Teekay Offshore Partners L.P. (NYSE:TOO) -
Highlights
-- Generated distributable cash flow(1) of $54.2 million in the second
quarter of 2012, up approximately 27 percent from the same period of the
prior year.
-- Received offer from Teekay Corporation to acquire the Voyageur Spirit
FPSO unit.
-- Three-year extension option on the Petrojarl Varg FPSO unit exercised by
Talisman Energy, extending firm contract period to June 30, 2016.
-- Total liquidity of $373 million as at June 30, 2012, including the
Partnership's $46 million equity private placement completed in July
2012.
Teekay Offshore GP LLC, the general partner of Teekay Offshore
Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO),
today reported the Partnership's results for the quarter ended June
30, 2012. During the second quarter of 2012, the Partnership
generated distributable cash flow(1) of $54.2 million, compared to
$42.6 million in the same period of the prior year.
On July 13, 2012, a cash distribution of $0.5125 per common unit
was declared for the quarter ended June 30, 2012. The cash
distribution is payable on August 10, 2012 to all unit holders of
record on July 25, 2012.
"The Partnership's second quarter distributable cash flow was up
27 percent from the same quarter last year due primarily to higher
revenues, including a $14.7 million charter termination fee
received from Teekay Corporation, and lower operating and
time-charter-in costs, as well as accretive acquisitions completed
over the past year," commented Peter Evensen, Teekay Offshore GP
LLC's Chief Executive Officer. "The extension of the Petrojarl Varg
FPSO unit time-charter for an additional three years further
enhances the Partnership's cash flow stability and with several
FPSO assets soon to be available for purchase from Teekay
Corporation, the Partnership is also well-positioned for visible
cash flow growth over the next several years. This includes an
offer from Teekay Corporation to the Partnership to purchase the
Voyageur Spirit FPSO unit, which offer was received in June and is
currently being reviewed by the Conflicts Committee of the
Partnership's Board of Directors."
"Furthermore, construction of the Partnership's four newbuilding
shuttle tankers is on schedule," Mr. Evensen added. "Proceeds from
the Partnership's recently completed $46 million equity private
placement will be used to partially finance upcoming shipyard
installment payments on these vessels, which are expected to
deliver from the shipyard between April and October 2013."
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 United States generally accepted
accounting principles (GAAP).
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of
August 1, 2012.
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Number of Vessels
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Conversion
Owned Chartered-in Committed Candidates
Vessels Vessels Newbuildings (iii) Total
---------------------------------------------------
Shuttle Tanker Segment 30(i) 4 4(ii) 2 40
Conventional Tanker
Segment 7 - - 2 9
FSO Segment 5 - - - 5
FPSO Segment 3 - - - 3
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Total 45 4 4 4 57
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i. Includes six shuttle tankers in which Teekay Offshore's ownership
interest is 50 percent and three shuttle tankers in which Teekay
Offshore's ownership interest is 67 percent.
ii. Includes four shuttle tanker newbuildings expected to deliver in mid- to
late-2013 and commence operations under contracts with a subsidiary of
BG Group plc in Brazil.
iii.Includes two shuttle tankers and two conventional tankers which are
currently in lay-up and are candidates for conversion to offshore
assets.
Future Growth Opportunities
Pursuant to an omnibus agreement that Teekay Offshore entered
into in connection with its initial public offering in December
2006, Teekay Corporation (Teekay) is obligated to offer to the
Partnership its interest in certain shuttle tankers, floating
storage and offtake (FSO) units and floating, production, storage
and offloading (FPSO) units Teekay owns or may acquire in the
future, provided the vessels are servicing contracts with remaining
durations of greater than three years. The Partnership may also
acquire other vessels that Teekay may offer it from time to time
and intends to pursue direct acquisitions from third parties and
new organic offshore projects.
Shuttle Tankers
In June 2011, the Partnership entered into a long-term contract
with a subsidiary of BG Group plc (BG) to provide shuttle tanker
services in Brazil. The contract with BG will be serviced by four
Suezmax newbuilding shuttle tankers under construction by Samsung
Heavy Industries for an estimated total delivered cost of
approximately $470 million. Upon their scheduled deliveries in mid-
to late-2013, the vessels will commence operations under 10-year,
fixed-rate time-charter contracts. The contract with BG also
includes certain extension options and vessel purchase options.
FPSO Units
As previously announced, on November 30, 2011, Teekay acquired
from Sevan Marine ASA (Sevan) the Hummingbird Spirit FPSO unit
(which is currently operating under a short-term charter contract),
and has agreed to acquire the Voyageur Spirit FPSO unit upon the
completion of certain upgrades that are expected to be completed in
the fourth quarter of 2012 (upon which time the unit is expected to
commence operations under a 5-year charter contract, plus extension
options). In June 2012, Teekay formally offered to sell the
Voyageur Spirit FPSO unit to Teekay Offshore at fair market value
and the offer is currently being reviewed by the Conflicts
Committee of the Partnership's Board of Directors. Pursuant to the
omnibus agreement, Teekay is obligated to offer the Hummingbird
Spirit FPSO unit to Teekay Offshore within approximately one year
following commencement of a charter contract with a firm period of
greater than three years in duration.
Pursuant to the omnibus agreement and a subsequent agreement,
Teekay is obligated to offer to sell the Petrojarl Foinaven FPSO
unit, an existing unit owned by Teekay and operating under a
long-term contract in the North Sea, to Teekay Offshore prior to
July 9, 2013. The purchase price for the Petrojarl Foinaven FPSO
unit would be 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
Petroleo Brasileiro S.A. (or Petrobras) to provide an 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 Cidade de Itajai. This FPSO unit is
scheduled to deliver from the shipyard in the third quarter of 2012
and arrive in Brazilian waters in the fourth quarter of 2012, at
which time the unit is expected to commence operations under a
nine-year, fixed-rate time-charter contract with Petrobras with six
additional one-year extension options. Pursuant to the omnibus
agreement, Teekay is obligated to offer to the Partnership its 50
percent interest in this FPSO project at Teekay's fully built-up
cost, within approximately one year after the commencement of its
charter with Petrobras.
In May 2011, Teekay 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. 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. As part
of the joint venture agreement, Odebrecht is a 50 percent partner
in the Tiro Sidon FPSO project and Teekay is currently working with
Odebrecht on other FPSO project opportunities that, if awarded, may
result in the Partnership being able to acquire Teekay's interests
in such projects pursuant to the omnibus agreement.
In June 2011, Teekay entered into a new contract with BG Norge
Limited to provide a high-specification FPSO unit for the Knarr oil
and gas field located in the North Sea. The contract will be
serviced by a new FPSO unit to be constructed by Samsung Heavy
Industries for a fully built-up cost of approximately $1 billion.
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 approximately one year after the commencement
of the charter, which is expected to commence in the first quarter
of 2014.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1) (as detailed in Appendix A to this release) of $20.6
million for the quarter ended June 30, 2012, compared to $26.2
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 decreasing net income by $32.8 million
and $37.5 million for the quarters ended June 30, 2012 and June 30,
2011, respectively, as detailed in Appendix A. Including these
items, the Partnership reported, on a GAAP basis, net loss
attributable to the partners of $12.1 million for the second
quarter of 2012, compared to $11.4 million in the same period of
the prior year. Net revenues(2) for the second quarter of 2012
increased to $213.4 million, compared to $201.6 million in the same
period of the prior year.
The Partnership reported adjusted net income attributable to the
partners(1) (as detailed in Appendix A to this release) of $46.7
million for the six months ended June 30, 2012, compared to $48.3
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 decreasing net income by $6.2 million
and $36.2 million for the six months ended June 30, 2012 and June
30, 2011, respectively, as detailed in Appendix A. Including these
items, the Partnership reported, on a GAAP basis, net income
attributable to the partners of $40.5 million for the six months
ended June 30, 2012, compared to $12.0 million in the same period
of the prior year. Net revenues(2) for the six months ended June
30, 2012 increased to $421.5 million, compared to $409.9 million in
the same period of the prior year.
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.
1. Adjusted net income attributable to the partners is a non-GAAP financial
measure. Please refer to Appendix A included in this release for a
reconciliation of this non-GAAP measure to the most directly comparable
financial measure under GAAP and information about specific items
affecting net income that are typically excluded by securities analysts
in their published estimates of the Partnership's financial results.
2. Net revenues represents revenues less voyage expenses, which comprise
all expenses relating to certain voyages, including bunker fuel
expenses, port fees, canal tolls and brokerage commissions. Net revenues
is a non-GAAP financial measure used by certain investors to measure the
financial performance of shipping companies. Please see the
Partnership's web site at www.teekayoffshore.com for a reconciliation of
this non-GAAP measure as used in this release to the most directly
comparable GAAP financial measure.
Operating Results
The following table highlights certain financial information for
Teekay Offshore's four 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
June 30, 2012
(unaudited)
-----------------------------------------------
Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment Segment Segment Segment Total
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Net revenues(1) 111,597 30,656 14,781 56,317 213,351
Vessel operating expenses 33,341 4,366 6,519 25,854 70,080
Time-charter hire expense 12,969 - - - 12,969
Depreciation and amortization 31,944 3,331 2,001 12,727 50,003
Cash flow from vessel
operations(2) 54,282 25,192 8,010 22,329 109,813
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Three Months Ended
June 30, 2011
(unaudited)
-----------------------------------------------
Shuttle Conventional
(in thousands of U.S. Tanker Tanker FSO FPSO
dollars) Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 113,471 30,915 14,626 42,561 201,573
Vessel operating expenses 42,109 6,012 7,411 19,665 75,197
Time-charter hire expense 18,182 - - - 18,182
Depreciation and amortization 28,704 5,557 2,991 8,911 46,163
Cash flow from vessel
operations(2) 44,551 24,145 6,520 19,955 95,171
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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. Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense and amortization
of deferred gains and in-process revenue contract, loss on sale of
vessel and write-down of vessels, includes the realized gains (losses)
on the settlement of foreign exchange forward contracts, excludes the
cash flow from vessel operations relating to the Partnership's Variable
Interest Entities 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.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's Shuttle
Tanker segment increased to $54.3 million for the second quarter of
2012 compared to $44.6 million for the same period of the prior
year, primarily due to decreases in vessel operating expenses and
time-charter hire expense. Vessel operating expenses decreased due
to lower repairs and maintenance and crewing costs, and due to the
lay-ups of the shuttle tankers Navion Torinita and Basker Spirit
commencing in the second quarter of 2012 and the third quarter of
2011, respectively. Time-charter hire expense decreased due to the
redelivery of one in-chartered vessel in the fourth quarter of 2011
and fewer short-term chartered-in days.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
Conventional Tanker segment increased to $25.2 million in the
second quarter of 2012 compared to $24.1 million for the same
period of the prior year. In June 2012, the Partnership sold a
1997-built conventional Aframax tanker to a third party buyer for
net proceeds of $8.7 million. As a result of the early termination
of the time-charter for this vessel, the Partnership received a
termination fee of $14.7 million from Teekay the charterer of the
vessel. This is partially offset by the expiry of time-charter
contracts on two conventional tankers during the fourth quarter of
2011, which are currently laid up, and the sale of a conventional
Aframax tanker, the Scotia Spirit in the third quarter of 2011.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment increased to $8.0 million in the second quarter of 2012
compared to $6.5 million for the same period of the prior year,
primarily due to a decrease in vessel operating expenses as a
result of a decrease in the consumption and use of consumables.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment increased to $22.3 million for the second quarter of 2012
compared to $20.0 million for the same period of the prior year,
primarily due to the acquisition of the Piranema Spirit FPSO unit
on November 30, 2011. Vessel operating expenses for the Piranema
Spirit FPSO unit in the second quarter of 2012 includes additional
maintenance costs from a scheduled shutdown.
Liquidity
As of June 30, 2012, the Partnership had total liquidity of
$327.5 million, which consisted of $179.5 million in cash and cash
equivalents and $148.0 million in undrawn revolving credit
facilities. Following the $45.9 million private placement completed
in July 2012, the Partnership had total liquidity of $373.4
million.
Conference Call
The Partnership plans to host a conference call on Friday,
August 10, 2012 at noon (ET) to discuss its results for the second
quarter of 2012. An accompanying investor presentation will be
available on Teekay Offshore's website at www.teekayoffshore.com
prior to the start of the call. All unitholders 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 4125062.
- By accessing the webcast, which will be available on Teekay
Offshore's website at www.teekayoffshore.com (the archive will
remain on the website for a period of 30 days).
The conference call will be recorded and made available until
Friday August 17, 2012. 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 4125062.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of
marine transportation, oil production and storage services to the
offshore oil industry focusing on the fast-growing, deepwater
offshore oil regions of the North Sea and Brazil. Teekay Offshore
owns interests in 40 shuttle tankers (including four chartered-in
vessels and four committed newbuildings), three floating
production, storage and offloading (FPSO) units, five floating
storage and offtake (FSO) units and nine conventional oil tankers.
Teekay Offshore has rights to participate in certain other FPSO and
shuttle tanker opportunities provided by Teekay Corporation
(NYSE:TK) and Sevan Marine ASA (Oslo Bors:SEVAN). The Partnership
has recently received an offer from Teekay Corporation to acquire
the Voyageur Spirit FPSO unit which offer is currently being
reviewed by the Conflicts Committee of the Partnership's Board of
Directors. A majority of Teekay Offshore's fleet trades on
long-term, stable contracts and it is structured as a
publicly-traded master limited partnership.
Teekay Offshore Partners' 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 (LOSS) INCOME
(in thousands of U.S. dollars, except unit data)
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Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------
REVENUES 251,151 244,598 234,145 495,749 467,916
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OPERATING
EXPENSES
Voyage expenses 37,800 36,481 32,572 74,281 58,037
Vessel operating
expenses(1) 70,080 71,007 75,197 141,087 150,327
Time-charter
hire expense 12,969 13,617 18,182 26,586 38,452
Depreciation and
amortization 50,003 49,611 46,163 99,614 91,733
General and
administrative
(1) 18,689 20,136 18,157 38,825 36,887
Loss on sale of
vessels and
write-down of
vessels 3,269 - 8,194 3,269 9,265
Restructuring
charge(2) - - - - 3,924
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192,810 190,852 198,465 383,662 388,625
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Income from
vessel
operations 58,341 53,746 35,680 112,087 79,291
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OTHER ITEMS
Interest expense (12,506) (12,776) (8,890) (25,282) (17,359)
Interest income 138 212 150 350 279
Realized and
unrealized
(loss) gain on
derivative
instruments(3) (60,317) 16,239 (38,720) (44,078) (27,880)
Foreign exchange
gain (loss)(4) 888 (2,758) 367 (1,870) (432)
Income tax
recovery
(expense) 1,946 (1,485) (3,037) 461 (5,690)
Other (loss)
income - net (119) 1,425 1,159 1,306 2,469
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Net (loss)
income (11,629) 54,603 (13,291) 42,974 30,678
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Net (loss)
income
attributable
to:
Non-
controlling
interests 499 1,969 (1,937) 2,468 18,656
Partners (12,128) 52,634 (11,354) 40,506 12,022
Limited
partners' units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 70,626,554 70,626,554 62,800,314 70,626,554 60,000,819
Total units
outstanding at
end of period 70,626,554 70,626,554 62,800,314 70,626,554 62,800,314
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1. 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
(losses) gains arising from hedge ineffectiveness from such forward
contracts 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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
-------------------------------------------------
Vessel operating expenses - - (83) - (267)
General and administrative (254) 20 69 (234) 199
2. Restructuring charges for the six months ended June 30, 2011 were
incurred in connection with the sale of an FSO unit and the termination
of the charter contract of one of the Partnership's shuttle tankers.
3. The realized (losses) gains on derivative instruments relate to the
amounts the Partnership actually paid or received to settle such
derivative instruments, and the unrealized (losses) gains on derivative
instruments relate to the change in fair value of such derivative
instruments as detailed in the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
--------------------------------------------------
Realized (losses) gains
relating to:
Interest rate swaps (14,338) (15,007) (13,769) (29,345) (27,471)
Foreign currency forward
contract 437 1,198 1,204 1,635 1,622
--------------------------------------------------
(13,901) (13,809) (12,565) (27,710) (25,849)
--------------------------------------------------
Unrealized (losses) gains
relating to:
Interest rate swaps (41,842) 24,763 (26,969) (17,079) (6,204)
Foreign currency forward
contracts (4,574) 5,285 814 711 4,173
--------------------------------------------------
(46,416) 30,048 (26,155) (16,368) (2,031)
--------------------------------------------------
--------------------------------------------------
Total realized and
unrealized (losses) gains
on non-designated
derivative instruments (60,317) 16,239 (38,720) (44,078) (27,880)
--------------------------------------------------
4. Foreign exchange gain (loss) includes realized gains relating to the
amounts the Partnership received to settle the Partnership's non-
designated cross currency swaps that were entered into as an economic
hedge in relation to the Partnership's Norwegian Kroner (NOK)-
denominated unsecured bonds as detailed in the table below. The
Partnership issued NOK 600 million unsecured bonds in 2010 maturing in
2013 and issued NOK 600 million unsecured bonds in 2012 maturing in
2017. Foreign exchange gain (loss) also includes unrealized (losses)
gains relating to the change in fair value of such derivative
instruments, partially offset by unrealized gains (losses) on the
revaluation of the NOK bonds as detailed in the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
--------------------------------------------------
Realized gains on cross-
currency swaps 696 994 777 1,690 1,444
Unrealized (losses) gains
on cross-currency swaps (10,776) 7,879 3,135 (2,897) 9,363
Unrealized gains (losses)
on revaluation of NOK
bonds 9,414 (9,031) (3,058) 383 (8,312)
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at As at As at
June 30, 2012 March 31, 2012 December 31, 2011
(unaudited) (unaudited) (unaudited)
------------------------------------------------
ASSETS
Cash and cash equivalents 179,462 234,742 179,934
Vessels held for sale 14,930 19,000 19,000
Other current assets 157,242 162,295 148,825
Vessels and equipment 2,446,287 2,493,934 2,539,949
Advances on newbuilding
contracts 69,163 46,333 45,637
Other assets 61,875 71,768 62,627
Intangible assets 18,585 20,114 21,644
Goodwill 127,113 127,113 127,113
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Total Assets 3,074,657 3,175,299 3,144,729
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LIABILITIES AND EQUITY
Accounts payable and accrued
liabilities 91,606 98,963 99,220
Other current liabilities 102,445 112,848 99,624
Current portion of long-term
debt 261,272 214,274 229,365
Long-term debt 1,734,169 1,847,607 1,799,711
Other long-term liabilities 400,634 362,118 393,769
Redeemable non-controlling
interest 36,356 37,805 38,307
Equity:
Non-controlling interest 40,384 42,046 40,622
Partners' equity 407,791 459,638 444,111
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Total Liabilities and Equity 3,074,657 3,175,299 3,144,729
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TEEKAY OFFSHORE PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six Months Ended June 30,
2012 2011
(unaudited) (unaudited)
--------------------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
----------------------------------------------------------------------------
Net operating cash flow 126,229 152,506
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FINANCING ACTIVITIES
Proceeds from drawdown of long-term debt 265,053 311,472
Scheduled repayments of long-term debt (95,032) (69,429)
Prepayments of long-term debt (203,273) (50,360)
Advance from joint venture partner - 14,500
Contribution by Teekay Corporation relating to
acquisition of Rio das Ostras - 2,000
Purchase of 49% interest in Teekay Offshore
Operating L.P. - (160,000)
Equity contribution from joint venture partner 1,000 2,250
Cash distributions paid by the Partnership (76,779) (61,335)
Cash distributions paid by subsidiaries to non-
controlling interests (5,657) (19,642)
Other (4,479) (91)
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Net financing cash flow (119,167) (30,635)
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INVESTING ACTIVITIES
Expenditures for vessels and equipment (26,148) (145,611)
Direct financing lease payments received 9,129 10,477
Proceeds from sale of vessels and equipment 9,485 5,054
Investment in direct financing lease assets - 370
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Net investing cash flow (7,534) (129,710)
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Decrease in cash and cash equivalents (472) (7,839)
Cash and cash equivalents, beginning of the period 179,934 166,483
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Cash and cash equivalents, end of the period 179,462 158,644
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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - SPECIFIC ITEMS AFFECTING NET (LOSS) INCOME
(in thousands of U.S. dollars)
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Set forth below is a reconciliation of the Partnership's
unaudited adjusted net income attributable to the partners, a
non-GAAP financial measure, to net (loss) income attributable to
the partners as determined in accordance with GAAP. The Partnership
believes that, in addition to conventional measures prepared in
accordance with GAAP, certain investors use this information to
evaluate the Partnership's financial performance. The items below
are also typically excluded by securities analysts in their
published estimates of the Partnership's financial results.
Adjusted net income attributable to the partners is intended to
provide additional information and should not be considered a
substitute for measures of performance prepared in accordance with
GAAP.
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Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
(unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------
Net (loss) income - GAAP
basis (11,629) (13,291) 42,974 30,678
Adjustments:
Net (income) loss
attributable to non-
controlling interests (499) 1,937 (2,468) (18,656)
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Net (loss) income
attributable to the
partners (12,128) (11,354) 40,506 12,022
Add (subtract) specific
items affecting net (loss)
income:
Foreign exchange (gains)
losses(1) (192) 411 3,560 1,875
Foreign currency exchange
losses resulting from
hedging
ineffectiveness(2) 254 14 234 68
Deferred income tax
expense relating to
unrealized foreign
exchange gains(3) - 3,577 - 10,096
Unrealized losses on
derivative instruments(4) 46,416 26,155 16,368 2,031
Loss on sale of vessels(5) 2,221 - 2,221 171
Write-down of vessels(6) 1,048 8,194 1,048 9,094
Termination fee(7) (14,670) - (14,670) -
Restructuring charges and
other(8) (2,410) - (2,956) 4,873
Non-controlling interests'
share of items above 94 (810) 407 8,039
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Total adjustments 32,761 37,541 6,212 36,247
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted net income
attributable to the
partners 20,633 26,187 46,718 48,269
----------------------------------------------------------------------------
1. Foreign exchange (gains) losses 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 and unrealized gains or losses related to the
Partnership's cross currency swaps and exclude the realized gains
relating to the cross currency swaps for outstanding Norwegian bonds of
the Partnership.
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 (recovery) expense related to unrealized
foreign exchange gains and losses. There is no adjustment for this item
for the three and six months ended June 30, 2012, as a full valuation
allowance was taken starting in the third quarter of 2011 against the
deferred tax asset.
4. Reflects the unrealized 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.
5. Loss on sale of vessels relates to the sale of a 1997-built conventional
tanker in 2012 and the Karratha Spirit FSO unit in 2011.
6. The write-down of vessels for the three and six months ended June 30,
2012 and 2011 relates to the valuation impairment of one shuttle tanker
in 2012 and one conventional tanker in 2011, respectively, based on
their estimated fair value.
7. A termination fee was received upon cancellation of the Hamane Spirit
conventional tanker's time-charter contract with Teekay Corporation.
8. Other items include a loss of $0.4 million and a gain of $0.2 million
for the three months and six months ended June 30, 2012, respectively,
related to the revaluation of a fair value adjustment of contingent
consideration liability associated with the purchase of the Scott Spirit
shuttle tanker. Other items include a one-time reversal of an income tax
accrual of $2.8 million for the three and six months ended June 30,
2012. Restructuring charges of $3.9 million for the six months ended
June 30, 2011 were incurred in connection with the sale of an FSO unit
and the termination of the charter contract of one of the Partnership's
shuttle tankers. Other items for the six months ended June 30, 2011
include $0.9 million related to a one-time management fee associated
with the portion of stock-based compensation grants for Teekay's former
Chief Executive Officer that had not yet vested prior to the date of his
retirement on March 31, 2011.
----------------------------------------------------------------------------
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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 loss adjusted for
depreciation and amortization expense, non-controlling interest,
non-cash items, distributions relating to equity financing of
newbuilding instalments, vessel acquisition costs, estimated
maintenance capital expenditures, unrealized gains and losses from
derivatives, non-cash income taxes 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 loss or any other indicator of the Partnership's
performance required by GAAP. The table below reconciles
distributable cash flow to net loss for the quarters ended June 30,
2012 and June 30, 2011, respectively.
----------------------------------------------------------------------------
Three Months Ended
June 30, 2012 June 30, 2011
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net loss (11,629) (13,291)
Add (subtract):
Loss on sale of vessel and write-down of
vessels 3,269 8,194
Depreciation and amortization 50,003 46,163
Distributions relating to equity financing
of newbuilding instalments 1,447 -
Foreign exchange and other, net (2,682) 4,259
Estimated maintenance capital expenditures (27,652) (25,793)
Unrealized gains on non-designated
derivative instruments 46,416 26,155
----------------------------------------------------------------------------
Distributable Cash Flow before Non-
Controlling Interest 59,172 45,687
Non-controlling interests' share of DCF (4,991) (3,097)
----------------------------------------------------------------------------
Distributable Cash Flow 54,181 42,590
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2012
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 111,597 30,656 14,781 56,317 213,351
Vessel operating
expenses 33,341 4,366 6,519 25,854 70,080
Time-charter hire
expense 12,969 - - - 12,969
Depreciation and
amortization 31,944 3,331 2,001 12,727 50,003
General and
administrative 11,709 1,098 919 4,963 18,689
Loss on sale of vessel
and write-down of
vessel 1,048 2,221 - - 3,269
----------------------------------------------------------------------------
Income from vessel
operations 20,586 19,640 5,342 12,773 58,341
----------------------------------------------------------------------------
Three Months Ended June 30, 2011
(unaudited)
Shuttle Conventional
Tanker Tanker FSO FPSO
Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 113,471 30,915 14,626 42,561 201,573
Vessel operating
expenses 42,109 6,012 7,411 19,665 75,197
Time-charter hire
expense 18,182 - - - 18,182
Depreciation and
amortization 28,704 5,557 2,991 8,911 46,163
General and
administrative 13,197 758 1,242 2,960 18,157
Write-down of vessel - 8,194 - - 8,194
----------------------------------------------------------------------------
Income from vessel
operations 11,279 10,394 2,982 11,025 - 35,680
----------------------------------------------------------------------------
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.
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 and stability of the Partnership's
distributable cash flow; the potential for Teekay to offer
additional vessels to the Partnership and the Partnership's
acquisition of any such vessels, including the Petrojarl Foinaven,
the Petrojarl Cidade de Itajai, the Hummingbird Spirit and the
newbuilding FPSO unit that will service the Knarr field under
contract with BG Norge Limited; the potential for the Partnership
to accept Teekay's offer of the Voyageur Spirit FPSO unit; the
timing of delivery of vessels under construction or conversion; and
the potential for the Partnership to acquire other vessels or
offshore projects from Teekay or directly from 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;
different-than-expected levels of oil production in the North Sea
and Brazil offshore fields; potential early termination of
contracts; 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 to obtain required approvals
by the Conflicts Committee of Teekay Offshore's general partner to
acquire other vessels or offshore projects from Teekay or third
parties, including the Voyageur Spirit FPSO unit; the Partnership's
ability to raise adequate financing to purchase additional assets;
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, 2011. 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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