) gains relating
to:
Interest rate swaps (13,702) (12,993) (12,787)
Foreign currency forward contract 418 (384) (155)
---------------------------------
(13,284) (13,377) (12,942)
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Unrealized gains (losses) relating
to:
Interest rate swaps 20,765 76,368 (10,949)
Foreign currency forward
contracts 3,359 872 (584)
---------------------------------
24,124 77,240 (11,533)
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Total realized and unrealized gains
(losses) on non-designated
derivative instruments 10,840 63,863 (24,475)
---------------------------------
6. Foreign exchange (loss) gain includes realized gains of $0.7 million for
the three months ended March 31, 2011 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 $6.2 million for the three
months ended March 31, 2011 relating to the change in fair value of such
derivative instrument, partially offset by $5.3 million in unrealized
losses on the revaluation of the NOK bond.
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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
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March 31, December
2011 31, 2010
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(unaudited) (unaudited)
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ASSETS
Cash and cash equivalents 123,422 166,483
Other current assets 156,946 142,493
Vessels and equipment 2,271,695 2,299,507
Other assets 75,501 78,267
Intangible assets 26,983 28,763
Goodwill 127,113 127,113
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Total Assets 2,781,660 2,842,626
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LIABILITIES AND EQUITY
Accounts payable and accrued liabilities 101,491 101,287
Other current liabilities 145,511 113,183
Current portion of long-term debt 137,468 152,096
Long-term debt 1,667,768 1,565,044
Other long-term liabilities 117,483 140,842
Redeemable non-controlling interest 40,614 41,725
Equity:
Non-controlling interest 48,323 170,876
Partners' equity 523,002 557,573
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Total Liabilities and Equity 2,781,660 2,842,626
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TEEKAY OFFSHOREPARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
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Three Months Ended
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March 31,
------------------------
2011 2010 (1)
------------------------
(unaudited) (unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
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Net operating cash flow 69,028 73,951
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FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt 177,644 62,000
Scheduled repayments of long-term debt (44,441) (11,839)
Prepayments of long-term debt (50,360) (110,163)
Advances to affiliates - (44,410)
Joint venture partner advances 14,500 4,532
Contribution by Teekay Corporation relating to
acquisition of Rio das Ostras 1,000 -
Purchase of 49% interest in Teekay Offshore
Operating L.P. (160,000) -
Equity contribution from joint venture partner 750 -
Proceeds from issuance of common units - 100,581
Expenses of equity offerings - (4,452)
Cash distributions paid by the Partnership (27,723) (17,665)
Cash distributions paid by subsidiaries to non-
controlling interests (17,449) (19,472)
Other - 333
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Net financing cash flow (106,079) (40,555)
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INVESTING ACTIVITIES
Expenditures for vessels and equipment (16,907) (208)
Proceeds from sale of vessels and equipment 5,054 -
Investment in direct financing lease assets 370 (886)
Direct financing lease payments received 5,473 6,178
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Net investing cash flow (6,010) 5,084
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(Decrease) increase in cash and cash equivalents (43,061) 38,480
Cash and cash equivalents, beginning of the period 166,483 109,407
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Cash and cash equivalents, end of the period 123,422 147,887
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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 and the Rio das
Ostras FPSO unit, for the period from April 1, 2008 to October 1, 2010,
when the vessels were under the common control of Teekay Corporation,
but prior to their acquisition by the Partnership.
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET 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 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.
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Three Months Ended
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March 31, March 31,
2011 2010
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(unaudited) (unaudited)
Net income - GAAP basis 43,969 25,262
Adjustments:
Net (income) attributable to non-controlling
interests (20,593) (10,849)
Net loss attributable to Dropdown Predecessor - 467
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Net income attributable to the partners 23,376 14,880
Add (subtract) specific items affecting net income:
Foreign exchange losses (gains) (1) 1,464 (636)
Foreign currency exchange losses resulting from
hedging ineffectiveness (2) 54 1,860
Deferred income tax expense (recovery) relating to
unrealized foreign exchange gains (3) 6,519 (3,209)
Unrealized (gains) losses on derivative
instruments (4) (24,124) 11,150
Loss on sale of vessel (5) 171 -
Write-down of vessel (6) 900 -
Restructuring charges and other(7) 4,873 119
Non-controlling interests' share of items above 8,849 (4,019)
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Total adjustments (1,294) 5,265
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Adjusted net income attributable to the partners 22,082 20,145
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1. 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.
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. This excludes foreign currency exchange
gains resulting from hedging ineffectiveness relating to the Dropdown
Predecessors of $0.02 million for the three months ended March 31, 2010.
3. Portion of deferred income tax (recovery) expense related to unrealized
foreign exchange gains and losses.
4. 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 of $0.4 million relating to the Dropdown
Predecessors for the three months ended March 31, 2010.
5. Loss on sale of vessel relates to the sale of the Karratha Spirit FSO
unit.
6. Write-down of vessel is related to the valuation impairment of one
conventional tanker based on its projected discounted cash flows.
7. Restructuring charges of $3.9 million for the three months ended March
31, 2011 were incurred in connection with the sale of a FSO unit and the
termination of the charter contract of one of the Partnership's shuttle
tankers. Restructuring charges of $0.1 million for the three months
ended March 31, 2010 were incurred in connection with the re-flagging of
certain of the Partnership's vessels. Other items for the three months
ended March 31, 2011 include $0.9 million related to a one-time
management fee associated with the portion of stock-based compensation
grants of Teekay's former Chief Executive Officer that had not yet
vested prior to the date of his retirement on March 31, 2011.
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, 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
-------------
March 31,
2011
-------------
(unaudited)
----------------------------------------------------------------------------
Net income 43,969
Add (subtract):
Depreciation and amortization 45,570
Loss on sale of vessel 171
Write-down of vessel 900
Foreign exchange and other, net 3,154
Deferred income tax expense 1,169
Estimated maintenance capital expenditures (25,610)
Unrealized gains on non-designated derivative instruments (1) (24,124)
----------------------------------------------------------------------------
Distributable Cash Flow before Non-Controlling Interest 45,199
Non-controlling interests' share of DCF (15,983)
----------------------------------------------------------------------------
Distributable Cash Flow 29,216
----------------------------------------------------------------------------
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 March 31, 2011
---------------------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues (1) 119,204 29,617 17,200 42,285 208,306
Vessel operating expenses 40,785 5,825 9,148 19,372 75,130
Time-charter hire expense 20,270 - - - 20,270
Depreciation and
amortization 27,432 6,045 3,181 8,912 45,570
General and
administrative 12,482 1,749 1,063 3,436 18,730
Loss on sale of vessel - - 171 - 171
Write-down of vessel - 900 - - 900
Restructuring charges 1,227 - 2,697 - 3,924
----------------------------------------------------------------------------
Income from vessel
operations 17,008 15,098 940 10,565 43,611
----------------------------------------------------------------------------
Three Months Ended March 31, 2010
---------------------------------------------------
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment(2) Segment(2) Total
----------------------------------------------------------------------------
Net revenues(1) 112,939 25,914 20,401 39,371 198,625
Vessel operating expenses 34,163 5,714 8,405 15,106 63,388
Time-charter hire expense 25,038 - - - 25,038
Depreciation and
amortization 24,955 5,742 5,417 8,894 45,008
General and
administrative 11,260 1,193 1,010 3,171 16,634
Restructuring charges 119 - - - 119
----------------------------------------------------------------------------
Income from vessel
operations 17,404 13,265 5,569 12,200 48,438
----------------------------------------------------------------------------
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
are 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 and the Rio das
Ostras FPSO unit for the periods prior to their acquisition by the
Partnership on April 1, 2010 and October 1, 2010, respectively, 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 Falcon Spirit FSO unit
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 Falcon Spirit FSO unit 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 first 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 increase in distributable cash flow in
the second quarter of 2011 as a result of the acquisition of the
remaining 49 percent interest in OPCO in March 2011; the industry
fundamentals for deepwater offshore oil production; the potential
for Teekay to offer additional vessels to the Partnership and the
Partnership's acquisition of any such vessels, including the
Petrojarl Foinaven FPSO unit, the Petrojarl Cidade de Itajai FPSO
unit, and the Scott Spirit newbuilding Aframax shuttle tanker; 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;
significant changes in oil prices; 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; 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; the inability of the joint venture
between Teekay and Odebrecht to secure new Brazil FPSO projects
that may be offered for sale to the Partnership; failure of Teekay
to win a new long-term fixed-rate contract in the North Sea with a
major oil and gas company; failure to obtain required approvals by
the Conflicts Committee of Teekay Offshore's general partner to
acquire to acquire other vessels or offshore projects from from
Teekay or third parties; the Partnership's ability to raise
financing to purchase additional assets; 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, 2010.
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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