Highlights
-- Generated distributable cash flow(1) of $43.0 million in the second
quarter of 2013.
-- Completed acquisition of Voyageur Spirit FPSO unit from Teekay
Corporation for $540 million.
-- Completed acquisition of a 50 percent interest in Cidade de Itajai FPSO
unit from Teekay Corporation for $204 million.
-- First two BG Shuttle Tanker newbuildings delivered in May and June 2013.
-- Awarded contract with Statoil to convert an existing shuttle tanker to
an FSO unit.
-- Liquidity of approximately $487 million as at June 30, 2013, pro forma
for debt refinancing of Varg FPSO completed in July 2013.
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, 2013. During the second quarter of 2013, the Partnership
generated distributable cash flow(1) of $43.0 million, compared to
$54.2 million in the same period of the prior year.
On July 12, 2013, a cash distribution of $0.5253 per common unit
was declared for the quarter ended June 30, 2013. The cash
distribution is payable on August 9, 2013 to all unitholders of
record on July 23, 2013.
"During the second and third quarters of 2013 to-date, the
Partnership completed a number of acquisitions, vessel deliveries
and new contracts which the Partnership expects will all contribute
to Teekay Offshore's future distributable cash flow growth,"
commented Peter Evensen, Teekay Offshore GP LLC's Chief Executive
Officer. "In May and June 2013, respectively, we completed the
accretive acquisitions of the Voyageur Spirit FPSO and a 50 percent
interest in the Cidade de Itajai FPSO, bringing the Partnership's
total FPSO fleet count to five units. Although issues were
encountered in achieving full production on the Voyageur Spirit
related to gas compression equipment, our sponsor, Teekay
Corporation, will indemnify the Partnership for loss of revenues
resulting from the delay in achieving final acceptance by the
charterer. This indemnification will effectively be applied as
reduction to the $540 million purchase price the Partnership paid
to Teekay Corporation to acquire the Voyageur Spirit FPSO and will
not impact the Partnership's distributable cash flow. For the
second quarter of 2013, the amount of the purchase price adjustment
was approximately $12.5 million. Since April 13, 2013, the Voyageur
Spirit FPSO has been operating at partial production levels and is
expected to reach full capacity levels during August 2013."
Mr. Evensen continued, "During the second quarter, the
Partnership also took delivery of the first two of four BG shuttle
tanker newbuildings, the Samba Spirit and Lambada Spirit, with the
remaining two BG shuttle tanker newbuildings, the Bossa Nova Spirit
and Sertanejo Spirit, which recently secured long-term debt
financing, scheduled for delivery in September and November of
2013. In addition, in May 2013, we were awarded a contact with
Statoil Petroleum AS to convert the 1995-built shuttle tanker, the
Randgrid, to an FSO unit. The converted FSO unit will operate on
the Gina Krog oil and gas field in the North Sea under a new
three-year charter contract, plus 12 additional one-year extension
options, commencing in the first quarter of 2017."
Mr. Evensen continued, "Looking ahead, Teekay Offshore continues
to bid on new FPSO projects and are currently working on three
customer-funded Front-end Engineering and Design, or FEED, studies.
In addition, through our relationship with Remora AS, we are also
engaged in a FEED study to develop the next generation of DP HiLoad
offtake units."
(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).
Summary of Recent Transactions
Voyageur Spirit FPSO Acquisition
On May 2, 2013, the Partnership completed the acquisition of the
Voyageur Spirit floating production, storage and offloading (FPSO)
unit from Teekay Corporation for a purchase price of $540 million.
The Voyageur Spirit FPSO unit has been contracted by E.ON Ruhrgas
UK E&P Limited (E.ON) to operate on the Huntington Field in the
North Sea under a five-year time-charter, plus up to 10 one-year
extension options. The acquisition has been financed with a new
$330 million debt facility secured by the FPSO unit, a portion of
the proceeds from the public offering completed in September 2012,
and an equity private placement of common units to Teekay
Corporation completed in May 2013.
On April 13, 2013, the Voyageur Spirit FPSO unit achieved first
oil and began production. The charter contract with E.ON required
the FPSO unit to achieve full production capability within a
specified time period to receive final acceptance from E.ON. Due to
a defective gas compressor on board the unit, the FPSO unit was
unable to achieve final acceptance within the allowable timeframe,
resulting in the FPSO unit being declared off-hire by the charterer
retroactive to April 13, 2013. Under the Voyageur Spirit FPSO sale
and purchase agreement between Teekay Corporation and Teekay
Offshore, since Teekay Offshore acquired the Voyageur Spirit,
Teekay Corporation warranted that the FPSO unit would be accepted
by the charterer and agreed to indemnify Teekay Offshore for loss
of revenue under the charter with E.ON from the date of acquisition
until final acceptance is achieved, up to a maximum of $54 million.
For the period from May 2, 2013 to June 30, 2013, the
indemnification effectively resulted in a reduction to the Voyageur
Spirit FPSO purchase price of approximately $12.5 million.
The Partnership now expects the Voyageur Spirit FPSO to reach
full production capacity in mid-August and achieve final acceptance
by the end of August 2013. Teekay Corporation intends to enter into
commercial negotiations with the charterer to seek compensation for
the services provided by the FPSO unit to E.ON during the period
prior to final acceptance since the FPSO has been operating and
producing oil at partial production levels throughout the period
since April 13, 2013.
Any amounts relating to the indemnification from Teekay
Corporation to Teekay Offshore will be effectively treated as a
reduction in the purchase price paid by Teekay Offshore. In
addition, any compensation received from the charterer during the
indemnification period will reduce the amount of Teekay
Corporation's indemnification to Teekay Offshore. Although the
Partnership's reported revenues will be lower as a result of any
off-hire relating to the Voyageur Spirit FPSO, there is no net
impact on the Partnership's cash flows as a result of the Teekay
Corporation indemnification.
Acquisition of a 50 Percent Interest in Cidade de Itajai
FPSO
In June 2013, the Partnership completed the acquisition of a 50
percent interest in the Cidade de Itajai (Itajai) FPSO unit from
Teekay Corporation for a purchase price of $204 million. The Itajai
FPSO has been operating on the Bauna and Piracaba (previously named
Tiro and Sidon) fields in the Santos Basin offshore Brazil since
February 2013 under a nine-year fixed-rate time-charter contract,
plus extension options, with Petroleo Brasileiro SA (Petrobras).
The remaining 50 percent interest in the Itajai FPSO unit is owned
by Brazilian-based Odebrecht Oil & Gas S.A. (a member of the
Odebrecht group) (Odebrecht). The acquisition was financed with the
assumption of 50% of the joint venture's outstanding debt of
approximately $290 million and approximately $54 million with
proceeds from the equity private placement completed in April
2013.
Statoil FSO Contract
In May 2013, the Partnership entered into an agreement with
Statoil Petroleum AS (Statoil), on behalf of the field license
partners, to provide a floating storage and offtake (FSO) unit for
the Gina Krog oil and gas field located in the North Sea. The
contract will be serviced by a new FSO unit converted from the
1995-built shuttle tanker, Randgrid, which the Partnership
currently owns through a 67 percent-owned subsidiary. The FSO
conversion project is expected to be completed for a net capital
cost of approximately $220 million, including the cost of acquiring
the remaining 33 percent ownership interest in the Randgrid shuttle
tanker. Following scheduled completion in early 2017, the newly
converted FSO unit will commence operations under a three-year firm
period time-charter contract to Statoil, which includes 12
additional one-year extension options.
Salamander Energy FSO Contract
In May 2013, the Partnership finalized the ten-year charter
contract, plus extension options, with Salamander Energy plc
(Salamander) to supply an FSO unit in Asia. The Partnership will
convert its 1993-built shuttle tanker, the Navion Clipper, into an
FSO unit for an estimated fully built-up cost of approximately $50
million. The unit is expected to commence its contract with
Salamander in the third quarter of 2014.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of
August 1, 2013.
----------------------------------------------------------------------------
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Number of Vessels
------------------------------------------------------------
------------------------------------------------------------
Committed
Newbuildings Conversion
Owned Chartered-in / Candidates
Vessels Vessels Conversions (iii) Total
------------------------------------------------------------
------------------------------------------------------------
Shuttle Tanker
Segment 29(i) 4 2(ii) 1 36
FPSO Segment 5(iv) - - - 5
Conventional
Tanker Segment 5 - - - 5
FSO Segment 5 - 1(v) - 6
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----------------------------------------------------------------------------
Total 44 4 3 1 52
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i. Includes six shuttle tankers in which Teekay Offshore's ownership
interest is 50 percent and two shuttle tankers in which Teekay
Offshore's ownership interest is 67 percent. One of the 67 percent owned
shuttle tankers, the Randgrid, will be converted to an FSO unit for the
Statoil project after its current charter contract expires in 2015.
ii. Includes two shuttle tanker newbuildings expected to deliver in
September 2013 and November 2013 and to commence operations under 10-
year charter contracts with a subsidiary of BG Group plc in Brazil.
iii.Includes one shuttle tanker which is currently in lay-up and is a
candidate for conversion to an offshore asset.
iv. Includes one FPSO unit in which Teekay Offshore's ownership interest is
50 percent.
v. Includes the Navion Clipper shuttle tanker, which is currently being
converted into an FSO unit and is expected to commence operations under
a 10-year charter contract in the third quarter of 2014 with Salamander
Energy plc.
Other Future Growth Opportunities
Pursuant to an omnibus agreement that the Partnership entered
into in connection with our initial public offering in December
2006, Teekay Corporation is obligated to offer to the Partnership
its interest in certain shuttle tankers, FSO units and FPSO units
Teekay Corporation 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 Corporation may offer it from time to time and also
intends to pursue direct acquisitions from third parties and new
organic offshore projects.
Shuttle Tankers
In June 2011, the Partnership entered into a new 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 (the BG Shuttle Tankers),
constructed by Samsung Heavy Industries for an estimated total cost
of approximately $446 million (excluding capitalized interest and
miscellaneous construction costs). The BG Shuttle Tankers will
operate under ten-year, fixed-rate time-charter-out contracts,
which include certain extension options and vessel purchase options
exercisable by the charterer. In May 2013, the Partnership took
delivery of the Samba Spirit, the first of the four shuttle tanker
newbuildings, which commenced its time-charter contract with BG in
late June 2013. In June 2013, the Partnership took delivery of the
Lambada Spirit, the second of the four shuttle tanker newbuildings,
which will commence its time-charter contract with BG in August
2013. The remaining two shuttle tanker newbuildings, which recently
received financing commitments through a ten-year senior secured
private placement, are scheduled to be delivered in September 2013
and November 2013, respectively.
In November 2012, the Partnership agreed to acquire a 2010-built
HiLoad Dynamic Positioning (DP) unit from Remora AS (Remora), a
Norway-based offshore marine technology company, for a total
purchase price of approximately $55 million, including modification
costs. The acquisition of the HiLoad DP unit, which will operate
under a ten-year time-charter contract with Petrobras in Brazil,
was completed in August 2013 and the unit is expected to commence
operations at its full time-charter rate in early 2014 once
modifications, delivery of the DP unit to Brazil, and operational
testing have been completed. Under the terms of an agreement
between Remora and Teekay Offshore, the Partnership has the right
of first refusal to acquire any future HiLoad DP projects developed
by Remora. In July 2013, Remora was awarded a contract by BG Brasil
to perform a FEED study to develop the next generation of HiLoad DP
units. The design, which is based on the main parameters of the
first generation design, will include new features, such as
increased engine power and the capability to maneuver vessels
larger than Suezmax conventional tankers.
FPSO Units
In May 2011, Teekay Corporation entered into a joint venture
agreement with Odebrecht 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 Cidade de Itajai FPSO project and Teekay
Corporation is currently working with Odebrecht on other FPSO
project opportunities that, if awarded, may result in the
Partnership being able to acquire Teekay Corporation's interests in
such projects pursuant to the omnibus agreement.
Pursuant to the omnibus agreement and subsequent agreements,
Teekay Corporation is obligated to offer to sell to the Partnership
the Petrojarl Foinaven FPSO unit, an existing unit owned by Teekay
Corporation and operating under a long-term contract in the North
Sea, prior to July 9, 2014. The purchase price for the Petrojarl
Foinaven would be its fair market value plus any additional tax or
other costs incurred by Teekay Corporation to transfer ownership of
this FPSO unit to the Partnership.
In June 2011, Teekay Corporation entered into a contract with BG
Norge Limited to provide a harsh weather FPSO unit to operate in
the North Sea. The contract will be serviced by an FPSO unit being
constructed by Samsung Heavy Industries for a fully built-up cost
of approximately $1 billion. Pursuant to the omnibus agreement,
Teekay Corporation is obligated to offer to the Partnership its
interest in this FPSO project at Teekay Corporation's fully
built-up cost within a year after the commencement of the charter,
which commencement is expected to occur mid-2014.
In November 2011, Teekay Corporation acquired from Sevan Marine
ASA, a Norway-based developer of cylindrical-shaped FPSO units, the
Hummingbird Spirit FPSO unit, which is currently operating under a
short-term charter contract. Pursuant to the omnibus agreement,
Teekay Corporation is obligated to offer to the Partnership the
Hummingbird Spirit FPSO unit within approximately one year
following commencement of a charter contract with a firm period of
greater than three years in duration.
Teekay Corporation owns two additional FPSO units, the Petrojarl
Banff FPSO and the Petrojarl 1 FPSO, which may also be offered to
the Partnership in the future pursuant to the omnibus
agreement.
Financial Summary
The Partnership reported adjusted net income attributable to the
partners(1) of $9.7 million for the quarter ended June 30, 2013,
compared to $20.6 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 $47.9 million and decreasing net income by $32.8 million for the
quarters ended June 30, 2013 and June 30, 2012, respectively, as
detailed in Appendix A to this release. Including these items, the
Partnership reported, on a GAAP basis, net income attributable to
the partners of $57.6 million for the second quarter of 2013,
compared to a net loss of $12.1 million in the same period of the
prior year. Net revenues(2) increased to $199.1 million for the
second quarter of 2013, compared to $190.5 million in the same
period of the prior year.
The Partnership reported adjusted net income attributable to the
partners(1) of $28.6 million for the six months ended June 30,
2013, compared to $46.7 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 $49.2 million and decreasing net income by $6.2 million
for the six months ended June 30, 2013 and June 30, 2012,
respectively, as detailed in Appendix A to this release. Including
these items, the Partnership reported, on a GAAP basis, net income
attributable to the partners of $77.7 million for the six months
ended June 30, 2013, compared to $40.5 million in the same period
of the prior year. Net revenues(2) for the six months ended June
30, 2013 was $388.3 million, which is consistent with the same
period of the prior year.
(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 is a non-GAAP financial measure used by certain investors
to measure the financial performance of shipping companies. Please
refer to Appendix C included in this release for a reconciliation of
this non-GAAP measure to the most directly comparable financial
measure under GAAP
Adjusted net income attributable to the partners for the three
and six months ended June 30, 2013 declined from the same periods
in the prior year, mainly due to the Voyageur Spirit FPSO off-hire
discussed elsewhere in this release and the sale and lay-up of
older shuttle and conventional tankers during 2012 and 2013 as
their related charter contracts expired or terminated. In addition,
there is a higher level of maintenance activity in the FPSO fleet
during the first six months of 2013. Given the delay in the
achieving final acceptance for the Voyageur Spirit FPSO unit, the
Partnership has not recorded the revenues associated with its
operations in the second quarter; however, $12.5 million has been
reimbursed by our sponsor, Teekay Corporation, which is recorded in
equity as an adjustment to the purchase price. As a result of the
indemnification from Teekay Corporation, there is no net impact on
the Partnership's cash flows relating to the Voyageur Spirit FPSO
off-hire.
Adjusted net income is expected to increase during the latter
half of 2013 when the Voyageur Spirit reaches final acceptance and
the four shuttle tanker newbuildings begin their time-charter
contracts in Brazil.
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 nor does it have any impact
on the Partnership's actual cash flows or the calculation of its
distributable cash flow.
The Partnership has recast its financial results to include the
results of the Voyageur Spirit FPSO unit relating to the period
prior to its acquisition by the Partnership from Teekay when it was
under common control, 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 vessel was originally under the control of
Teekay. For these purposes, the Voyageur Spirit FPSO was under
common control by Teekay from April 13, 2013 to May 2, 2013, when
it was sold to the Partnership.
Operating Results
The following table highlights certain financial information for
Teekay Offshore's four segments: the Shuttle Tanker segment, the
FPSO segment, the Conventional Tanker segment and the FSO segment
(please refer to the "Teekay Offshore's Fleet" section of this
release above and Appendix D for further details).
----------------------------------------------------------------------------
Three Months Ended
June 30, 2013
(unaudited)
---------------------------------------------------------
Shuttle Conventional
(in thousands of Tanker FPSO Tanker FSO
U.S. dollars) Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 110,947 65,260 7,879 15,053 199,139
Vessel operating
expenses 36,511 40,074 1,619 8,315 86,519
Time-charter hire
expense 14,093 - - - 14,093
Depreciation and
amortization 28,165 17,789 1,568 2,743 50,265
----------------------------------------------------------------------------
CFVO from
consolidated
vessels(2) 54,422 17,234 11,810 6,749 90,215
CFVO from equity
accounted
vessel(3) - 1,311 - - 1,311
Total CFVO(2) 54,422 18,545 11,810 6,749 91,526
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended
June 30, 2012
(unaudited)
-----------------------------------------------------------
Shuttle Conventional
(in thousands of Tanker FPSO Tanker FSO
U.S. dollars) Segment Segment Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 111,598 56,317 7,765 14,781 190,461
Vessel operating
expenses 39,653 28,203 1,556 6,986 76,398
Time-charter hire
expense 12,969 - - - 12,969
Depreciation and
amortization 31,944 12,727 1,715 2,001 48,387
----------------------------------------------------------------------------
CFVO from
consolidated
vessels(2) 54,283 22,329 25,192 8,010 109,814
----------------------------------------------------------------------------
(1) Net revenues is a non-GAAP financial measure used by certain investors
to measure the financial performance of shipping companies. Please
refer to Appendix C, included in this release for a reconciliation of
this non-GAAP measure to the most directly comparable GAAP financial
measure.
(2) Cash flow from vessel operations (CFVO) from consolidated vessels
represents income from vessel operations before depreciation and
amortization expense, write-down of vessels and amortization of
deferred gains, includes the realized gains (losses) on the settlement
of foreign exchange forward contracts and cash flow from vessel
operations relating to its discontinued operations 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. CFVO is a non-GAAP financial measure used by certain
investors to measure the financial performance of shipping companies.
Please refer to Appendix E included in this release for a description
and reconciliation of this non-GAAP measure to the most directly
comparable GAAP financial measure.
(3) The Partnership's equity accounted investment for the three months
ended June 30, 2013 reflects the Partnership's 50 percent interest in
the Itajai FPSO unit. Please see Appendix F for a description and
reconciliation of CFVO from equity accounted vessels (a 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 in the second quarter of 2013 of $54.4 million was
comparable with the $54.3 million generated in the second quarter
of 2012. Higher revenues from increased rates on both time-charter
and contract of affreightment contracts as well as new contracts
were partially offset by the lay-up of the Navion Torinita and the
Navion Clipper upon expiration of their time-charter contracts in
the second and fourth quarters of 2012, respectively, and the sales
of the Navion Fennia and Navion Savonita in the third and fourth
quarters of 2012, respectively.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO
segment, including the equity-accounted vessel, decreased to $18.5
million for the second quarter of 2013 compared to $22.3 million
for the same period of the prior year, primarily due to the higher
maintenance costs and higher crew wages, partially offset by cash
flow from the Itajai FPSO.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's
Conventional Tanker segment decreased to $11.8 million in the
second quarter of 2013 compared to $25.2 million for the same
period of the prior year primarily due to a $14.7 million
termination fee received from Teekay Corporation in the second
quarter of 2012 for the termination of the time-charter contract
for the Hamane Spirit as well as the sale of five conventional
tankers during the past twelve months. This was partially offset by
a $4.5 million termination fee received in the second quarter of
2013 for the termination of the Gotland Spirit time-charter
contract with Teekay Corporation.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO
segment in the second quarter of 2013 decreased to $6.7 million
compared from $8.0 million generated in the same period of the
prior year primarily due to higher vessel operating expenditures
related to an underwater inspection of the Dampier Spirit, as well
as an increase in crewing costs in the FSO fleet.
Liquidity and Continuous Offering Program Update
In May 2013, the Partnership implemented a continuous offering
program (COP) under which the Partnership may issue new common
units, representing limited partner interests, at market prices up
to maximum aggregate amount of $100 million. Through June 30, 2013,
the Partnership sold an aggregate of 85,508 common units under the
COP, generating proceeds of approximately $2.7 million (including
the Partnership's general partner's 2 percent proportionate capital
contribution and net of offering costs). The net proceeds from the
issuance of these common units were used for general partnership
purposes.
As of June 30, 2013, the Partnership had total liquidity of
$286.7 million, which consisted of $163.7 million in cash and cash
equivalents and $123.0 million in undrawn revolving credit
facilities. Including the $200 million revolving credit facility
relating to the Varg FPSO completed in July 2013, the Partnership
had total liquidity of approximately $487 million as at June 30,
2013.
Conference Call
The Partnership also plans to host a conference call on Friday,
August 9, 2013 at noon (ET) to discuss the results for the second
quarter of 2013. All unitholders and interested parties are invited
to listen to the live conference call by choosing from the
following options:
-- By dialing 1-866-322-8032 or 416-640-3406, if outside North America, and
quoting conference ID code 2823263.
-- 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).
A supporting Second Quarter 2013 Earnings Presentation will also
be available at www.teekayoffshore.com in advance of the conference
call start time.
The conference call will be recorded and available until Friday,
August 16, 2013. This recording can be accessed following the live
call by dialing 1-888-203-1112 or 647-436-0148, if outside North
America, and entering access code 2823263.
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
is structured as a publicly-traded master limited partnership and
owns interests in 36 shuttle tankers (including four chartered-in
vessels and two committed newbuildings), five floating production,
storage and offloading (FPSO) units, six floating storage and
offtake (FSO) units (including one FSO unit under conversion) and
five conventional oil tankers. The majority of Teekay Offshore's
fleet is employed on long-term, stable contracts. In addition,
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).
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)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Six months ended
June 30, March 31, June 30, June 30, June 30,
2013(1) 2013 2012 2013(1) 2012
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUES 222,412 212,112 224,158 434,524 451,506
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OPERATING
EXPENSES
Voyage expenses 23,273 22,948 33,697 46,221 63,214
Vessel operating
expenses (2) 86,519 77,324 76,398 163,843 153,258
Time-charter
hire expense 14,093 14,777 12,969 28,870 26,586
Depreciation and
amortization 50,265 44,510 48,387 94,775 96,391
General and
administrative
(2) 10,417 10,390 8,706 20,807 17,630
Write-down of
vessels - - 1,048 - 1,048
Restructuring
charge(3) 1,395 659 - 2,054 -
----------------------------------------------------------------------------
Total operating
expenses 185,962 170,608 181,205 356,570 358,127
----------------------------------------------------------------------------
Income from
vessel
operations 36,450 41,504 42,953 77,954 93,379
----------------------------------------------------------------------------
OTHER ITEMS
Interest expense (16,035) (11,628) (12,267) (27,663) (24,782)
Interest income 1,465 195 138 1,660 350
Realized and
unrealized
gains (losses)
on derivative
instruments (4) 33,901 (1,077) (60,317) 32,824 (44,078)
Equity income 1,598 - - 1,598 -
Foreign exchange
gains
(losses)(5) 3,555 (3,638) 888 (83) (1,872)
Loss on bond
repurchase(6) - (1,759) - (1,759) -
Other income
(expense) - net 260 314 (119) 574 1,278
----------------------------------------------------------------------------
Total other
items 24,744 (17,593) (71,677) 7,151 (69,104)
----------------------------------------------------------------------------
Income from
continuing
operations
before income
tax (expense)
recovery 61,194 23,911 (28,724) 85,105 24,275
Income tax
(expense)
recovery (456) 234 1,946 (222) 461
----------------------------------------------------------------------------
Net income
(loss) from
continuing
operations 60,738 24,145 (26,778) 84,883 24,736
Net (loss)
income from
discontinued
operations(7) (2,134) (2,175) 15,149 (4,309) 18,238
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income
(loss) 58,604 21,970 (11,629) 80,574 42,974
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-controlling
interests in
net income
(loss) 3,274 1,777 499 5,051 2,468
Dropdown
Predecessor's
interest in net
income (loss)
(1) (2,225) - - (2,225) -
General
Partner's
interest in net
income
(loss)(8) 3,833 3,073 1,808 6,906 4,863
Limited
partners'
interest in net
income
(loss)(8) 51,909 17,120 (13,936) 69,029 35,643
----------------------------------------------------------------------------
Weighted-average
number of
common units -
basic 82,726,359 80,105,408 70,626,554 81,423,123 70,626,554
Weighted-average
number of
common units
-diluted 82,742,751 80,106,741 70,626,554 81,432,027 70,626,554
----------------------------------------------------------------------------
(1) Results for the Voyageur Spirit FPSO unit for the period beginning in
April 13, 2013 prior to its acquisition by the Partnership on May 2,
2013 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 6-K filing for
the quarter ended June 30, 2013. Any revisions to the preliminary
Dropdown Predecessor figures are only expected to impact the
accounting for the periods prior to the date the Voyageur Spirit 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 second quarter of 2013.
(2) In order to more closely align the Partnership's presentation to that
of many of its peers, the cost of ship management services of $9.2
million for the three months ended March 31, 2013 and $8.6 million and
$17.7 million for the three and six months ended June 30, 2013,
respectively, have been presented in vessel operating expenses. Prior
to 2013, the Partnership included these amounts in general and
administrative expenses. All such costs incurred in comparative
periods have been reclassified from general and administrative
expenses to vessel operating expenses to conform to the presentation
adopted in the current period. The amounts reclassified were $9.3
million and $19.3 million for the three and six months ended June 30,
2012, respectively.
(3) Restructuring charge for the three and six months ended June 30, 2013
relates to the reorganization of the Partnership's marine operations
to create better alignment with its shuttle tanker and conventional
tanker business units.
(4) 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 gains (losses) 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,
2013 2013 2012 2013 2012
Realized (losses)
gains relating to:
Interest rate
swaps (14,956) (14,623) (14,338) (29,579) (29,345)
Termination of
interest rate
swap in Dropdown
Predecessor (4,099) - - (4,099) -
Foreign currency
forward contract (1,646) 353 437 (1,293) 1,635
--------------------------------------------------------
(20,701) (14,270) (13,901) (34,971) (27,710)
--------------------------------------------------------
Unrealized gains
(losses) relating
to:
Interest rate
swaps 52,947 14,971 (41,842) 67,918 (17,079)
Termination of
interest rate
swap in Dropdown
Predecessor 3,984 - - 3,984 -
Foreign currency
forward contracts (2,329) (1,778) (4,574) (4,107) 711
--------------------------------------------------------
54,602 13,193 (46,416) 67,795 (16,368)
--------------------------------------------------------
Total realized and
unrealized gains
(losses)
--------------------------------------------------------
on non-designated
derivative
instruments 33,901 (1,077) (60,317) 32,824 (44,078)
--------------------------------------------------------
(5) 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 of which it repurchased NOK 388.5 million in the first quarter of
2013 and recognized a realized gain of $6.8 million on the partial
early termination of a cross currency swap and a realized foreign
exchange loss of $6.6 million on the repurchase of the bonds. The
Partnership also issued NOK 600 million unsecured bonds in 2012
maturing in 2017 and NOK 1,300 million of unsecured bonds in 2013
maturing in 2016 and 2018. 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 are also detailed in the table
below:
Three Months Ended Six months ended
June 30, March June 30, June 30, June 30,
2013 31, 2013 2012 2013 2012
Realized gain on partial
termination of cross-currency
swap - 6,800 - 6,800 -
Realized foreign exchange loss
on partial repurchase of NOK
bonds - (6,573) - (6,573) -
Realized gains on cross-
currency swaps 297 725 696 1,022 1,690
Unrealized losses on cross-
currency swaps (9,307) (25,502) (10,776) (34,809) (2,897)
Unrealized gains on revaluation
of NOK bonds 13,250 25,011 9,414 38,261 383
(6) Loss on bond repurchase for the three months ended March 31, 2013
relates to the repurchase of NOK 388.5 million of the Partnership's
existing NOK 600 million bond issue at a premium.
(7) Results for six conventional tankers (Hamane Spirit, Torben Spirit,
Luzon Spirit, Leyte Sprit, Poul Spirit and Gotland Spirit), which we
sold or held for sale during 2012 and 2013, have been included in Net
(loss) income from discontinued operations for the three and six
months ended June 30, 2013 and June 30, 2012.
(8) The General Partner's and Limited Partners' interest in net income for
both the three months and six months ended June 30, 2013 is
cumulatively reduced by approximately $1.8 million associated with the
accrued dividends for the preferred equity units issued on April 30,
2013.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at
As at As at December 31,
June 30, 2013 March 31, 2013 2012
(unaudited) (unaudited) (unaudited)
ASSETS
Current
Cash and cash equivalents 163,744 172,801 206,339
Accounts receivable 176,189 100,715 91,879
Vessels held for sale 6,800 - 13,250
Net investments in direct
financing leases - current 5,628 5,387 5,647
Prepaid expenses 30,461 31,348 29,384
Due from affiliates 35,570 163,202 29,682
Current portion of derivative
instruments 546 3,119 12,398
Other current assets - 513 8
----------------------------------------------------------------------------
Total current assets 418,938 477,085 388,587
----------------------------------------------------------------------------
Vessels and equipment
At cost, less accumulated
depreciation 2,935,389 2,287,334 2,327,337
Advances on newbuilding
contracts 82,499 139,628 127,286
Investment in and advances to
joint venture 62,880 - -
Net investments in direct
financing leases 24,634 26,135 27,568
Derivative instruments 9,398 34 2,913
Deferred income tax 10,824 9,021 8,948
Other assets 36,008 31,068 28,112
Intangible assets - net 12,952 14,230 15,527
Goodwill - shuttle tanker
segment 127,113 127,113 127,113
----------------------------------------------------------------------------
Total assets 3,720,635 3,111,648 3,053,391
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current
Accounts payable 23,580 12,164 15,220
Accrued liabilities 154,188 73,701 84,349
Due to affiliates 92,123 41,852 47,810
Current portion of long-term
debt 288,690 250,414 248,385
Current portion of derivative
instruments 89,111 47,874 47,748
Current portion of in-process
revenue contracts 12,744 12,744 12,744
----------------------------------------------------------------------------
Total current liabilities 660,436 438,749 456,256
----------------------------------------------------------------------------
Long-term debt 1,895,628 1,623,410 1,521,247
Derivative instruments 137,999 213,757 213,731
In-process revenue contracts 95,009 98,151 101,294
Other long-term liabilities 37,072 25,643 26,819
----------------------------------------------------------------------------
Total liabilities 2,826,144 2,399,710 2,319,347
----------------------------------------------------------------------------
Redeemable non-controlling
interest 28,357 28,383 28,815
Equity
Limited partners - common
units (83.7 and 80.1 million
units issued and outstanding
at June 30, 2013 and December
31, 2012, respectively) 649,814 617,199 640,990
Limited partners - preferred
units (6.0 and nil million
units issued and outstanding
at June 30, 2013 and December
31, 2012, respectively) 144,921 - -
General Partner 20,475 20,012 20,162
Accumulated other
comprehensive loss - - (58)
----------------------------------------------------------------------------
Partners' equity 815,210 637,211 661,094
----------------------------------------------------------------------------
Non-controlling interests 50,924 46,344 44,135
----------------------------------------------------------------------------
Total equity 866,134 683,555 705,229
----------------------------------------------------------------------------
Total liabilities and total
equity 3,720,635 3,111,648 3,053,391
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended
June 30, 2013(1) June 30, 2012
(unaudited) (unaudited)
Cash and cash equivalents provided by
(used for)
OPERATING ACTIVITIES
Net income 80,574 42,974
Non-cash items:
Unrealized (gain) loss on derivative
instruments (32,927) 19,499
Equity income (1,598) -
Depreciation and amortization 96,011 99,614
Write-down and loss on sale of vessels 19,029 3,269
Deferred income tax (recovery) expense (62) 91
Foreign currency exchange gain and other (36,098) (7,543)
Change in non-cash working capital items
related to operating activities 6,919 (23,056)
Expenditures for dry docking (7,656) (8,619)
----------------------------------------------------------------------------
Net operating cash flow 124,192 126,229
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 736,725 265,053
Scheduled repayments of long-term debt (97,215) (95,032)
Prepayments of long-term debt (424,152) (203,273)
Debt issuance costs (10,126) (4,362)
Equity contribution from Teekay
Corporation to Dropdown Predecessor 5,596 -
Purchase of Voyageur LLC from Teekay
Corporation (252,086) -
Equity contribution from joint venture
partner 1,500 1,000
Proceeds from issuance of common units 65,067 -
Proceeds from issuance of preferred units 150,000 -
Expenses relating to equity offerings (5,385) (117)
Cash distributions paid by the Partnership (90,972) (76,779)
Cash distributions paid by subsidiaries to
non-controlling interests (280) (5,657)
----------------------------------------------------------------------------
Net financing cash flow 78,672 (119,167)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for vessels and equipment (216,242) (26,148)
Purchase of equity investment in Itajai
joint venture (52,520) -
Proceeds from sale of vessels and
equipment 20,350 9,485
Direct financing lease payments received 2,953 9,129
----------------------------------------------------------------------------
Net investing cash flow (245,459) (7,534)
----------------------------------------------------------------------------
Decrease in cash and cash equivalents (42,595) (472)
Cash and cash equivalents, beginning of
the period 206,339 179,934
----------------------------------------------------------------------------
Cash and cash equivalents, end of the
period 163,744 179,462
----------------------------------------------------------------------------
(1) In accordance with GAAP, the Consolidated Statement of Cash Flows for
the six months ended June 30, 2013 includes the cash flows relating to
the Voyageur Spirit FPSO unit Dropdown Predecessor for the period from
April 13, 2013 to May 2, 2013, when the vessel was under the common
control of Teekay Corporation, but prior to its acquisition by the
Partnership. The amounts included in this release related to the
Dropdown Predecessor are preliminary, and will be finalized for
inclusion in the Partnership's Form 6-K filing for the quarter ended
June 30, 2013. Any revisions to the preliminary Dropdown Predecessor
figures are only expect to impact the accounting for the periods prior
to the date the Voyageur Spirit 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 second quarter of 2013.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 Six months ended
June 30, June 30, June 30, June 30,
2013 2012 2013 2012
(unaudited) (unaudited) (unaudited) (unaudited)
Net income (loss) - GAAP
basis 58,604 (11,629) 80,574 42,974
Adjustments:
Net income attributable to
non-controlling interests (3,274) (499) (5,051) (2,468)
Net loss attributable to
Dropdown Predecessor 2,225 - 2,225 -
----------------------------------------------------------------------------
Net income (loss)
attributable to the
partners 57,555 (12,128) 77,748 40,506
Add (subtract) specific
items affecting net income
(loss):
Foreign exchange (gains)
losses(1) (3,529) (192) 836 3,560
Unrealized (gains) losses
on derivative instruments
(2) (51,803) 46,416 (64,996) 16,368
Components of discontinued
operations(3) 3,302 (12,449) 7,749 (12,449)
Write-down of vessel - 1,048 - 1,048
Realized losses on foreign
currency forward
contracts(4) 1,863 - 1,863 -
Restructuring charge and
other (5) 1,501 (2,410) 2,322 (2,956)
Loss on bond repurchase(6) - - 1,759 -
Foreign currency exchange
losses resulting
from hedging
ineffectiveness - 254 - 234
Non-controlling interests'
share of items above(7) 808 94 1,278 407
----------------------------------------------------------------------------
Total adjustments (47,858) 32,761 (49,189) 6,212
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted net income
attributable to the
partners 9,697 20,633 28,559 46,718
----------------------------------------------------------------------------
(1) Foreign exchange 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 repurchase of Norwegian kroner
bonds and exclude the realized gains and losses relating to the cross
currency swaps for outstanding Norwegian bonds of the Partnership
(2) Reflects the unrealized (gains) losses 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,
including the interest rate swap from Itajai FPSO equity accounted
joint venture and excluding amounts relating to the Dropdown
Predecessor.
(3) Related to components of net income (loss) from discontinued
operations. The results for the three months ended June 30, 2013
include the termination fee received from Teekay Corporation upon
cancellation of the Gotland Spirit time-charter contract, partially
offset by the write down to the Gotland Spirit to its estimated fair
value in conjunction with the termination of its charter contract and
the loss on sale of the Poul Spirit. In addition, the results for the
six months ended June 30, 2013 include the termination fee received
from Teekay Corporation upon cancellation of the Poul Spirit time-
charter contract, partially offset by the write down of Poul Spirit to
its estimated fair value in conjunction with the termination of its
charter contract. The results for the three and six months ended June
30, 2012 include the termination fee received from Teekay Corporation
upon the cancellation of the Hamane Spirit time-charter contract,
partially offset by the loss on sale of the Hamane Spirit.
(4) Reflects the realized losses on foreign currency forward contracts
entered into for the expected purchase of the HiLoad DP unit from
Remora that is not designated as a hedge for accounting purposes.
(5) Other items include restructuring charges of $1.4 million and $2.1
million for the three and six months ended June 30, 2013,
respectively, relating to the reorganization of the Partnership's
marine operations to create better alignment with its shuttle tanker
and conventional tanker business units. Other items for the three and
six months ended June 30, 2013 and 2012 include $0.1 million, $0.3
million, $0.2 million and ($0.2) million, respectively, relating to
the revaluation of a fair value adjustment of contingent consideration
liability associated with the purchase of the Scott Spirit shuttle
tanker. In addition, 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.
(6) Loss on bond repurchase for the six months ended June 30, 2013 relates
to the repurchase of NOK 388.5 million of the Partnership's existing
NOK 600 million bond issue at a premium in January 2013.
(7) Items affecting net income include items from the Partnership's
consolidated non-wholly-owned subsidiaries. The specific items
affecting net income are analyzed to determine whether any of the
amounts originated from a consolidated non-wholly-owned subsidiary.
Each amount that originates from a consolidated non-wholly-owned
subsidiary is multiplied by the non-controlling interests' percentage
share in this subsidiary to arrive at the non-controlling interests'
share of the amount. The amount identified as "non-controlling
interests' share of items listed above" in the table above is the
cumulative amount of the non-controlling interests' proportionate
share of items listed in the table.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
DISTRIBUTABLE CASH FLOW
(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, net loss in the Dropdown Predecessor, non-cash items,
distributions relating to equity financing of newbuilding
installments and on our preferred units, certain realized losses on
forward contracts, vessel acquisition costs, estimated maintenance
capital expenditures, unrealized gains and losses from derivatives,
non-cash income taxes, foreign currency 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 (loss) for the
quarters ended June 30, 2013 and June 30, 2012, respectively.
----------------------------------------------------------------------------
Three Months Ended
June 30, 2013 June 30, 2012
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net income (loss) 58,604 (11,629)
Net loss attributable to Dropdown
Predecessor 2,225 -
----------------------------------------------------------------------------
60,829 (11,629)
Add (subtract):
Depreciation and amortization 49,169 48,387
Write down of vessel - 1,048
Non-cash items in discontinued
operations(1) 8,179 3,838
Distributions relating to equity
financing of newbuilding installments 2,813 1,447
Partnership's share of equity
accounted joint ventures'
distributable cash flow before
estimated maintenance capital
expenditures 814 -
Equity income (1,598) -
Distributions relating to preferred
units (1,817) -
Estimated maintenance capital
expenditures(2) (26,808) (27,652)
Indemnification from Teekay
Corporation relating to the Voyageur
Spirit FPSO(2) 12,505 -
Unrealized (losses) gains on non-
designated derivative instruments (3) (50,618) 46,416
Foreign exchange and other, net (3,382) (2,683)
----------------------------------------------------------------------------
Distributable Cash Flow before Non-
Controlling Interests 50,086 59,172
Non-controlling interests' share of
DCF (7,046) (4,991)
----------------------------------------------------------------------------
Distributable Cash Flow 43,040 54,181
----------------------------------------------------------------------------
(1) Includes depreciation, write-down and loss on sale of vessels included
within discontinued operations.
(2) Indemnification of the loss of revenues from the Voyageur Spirit FPSO
is effectively treated as a reduction to estimated maintenance capital
expenditures in the second quarter of 2013, since the indemnification
amount received from Teekay Corporation is effectively treated as a
reduction to the purchase price of the Voyageur Spirit FPSO.
(3) Derivative instruments include interest rate swaps and foreign
exchange forward contracts.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX C - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
NET REVENUES
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Description of Non-GAAP Financial Measure - Net Revenues
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, however, it is not required by GAAP and should not be
considered as an alternative to revenues or any other indicator of
the Partnership's performance required by GAAP.
Three Months Ended June 30, 2013
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment Tanker Segment Segment Total
----------------------------------------------------------------------------
Revenues 133,222 65,260 8,877 15,053 222,412
Voyage expenses 22,275 - 998 - 23,273
----------------------------------------------------------------------------
Net revenues 110,947 65,260 7,879 15,053 199,139
----------------------------------------------------------------------------
Three Months Ended June 30, 2012
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment Tanker Segment Segment Total
----------------------------------------------------------------------------
Revenues 143,748 56,317 9,312 14,781 224,158
Voyage expenses 32,150 - 1,547 - 33,697
----------------------------------------------------------------------------
Net revenues 111,598 56,317 7,765 14,781 190,461
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX D - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2013
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment Tanker Segment Segment Total
----------------------------------------------------------------------------
Net revenues (1) 110,947 65,260 7,879 15,053 199,139
Vessel operating
expenses(2) 36,511 40,074 1,619 8,315 86,519
Time-charter hire
expense 14,093 - - - 14,093
Depreciation and
amortization 28,165 17,789 1,568 2,743 50,265
General and
administrative(2) 4,911 4,600 97 809 10,417
Restructuring charge 957 - 438 - 1,395
----------------------------------------------------------------------------
Income from vessel
operations 26,310 2,797 4,157 3,186 36,450
----------------------------------------------------------------------------
Three Months Ended June 30, 2012
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment Tanker Segment Segment Total
----------------------------------------------------------------------------
Net revenues(1) 111,598 56,317 7,765 14,781 190,461
Vessel operating
expenses(2) 39,653 28,203 1,556 6,986 76,398
Time-charter hire
expense 12,969 - - - 12,969
Depreciation and
amortization 31,944 12,727 1,715 2,001 48,387
General and
administrative(2) 5,397 2,614 243 452 8,706
Write-down of vessel 1,048 - - - 1,048
----------------------------------------------------------------------------
Income from vessel
operations 20,587 12,773 4,251 5,342 42,953
----------------------------------------------------------------------------
(1) Net revenues is a non-GAAP financial measure used by certain investors
to measure the financial performance of shipping companies. Please
refer to Appendix C included in this release for a reconciliation of
this non-GAAP measure to the most directly comparable GAAP financial
measure.
(2) In order to more closely align the Partnership's presentation to that
of its peers, the cost of ship management services of $8.6 million for
the three months ended June 30, 2013 have been presented in vessel
operating expenses. All such costs incurred in comparative periods
have been reclassified from general and administrative expenses to
vessel operating expenses to conform to the presentation adopted in
the current period. The amount reclassified was $9.3 million for the
three months ended June 30, 2012.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX E - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
CASH FLOW FROM VESSEL OPERATIONS FROM CONSOLIDATED VESSELS
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Description of Non-GAAP Financial Measure - Cash Flow from
Vessel Operations from Consolidated Vessels
Cash flow from vessel operations from consolidated vessels
represents income from vessel operations before depreciation and
amortization expense, write down of vessels and amortization of
deferred gains, includes the realized gains (losses) on the
settlement of foreign exchange forward contracts and cash flow from
vessel operations relating to its discontinued operations 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 included because certain investors use this data to measure a
company's financial performance. Cash flow from vessel operations
is not required by GAAP and should not be considered as an
alternative to net income (loss) or any other indicator of the
Partnership's performance required by GAAP.
Three Months Ended June 30, 2013
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment(1) Tanker Segment Segment Total
----------------------------------------------------------------------------
Income from
vessel
operations
(Appendix D) 26,310 2,797 4,157 3,186 36,450
Depreciation and
amortization 28,165 17,789 1,568 2,743 50,265
Realized
(losses) gains
from the
settlements of
non-designated
foreign
exchange
forward
contracts (53) 271 - - 218
Amortization of
intangible and
non-cash
portion of
revenue
contracts - (3,122) - - (3,122)
Falcon Spirit
revenue
accounted for
as direct
financing lease - - - (1,304) (1,304)
Falcon Spirit
cash flow from
time-charter
contracts - - - 2,124 2,124
Cash flow from
discontinued
operations - - 6,085 - 6,085
Dropdown
Predecessor
cash flow from
vessel
operations - (501) - - (501)
----------------------------------------------------------------------------
Cash flow from
vessel
operations from
consolidated
vessels 54,422 17,234 11,810 6,749 90,215
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Three Months Ended June 30, 2012
(unaudited)
Shuttle
Tanker FPSO Conventional FSO
Segment Segment Tanker Segment Segment Total
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Income from
vessel
operations
(Appendix D) 20,587 12,773 4,251 5,342 42,953
Depreciation and
amortization 31,944 12,727 1,715 2,001 48,387
Unrealized gains
from the change
in fair value of
designated
foreign exchange
forward
contracts 254 - - - 254
Realized gains
(losses) from
the settlements
of non-
designated
foreign exchange
forward
contracts 450 (13) - - 437
Amortization of
intangible and
non-cash portion
of revenue
contracts - (3,158) - - (3,158)
Write-down of
vessel 1,048 - - - 1,048
Falcon Spirit
revenue
accounted for as
direct financing
lease - - - (1,437) (1,437)
Falcon Spirit
cash flow from
time-charter
contracts - - - 2,104 2,104
Cash flow from
discontinued
operations - - 19,226 - 19,226
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Cash flow from
vessel
operations from
consolidated
vessels 54,283 22,329 25,192 8,010 109,814
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(1) Cash flow from vessel operations for the FPSO unit segment includes
the cash flows generated by the Voyageur Spirit FPSO unit since its
acquisition by the Partnership on May 2, 2013. Cash flow for the
Voyageur Spirit FPSO unit for the period April 13, 2013 through May 2,
2013 prior to its acquisition by the Partnership when it was under
common control by Teekay Corporation, referred to as the Dropdown
Predecessor, has been excluded from cash flow from vessel operations.
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TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX F - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
CASH FLOW FROM VESSEL OPERATIONS FROM EQUITY ACCOUNTED VESSEL
(in thousands of U.S. dollars)
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Description of Non-GAAP Financial Measure - Cash Flow from
Vessel Operations from Equity Accounted Vessel
Cash flow from vessel operations from equity accounted vessel
represents income from vessel operations before depreciation and
amortization expense. Cash flow from equity accounted vessel
represents the Partnership's proportionate share of cash flow from
vessels operations from its equity accounted vessel, the Itajai
FPSO unit. Cash flow from vessel operations from equity accounted
vessel is included because certain investors use cash flow from
vessel operations to measure a company's financial performance, and
to highlight this measure for the Partnership's equity accounted
joint venture. Cash flow from vessel operations from equity
accounted vessel is not required by GAAP and should not be
considered as an alternative to equity income or any other
indicator of the Partnership's performance required by GAAP.
Three and Six Months Ended
June 30, 2013
(unaudited)
At Partnership's
100% 50%
----------------------------------------------------------------------------
Voyage revenues 4,375 2,188
Vessel and other operating expenses 1,736 868
Depreciation and amortization 802 401
General and administrative 18 9
----------------------------------------------------------------------------
Income from vessel operations of equity
accounted vessel 1,819 910
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Interest expense (887) (443)
Unrealized gains on derivative
instruments 2,371 1,185
Foreign currency exchange gain (38) (19)
----------------------------------------------------------------------------
Total other items 1,446 723
----------------------------------------------------------------------------
Net income / equity income of equity
accounted vessel
before income tax expense 3,265 1,633
Income tax expense 69 35
----------------------------------------------------------------------------
Net income / equity income of equity
accounted vessel 3,196 1,598
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Income from vessel operations 1,819 910
Depreciation and amortization 802 401
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Cash flow from vessel operations from
equity accounted vessel 2,621 1,311
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FORWARD LOOKING STATEMENTS
----------------------------------------------------------------------------
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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
expected contribution of recent acquisitions, vessel deliveries and
new contracts to cash flow growth; the timing of the Voyageur
Spirit achieving final acceptance and commencing full operations
under the E.ON contract; the timing of the Lambada Spirit shuttle
tanker commencing its contract with BG; the timing of the HiLoad DP
unit commencing its 10-year time-charter contract with Petroleo
Brasileiro SA; the potential for the Partnership to acquire future
HiLoad projects developed by Remora, including development of the
next generation HiLoad DP units with BG Brasil; the timing of and
cost of converting the Navion Clipper into an FSO unit and the
timing of the commencement of its 10-year charter contract with
Salamander; the timing of and cost of converting the Randgrid into
an FSO unit and the timing of the commencement of the commencement
of its 3-year charter contract with Statoil; the potential for
Teekay Corporation to offer additional vessels to the Partnership
and the Partnership's acquisition of any such vessels, including
the Petrojarl Foinaven, the Hummingbird Spirit and the newbuilding
FPSO unit that will service the Knarr field under contract with BG
Norge Limited; 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 Corporation 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; the inability of the Voyageur Spirit FPSO
to complete the repair of its compressors, achieve full production
and receive final acceptance by E.ON during August 2013; the
potential for the loss of revenue under the charter with E.ON from
the date of acquisition until final acceptance exceeds Teekay
Corporation's maximum indemnification of $54 million; 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; potential delays
to the commencement of the BG shuttle tanker time-charters; failure
of Teekay Corporation to offer to the Partnership additional
vessels; the inability of the joint venture between Teekay
Corporation and Odebrecht to secure new Brazil FPSO projects that
may be offered for sale to the Partnership; the inability of Remora
to develop future HiLoad DP units; failure to obtain required
approvals by the Conflicts Committee of Teekay Offshore's general
partner to approve the acquisition of vessels offered from Teekay
Corporation, or third parties; the Partnership's ability to raise
adequate financing to purchase additional assets; delays in vessel
deliveries or conversions; 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, 2012.
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: Investor Relations enquiries: Kent Alekson +1 (604)
609-6442 www.teekayoffshore.com
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