UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
¨ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x |
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2014
OR
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
¨ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For
the transition period from to
Commission file number 1-33198
TEEKAY
OFFSHORE PARTNERS L.P.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrants Name into English)
Republic of The Marshall Islands
(Jurisdiction of incorporation or organization)
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
Telephone: (441) 298-2530
(Address and telephone number of principal executive offices)
Edith Robinson
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
Telephone:
(441) 298-2533
Fax: (441) 292-3931
(Contact information for company contact person)
Securities registered, or to be registered, pursuant to Section 12(b) of the Act.
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Title of each class |
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Name of each exchange on which registered |
Common Units |
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New York Stock Exchange |
Series A Preferred Units |
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New York Stock Exchange |
Securities registered or to be registered, pursuant to Section 12(g) of the Act.
None
Securities for
which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each issuers classes of capital or common stock as of the close of the period covered by
the annual report.
92,386,383 Common Units
6,000,000 Series A Preferred Units
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No ¨
Indicate by check mark if the registrant (1) has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated
Filer x Accelerated
Filer ¨ Non-Accelerated Filer ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP x |
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International Financial Reporting Standards as issued
by the International Accounting Standards Board ¨ |
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Other ¨ |
If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to
follow: Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
TEEKAY OFFSHORE PARTNERS L.P.
INDEX TO REPORT ON FORM 20-F
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PART I. |
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Item 1. |
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Identity of Directors, Senior Management and Advisors |
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5 |
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Item 2. |
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Offer Statistics and Expected Timetable |
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5 |
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Item 3. |
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Key Information |
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5 |
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Selected Financial Data |
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5 |
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Risk Factors |
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Tax Risks |
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22 |
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Item 4. |
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Information on the Partnership |
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23 |
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A. Overview, History and Development |
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Overview and History |
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23 |
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Potential Additional Shuttle Tanker, FSO, and FPSO Projects |
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23 |
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B. Business Overview |
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Shuttle Tanker Segment |
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FPSO Segment |
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25 |
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Conventional Tanker Segment |
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27 |
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FSO Segment |
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26 |
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Business Strategies |
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Customers |
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Safety, Management of Ship Operations and Administration |
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29 |
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Risk of Loss, Insurance and Risk Management |
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29 |
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Flag, Classification, Audits and Inspections |
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30 |
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Regulations |
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30 |
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C. Organizational Structure |
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34 |
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D. Properties |
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E. Taxation of the Partnership |
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34 |
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Item 4A. |
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Unresolved Staff Comments |
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Item 5. |
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Operating and Financial Review and Prospects |
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35 |
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Overview |
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Significant Developments |
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36 |
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Potential Additional Shuttle Tanker, FSO and FPSO Projects |
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37 |
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Our Contracts and Charters |
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38 |
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Important Financial and Operational Terms and Concepts |
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38 |
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Items You Should Consider When Evaluating Our Results |
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Results of Operations |
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Liquidity and Capital Resources |
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Cash Flows |
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53 |
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Contractual Obligations and Contingencies |
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54 |
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Off-Balance Sheet Arrangements |
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55 |
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Critical Accounting Estimates |
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Item 6. |
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Directors, Senior Management and Employees |
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58 |
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A. Directors and Senior Management |
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Management of Teekay Offshore Partners L.P. |
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58 |
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Directors and Executive Officers of Teekay Offshore GP L.L.C. |
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B. Compensation |
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Executive Compensation |
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59 |
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Compensation of Directors |
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59 |
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2006 Long-Term Incentive Plan |
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60 |
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C. Board Practices |
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60 |
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D. Employees |
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61 |
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E. Unit Ownership |
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61 |
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Item 7. |
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Major Unitholders and Related Party Transactions |
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A. Major Unitholders |
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62 |
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B. Certain Relationships and Related Party Transactions |
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62 |
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Item 8. |
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Financial Information |
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63 |
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2
3
PART I
This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in this report.
Unless otherwise indicated, references in this Annual Report to Teekay Offshore, we, us and
our and similar terms refer to Teekay Offshore Partners L.P. and/or one or more of its subsidiaries, except that those terms, when used in this Annual Report in connection with the common units described herein, shall mean specifically
Teekay Offshore Partners L.P. References in this Annual Report to Teekay Corporation refer to Teekay Corporation and/or any one or more of its subsidiaries.
In addition to historical information, this Annual Report contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements relate to future events and our operations, objectives, expectations, performance, financial condition and intentions. When used in this Annual Report, the words expect, intend, plan,
believe, anticipate, estimate and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this Annual Report include, in particular,
statements regarding:
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our distribution policy and our ability to make cash distributions on our units or any increases in quarterly distributions; |
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our future growth prospects business strategy and other plans and objectives for future operations; |
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our ability to maintain and expand long-term relationships with major crude oil companies, including our ability to service fields until they no
longer produce, and the negative impact of low oil prices on the likelihood of certain charter contract extensions; |
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the derivation of a substantial majority of revenue from a limited number of customers; |
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our ability to leverage to our advantage Teekay Corporations relationships and reputation in the shipping industry; |
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our continued ability to enter into fixed-rate time charters with customers; |
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results of operations and revenues and expenses; |
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expected increases in vessel operating expenses, including crewing costs and charter rates for our vessels; |
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offshore and tanker market fundamentals, including the balance of supply and demand in the offshore and tanker market and spot tanker charter
rates; |
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our competitive advantage in the shuttle tanker market; |
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the expected lifespan of our vessels; |
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the estimated sales price or scrap value of vessels; |
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our expectations as to any impairment of our vessels; |
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future capital expenditures and availability of capital resources to fund capital expenditures; |
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offers of shuttle tankers, floating storage and off-take (or FSO) units, floating production, storage and offloading (or FPSO) units,
towage vessels, or floating accommodation units (or FAUs) and related contracts from Teekay Corporation and our accepting such offers; |
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acquisitions from third parties and obtaining offshore projects, that we or Teekay Corporation bid on or may be awarded; |
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certainty of completion, estimated delivery, completion dates, intended financing and estimated costs for newbuildings, acquisitions and
conversions, including the FAUs, towage newbuildings and the three on-the-water towage vessels, conversion of the Randgrid to an FSO unit to serve the Gina Krog oil and gas field, conversion of the Navion Norvegia to an FPSO unit to
serve the Libra field, the upgrades of the Petrojarl I FPSO unit and the acquisition of the Petrojarl Knarr FPSO unit, including the purchase price, financing, timing of completion of field installation and contract start-up;
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payment of additional contingent consideration for our acquisitions of ALP and Logitel and the capabilities of the ALP vessels and FAUs;
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our expectations regarding growth of our long-haul ocean towage and offshore installation service business; |
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the expectations as to the chartering of unchartered vessels, including two FAU and four towage newbuildings and the three on-the-water towage
vessels; |
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features and performance of next generation HiLoad DP units and our ability to successfully secure a contract for the HiLoad DP unit;
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the expected cost to install ballast water treatment systems on our vessels in compliance with IMO proposals; |
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our expectations regarding competition in the markets we serve; |
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our entering into joint ventures or partnerships with companies; |
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our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter;
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the duration of dry dockings; |
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the future valuation of goodwill; |
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our liquidity needs and anticipated funds for liquidity needs and the sufficiency of cash flows; |
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our compliance with covenants under our credit facilities; |
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the ability of the counterparties for our derivative contracts to fulfill their contractual obligations; |
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our exposure to foreign currency fluctuations, particularly in Norwegian Kroner; |
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the adequacy of our insurance coverage; |
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the expected impact of heightened environmental and quality concerns of insurance underwriters, regulators and charterers; |
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the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards applicable to
our business; |
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anticipated taxation of our partnership and its subsidiaries and taxation of unitholders; |
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our intent to take the position that we are not a passive foreign investment company; |
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our general and administrative expenses as a public company and expenses under service agreements with other affiliates of Teekay Corporation and
for reimbursements of fees and costs of Teekay Offshore GP L.L.C., our general partner; and |
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our ability to avoid labor disruptions and attract and retain highly skilled personnel. |
Forward-looking statements are necessary estimates reflecting the judgment of senior management, involve known and unknown risks and are based
upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking
statements. Important factors that could cause actual results to differ materially include, but are not limited to, those factors discussed below in Item 3 Key Information: Risk Factors and other factors detailed from time to time in
other reports we file with the U.S. Securities and Exchange Commission (or the SEC).
We do not intend to revise any
forward-looking statements in order to reflect any change in our expectations or events or circumstances that may subsequently arise. You should carefully review and consider the various disclosures included in this Annual Report and in our other
filings made with the SEC that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.
Item 1. |
Identity of Directors, Senior Management and Advisors |
Not applicable.
Item 2. |
Offer Statistics and Expected Timetable |
Not applicable.
Selected Financial Data
Set forth below is selected consolidated financial and other data of Teekay Offshore Partners L.P. and its subsidiaries for the fiscal years
2010 through 2014, which have been derived from our audited consolidated financial statements.
The following tables should be read
together with, and are qualified in their entirety by reference to, (a) Item 5. Operating and Financial Review and Prospects, included herein, and (b) the historical consolidated financial statements and the accompanying notes and the
Report of Independent Registered Public Accounting Firm therein (which are included herein), with respect to the consolidated financial statements for each of the fiscal years ended December 31, 2012 through 2014.
Occasionally we purchase vessels from Teekay Corporation. In April 2010, we acquired from Teekay Corporation an FSO unit, the Falcon
Spirit, together with its charter contract. In October 2010, we acquired from Teekay Corporation the Cidade de Rio das Ostras (or Rio das Ostras) FPSO unit, along with its operations and charter contract. In October 2010 and
October 2011, we also acquired from Teekay Corporation the newbuilding shuttle tankers, the Amundsen Spirit and the Scott Spirit, both on charter to Statoil ASA (or Statoil). In May 2013, we acquired from Teekay Corporation the
Voyageur Spirit FPSO unit, along with its operations and charter contract.
These transactions were deemed to be business
acquisitions between entities under common control. Accordingly, we have accounted for these transactions in a manner similar to the pooling of interest method. Under this method of accounting, our financial statements, prior to the date the
interests in these vessels were actually acquired by us, are retroactively adjusted to include the results of these acquired vessels. The periods retroactively adjusted include all periods that we and the acquired vessels were both under common
control of Teekay Corporation and had begun operations. As a result, our applicable consolidated financial statements reflect these vessels and the results of operations of the vessels, referred to herein as the Dropdown Predecessor, as if we
had acquired them when each respective vessel began operations under the ownership of Teekay Corporation. These vessels began operations on April 1, 2008 (Rio das Ostras), December 15, 2009 (Falcon Spirit), July 30, 2010
(Amundsen Spirit), July 22, 2011 (Scott Spirit) and April 13, 2013 (Voyageur Spirit). Please read Item 18 Financial Statements: Note 3 Dropdown Predecessor.
5
On October 1, 2010, we agreed to acquire Teekay Corporations interests in two
entities, which each own a newbuilding shuttle tanker, the Nansen Spirit and the Peary Spirit. We acquired the Nansen Spirit on December 10, 2010 and the Peary Spirit on August 2, 2011. As these entities were
considered variable interest entities prior to their acquisition by us, our consolidated financial statements reflect the financial position, results of operations and cash flows of the Peary Spirit from October 1, 2010 to August 2,
2011, and the Nansen Spirit from October 1, 2010 to December 10, 2010. Subsequent to our acquisition of the entities which own these two vessels, these entities continue to be consolidated in our results as we hold voting control.
On December 15, 2014, we acquired the Petrojarl I FPSO unit from Teekay Corporation. This transaction was deemed to be a
transfer of net assets between entities under common control. Under this method, the carrying amount of net assets recognized in the balance sheets of each combining entity are carried forward to the balance sheet of the combined entity, and no
other assets or liabilities are recognized as a result of the combination. The excess of the proceeds paid by us over Teekay Corporations historical cost is accounted for as an equity distribution to Teekay Corporation.
Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (or GAAP).
6
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Year Ended December 31, |
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2010 |
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2011 |
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2012 |
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2013 |
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2014 |
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(in thousands of US dollars, except per unit, unit and fleet data) |
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Income Statement Data: |
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Revenues |
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816,056 |
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840,982 |
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901,227 |
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930,739 |
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1,019,539 |
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Income from vessel operations (1) |
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130,986 |
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111,134 |
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166,577 |
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103,418 |
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256,218 |
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Interest expense |
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(36,242 |
) |
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(35,929 |
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(47,508 |
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(62,855 |
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(88,381 |
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Interest income |
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842 |
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659 |
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1,027 |
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2,561 |
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719 |
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Realized and unrealized (loss) gain on derivative instruments |
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(55,666 |
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(159,744 |
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(26,349 |
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34,820 |
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(143,703 |
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Equity income |
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6,731 |
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10,341 |
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Foreign currency exchange gain (loss) (2) |
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941 |
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1,500 |
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(315 |
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(5,278 |
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(16,140 |
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Loss on bond repurchase |
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(1,759 |
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Other income - net |
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6,810 |
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3,683 |
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1,538 |
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1,144 |
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781 |
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Income tax recovery (expense) |
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9,718 |
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(6,679 |
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10,477 |
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(2,225 |
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(2,179 |
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Net income (loss) from continuing operations |
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57,389 |
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(85,376 |
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105,447 |
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76,557 |
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17,656 |
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Net income (loss) from discontinued operations |
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21,474 |
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(11,495 |
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17,568 |
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(4,642 |
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Net income (loss) |
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78,863 |
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(96,871 |
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123,015 |
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71,915 |
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17,656 |
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Non-controlling and other interests in net income (loss) from continuing operations |
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13,710 |
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7,601 |
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12,885 |
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62 |
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37,036 |
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Non-controlling and other interests in net income (loss) from discontinued operations |
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11,342 |
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4,174 |
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(1,772 |
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(452 |
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Limited partners interest: |
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Net income (loss) from continuing operations |
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43,679 |
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(92,977 |
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92,562 |
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76,495 |
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(19,380 |
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Net income (loss) from continuing operations per common unit (basic and diluted)
(3) |
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0.99 |
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(1.49 |
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1.26 |
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0.93 |
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(0.22 |
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Net income (loss) from discontinued operations |
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10,132 |
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(15,669 |
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19,340 |
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(4,190 |
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Net income (loss) from discontinued operations per common unit (basic and diluted)
(3) |
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0.23 |
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(0.25 |
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0.26 |
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(0.05 |
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Cash distributions declared per unit |
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1.88 |
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1.98 |
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2.04 |
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2.11 |
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2.15 |
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Balance Sheet Data (at end of year): |
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Cash and cash equivalents |
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166,483 |
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179,934 |
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206,339 |
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219,126 |
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252,138 |
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Vessels and equipment (4) |
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2,299,507 |
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2,585,586 |
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2,454,623 |
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3,089,582 |
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3,183,465 |
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Total assets |
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2,842,626 |
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3,144,729 |
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3,053,391 |
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3,806,086 |
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3,945,264 |
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Total debt |
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1,717,140 |
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2,029,076 |
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1,769,632 |
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2,368,976 |
|
|
|
2,436,023 |
|
Total equity |
|
|
728,449 |
|
|
|
484,733 |
|
|
|
705,229 |
|
|
|
821,341 |
|
|
|
802,853 |
|
|
|
|
|
|
|
Common units outstanding |
|
|
55,237,500 |
|
|
|
70,626,554 |
|
|
|
80,105,108 |
|
|
|
85,452,079 |
|
|
|
92,386,383 |
|
|
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues (5) |
|
|
710,685 |
|
|
|
743,398 |
|
|
|
790,744 |
|
|
|
827,096 |
|
|
|
906,999 |
|
EBITDA (6) |
|
|
252,639 |
|
|
|
128,303 |
|
|
|
330,815 |
|
|
|
338,082 |
|
|
|
306,050 |
|
Adjusted EBITDA (6) |
|
|
362,976 |
|
|
|
390,967 |
|
|
|
405,243 |
|
|
|
397,445 |
|
|
|
467,868 |
|
Expenditures for vessels and equipment |
|
|
40,645 |
|
|
|
148,480 |
|
|
|
87,408 |
|
|
|
455,578 |
|
|
|
172,169 |
|
|
|
|
|
|
|
Fleet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shuttle tankers (7) |
|
|
35.2 |
|
|
|
36.5 |
|
|
|
35.5 |
|
|
|
33.8 |
|
|
|
34.7 |
|
Average number of FPSO units (7) |
|
|
2.0 |
|
|
|
2.1 |
|
|
|
3.0 |
|
|
|
4.2 |
|
|
|
5.2 |
|
Average number of conventional tankers (7) |
|
|
11.0 |
|
|
|
10.6 |
|
|
|
6.0 |
|
|
|
5.2 |
|
|
|
4.0 |
|
Average number of FSO units (7) |
|
|
6.0 |
|
|
|
5.2 |
|
|
|
5.0 |
|
|
|
5.8 |
|
|
|
6.0 |
|
(1) |
Income from vessel operations includes, among other things, the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
(Write down) and gain (loss) on sale of vessels |
|
|
(9,441 |
) |
|
|
(37,039 |
) |
|
|
(24,542 |
) |
|
|
(76,782 |
) |
|
|
(1,638 |
) |
Restructuring (charge) recovery |
|
|
(119 |
) |
|
|
(3,924 |
) |
|
|
(1,115 |
) |
|
|
(2,607 |
) |
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,560 |
) |
|
|
(40,963 |
) |
|
|
(25,657 |
) |
|
|
(79,389 |
) |
|
|
(1,413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
Substantially all of these foreign currency exchange gains and losses were unrealized and not settled in cash. Under GAAP, all foreign
currency-denominated monetary assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable, advances from affiliates, deferred income taxes and long-term debt are revalued and reported based on the prevailing
exchange rate at the end of the period. Starting in November 2010, foreign currency exchange gains and losses include realized and unrealized gains and losses on the cross currency swaps. |
(3) |
Net income (loss) per unit is determined by dividing net income (loss), after deducting the amount of net income (loss) attributable to the
Dropdown Predecessor, the non-controlling interests, our general partners interest and the distributions on our Series A preferred units, by the weighted-average number of common units outstanding during the period. We allocate the limited
partners interest in net income (loss), including both distributed and undistributed net income (loss), between continuing operations and discontinued operations based on the proportion of net income (loss) from continuing and discontinuing
operations to total net income (loss). |
7
(4) |
Vessels and equipment consists of (a) vessels, at cost less accumulated depreciation and (b) advances on newbuilding contracts and
conversion costs. |
(5) |
Consistent with general practice in the shipping industry, we use net revenues (defined as revenues less voyage expenses, which
comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions) as a measure of equating revenues generated from voyage charters to
revenues generated from time charters, which assists us in making operating decisions about the deployment of vessels and their performance. Under time charters and bareboat charters, the charterer typically pays the voyage expenses, whereas under
voyage charter contracts and contracts of affreightment the shipowner typically pays the voyage expenses. Some voyage expenses are fixed, and the remainder can be estimated. If we, as the shipowner, pay the voyage expenses, we typically pass the
approximate amount of these expenses on to the customers by charging higher rates under the contract or billing the expenses to them. As a result, although revenues from different types of contracts may vary, the net revenues are
comparable across the different types of contracts. We principally use net revenues, a non-GAAP financial measure, because it provides more meaningful information to us than revenues, the most directly comparable GAAP financial measure. Net revenues
are also widely used by investors and analysts in the shipping industry for comparing financial performance between companies in the shipping industry to industry averages. The following table reconciles net revenues with revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
Revenues |
|
|
816,056 |
|
|
|
840,982 |
|
|
|
901,227 |
|
|
|
930,739 |
|
|
|
1,019,539 |
|
Voyage expenses |
|
|
(105,371 |
) |
|
|
(97,584 |
) |
|
|
(110,483 |
) |
|
|
(103,643 |
) |
|
|
(112,540 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
710,685 |
|
|
|
743,398 |
|
|
|
790,744 |
|
|
|
827,096 |
|
|
|
906,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
EBITDA and Adjusted EBITDA are used as supplemental financial measures by management and by external users of our financial statements, such as
investors, as discussed below. |
|
|
|
Financial and operating performance. EBITDA and Adjusted EBITDA assist our management and investors by increasing the comparability of the
fundamental performance of us from period to period and against the fundamental performance of other companies in our industry that provide EBITDA or Adjusted EBITDA-based information. This increased comparability is achieved by excluding the
potentially disparate effects between periods or companies of interest expense, taxes, depreciation or amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which
items may significantly affect net income (loss) between periods. We believe that including EBITDA and Adjusted EBITDA as a financial and operating measures benefits investors in (a) selecting between investing in us and other investment
alternatives and (b) monitoring our ongoing financial and operational strength and health in assessing whether to continue to hold our common and preferred units. |
|
|
|
Liquidity. EBITDA and Adjusted EBITDA allow us to assess the ability of assets to generate cash sufficient to service debt, make
distributions and undertake capital expenditures. By eliminating the cash flow effect resulting from the existing capitalization of us and other items such as dry-docking expenditures, working capital changes and foreign currency exchange gains and
losses (which may vary significantly from period to period), EBITDA and Adjusted EBITDA provide a consistent measure of our ability to generate cash over the long term. Management uses this information as a significant factor in determining
(a) our proper capitalization (including assessing how much debt to incur and whether changes to the capitalization should be made) and (b) whether to undertake material capital expenditures and how to finance them, all in light of
existing cash distribution commitments to common and preferred unitholders. Use of EBITDA and Adjusted EBITDA as liquidity measures also permits investors to assess our fundamental ability to generate cash sufficient to meet cash needs, including
distributions on our common and preferred units. |
Neither EBITDA nor Adjusted EBITDA, which are non-GAAP
measures, should be considered as an alternative to net income (loss), cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not
all, items that affect net income (loss) and these measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA as presented in this Annual Report may not be comparable to similarly titled measures of other companies.
8
The following table reconciles our historical consolidated EBITDA and Adjusted
EBITDA to net income (loss), and our historical consolidated Adjusted EBITDA to net operating cash flow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
|
(in thousands of US dollars) |
|
Reconciliation of EBITDA and Adjusted EBITDA to Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations |
|
|
57,389 |
|
|
|
(85,376 |
) |
|
|
105,447 |
|
|
|
76,557 |
|
|
|
17,656 |
|
Depreciation and amortization |
|
|
169,568 |
|
|
|
171,730 |
|
|
|
189,364 |
|
|
|
199,006 |
|
|
|
198,553 |
|
Interest expense, net of interest income |
|
|
35,400 |
|
|
|
35,270 |
|
|
|
46,481 |
|
|
|
60,294 |
|
|
|
87,662 |
|
Income tax (recovery) expense |
|
|
(9,718 |
) |
|
|
6,679 |
|
|
|
(10,477 |
) |
|
|
2,225 |
|
|
|
2,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
252,639 |
|
|
|
128,303 |
|
|
|
330,815 |
|
|
|
338,082 |
|
|
|
306,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write down and loss (gain) of sale of vessels |
|
|
9,441 |
|
|
|
37,039 |
|
|
|
24,542 |
|
|
|
76,782 |
|
|
|
1,638 |
|
Restructuring charge (recovery) |
|
|
119 |
|
|
|
3,924 |
|
|
|
1,115 |
|
|
|
2,607 |
|
|
|
(225 |
) |
Unrealized loss (gain) on derivative instruments |
|
|
5,618 |
|
|
|
107,860 |
|
|
|
(39,538 |
) |
|
|
(91,837 |
) |
|
|
180,156 |
|
Realized loss on interest rate swaps |
|
|
49,224 |
|
|
|
58,475 |
|
|
|
58,596 |
|
|
|
94,848 |
|
|
|
55,588 |
|
Foreign exchange loss (gain)(i) |
|
|
3,090 |
|
|
|
(3,081 |
) |
|
|
11,015 |
|
|
|
(33,318 |
) |
|
|
(77,813 |
) |
Loss on bond repurchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,759 |
|
|
|
|
|
Amortization of in-process revenue contracts |
|
|
(571 |
) |
|
|
(1,075 |
) |
|
|
(12,634 |
) |
|
|
(12,704 |
) |
|
|
(12,744 |
) |
Adjustments relating to equity income(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
15,218 |
|
Adjustments relating to discontinued operations(iii) |
|
|
43,416 |
|
|
|
59,522 |
|
|
|
31,332 |
|
|
|
15,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
362,976 |
|
|
|
390,967 |
|
|
|
405,243 |
|
|
|
397,445 |
|
|
|
467,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA to Net operating cash flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating cash flow |
|
|
286,585 |
|
|
|
254,162 |
|
|
|
267,494 |
|
|
|
255,387 |
|
|
|
160,186 |
|
Expenditures for dry docking |
|
|
23,637 |
|
|
|
26,407 |
|
|
|
19,122 |
|
|
|
19,332 |
|
|
|
36,221 |
|
Interest expense, net of interest income |
|
|
35,400 |
|
|
|
35,270 |
|
|
|
46,481 |
|
|
|
60,294 |
|
|
|
87,662 |
|
Current income tax expense (recovery) |
|
|
6,038 |
|
|
|
7,293 |
|
|
|
(1,669 |
) |
|
|
75 |
|
|
|
1,290 |
|
Realized loss on interest rate swaps |
|
|
49,224 |
|
|
|
58,475 |
|
|
|
58,596 |
|
|
|
94,848 |
|
|
|
55,588 |
|
Equity income, net of dividends received |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,731 |
|
|
|
(6,462 |
) |
Change in working capital |
|
|
(34,464 |
) |
|
|
11,296 |
|
|
|
17,447 |
|
|
|
(51,999 |
) |
|
|
111,484 |
|
Restructuring charge |
|
|
119 |
|
|
|
3,924 |
|
|
|
1,115 |
|
|
|
2,607 |
|
|
|
(225 |
) |
Loss on bond repurchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,759 |
|
|
|
|
|
Other, net |
|
|
(4,732 |
) |
|
|
(6,828 |
) |
|
|
(4,165 |
) |
|
|
2,244 |
|
|
|
6,906 |
|
Adjustments relating to equity income(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
15,218 |
|
Interest expense, net of interest income related to discontinued
operations(iii) |
|
|
1,169 |
|
|
|
968 |
|
|
|
822 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
362,976 |
|
|
|
390,967 |
|
|
|
405,243 |
|
|
|
397,445 |
|
|
|
467,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Foreign exchange loss (gain) excludes the unrealized loss of $94.0 million in 2014 (2013 loss of $38.6 million, 2012 gain of $10.7
million, 2011 loss of $1.6 million and 2010 gain of $4.0 million) on cross currency swaps, which is incorporated in unrealized loss (gain) on derivative instruments in the table. |
|
(ii) |
Adjustments relating to equity income from our equity accounted joint venture are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,239 |
|
|
|
8,085 |
|
Interest expense, net of interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,715 |
|
|
|
3,837 |
|
Income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184 |
) |
|
|
(33 |
) |
Unrealized (gain) loss on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,302 |
) |
|
|
410 |
|
Realized loss on interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,589 |
|
|
|
2,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments relating to equity income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
15,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iii) |
Adjustments relating to our discontinued operations are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
Net income (loss) from discontinued operations |
|
|
21,474 |
|
|
|
(11,495 |
) |
|
|
17,568 |
|
|
|
(4,642 |
) |
|
|
|
|
Depreciation and amortization |
|
|
20,773 |
|
|
|
15,980 |
|
|
|
5,267 |
|
|
|
1,236 |
|
|
|
|
|
Interest expense, net of interest income |
|
|
1,169 |
|
|
|
968 |
|
|
|
822 |
|
|
|
110 |
|
|
|
|
|
Write down and loss on sale of vessels |
|
|
|
|
|
|
54,069 |
|
|
|
7,675 |
|
|
|
18,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments relating to discontinued operations |
|
|
43,416 |
|
|
|
59,522 |
|
|
|
31,332 |
|
|
|
15,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
Average number of vessels consists of the average number of owned and chartered-in vessels that were in our possession during the period, including
the Dropdown Predecessor and those in discontinued operations. For 2014 and 2013, this includes two FPSO units and one FPSO unit, respectively, in equity accounted joint ventures at 100%. |
Risk Factors
Some of the following risks relate principally to the industry in which we operate and to our business in general. Other risks relate
principally to the securities market and to ownership of our common and preferred units. The occurrence of any of the events described in this section could materially and adversely affect our business, financial condition, operating results and
ability to pay distributions on, and the trading price of our common and preferred units.
9
Our cash flow depends substantially on the ability of our subsidiaries to make
distributions to us.
The source of our cash flow includes cash distributions from our subsidiaries. The amount of cash our
subsidiaries can distribute to us principally depends upon the amount of cash they generate from their operations, which may fluctuate from quarter to quarter based on, among other things:
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the rates they obtain from their charters and contracts of affreightment (whereby our subsidiaries carry an agreed quantity of cargo for a
customer over a specified trade route within a given period of time); |
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the price and level of production of, and demand for, crude oil, particularly the level of production at the offshore oil fields our
subsidiaries service under contracts of affreightment; |
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the operating performance of our FPSO units, whereby receipt of incentive-based revenue from our FPSO units is dependent upon the
fulfillment of the applicable performance criteria; |
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the level of their operating costs, such as the cost of crews and repairs and maintenance; |
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the number of off-hire days for their vessels and the timing of, and number of days required for, dry docking of vessels;
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the rates, if any, at which our subsidiaries may be able to redeploy shuttle tankers in the spot market as conventional oil tankers during
any periods of reduced or terminated oil production at fields serviced by contracts of affreightment; |
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delays in the delivery of any newbuildings or vessels undergoing conversion and the beginning of payments under charters relating to those
vessels; |
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prevailing global and regional economic and political conditions; |
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currency exchange rate fluctuations; and |
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the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of business.
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The actual amount of cash our subsidiaries have available for distribution also depends on other
factors such as:
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the level of their capital expenditures, including for maintaining vessels or converting existing vessels for other uses and complying with
regulations; |
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their debt service requirements and restrictions on distributions contained in their debt instruments; |
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fluctuations in their working capital needs; |
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their ability to make working capital borrowings; and |
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the amount of any cash reserves, including reserves for future maintenance capital expenditures, working capital and other matters,
established by the Board of Directors of our general partner at their discretion. |
The amount of cash our subsidiaries
generate from operations may differ materially from their profit or loss for the period, which will be affected by non-cash items and the timing of debt service payments. As a result of this and the other factors mentioned above, our subsidiaries
may make cash distributions during periods when they record losses and may not make cash distributions during periods when they record net income.
We may not have sufficient cash from operations to enable us to pay the current level of distribution on our units or to maintain or
increase distributions.
The source of our earnings and cash flow includes cash distributions from our subsidiaries. Therefore, the
amount of distributions we are able to make to our unitholders will fluctuate based on the level of distributions made to us by our subsidiaries. Our subsidiaries may not make quarterly distributions at a level that will permit us to maintain or
increase our quarterly distributions in the future. In addition, while we would expect to increase or decrease distributions to our common unitholders if our subsidiaries increase or decrease distributions to us, the timing and amount of any such
increased or decreased distributions will not necessarily be comparable to the timing and amount of the increase or decrease in distributions made by our subsidiaries to us.
Our ability to distribute to our unitholders any cash we may receive from our subsidiaries is or may be limited by a number of factors,
including, among others:
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interest expense and principal payments on any indebtedness we incur; |
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distributions on any preferred units we have issued or may issue; |
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changes in our cash flows from operations; |
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restrictions on distributions contained in any of our current or future debt agreements; |
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fees and expenses of us, our general partner, its affiliates or third parties we are required to reimburse or pay, including expenses we
incur as a result of being a public company; and |
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reserves our general partner believes are prudent for us to maintain for the proper conduct of our business or to provide for future
distributions. |
Many of these factors reduce the amount of cash we may otherwise have available for distribution. We may
not be able to pay distributions, and any distributions we do make may not be at or above our current level of quarterly distribution. The actual amount of cash that is available for distribution to our unitholders depends on several factors, many
of which are beyond the control of us or our general partner.
Our ability to grow and to meet our financial needs may be adversely
affected by our cash distribution policy.
Our cash distribution policy, which is consistent with our partnership agreement,
requires us to distribute all of our available cash (as defined in our partnership agreement) each quarter. Accordingly, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations.
In determining the amount of cash available for distribution, the Board of Directors of our general partner, in making the determination on
our behalf, approves the amount of cash reserves to set aside, including reserves for future maintenance capital expenditures, working capital and other matters. We also rely upon external financing sources, including commercial borrowings, to fund
our capital expenditures. Accordingly, to the extent we do not have sufficient cash reserves or are unable to obtain financing, our cash distribution policy may significantly impair our ability to meet our financial needs or to grow.
We must make substantial capital expenditures to maintain the operating capacity of our fleet, which reduces cash available for
distribution. In addition, each quarter our general partner is required to deduct estimated maintenance capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance capital
expenditures were deducted.
We must make substantial capital expenditures to maintain, over the long term, the operating capacity
of our fleet. We intend to continue to expand our fleet, which would increase the level of our maintenance capital expenditures. Maintenance capital expenditures include capital expenditures associated with dry docking a vessel, modifying an
existing vessel or acquiring a new vessel to the extent these expenditures are incurred to maintain the operating capacity of our fleet. These expenditures could increase as a result of changes in:
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the cost of labor and materials; |
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increases in fleet size or the cost of replacement vessels; |
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governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and
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In addition, actual maintenance capital expenditures vary significantly from quarter to quarter based on the number of vessels dry docked
during that quarter. Certain repair and maintenance items are more efficient to complete while a vessel is in dry dock. Consequently, maintenance capital expenditures will typically increase in periods when there is an increase in the number of
vessels dry docked. Significant maintenance capital expenditures reduce the amount of cash that we have available for distribution to our unitholders.
Our partnership agreement requires our general partner to deduct our estimated, rather than actual, maintenance capital expenditures from
operating surplus each quarter in an effort to reduce fluctuations in operating surplus (as defined in our partnership agreement). The amount of estimated maintenance capital expenditures deducted from operating surplus is subject to review and
change by the Conflicts Committee of our general partner at least once a year. In years when estimated maintenance capital expenditures are higher than actual maintenance capital expenditures, the amount of cash available for distribution to
unitholders is lower than if actual maintenance capital expenditures were deducted from operating surplus. If our general partner underestimates the appropriate level of estimated maintenance capital expenditures, we may have less cash available for
distribution in future periods when actual capital expenditures begin to exceed our previous estimates.
We require substantial
capital expenditures to expand the size of our fleet. We generally are required to make significant installment payments for acquisitions of newbuilding vessels or for the conversion of existing vessels prior to their delivery and generation of
revenue. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our ability to make cash distributions may be diminished or our financial leverage may increase or our unitholders may be
diluted.
Currently, the total delivered cost for an Aframax or Suezmax-size shuttle tanker is approximately $95 to
$115 million, the cost of an FSO unit is approximately $50 to $250 million and the cost of an FPSO unit is approximately $200 million to $3 billion, although actual costs vary significantly depending on the market price charged
by shipyards, the size and specifications of the vessel, governmental regulations and maritime self-regulatory organization standards.
We
and Teekay Corporation regularly evaluate and pursue opportunities to provide marine transportation services and offshore oil production and storage services for new or expanding offshore projects. Under an omnibus agreement that we have entered
into in connection with our initial public offering, Teekay Corporation is required to offer to us, within 365 days of their deliveries, certain shuttle tankers, FSO units and FPSO units Teekay Corporation owns or may acquire in the future,
including certain vessels of Teekay Corporations subsidiary Teekay Petrojarl AS (or Teekay Petrojarl), provided the vessels are servicing contracts with remaining durations of greater than three years. We may also acquire other vessels
that Teekay Corporation may offer us from time to time and we are pursuing direct acquisitions from third parties and new offshore projects. Neither we nor Teekay Corporation may be awarded charters or contracts of affreightment relating to any of
the projects we pursue or it pursues, and we may choose not to purchase the vessels Teekay Corporation is required to offer to us under the omnibus agreement. If we elect pursuant to the omnibus agreement to obtain Teekay Corporations
interests in any projects Teekay Corporation may be awarded, or if we bid on and are awarded contracts relating to any offshore project, we will need to incur significant capital expenditures to buy Teekay Corporations interest in these
offshore projects or to build the offshore units.
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We typically must pay between 10% to 20% of the purchase price of a shuttle tanker upon signing
the purchase contract, even though delivery of the completed vessel will not occur until much later (approximately two to three years from the time the order is placed). During the construction period, we generally are required to make installment
payments on newbuildings prior to their delivery, in addition to incurring financing, miscellaneous construction and project management costs. If we finance these acquisition costs by issuing debt or equity securities, we will increase the aggregate
amount of interest or cash required to maintain our current level of quarterly distributions to unitholders prior to generating cash from the operation of the newbuilding.
To fund the remaining portion of existing or future capital expenditures, we will be required to use cash from operations or incur borrowings
or raise capital through the sale of debt or additional equity securities. Use of cash from operations will reduce cash available for distribution to unitholders. Our ability to obtain bank financing or to access the capital markets for future
offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are
beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and on our ability to make cash distributions. Even if we are
successful in obtaining necessary funds, the terms of such financings could limit our ability to pay cash distributions to unitholders. In addition, incurring additional debt may significantly increase our interest expense and financial leverage,
and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain our current level of quarterly distributions to unitholders, which could have a material
adverse effect on our ability to make cash distributions.
Our substantial debt levels may limit our flexibility in obtaining
additional financing, refinancing credit facilities upon maturity, pursuing other business opportunities and paying distributions to you.
As at December 31, 2014, our total debt was approximately $2.4 billion and we had the ability to borrow an additional $99.6 million under
our revolving credit facilities, subject to limitations in the credit facilities. We plan to increase our total debt relating to our towage and FAU newbuildings and FPSO conversion projects. If we are awarded contracts for additional offshore
projects or otherwise acquire additional vessels or businesses, our consolidated debt may significantly increase. We may incur additional debt under these or future credit facilities. Our level of debt could have important consequences to us,
including:
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our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes, and our
ability to refinance our credit facilities may be impaired or such financing may not be available on favorable terms; |
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we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would
otherwise be available for operations, future business opportunities and distributions to unitholders; |
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our debt level may make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our industry or the
economy generally; and |
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our debt level may limit our flexibility in responding to changing business and economic conditions. |
Our ability to service our debt depends upon, among other things, our future financial and operating performance, which will be affected by
prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions
such as reducing dividends/cash distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy
protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.
Financing agreements containing
operating and financial restrictions may restrict our business and financing activities.
The operating and financial restrictions
and covenants in our financing arrangements and any future financing agreements for us could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, the
arrangements may restrict the ability of us and our subsidiaries to:
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incur or guarantee indebtedness; |
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change ownership or structure, including mergers, consolidations, liquidations and dissolutions; |
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make dividends or distributions; |
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make certain negative pledges and grant certain liens; |
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sell, transfer, assign or convey assets; |
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make certain investments; and |
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enter into a new line of business. |
Four of our revolving credit facilities are guaranteed by us and certain of our subsidiaries for all outstanding amounts and contain covenants
that require us to maintain the greater of a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months of maturity) of at least $75.0 million and 5.0% of the our total consolidated debt. Our
remaining two revolving credit facilities are guaranteed by Teekay Corporation and contain covenants that require Teekay Corporation to maintain the greater of a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines
with at least six months to maturity) of at least $50.0 million and 5.0% of Teekay Corporations total consolidated debt which has recourse to Teekay Corporation. The revolving credit facilities are collateralized by first-priority mortgages
granted on 21 of our vessels, together with other related security. The ability of Teekay Corporation or us to comply with covenants and restrictions contained in debt instruments may be affected by events beyond their or our control, including
prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, compliance with these covenants may be impaired. If restrictions, covenants,
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ratios or tests in the financing agreements are breached, a significant portion of the obligations may become immediately due and payable, and the lenders commitment to make further loans
may terminate. Neither Teekay Corporation nor we might have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, obligations under our credit facilities are secured by certain vessels, and if we are unable to
repay debt under the credit facilities, the lenders could seek to foreclose on those assets.
We have two revolving credit facilities that
require us to maintain a vessel value to drawn principal balance ratio of a minimum of 105% and 120%, respectively. As at December 31, 2014, these ratios were 151% and 137%, respectively. The vessel value used in this ratio is the appraised
value prepared by us based on second-hand sale and purchase market data. Changes in the conventional tanker market could negatively affect these ratios.
At December 31, 2014, we and Teekay Corporation were in compliance with all covenants in the credit facilities and long-term debt.
Restrictions in our debt agreements may prevent us or our subsidiaries from paying distributions.
The payment of principal and interest on our debt reduces cash available for distribution to us and on our units. In addition, our and our
subsidiaries financing agreements prohibit the payment of distributions upon the occurrence of the following events, among others:
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failure to pay any principal, interest, fees, expenses or other amounts when due; |
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failure to notify the lenders of any material oil spill or discharge of hazardous material, or of any action or claim related thereto;
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breach or lapse of any insurance with respect to vessels securing the facilities; |
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breach of certain financial covenants; |
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failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases;
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default under other indebtedness; |
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bankruptcy or insolvency events; |
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failure of any representation or warranty to be materially correct; |
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a change of control, as defined in the applicable agreement; and |
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a material adverse effect, as defined in the applicable agreement. |
We derive a substantial majority of our revenues from a limited number of customers, and the loss of any such customers could result in
a significant loss of revenues and cash flow.
We have derived, and we believe we will continue to derive, a substantial majority
of revenues and cash flow from a limited number of customers. Petrobras Transporte S.A. (or Petrobras), Statoil, E.ON Ruhrgas UK GP Limited (or E.ON) and Talisman Energy Inc. accounted for approximately 22%, 19%, 12% and 11%,
respectively, of our consolidated revenues from continuing operations during 2014. Petrobras, Statoil and Talisman Energy Inc. accounted for approximately 25%, 20%, and 13%, and 28%, 21%, and 13%, respectively, of consolidated revenues from
continuing operations during 2013 and 2012. No other customer accounted for 10% or more of revenues from continuing operations during any of these periods.
Petrobras, the Brazil state-controlled oil company, is alleged to have participated in a widespread corruption scandal involving improper
payments to Brazilian politicians and political parties. It is uncertain at this time how this may affect Petrobras, its performance of existing contracts with us or the development of new projects offshore of Brazil. Any adverse effect on
Petrobras ability to develop new offshore projects or to perform under existing contracts with us could harm us.
If we lose a key
customer, we may be unable to obtain replacement long-term charters or contracts of affreightment and may become subject, with respect to any shuttle tankers redeployed on conventional oil tanker trades, to the volatile spot market, which is highly
competitive and subject to significant price fluctuations. If a customer exercises its right under some charters to purchase the vessel, or terminate the charter, we may be unable to acquire an adequate replacement vessel or charter. Any replacement
newbuilding would not generate revenues during its construction and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter.
The loss of any of our significant customers or a reduction in revenues from them could have a material adverse effect on our business,
results of operations and financial condition and our ability to make cash distributions.
We depend on Teekay Corporation and
certain joint venture partners to assist us in operating our businesses and competing in our markets.
We and our operating
subsidiaries have entered into various services agreements with certain subsidiaries of Teekay Corporation pursuant to which those subsidiaries will provide to us all of our administrative services and to the operating subsidiaries substantially all
of their managerial, operational and administrative services (including vessel maintenance, crewing, crew training, purchasing, shipyard supervision, insurance and financial services) and other technical and advisory services. Our operational
success and ability to execute our growth strategy depends significantly upon the satisfactory performance of these services by the Teekay Corporation subsidiaries. Our business will be harmed if such subsidiaries fail to perform these services
satisfactorily or if they stop providing these services to us or our operating subsidiaries.
In addition, we have entered into, and
expect to enter into additional, joint venture arrangements with third parties to expand our fleet and access growth opportunities. In particular, we rely on the expertise and relationships that our joint ventures and joint venture partners may have
with current and potential customers to jointly pursue FPSO projects and provide assistance in competing in new markets.
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Our ability to compete for offshore oil marine transportation, processing, floating
accommodation, towage and storage projects and to enter into new charters or contracts of affreightment and expand our customer relationships depends largely on our ability to leverage our relationship with Teekay
Corporation or our joint venture partners and their reputation and relationships in the shipping industry. If Teekay Corporation or our joint
venture partners suffer material damage to its reputation or relationships, it may harm the ability of us or other subsidiaries to:
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renew existing charters and contracts of affreightment upon their expiration; |
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obtain new charters and contracts of affreightment; |
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successfully interact with shipyards during periods of shipyard construction constraints; |
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obtain financing on commercially acceptable terms; or |
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maintain satisfactory relationships with suppliers and other third parties. |
If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of
operations and financial condition and our ability to make cash distributions.
A continuation of the recent significant declines in
oil prices may adversely affect our growth prospects and results of operations.
Global crude oil prices have significantly
declined since mid-2014. A continuation of lower oil prices or a further decline in oil prices may adversely affect our business, results of operations and financial condition and our ability to make cash distributions, as a result of, among other
things:
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a reduction in exploration for or development of new offshore oil fields, or the delay or cancelation of existing offshore projects as energy
companies lower their capital expenditures budgets, which may reduce our growth opportunities; |
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a reduction in or termination of production of oil at certain fields we service, which may reduce our revenues under volume-based contracts of
affreightment, production-based components of our FPSO unit contracts or life-of-field contracts; |
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lower demand for vessels of the types we own and operate, which may reduce available charter rates and revenue to us upon redeployment of our
vessels following expiration or termination of existing contracts or upon the initial chartering of vessels; |
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customers potentially seeking to renegotiate or terminate existing vessel contracts, or failing to extend or renew contracts upon expiration;
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the inability or refusal of customers to make charter payments to us due to financial constraints or otherwise; or |
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declines in vessel values, which may result in losses to us upon vessel sales or impairment charges against our earnings. |
Our growth depends on continued growth in demand for offshore oil transportation, processing and storage services, offshore
accommodation, and towage services.
Our growth strategy focuses on expansion in the shuttle tanker, FSO, FPSO, FAU and towage
sectors. Accordingly, our growth depends on continued growth in world and regional demand for these offshore services, which could be negatively affected by a number of factors, such as:
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decreases in the actual or projected price of oil, which could lead to a reduction in or termination of production of oil at certain fields
we service or a reduction in exploration for or development of new offshore oil fields; |
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increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new,
pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those markets; |
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decreases in the consumption of oil due to increases in its price relative to other energy sources, other factors making consumption of oil
less attractive or energy conservation measures; |
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availability of new, alternative energy sources; and |
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negative global or regional economic or political conditions, particularly in oil consuming regions, which could reduce energy consumption
or its growth. Reduced demand for offshore marine transportation, processing, storage services, floating accommodation or towage services would have a material adverse effect on our future growth and could harm our business, results of operations
and financial condition. |
Because payments under our contracts of affreightment are based on the volume of oil
transported and a portion of the payments under our FPSO units operations contracts are based on the volume of oil produced, utilization of our shuttle tanker fleet, the success of our shuttle tanker business and the revenue from our FPSO units
depends upon continued production from existing or new oil fields, which is beyond our control and generally declines naturally over time.
A portion of our shuttle tankers operate under contracts of affreightment. Payments under these contracts of affreightment are based upon the
volume of oil transported, which depends upon the level of oil production at the fields we service under the contracts. Payments made to us under FPSO operations contracts are partially based on an incentive component, which is determined by the
volume of oil produced. Oil production levels are affected by several factors, all of which are beyond our control, including: geologic factors, including general declines in production that occur naturally over time; mechanical failure or operator
error; the rate of technical developments in extracting oil and related infrastructure and implementation costs; the availability of necessary drilling and other governmental permits; the availability of qualified personnel and equipment; strikes,
employee lockouts or other labor unrest; and regulatory changes. In addition, the volume of oil produced may be adversely affected by extended repairs to oil field installations or suspensions of field operations as a result of oil spills or
otherwise.
The rate of oil production at fields we service may decline from existing levels. If such a reduction occurs, the spot market
rates in the conventional oil tanker trades at which we may be able to redeploy the affected shuttle tankers may be lower than the rates previously earned by the vessels under the contracts of affreightment. We may receive a reduced production
incentive payment or no production incentive payment under the Petrojarl Varg FPSO operations contract depending on production levels. We also have an annual adjustment (within a specified range) to the daily base hire rate under the
Voyageur Spirit FPSO operations contract based on our operating performance. Talisman Energy Norge AS (or Talisman Energy) may terminate the Petrojarl Varg operations contract if the Varg field does not yield sufficient
revenues. E.ON may terminate the Voyageur Spirit operations contract if the Huntington field does not yield sufficient revenues, although there is a significant termination fee. Low spot market rates for the shuttle tankers or any idle time
prior to the commencement of a new contract or our inability to redeploy any of our FPSO units at an acceptable rate may have an adverse effect on our business and operating results.
The duration of many of our shuttle tanker, FSO and FPSO contracts is the life of the relevant oil field or is subject to extension by
the field operator or vessel charterer. If the oil field no longer produces oil or is abandoned or the contract term is not extended, we will no longer generate revenue under the related contract and will need to seek to redeploy affected vessels.
Many of our shuttle tanker contracts have a life-of-field duration, which means that the contract continues until oil
production at the field ceases. If production terminates for any reason, we no longer will generate revenue under the related contract. Other shuttle tanker, FSO and FPSO contracts under which our vessels operate are subject to extensions beyond
their initial term. The likelihood of these contracts being extended may be negatively affected by reductions in oil field reserves, low oil prices generally or other factors. If we are unable to promptly redeploy any affected vessels at rates at
least equal to those under the contracts, if at all, our operating results will be harmed. Any potential redeployment may not be under long-term contracts, which may affect the stability of our cash flow and our ability to make cash distributions.
FPSO units, in particular, are specialized vessels that have very limited alternative uses and high fixed costs. In addition, FPSO units typically require substantial capital investments prior to being redeployed to a new field and production
service agreement. Any idle time prior to the commencement of a new contract or our inability to redeploy the vessels at acceptable rates may have an adverse effect on our business and operating results.
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Future adverse economic conditions, including disruptions in the global credit markets,
could adversely affect our results of operations.
In recent years, the global economy experienced an economic downturn and crisis
in the global financial markets that produced illiquidity in the capital markets, market volatility, heightened exposure to interest rate and credit risks and reduced access to capital markets. If there is economic instability in the future, we may
face restricted access to the capital markets or secured debt lenders, such as our revolving credit facilities. The decreased access to such resources could have a material adverse effect on our business, financial condition and results of
operations.
Future adverse economic conditions or other developments may affect our customers ability to charter our vessels
and pay for our services and may adversely affect our business and results of operations.
Future adverse
economic conditions or other developments relating directly to our customers may lead to a decline in our customers operations or ability to pay for our services, which could result in decreased demand for our vessels and services. Our
customers inability to pay for any reason could also result in their default on our current contracts and charters. The decline in the amount of services requested by our customers or their default on our contracts with them could have a
material adverse effect on our business, financial condition and results of operations.
The results of our shuttle tanker
operations in the North Sea are subject to seasonal fluctuations.
Due to harsh winter weather conditions, oil field operators in
the North Sea typically schedule oil platform and other infrastructure repairs and maintenance during the summer months. Because the North Sea is one of our primary existing offshore oil markets, this seasonal repair and maintenance activity
contributes to quarter-to-quarter volatility in our results of operations, as oil production typically is lower in the second and third quarters in this region compared with production in the first and fourth quarters. Because a portion of our North
Sea shuttle tankers operate under contracts of affreightment, under which revenue is based on the volume of oil transported, the results of these shuttle tanker operations in the North Sea under these contracts generally reflect this seasonal
production pattern. When we redeploy affected shuttle tankers as conventional oil tankers while platform maintenance and repairs are conducted, the overall financial results for the North Sea shuttle tanker operations may be negatively affected as
the rates in the conventional oil tanker markets at times may be lower than contract of affreightment rates. In addition, we seek to coordinate some of the general dry-docking schedule of our fleet with this seasonality, which may result in lower
revenues and increased dry-docking expenses during the summer months.
Our growth depends on our ability to expand relationships
with existing customers and obtain new customers, for which we will face substantial competition.
One of our principal objectives
is to enter into additional long-term, fixed-rate time charters and contracts of affreightment. The process of obtaining new long-term time charters and contracts of affreightment is highly competitive and generally involves an intensive screening
process and competitive bids, and often extends for several months. Shuttle tanker, FSO, FPSO, towage vessel and FAU contracts are awarded based upon a variety of factors relating to the vessel operator, including:
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industry relationships and reputation for customer service and safety; |
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experience and quality of ship operations; |
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quality, experience and technical capability of the crew; |
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relationships with shipyards and the ability to get suitable berths; |
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construction management experience, including the ability to obtain on-time delivery of new vessels according to customer specifications;
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willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and
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competitiveness of the bid in terms of overall price. |
We expect substantial competition for providing services for potential shuttle tanker, FSO, FPSO, towage vessel and FAU projects from a number
of experienced companies, including state-sponsored entities. Our Aframax conventional tanker business also faces substantial competition from major oil companies, independent owners and operators and other sized tankers. Many of our competitors,
including Teekay Corporation, which also may compete with us, have significantly greater financial resources than us. We anticipate that an increasing number of marine transportation companies including many with strong reputations and
extensive resources and experience will enter the FSO and FPSO sectors. This increased competition may cause greater price competition for charters. As a result of these factors, we may be unable to expand our relationships with existing
customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.
Delays in the operational start-up of FPSO units, deliveries of newbuilding vessels or of conversions of existing vessels could harm our
operating results.
The operational start-up of FPSO units or the deliveries of any newbuildings or of vessel conversions we may
order could be delayed, which would delay our receipt of revenues under the charters or other contracts related to the units or vessels. In addition, under some charters we may enter into, if the operational start-up or our delivery of the
newbuilding or converted vessel to our customer is delayed, we may be required to pay liquidated damages during the delay. For prolonged delays, the customer may terminate the charter and, in addition to the resulting loss of revenues, we may be
responsible for substantial liquidated damages.
The operational start-up of FPSO units or completion and deliveries of newbuildings or of
vessel conversions could be delayed because of:
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quality or engineering problems, the risk of which may be increased with FPSO units due to their technical complexity; |
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changes in governmental regulations or maritime self-regulatory organization standards; |
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work stoppages or other labor disturbances at the shipyard; |
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bankruptcy or other financial crisis of the shipbuilder; |
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a backlog of orders at the shipyard; |
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political or economic disturbances; |
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weather interference or catastrophic event, such as a major earthquake or fire; |
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requests for changes to the original vessel specifications; |
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shortages of or delays in the receipt of necessary construction materials, such as steel; |
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inability to finance the construction or conversion of the vessels; or |
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inability to obtain requisite permits or approvals. |
If the operational start-up of an FPSO unit or the delivery of a vessel or of a conversion is materially delayed, it could adversely affect
our results of operations and financial condition and our ability to make cash distributions.
Charter rates for towage vessels and
conventional oil tankers may fluctuate substantially over time and may be lower when we are attempting to charter our towage vessels and recharter our conventional oil tankers, which could adversely affect operating results. Any changes in charter
rates for shuttle tankers, FSO or FPSO units and FAUs could also adversely affect redeployment opportunities for those vessels.
Our ability to charter our towage vessels will depend, among other things, the state of the towage market. Towage contracts are highly
competitive and are based on the level of projects undertaken by the customer base. Our ability to recharter our conventional oil tankers following expiration of existing time-charter contracts and the rates payable upon any renewal or replacement
charters will depend upon, among other things, the state of the conventional tanker market. Conventional oil tanker trades are highly competitive and have experienced significant fluctuations in charter rates based on, among other things, oil and
vessel demand. For example, an oversupply of conventional oil tankers can significantly reduce their charter rates. There also exists some volatility in charter rates for shuttle tankers, FSO and FPSO units and FAUs, which could affect our ability
to charter or recharter these vessels at acceptable rules, if at all.
Over time, the value of our vessels may decline, which could
adversely affect our operating results.
Vessel values for shuttle tankers, conventional oil tankers, FSO, and FPSO units, towage
vessels and FAUs can fluctuate substantially over time due to a number of different factors, including:
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prevailing economic conditions in oil and energy markets; |
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a substantial or extended decline in demand for oil; |
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increases in the supply of vessel capacity; |
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competition from more technologically advanced vessels; |
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the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable
environmental or other regulations or standards, or otherwise; and |
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a decrease in oil reserves in the fields and other fields in which our FPSO units might otherwise be deployed. |
Vessel values may decline from existing levels. If operation of a vessel is not profitable, or if we cannot re-deploy a vessel at attractive
rates upon termination of its contract, rather than continue to incur costs to maintain and finance the vessel, we may seek to dispose of it. Our inability to dispose of the vessel at a reasonable value could result in a loss on its sale and
adversely affect our results of operations and financial condition. Further, if we determine at any time that a vessels future useful life and earnings require us to impair its value on our financial statements, we may need to recognize a
significant charge against our earnings.
Climate change and greenhouse gas restrictions may adversely impact our operations and
markets.
Due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of,
regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. Compliance
with changes in laws, regulations and obligations relating to climate change could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our
greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.
Adverse effects upon the oil industry relating to climate change may also adversely affect demand for our services. Although we do not expect
that demand for oil will lessen dramatically over the short term, in the long term climate change may reduce the demand for oil or increased regulation of greenhouse gases may create greater incentives for use of alternative energy sources. Any
long-term material adverse effect on the oil industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.
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We may be unable to make or realize expected benefits from acquisitions, and implementing
our growth strategy through acquisitions may harm our business, financial condition and operating results.
Our growth strategy
includes selectively acquiring existing shuttle tankers, FSO and FPSO units, towage vessels and FAUs, businesses that own or operate these types of vessels or businesses that provide services to the offshore oil and gas industry. Historically, there
have been very few purchases of existing vessels and businesses in the FSO and FPSO segments. Factors that may contribute to a limited number of acquisition opportunities for FSO units and FPSO units in the near term include the relatively small
number of independent FSO and FPSO fleet owners. In addition, competition from other companies, many of which have significantly greater financial resources than do we or Teekay Corporation, could reduce our acquisition opportunities or cause us to
pay higher prices. We entered the long-haul ocean towage and offshore installation services business and the floating accommodation service business through our acquisitions of ALP Maritime Services B.V. (or ALP) and Logitel Offshore Holding
AS (or Logitel) in 2014.
Any acquisition of a vessel or business may not be profitable at or after the time of acquisition and may
not generate cash flow sufficient to justify the investment. In addition, our acquisition growth strategy exposes us to risks that may harm our business, financial condition and operating results, including risks that we may:
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fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements; |
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be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet;
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decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions; |
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significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions; |
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incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or |
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incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
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Unlike newbuildings, existing vessels typically do not carry warranties as to their condition. While we generally
inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessels condition as we would possess if it had been built for us and operated by us during its life. Repairs and
maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flow and reduce our liquidity.
We may not be successful in our entry into the long-haul ocean towage and offshore installation market or the floating accommodation market.
These markets have competitive dynamics that may differ from markets in which we already participate, and we may be unsuccessful in securing contracts for the FAUs and towage vessels which are currently unchartered, gaining acceptance in these
markets from customers or competing against other companies with more experience or larger fleets or resources in these markets. We also may not be successful in employing the HiLoad DP unit on contracts sufficient to recover our investment
in the unit.
Our substantial operations outside the United States expose us to political, governmental and economic instability,
which could harm our operations.
Because our operations are primarily conducted outside of the United States, they may be affected
by economic, political and governmental conditions in the countries where we engage in business, including Brazil, or where our vessels are registered. Any disruption caused by these factors could harm our business, including by reducing the levels
of oil exploration, development and production activities in these areas. We derive some of our revenues from shipping oil from politically unstable regions, in particular, our operations in South America. Conflicts in these regions have included
attacks on ships and other efforts to disrupt shipping. Hostilities or other political instability in regions where we operate or where we may operate could have a material adverse effect on the growth of our business, results of operations and
financial condition and ability to make cash distributions. In addition, tariffs, trade embargoes and other economic sanctions by the United States or other countries against countries in Southeast Asia or elsewhere as a result of terrorist attacks,
hostilities or otherwise may limit trading activities with those countries, which could also harm our business and ability to make cash distributions. Finally, a government could requisition one or more of our vessels, which is most likely during
war or national emergency. Any such requisition would cause a loss of the vessel and could harm our cash flow and financial results.
Marine transportation is inherently risky, particularly in the extreme conditions in which many of our vessels operate. An incident
involving significant loss of product or environmental contamination by any of our vessels could harm our reputation and business.
Vessels and their cargoes and oil production facilities we service are at risk of being damaged or lost because of events such as:
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grounding, capsizing, fire, explosions and collisions; |
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A portion of our shuttle tanker fleet and the Petrojarl Varg and Voyageur Spirit
FPSO units operate in the North Sea. Harsh weather conditions in this region and other regions in which our vessels operate may increase the risk of collisions, oil spills, or mechanical failures.
An accident involving any of our vessels could result in any of the following:
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death or injury to persons, loss of property or damage to the environment and natural resources; |
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delays in the delivery of cargo; |
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loss of revenues from charters or contracts of affreightment; |
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liabilities or costs to recover any spilled oil or other petroleum products and to restore the eco-system affected by the spill;
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governmental fines, penalties or restrictions on conducting business; |
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higher insurance rates; and |
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damage to our reputation and customer relationships generally. |
Any of these results could have a material adverse effect on our business, financial condition and operating results. In addition, any damage
to, or environmental contamination involving, oil production facilities serviced could suspend that service and result in loss of revenues.
Our insurance may not be sufficient to cover losses that may occur to our property or as a result of our operations.
The operation of shuttle tankers, conventional oil tankers, FSO and FPSO units, towage vessels and FAUs, is inherently risky. All risks may not
be adequately insured against, and any particular claim may not be paid by insurance. In addition, substantially all of our vessels are not insured against loss of revenues resulting from vessel off-hire time, based on the cost of this insurance
compared to our off-hire experience. Any significant off-hire time of our vessels could harm our business, operating results and financial condition. Any claims relating to our operations covered by insurance would be subject to deductibles, and
since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. Certain insurance coverage is maintained through mutual protection and indemnity associations, and as a member of such
associations we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves.
We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent
environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A catastrophic oil spill or marine disaster could
exceed the insurance coverage, which could harm our business, financial condition and operating results. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers
as a result of certain actions, such as vessels failing to maintain certification with applicable maritime self-regulatory organizations.
Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult to obtain. In
addition, the insurance that may be available may be significantly more expensive than existing coverage.
We may experience
operational problems with vessels that reduce revenue and increase costs.
Shuttle tankers, FSO and FPSO units, towage vessels and
FAUs are complex and their operations are technically challenging. Marine transportation and oil production operations are subject to mechanical risks and problems. Operational problems may lead to loss of revenue or higher than anticipated
operating expenses or require additional capital expenditures. Any of these results could harm our business, financial condition and operating results.
Terrorist attacks, piracy, increased hostilities or war could lead to further economic instability, increased costs and disruption of
business.
Terrorist attacks, piracy and the current conflicts in the Middle East, and other current and future conflicts, may
adversely affect our business, operating results, financial condition, and ability to raise capital and future growth. Continuing hostilities in the Middle East may lead to additional armed conflicts or to further acts of terrorism and civil
disturbance in the United States or elsewhere, which may contribute further to economic instability and disruption of oil production and distribution, which could result in reduced demand for our services.
In addition, oil facilities, shipyards, vessels, pipelines, oil fields or other infrastructure could be targets of future terrorist attacks
and our vessels could be targets of pirates or hijackers. Any such attacks could lead to, among other things, bodily injury or loss of life, vessel or other property damage, increased vessel operational costs, including insurance costs, and the
inability to transport oil to or from certain locations. Terrorist attacks, war, piracy, hijacking or other events beyond our control that adversely affect the distribution, production or transportation of oil to be shipped by us could entitle
customers to terminate the charters and impact the use of shuttle tankers under contracts of affreightment, which would harm our cash flow and business.
Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and the Indian Ocean
off the coast of Somalia. While there continue to be significant numbers of piracy incidents in the Gulf of Aden and Indian Ocean, recently there have been increases in the frequency and severity of piracy incidents off the coast of West Africa. If
these piracy attacks result in regions in which our vessels are deployed being named on the Joint War Committee Listed Areas, war risk insurance premiums payable for such coverage can increase significantly and such insurance coverage may be more
difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ on-board security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which
could have a material adverse effect on us. In addition, hijacking as a result of an act of piracy against our vessels, or an increase in cost or unavailability of insurance for our vessels, could have a material adverse impact on our business,
financial condition and results of operations.
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The offshore shipping and storage industry is subject to substantial environmental and
other regulations, which may significantly limit operations or increase expenses.
Our operations are affected by extensive and
changing international, national and local environmental protection laws, regulations, treaties and conventions in force in international waters, the jurisdictional waters of the countries in which our vessels operate, as well as the countries of
our vessels registration, including those governing oil spills, discharges to air and water, and the handling and disposal of hazardous substances and wastes. Many of these requirements are designed to reduce the risk of oil spills and other
pollution. In addition, we believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will lead to additional regulatory requirements, including enhanced risk assessment and security
requirements and greater inspection and safety requirements on vessels. We expect to incur substantial expenses in complying with these laws and regulations, including expenses for vessel modifications and changes in operating procedures.
These requirements can affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications or
operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in, certain ports. Under local, national
and foreign laws, as well as international treaties and conventions, we could incur material liabilities, including cleanup obligations, in the event that there is a release of petroleum or hazardous substances from our vessels or otherwise in
connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of or exposure to hazardous materials associated with our operations. In addition, failure to comply with applicable
laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations, including, in certain instances, seizure or detention of our vessels. Please see Item 4. Information
on the Partnership B. Business Overview Regulations for important information on these regulations, including potential impacts on us.
Exposure to currency exchange rate fluctuations results in fluctuations in cash flows and operating results.
We currently are paid partly in Norwegian Kroner under some of our time charters and contracts of affreightment. In addition, we and our
operating subsidiaries have entered into services agreements with certain subsidiaries of Teekay Corporation pursuant to which those subsidiaries provide to us administrative services and to our operating subsidiaries managerial, operational and
administrative services. Under the services agreements, the applicable subsidiaries of Teekay Corporation are paid in U.S. Dollars for reasonable direct and indirect expenses incurred in providing the services. A substantial majority of those
expenses are in Norwegian Kroner. Fluctuating exchange rates may result in increased payments by us under the services agreements if the strength of the U.S. Dollar declines relative to the Norwegian Kroner. We have entered into foreign
currency forward contracts to economically hedge portions of our forecasted expenditures denominated in Norwegian Kroner. We also incur interest expense on our Norwegian Kroner-denominated bonds. We have entered into cross-currency swaps to
economically hedge the foreign exchange risk on the principal and interest payments on our Norwegian Kroner bonds.
Many seafaring
employees are covered by collective bargaining agreements and the failure to renew those agreements or any future labor agreements may disrupt operations and adversely affect our cash flows.
A significant portion of Teekay Corporations seafarers that crew certain of our vessels and Norwegian-based onshore operational staff
that provide services to us are employed under collective bargaining agreements. Teekay Corporation may become subject to additional labor agreements in the future. Teekay Corporation may suffer labor disruptions if relationships deteriorate with
the seafarers or the unions that represent them. The collective bargaining agreements may not prevent labor disruptions, particularly when the agreements are being renegotiated. Salaries are typically renegotiated annually or bi-annually for
seafarers and annually for onshore operational staff and higher compensation levels will increase our costs of operations. Although these negotiations have not caused labor disruptions in the past, any future labor disruptions could harm our
operations and could have a material adverse effect on our business, results of operations and financial condition and ability to make cash distributions.
Teekay Corporation may be unable to attract and retain qualified, skilled employees or crew necessary to operate our business, or may
have to pay substantially increased costs for its employees and crew.
Our success depends in large part on Teekay
Corporations ability to attract and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract and
retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase our rates to compensate for any crew cost increases, our financial condition and results of operations may be adversely affected.
Any inability we experience in the future to hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.
Teekay Corporation and its affiliates may engage in competition with us.
Teekay Corporation and its affiliates may engage in competition with us. Pursuant to an omnibus agreement we entered into in connection with
our initial public offering, Teekay Corporation, Teekay LNG Partners L.P. (NYSE: TGP) and their respective controlled affiliates (other than us and our subsidiaries) generally have agreed not to engage in, acquire or invest in any business that
owns, operates or charters (a) dynamically-positioned shuttle tankers (other than those operating in the conventional oil tanker trade under contracts with a remaining duration of less than three years, excluding extension options),
(b) FSO units or (c) FPSO units (collectively Offshore Vessels) without the consent of our general partner. The omnibus agreement, however, allows Teekay Corporation, Teekay LNG Partners L.P. and any of such controlled
affiliates to:
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own, operate and charter Offshore Vessels if the remaining duration of the time charter or contract of affreightment for the vessel, excluding any
extension options, is less than three years; |
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own, operate and charter Offshore Vessels and related time charters or contracts of affreightment acquired as part of a business or package of
assets and operating or chartering those vessels if a majority of the value of the total assets or business acquired is not attributable to the Offshore Vessels and related contracts, as determined in good faith by Teekay Corporations Board of
Directors or the conflicts committee of the Board of Directors of Teekay LNG Partners L.P.s general partner, as applicable; however, if at any time Teekay Corporation or |
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Teekay LNG Partners L.P. completes such an acquisition, it must, within 365 days of the closing of the transaction, offer to sell the Offshore Vessels and related contracts to us for their
fair market value plus any additional tax or other similar costs to Teekay Corporation or Teekay LNG Partners L.P. that would be required to transfer the vessels and contracts to us separately from the acquired business or package of assets; or
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own, operate and charter Offshore Vessels and related time charters and contracts of affreightment that relate to tenders, bids or awards
for an offshore project that Teekay Corporation or any of its subsidiaries submits or receives; however, at least 365 days after the delivery date of any such Offshore Vessel, Teekay Corporation must offer to sell the vessel and related time
charter or contract of affreightment to us, with the vessel valued (a) for newbuildings originally contracted by Teekay Corporation, at its fully-built-up cost (which represents the aggregate expenditures incurred (or to be incurred
prior to delivery to us) by Teekay Corporation to acquire, construct and/or convert and bring such Offshore Vessel to the condition and location necessary for our intended use, plus project development costs for completed projects and projects that
were not completed but, if completed, would have been subject to an offer to us) and (b) for any other vessels, Teekay Corporations cost to acquire a newbuilding from a third party or the fair market value of an existing vessel, as
applicable, plus in each case any subsequent expenditures that would be included in the fully-built-up cost of converting the vessel prior to delivery to us. |
If we decline the offer to purchase the Offshore Vessels and time charters described above, Teekay Corporation or Teekay LNG Partners L.P., as
applicable, may own and operate the Offshore Vessels, but may not expand that portion of its business.
In addition, pursuant to the
omnibus agreement, Teekay Corporation, Teekay LNG Partners L.P. and any of their respective controlled affiliates (other than us and our subsidiaries) may:
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acquire, operate and charter Offshore Vessels and related time charters and contracts of affreightment if our general partner has previously
advised Teekay Corporation or Teekay LNG Partners L.P. that our general partners Board of Directors has elected, with the approval of its Conflicts Committee, not to cause us or our controlled affiliates to acquire or operate the vessels and
related time charters and contracts of affreightment; |
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acquire up to a 9.9% equity ownership, voting or profit participation interest in any publicly-traded company that engages in, acquires or
invests in any business that owns or operates or charters Offshore Vessels and related time charters and contracts of affreightment; |
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provide ship management services relating to owning, operating or chartering Offshore Vessels and related time charters and contracts of
affreightment; or |
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own a limited partner interest in Teekay Offshore Operating L.P. (or OPCO) or own shares of Teekay Petrojarl. |
If there is a change of control of Teekay Corporation or of the general partner of Teekay LNG Partners L.P., the non-competition provisions of
the omnibus agreement may terminate, which termination could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.
Our general partner and its other affiliates own a controlling interest in us and have conflicts of interest and limited fiduciary
duties, which may permit them to favor their own interests to those of unitholders.
As at December 31, 2014, Teekay
Corporation indirectly owns the 2.0% general partner interest and a 25.8% limited partner interest in us and controls our general partner, which controls us. Although our general partner has a fiduciary duty to manage us in a manner beneficial to us
and our unitholders, the directors and officers of our general partner have a fiduciary duty to manage our general partner in a manner beneficial to Teekay Corporation. Furthermore, certain directors and officers of our general partner are directors
or officers of affiliates of our general partner. Conflicts of interest may arise between Teekay Corporation and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. As a result of these
conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:
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neither our partnership agreement nor any other agreement requires Teekay Corporation or its affiliates (other than our general partner) to
pursue a business strategy that favors us or utilizes our assets, and Teekay Corporations officers and directors have a fiduciary duty to make decisions in the best interests of the stockholders of Teekay Corporation, which may be contrary to
our interests; |
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the Chief Executive Officer, the Chief Financial Officer and one of the directors of our general partner also serve as officers, management
or directors of Teekay Corporation and, for two of such individuals, the general partner of Teekay LNG Partners L.P.; |
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our general partner is allowed to take into account the interests of parties other than us, such as Teekay Corporation, in resolving
conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders; |
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our general partner has limited its liability and reduced its fiduciary duties under the laws of the Marshall Islands, while also
restricting the remedies available to our unitholders and unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner, all as set forth in our partnership
agreement; |
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our general partner determines the amount and timing of our asset purchases and sales, capital expenditures, borrowings, issuances of
additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders; |
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in some instances, our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the
purpose or effect of the borrowing is to make incentive distributions (in each case to affiliates of Teekay Corporation); |
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our general partner determines which costs incurred by it and its affiliates are reimbursable by us; |
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our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us
on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf; |
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our general partner intends to limit its liability regarding our contractual and other obligations; |
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our general partner may exercise its right to call and purchase common units if it and its affiliates own more than 80.0% of our common
units; |
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our general partner controls the enforcement of obligations owed to us by it and its affiliates; and |
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our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
The fiduciary duties of the officers and directors of our general partner may conflict with those of the officers and directors of
Teekay Corporation.
Our general partners officers and directors have fiduciary duties to manage our business in a manner
beneficial to us and our partners. However, the Chief Executive Officer, the Chief Financial Officer and all of the non-independent directors of our general partner also serve as officers, management or directors of Teekay Corporation. Consequently,
these officers and directors may encounter situations in which their fiduciary obligations to Teekay Corporation, on one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in the best interest of us
or our unitholders.
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Tax Risks
In addition to the following risk factors, you should read Item 4E Taxation of the Partnership, Item 10 Additional
Information Material U.S. Federal Income Tax Considerations and Item 10 Additional Information Non-United States Tax Consequences for a more complete discussion of the expected material U.S. federal and non-U.S. income tax
considerations relating to us and the ownership and disposition of our Common Units.
U.S. tax authorities could treat us as a
passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. holders.
A
non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a passive foreign investment company (or PFIC), for such purposes in any taxable year for which either (a) at least 75% of its
gross income consists of passive income, or (b) at least 50% of the average value of the entitys assets is attributable to assets that produce or are held for the production of passive income. For purposes of these
tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties (other than rents and royalties that are received from unrelated parties in connection with the active
conduct of a trade or business). By contrast, income derived from the performance of services does not constitute passive income.
There are legal uncertainties involved in determining whether the income derived from our time-chartering activities constitutes rental income
or income derived from the performance of services, including the decision in Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), which held that income derived from certain time-chartering activities should be treated as rental
income rather than services income for purposes of a foreign sales corporation provision of the U.S. Internal Revenue Code of 1986, as amended (or the Code). However, the Internal Revenue Service (or IRS) stated in an Action on
Decision (AOD 2010-01) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated that the time charters at issue in
Tidewater would be treated as producing services income for PFIC purposes. The IRSs statement with respect to Tidewater cannot be relied upon or otherwise cited as precedent by taxpayers. Consequently, in the absence of any
binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court would not follow the Tidewater decision in interpreting the PFIC provisions of the Code.
Nevertheless, based on the current composition of our assets and operations (and those of our subsidiaries), we intend to take the position that we are not now and have never been a PFIC. No assurance can be given, however, that this position would
be sustained by a court if contested by the IRS, or that we would not constitute a PFIC for any future taxable year if there were to be changes in our assets, income or operations.
If the IRS were to determine that we are or have been a PFIC for any taxable year during which a U.S. Holder (as defined below under
Item 10 Additional Information Material U.S. Federal Income Tax Considerations) held units, such U.S. Holder would face adverse tax consequences. For a more comprehensive discussion regarding our status as a PFIC and the
tax consequences to U.S. Holders if we are treated as a PFIC, please read Item 10 Additional Information: Material U.S. Federal Income Tax Considerations United States Federal Income Taxation of U.S. Holders Consequences of
Possible PFIC Classification.
We may be subject to taxes, which reduces our Cash Available for Distribution to partners.
We or our subsidiaries are subject to tax in certain jurisdictions in which we or our subsidiaries are organized, own assets or have
operations, which reduces the amount of our cash available for distribution. In computing our tax obligations in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free
from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions, the applicable authorities will agree with our positions. A successful challenge by a tax authority could
result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. For example, authorities in Norway have asserted certain positions that may result in additional tax imposed on our subsidiaries
in Norway. We have established reserves in our financial statements that we believe are adequate to cover our liability for any such additional taxes. We cannot assure you, however, that such reserves will be sufficient to cover any additional tax
liability that may be imposed on our Norwegian subsidiaries. In addition, changes in our operations or ownership could result in additional tax being imposed on us or on our subsidiaries in jurisdictions in which operations are
conducted. For example, Teekay Corporation indirectly owns less than 50% of the value of our outstanding units and therefore we believe that we do not satisfy the requirements of the exemption from U.S. taxation under Section 883 of the
Code and our U.S. source income is subject to taxation under Section 887 of the Code. The amount of such tax will depend upon the amount of income we earn from voyages into or out of the United States, which is not within our complete
control.
Unitholders may be subject to income tax in one or more non-U.S. countries, including Canada, as a result of owning our
units if, under the laws of any such country, we are considered to be carrying on business there. Such laws may require unitholders to file a tax return with, and pay taxes to, those countries. Any foreign taxes imposed on us or any of our
subsidiaries will reduce our cash available for distribution to unitholders.
We intend that our affairs and the business of each
of our subsidiaries is conducted and operated in a manner that minimizes foreign income taxes imposed upon us and our subsidiaries or which may be imposed upon unitholders as a result of owning our units. However, there is a risk that unitholders
will be subject to tax in one or more countries, including Canada, as a result of owning our units if, under the laws of any such country, we are considered to be carrying on business there. If unitholders are subject to tax in any such country,
unitholders may be required to file a tax return with, and pay taxes to, that country based on their allocable share of our income. We may be required to reduce distributions to unitholders on account of any withholding obligations imposed upon us
by that country in respect of such allocation to unitholders. The United States may not allow a tax credit for any foreign income taxes that unitholders directly or indirectly incur. Any foreign taxes imposed on us or any of our subsidiaries will
reduce our cash available for unitholders.
22
Item 4. |
Information on the Partnership |
A. Overview, History and Development
Overview and History
We are an international provider of marine transportation, oil production, storage, towage and floating accommodation services to the offshore
oil industry. We were formed as a Marshall Islands limited partnership in August 2006 by Teekay Corporation (NYSE: TK), a portfolio manager and project developer in the marine midstream space. We seek to leverage the expertise, relationships and
reputation of Teekay Corporation and our controlled affiliates to pursue growth opportunities in this market. As of December 31, 2014, Teekay Corporation, which owns and controls our general partner, owned 25.8% of our limited partner interest.
Please see Item 5. Operating and Financial Review and Prospects Management Discussion and Analysis of Financial Condition and
Results of Operations Significant Developments for recent acquisitions and developments.
As of December 31, 2014, our fleet
consisted of:
|
|
|
Shuttle Tankers. Our shuttle tanker fleet consisted of 34 vessels (including one vessel in lay-up as a conversion candidate and our
HiLoad Dynamic Positioning (or DP) unit) that mainly operate under fixed-rate contracts of affreightment, time charters and bareboat charters. Of the 34 shuttle tankers, six were held through 50% owned subsidiaries, two through a 67%
owned subsidiary and two were chartered-in, with the remainder owned 100% by us. All of these shuttle tankers, with the exception of the HiLoad DP unit, provide transportation services to energy companies, primarily in the North Sea and
Brazil. The average term of the contracts of affreightment, weighted based on vessel years, is 2.5 years. The time charters and bareboat charters have an average remaining contract term of approximately 4.8 years. As of December 31, 2014, our
shuttle tanker fleet had a total cargo capacity of approximately 4.2 million deadweight tonnes (or dwt), representing approximately 35% of the total tonnage of the world shuttle tanker fleet. |
|
|
|
FPSO Units. We have five FPSO units in which we have 100% ownership interests, one of which is undergoing upgrades at the Damen Shipyard in
the Netherlands, and two FPSO units in which we have 50% ownership interests, one of which is currently undergoing a conversion into an FPSO unit for operation in the Libra field in Brazil. The other five units are operating under contracts with
major energy companies in the North Sea and Brazil. We use the FPSO units to provide production, processing and storage services to oil companies operating offshore oil field installations. The FPSO contracts have an average remaining term of
approximately 5.1 years. As of December 31, 2014, our FPSO units had a total production capacity of approximately 0.3 million barrels of oil per day. |
|
|
|
FSO Units. We have five FSO units in which we have 100% ownership interests and one FSO unit in which we have an 89% ownership interest. All
of the FSO units operate under fixed-rate contracts, with an average remaining term of approximately 5.1 years. As of December 31, 2014, our FSO units had a total cargo capacity of approximately 0.7 million dwt. |
|
|
|
Conventional Tankers. We have four Aframax conventional crude oil tankers, all of which operate under fixed-rate time charters with Teekay
Corporation. Two of these tankers have additional equipment for lightering. We have 100% ownership in all of these vessels. The average remaining term on these time charter and bareboat charter contracts is approximately 3.5 years. As of
December 31, 2014, our conventional tankers had a total cargo capacity of approximately 0.4 million dwt. |
|
|
|
Towage vessels. We have four long-haul towing and anchor handling vessel newbuildings scheduled for delivery in 2016. In late 2014, we
agreed to acquire six on-the-water long-distance towing and anchor handling vessels, of which three vessels delivered in early-2015, with the remaining three vessels expected to deliver during the second quarter of 2015. We have 100% ownership in
all our towage vessels. |
|
|
|
FAUs: We have three newbuilding FAUs, of which one unit delivered in February 2015 and the remaining two units are scheduled to deliver in
2016. These FAUs are expected to operate on fixed-rate time-charter contracts. We have 100% ownership in all of these FAUs. |
We were formed under the laws of the Republic of The Marshall Islands as Teekay Offshore Partners L.P. and maintain our principal executive
headquarters at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda. Our telephone number at such address is (441) 298-2530.
Potential Additional Shuttle Tanker, FSO and FPSO Projects
Please see Item 5. Operating and Financial Review and Prospects Managements Discussion and Analysis of Financial Condition
and Results of Operations Potential Additional Shuttle Tanker, FSO and FPSO Projects for possible future vessel acquisitions.
B. Business Overview
Shuttle Tanker Segment
A shuttle tanker is a specialized ship designed to transport crude oil and condensates from offshore oil field installations to onshore
terminals and refineries. Shuttle tankers are equipped with sophisticated loading systems and dynamic positioning systems that allow the vessels to load cargo safely and reliably from oil field installations, even in harsh weather conditions.
Shuttle tankers were developed in the North Sea as an alternative to pipelines. The first cargo from an offshore field in the North Sea was shipped in 1977, and the first dynamically-positioned shuttle tankers were introduced in the early 1980s.
Shuttle tankers are often described as floating pipelines because these vessels typically shuttle oil from offshore installations to onshore facilities in much the same way a pipeline would transport oil along the ocean floor.
Our shuttle tankers are primarily subject to long-term, fixed-rate time-charter contracts for a specific offshore oil field or under contracts
of affreightment for various fields. The number of voyages performed under these contracts of affreightment normally depends upon the oil production of each field. Competition for charters is based primarily upon price, availability, the size,
technical sophistication, age and condition of the vessel
23
and the reputation of the vessels manager. Although the size of the world shuttle tanker fleet has been relatively unchanged in recent years, conventional tankers could be converted into
shuttle tankers by adding specialized equipment to meet customer requirements. Shuttle tanker demand may also be affected by the possible substitution of sub-sea pipelines to transport oil from offshore production platforms.
As of December 31, 2014, there were approximately 105 vessels in the world shuttle tanker fleet (including 19 newbuildings), the majority
of which operate in the North Sea and Brazil. Shuttle tankers also operate off the east coast of Canada and in the US Gulf. As of December 31, 2014, we owned 32 shuttle tankers (including the HiLoad DP unit), in which our ownership
interests ranged from 50% to 100%, and chartered-in an additional two shuttle tankers. Other shuttle tanker owners include Knutsen NYK Offshore Tankers AS, SCF Group, Viken Shipping, Petroleo Brasileiro S.A. and Chevron, which as of
December 31, 2014 controlled fleets ranging from 2 to 27 shuttle tankers each. We believe that we have certain competitive advantages in the shuttle tanker market as a result of the quality, type and dimensions of our vessels combined with our
market share in the North Sea and Brazil.
The following tables provide additional information about our shuttle tankers as of
December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Capacity (dwt) |
|
|
Built |
|
Ownership |
|
Positioning system |
|
Operating Region |
|
Contract Type (1) |
|
Charterer |
|
Contract End Date |
|
|
|
|
|
|
|
|
Scott Spirit |
|
|
109,300 |
|
|
2011 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
Chevron, Hess, Marathon Oil, ENI, Draugen Transport, BP, ConocoPhillips, Total,
Talisman, Nexen, MTDA, Dana Petroleum, Shell Intl Trading & Shipping Co Ltd., Statoil, Norske Shell, OMV, Maersk Oil, BG Norge, Wintershall, Idemitsu, Rwe-Dea, E.ON Ruhrgas, Det Norske Oljeselslcap, Lundin, PGING(7) |
|
|
Navion Oslo |
|
|
100,300 |
|
|
2001 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Navion Hispania |
|
|
126,200 |
|
|
1999 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Navion Britannia (2) |
|
|
124,200 |
|
|
1998 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Navion Scandia |
|
|
126,700 |
|
|
1998 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Aberdeen |
|
|
87,100 |
|
|
1996 |
|
In-chartered (until December 2016) |
|
DP |
|
North Sea |
|
CoA |
|
|
|
Navion Europa (2) |
|
|
130,300 |
|
|
1995 |
|
67%(6) |
|
DP |
|
North Sea |
|
CoA |
|
|
|
Randgrid (2) (3) |
|
|
124,500 |
|
|
1995 |
|
67%(6) |
|
DP |
|
North Sea |
|
CoA |
|
|
|
Navion Oceania |
|
|
126,400 |
|
|
1999 |
|
100% |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Stena Natalita |
|
|
108,100 |
|
|
2001 |
|
50%(8) |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
Stena Alexita |
|
|
127,000 |
|
|
1998 |
|
50%(8) |
|
DP2 |
|
North Sea |
|
CoA |
|
|
|
|
Samba Spirit |
|
|
154,100 |
|
|
2013 |
|
100% |
|
DP2 |
|
Brazil |
|
Time charter |
|
BG |
|
June 2023 |
Lambada Spirit |
|
|
154,000 |
|
|
2013 |
|
100% |
|
DP2 |
|
Brazil |
|
Time charter |
|
BG |
|
July 2023 |
Bossa Nova Spirit |
|
|
155,000 |
|
|
2013 |
|
100% |
|
DP2 |
|
Brazil |
|
Time charter |
|
BG |
|
November 2023 |
Sertanejo Spirit |
|
|
155,000 |
|
|
2013 |
|
100% |
|
DP2 |
|
Brazil |
|
Time charter |
|
BG |
|
January 2024 |
Amundsen Spirit |
|
|
109,300 |
|
|
2010 |
|
100% |
|
DP2 |
|
North Sea |
|
Time charter |
|
Statoil (9) |
|
|
Peary Spirit |
|
|
109,300 |
|
|
2011 |
|
100% |
|
DP2 |
|
North Sea |
|
Time charter |
|
Statoil (9) |
|
|
Nansen Spirit |
|
|
109,300 |
|
|
2010 |
|
100% |
|
DP2 |
|
North Sea |
|
Time charter |
|
Statoil (9) |
|
|
Grena Knutsen |
|
|
148,600 |
|
|
2003 |
|
In-chartered (until June 2015) |
|
DP2 |
|
North Sea |
|
Time charter |
|
Statoil (9) |
|
|
Stena Sirita |
|
|
126,900 |
|
|
1999 |
|
50%(8) |
|
DP2 |
|
North Sea |
|
Time charter |
|
Esso |
|
September 2015 |
Navion Anglia |
|
|
126,400 |
|
|
1999 |
|
100% |
|
DP2 |
|
Brazil |
|
Time charter |
|
Petrobras |
|
June 2016 |
Navion Svenita(4) |
|
|
106,500 |
|
|
1997 |
|
100% |
|
DP |
|
Brazil |
|
Time charter |
|
Petrobras |
|
March 2015 |
HiLoad DP Unit (5) |
|
|
n/a |
|
|
2010 |
|
100% |
|
DP |
|
Brazil |
|
n/a |
|
n/a |
|
n/a |
Navion Gothenburg |
|
|
152,200 |
|
|
2006 |
|
50%(8) |
|
DP2 |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
July 2020 |
Nordic Brasilia |
|
|
151,300 |
|
|
2004 |
|
100% |
|
DP |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
July 2017 |
Nordic Rio |
|
|
151,300 |
|
|
2004 |
|
50%(8) |
|
DP |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
July 2017 |
Navion Stavanger |
|
|
148,700 |
|
|
2003 |
|
100% |
|
DP2 |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
July 2019 |
Petroatlantic |
|
|
93,000 |
|
|
2003 |
|
100% |
|
DP2 |
|
North Sea |
|
Bareboat |
|
Teekay Corporation |
|
March 2016 |
Petronordic |
|
|
93,000 |
|
|
2002 |
|
100% |
|
DP2 |
|
North Sea |
|
Bareboat |
|
Teekay Corporation |
|
March 2016 |
Nordic Spirit |
|
|
151,300 |
|
|
2001 |
|
100% |
|
DP |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
April 2018 |
Stena Spirit |
|
|
151,300 |
|
|
2001 |
|
50%(8) |
|
DP |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
July 2018 |
Navion Bergen |
|
|
105,600 |
|
|
2000 |
|
100% |
|
DP2 |
|
Brazil |
|
Bareboat |
|
Petrobras (10) |
|
April 2020 |
Navion Marita |
|
|
103,900 |
|
|
1999 |
|
100% |
|
DP |
|
Far-East |
|
Spot |
|
|
|
|
Navion Torinita (11) |
|
|
106,900 |
|
|
1992 |
|
100% |
|
DP2 |
|
|
|
Lay-up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capacity |
|
|
4,153,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
CoA refers to contracts of affreightment. |
(2) |
The vessel is capable of loading from a submerged turret loading buoy. |
24
(3) |
The vessel is committed to a conversion into an FSO unit upon the expiry of its existing shuttle tanker charter contract in the second quarter of
2015. |
(4) |
The Navion Svenita was sold in March 2015. |
(5) |
Self-propelled DP system that attaches to and keeps conventional tankers in position when loading from offshore installations.
|
(6) |
The parties share in the profits and losses of the subsidiary in proportion to each partys relative capital contributions.
|
(7) |
Not all of the contracts of affreightment customers utilize every ship in the contract of affreightment fleet. |
(8) |
Owned through a 50% owned subsidiary. The parties share in the profits and losses of the subsidiary in proportion to each partys relative
ownership. |
(9) |
Under the terms of a master agreement with Statoil, the vessels are chartered under individual fixed-rate annually renewable time-charter
contracts. The number of vessels may be adjusted annually based on the requirements of the fields serviced. It is expected that between one and three vessels will be required by Statoil annually. Statoil will require three vessels during 2015. The
vessels currently on time charter to Statoil may be replaced by vessels currently servicing contracts of affreightment or other time-charter contracts. |
(10) |
Charterer has the right to purchase the vessel at end of the bareboat charter. |
(11) |
The vessel was 20 years old in 2012 and could no longer trade as a shuttle tanker in the North Sea and Brazil. The vessel is in lay-up following
its redelivery to us in April 2012. |
On the Norwegian continental shelf, regulations have been imposed on the operators
of offshore fields related to vaporized crude oil that is formed and emitted during loading operations and which is commonly referred to as Volatile Organic Compounds (or VOC). To assist the oil companies in their efforts to meet the
regulations on VOC emissions from shuttle tankers, we and Teekay Corporation have played an active role in establishing and participating in a unique co-operation among 29 owners of offshore fields in the Norwegian sector. The purpose of the
co-operation is to implement VOC reduction systems on selected shuttle tankers to reduce and report VOC emissions according to Norwegian authorities requirements. Currently, we own or operate VOC systems on 13 of our shuttle tankers. The oil
companies that participate in the co-operation have also engaged us to undertake the day-to-day administration, technical follow-up and handling of payments through a dedicated clearing house function.
During 2014, approximately 52% of our consolidated net revenues from continuing operations were earned by the vessels in the shuttle tanker
segment, compared to approximately 55% in 2013 and 59% in 2012. Please read Item 5 Operating and Financial Review and Prospects: Results of Operations.
Historically, the utilization of shuttle tankers in the North Sea is higher in the winter months, as favorable weather conditions in the
summer months provide opportunities for repairs and maintenance to our vessels and to the offshore oil platforms. Downtime for repairs and maintenance generally reduces oil production and, thus, transportation requirements.
FPSO Segment
FPSO units are offshore production facilities that are ship-shaped or cylindrical-shaped and store processed crude oil in tanks located in the
hull of the vessel. FPSO units are typically used as production facilities to develop marginal oil fields or deepwater areas remote from existing pipeline infrastructure. Of four major types of floating production systems, FPSO units are the most
common type. Typically, the other types of floating production systems do not have significant storage and need to be connected into a pipeline system or use an FSO unit for storage. FPSO units are less weight-sensitive than other types of floating
production systems and their extensive deck area provides flexibility in process plant layouts. In addition, the ability to utilize surplus or aging tanker hulls for conversion to an FPSO unit provides a relatively inexpensive solution compared to
the new construction of other floating production systems. A majority of the cost of an FPSO comes from its top-side production equipment and thus FPSO units are expensive relative to conventional tankers. An FPSO unit carries on board all the
necessary production and processing facilities normally associated with a fixed production platform. As the name suggests, FPSOs are not fixed permanently to the seabed but are designed to be moored at one location for long periods of time. In a
typical FPSO unit installation, the untreated wellstream is brought to the surface via subsea equipment on the sea floor that is connected to the FPSO unit by flexible flow lines called risers. The risers carry oil, gas and water from the ocean
floor to the vessel, which processes it on board. The resulting crude oil is stored in the hull of the vessel and subsequently transferred to tankers either via a buoy or tandem loading system for transport to shore.
Traditionally for large field developments, the major oil companies have owned and operated new, custom-built FPSO units. FPSO units for
smaller fields have generally been provided by independent FPSO contractors under life-of-field production contracts, where the contracts duration is for the useful life of the oil field. FPSO units have been used to develop offshore fields
around the world since the late 1970s. As of December 31, 2014, there were approximately 167 FPSO units operating and 35 FPSO units on order in the world fleet. At December 31, 2014, we owned five FPSO units in which we have 100%
ownership interests and two FPSO units in which we have 50% ownership interests. One of these FPSO units is currently undergoing a conversion and another is undergoing an upgrade as of December 31, 2014. Most independent FPSO contractors have
backgrounds in marine energy transportation, oil field services or oil field engineering and construction. The other major independent FPSO contractors are SBM Offshore N.V., BW Offshore, MODEC, Bumi Armada, Bluewater and Yinson Production.
25
The following table provides additional information about our FPSO units as of December 31,
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Production Capacity (bbl/day) |
|
|
Built |
|
Ownership |
|
|
Field name and location |
|
Charterer |
|
Contract End Date |
Voyageur Spirit (1) |
|
|
30,000 |
|
|
2008 |
|
|
100 |
% |
|
Huntington, U.K. |
|
E.ON |
|
April 2018 |
Cidade de Itajai (1)(2) |
|
|
80,000 |
|
|
2010 |
|
|
50 |
% |
|
Bauna and Piracaba, Brazil |
|
Petrobras |
|
February 2022 |
Petrojarl Cidade de Rio das Ostras (3) |
|
|
25,000 |
|
|
2008 |
|
|
100 |
% |
|
Espadarte, Brazil |
|
Petrobras |
|
January 2018 |
Piranema Spirit (1) |
|
|
30,000 |
|
|
2007 |
|
|
100 |
% |
|
Piranema, Brazil |
|
Petrobras |
|
October 2018 |
Petrojarl Varg (1) |
|
|
57,000 |
|
|
1998 |
|
|
100 |
% |
|
Varg, Norway |
|
Talisman Energy |
|
June 2016 |
Petrojarl I (4) |
|
|
46,000 |
|
|
1986 |
|
|
100 |
% |
|
Atlanta, Brazil |
|
QGEP |
|
March 2021 |
Libra (5) |
|
|
50,000 |
|
|
2014 |
|
|
50 |
% |
|
Libra, Brazil |
|
Petrobras |
|
March 2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capacity |
|
|
318,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The charterer has options to extend the service contract. |
(2) |
The Cidade de Itajai was converted to an FPSO unit in 2012. The original hull was built in 1985. |
(3) |
The Petrojarl Cidade de Rio das Ostras was converted to an FPSO unit in 2008. The original hull was built in 1981. |
(4) |
The Petrojarl I is currently undergoing upgrades. The unit is expected to commence its five-year fixed-rate contract in early-2016.
|
(5) |
The vessel is currently undergoing conversion into an FPSO unit for employment in the Libra field. The original hull was built in 1995. The unit is
expected to commence its 12-year firm-period fixed-rate contract in early-2017. |
During 2014, approximately 39% of our
consolidated net revenues from continuing operations were earned by our FPSO units, compared to approximately 34% in 2013 and 29% in 2012. Please read Item 5 Operating and Financial Review and Prospects: Results of Operations.
FSO Segment
FSO units provide on-site storage for oil field installations that have no storage facilities or that require supplemental storage. An FSO unit
is generally used in combination with a jacked-up fixed production system, floating production systems that do not have sufficient storage facilities or as supplemental storage for fixed platform systems, which generally have some on-board storage
capacity. An FSO unit is usually of similar design to a conventional tanker, but has specialized loading and off-take systems required by field operators or regulators. FSO units are moored to the seabed at a safe distance from a field installation
and receive the cargo from the production facility via a dedicated loading system. An FSO unit is also equipped with an export system that transfers cargo to shuttle or conventional tankers. Depending on the selected mooring arrangement and where
they are located, FSO units may or may not have any propulsion systems. FSO units are usually conversions of older single-hull conventional oil tankers. These conversions, which include installation of a loading and off-take system and hull
refurbishment, can generally extend the lifespan of a vessel as an FSO unit by up to 20 years over the normal conventional tanker lifespan of 25 years.
Our FSO units are generally placed on long-term, fixed-rate time charters or bareboat charters as an integrated part of the field development
plan, which provides more stable cash flow to us.
As of December 31, 2014, there were approximately 94 FSO units operating and eight
FSO units on order in the world fleet, and we had six FSO units in which our ownership interests ranged from 89% to 100%. The major markets for FSO units are Southeast Asia, West Africa, Northern Europe, the Mediterranean, Southwest Asia and the
Middle East. Our primary competitors in the FSO market are conventional tanker owners, who have access to tankers available for conversion, and oil field services companies and oil field engineering and construction companies who compete in the
floating production system market. Competition in the FSO market is primarily based on price, expertise in FSO operations, management of FSO conversions and relationships with shipyards, as well as the ability to access vessels for conversion that
meet customer specifications.
The following table provides additional information about our FSO units as of December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Capacity (dwt) |
|
|
Built |
|
Ownership |
|
|
Field name and location |
|
Contract Type |
|
Charterer |
|
Contract End Date |
Suksan Salamander (1) |
|
|
78,200 |
|
|
1993 |
|
|
100 |
% |
|
Bualuang, Thailand |
|
Bareboat |
|
Teekay Corporation |
|
August 2024 |
Navion Saga (1) |
|
|
149,000 |
|
|
1991 |
|
|
100 |
% |
|
Volve, Norway |
|
Time charter |
|
Statoil ASA |
|
December 2015 |
Pattani Spirit (1) |
|
|
113,800 |
|
|
1988 |
|
|
100 |
% |
|
Platong, Thailand |
|
Bareboat |
|
Teekay Corporation |
|
April 2019 |
Dampier Spirit (1) |
|
|
106,700 |
|
|
1987 |
|
|
100 |
% |
|
Stag, Australia |
|
Time charter |
|
Apache Energy |
|
October 2024 |
Falcon Spirit (1) |
|
|
124,500 |
|
|
1986 |
|
|
100 |
% |
|
Al Rayyan, Qatar |
|
Time charter |
|
Occidental Qatar Energy |
|
June 2017 |
Apollo Spirit (2) |
|
|
129,000 |
|
|
1978 |
|
|
89 |
% |
|
Banff, U.K. |
|
Bareboat |
|
Teekay Corporation |
|
December 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capacity |
|
|
701,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Charterer has option to extend the time charter. |
(2) |
Charterer is required to charter the vessel for as long as the Petrojarl Banff FPSO unit produces in the Banff field in the North Sea, which
is expected to remain under contract until the end of 2020. |
During 2014, approximately 6% of our consolidated net
revenues from continuing operations were earned by the vessels in the FSO segment, compared to 7% in 2013 and 8% in 2012. Please read Item 5 Operating and Financial Review and Prospects: Results of Operations.
26
Conventional Tanker Segment
Conventional oil tankers are used primarily for transcontinental seaborne transportation of oil. Long-term, fixed-rate charters for crude oil
transportation, such as those applicable to our conventional tanker fleet, are less typical in the industry. As used in this discussion, conventional oil tankers exclude those vessels that can carry dry bulk and ore, tankers that
currently are used for storage purposes and shuttle tankers.
Oil tanker demand is a function of several factors, including the location
of oil production, refining and consumption and world oil demand and supply. Tanker demand is based on the amount of crude oil transported in tankers and the distance over which the oil is transported. The distance over which oil is transported is
determined by seaborne trading and distribution patterns, which are principally influenced by the relative advantages of the various sources of production and locations of consumption.
The majority of crude oil tankers ranges in size from approximately 80,000 to approximately 320,000 dwt. Aframax tankers are the mid-size of
the various primary oil tanker types, typically sized from 80,000 to 120,000 dwt. As of December 31, 2014, the world Aframax tanker fleet consisted of approximately 867 vessels, of which 609 are crude tankers and 258 are coated tankers are
termed conventional tankers. As of December 31, 2014, there were approximately 110 conventional Aframax newbuildings on order for delivery through 2017, of which 40 crude tankers and 70 coated tankers. Delivery of a vessel typically occurs
within two to three years after ordering.
As of December 31, 2014, our Aframax conventional crude oil tankers had an average age of
approximately 8.3 years, compared to the average age of 9.2 years for the world Aframax conventional tanker fleet. New Aframax tankers generally are expected to have a lifespan of approximately 25 to 30 years, based on estimated hull
fatigue life. However, United States and international regulations require double-hulled vessels to be phased out after 25 years. All of our Aframax tankers are double-hulled.
The shuttle tankers in our contract of affreightment fleet may operate in the conventional spot market during downtime or maintenance periods
for oil field installations or otherwise, which provides greater capacity utilization for the fleet.
The following table provides
additional information about our conventional tankers as of December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Capacity (dwt) |
|
|
Built |
|
|
Ownership |
|
|
Contract Type |
|
Charterer |
|
Contract End Date |
SPT Explorer (1) |
|
|
106,000 |
|
|
|
2008 |
|
|
|
100 |
% |
|
Bareboat |
|
Teekay Corporation |
|
January 2018 |
SPT Navigator (1) |
|
|
106,000 |
|
|
|
2008 |
|
|
|
100 |
% |
|
Bareboat |
|
Teekay Corporation |
|
March 2018 |
Kilimanjaro Spirit (2) |
|
|
115,000 |
|
|
|
2004 |
|
|
|
100 |
% |
|
Time charter |
|
Teekay Corporation |
|
November 2018 |
Fuji Spirit (2) |
|
|
106,400 |
|
|
|
2003 |
|
|
|
100 |
% |
|
Time charter |
|
Teekay Corporation |
|
November 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capacity |
|
|
433,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Charterer has options to extend each bareboat charter for periods of two years, two years and one year for a total of five years after the initial
term. The bareboat charter agreement was novated under the same terms from Skaugen PetroTrans, a joint venture 50%-owned by Teekay Corporation, to a wholly-owned subsidiary of Teekay Corporation in 2014. |
(2) |
Charterer has options to extend each time charter on an annual basis for a total of five years after the initial term. Charterer also has the right
to purchase the vessel beginning on the third anniversary of the contract at a specified price. |
During 2014,
approximately 3% of our consolidated net revenues from continuing operations were earned by the vessels in the conventional tanker segment, compared to 4% in 2013 and 2012. All earnings from discontinued operations were from the conventional tanker
segment. Please read Item 5 Operating and Financial Review and Prospects: Results of Operations.
Towage Segment
Long-haul towage and anchor handling vessels are used for the towage, station-keeping, installation and decommissioning of large floating
objects such as exploration, production and storage units, including FPSO units, floating liquefied natural gas (or FLNG) units and floating drill rigs. We operate with high-end vessels which can be defined as long-haul towage and anchor
handling vessels with a bollard pull of greater than 180 tonnes and a fuel capacity of more than 2,000 metric tonnes. Our focus is on intercontinental towages requiring trans-ocean movements.
We are the sole provider of long-haul towage and anchor handling vessels with DP2 capability. Our towage vessels will operate on time-charter
or voyage-charter towage contracts when they deliver. Under voyage-charter contracts, as project budgets are prepared and maintained well in advance of the contract commencement, voyage-charter revenue rates are less volatile than spot market rates.
As of December 31, 2014, there were approximately 33 long-haul towage vessels operating and four long-haul towage vessels on order
in the world fleet, in which we have ten vessels (including four newbuildings scheduled to deliver throughout 2016, three vessels which delivered early-2015 and three vessels expected to deliver during the second quarter of 2015) with 100% ownership
interests in. The average life expectancy of towing vessels is 25 to 30 years.
27
The following table provides additional information about our towage vessels as of
December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Bollard Pull (tonnes) |
|
|
Built |
|
Ownership |
|
ALP Winger (1) |
|
|
220 |
|
|
2007 |
|
|
100 |
% |
ALP Guard (1) |
|
|
301 |
|
|
2009 |
|
|
100 |
% |
ALP Centre (1) |
|
|
306 |
|
|
2010 |
|
|
100 |
% |
ALP Striker (2) |
|
|
300 |
|
|
2016 |
|
|
100 |
% |
ALP Defender (2) |
|
|
300 |
|
|
2016 |
|
|
100 |
% |
ALP Sweeper (2) |
|
|
300 |
|
|
2016 |
|
|
100 |
% |
ALP Keeper (2) |
|
|
300 |
|
|
2016 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total Capacity |
|
|
2,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Delivered in early-2015. |
(2) |
Newbuilding scheduled for delivery in 2016. |
In 2014, we agreed to acquire six modern on-the-water long-distance towing and anchor handling vessels. In early 2015 we have taken delivery
of three of the vessels and expect to take delivery of the remaining three vessels during the second quarter of 2015.
FAU Segment
Floating accommodation units are used primarily for offshore accommodation, storage and support for maintenance and modification projects on
existing offshore installations, or during the installation and decommissioning of large floating exploration, production and storage units, including FPSO units, FLNG units and floating drill rigs. Our FAUs are available for world-wide operations,
excluding operations within the Norwegian Continental Shelf, and include DP3 keeping systems that are capable of operating in deep water and harsh weather.
One of our FAUs is placed on a mid-term, fixed-rate time-charter contract.
As of December 31, 2014, there were approximately 30 DP FAUs operating and 18 units on order in the world fleet, and we had three units
(consisting of one unit which delivered in February 2015 and two newbuilding units scheduled for delivery in 2016), in which we have 100% ownership interests.
The following table provides additional information about our FAUs as of December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Berths |
|
|
Built |
|
Ownership |
|
|
Location |
|
Contract type |
|
Charterer |
|
Contract End Date |
Arendal Spirit (1)(2) |
|
|
500 |
|
|
2015 |
|
|
100 |
% |
|
Brazil |
|
Time charter |
|
Petrobras |
|
June 2018 |
Stavanger Spirit (3)(4) |
|
|
500 |
|
|
2016 |
|
|
100 |
% |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
Nantong Spirit (3)(5) |
|
|
500 |
|
|
2016 |
|
|
100 |
% |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capacity |
|
|
1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Delivered in February 2015 and expected to commence its three year fixed-rate time-charter contract in June 2015. |
(2) |
Charterer has an option to extend the time charter. |
(3) |
We expect to secure charter contracts before scheduled delivery. |
(4) |
Newbuilding expected to deliver early-2016. |
(5) |
Newbuilding expected to deliver late-2016. |
Business Strategies
Our primary business objective is to increase distributions per unit by executing the following strategies:
|
|
|
Expand global operations in high growth regions. We seek to continue expansion of our shuttle tanker, FSO and FPSO, towage and FAU
operations, particularly in our existing core offshore markets of Brazil and the North Sea. |
|
|
|
Pursue further opportunities in the offshore sector. We believe that as a leading operator in the offshore FPSO sector, we can competitively
pursue additional offshore FPSO projects anywhere in the world by combining our engineering and operational expertise with our global marketing organization and extensive customer and shipyard relationships. We believe that our joint venture
agreement with Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) to jointly pursue FPSO projects in Brazil and arrangements with Sevan and Remora AS by which we have access to offshore production projects developed by both
companies in the future, will also expand our offshore opportunities. |
|
|
|
Acquire or construct additional vessels to serve under long-term, fixed-rate contracts. We intend to continue acquiring and constructing
shuttle tankers, FSO and FPSO units and FAUs primarily with long-term contracts, rather than ordering vessels on a speculative basis. We believe this approach facilitates the financing of new vessels based on their anticipated future revenues and
ensures that new vessels will be employed upon acquisition, which should provide stable cash flows. |
|
|
|
Provide superior customer service by maintaining high reliability, safety, environmental and quality standards. Energy companies seek
partners that have a reputation for high reliability, safety, environmental and quality standards. We intend to leverage our operational expertise and customer relationships to further expand a sustainable competitive advantage with consistent
delivery of superior customer service. |
Customers
Our most important customer measured by annual revenue is Petrobras Transporte S.A, which is Brazils largest company and the third
largest energy company in the world.
28
Petrobras, Statoil, E.ON and Talisman Energy Inc. accounted for approximately 22%, 19%, 12% and
11%, respectively, of consolidated revenues from continuing operations during 2014. Petrobras, Statoil and Talisman Energy Inc accounted for approximately 25%, 20%, and 13%, and 28%, 21%, and 13%, respectively, of consolidated revenues from
continuing operations during 2013 and 2012, respectively.
Safety, Management of Ship Operations and Administration
Safety and environmental compliance are our top operational priorities. We operate our vessels in a manner intended to protect the safety and
health of our employees, the general public and the environment. We seek to manage the risks inherent in our business and are committed to eliminating incidents that threaten the safety and integrity of our vessels, such as groundings, fires,
collisions and petroleum spills. In 2008, we introduced the Quality Assurance and Training Officers (or QATO) program to conduct rigorous internal audits of our processes and provide our seafarers with on-board training. In 2007, we
introduced a behavior-based safety program called Safety in Action to improve the safety culture in our fleet. We are also committed to reducing our emissions and waste generation. In 2010, Teekay Corporation introduced the
Operational Leadership campaign to reinforce commitment to personal and operational safety.
Key performance indicators
facilitate regular monitoring of our operational performance. Targets are set on an annual basis to drive continuous improvement, and indicators are reviewed monthly to determine if remedial action is necessary to reach the targets.
We, through certain of our subsidiaries, assist our operating subsidiaries in managing their ship operations. All vessels are operated under
our comprehensive and integrated Safety Management System that complies with the International Safety Management Code (or ISM Code), the International Standards Organizations (or ISO) 9001 for Quality Assurance, ISO 14001 for
Environment Management Systems, Occupational Health and Safety Assessment Series (or OHSAS) 18001 and the new Maritime Labor Convention 2006 (or MLC 2006) that became effective on August 20, 2013. The management system is
certified by Det Norske Veritas (or DNV), the Norwegian classification society. It has also been separately approved by the Australian flag administrations. Although certification is valid for five years, compliance with the above mentioned
standards is confirmed on a yearly basis by a rigorous auditing procedure that includes both internal audits as well as external verification audits by DNV and applicable flag states.
We provide, through certain of our subsidiaries, expertise in various functions critical to the operations of our operating subsidiaries. We
believe this arrangement affords a safe, efficient and cost-effective operation. Our subsidiaries also provide to us access to human resources, financial and other administrative functions pursuant to administrative services agreements.
Ship management services are provided by subsidiaries of Teekay Corporation, located in various offices around the world. These include
critical ship management functions such as:
|
|
|
vessel maintenance (including repairs and dry docking) and certification; |
|
|
|
crewing by competent seafarers; |
|
|
|
procurement of stores, bunkers and spare parts; |
|
|
|
management of emergencies and incidents; |
|
|
|
supervision of shipyard and projects during new-building and conversions; |
|
|
|
financial management services. |
These functions are supported by on-board and on-shore systems for maintenance, inventory, purchasing and budget management.
In addition, Teekay Corporations day-to-day focus on cost control is applied to our operations. In 2003, Teekay Corporation and two
other shipping companies established a purchasing alliance, Teekay Bergesen Worldwide, which leverages the purchasing power of the combined fleets, mainly in such commodity areas as lube oils, paints and other chemicals. Through our arrangements
with Teekay Corporation, we benefit from this purchasing alliance.
We believe that the generally uniform design of some of our existing
vessels and the adoption of common equipment standards provides operational efficiencies, including with respect to crew training and vessel management, equipment operation and repair, and spare parts ordering.
Risk of Loss, Insurance and Risk Management
The operation of any ocean-going vessel carries an inherent risk of catastrophic marine disasters, death or injury of persons and property
losses caused by adverse weather conditions, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. In addition, the transportation of crude oil and petroleum products is subject to the risk of spills and to
business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts. The occurrence of any of these events may result in loss of revenues or increased costs.
We carry hull and machinery (marine and war risks) and protection and indemnity insurance coverage to protect against most of the
accident-related risks involved in the conduct of our business. Hull and machinery insurance covers loss of or damage to a vessel due to marine perils such as collisions, grounding and weather. Protection and indemnity insurance indemnifies against
other liabilities incurred while operating vessels, including injury to the crew, third parties, cargo loss and pollution. The current range of our coverage for third party liability and pollution is $500 million to $1 billion per vessel per
incident. We also carry insurance policies covering war risks (including piracy and terrorism).
Under bareboat charters, the customer is
responsible to insure the vessel. We believe that current insurance coverage is adequate to protect against most of the accident-related risks involved in the conduct of our business and that we maintain appropriate levels of environmental damage
and pollution coverage. However, we cannot assure that all covered risks are adequately insured against, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the
future. More stringent environmental
29
regulations at times in the past have resulted in increased costs for, and may result in the lack of availability of, insurance against the risks of environmental damage or pollution.
Substantially all of our vessels are not insured against loss of revenues resulting from vessel off-hire time, based on the cost of this insurance compared to our off-hire experience.
In Norway, the Norwegian Pollution Control Authority requires the installation of VOC emissions reduction units on most shuttle tankers
serving the Norwegian continental shelf. Customers bear the cost to install and operate the VOC equipment on board the shuttle tankers.
We have achieved certification under the standards reflected in ISO 9001 for quality assurance, ISO 14001 for environment management systems,
OHSAS 18001, and the IMOs International Management Code for the Safe Operation of Ships and Pollution Prevention on a fully integrated basis.
Flag, Classification, Audits and Inspections
Our vessels are registered with reputable flag states, and the hull and machinery of
all of our vessels have been Classed by one of the major classification societies and members of IACS (International Association of Classification Societies Ltd): DNV, Lloyds Register of Shipping or American Bureau of
Shipping.
The applicable classification society certifies that the vessels design and build conforms to the applicable class rules
and meets the requirements of the applicable rules and regulations of the country of registry of the vessel and the international conventions to which that country is a signatory. The classification society also verifies throughout the vessels
life that it continues to be maintained in accordance with those rules. In order to validate this, the vessels are surveyed by the classification society in accordance with the classification society rules, which in the case of our vessels follows a
comprehensive five year special survey cycle, renewed every fifth year. During each five-year period the vessel undergoes annual and intermediate surveys, the scrutiny and intensity of which is primarily dictated by the age of the vessel. We have
enhanced the resiliency of the underwater coatings of each vessel hull and marked the hull to facilitate underwater inspections by divers, their underwater areas are inspected in a dry dock at five year intervals. In-water inspection is carried out
during the second or third annual inspection (i.e. during an intermediate survey).
In addition to Class surveys, the vessels flag
state also verifies the condition of the vessel during annual flag state inspections, either independently or by additional authorization to Class. Also, Port State Authorities of a vessels port of call are authorized under international
conventions to undertake regular and spot checks of vessels visiting their jurisdiction.
Processes followed on board are audited by
either the flag state or the classification society acting on behalf of a flag state to ensure that they meet the requirements of the International Management Code for the Safe Operation of Ships and for Pollution Prevention (or ISM Code).
DNV typically carries out this task. We also follow an internal process of internal audits undertaken at each office and vessel annually.
We follow a comprehensive inspections scheme supported by our sea staff, shore-based operational and technical specialists and members of our
QATO program. We carry out regular inspections which helps ensure that:
|
|
|
our vessels and operations adhere to our operating standards; |
|
|
|
the structural integrity of the vessel is being maintained; |
|
|
|
machinery and equipment is being maintained to give reliable service; |
|
|
|
we are optimizing performance in terms of speed and fuel consumption; and |
|
|
|
the vessels appearance will support our brand and meet customer expectations. |
Our customers often carry out inspections under the Ship Inspection Report Program (or SIRE Program), which is a significant safety
initiative introduced by Oil Companies International Marine Forum (or OCIMF) to specifically address concerns about sub-standard vessels. The inspection results permit charterers to screen a vessel to ensure that it meets their general and
specific risk-based shipping requirements.
We believe that the heightened environmental and quality concerns of insurance underwriters,
regulators and charterers will generally lead to greater scrutiny, inspection and safety requirements on all vessels in the oil tanker markets and will accelerate the scrapping or phasing out of older vessels throughout these markets.
Overall we believe that our well-maintained and high-quality vessels provide us with a competitive advantage in the current environment of
increasing regulation and customer emphasis on quality of service.
Regulations
General
Our business and the
operation of our vessels are significantly affected by international conventions and national, state and local laws and regulations in the jurisdictions in which our vessels operate, as well as in the country or countries of their registration.
Because these conventions, laws and regulations change frequently, we cannot predict the ultimate cost of compliance or their impact on the resale price or useful life of our vessels. Additional conventions, laws, and regulations may be adopted that
could limit our ability to do business or increase the cost of our doing business and that may materially affect our operations. We are required by various governmental and quasi-governmental agencies to obtain permits, licenses and certificates
with respect to our operations. Subject to the discussion below and to the fact that the kinds of permits, licenses and certificates required for the operations of the vessels we own will depend on a number of factors, we believe that we will be
able to continue to obtain all permits, licenses and certificates material to the conduct of our operations.
30
International Maritime Organization (or IMO)
The IMO is the United Nations agency for maritime safety. IMO regulations relating to pollution prevention for oil tankers have been
adopted by many of the jurisdictions in which our tanker fleet operates. Under IMO regulations and subject to limited exceptions, a tanker must be of double-hull construction in accordance with the requirements set out in these regulations, or be of
another approved design ensuring the same level of protection against oil pollution. All of our tankers are double-hulled.
Many
countries, but not the United States, have ratified and follow the liability regime adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended (or CLC). Under this convention,
a vessels registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil (e.g. crude oil, fuel oil, heavy diesel oil or lubricating oil), subject to certain
defenses. The right to limit liability to specified amounts that are periodically revised is forfeited under the CLC when the spill is caused by the owners actual fault or when the spill is caused by the owners intentional or reckless
conduct. Vessels trading to contracting states must provide evidence of insurance covering the limited liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative regimes or common law governs, and liability is
imposed either on the basis of fault or in a manner similar to the CLC.
IMO regulations also include the International Convention for
Safety of Life at Sea (or SOLAS), including amendments to SOLAS implementing the International Ship and Port Facility Security Code (or ISPS), the ISM Code, and the International Convention on Load Lines of 1966. The IMO Marine Safety
Committee has also published guidelines for vessels with dynamic positioning (or DP) systems, which would apply to shuttle tankers and DP-assisted FSO units and FPSO units. SOLAS provides rules for the construction of and the equipment
required for commercial vessels and includes regulations for their safe operation. Flag states which have ratified the convention and the treaty generally employ the classification societies, which have incorporated SOLAS requirements into their
class rules, to undertake surveys to confirm compliance.
SOLAS and other IMO regulations concerning safety, including those relating to
treaties on training of shipboard personnel, lifesaving appliances, radio equipment and the global maritime distress and safety system, are applicable to our operations. Non-compliance with IMO regulations, including SOLAS, the ISM Code, ISPS and
the specific requirements for shuttle tankers, FSO units and FPSO units under the NPD (Norway) and HSE (United Kingdom) regulations, may subject us to increased liability or penalties, may lead to decreases in available insurance coverage for
affected vessels and may result in the denial of access to or detention in some ports. For example, the U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading
in U.S. and European Union ports.
The ISM Code requires vessel operators to obtain a safety management certification for each vessel they
manage, evidencing the shipowners development and maintenance of an extensive safety management system. Each of the existing vessels in our fleet is currently ISM Code-certified, and we expect to obtain safety management certificates for each
newbuilding vessel upon delivery.
Annex VI to the IMOs International Convention for the Prevention of Pollution from Ships
(MARPOL)(or Annex VI) sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits emissions of ozone depleting substances, emissions of volatile compounds from cargo tanks and the incineration of specific
substances. Annex VI also includes a world-wide cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions.
The IMO has issued guidance regarding protecting against acts of piracy off the coast of Somalia. We comply with these guidelines.
In addition, the IMO has proposed (by the adoption in 2004 of the International Convention for the Control and Management of Ships
Ballast Water and Sediments (or the Ballast Water Convention)) that all shuttle tankers of the size we operate that were built starting in 2012 contain ballast water treatment systems to comply with the ballast water performance standard
specified in the Ballast Water Convention, and that all other similarly sized shuttle tankers install ballast water treatment systems in order to comply with the ballast water performance standard from 2016. In the latter case, compliance is
required not later than by their first intermediate or renewal survey in relation to the International Ballast Water Management Certificate, whichever occurs first, after the anniversary date of delivery of the relevant vessel in the year of
compliance with the applicable standard. This convention is not yet effective. We estimate that the installation of ballast water treatment systems on our tankers may cost between $2 million and $3 million per vessel.
The IMO has also developed an International Code for Ships Operating in Polar Waters (or Polar Code) which deals with matters regarding
design, construction, equipment, operation, search and rescue and environmental protection in relation to ships operating in waters surrounding the two poles. The Polar Code includes both safety and environmental provisions and will be mandatory,
with the safety provisions becoming part of SOLAS and the environmental provisions becoming part of MARPOL. In November 2014 the IMOs MSC adopted the Polar Code and the related amendments to SOLAS in relation to safety, while the IMOs
Marine Environment Protection Committee (or MEPC) is expected to adopt the environmental provisions of the Polar Code and associated amendments to MARPOL at its next session in 2015. Once adopted, the Polar Code is to enter into force on
January 1, 2017.
European Union (or EU)
Like the IMO, the EU has adopted regulations phasing out single-hull tankers. All of our tankers are double-hulled.
The EU has also adopted legislation (Directive 2009/16/EC on Port State Control as subsequently amended) that: bans from European waters
manifestly sub-standard vessels (defined as vessels that have been detained twice by EU port authorities, in the preceding two years); creates obligations on the part of EU member port states to inspect minimum percentages of vessels using these
ports annually; provides for increased surveillance of vessels posing a high risk to maritime safety or the marine environment; and provides the EU with greater authority and control over classification societies, including the ability to seek to
suspend or revoke the authority of negligent societies. The EU is also considering the adoption of criminal sanctions for certain pollution events, including improper cleaning of tanks (Directive 2009/15/EC as amended by Directive 2014/111/EU of
December 17, 2014).
The EU has adopted regulations requiring the use of low sulfur fuel. Currently, vessels are required to burn
fuel with a sulfur content not exceeding 1% (while within EU member states territorial seas, exclusive economic zones and pollution control zones that are included in SOX Emission Control Areas). Beginning January 1, 2015, vessels are
required to burn fuel with sulfur content not exceeding 0.1% while within EU member states territorial seas, exclusive economic zones and pollution control zones that are included in SOX Emission Control Areas. Other jurisdictions have also
adopted regulations requiring the use of low sulfur fuel. The California Air Resources Board will require vessels to burn fuel with 0.1% sulfur content or less within 24 nautical miles of California as of January 1, 2014. IMO regulations
require that as of January 1, 2015, all vessels operating
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within Emissions Control Areas (or ECAs) worldwide must comply with 0.1% sulfur requirements. Currently, the only grade of fuel meeting 0.1% sulfur content requirement is low sulfur marine
gas oil (or LSMGO). Since July 1, 2010, the applicable sulfur content limits in the North Sea, the Baltic Sea and the English Channel sulfur control areas have been 1.00%. Other established ECAs under Annex VI to MARPOL are the North
American ECA and the United States Caribbean Sea ECA. Certain modifications were necessary in order to optimize operation on LSMGO of equipment originally designed to operate on Heavy Fuel Oil (or HFO). In addition, LSMGO is more expensive
than HFO and this will impact the costs of operations. However, for vessels employed on fixed term business, all fuel costs, including any increases, are borne by the charterer. Our exposure to increased cost is in our spot trading vessels, although
our competitors bear a similar cost increase as this is a regulatory item applicable to all vessels. All required vessels in our fleet trading to and within regulated low sulfur areas are able to comply with fuel requirements.
The EU has recently adopted Regulation (EU) No 1257/2013 which imposes rules regarding ship recycling and management of hazardous materials on
vessels. The Regulation sets out requirements for the recycling of vessels in an environmentally sound manner at approved recycling facilities, so as to minimize the adverse effects of recycling on human health and the environment. The Regulation
also contains rules to control and properly manage hazardous materials on vessels and prohibits or restricts the installation or use of certain hazardous materials on vessels. The Regulation aims at facilitating the ratification of the Hong Kong
International Convention for the Safe and Environmentally Sound Recycling of Ships adopted by the IMO in 2009 (which has not entered into force). It applies to vessels flying the flag of a Member State. In addition, certain of its provisions also
apply to vessels flying the flag of a third country calling at a port or anchorage of a Member State. For example, when calling at a port or anchorage of a Member State, the vessels flying the flag of a third country will be required, amongst other
things, to have on board an inventory of hazardous materials which complies with the requirements of the Regulation and to be able to submit to the relevant authorities of that Member State a copy of a statement of compliance issued by the relevant
authorities of the country of their flag and verifying the inventory. The Regulation is to apply not earlier than December 31, 2015 and not later than December 31, 2018, although certain of its provisions are applicable from
December 31, 2014 and certain others are to apply from December 31, 2020.
North Sea and Brazil
Our shuttle tankers and FPSO units primarily operate in the North Sea and Brazil.
There is no international regime in force which deals with compensation for oil pollution from offshore craft, such as FPSOs. The issue
whether the CLC and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971, as amended by the 1992 Protocol (or the Fund Convention), which deal with liability and compensation for
oil pollution and the Convention on Limitation of Liability for Maritime Claims 1976, as amended by the 1996 Protocol to it (or the 1976 Limitation of Liability Convention), which deals with limitation of liability for maritime claims, apply to
FPSOs is neither straightforward nor certain. The CLC and the Fund Convention were not drafted with FPSOs and offshore craft in mind and it is doubtful whether FPSOs and any claims for oil pollution caused by them fall within the ambit of the CLC
and the Fund Convention. This is due to the definition of ship under these conventions and the requirement that oil is carried on board the relevant vessel. Nevertheless, the wording of the 1992 Protocol to the CLC leaves
room for arguing that FPSOs and oil pollution caused by them can come under the ambit of these conventions for the purposes of liability and compensation. However, the application of these conventions also depends on their implementation by the
relevant domestic laws of the countries which are parties to them.
UKs Merchant Shipping Act 1995, as amended (or the MSA),
implements the CLC but uses a wider definition of a ship than the one used in the CLC and in its 1992 Protocol but still refers to the criteria used by the CLC. It is therefore doubtful that FPSOs fall within its wording. However, the
MSA also includes separate provisions for liability for oil pollution otherwise than under the CLC (section 154 of Chapter III of Part VI of the MSA). These apply to vessels which fall within a much wider definition and include non-seagoing vessels.
It is arguable that the wording of these MSA provisions is wide enough to cover oil pollution caused by offshore craft such as FPSOs. The liability regime under these MSA provisions is similar to that imposed under the CLC but limitation of
liability is subject to the 1976 Limitation of Liability Convention regime (as implemented in the MSA),
With regard to the 1976
Limitation of Liability Convention, it is, again, doubtful whether it applies to FPSOs, as it contains certain exceptions in relation to vessels constructed for or adapted to and engaged in drilling and in relation to floating platforms constructed
for the purpose of exploring or exploiting natural resources of the seabed or its subsoil. However, these exceptions are not included in the legislation implementing the 1976 Limitation of Liability Convention in the UK, which is also to be found in
the MSA. In addition, the MSA sets out a very wide definition of ship in relation to which the 1976 Limitation of Liability Convention is to apply and there is room for argument that if FPSOs fall within that definition of
ship, they are subject in the UK to the limitation provisions of the 1976 Limitation of Liability Convention.
In the absence
of an international regime regulating liability and compensation for oil pollution caused by offshore oil and gas facilities, the Offshore Pollution Liability Agreement 1974 (or OPOL) was entered into by a number of oil companies and became
effective in 1975. This is a voluntary industry oil pollution compensation scheme which is funded by the parties to it. These are operators or intending operators of offshore facilities used in the exploration for and production of oil and gas
located within the jurisdictions of a number of Designated States which include the UK, Denmark, Norway, Germany, France, Greenland, Ireland, the Netherlands, the Isle of Man and the Faroe Islands. The scheme provides for strict
liability of the relevant operator for pollution damage and remedial costs, subject to a limit, and the operators must provide evidence of financial responsibility in the form of insurance or other security to meet the liability under the scheme.
With regard to FPSOs, Chapter 7 of Annex I of MARPOL (which contains regulations for the prevention of oil pollution) sets out special
requirements for fixed and floating platforms, including, amongst others, FPSOs and FSUs. The IMOs Marine Environment Protection Committee has issued guidelines for the application of MARPOL Annex I requirements (as revised from time to time)
to FPSOs and FSUs.
The EUs Directive 2004/35/CE on environmental liability with regard to the prevention and remedying of
environmental damage (or the Environmental Liability Directive) deals with liability for environmental damage on the basis of the polluter pays principle. Environmental damage includes damage to protected species and natural habitats and
damage to water and land. Under this Directive, operators whose activities caused the environmental damage or the imminent threat of such damage are to be held liable for the damage (subject to certain exceptions). With regard to environmental
damage caused by specific activities listed in the Directive, operators are strictly liable, regardless of fault or negligence. This is without prejudice to their right to limit their liability in accordance with national legislation implementing
the 1976 Limitation of Liability Convention. The Directive applies both to damage which has already occurred and where there is an imminent threat of damage. It also requires the relevant operator to take preventive action, to report an imminent
threat and any environmental damage to the regulators and to perform remedial measures, such as clean-up. The Environmental Liability Directive has been implemented in the UK by the Environmental Damage (Prevention and Remediation) Regulations 2009.
In June 2013 the EU adopted Directive 2013/30/EU on safety of offshore oil and gas operations and amending Directive 2004/35/EC. This new
Directive lays down minimum requirements for member states and the European Maritime Safety Agency for the purposes of reducing the occurrence of major accidents related to offshore oil and gas operations, thus increasing protection of the marine
environment and coastal economies against pollution, establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting disruptions to the EUs energy production and improving responses to accidents. The
Directive sets out extensive requirements, such as preparation of a major hazard report with risk assessment, emergency response plan and safety and environmental management system applicable to the relevant oil and gas installation before the
planned commencement of the operations, independent verification of safety and environmental critical elements identified in the risk assessment for the relevant oil and gas installation, and ensuring that factors such as the applicants safety
and environmental performance and its financial capabilities or security to meet potential liabilities arising from the oil and gas operations are taken into account when considering granting a license. Under the Directive, Member States are to
ensure that the relevant licensee is financially liable for the prevention and remediation of environmental damage (as defined in the Environmental Liability Directive) caused by offshore oil and gas operations carried out by or on behalf of the
licensee or the operator. Member States must lay down rules on penalties applicable to infringements of the legislation adopted pursuant to this Directive. Member States must bring into force laws, regulations and administrative provisions necessary
to comply with this Directive by 19 July 2015. The UK legislation implementing this Directive and due to enter into force on 19 July 2015 are the Environmental Damage (Prevention and Remediation) (England) Regulations 2015.
In addition to the regulations imposed by the IMO and EU, countries having jurisdiction over North Sea areas impose regulatory requirements in
connection with operations in those areas, including the United Kingdom and Norway. In the UK, the exploration for and production of oil and gas in the UK, including the UK sector of the North Sea is undertaken pursuant to the Petroleum Act 1998 in
accordance with the conditions of a license issued by the UK government. Model clauses included in such licenses require licensees amongst other things to operate in accordance with methods customarily used in good oilfield practice and to take all
steps practicable to prevent the escape of oil. Various UK regulations dealing with environmental and other aspects of offshore oil and gas activities are also in place. These regulatory requirements, together with additional requirements imposed by
operators in North Sea oil fields, require that we make further expenditures for sophisticated equipment, reporting and redundancy systems on the shuttle tankers and for the training of seagoing staff. Additional regulations and requirements may be
adopted or imposed that could limit our ability to do business or further increase the cost of doing business in the North Sea.
In
Norway, the Norwegian Pollution Control Authority requires the installation of Volatile Organic Compound (or VOC) emissions reduction units on most shuttle tankers serving the Norwegian continental shelf. Customers bear the cost to install
and operate the VOC equipment on board the shuttle tankers.
In addition to the regulations imposed by the IMO, Brazil imposes regulatory
requirements in connection with operations in its territory, including specific requirements for the operations of vessels flagged in countries other than Brazil. Under Brazils environmental laws, owners and operators of vessels are strictly
liable for damages to the environment. Other penalties for non-compliance with environmental laws include fines, loss of tax incentives and suspension of activities. Operators such as Petrobras may impose additional requirements, such as compliance
with specific health, safety and environmental standards or the use of local labor. Additional regulations and requirements may be adopted or imposed that could limit our ability to do business or further increase the cost of doing business in
Brazil.
United States
The
United States has enacted an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills, including discharges of oil cargoes, bunker fuels or lubricants, primarily through the Oil Pollution Act of
1990 (or OPA 90) and the Comprehensive Environmental Response, Compensation and Liability Act (or CERCLA). OPA 90 affects all owners, bareboat charterers, and operators whose vessels trade to the United States or its territories or
possessions or whose vessels operate in United States waters, which include the U.S. territorial sea and 200-mile exclusive economic zone around the United States. CERCLA applies to the discharge of hazardous substances rather than
oil and imposes strict joint and several liability upon the owners, operators or bareboat charterers of vessels for cleanup costs and damages arising from discharges of hazardous substances. We believe that petroleum products should not
be considered hazardous substances under CERCLA, but additives to oil or lubricants used on vessels might fall within its scope.
Under
OPA 90, vessel owners, operators and bareboat charterers are responsible parties and are jointly, severally and strictly liable (unless the oil spill results solely from the act or omission of a third party, an act of God or an act of
war and the responsible party reports the incident and reasonably cooperates with the appropriate authorities) for all containment and cleanup costs and other damages arising from discharges or threatened discharges of oil from their vessels. These
other damages are defined broadly to include:
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natural resources damages and the related assessment costs; |
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real and personal property damages; |
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net loss of taxes, royalties, rents, fees and other lost revenues; |
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lost profits or impairment of earning capacity due to property or natural resources damage; |
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net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and |
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loss of subsistence use of natural resources. |
OPA 90 limits the liability of responsible parties in an amount it periodically updates. The liability limits do not apply if the incident was
proximately caused by violation of applicable U.S. federal safety, construction or operating regulations, including IMO conventions to which the United States is
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a signatory, or by the responsible partys gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in
connection with the oil removal activities. Liability under CERCLA is also subject to limits unless the incident is caused by gross negligence, willful misconduct or a violation of certain regulations. We currently maintain for each of our
vessels pollution liability coverage in the maximum coverage amount of $1 billion per incident. A catastrophic spill could exceed the coverage available, which could harm our business, financial condition and results of operations.
Under OPA 90, with limited exceptions, all newly built or converted tankers delivered after January 1, 1994 and operating in U.S. waters
must be double-hulled. All of our tankers are double-hulled.
OPA 90 also requires owners and operators of vessels to establish and
maintain with the United States Coast Guard (or Coast Guard) evidence of financial responsibility in an amount at least equal to the relevant limitation amount for such vessels under the statute. The Coast Guard has implemented regulations
requiring that an owner or operator of a fleet of vessels must demonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum limited liability under OPA 90 and CERCLA. Evidence
of financial responsibility may be demonstrated by insurance, surety bond, self-insurance, guaranty or an alternate method subject to approval by the Coast Guard. Under the self-insurance provisions, the shipowner or operator must have a net worth
and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial responsibility. We have complied with the Coast Guard regulations by using
self-insurance for certain vessels and obtaining financial guarantees from a third party for the remaining vessels. If other vessels in our fleet trade into the United States in the future, we expect to obtain guarantees from third-party insurers.
OPA 90 and CERCLA permit individual U.S. states to impose their own liability regimes with regard to oil or hazardous substance pollution
incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited strict liability for spills. Several coastal states, such as California, Washington and Alaska require state-specific evidence of financial
responsibility and vessel response plans. We intend to comply with all applicable state regulations in the ports where our vessels call.
Owners or operators of vessels, including tankers operating in U.S. waters are required to file vessel response plans with the Coast Guard,
and their tankers are required to operate in compliance with their Coast Guard approved plans. Such response plans must, among other things:
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address a worst case scenario and identify and ensure, through contract or other approved means, the availability of necessary private
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describe crew training and drills; and |
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identify a qualified individual with full authority to implement removal actions. |
We have filed vessel response plans with the Coast Guard and have received its approval of such plans. In addition, we conduct regular oil
spill response drills in accordance with the guidelines set out in OPA 90. The Coast Guard has announced it intends to propose similar regulations requiring certain vessels to prepare response plans for the release of hazardous substances.
OPA 90 and CERCLA do not preclude claimants from seeking damages resulting from the discharge of oil and hazardous substances under other
applicable law, including maritime tort law. The application of this doctrine varies by jurisdiction.
The United States Clean Water Act
also prohibits the discharge of oil or hazardous substances in U.S. navigable waters and imposes strict liability in the form of penalties for unauthorized discharges. The Clean Water Act imposes substantial liability for the costs of removal,
remediation and damages and complements the remedies available under OPA 90 and CERCLA discussed above.
Our vessels that discharge
certain effluents, including ballast water, in U.S. waters must obtain a Clean Water Act permit from the Environmental Protection Agency (or EPA) titled the Vessel General Permit and comply with a range of effluent limitations,
best management practices, reporting, inspections and other requirements. The current Vessel General Permit incorporates Coast Guard requirements for ballast water exchange and includes specific technology-based requirements for vessels, and
includes an implementation schedule to require vessels to meet the ballast water effluent limitations by the first drydocking after January 1, 2014 or January 1, 2016, depending on the vessel size. Vessels that are constructed after
December 1, 2013 are subject to the ballast water numeric effluent limitations. Several U.S. states have added specific requirements to the Vessel General Permit and, in some cases, may require vessels to install ballast water treatment
technology to meet biological performance standards.
Greenhouse Gas Regulation
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (or the Kyoto Protocol) entered into
force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of greenhouse gases. In December 2009, more than 27 nations, including the United States, entered into the Copenhagen Accord.
The Copenhagen Accord is non-binding, but is intended to pave the way for a comprehensive, international treaty on climate change. Certain new IMO regulations became effective on January 1, 2013. The new technical and operational measures
imposed by these new regulations include the Energy Efficiency Design Index, which is mandatory for newbuilding vessels, and the Ship Energy Efficiency Management Plan, which is mandatory for all vessels. In addition, the IMO
is evaluating various mandatory measures to reduce greenhouse gas emissions from international shipping, which may include market-based instruments or a carbon tax. In October 2014, the IMOs MEPC agreed in principle to develop a system of data
collection regarding fuel consumption of ships. The EU also has indicated that it intends to propose an expansion of an existing EU emissions trading regime to include emissions of greenhouse gases from vessels, and individual countries in the EU
may impose additional requirements. The EU is currently considering a proposal for a regulation establishing a system of monitoring, reporting and verification of greenhouse gas shipping emissions (or MRV system). The proposed MRV system may
be the precursor to a market-based mechanism to be adopted in the future. In the United States, the EPA issued an endangerment finding regarding greenhouse gases under the Clean Air Act. While this finding in itself does not impose any
requirements on our industry, it authorizes the EPA to regulate directly greenhouse gas emissions through a rule-making process. In addition, climate change initiatives are being considered in the United States Congress and by individual states. Any
passage of new climate control legislation or other regulatory initiatives by the IMO, the EU, the United States or other countries or states where we operate that restrict emissions of greenhouse gases could have a significant financial and
operational impact on our business that we cannot predict with certainty at this time.
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Vessel Security
The ISPS was adopted by the IMO in December 2002 in the wake of heightened concern over worldwide terrorism and became effective on
July 1, 2004. The objective of ISPS is to enhance maritime security by detecting security threats to ships and ports and by requiring the development of security plans and other measures designed to prevent such threats. Each of the existing
vessels in our fleet currently complies with the requirements of ISPS and Maritime Transportation Security Act of 2002 (U.S. specific requirements) and regularly exercise these plans to ensure efficient use and familiarity by all involved.
C. Organizational Structure
Our sole general partner is Teekay Offshore GP L.L.C., which is a wholly-owned indirect subsidiary of Teekay Corporation. Teekay Corporation
also controls its public subsidiaries Teekay LNG Partners L.P. (NYSE: TGP) and Teekay Tankers Ltd. (NYSE: TNK).
Please read Exhibit 8.1
to this Annual Report for a list of our significant subsidiaries as of December 31, 2014.
D. Properties
Other than our vessels and VOC plants mentioned above, we do not have any material property.
E. Taxation of the Partnership
United States Taxation
The
following is a discussion of the expected material U.S. federal income tax considerations applicable to us. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (or the Code), legislative history,
applicable U.S. Treasury Regulations (or Treasury Regulations), judicial authority and administrative interpretations, all as in effect on the date of this Annual Report, and which are subject to change, possibly with retroactive effect, or
are subject to different interpretations. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below.
Election to be Taxed as a Corporation. We have elected to be taxed as a corporation for U.S. federal income tax purposes.
As such, we are subject to U.S. federal income tax on our income to the extent it is from U.S. sources or otherwise is effectively connected with the conduct of a trade or business in the United States as discussed below.
Taxation of Operating Income. A significant portion of our gross income will be attributable to the transportation of crude oil
and related products. For this purpose, gross income attributable to transportation (or Transportation Income) includes income derived from, or in connection with, the use (or hiring or leasing for use) of a vessel to transport cargo, or the
performance of services directly related to the use of any vessel to transport cargo, and thus includes income from time charters, contracts of affreightment, bareboat charters, and voyage charters.
Fifty percent (50%) of Transportation Income attributable to transportation that either begins or ends, but that does not both begin and
end, in the United States (or U.S. Source International Transportation Income) is considered to be derived from sources within the United States. Transportation Income attributable to transportation that both begins and ends in the
United States (or U.S. Source Domestic Transportation Income) is considered to be 100% derived from sources within the United States. Transportation Income attributable to transportation exclusively between non-U.S. destinations is
considered to be 100% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally will not be subject to U.S. federal income tax.
Based on our current operations, a substantial portion of our Transportation Income is from sources outside the United States and not subject
to U.S. federal income tax. In addition, we believe that we have not earned any U.S. Source Domestic Transportation Income, and we expect that we will not earn any such income in future years. However, certain of our activities give rise to
U.S. Source International Transportation Income. Unless the exemption from U.S. taxation under Section 883 of the Code (or the Section 883 Exemption) applies, our U.S. Source International Transportation Income
generally will be subject to U.S. federal income taxation under either the net basis and branch profits taxes or the 4% gross basis tax, each of which is discussed below.
The Section 883 Exemption. In general, the Section 883 Exemption provides that if a non-U.S. corporation
satisfies the requirements of Section 883 of the Code and the Treasury Regulations thereunder (or the Section 883 Regulations), it will not be subject to the net basis and branch profits taxes or 4.0% gross basis tax described below
on its U.S. Source International Transportation Income. The Section 883 Exemption does not apply to U.S. Source Domestic Transportation Income.
A non-U.S. corporation will qualify for the Section 883 Exemption if, among other things, (i) it is organized in a jurisdiction
outside the United States that grants an exemption from tax to U.S. corporations on international Transportation Income (or an Equivalent Exemption), (ii) it meets one of three ownership tests (or Ownership Tests) described in the
Section 883 Regulations, and (iii) it meets certain substantiation, reporting and other requirements (or the Substantiation Requirements).
We are organized under the laws of the Republic of The Marshall Islands. The U.S. Treasury Department has recognized the Republic of The
Marshall Islands as a jurisdiction that grants an Equivalent Exemption. We also believe that we will be able to satisfy the Substantiation Requirements. However, we do not believe that we meet the Ownership Tests and therefore we will not qualify
for the Section 883 Exemption and our U.S. Source International Transportation Income will not be exempt from U.S. federal income taxation.
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The Net Basis and Branch Profits Taxes. If the Section 883 Exemption does not
apply, our U.S. Source International Transportation Income may be treated as effectively connected with the conduct of a trade or business in the United States (or Effectively Connected Income) if we have a fixed place of business in the
United States and substantially all of our U.S. Source International Transportation Income is attributable to regularly scheduled transportation or, in the case of income derived from bareboat charters, is attributable to a fixed place of
business in the United States. Based on our current operations, none of our potential U.S. Source International Transportation Income is attributable to regularly scheduled transportation or is derived from bareboat charters attributable to a
fixed place of business in the United States. As a result, we do not anticipate that any of our U.S. Source International Transportation Income will be treated as Effectively Connected Income. However, there is no assurance that we will not
earn income pursuant to regularly scheduled transportation or bareboat charters attributable to a fixed place of business in the United States in the future, which would result in such income being treated as Effectively Connected Income. U.S.
Source Domestic Transportation Income generally will be treated as Effectively Connected Income. However, we do not anticipate that any of our income has been or will be, U.S. Source Domestic Transportation Income.
Any income we earn that is treated as Effectively Connected Income would be subject to U.S. federal corporate income tax (the highest
statutory rate currently is 35%) and a 30% branch profits tax imposed under Section 884 of the Code. In addition, a branch interest tax could be imposed on certain interest paid or deemed paid by us.
On the sale of a vessel that has produced Effectively Connected Income, we generally would be subject to the net basis and branch profits
taxes with respect to our gain not in excess of certain prior deductions for depreciation that reduced Effectively Connected Income. Otherwise, we would not be subject to U.S. federal income tax with respect to gain realized on the sale of a
vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles.
The
4% Gross Basis Tax. If the Section 883 Exemption does not apply and we are not subject to the net basis and branch profit taxes described above, we would be subject to a 4% U.S. federal income tax on our gross U.S.
Source International Transportation Income, without benefit of deductions. For 2015, we estimate that the U.S. federal income tax on such U.S. Source International Transportation Income will be approximately $150,000 based on the amount of U.S.
Source International Transportation Income we earned for 2014. The amount of such tax for which we are liable for any year will depend upon the amount of income we earn from voyages into or out of the United States in such year, however, which is
not within our complete control.
Marshall Islands Taxation
Because we and our controlled affiliates do not, and we do not expect that we and our controlled affiliates will, conduct business or
operations in the Republic of The Marshall Islands, neither we nor our controlled affiliates are subject to income, capital gains, profits or other taxation under current Marshall Islands law. As a result, distributions by controlled affiliates to
us are not subject to Marshall Islands taxation.
Other Taxation
We and our subsidiaries are subject to taxation in certain non-U.S. jurisdictions because we or our subsidiaries are either organized, or
conduct business or operations, in such jurisdictions. We intend that our business and the business of our subsidiaries will be conducted and operated in a manner that minimizes taxes imposed upon us and our subsidiaries. However, we cannot assure
this result as tax laws in these or other jurisdictions may change or we may enter into new business transactions relating to such jurisdictions, which could affect our tax liability. Please read Item 18 Financial
Statements: Note 13 Income Taxes.
Item 4A. |
Unresolved Staff Comments |
Not applicable.
Item 5. |
Operating and Financial Review and Prospects |
The following discussion should be read
in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
Managements Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
We are an international provider of marine transportation, oil production, storage, towage and floating accommodation services to the offshore
oil industry focusing on the fast-growing, deep-water offshore oil regions of the North Sea and Brazil. We operate shuttle tankers, floating production, storage and off-loading (or FPSO) units, floating storage and off-take (or FSO)
units, and conventional crude oil tankers, and will operate towage vessels and floating accommodation units (FAUs). As at December 31, 2014, our fleet consists of 34 shuttle tankers (including two chartered-in vessels and one HiLoad
Dynamic Positioning (or DP) unit), seven FPSO units (including the Libra FPSO and the Petrojarl I FPSO conversion and upgrade projects), six FSO units, and four conventional oil tankers, in which our interests range from 50% to
100%. In addition, our fleet includes six modern on-the-water towing and anchor handling vessels (of which three vessels delivered during the first quarter of 2015, with the remaining three vessels expected to deliver during the second quarter of
2015), and four long-haul towing and anchor handling vessel newbuildings scheduled for delivery in 2016 and three FAUs, of which one FAU delivered in February 2015 and the remaining two units are scheduled for delivery in 2016.
Our growth strategy focuses on expanding our fleet of shuttle tankers and our FPSO and FSO units under long-term, fixed-rate time charters and
expanding into related offshore services, including specialized towage and floating accommodation. We intend to continue our practice of primarily acquiring vessels as needed for approved projects only after the long-term charters for the projects
have been awarded to us, rather than ordering vessels on a speculative basis. We seek to capitalize on opportunities emerging from the global expansion of the offshore transportation, production and storage sectors by selectively targeting
long-term, fixed-rate time charters. We have entered and may enter into joint ventures and partnerships with companies that may provide increased access to long-term, fixed-rate time charter opportunities or may engage in vessel or business
acquisitions. We seek to leverage the expertise, relationships and reputation of Teekay Corporation and its affiliates to pursue these growth opportunities in the offshore sectors and may consider other opportunities to which our competitive
strengths are well suited. We have rights to participate in certain other FPSO and shuttle tanker opportunities provided by Teekay Corporation, Sevan Marine ASA (or Sevan) and Remora AS (or Remora). Our operating fleet primarily trades
on medium to long-term, stable contracts and we are structured as a publicly-traded master limited partnership.
Global crude oil prices
have significantly declined since mid-2014. A continuation of lower oil prices or a further decline in oil prices may adversely affect investment in the exploration for or development of new or existing offshore projects and limit our growth
opportunities, as well as reduce our revenues under volume- or production-based contracts or upon entering into replacement or new charter contracts.
35
SIGNIFICANT DEVELOPMENTS
Libra FPSO Project
In January 2015, we,
through our 50/50 joint venture with Odebrecht Oil & Gas S.A (Odebrecht), finalized the contract with Petroleo Brasileiro SA (Petrobras) to provide an FPSO unit for the Libra field located in the Santos Basin offshore Brazil.
The contract will be serviced by a new FPSO unit converted from our 1995-built shuttle tanker, the Navion Norvegia. The conversion project is currently underway at Sembcorp Marines Jurong Shipyard in Singapore and is scheduled to
commence operations in early-2017 under a 12-year firm period fixed-rate contract with Petrobras and its international partners. The FPSO conversion is expected to be completed for a total fully built-up cost of approximately $1.0 billion.
Petrojarl I FPSO Acquisition
In December 2014, we entered into an agreement with a consortium led by Queiroz Galvão Exploração e Produção
SA (QGEP) to provide an FPSO unit for the Atlanta field located in the Santos Basin offshore Brazil. In connection with the QGEP contract, we acquired the Petrojarl I FPSO unit from Teekay Corporation for $57 million and the unit is
currently undergoing upgrades at the Damen Shipyard Groups DSR Schiedam Shipyard in the Netherlands for an estimated cost of approximately $232 million, including the cost of acquiring the Petrojarl I FPSO unit. The unit is scheduled to
commence operations in the first half of 2016 under a five-year fixed-rate charter contract with QGEP. The FPSO will be used as an early production system unit on the Atlanta field which is located 185 kilometers offshore from the Brazil coast at a
water depth of approximately 1,550 meters and contains an estimated 260 million recoverable barrels of oil equivalent.
Knarr
FPSO Acquisition
In June 2011, Teekay Corporation entered into a contract with BG Norge Limited (BG) to provide a harsh weather
FPSO unit to operate in the North Sea. The contract will be serviced by a newbuilding FPSO unit, the Petrojarl Knarr (or Knarr), which arrived in Norway in mid-September 2014 following delivery from the shipyard. In December 2014, the
Board of Directors of our general partner approved our acquisition of the Knarr FPSO unit from Teekay Corporation, subject to the unit completing certain operational tests and commencing its charter contract at full rate. The purchase price
for the Knarr, which is based on a fully built-up cost of approximately $1.25 billion, is expected to be financed through the assumption of an existing $815 million long-term debt facility and $450 million through a combination of issuing
equity and short-term vendor financing from Teekay Corporation. In March 2015, the Knarr achieved first oil under its charter contract with BG. We expect to complete the acquisition of the Knarr during the second quarter of 2015.
Acquisition of Logitel
In August 2014,
we acquired Logitel Offshore Holding AS (Logitel), a Norway-based company focused on the high-end floating accommodation market. Logitel is currently constructing three newbuilding FAUs, based on a Sevan cylindrical hull design, at the COSCO
(Nantong) Shipyard (or COSCO) in China for an estimated cost of approximately $588 million, including $30.0 million from our assumption of Logitels obligations under a bond agreement from Sevan. We currently hold options to order up to
an additional five FAUs. Prior to the acquisition, Logitel secured a three-year fixed-rate charter contract, plus extension options, with Petrobras in Brazil for the first FAU, which delivered in February 2015. The FAU is expected to commence its
charter with Petrobras during the second quarter of 2015. We expect to secure charter contracts for the remaining two newbuilding FAUs prior to their respective scheduled deliveries in the first quarter of 2016 and the fourth quarter of 2016. We
intend to finance the initial newbuilding payments through our existing liquidity and expect to secure long-term debt financing for the units prior to their scheduled deliveries. Please read Item 18 Financial Statements: Note 18b
Acquisition of Logitel Offshore Holding AS.
Acquisition of ALP and Towage Vessels
In March 2014, we acquired ALP Maritime Services B.V. (or ALP), a Netherlands-based provider of long-haul ocean towage and offshore
installation services to the global offshore oil and gas industry. As part of the transaction, we and ALP entered into an agreement with Niigata Shipbuilding & Repair of Japan for the construction of four state-of-the-art SX-157 Ulstein
Design ultra-long distance towing and anchor handling vessel newbuildings, which will be equipped with dynamic positioning capability, for an estimated cost of approximately $258 million. We intend to continue financing the newbuilding installments
through our existing liquidity and expect to secure long-term debt financing for these vessels prior to their scheduled deliveries in 2016. Please read Item 18 Financial Statements: Note 18a Acquisition of ALP Maritime Services
B.V.
In October 2014, we, through our wholly-owned subsidiary ALP, agreed to acquire six modern on-the-water long-distance towing and
anchor handling vessels for approximately $220 million. The vessels were built between 2006 and 2010 and are all equipped with DP capabilities. We took delivery of three vessels in early-2015 and expect to take delivery of the remaining three
vessels during the second quarter of 2015. Including these vessels, along with ALPs four state-of-the-art long-distance towing and anchor handling newbuildings scheduled to deliver in 2016, ALP will become the worlds largest owner and
operator of DP towing and anchor handling vessels. All ten vessels will be capable of long-distance towing and offshore unit installation and decommissioning of large floating exploration, production and storage units.
This acquisition of ALP, the related newbuilding orders and on the water assets represents our entrance into the long-haul ocean towage and
offshore installation services business. We believe that the combination of our infrastructure and access to capital with ALPs experienced management team in this market will enable us to further grow this niche business, which is a natural
complement to our existing offshore business.
Shuttle Contracts
In December 2013, we were awarded a six-year shuttle tanker contract of affreightment, with extension options up to an additional four years,
with BG Group plc, which will service the Knarr oil and gas field in the North Sea. The expected start date for the shuttle tanker contract of affreightment coincides with the expected full start-up of the Petrojarl Knarr FPSO unit in the
North Sea in the second quarter of 2015.
36
In September 2013, we acquired a 2010-built HiLoad DP unit from Remora, a Norway-based offshore
marine technology company, for a total purchase price of approximately $60 million, including modification and mobilization costs. In late-December 2014, we received notification from Petrobras that the HiLoad DP unit did not meet certain test
criteria under the time-charter contract and therefore, we are currently reviewing various alternatives. In July 2013, Remora was awarded a contract by BG E&P Brasil Ltd. to undertake a front-end engineering and design (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, is expected to include new features such as increased engine power and capability to maneuver vessels larger than
Suezmax conventional tankers. Under the terms of an agreement between Remora and us, we have a right of first refusal to acquire any future HiLoad DP projects developed by Remora.
Voyageur Spirit FPSO Acquisition
On August 27, 2013, repairs to the defective gas compressor on the Voyageur Spirit FPSO unit were completed. Since that time, we
have been receiving full rate under the charter contract as though the unit was producing at full capacity either directly from the charterer or through an indemnification arrangement with Teekay Corporation, which indemnified us for certain lost
revenues and unrecovered vessel operating expenses relating to the unit. On April 4, 2014, we received the certificate of final acceptance from the charterer of the Voyageur Spirit FPSO unit, E.ON Ruhrgas UK GP Limited (or E.ON),
which declared the unit on-hire retroactive to February 22, 2014.
Indemnification amounts paid to us by Teekay Corporation have been
effectively treated as a reduction in the purchase price paid by us to Teekay Corporation for the Voyageur Spirit FPSO. From the date of first oil, on April 13, 2013, Teekay Corporation indemnified us for a total of $41.1 million.
FSO Contracts
In July 2014, we completed
the conversion of our 1993-built shuttle tanker the Navion Clipper into an FSO unit, now the Suksan Salamander, for an estimated cost of approximately $75 million, including mobilization costs. In August 2014, the FSO unit commenced
its ten-year charter contract plus extension options with Salamander Energy plc, in Asia.
In May 2014, we entered into a ten-year
contract extension with Apache Energy for the Dampier Spirit FSO unit, which operates on the Stag oil field offshore Western Australia.
In May 2013, we entered into an agreement with Statoil, on behalf of the field license partners, to provide an 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 that will be converted from the 1995-built shuttle tanker, the Randgrid, which we currently own through a 67%-owned subsidiary and of which we will
acquire full ownership prior to its conversion. The FSO conversion project is expected to cost approximately $276 million, including amounts reimbursable upon delivery of the unit relating to installation and mobilization, and the cost of acquiring
the remaining 33% ownership interest in the Randgrid shuttle tanker. Following scheduled completion of the conversion in early-2017, the newly converted FSO unit will commence operations under a three-year time-charter contract to Statoil,
which includes 12 additional one-year extension options.
Equity Issuances
In November 2014, we issued 6.7 million common units to a group of institutional investors, generating net proceeds of $178.5 million
(including our general partners 2% proportionate capital contribution). The net proceeds from the issuance of these common units were used for general partnership purposes, which include funding vessel conversion projects and financing
newbuilding FAUs and towage vessels.
In 2013, we implemented a continuous offering program (or the COP) under which we may issue
new common units, representing limited partner interests, at market prices up to a maximum aggregate amount of $100 million. During 2014, we sold an aggregate of 0.2 million common units under the COP, generating net proceeds of approximately
$7.6 million (including our general partners 2% proportionate capital contribution and net of offering costs). The net proceeds from the issuance of these common units were used for general partnership purposes.
Bond Issuances
In May 2014, we issued
$300.0 million in new senior unsecured non-rated bonds in the United States which mature in January 2019. The bonds are listed on the New York Stock Exchange and bear interest at a fixed rate of 6.0%. We used the net proceeds of $293.5 million from
the bond offering for general partnership purposes.
In January 2014, we issued in the Norwegian bond market NOK 1,000 million in
senior unsecured bonds, maturing in January 2019. The bonds are listed on the Oslo Stock Exchange. The aggregate principal amount of the bonds was equivalent to $162.2 million and all interest and principal payments have been swapped into U.S.
dollars at a fixed rate of 6.28%. The net proceeds from the bond offering was used for general partnership purposes.
Potential Additional Shuttle Tanker, FSO and FPSO Projects
Pursuant to an omnibus agreement that we entered into in connection with our initial public offering in December 2006, Teekay Corporation is
obligated to offer to us 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. We
may also acquire other vessels that Teekay Corporation may offer us from time to time and we intend to pursue direct acquisitions from third parties and new offshore projects.
Pursuant to the omnibus agreement and subsequent agreements, Teekay Corporation is obligated to offer to sell to us the Petrojarl Foinaven
FPSO unit, an existing unit owned by Teekay Corporation and operating under a long-term contract in the North Sea, subject to approvals required from the charterer. The purchase price for the Petrojarl Foinaven would be based on fair
market value.
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 180,000 employees and a
presence in over 20 countries. Through the joint venture agreement, Odebrecht is a 50 percent partner in the Cidade de Itajai FPSO and the new Libra FPSO project.
37
Teekay Corporation owns two additional FPSO units, the Hummingbird Spirit and the
Petrojarl Banff, which may also be offered to us in the future pursuant to the omnibus agreement.
Our Contracts and
Charters
We generate revenues by charging customers for the transportation and storage of their crude oil using our vessels.
Historically, these services generally have been provided under the following basic types of contractual relationships:
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Contracts of affreightment, whereby we carry an agreed quantity of cargo for a customer over a specified trade route within a given period of time;
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Time charters, whereby vessels we operate and are responsible for crewing are chartered to customers for a fixed period of time at rates that are
generally fixed, but may contain a variable component based on inflation, interest rates or current market rates; |
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Bareboat charters, whereby customers charter vessels for a fixed period of time at rates that are generally fixed, but the customers operate the
vessels with their own crews; and |
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Voyage charters, which are charters for shorter intervals that are priced on a current, or spot, market rate. |
We also generate revenues by charging customers for production, processing and storage services to oil companies operating offshore oil field
installations. These services are typically provided under long-term, fixed-rate FPSO contracts, which may contain a variable component for incentive-based revenues dependent upon operating performance.
The table below illustrates the primary distinctions among these types of charters and contracts:
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Contract of Affreightment |
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Time Charter |
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Bareboat Charter |
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Voyage Charter (1) |
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FPSO Service Contracts |
Typical contract length |
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One year or more |
|
One year or more |
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One year or more |
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Single voyage |
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Long-term |
Hire rate basis(2) |
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Typically daily |
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Daily |
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Daily |
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Varies |
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Daily |
Voyage expenses(3) |
|
We pay |
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Customer pays |
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Customer pays |
|
Varies |
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Not applicable |
Vessel operating expenses(3) |
|
We pay |
|
We pay |
|
Customer pays |
|
We pay |
|
We pay |
Off hire (4) |
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Customer typically does not pay |
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Varies |
|
Customer typically pays |
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Customer does not pay |
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Not applicable |
Shutdown (5) |
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Not applicable |
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Not applicable |
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Not applicable |
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Not applicable |
|
Varies |
(1) |
Under a consecutive voyage charter, the customer pays for idle time. |
(2) |
Hire rate refers to the basic payment from the charterer for the use of the vessel. |
(3) |
Defined below under Important Financial and Operational Terms and Concepts. |
(4) |
Off hire refers to the time a vessel is not available for service. |
(5) |
Shutdown refers to the time production services are not available. |
Important Financial and Operational Terms and Concepts
We use a variety of financial and operational terms and concepts. These include the following:
Revenues. Revenues primarily include revenues from contracts of affreightment, time charters, bareboat charters, voyage charters
and FPSO contracts. Revenues are affected by hire rates and the number of days a vessel operates and the daily production volume on FPSO units. Revenues are also affected by the mix of business between contracts of affreightment, time charters,
bareboat charters, voyage charters and FPSO contracts. Hire rates for voyage charters are more volatile, as they are typically tied to prevailing market rates at the time of a voyage.
Voyage Expenses. Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees,
cargo loading and unloading expenses, canal tolls, agency fees and commissions. Voyage expenses are typically paid by the customer under time charters and bareboat charters and by the shipowner under voyage charters and contracts of affreightment.
When we pay voyage expenses, they typically are added to the hire rates at an approximate cost.
Net Revenues. Net revenues
represent revenues less voyage expenses incurred by us. Because the amount of voyage expenses we incur for a particular charter depends upon the type of charter, we use net revenues to improve the comparability between periods of reported revenues
that are generated by the different types of charters. We principally use net revenues, a non-GAAP financial measure, because it provides more meaningful information to us about the deployment of our vessels and their performance than revenues, the
most directly comparable financial measure under accounting principles generally accepted in the United States (or GAAP).
Vessel Operating Expenses. Under all types of charters and contracts for our vessels, except for bareboat charters, we are
responsible for vessel operating expenses, which include crewing, repairs and maintenance, ship management services, insurance, stores, lube oils and communication expenses. The two largest components of our vessel operating expenses are crew costs
and repairs and maintenance. We are taking steps to maintain these expenses at a stable level, but expect an increase in line with inflation in respect of crew, material, and maintenance costs.
Time-Charter Hire Expenses. Time-charter hire expenses represent the cost to charter-in a vessel for a fixed period of time.
38
Income from Vessel Operations. To assist us in evaluating operations by segment, we
sometimes analyze the income we receive from each segment after deducting operating expenses, but prior to the deduction of interest expense, taxes, realized and unrealized (losses) gains on non-designated derivative instruments, foreign currency
exchange losses and other income.
Dry docking. We must periodically dry dock our shuttle tankers, conventional oil tankers,
towage vessels and FAUs for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. We may dry dock FSO units if we desire to qualify them for shipping classification. Generally,
we dry dock each of our vessels every two and a half to five years, depending upon the type of vessel and its age. We capitalize a substantial portion of the costs incurred during dry docking and amortize those costs on a straight-line basis from
the completion of a dry docking over the estimated useful life of the dry dock. We expense costs related to routine repairs and maintenance performed during dry docking that do not improve or extend the useful lives of the assets, and for annual
class survey costs on our FPSO units. The number of dry dockings undertaken in a given period and the nature of the work performed determine the level of dry-docking expenditures.
Depreciation and Amortization. Depreciation and amortization expense typically consists of:
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charges related to the depreciation of the historical cost of our fleet (less an estimated residual value) over the estimated useful lives of the
vessels; |
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charges related to the amortization of dry-docking expenditures over the estimated useful life of the dry docking; and |
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charges related to the amortization of the fair value of contracts of affreightment where amounts have been attributed to those items in
acquisitions; these amounts are amortized over the period in which the asset is expected to contribute to future cash flows. |
Revenue Days. Revenue days are the total number of calendar days our vessels were in our possession during a period, less the
total number of off-hire days during the period associated with major repairs or dry dockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when the vessel is
available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net revenues between periods.
Calendar-Ship-Days. Calendar-ship-days are equal to the total number of calendar days that our vessels were in our possession
during a period. We use calendar-ship-days primarily to highlight changes in vessel operating expenses, time-charter hire expense and depreciation and amortization. Calendar-ship days are based on our owned and chartered-in fleet, including vessels
owned by our 50%, 67% and 89% owned subsidiaries.
VOC Equipment. We assemble, install, operate and lease equipment that
reduces volatile organic compound (or VOC) emissions during loading, transportation and storage of oil and oil products. Leasing of the VOC equipment is accounted for either as a direct financing lease or as an operating lease. For VOC
equipment accounted for as a direct financing lease, payments received are allocated between the net investment in the lease and other income using the effective interest method so as to produce a constant periodic rate of return over the lease
term.
Items You Should Consider When Evaluating Our Results
You should consider the following factors when evaluating our historical financial performance and assessing our future prospects:
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Our financial results reflect the results of the interests in vessels acquired from Teekay Corporation for all periods the vessels were under
common control. In May 2013, we acquired the Voyageur Spirit FPSO unit. This transaction was deemed to be a business acquisition between entities under common control. Accordingly, we have accounted for this transaction in a manner
similar to the pooling of interest method. Under this method of accounting, our financial statements prior to the date the interest in this vessel was actually acquired by us are retroactively adjusted to include the results of this acquired vessel.
The period retroactively adjusted include all periods that we and the acquired vessel were both under common control of Teekay Corporation and had begun operations. As a result, our applicable consolidated financial statements reflect the vessel and
its results of operations, referred to herein as the Dropdown Predecessor, as if we had acquired it when the vessel began operations under the ownership of Teekay Corporation on April 13, 2013. Please read Item 18 Financial
Statements: Note 3 Dropdown Predecessor. |
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The size of our fleet continues to change. Our results of operations reflect changes in the size and composition of our fleet due to
certain vessel deliveries and vessel dispositions. Please read Results of Operations below for further details about vessel dispositions and deliveries. Due to the nature of our business, we expect our fleet to continue to
fluctuate in size and composition. |
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Vessel operating and other costs are facing industry-wide cost pressures. The shipping industry continues to experience a global
manpower shortage of qualified seafarers in certain sectors due to growth in the world fleet and competition for qualified personnel. Going forward, there may be significant increases in crew compensation as vessel and officer supply dynamics
continue to change. In addition, factors such as fluctuations in commodity and raw material prices could contribute to changes in operating expenditures, while changes in regulatory requirements could contribute to operating expenditure increases.
We continue to take action aimed at improving operational efficiencies, and to temper the effect of inflationary and other price escalations, however increases to operational costs are still likely to occur in the future. |
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Our financial results of operations are affected by fluctuations in currency exchange rates. Under GAAP, all foreign
currency-denominated monetary assets and liabilities (such as cash and cash equivalents, accounts receivable, accounts payable, advances from affiliates, long-term debt and deferred income taxes) are revalued and reported based on the prevailing
exchange rate at the end of the period. We have entered into services agreements with subsidiaries of Teekay Corporation whereby the subsidiaries operate and crew the vessels. Payments under the service agreements are adjusted to reflect any change
in Teekay Corporations cost of providing services based on fluctuations in the value of the Norwegian Kroner relative to the U.S. Dollar, which may result in increased or decreased payments under the services agreements if the strength of
the U.S. Dollar declines or increases, respectively, relative to the Norwegian Kroner. |
39
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Our net income is affected by fluctuations in the fair value of our derivatives instruments. Our interest rate swaps, cross currency
swaps and foreign currency forward contracts are not designated as hedges for accounting purposes. Although we believe these derivative instruments are economic hedges, the changes in their fair value are included in our statements of income as
unrealized gains or losses on derivatives for interest rate swaps and foreign currency forward contracts and as foreign exchange losses for the cross currency swaps. The changes in fair value do not affect our consolidated cash flows, liquidity or
cash distributions to partners. |
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Our operations are seasonal and our financial results vary as a consequence of dry dockings. Historically, the utilization of shuttle
tankers in the North Sea is higher in the winter months, as favorable weather conditions in the warmer months provide opportunities for repairs and maintenance to our vessels and to offshore oil platforms. Downtime for repairs and maintenance
generally reduces oil production and, thus, transportation requirements. In addition, we generally do not earn revenue when our vessels are in scheduled and unscheduled dry docking. Five shuttle tankers are scheduled for dry docking in 2015. From
time to time, unscheduled dry dockings may cause additional fluctuations in our financial results. |
We manage our
business and analyze and report our results of operations on the basis of four operating business segments: the shuttle tanker segment, the FPSO segment, the FSO segment and the conventional tanker segment, each of which are discussed below.
Results of Operations
Year
Ended December 31, 2014 versus Year Ended December 31, 2013
Shuttle Tanker Segment
As at December 31, 2014, our shuttle tanker fleet consisted of 32 vessels that operate under fixed-rate contracts of affreightment,
time charters and bareboat charters, one shuttle tanker in lay-up as a conversion candidate, and the HiLoad DP unit. Of these 34 shuttle tankers, six were owned through 50%-owned subsidiaries, two through a 67%-owned subsidiary and two were
chartered-in. The remaining vessels are owned 100% by us. All of these shuttle tankers, with the exception of the HiLoad DP unit, provide transportation services to energy companies, primarily in the North Sea and Brazil. Our shuttle tankers
service the conventional spot tanker market from time to time. One of these shuttle tankers, the Randgrid, is committed to a conversion into an FSO unit upon the expiry of its existing shuttle tanker charter contract in the second quarter of
2015. In October 2014, the Navion Norvegia was sold to our 50/50 joint venture with Odebrecht and is now undergoing conversion into an FPSO for operation in the Libra oil field in Brazil.
The following table presents our shuttle tanker segments operating results for 2014 and 2013, and compares its net revenues (which is a
non-GAAP financial measure) for 2014 and 2013, to revenues, the most directly comparable GAAP financial measure, for the same periods. The following table also provides a summary of the changes in calendar-ship-days by owned and chartered-in vessels
for our shuttle tanker segment:
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Year Ended December 31, |
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(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
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2014 |
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2013 |
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% Change |
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Revenues |
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577,064 |
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552,019 |
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4.5 |
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Voyage expenses |
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(105,562 |
) |
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(99,543 |
) |
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6.0 |
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Net revenues |
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471,502 |
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452,476 |
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4.2 |
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Vessel operating expenses |
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(159,438 |
) |
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(152,986 |
) |
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4.2 |
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Time-charter hire expense |
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(31,090 |
) |
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(56,682 |
) |
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(45.2 |
) |
Depreciation and amortization |
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(110,686 |
) |
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(115,913 |
) |
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(4.5 |
) |
General and administrative (1) |
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(29,154 |
) |
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(21,821 |
) |
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33.6 |
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(Write down) and gain (loss) on sale of vessels |
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(1,638 |
) |
|
|
(76,782 |
) |
|
|
(97.9 |
) |
Restructuring recovery (charge) |
|
|
225 |
|
|
|
(2,169 |
) |
|
|
(110.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
139,721 |
|
|
|
26,123 |
|
|
|
434.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
11,870 |
|
|
|
10,914 |
|
|
|
8.8 |
|
Chartered-in Vessels |
|
|
802 |
|
|
|
1,456 |
|
|
|
(44.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,672 |
|
|
|
12,370 |
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the shuttle tanker segment based
on estimated use of corporate resources). |
The average size of our owned shuttle tanker fleet increased in 2014 compared
to 2013, primarily due to the delivery to us during 2013 of four newbuilding shuttle tankers (or the BG Shuttle Tankers) and the delivery of the HiLoad DP unit in April 2014, partially offset by the sale of the Navion Norvegia
in October 2014, the commencement of the conversion of the Navion Clipper to the Suksan Salamander FSO unit in April 2013, and the sale of the Basker Spirit in January 2013. Included in calendar-ship-days for 2014 and 2013
is one owned shuttle tanker that has been in lay-up since May 2012 following its redelivery to us upon expiration of its time-charter-out contract in April 2012.
The average size of our chartered-in shuttle tanker fleet decreased for 2014 compared to 2013, primarily due to the redelivery to their owners
of the Karen Knutsten in January 2014 and the Grena in November 2013.
40
Net Revenues. Net revenues increased for 2014 from 2013, primarily due to:
|
|
|
an increase of $60.0 million due to the commencement of the ten-year time-charter contracts of the four BG Shuttle Tankers during 2013 and
early-2014; |
|
|
|
an increase of $7.6 million due to a higher level of trading our excess shuttle tanker capacity in the conventional tanker spot market;
|
|
|
|
an increase of $3.8 million due to an increase in reimbursable bunker expenses; and |
|
|
|
an increase of $0.8 million due to an increase in rates under certain bareboat charter contracts; |
partially offset by
|
|
|
a decrease of $43.8 million due to fewer revenue days resulting from the redelivery of four vessels to us in July 2013, December
2013, January 2014 and February 2014, as they completed their time-charter-out agreements, a decrease in revenues in our contract of affreightment fleet due to lower fleet utilization and a decrease in rates as provided in certain contracts;
|
|
|
|
a decrease $5.0 million due to more repair off-hire days in our time-chartered-out fleet compared to last year; and |
|
|
|
a decrease of $4.6 million due to less opportunities to trade excess shuttle tanker capacity in short-term offshore projects.
|
Vessel Operating Expenses. Vessel operating expenses increased for 2014 from 2013, primarily due to:
|
|
|
an increase of $9.7 million due to the commencement of the time-charter-out agreements of the four BG Shuttle Tankers during 2013 and early-2014;
and |
|
|
|
an increase of $8.3 million relating to the HiLoad DP unit due to $4.7 million of mobilization costs and due to the commencement of
operations of the unit in April 2014; |
partially offset by
|
|
|
a decrease of $4.4 million due to the lay-up of the Navion Norvegia since June 2014 and its subsequent sale to our 50/50 joint venture with
Odebrecht in October 2014; |
|
|
|
a decrease of $2.5 million due to a decrease in ship management fees in our contract of affreightment and time-charter fleets resulting from the
reorganization of our onshore marine operations in 2013; |
|
|
|
a decrease of $1.8 million primarily due to a decrease in repairs and maintenance expenses compared to 2013; |
|
|
|
a decrease of $1.2 million due to the timing of port and project expenses compared to 2013; |
|
|
|
a decrease of $0.8 million due to a change in crew composition relating to the reflagging of two vessels during late 2013 and early 2014,
respectively, and the strengthening of the U.S. Dollar against the Norwegian Kroner; partially offset by an increase in crew and manning costs primarily due to higher crew levels; and |
|
|
|
a decrease of $0.7 million relating to the lay-up and FSO conversion of the Navion Clipper since February 2013. |
Time-Charter Hire Expense. Time-charter hire expense decreased for 2014 from 2013, primarily due to:
|
|
|
a decrease of $26.1 million due to the redelivery by us of the Karen Knutsen in January 2014 and the Grena in November 2013. The
Grena was subsequently re-chartered by us coinciding with the redelivery of the Sallie Knutsen, in September 2014; |
|
|
|
a decrease of $1.7 million due to the off-hire and drydocking of the Sallie Knusten during 2014; and |
|
|
|
a decrease of $1.3 million primarily relating to the drydocking and higher off-hire of the Aberdeen during 2014; |
partially offset by
|
|
|
an increase of $3.6 million due to increased spot in-chartering of shuttle tankers. |
Depreciation and Amortization. Depreciation and amortization expense decreased for 2014 from 2013, primarily due to the impact from the
write-down of six shuttle tankers during 2013 and lower vessel contract amortization expense, partially offset by increases due to the delivery of the four BG Shuttle Tankers during 2013, the dry docking of shuttle tankers in late-2013 and
early-to-mid-2014, and a decrease in the depreciation period of a shuttle tanker, the Randgrid, due to its expected conversion to an FSO unit.
(Write-down) and gain (loss) on sale of vessels. (Write-down) and gain on sale of vessels was ($1.6) million for 2014 which consisted
of a write-down of a vessel of $4.8 million and a gain on the sale of a vessel of $3.1 million. In the third quarter of 2014, the carrying value of one of our 1990s-built shuttle tanker was written down to its estimated fair value, using an
appraised value. The write-down was the result of the vessel charter contract expiring in early-2015 and the expected sale of the vessel. In October 2014, a 1995-built shuttle tanker, the Navion Norvegia, was sold to our 50/50 joint venture
with Odebrecht. The proceeds from the sale of the vessel were $13.4 million, which included $0.4 million for bunkers on-board at the time of sale. The net book value of the vessel at the time of sale was $6.8 million. As the vessel was sold to our
50/50 joint venture with Odebrecht, we have deferred 50% of the gain on sale of the vessel. The vessel is committed to a new FPSO conversion for the Libra field.
41
Write-down and loss on sale of vessels was $76.8 million for 2013, of which $37.2 million relates to two shuttle tankers which we own through a 50%-owned subsidiary and $19.3 million relates to
two shuttle tankers which we own through a 67%-owned subsidiary. During 2013, the carrying value of six of our 1990s-built shuttle tankers were written down to their estimated fair values using appraised values. Of the six vessels, during the third
quarter of 2013, four of the shuttle tankers were written down as the result of: the recontracting of one of the vessels, which we own through a 50%-owned subsidiary, at lower rates than expected during the third quarter of 2013; the cancellation of
a short-term contract which occurred in September 2013; and a change in expectations for the contract renewal for two of the shuttle tankers, one operating in Brazil, and the other, which we own through a 50%-owned subsidiary, in the North Sea. In
the fourth quarter of 2013, two shuttle tankers, which we own through a 67%-owned subsidiary, were written down to their estimated fair values due to a cancellation of a contract renewal and the expected sale of an aging vessel. One of these two
vessels was also written down in 2012.
Restructuring Recovery (Charge). Restructuring recovery for 2014 was $0.2 million relating
to a $0.8 million reimbursement received relating to the reorganization of our shuttle tanker marine operations, partially offset by a $0.6 million charge relating to the reflagging of one shuttle tanker.
Restructuring charge was $2.2 million for 2013 resulting from a $0.6 million charge from the reflagging of one shuttle tanker and a $1.6
million charge from the reorganization of our shuttle tanker marine operations.
FPSO Segment
As at December 31, 2014, our FPSO fleet consisted of the Petrojarl Varg, the Cidade de Rio das Ostras (or Rio das
Ostras), the Piranema Spirit, the Voyageur Spirit and the Petrojarl I FPSO units, all of which we own 100%, and the Itajai and the Libra FPSO units, of which we own 50%. We acquired the
Voyageur Spirit FPSO unit and our interest in the Itajai FPSO unit from Teekay Corporation in May 2013 and June 2013, respectively. In October 2014, we sold a 1995-built shuttle tanker, the Navion Norvegia, to a 50/50 joint
venture with Odebrecht and the vessel currently is undergoing conversion into an FPSO unit for the Libra field located in the Santos Basin offshore Brazil. We acquired the Petrojarl I FPSO unit from Teekay Corporation in December 2014 which
is undergoing upgrades at the Damen Shipyard Groups DSR Schiedam Shipyard in the Netherlands. The strengthening or weakening of the U.S. Dollar relative to the Norwegian Kroner may result in significant decreases or increases,
respectively, in our revenues and vessel operating expenses.
We use the FPSO units to provide production, processing and storage services
to oil companies operating offshore oil field installations. These services are typically provided under long-term, fixed-rate FPSO contracts, some of which also include certain incentive compensation or penalties based on the level of oil
production and other operational measures. Historically, the utilization of FPSO units and other vessels in the North Sea, where the Petrojarl Varg and Voyageur Spirit operate, is higher in the winter months, as favorable weather
conditions in the summer months provide opportunities for repairs and maintenance to our vessels and the offshore oil platforms, which generally reduces oil production.
On April 13, 2013, the Voyageur Spirit FPSO unit began production and on May 2, 2013, we acquired the unit from Teekay
Corporation. Upon commencing production, we had a specified time period to receive final acceptance from the charterer; however due to a defect encountered in one of its two gas compressors, 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.
On
August 27, 2013, repairs to the defective gas compressor on the Voyageur Spirit FPSO unit were completed and the unit achieved full production capacity. We entered into an interim agreement with E.ON, the charterer, whereby we were
compensated for production beginning August 27, 2013 until final acceptance on February 22, 2014.
Until the Voyageur
Spirit FPSO unit was declared on hire, Teekay Corporation indemnified us for certain production shortfalls and unreimbursed vessel operating expenses. For the period from April 13, 2013 to December 31, 2013, Teekay Corporation
indemnified us for a total of $34.9 million for production shortfalls and unreimbursed repair costs. For 2014, Teekay Corporation indemnified us for an additional $3.5 million for production shortfalls and unreimbursed repair costs. Amounts paid as
indemnification from Teekay Corporation to us were treated as a reduction in the purchase price we paid for the FPSO unit.
The following
table presents our FPSO segments operating results for 2014 and 2013, and also provides a summary of the calendar-ship-days for our FPSO segment. The table excludes the results of the Itajai and the Libra FPSO units, which are
accounted for under the equity method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2014 |
|
|
2013 |
|
|
% Change |
|
Revenues |
|
|
354,518 |
|
|
|
284,932 |
|
|
|
24.4 |
|
Vessel operating expenses |
|
|
(158,216 |
) |
|
|
(152,616 |
) |
|
|
3.7 |
|
Depreciation and amortization |
|
|
(72,905 |
) |
|
|
(66,404 |
) |
|
|
9.8 |
|
General and administrative (1) |
|
|
(27,406 |
) |
|
|
(17,742 |
) |
|
|
54.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
95,991 |
|
|
|
48,170 |
|
|
|
99.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
1,476 |
|
|
|
1,339 |
|
|
|
10.2 |
|
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FPSO segment based on
estimated use of corporate resources). |
42
The average number of our FPSO units increased in 2014 compared to 2013, due to the acquisition
of the Voyageur Spirit on May 2, 2013 and the Petrojarl I on December 15, 2014. No earnings are expected from the Petrojarl I until its upgrades are completed, which is scheduled for the first half of 2016.
Revenues. Revenues increased for 2014 from 2013, primarily due to:
|
|
|
an increase of $60.9 million mainly relating to the commencement of the charter agreement for the Voyageur Spirit FPSO unit in August 2013;
|
|
|
|
an increase of $4.5 million due to settlement payments relating to reimbursable expenses for the Voyageur Spirit FPSO unit during the third
and fourth quarters of 2014; |
|
|
|
an increase of $4.5 million due to a produced water treatment plant startup on the Piranema Spirit, which commenced the second quarter of
2014; |
|
|
|
an increase of $4.1 million due to an increase in rates on the Rio das Ostras in accordance with the annual contractual escalation
adjustment and a credit earned from the charterer of the unit for unused maintenance days under the service contract; |
|
|
|
an increase of $2.0 million relating to the Piranema Spirit for a credit earned from the charterer for unused maintenance days in accordance
with the service contract; and |
|
|
|
an increase of $1.0 million relating to an increase in daily hire rates on the Voyageur Spirit, partially offset by a decrease in incentive
compensation of the unit; |
partially offset by
|
|
|
a decrease of $4.8 million due to a reduction in crew hours recharged to the charterer of the Petrojarl Varg; and |
|
|
|
a decrease of $3.0 million due to the strengthening of the U.S. Dollar against the Norwegian Kroner. |
In connection with the sale and purchase agreement, Teekay Corporation indemnified us for lost revenue and unreimbursed repair costs from the
Voyageur Spirit being off-hire since the unit began operations on April 13, 2013 until February 21, 2014. The indemnification amounts relating to lost revenue were $3.1 million and $31.3 million for 2014 and 2013, respectively. The
indemnification amounts relating to unreimbursed repair costs were $0.4 million and $3.6 million for 2014 and 2013, respectively. These have been recorded in equity as an adjustment to the purchase price we paid for the FPSO unit.
Vessel Operating Expenses. Vessel operating expenses increased for 2014 from 2013, primarily due to:
|
|
|
an increase of $23.2 million due to the acquisition of the Voyageur Spirit FPSO unit in May 2013 and higher repair and maintenance costs on
the unit in 2014, partially offset by a decrease in external consulting fees for the unit in 2014; |
partially offset by
|
|
|
a decrease of $8.5 million due to lower repair and maintenance costs on the Piranema Spirit, Petrojarl Varg and Rio das Ostras FPSO
units; |
|
|
|
a decrease of $7.6 million due to the strengthening of the U.S. Dollar against the Norwegian Kroner; |
|
|
|
a decrease of $1.3 million primarily due to lower ship management fees relating to the FPSO units; and |
|
|
|
a decrease of $0.9 million due to a decrease in external agency fees for the Piranema Spirit FPSO unit. |
Depreciation and Amortization Expense. Depreciation and amortization expense increased for 2014 from 2013, primarily due to the
acquisition of the Voyageur Spirit FPSO unit during the second quarter of 2013.
FSO Segment
As at December 31, 2014, our FSO fleet consisted of six units that operate under fixed-rate time charters or fixed-rate bareboat charters,
in which our ownership interests range from 89% to 100%. We have committed one shuttle tanker, the Randgrid, to conversion into an FSO unit upon the expiry of its existing shuttle tanker charter contract in the second quarter of 2015. FSO
units provide an on-site storage solution to oil field installations that have no oil storage facilities or that require supplemental storage. Our revenues and vessel operating expenses for the FSO segment are affected by fluctuations in currency
exchange rates, as a significant component of revenues are earned and vessel operating expenses are incurred in Norwegian Kroner and Australian Dollars for certain vessels. The strengthening or weakening of the U.S. Dollar relative to the
Norwegian Kroner and Australian Dollar may result in significant decreases or increases, respectively, in our revenues and vessel operating expenses.
The following table presents our FSO segments operating results for 2014 and 2013, and compares its net revenues (which is a non-GAAP
financial measure) for 2014 and 2013, to revenues, the most directly comparable GAAP financial measure, for the same periods. The following table also provides a summary of the changes in calendar-ship-days for our FSO segment:
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2014 |
|
|
2013 |
|
|
% Change |
|
Revenues |
|
|
53,868 |
|
|
|
59,016 |
|
|
|
(8.7 |
) |
Voyage (expenses) recoveries |
|
|
(1,500 |
) |
|
|
432 |
|
|
|
(447.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
52,368 |
|
|
|
59,448 |
|
|
|
(11.9 |
) |
Vessel operating expenses |
|
|
(28,649 |
) |
|
|
(32,713 |
) |
|
|
(12.4 |
) |
Depreciation and amortization |
|
|
(8,282 |
) |
|
|
(10,178 |
) |
|
|
(18.6 |
) |
General and administrative (1) |
|
|
(3,870 |
) |
|
|
(2,553 |
) |
|
|
51.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
11,567 |
|
|
|
14,004 |
|
|
|
(17.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
2,190 |
|
|
|
2,100 |
|
|
|
4.3 |
|
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FSO segment based on
estimated use of corporate resources). |
The average number of our FSO units increased in 2014 compared to 2013, due to
the conversion of the Navion Clipper shuttle tanker to an FSO unit, the Suksan Salamander, which commenced in April 2013 and was completed in July 2014. The Suksan Salamander commenced its charter contract in August 2014.
Net Revenues. Net revenues decreased for 2014 from 2013, primarily due to:
|
|
|
a decrease of $3.2 million due to the recontracting of the Pattani Spirit at a lower charter rate in April 2014, for a further five years;
|
|
|
|
a decrease of $2.7 million due to the drydocking of the Navion Saga during the third quarter of 2014; |
|
|
|
a decrease of $2.4 million due to the drydocking of the Dampier Spirit during the second quarter of 2014; |
|
|
|
a decrease of $0.9 million due to a recovery of expenses in the first quarter of 2013 relating to the 2012 drydocking of the Navion Saga and
the appreciation of the U.S. Dollar against the Norwegian Kroner; |
|
|
|
a decrease of $0.9 million primarily due to the appreciation of the U.S. Dollar against the Australia Dollar; and |
|
|
|
a decrease of $0.7 million due to an increase in bunker expenses. |
partially offset by
|
|
|
an increase of $3.3 million due to the commencement of operations of the Suksan Salamander in the third quarter of 2014; and
|
|
|
|
an increase of $0.6 million primarily due to the timing of vessel operating expense reimbursements relating to the Dampier Spirit;
|
Vessel Operating Expenses. Vessel operating expenses decreased for 2014 from 2013, primarily due to:
|
|
|
a decrease of $1.7 million relating to expenditures on engineering studies completed to support our FSO tenders in 2013; |
|
|
|
a decrease of $1.7 million for the Navion Saga FSO unit due to lower crew costs mainly relating to a pension expense incurred in the fourth
quarter of 2013; and the management of the unit was outsourced until the first quarter of 2013, when management was taken in-house and transition costs were incurred in that period; and |
|
|
|
a decrease of $0.5 million due to the timing of services, spares and offshore expenses for the Navion Saga. |
Depreciation and amortization. Depreciation and amortization expense decreased for 2014 from 2013, primarily due to an extension of the
estimated useful lives of the Pattani Spirit and the Apollo Spirit resulting from an extension of the charter periods for these units and the completion of dry docking depreciation of the Dampier Spirit prior to its scheduled
dry docking in the second quarter of 2014, partially offset by the delivery of the Suksan Salamander in August 2014.
Conventional Tanker
Segment
As at December 31, 2014, we owned 100% interests in two Aframax conventional crude oil tankers (which operate under
fixed-rate time charters with Teekay Corporation) and two vessels (that have additional equipment for lightering) which operate under fixed-rate bareboat charters with a 100% owned subsidiary of Teekay Corporation.
The table below excludes three additional conventional tankers as they have been determined to be discontinued operations. During the first
quarter of 2013, we sold a vessel and we terminated the long-term time-charter-out contract employed by one of our conventional tankers with a subsidiary of Teekay Corporation, which was subsequently sold in the second quarter of 2013. A third
conventional tanker on contract to Teekay Corporation was sold in the third quarter of 2013. We received early termination fees from Teekay Corporation of $6.8 million and $4.5 million in the first and second quarters of 2013, respectively, which
are recorded in discontinued operations.
The following table presents our conventional tanker segments operating results for 2014
and 2013, and compares its net revenues (which is a non-GAAP financial measure) for 2014 and 2013, to revenues, the most directly comparable GAAP financial measure, for the same periods. The following table also provides a summary of the changes in
calendar-ship-days by owned vessels for our conventional tanker segment.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2014 |
|
|
2013 |
|
|
% Change |
|
Revenues |
|
|
33,566 |
|
|
|
34,772 |
|
|
|
(3.5 |
) |
Voyage expenses |
|
|
(5,373 |
) |
|
|
(4,532 |
) |
|
|
18.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
28,193 |
|
|
|
30,240 |
|
|
|
(6.8 |
) |
Vessel operating expenses |
|
|
(5,906 |
) |
|
|
(5,813 |
) |
|
|
1.6 |
|
Depreciation and amortization |
|
|
(6,680 |
) |
|
|
(6,511 |
) |
|
|
2.6 |
|
General and administrative (1) |
|
|
(2,136 |
) |
|
|
(2,357 |
) |
|
|
(9.4 |
) |
Restructuring charge |
|
|
|
|
|
|
(438 |
) |
|
|
(100.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
13,471 |
|
|
|
15,121 |
|
|
|
(10.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
1,460 |
|
|
|
1,460 |
|
|
|
|
|
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the conventional tanker segment
based on estimated use of corporate resources). |
Net Revenues. Net revenues decreased for 2014 from 2013,
primarily due to a lower amount of reimbursed bunkers and off-hire days associated with the drydocking of one vessel in 2014.
Restructuring Charge. Restructuring charge was $0.4 million for 2013 related to the reorganization of the conventional tanker marine
operations. The purpose of the restructuring was to create better alignment with marine operations resulting in a lower cost organization. The reorganization was completed by June 30, 2013.
Other Operating Results
General and Administrative Expenses. General and administrative expenses increased to $67.5 million for 2014, from $44.5 million for
2013, mainly due to: the acquisition of the Voyageur Spirit FPSO unit during the second quarter of 2013; the acquisition of ALP during the first quarter of 2014 (including a $1.6 million business development fee paid to Teekay Corporation for
assistance with the acquisition during the second quarter of 2014 and a $1.0 million fee to a third party relating to the acquisition during the first quarter of 2014); the delivery of the HiLoad DP unit during the second quarter of 2014; the
acquisition of Logitel during the third quarter of 2014; the commencement of operations for the four BG Shuttle Tankers during 2013 and early-2014; the acquisition of the Petrojarl I FPSO during the fourth quarter of 2014 (including a $2.1
million business development fee paid to Teekay Corporation for assistance with securing the charter contract for the Petrojarl I); an increase in business development costs relating to FPSO tenders including the Libra FPSO project; an
increase in equity based compensation relating to restricted unit awards; and an increase in the corporate service fee from Teekay Corporation to support our growth due to additional efforts required; partially offset by cost savings due to the
reorganization of marine operations within our shuttle tanker business unit completed in 2013.
Interest Expense. Interest expense
increased to $88.4 million for 2014, from $62.9 million for 2013, primarily due to:
|
|
|
an increase of $21.0 million due to the $300 million senior unsecured bonds issued during the second quarter of 2014 and the borrowings relating to
the Voyageur Spirit FPSO, the four BG Shuttle Tankers (which commenced operations during 2013 and early-2014), and the Suksan Salamander (which commenced operations in the third quarter of 2014); |
|
|
|
a net increase of $5.2 million primarily from the issuance of NOK 1,000 million senior unsecured bonds in January 2014, partially offset by
the repurchase during the first quarter of 2013 of NOK 388.5 million of the NOK 600 million senior unsecured bonds and the remaining NOK 211.5 million bonds that matured in November 2013; and |
|
|
|
an increase of $1.5 million from an increase in loan cost amortization relating to new debt facilities; |
partially offset by
|
|
|
a decrease of $2.3 million mainly due to lower debt balances and partially due to lower interest rates on all other borrowings.
|
Interest Income. Interest income decreased to $0.7 million for 2014, from $2.6 million for 2013, primarily due
to interest income received in 2013 on our partial prepayment to Teekay Corporation of $150 million in anticipation of the Voyageur Spirit FPSO unit acquisition. We received interest on this amount at a rate of LIBOR plus a margin of 4.25%
until we acquired the FPSO unit on May 2, 2013.
Realized and Unrealized (Losses) Gains on Derivative Instruments. Net
realized and unrealized (losses) gains on non-designated derivative instruments were ($143.7) million for 2014, compared to $34.8 million for 2013.
During 2014 and 2013, we had interest rate swap agreements with aggregate average outstanding notional amounts of approximately $1.7 billion
and $1.6 billion, respectively, and average fixed rates of approximately 3.6%. Short-term variable benchmark interest rates during these periods were generally 0.8% or less and, as such, we incurred realized losses of $55.6 million and $63.1 million
during 2014 and 2013, respectively, under the interest rate swap agreements. Included in realized losses for 2013 is a $4.1 million loss due to the termination of an interest rate swap relating to the Voyageur Spirit, which is included in the
results of the Dropdown Predecessor. Please see Item 18 Financial Statements: Note 3. In addition, we recorded a $31.8 million realized loss in 2013 related to the early termination of an interest rate swap.
45
During 2014 and 2013, we recognized unrealized (losses) gains on our interest rate swaps of
($75.8) million and $133.5 million, respectively. The unrealized losses during 2014 resulted from a $131.4 million of unrealized losses relating to decreases in long-term LIBOR benchmark interest rates relative to 2013, partially offset by the
transfer of $55.6 million of previously recognized unrealized losses to realized losses related to actual cash settlements. The unrealized gains during 2013 resulted from the transfer of $94.9 million of previously recognized unrealized losses to
realized losses related to actual cash settlements, including a $31.8 million realized loss from the early termination of an interest rate swap, and an additional $38.6 million of unrealized gains relating to increases in long-term LIBOR benchmark
interest rates relative to the prior year.
Please see Item 5 - Operating and Financial Review and Prospects: Valuation of Derivative
Instruments, which explains how our derivative instruments are valued, including the significant factors and uncertainties in determining the estimated fair value and why changes in these factors result in material variances in realized and
unrealized (losses) gains on derivative instruments.
Equity Income. Equity income was $10.3 million for 2014 compared to $6.7
million for 2013 relating to a full year of earnings on our investment in the Itajai FPSO unit, of which we acquired a 50% interest from Teekay Corporation in June 2013.
Foreign Currency Exchange Loss. Foreign currency exchange losses were $16.1 million for 2014, compared to $5.3 million for 2013. Our
foreign currency exchange losses, substantially all of which are unrealized, are due primarily to the relevant period-end revaluation of Norwegian Kroner-denominated monetary assets and liabilities for financial reporting purposes and the realized
and unrealized gains and losses on our cross currency swaps. Gains on Norwegian Kroner-denominated monetary liabilities reflect a stronger U.S. Dollar against the Norwegian Kroner on the date of revaluation or settlement compared to the rate in
effect at the beginning of the period. Losses on Norwegian Kroner-denominated monetary liabilities reflect a weaker U.S. Dollar against the Norwegian Kroner on the date of revaluation or settlement compared to the rate in effect at the
beginning of the period.
For 2014, foreign currency exchange losses include a realized loss of $2.0 million (2013 gain of $1.6
million) and an unrealized loss of $94.0 million (2013 $38.6 million) on the cross currency swaps, and an unrealized gain of $86.0 million (2013 - $38.0 million) on the revaluation of the Norwegian Kroner denominated debt. There were
additional realized and unrealized foreign exchange losses of $6.2 million, (2013 - $6.5 million) on all other monetary assets and liabilities. For 2013, we repurchased NOK 388.5 million of the then outstanding NOK 600 million senior
unsecured bonds that matured in November 2013. Associated with this, we recorded $6.6 million of realized losses on the repurchased bonds and recorded $6.8 million of realized gains on the termination of the associated cross currency swap.
Loss on Bond Repurchase. Loss on bond repurchase was $1.8 million for 2013. The loss represents a 2.5% premium paid for the repurchase
of NOK 388.5 million of the then outstanding NOK 600 million senior unsecured bonds that matured in November 2013.
Other
Income. Other income decreased to $0.8 million for 2014 from $1.1 million for 2013, mainly due to a decrease in leasing income from our VOC equipment. The leasing income decreased as a result of the completion of the VOC contracts during 2014.
Income Tax Expense. Income tax expense was $2.2 million for each of 2014 and 2013. Our 2014 deferred tax expense decreased, mainly
due to a deferred tax recovery recognized in 2014 as a result of higher future projected income for our Norwegian tax group, while we incurred a deferred tax expense in 2013 due to lower projected income for our Norwegian tax group. The 2014
deferred tax recovery was offset by the recognition of deferred tax expense relating to the utilization of prior year loss carry forwards to offset an increase in 2014 earnings of the Dampier Spirit due to higher rates from a contract
extension, and the utilization of prior year loss carry forwards for the Voyageur Spirit. Our 2014 current tax expense increased, mainly due to income tax adjustments relating to the Rio das Ostras Brazilian entity during the first
quarters of 2014 and 2013, and the settlement of a claim for prior taxes paid during 2013.
Net (Loss) Income from Discontinued
Operations. Net loss from discontinued operations was $4.6 million for the year ended December 31, 2013. We sold the Leyte Spirit, the Poul Spirit and the Gotland Spirit during the first, second and third quarters of
2013, respectively.
If these vessels were not classified as discontinued operations, the results of the operations of these vessels would
have been reported within the conventional tanker segment.
During the first and second quarters of 2013, we terminated the long-term
time-charter-out contract employed by the Poul Spirit and the Gotland Spirit with a subsidiary of Teekay Corporation. We received early termination fees from Teekay Corporation of $11.3 million during 2013. In addition, we recorded
(write-downs) and gain (loss) on sale of vessels of ($18.5) million during 2013.
Year Ended December 31, 2013 versus Year Ended December 31,
2012
Shuttle Tanker Segment
As
at December 31, 2013, our shuttle tanker fleet consisted of 34 vessels that operate under fixed-rate contracts of affreightment, time charters and bareboat charters, one shuttle tanker in lay-up as a conversion candidate, and the HiLoad
DP unit. Of these 36 shuttle tankers, six were owned through 50% owned subsidiaries, three through a 67% owned subsidiary and three were chartered-in (of which one was redelivered to its owner in January 2014), with the remainder owned 100% by
us. All of these shuttle tankers, with the exception of the HiLoad DP unit, provide transportation services to energy companies, primarily in the North Sea and Brazil. Our shuttle tankers service the conventional spot tanker market from time
to time. One of these shuttle tankers, the Randgrid, is committed to a conversion into an FSO unit upon the expiry of its existing shuttle tanker charter contract in the second quarter of 2015.
The following table presents our shuttle tanker segments operating results for 2013 and 2012, and compares its net revenues (which is a
non-GAAP financial measure) for 2013 and 2012, to revenues, the most directly comparable GAAP financial measure, for the same periods. The following table also provides a summary of the changes in calendar-ship-days by owned and chartered-in vessels
for our shuttle tanker segment:
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2013 |
|
|
2012 |
|
|
% Change |
|
Revenues |
|
|
552,019 |
|
|
|
569,519 |
|
|
|
(3.1 |
) |
Voyage expenses |
|
|
(99,543 |
) |
|
|
(104,394 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
452,476 |
|
|
|
465,125 |
|
|
|
(2.7 |
) |
Vessel operating expenses |
|
|
(152,986 |
) |
|
|
(160,957 |
) |
|
|
(5.0 |
) |
Time-charter hire expense |
|
|
(56,682 |
) |
|
|
(56,989 |
) |
|
|
(0.5 |
) |
Depreciation and amortization |
|
|
(115,913 |
) |
|
|
(122,921 |
) |
|
|
(5.7 |
) |
General and administrative (1) |
|
|
(21,821 |
) |
|
|
(20,146 |
) |
|
|
8.3 |
|
Write down and loss on sale of vessels |
|
|
(76,782 |
) |
|
|
(24,542 |
) |
|
|
212.9 |
|
Restructuring charge |
|
|
(2,169 |
) |
|
|
(647 |
) |
|
|
235.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
26,123 |
|
|
|
78,923 |
|
|
|
(66.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
10,914 |
|
|
|
11,530 |
|
|
|
(5.3 |
) |
Owned Vessels |
|
|
1,456 |
|
|
|
1,459 |
|
|
|
(0.2 |
) |
Chartered-in Vessels |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,370 |
|
|
|
12,989 |
|
|
|
(4.8 |
) |
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the shuttle tanker segment based
on estimated use of corporate resources). |
The average size of our owned shuttle tanker fleet decreased in 2013 compared
to 2012, primarily due to the sale of the Navion Fennia in July 2012, the sale of the Navion Savonita in December 2012, the sale of the Basker Spirit in January 2013, the in-progress conversion of the Navion Clipper to an
FSO unit, and the redelivery of one of our in-chartered shuttle tankers in December 2013, partially offset by the delivery of the four BG Shuttle Tankers to us during 2013. Included in calendar-ship-days is one owned shuttle tanker that has been in
lay-up since May 2012 following its redelivery to us upon maturity of its time-charter-out contract in April 2012.
Net Revenues.
Net revenues decreased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $18.8 million due to the lay-up of two vessels following their redelivery to us in April 2012 and November 2012, respectively, upon
maturity of their time-charter-out contracts; one of these vessels, the Navion Clipper, is currently being converted to an FSO unit; |
|
|
|
a decrease of $12.0 million due to the sale of the Navion Savonita in December 2012; |
|
|
|
a net decrease of $5.9 million primarily due to fewer revenue days from the redelivery of four vessels to us in February 2012, March
2012, April 2012 and July 2013, as they completed their time-charter-out agreements, partially offset by an increase in revenues in our contract of affreightment fleet and an increase in revenues in our time-chartered-out fleet from entering
into new contracts and an increase in rates as provided in certain contracts; |
|
|
|
a decrease of $2.0 million due to fewer opportunities to trade excess capacity in the conventional spot market; and |
|
|
|
a decrease of $0.5 million due to a decrease in reimbursable bunker expenses; |
partially offset by
|
|
|
a net increase of $15.4 million due to the commencement of the ten-year time-charter contracts in June 2013, August 2013 and November 2013 for
three of the four BG Shuttle Tankers, the Samba Spirit, the Lambada Spirit and the Bossa Nova Spirit, respectively; |
|
|
|
an increase of $7.5 million, due to an increase in rates as provided in certain contracts from our bareboat fleet; and |
|
|
|
an increase of $3.8 million due to less repair off-hire days in our time-chartered-out fleet. |
Vessel Operating Expenses. Vessel operating expenses decreased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $11.6 million relating to the lay-up of two of our shuttle tankers since May 2012 and February 2013, and the reduction in costs
associated with the sale of two of our older shuttle tankers in July 2012 and December 2012; one of these vessels, the Navion Clipper, is currently being converted to an FSO unit; and |
|
|
|
a decrease of $5.5 million due to a decrease in ship management costs from the reduction in our contract of affreightment and time-charter fleet
and cost saving initiatives; |
partially offset by
|
|
|
an increase of $7.5 million due to the delivery of the four BG Shuttle Tankers during 2013; |
47
|
|
|
an increase of $0.9 million due to the timing of port expenses; and |
|
|
|
an increase of $0.9 million due to an increase in crew training expenses. |
Time-Charter Hire Expense. Time-charter hire expense decreased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $2.0 million due to the redelivery of one vessel to its owner in November 2013; and |
|
|
|
a decrease of $0.9 million due to decreased spot in-chartering during 2013; |
partially offset by
|
|
|
an increase of $2.8 million due to fewer off-hire days in 2013. |
Depreciation and Amortization. Depreciation and amortization expense decreased for 2013 from 2012, primarily due to the write-down of
two older shuttle tankers in 2012 to their estimated fair value, the write-down of four older shuttle tankers in 2013 to their estimated fair value, the sale of the two older shuttle tankers in 2012 and one older shuttle tanker in 2013, lower vessel
contract amortization and the completion of dry-dock depreciation for various shuttle tankers, partially offset by additional depreciation relating to the deliveries of the four BG Shuttle Tankers, vessel upgrades and dry dockings.
Write down and Loss on Sale of Vessels. Write down and loss on sale of vessels was $76.8 million for 2013, of which $37.2 million
relates to two shuttle tankers which we own through a 50%-owned subsidiary and $19.3 million relates to two shuttle tankers which we own through a 67%-owned subsidiary. During 2013, the carrying value of six of our 1990s-built shuttle tankers were
written down to their estimated fair value using appraised values. Of the six vessels, during the third quarter of 2013, four of the shuttle tankers were written down as the result of: the recontracting of one of the vessels, which we own through a
50%-owned subsidiary, at lower rates than expected during the third quarter of 2013; the cancellation of a short-term contract which occurred in September 2013, and a change in expectations for the contract renewal for two of the shuttle tankers,
one operating in Brazil, and the other, which we own through a 50%-owned subsidiary, in the North Sea. In the fourth quarter of 2013, two shuttle tankers, which we own through a 67%-owned subsidiary, were written down to their estimated fair value
due to a cancellation of a contract renewal and expected sale of an aging vessel. One of these two vessels was also written down in 2012.
Write-down and loss on sale of vessels was $24.5 million for 2012. In 2012, the carrying value of five of our shuttle tankers were written
down to their estimated fair value. In the third quarter of 2012, a 1993-built shuttle tanker was written down to its estimated fair value due to a change in the operating plan for the vessel. In the third and fourth quarters of 2012, two shuttle
tankers, which were written down in 2011, were further written down to their estimated fair value upon sale in 2012. In the fourth quarter of 2012, a 1992-built shuttle tanker, which was written down in 2010, was further written down to its
estimated fair value and classified as held-for-sale as at December 31, 2012. The vessel was sold in 2013. In the fourth quarter of 2012, a 1995-built shuttle tanker was written down to its estimated fair value due to the age of the vessel and
the requirements of trading in the North Sea and Brazil and the weak tanker market. The estimated fair value of the vessel was determined using discounted cash flows. The estimated fair value for each of the other four vessels written down in 2012
was determined using appraised values.
Restructuring Charge. Restructuring charges was $2.2 million for 2013 resulting from a $0.6
million charge from the reflagging of one shuttle tanker and a $1.6 million charge from the reorganization of our shuttle tanker marine operations.
Restructuring charges were $0.6 million for 2012, resulting from a reorganization of marine operations to create better alignment within the
shuttle tanker business unit to create a reduced-cost organization going forward.
FPSO Segment
As at December 31, 2013, our FPSO fleet consisted of the Petrojarl Varg, the Rio das Ostras, the Piranema Spirit and
the Voyageur Spirit FPSO units, all of which we own 100%, and the Itajai FPSO unit, of which we own 50%. We acquired the Voyageur Spirit FPSO unit and our interest in the Itajai FPSO unit from Teekay Corporation in
May 2013 and June 2013, respectively.
We use the FPSO units to provide production, processing and storage services to oil companies
operating offshore oil field installations. These services are typically provided under long-term, fixed-rate FPSO contracts, some of which also include certain incentive compensation or penalties based on the level of oil production and other
operational measures. Historically, the utilization of FPSO units and other vessels in the North Sea, where the Petrojarl Varg and Voyageur Spirit operate, is higher in the winter months, as favorable weather conditions in the summer
months provide opportunities for repairs and maintenance to our vessels and the offshore oil platforms, which generally reduces oil production.
The following table presents our FPSO segments operating results for 2013 and 2012, and also provides a summary of the
calendar-ship-days for our FPSO segment. The table excludes the results of the Itajai FPSO unit, which is accounted for under the equity method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2013 |
|
|
2012 |
|
|
% Change |
|
Revenues |
|
|
284,932 |
|
|
|
231,688 |
|
|
|
23.0 |
|
Vessel operating expenses |
|
|
(152,616 |
) |
|
|
(111,855 |
) |
|
|
36.4 |
|
Depreciation and amortization |
|
|
(66,404 |
) |
|
|
(50,905 |
) |
|
|
30.4 |
|
General and administrative (1) |
|
|
(17,742 |
) |
|
|
(11,208 |
) |
|
|
58.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
48,170 |
|
|
|
57,720 |
|
|
|
(16.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
1,339 |
|
|
|
1,098 |
|
|
|
21.9 |
|
48
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FPSO segment based on
estimated use of corporate resources). |
The average number of our FPSO units increased in 2013 compared to 2012 due to
the acquisition of the Voyageur Spirit on May 2, 2013.
Revenues. Revenues increased for 2013 from 2012, primarily due
to:
|
|
|
an increase of $53.2 million relating to the acquisition of the Voyageur Spirit FPSO unit, of which $25.2 million relates to the
charter-hire of the unit beginning August 27, 2013 under an interim agreement with E.ON; and |
|
|
|
an increase of $1.2 million due to an increase in rates on the Piranema Spirit in accordance with the annual escalation of the charter
component; |
partially offset by
|
|
|
a decrease of $1.9 million due to the Rio das Ostras earning only a 95% standby rate, while it was shut down and being relocated to a new
oil field in 2013, and a lower credit earned from the charterer for unused maintenance days under the service contract of the Rio das Ostras compared to last year, partially offset by the recovery of certain upgrade costs.
|
Teekay Corporation has indemnified us for lost revenue and unreimbursed repair costs from the Voyageur Spirit
being off-hire since the start of the Dropdown Predecessor period on April 13, 2013. The indemnification amount relating to lost revenue was $31.3 million for 2013. The indemnification amount relating to unreimbursed repair costs was $3.6
million for 2013. These have been recorded in equity as a reduction to the purchase price we paid for the FPSO unit.
Vessel Operating
Expenses. Vessel operating expenses increased for 2013 from 2012, primarily due to:
|
|
|
an increase of $32.1 million due to the acquisition of the Voyageur Spirit FPSO unit; |
|
|
|
an increase of $4.1 million due to higher crew and manning costs mainly relating to the Petrojarl Varg and the Piranema Spirit due to
higher salaries, crew levels and crew expenses; |
|
|
|
an increase of $3.7 million due to higher maintenance work on the Rio das Ostras while on shutdown and being relocated to a new oil field in
2013; and |
|
|
|
an increase of $2.0 million due to higher maintenance costs on the Petrojarl Varg due to increased class work performed during 2013;
|
partially offset by
|
|
|
a decrease of $1.1 million due to a decrease in our ship management costs on the Petrojarl Varg, Rio das Ostras and Piranema Spirit;
and |
|
|
|
a decrease of $0.6 million due to the appreciation of the U.S. Dollar against the Norwegian Kroner. |
Depreciation and Amortization Expense. Depreciation and amortization expense increased for 2013 from 2012, primarily due to the
acquisition of the Voyageur Spirit FPSO unit during the second quarter of 2013.
FSO Segment
As at December 31, 2013, our FSO fleet consisted of six units that operate under fixed-rate time charters or fixed-rate bareboat charters,
in which our ownership interests range from 89% to 100%. During 2013, we committed to converting one of our shuttle tankers, the Navion Clipper, into an FSO unit. In addition, we have committed one shuttle tanker, the Randgrid, to
conversion into an FSO unit upon the expiry of its existing shuttle tanker charter contract in 2015. FSO units provide an on-site storage solution to oil field installations that have no oil storage facilities or that require supplemental storage.
Our revenues and vessel operating expenses for the FSO segment are affected by fluctuations in currency exchange rates, as a significant component of revenues are earned and vessel operating expenses are incurred in Norwegian Kroner and Australian
Dollars for certain vessels. The strengthening or weakening of the U.S. Dollar relative to the Norwegian Kroner and Australian Dollar may result in significant decreases or increases, respectively, in our revenues and vessel operating expenses.
The following table presents our FSO segments operating results for 2013 and 2012, and compares its net revenues (which is a
non-GAAP financial measure) for 2013 and 2012, to revenues, the most directly comparable GAAP financial measure, for the same periods. The following table also provides a summary of the changes in calendar-ship-days for our FSO segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2013 |
|
|
2012 |
|
|
% Change |
|
Revenues |
|
|
59,016 |
|
|
|
62,901 |
|
|
|
(6.2 |
) |
Voyage (recoveries) expenses |
|
|
432 |
|
|
|
(400 |
) |
|
|
(208.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
59,448 |
|
|
|
62,501 |
|
|
|
(4.9 |
) |
Vessel operating expenses |
|
|
(32,713 |
) |
|
|
(38,255 |
) |
|
|
(14.5 |
) |
Depreciation and amortization |
|
|
(10,178 |
) |
|
|
(9,038 |
) |
|
|
12.6 |
|
General and administrative (1) |
|
|
(2,553 |
) |
|
|
(1,838 |
) |
|
|
38.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
14,004 |
|
|
|
13,370 |
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
2,100 |
|
|
|
1,830 |
|
|
|
14.8 |
|
49
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the FSO segment based on
estimated use of corporate resources). |
The average number of our FSO units increased in 2013 compared to 2012, due to
the commencement of the conversion of the Navion Clipper shuttle tanker to an FSO unit in April 2013.
Net Revenues. Net
revenues decreased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $5.5 million from engineering studies completed in 2012 to support our FSO tenders; and |
|
|
|
a decrease of $0.7 million due to reduced rates on the Falcon Spirit; |
partially offset by
|
|
|
an increase of $3.5 million due to the drydocking of the Navion Saga during the third quarter of 2012. |
Vessel Operating Expenses. Vessel operating expenses decreased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $5.7 million relating to expenditures on engineering studies completed in 2012 to support our FSO tenders; |
|
|
|
a decrease of $0.8 million due to a reduction in services and spares for the Navion Saga relating to its drydocking during the third quarter
of 2012; and |
|
|
|
a decrease of $0.5 million relating to lower crew costs and the timing of services and spares for the Dampier Spirit primarily due to the
appreciation of the U.S. Dollar against the Australian Dollar; |
partially offset by
|
|
|
an increase of $0.8 million due to lay-up costs for the Navion Clipper prior to the commencement of its conversion to an FSO unit; and
|
|
|
|
an increase of $0.8 million due to costs to transition the management of the Navion Saga in-house. |
Depreciation and amortization. Depreciation and amortization expense increased for 2013 from 2012, primarily due to additional dry-dock
depreciation for the dry docking of the Navion Saga completed in the third quarter of 2012.
Conventional Tanker Segment
As at December 31, 2013, we owned 100% interests in two Aframax conventional crude oil tankers (which operate under fixed-rate time
charters with Teekay Corporation), and two vessels (that have additional equipment for lightering) which operated under fixed-rate bareboat charters with Skaugen PetroTrans, Teekay Corporations 50% owned joint venture.
The table below excludes six additional conventional tankers as they have been determined to be discontinued operations, including one tanker
sold during the third quarter of 2013, two tankers sold during the first half of 2013 and three tankers sold in the second half of 2012. During the first and second quarters of 2013 and the second quarter of 2012, we terminated the long-term
time-charter-out contracts employed by three of our conventional tankers with a subsidiary of Teekay Corporation. We received early termination fees from Teekay Corporation of $6.8 million, $4.5 million and $14.7 million in the first and second
quarter of 2013 and the second quarter of 2012, respectively, which are recorded in discontinued operations.
The following table presents
our conventional tanker segments operating results for 2013 and 2012, and compares its net revenues (which is a non-GAAP financial measure) for 2013 and 2012, to revenues, the most directly comparable GAAP financial measure, for the same
periods. The following table also provides a summary of the changes in calendar-ship-days by owned vessels for our conventional tanker segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
(in thousands of U.S. dollars, except calendar-ship-days and percentages) |
|
2013 |
|
|
2012 |
|
|
% Change |
|
Revenues |
|
|
34,772 |
|
|
|
37,119 |
|
|
|
(6.3 |
) |
Voyage expenses |
|
|
(4,532 |
) |
|
|
(5,689 |
) |
|
|
(20.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
30,240 |
|
|
|
31,430 |
|
|
|
(3.8 |
) |
Vessel operating expenses |
|
|
(5,813 |
) |
|
|
(6,509 |
) |
|
|
(10.7 |
) |
Depreciation and amortization |
|
|
(6,511 |
) |
|
|
(6,500 |
) |
|
|
0.2 |
|
General and administrative(1) |
|
|
(2,357 |
) |
|
|
(1,389 |
) |
|
|
69.7 |
|
Restructuring charge |
|
|
(438 |
) |
|
|
(468 |
) |
|
|
(6.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
15,121 |
|
|
|
16,564 |
|
|
|
(8.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Calendar-Ship-Days |
|
|
|
|
|
|
|
|
|
|
|
|
Owned Vessels |
|
|
1,460 |
|
|
|
1,460 |
|
|
|
|
|
50
(1) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the conventional tanker segment
based on estimated use of corporate resources). |
Net Revenues. Net revenues decreased for 2013 from 2012,
primarily due to more off-hire days associated with the drydocking of one vessel in 2013.
Vessel Operating Expenses and Restructuring
Charge. Vessels operating expenses decreased for 2013 from 2012, primarily due to a decrease in our ship management costs relating to the reorganization of our conventional tanker marine operations to create better alignment with marine
operations. The reorganization was completed in 2013. We recorded restructuring charges of $0.4 million and $0.5 million during 2013 and 2012, respectively, since this plan began in 2012.
Other Operating Results
General and Administrative Expenses. General and administrative expenses increased to $44.5 million for 2013, from $34.6 million for
2012, mainly due to the acquisition of the Voyageur Spirit FPSO unit during the second quarter of 2013, an increase in business development and project activities supporting our shuttle tanker fleet and FSO units, a success fee paid to Teekay
Corporation relating to the acquisition of the HiLoad DP unit and an increase in administrative costs associated with our other FPSO units.
Interest Expense. Interest expense, which excludes realized and unrealized gains and losses from interest rate swaps, increased to
$62.9 million for 2013, from $47.5 million for 2012, primarily due to:
|
|
|
an increase of $14.5 million due to the drawdown of new debt facilities relating to the Voyageur Spirit FPSO and the four BG Shuttle Tankers
that delivered during 2013; and |
|
|
|
a net increase of $7.3 million primarily from the issuance of the NOK 1,300 million senior unsecured bonds in January 2013, partially offset
by the repurchase of NOK 388.5 million of the NOK 600 million senior unsecured bonds that matured in November 2013; and |
|
|
|
an increase of $0.9 million due to an increase in intercompany loan balances; |
partially offset by
|
|
|
a decrease of $5.0 million due to lower debt balances on existing debt facilities compared to 2012; and |
|
|
|
a decrease of $2.4 million due to decreased interest rates compared to 2012. |
Interest Income. Interest income increased to $2.6 million for 2013, from $1.0 million for 2012, primarily due to interest income
received in 2013 on our partial prepayment to Teekay Corporation of $150 million in anticipation of the Voyageur Spirit FPSO unit acquisition. We received interest on this amount at a rate of LIBOR plus a margin of 4.25% until we acquired the
FPSO unit on May 2, 2013.
Realized and Unrealized (Losses) Gains on Derivative Instruments. Net realized and unrealized gains
(losses) on non-designated derivatives were $34.8 million for 2013, compared to ($26.3) million for 2012.
During 2013 and 2012, we had
interest rate swap agreements with aggregate average outstanding notional amounts of approximately $1.6 billion, with average fixed rates of approximately 3.6% and 4.3%, respectively. Short-term variable benchmark interest rates during these periods
were generally 1.1% or less and, as such, we incurred realized losses of $63.1 million and $58.6 million during 2013 and 2012, respectively, under the interest rate swap agreements. Included in realized losses for 2013 is a $4.1 million loss due to
the termination of an interest rate swap relating to the Voyageur Spirit, which is included in the results of the Dropdown Predecessor. In addition, we recorded a $31.8 million realized loss in 2013 related to the early termination of an
interest rate swap.
During 2013 and 2012, we recognized unrealized gains on our interest rate swaps of $133.5 million and $26.1 million,
respectively. The unrealized gains during 2013 resulted from the transfer of $94.8 million of previously recognized unrealized losses to realized losses related to actual cash settlements, including a $31.8 million realized loss from the early
termination of an interest rate swap, and an additional $38.7 million of unrealized gains relating to increases in long-term LIBOR benchmark interest rates relative to the prior period. The net unrealized gain during 2012 resulted from the transfer
of $58.6 million of previously recognized unrealized losses to realized losses related to actual cash settlements, offset by an incremental $32.5 million of unrealized losses relating to further declines in long-term LIBOR benchmark interest rates
relative to the prior year.
Please see Item 5 - Operating and Financial Review and Prospects: Valuation of Derivative Instruments,
which explains how our derivative instruments are valued, including the significant factors and uncertainties in determining the estimated fair value and why changes in these factors result in material variances in realized and unrealized (losses)
gains on derivative instruments.
Foreign Currency Exchange Loss. Foreign currency exchange losses were $5.3 million for 2013,
compared to $0.3 million for 2012. Our foreign currency exchange losses, substantially all of which are unrealized, are due primarily to the relevant period-end revaluation of Norwegian Kroner-denominated monetary assets and liabilities for
financial reporting purposes and the realized and unrealized gains and losses on our cross currency swaps. Gains on Norwegian Kroner-denominated monetary liabilities reflect a stronger U.S. Dollar against the Norwegian Kroner on the date of
revaluation or settlement compared to the rate in effect at the beginning of the period. Losses on Norwegian Kroner-denominated monetary liabilities reflect a weaker U.S. Dollar against the Norwegian Kroner on the date of revaluation or
settlement compared to the rate in effect at the beginning of the period.
51
For 2013 foreign currency exchange losses include a realized gain of $1.6 million (2012
$3.0 million) and an unrealized (loss) gain of ($38.6) million (2012 $10.7 million) on the cross currency swap and an unrealized gain (loss) of $38.0 million (2012 ($13.9) million) on the revaluation of the Norwegian Kroner denominated
debt. There were additional realized and unrealized foreign exchange losses of $6.5 million, (2012 $0.1 million) on all other monetary assets and liabilities. During 2013, we repurchased NOK 388.5 million of our NOK 600 million
senior unsecured bonds that matured in November 2013. Associated with this, we recorded $6.6 million of realized losses on the repurchased bonds, and recorded $6.8 million of realized gains on the associated cross currency swap.
Loss on Bond Repurchase. Loss on bond repurchase was $1.8 million for 2013. The loss represents a 2.5% premium paid for the repurchase
of NOK 388.5 million of the NOK 600 million senior unsecured bonds that matured in November 2013.
Other Income. Other
income was $1.1 million for 2013, compared to $1.5 million for 2012, which was primarily comprised of leasing income from our VOC equipment and the unrealized gain on the contingent consideration liability relating to the Scott Spirit shuttle
tanker acquisition (please read Item 18. Financial Statements: Note 4a - Financial Instruments). The leasing income is decreasing as the VOC contracts near completion.
Income Tax (Expense) Recovery. Income tax expense was ($2.2) million for 2013, compared to a recovery of $10.5 million for 2012. The
increase to income tax expense was primarily due to a write-off of a portion of our deferred tax asset in 2013 amounting to $2.3 million relating to lower future projected income for our Norwegian tax group for which we recognized a $8.6 million
deferred tax recovery in 2012. This Norwegian tax structure was established in the fourth quarter of 2012 and allows the utilization of past losses carried forward against future projected income. The increase to income tax expense is also due to an
income tax recovery of $2.8 million relating to the reversal of an uncertain tax position accrual in the second quarter of 2012, partially offset by a tax recovery of $0.5 million relating to the settlement of a claim for prior taxes paid in the
fourth quarter of 2013.
Net (Loss) Income from Discontinued Operations. Net (loss) income from discontinued operations was ($4.6)
million for 2013 compared to $17.6 million for 2012. In 2012, we sold the Hamane Spirit, Torben Spirit and Luzon Spirit. During the first quarter of 2013, we sold the Leyte Spirit, which was classified as held-for-sale at
December 31, 2012. During 2013 we sold the Poul Spirit and the Gotland Spirit, respectively.
If these vessels
described above were not classified as discontinued operations, the results of the operations of these vessels would have been reported within the conventional tanker segment.
Net loss from discontinued operations increased for 2013 from 2012, primarily due to:
|
|
|
a decrease of $23.8 million in net revenues due to the sale of six conventional tankers since 2012; |
|
|
|
an increase of $10.8 million from the higher write down and loss on sale of vessels in 2013 relative to 2012, mainly as the vessels sold in 2012
had been previously written down in 2011; and |
|
|
|
a decrease of $3.4 million in termination fees received from Teekay Corporation, of which $11.3 million in termination fees were received in 2013
in relation to the early terminations of the time-charter contracts for the Poul Spirit and the Gotland Spirit, compared to a $14.7 million termination fee received in 2012 in relation to the early cancellation of the time-charter
contract for the Hamane Spirit; |
partially offset by
|
|
|
a decrease of $10.4 million in vessel operating expenses due to the sale of six conventional tankers since 2012; |
|
|
|
a decrease of $4.0 million in depreciation and amortization due to the sale of the Leyte Spirit, the Luzon Spirit, the Poul Spirit
and the Gotland Spirit; |
|
|
|
a decrease of $0.7 million in general and administrative expenses due to the sale of six conventional tankers since 2012; and
|
|
|
|
a decrease of $0.7 million in interest expense due to the sale of six conventional tankers since 2012. |
Liquidity and Capital Resources
Liquidity and Cash Needs
Our
business model is to employ our vessels on fixed-rate contracts with major oil companies, typically with original terms between three to ten years. The operating cash flow our vessels generate each quarter, excluding a reserve for maintenance
capital expenditures, is generally paid out to our common unitholders within approximately 45 days after the end of each quarter. Our primary short-term liquidity needs are to pay quarterly distributions on our outstanding common and Series A
preferred units, payment of operating expenses, dry docking expenditures, debt service costs and to fund general working capital requirements. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from
operations. We believe that our existing cash and cash equivalents and undrawn long-term borrowings, in addition to all other sources of cash including cash from operations, will be sufficient to meet our existing liquidity needs for at least the
next 12 months.
Our long-term liquidity needs primarily relate to expansion and maintenance capital expenditures and debt repayment.
Expansion capital expenditures primarily represent the purchase or construction of vessels to the extent the expenditures increase the operating capacity or revenue generated by our fleet, while maintenance capital expenditures primarily consist of
dry docking expenditures and expenditures to replace vessels in order to maintain the operating capacity or revenue generated by our fleet. Our primary sources of funds for our long-term liquidity needs are from cash from operations, long-term bank
borrowings and other debt or equity financings, or a combination thereof. Consequently, our ability to continue to expand the size of our fleet is dependent upon our ability to obtain long-term bank borrowings and other debt, as well as raising
equity.
52
Our revolving credit facilities and term loans are described in Item 18 Financial
Statements: Note 8 Long-Term Debt. They contain covenants and other restrictions typical of debt financing secured by vessels that restrict the ship-owning subsidiaries from incurring or guaranteeing indebtedness; changing ownership or
structure, including mergers, consolidations, liquidations and dissolutions; making dividends or distributions if we are in default; making capital expenditures in excess of specified levels; making certain negative pledges and granting certain
liens; selling, transferring, assigning or conveying assets; making certain loans and investments; or entering into a new line of business. Certain of our revolving credit facilities and term loans include financial covenants. Should we not meet
these financial covenants, the lender may accelerate the repayment of the revolving credit facilities and term loans, thus having an impact on our short-term liquidity requirements. We have two revolving credit facilities that requires us to
maintain vessel value to drawn principal balance ratios of a minimum of 105% and 120%, respectively. As at December 31, 2014, these ratios were 151% and 137%, respectively. The vessel values used in these ratios are the appraised values
prepared by us based on second hand sale and purchase market data. Changes in the conventional tanker market could negatively affect these ratios. As at December 31, 2014, we and our affiliates were in compliance with all covenants relating to
the revolving credit facilities and term loans.
As at December 31, 2014, our total cash and cash equivalents were $252.1 million,
compared to $219.1 million at December 31, 2013. Our total liquidity, including cash, cash equivalents and undrawn long-term borrowings, was $351.7 million as at December 31, 2014, compared to $331.0 million as at December 31, 2013.
The increase in liquidity was primarily due to: the proceeds from the issuance of NOK 1,000 million and $300.0 million of senior unsecured bonds in January 2014 and May 2014, respectively; the net proceeds from the issuance of common units,
including net proceeds of $7.6 million from the issuance of common units under the COP in May 2014 and $178.5 million from a private placement of common units in November 2014, partially offset by our acquisition in March 2014 of 100% of the shares
of ALP and installments on the four ALP towage vessels newbuildings; our acquisition in August 2014 of 100% of the shares of Logitel and the exercise of the option to construct the third FAU; the conversion costs relating to the Randgrid
shuttle tanker, a reduction in the amount available for borrowing under our revolving credit facilities; and the scheduled repayment and prepayment of outstanding term loans.
As at December 31, 2014, we had a working capital deficit of $124.0 million, compared to a working capital deficit of $720.6 million at
December 31, 2013. The current portion of long-term debt decreased mainly due to the refinancing of three debt facilities and the repayment of various debt facilities during 2014. Our net due to affiliates balance decreased mainly due to
repayments made during 2014, partially offset by our acquisition from Teekay Corporation of the Petrojarl I FPSO unit. We expect to manage our working capital deficit primarily with net operating cash flow generated in 2015 and, to a lesser
extent, with new and existing undrawn revolving credit facilities and term loans.
The passage of any climate control legislation or other
regulatory initiatives that restrict emissions of greenhouse gases could have a significant financial and operational impact on our business, which we cannot predict with certainty at this time. Such regulatory measures could increase our costs
related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. In addition,
increased regulation of greenhouse gases may, in the long term, lead to reduced demand for oil and reduced demand for our services.
Cash Flows. The following table summarizes our sources and uses of cash for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
(in thousands of U.S. dollars) |
|
2014 |
|
|
2013 |
|
|
2012 |
|
Net cash flow from operating activities |
|
|
160,186 |
|
|
|
255,387 |
|
|
|
267,494 |
|
Net cash flow from (used for) financing activities |
|
|
37,179 |
|
|
|
231,865 |
|
|
|
(206,007 |
) |
Net cash flow used for investing activities |
|
|
(164,353 |
) |
|
|
(474,465 |
) |
|
|
(35,082 |
) |
Operating Cash Flows.
Net cash flow from operating activities decreased to $160.2 million for 2014, from $255.4 million in 2013, primarily due to a $163.5 million
decrease in changes in non-cash working capital, a $26.2 million increase in net interest expense, a $23.1 million increase in general and administrative expenses, a $16.9 million increase in dry-docking expenditures, a $15.1 million decrease in
cash receipts from discontinued operations, a $6.6 million increase in vessel operating expenses, a $5.7 million decrease in foreign exchange gains and other items, and a $1.2 million increase in current income taxes, partially offset by a $77.9
million increase in net revenue, a $38.2 million decrease in realized losses on derivatives, a $25.6 million decrease in time-charter hire expense, a $16.8 million increase in dividends received from our equity-accounted joint venture, a $2.8
million decrease in restructuring costs and a $1.8 million decrease in loss on bond repurchase.
The increase in non-cash working capital
items for 2014 compared to 2013 is primarily due to the timing of payments made to vendors and the timing of settlements with related parties, partially offset by the timing of payments received from customers.
Net cash flow from operating activities decreased to $255.4 million for 2013, from $267.5 million in 2012, primarily due to a $40.0 million
increase in realized losses on non-designated derivative instruments, a $26.6 million increase in vessel operating expenses, a $15.7 million decrease in income from discontinued operations, a $12.8 million increase in net interest expense, a $10.3
million increase in general and administrative expenses, a $4.4 million increase in net deferred mobilization costs, a $1.8 million loss on bond repurchase, a $1.5 million increase in restructuring costs and a $1.5 million increase in current income
taxes partially offset by a $69.4 million increase in changes in non-cash working capital items and a $33.7 million increase in net revenue.
The increase in non-cash working capital items for 2013 compared to 2012 is primarily due to the timing of payments made to vendors and the
timing of settlements with related parties, partially offset by the timing of payments received from customers.
For a further discussion
of changes in income statement items described above, please read Results of Operations.
53
Financing Cash Flows.
In order to partially finance new acquisitions, we periodically issue equity to the public and to institutional investors. We raised net
proceeds (including our general partners 2% proportionate capital contribution) of $186.1 million in 2014, $263.8 million in 2013 and $257.2 million in 2012. Proceeds from equity issued in 2014 will be used for general partnership purposes,
which may include funding vessel conversion projects and financing newbuilding FAUs and towage vessels. We paid finance shipyard installments for the four BG shuttle tankers in 2013 and 2012. We purchased the Voyageur Spirit FPSO unit during
2013.
We use our revolving credit facilities to finance capital expenditures and for general partnership purposes. Occasionally we will
do this until longer-term financing is obtained, at which time we typically use all or a portion of the proceeds from the longer-term financings to prepay outstanding amounts under the revolving credit facilities. Our proceeds (outflow) from the
issuance of long-term debt, net of debt issuance costs and prepayments of long-term debt were $915.9 million in 2014, $658.7 million in 2013 and ($131.4) million in 2012. Net proceeds from the issuance of long-term debt increased in 2014 from 2013,
primarily due to proceeds from the issuance of NOK 1,000 million and $300.0 million unsecured bonds in January 2014 and May 2014, respectively, and long-term debt issued to finance conversion costs for the Suksan Salamander in October
2014. Net proceeds from the issuance of long-term debt increased in 2013 from 2012, primarily due to long-term debt issued to finance a portion of the acquisition of the Voyageur Spirit FPSO unit, to partially finance the final installments
for the four BG shuttle tankers and for repayments and prepayments of existing revolving debt facilities.
We actively manage the maturity
profile of our outstanding financing arrangements. Our scheduled repayments of long-term debt increased to $804.7 million in 2014, from $266.9 million in 2013 and $146.2 million in 2012.
Cash distributions paid by our subsidiaries to non-controlling interests totaled $27.9 million in 2014, $7.8 million in 2013 and $8.8 million
in 2012. Cash distributions paid by us to our common unitholders, our general partner and our Series A preferred unitholders totaled $214.7 million in 2014, $192.1 million in 2013 and $160.9 million in 2012. The increase in distributions paid by our
subsidiaries to non-controlling interests in 2014 from 2013 was due to the timing of payments of cash distributions. The increase in distributions to our common and preferred unitholders in 2014 and 2013 was attributed to: three increases in our
cash distribution to common unitholders, commencing with the cash distributions paid in the first quarter of 2014, the second quarter of 2013 and the second quarter of 2012, of $0.0131 per unit, $0.0128 per unit and $0.0125 per unit, respectively,
or approximately 2.5% each; an increase in the number of common units resulting from the 7.1 million (including our general partners 2% proportionate capital contribution) common units issued during 2014, the 5.5 million (including
our general partners 2% proportionate capital contribution) common units issued during 2013 and the 9.7 million (including our general partners 2% proportionate capital contribution) common units issued during 2012; and the issuance
of 6.0 million Series A preferred units in 2013. The increase in the 2014 cash distribution coincided with the completion of deliveries of the four BG Shuttle Tankers. The increase in the 2013 cash distribution coincided with our acquisition of
the Voyageur Spirit FPSO unit. The increase in the 2012 cash distribution coincided with our acquisition of the Piranema Spirit FPSO unit.
Subsequent to December 31, 2014, cash distributions for our common units relating to the fourth quarter of 2014 were declared and paid on
February 13, 2015 and totaled $55.0 million. Subsequent to December 31, 2014, cash distributions for Series A preferred units relating to the fourth quarter of 2014 were declared and paid on February 13, 2015 and totaled $2.7 million.
Investing Cash Flows
During
2014, net cash flow used for investing activities was $164.4 million, primarily relating to the expenditures for vessels and equipment, including installments of $59.7 million on the four newbuilding ALP towage vessels, $53.4 million on FSO
conversion costs, $11.5 million on installment payments on the FAU newbuildings and $47.8 million on various other vessel additions, investments in our equity accounted joint ventures of $12.4 million and the $2.3 million acquisition of 100% of the
shares of ALP, partially offset by aggregate sales proceeds of $13.4 million from the sale of the Navion Norvegia shuttle tanker, scheduled lease payments of $5.1 million received from the leasing of our VOC emissions equipment and direct
financing lease assets and a net cash inflow of $4.1 million due to cash received of $8.1 million as part of the acquisition of 100% of the shares of Logitel, offset by $4.0 million cash consideration paid.
During 2013, net cash flow used for investing activities was $474.5 million, primarily relating to the expenditures for vessels and equipment,
including installment and final payments of $336.8 million on the four newbuilding BG shuttle tankers, $54.3 million on the HiLoad DP Unit and $64.5 million on various other vessel additions and the $52.5 million acquisition from Teekay Corporation
of its 50 percent interest in the Itajai FPSO joint venture, partially offset by aggregate sale proceeds of $28.0 million from the sale of the Basker Spirit shuttle tanker and the Leyte Spirit, the Poul Spirit and the
Gotland Spirit conventional tankers and the scheduled lease payments of $5.6 million received from the leasing of our VOC emissions equipment and direct financing lease assets.
During 2012, net cash flow used for investing activities was $35.1 million, primarily relating to expenditures for vessels and equipment,
including installment payments of $78.1 million on the four newbuilding BG shuttle tankers and $9.3 million on various other vessel additions, partially offset by $35.2 million in proceeds from the sale of five vessels and scheduled lease payments
of $17.1 million received from the leasing of certain of our volatile organic compound emissions equipment and direct financing lease assets.
Contractual Obligations and Contingencies
The following table summarizes our long-term contractual obligations as at December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2015 |
|
|
2016 and 2017 |
|
|
2018 and 2019 |
|
|
Beyond 2019 |
|
|
|
(in millions of U.S. Dollars) |
|
U.S. Dollar-Denominated Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (1) |
|
|
2,046.9 |
|
|
|
258.0 |
|
|
|
644.5 |
|
|
|
794.1 |
|
|
|
350.3 |
|
Chartered-in vessels (operating leases) |
|
|
30.0 |
|
|
|
18.4 |
|
|
|
11.6 |
|
|
|
|
|
|
|
|
|
Acquisition of vessels and newbuildings and committed conversion costs
(2) |
|
|
1,821.3 |
|
|
|
945.2 |
|
|
|
874.2 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
Norwegian Kroner-Denominated Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (3) |
|
|
389.1 |
|
|
|
|
|
|
|
147.6 |
|
|
|
241.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
|
4,287.3 |
|
|
|
1,221.6 |
|
|
|
1,677.9 |
|
|
|
1,037.5 |
|
|
|
350.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
(1) |
Excludes expected interest payments of $57.6 million (2015), $94.9 million (2016 and 2017), $57.2 million (2018 and 2019) and
$22.8 million (beyond 2019). Expected interest payments are based on existing interest rates (fixed-rate loans) and LIBOR, plus margins which ranged between 0.30% and 3.25% (variable-rate loans) as at December 31, 2014. The expected
interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our variable rate debt. |
(2) |
Consists of the acquisition of four towage and anchor handling newbuildings and three FAU newbuildings, our 50% interest in an FPSO conversion for
the Libra field, upgrades of the Petrojarl I FPSO unit, the FSO conversion for the Randgrid shuttle tanker, and the acquisition of the six on-the-water long-distance towing and anchor handling vessels. Please read Item 18
Financial Statements: Note 14 (c), (d), (e), (f) and (g) Commitments and Contingencies, and Note 18 (a) and (b) Acquisitions. |
(3) |
Excludes expected interest payments of $24.5 million (2015), $36.2 million (2016 and 2017), and $9.1 million (2018 and 2019). Expected
interest payments are based on NIBOR, plus margins which ranged between 4.00% and 5.75% as at December 31, 2014. The expected interest payments do not reflect the effect of related interest rate swaps and cross currency swaps that we have used
as an economic hedge of certain of our Norwegian Kroner-denominated obligations. |
Off-Balance Sheet
Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with GAAP, which require us to make estimates in the application of our
accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly
and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates and such differences could be material. Accounting estimates and
assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements, because they inherently involve significant judgments and uncertainties. For a further description of our
material accounting policies. Please read Item 18 - Financial Statements: Note 1 - Summary of Significant Accounting Policies.
Revenue
Recognition
Description. A portion of our revenues are generated from voyages servicing contracts of affreightment and to a
lesser extent, spot voyages. Within the shipping industry, the two methods used to account for revenues and expenses are the proportionate performance and the completed voyage methods. Most shipping companies, including us, use the proportionate
performance method. For each method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. In other words, revenues are recognized ratably either from the beginning of when product is loaded for one voyage to when it is
loaded for another voyage, or from when product is discharged (unloaded) at the end of one voyage to when it is discharged after the next voyage. We recognize revenues from time charters and bareboat charters daily over the term of the charter
as the applicable vessel operates under the charter. Revenues from FPSO service contracts are recognized as service is performed. We generally do not recognize revenues during days that a vessel is off hire.
Judgments and Uncertainties. In applying the proportionate performance method, we believe that in most cases the discharge-to-discharge
basis of calculating voyages more accurately reflects voyage results than the load-to-load basis. At the time of cargo discharge, we generally have information about the next load port and expected discharge port, whereas at the time of loading we
are normally less certain what the next load port will be. We use this method of revenue recognition for all spot voyages. In the case of our shuttle tankers servicing contracts of affreightment, a voyage commences with tendering of notice of
readiness at a field, within the agreed lifting range, and ends with tendering of notice of readiness at a field for the next lifting. In all cases we do not begin recognizing revenue for any of our vessels until a charter has been agreed to by the
customer and us, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage.
Effect if
Actual Results Differ from Assumptions. If actual results are not consistent with our estimates in applying the proportionate performance method, our revenues could be overstated or understated for any given period by the amount of such
difference.
Vessel Lives and Impairment
Description. The carrying value of each of our vessels represents its original cost at the time of delivery or purchase less
depreciation and impairment charges. We depreciate the original cost, less an estimated residual value, of our vessels on a straight-line basis over each vessels estimated useful life. The carrying values of our vessels may not represent their
market value at any point in time because the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. Both charter rates and newbuilding costs tend to be cyclical in nature.
We review vessels and equipment for impairment whenever events or circumstances indicate the carrying value of an asset, including the
carrying value of the charter contract, if any, under which the vessel is employed, may not be recoverable. This occurs when the assets carrying value is greater than the future undiscounted cash flows the asset is expected to generate over
its remaining useful life. For a vessel under charter, the discounted cash flows from that vessel may exceed its market value, as market values may assume the vessel is not employed on an existing charter. If the estimated future undiscounted cash
flows of an asset exceeds the assets carrying value, no impairment is recognized even though the fair value of the asset may be lower than its carrying value. If the estimated future undiscounted cash flows of an asset is less than the
assets carrying value and the fair value of the asset is less than its carrying value, the asset is written down to its fair value. Fair value is calculated as the net present value of estimated future cash flows, which, in certain
circumstances, will approximate the estimated market value of the vessel.
55
Our business model is to employ our vessels on fixed-rate contracts with major oil companies.
These contracts generally have original terms between three to ten years in length. Consequently, while the market value of a vessel may decline below its carrying value, the carrying value of a vessel may still be recoverable based on the future
undiscounted cash flows the vessel is expected to obtain from servicing its existing and future contracts.
The following table presents
by segment the aggregate market values and carrying values of certain of our vessels that we have determined have a market value that is less than their carrying value as of December 31, 2014. Specifically, the following table reflects all such
vessels, except those operating on contracts where the remaining term is significant and the estimated future undiscounted cash flows relating to such contracts are sufficiently greater than the carrying value of the vessels such that we consider it
unlikely an impairment would be recognized in the following year. Consequently, the vessels included in the following table generally include those vessels employed on single-voyage, or spot charters, as well as those vessels near the end of
existing charters or other operational contracts. While the market values of these vessels are below their carrying values, no impairment has been recognized on any of these vessels as the estimated future undiscounted cash flows relating to such
vessels are greater than their carrying values.
We would consider the vessels reflected in the following table to be at a higher risk of
future impairment. The table is disaggregated for vessels which have estimated future undiscounted cash flows that are marginally or significantly greater than their respective carrying values. Vessels with estimated future cash flows significantly
greater than their respective carrying values would not necessarily represent vessels that would likely be impaired in the next 12 months. The recognition of an impairment in the future for those vessels may primarily depend upon our deciding to
dispose of the vessel instead of continuing to operate it. In deciding whether to dispose of a vessel, we determine whether it is economically preferable to sell the vessel or continue to operate it. This assessment includes an estimate of the net
proceeds expected to be received if the vessel is sold in its existing condition compared to the present value of the vessels estimated future revenue, net of operating costs. Such estimates are based on the terms of the existing charter,
charter market outlook and estimated operating costs, given a vessels type, condition and age. In addition, we typically do not dispose of a vessel that is servicing an existing customer contract. The recognition of an impairment in the future
may be more likely for vessels that have estimated future undiscounted cash flow only marginally greater than their respective carrying value.
|
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|
|
|
(in thousands of U.S. dollars, except number of vessels)
Reportable Segment |
|
Number of Vessels |
|
|
Market Values(1) $ |
|
|
Carrying Values $ |
|
|
|
|
Shuttle Tanker Segment |
|
|
6 |
(2) |
|
|
148,600 |
|
|
|
214,874 |
|
Shuttle Tanker Segment |
|
|
2 |
(3) |
|
|
46,600 |
|
|
|
73,205 |
|
FSO Segment |
|
|
2 |
(2) |
|
|
12,500 |
|
|
|
24,916 |
|
(1) |
Market values are determined using reference to second-hand market comparable values or using a depreciated replacement cost approach as at
December 31, 2014. Since vessel values can be volatile, our estimates of market value may not be indicative of either the current or future prices we could obtain if we sold any of the vessels. In addition, the determination of estimated market
values for our shuttle tankers and FSO units may involve considerable judgment, given the illiquidity of the second-hand markets for these types of vessels. |
|
The estimated market values for the shuttle tankers were based on second-hand market comparable values for conventional tankers of similar age and
size, adjusted for shuttle tanker specific functionality. The estimated market values for the FSO units in the table above were based on second-hand market comparable values for similar vessels. Given the advanced age of these vessels, the estimated
market values substantially reflect the price of steel and amount of steel in the vessel. |
(2) |
Undiscounted cash flows are marginally greater than the carrying values. |
(3) |
Undiscounted cash flows are significantly greater than the carrying values. |
Judgments and Uncertainties. Depreciation is calculated on a straight-line basis over a vessels estimated useful life, less an
estimated residual value. Shuttle and conventional tankers are depreciated using an estimated useful life of 20 to 25 years commencing the date the vessel is delivered from the shipyard, or a shorter period if regulations prevent us from
operating the vessel for the estimated useful life. FPSO units are depreciated using an estimated useful life of 20 to 25 years commencing the date the unit arrives at the oil field and is in a condition that is ready to operate. FSO units are
depreciated over the term of the contract. FAUs are depreciated over an estimated useful life of 35 years commencing the date the unit is delivered from the shipyard. Towage vessels are depreciated over an estimated useful life of 25 years
commencing the date the vessel is delivered from the shipyard. However, the actual life of a vessel may be different than the estimated useful life, with a shorter actual useful life resulting in an increase in the quarterly depreciation and
potentially resulting in an impairment loss. The estimated useful life of our vessels takes into account design life, commercial considerations and regulatory restrictions. Our estimates of future cash flows involve assumptions about future charter
rates, vessel utilization, operating expenses, dry-docking expenditures, vessel residual values and the remaining estimated life of our vessels. Our estimated charter rates are based on rates under existing vessel contracts and market rates at which
we expect we can re-charter our vessels. Our estimates of vessel utilization, including estimated off-hire time and the estimated amount of time our shuttle tankers may spend operating in the spot tanker market when not being used in their capacity
as shuttle tankers, are based on historical experience and our projections of the number of future shuttle tanker voyages. Our estimates of operating expenses and dry-docking expenditures are based on historical operating and drydocking costs and
our expectations of future inflation and operating requirements. Vessel residual values are a product of a vessels lightweight tonnage and an estimated scrap rate. The remaining estimated lives of our vessels used in our estimates of future
cash flows are consistent with those used in the calculation of depreciation.
Certain assumptions relating to our estimates of future
cash flows are more predictable by their nature in our experience, including estimated revenue under existing contract terms, on-going operating costs and remaining vessel life. Certain assumptions relating to our estimates of future cash flows
require more discretion and are inherently less predictable, such as future charter rates beyond the firm period of existing contracts and vessel residual values, due to factors such as the volatility in vessel charter rates and vessel values. We
believe that the assumptions used to estimate future cash flows of our vessels are reasonable at the time they are made. We can make no assurances, however, as to whether our estimates of future cash flows, particularly future vessel charter rates
or vessel values, will be accurate.
56
Effect if Actual Results Differ from Assumptions. If we conclude that a vessel or
equipment is impaired, we recognize a loss in an amount equal to the excess of the carrying value of the asset over its fair value at the date of impairment. The written-down amount becomes the new lower cost basis and will result in a lower annual
depreciation expense than for periods before the vessel impairment.
Dry docking
Description. We dry dock each of our shuttle tankers, conventional oil tankers and towage vessels, periodically for inspection, repairs
and maintenance and for any modifications to comply with industry certification or governmental requirements. We may dry dock FSO units if we desire to qualify them for shipping classification. We capitalize a substantial portion of the costs we
incur during dry docking and amortize those costs on a straight-line basis over the estimated useful life of the dry dock. We immediately expense costs for routine repairs and maintenance performed during dry docking that do not improve or extend
the useful lives of the assets.
Judgments and Uncertainties. Amortization of capitalized dry-dock expenditures requires us to
estimate the period of the next dry docking or estimated useful life of dry-dock expenditures. While we typically dry dock each shuttle tanker and conventional oil tanker every two and a half to five years, we may dry dock the vessels at an earlier
date.
Effect if Actual Results Differ from Assumptions. A change in our estimate of the useful life of a dry dock will have a
direct effect on our annual amortization of dry-docking expenditures.
Goodwill and Intangible Assets
Description. We allocate the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired,
with the remaining amount being classified as goodwill. Certain intangible assets, such as time-charter contracts, are being amortized over time. Our future operating performance will be affected by the amortization of intangible assets and
potential impairment charges related to goodwill or intangible assets. Accordingly, the allocation of the purchase price to intangible assets and goodwill may significantly affect our future operating results. Goodwill and indefinite-lived assets
are not amortized, but reviewed for impairment annually, or more frequently if impairment indicators arise. The process of evaluating the potential impairment of goodwill and intangible assets is highly subjective and requires significant judgment
at many points during the analysis.
Judgments and Uncertainties. The allocation of the purchase price of acquired
companies to intangible assets and goodwill requires management to make significant estimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets and the appropriate discount rate to value these
cash flows. In addition, the process of evaluating the potential impairment of goodwill and intangible assets is highly subjective and requires significant judgment at many points during the analysis. The fair value of our reporting units was
estimated based on discounted expected future cash flows using a weighted-average cost of capital rate. The estimates and assumptions regarding expected cash flows and the appropriate discount rates require considerable judgment and are based upon
existing contracts, historical experience, financial forecasts and industry trends and conditions.
As of December 31, 2014, the
shuttle segment and the towage segment had goodwill attributable to them. As of the date of this filing, we do not believe that there is a reasonable possibility that the goodwill attributable to these reporting units might be impaired within the
next year. However, certain factors that impact this assessment are inherently difficult to forecast and as such we cannot provide any assurances that an impairment will or will not occur in the future. An assessment for impairment involves a number
of assumptions and estimates that are based on factors that are beyond our control. These are discussed in more detail in the section entitled Forward-Looking Statements.
Aggregate amortization expense of intangible assets for 2014 and 2013 was $4.0 million and $5.1 million, respectively. If actual
results are not consistent with our estimates used to value our intangible assets, we may be exposed to an impairment charge and a decrease in the annual amortization expense of our intangible assets. As at December 31, 2014 and 2013, the net
book value of intangible assets was $6.4 million and $10.4 million, respectively.
Valuation of Derivative Instruments
Description. Our risk management policies permit the use of derivative financial instruments to manage interest rate and foreign
exchange risk. Changes in fair value of derivative financial instruments that are not designated as cash flow hedges for accounting purposes are recognized in earnings.
Judgments and Uncertainties. A substantial majority of the fair value of our derivative instruments and the change in fair value of our
derivative instruments from period to period result from our use of interest rate swap agreements. The fair value of our derivative instruments is the estimated amount that we would receive or pay to terminate the agreements in an arms length
transaction under normal business conditions at the reporting date, taking into account current interest rates, foreign exchange rates and the current credit worthiness of ourselves and the swap counterparties. The estimated amount is the present
value of estimated future cash flows, being equal to the difference between the benchmark interest rate and the fixed rate in the interest rate swap agreement, multiplied by the notional principal amount of the interest rate swap agreement at each
interest reset date.
The fair value of our interest rate swap agreements at the end of each period is most significantly impacted by the
interest rate implied by the benchmark interest rate yield curve, including its relative steepness. Interest rates have experienced significant volatility in recent years in both the short and long term. While the fair value of our interest rate
swap agreements is typically more sensitive to changes in short-term rates, significant changes in the long-term benchmark interest rate also materially impact our interest rate swap agreements.
The fair value of our interest rate swap agreements is also impacted by changes in our specific credit risk included in the discount factor.
We discount our interest rate swap agreements with reference to the credit default swap spreads of similarly rated global industrial companies and by considering any underlying collateral. The process of determining credit worthiness requires
significant judgment in determining which source of credit risk information most closely matches our risk profile.
57
The benchmark interest rate yield curve and our specific credit risk are expected to vary over
the life of the interest rate swap agreements. The larger the notional amount of the interest rate swap agreements outstanding and the longer the remaining duration of the interest rate swap agreements, the larger the impact of any variability in
these factors will be on the fair value of our interest rate swaps. We economically hedge the interest rate exposure on a significant amount of our long-term debt and for long durations. As such, we have historically experienced, and we expect to
continue to experience, material variations in the period-to-period fair value of our derivative instruments.
Effect if Actual Results
Differ from Assumptions. Although we measure the fair value of our derivative instruments utilizing the inputs and assumptions described above, if we were to terminate the agreements at the reporting date, the amount we would pay or receive to
terminate the derivative instruments may differ from our estimate of fair value. If the estimated fair value differs from the actual termination amount, an adjustment to the carrying amount of the applicable derivative asset or liability would be
recognized in earnings for the current period. Such adjustments could be material. See Item 18 Financial Statements: Note 12 Derivative Instruments for the effects on the change in fair value of our derivative instruments on our
consolidated statements of income.
Taxes
Description. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be
realized.
Judgments and Uncertainties. The future realization of deferred tax assets depends on the existence of sufficient
taxable income of the appropriate character in either the carryback or carryforward period. This analysis requires, among other things, the use of estimates and projections in determining future reversals of temporary differences, forecasts of
future profitability and evaluating potential tax-planning strategies.
Effect if Actual Results Differ from Assumptions. If we
determined that we were able to realize a net deferred tax asset in the future, in excess of the net recorded amount, an adjustment to the deferred tax assets would typically increase our net income (or decrease our loss) in the period such
determination was made. Likewise, if we determined that we were not able to realize all or a part of our deferred tax asset in the future, an adjustment to the deferred tax assets would typically decrease our net income (or increase our loss) in the
period such determination was made. As at December 31, 2014, we had a valuation allowance of $128.4 million (2013 - $136.7 million).
Item 6. |
Directors, Senior Management and Employees |
A. Directors and Senior
Management
Management of Teekay Offshore Partners L.P.
Teekay Offshore GP L.L.C., our general partner, manages our operations and activities. Unitholders generally are not entitled to elect the
directors of our general partner or directly or indirectly participate in our management or operation.
Our general partner owes a
fiduciary duty to our unitholders. Our general partner is liable, as general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are expressly non-recourse to it. Whenever
possible, our general partner intends to cause us to incur indebtedness or other obligations that are non-recourse to it.
The directors
of our general partner oversee our operations. The day-to-day affairs of our business are managed by the officers of our general partner and key employees of certain of our controlled affiliates. Employees of certain subsidiaries of Teekay
Corporation provide assistance to us pursuant to services agreements. Please see Item 7- Major Unitholders and Related Party transactions.
The Chief Executive Officer and Chief Financial Officer of our general partner, Peter Evensen, allocates his time between managing our
business and affairs and the business and affairs of Teekay Corporation and its subsidiaries, including Teekay LNG Partners L.P. (NYSE: TGP) (or Teekay LNG ). Mr. Evensen is also the Chief Executive Officer and Chief Financial Officer of
Teekay LNGs general partner, Teekay GP L.L.C. The amount of time Mr. Evensen allocates among our business and the businesses of Teekay Corporation and Teekay LNG varies from time to time depending on various circumstances and needs of the
businesses, such as the relative levels of strategic activities of the businesses. We believe Mr. Evensen devotes sufficient time to our business and affairs as is necessary for their proper conduct.
Officers of our general partner and those individuals providing services to us or our subsidiaries may face a conflict regarding the
allocation of their time between our business and the other business interests of Teekay Corporation or its other affiliates. Our general partner intends to seek to cause its officers to devote as much time to the management of our business and
affairs as is necessary for the proper conduct of our business and affairs.
Directors and Executive Officers of Teekay
Offshore GP L.L.C.
The following table provides information about the directors and executive officers of our general partner, Teekay
Offshore GP L.L.C. Directors are elected for one-year terms. The business address of each of our directors and executive officers listed below is c/o 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda. Ages of the
directors and officers are as of December 31, 2014.
|
|
|
|
|
Name |
|
Age |
|
Position |
C. Sean Day |
|
65 |
|
Chairman (1) |
Peter Evensen |
|
56 |
|
Chief Executive Officer, Chief Financial Officer and Director |
Kenneth Hvid |
|
46 |
|
Director |
David L. Lemmon |
|
72 |
|
Director (1) (2) |
Carl Mikael L.L. von Mentzer |
|
70 |
|
Director (1) (2) |
John J. Peacock |
|
71 |
|
Director (1) (2) |
(1) |
Member of Corporate Governance Committee. |
58
(2) |
Member of Audit Committee and Conflicts Committee. |
Certain biographical information about each of these individuals is set forth below.
C. Sean Day has served as Chairman of Teekay Offshore GP L.L.C. since it was formed in August 2006. Mr. Day has also served as
Chairman of the Board of Teekay Corporation since September 1999. He also serves as Chairman of Teekay GP L.L.C. He served as Chairman of Teekay Tankers from 2007 until 2013. From 1989 to 1999, he was President and Chief Executive Officer of Navios
Corporation, a large bulk shipping company based in Stamford, Connecticut. Prior to that, Mr. Day held a number of senior management positions in the shipping and finance industry. He is currently serving as a Director of Kirby Corporation and
Chairman of Compass Diversified Holdings. Mr. Day is engaged as a consultant to Kattegat Limited, the parent company of Teekay Corporations largest shareholder, to oversee its investments, including that in the Teekay Corporation group of
companies.
Peter Evensen has served as Chief Executive Officer, Chief Financial Officer and a Director of Teekay Offshore GP
L.L.C. since August 2006. In April 2011, Mr. Evensen became President and Chief Executive Officer of Teekay Corporation and also became a Director of Teekay Corporation. He also serves as Chief Executive Officer, Chief Financial Officer and a
Director of Teekay GP L.L.C. He served as a Director of Teekay Tankers Ltd. from 2007 until 2013. He joined Teekay Corporation in 2003 as Senior Vice President, Treasurer and Chief Financial Officer and in 2006 was appointed Executive Vice President
and Chief Strategy Officer. Mr. Evensen has over 30 years of experience in banking and shipping finance. Prior to joining Teekay Corporation, Mr. Evensen was Managing Director and Head of Global Shipping at J.P. Morgan Securities Inc., and
worked in other senior positions for its predecessor firms. His international industry experience includes positions in New York, London and Oslo.
Kenneth Hvid has served as a Director of Teekay Offshore GP L.L.C. and Teekay GP L.L.C. and Chief Strategy Officer and Executive Vice
President of Teekay Corporation since April 2011. He joined Teekay Corporation in October 2000 and was responsible for leading its global procurement activities until he was promoted in 2004 to Senior Vice President, Teekay Gas Services. During that
time, Mr. Hvid was involved in leading Teekay Corporation through its entry and growth in the liquefied natural gas business. He held that position until the beginning of 2006, when he was appointed President of the Teekay Shuttle Tankers and
Offshore division of Teekay Corporation. In that role, he was responsible for Teekay Corporations global shuttle tanker business as well as initiatives in the FSO business and related offshore activities. Mr. Hvid has 26 years of global
shipping experience, 12 of which were spent with A.P. Moller in Copenhagen, San Francisco and Hong Kong. In 2007, Mr. Hvid joined the board of Gard P. & I. (Bermuda) Ltd.
David L. Lemmon has served as a Director of Teekay Offshore GP L.L.C since December 2006. Mr. Lemmon served on the board of
directors of Kirby Corporation, a position he held from April 2006 until April 2014. Mr. Lemmon also serves on the board of directors of Deltic Timber Corporation a position he has held since February 2007. Mr. Lemmon was the President and
Chief Executive Office of Colonial Pipeline Company from 1997 until his retirement in March 2006. Prior to joining Colonial Pipeline Company, he served as President of Amoco Pipeline Company for seven years, as part of a career with Amoco
Corporation that spanned 32 years. Mr. Lemmon has served as a member of the board of directors of the American Petroleum Institute, the National Council of Economic Education and the Battelle Energy Advisory Committee. He has served as a member
of the Northwestern University Business Advisory Committee and as a guest faculty member at Northwestern Universitys Kellogg Graduate School of Management.
Carl Mikael L.L. von Mentzer has served as a Director of Teekay Offshore GP L.L.C. since December 2006. Since 1998, Mr. von
Mentzer has served as a non-executive director of Concordia Maritime AB in Gothenburg, Sweden and he also served as Deputy Chairman of its board of directors from 2002 until May 2014. Prior to 1998 Mr. von Mentzer served in executive positions
with various shipping and offshore service companies, including Gotaverken Arendal AB and Safe Partners AB in Gothenburg, Sweden and OAG Ltd. in Aberdeen, Scotland. He has also previously served as a non-executive director for Northern Offshore
Ltd., in Oslo, Norway, and GVA Consultants in Gothenburg, Sweden.
John J. Peacock has served as a Director of Teekay Offshore GP
L.L.C. since December 2006. Mr. Peacock retired in February 2007 from Fednav Limited, a Canadian ocean-going, dry-bulk shipowning and chartering group. Joining as Fednavs Treasurer in 1979, he became Vice-President Finance in 1984 and
joined the board of directors. In 1998, Mr. Peacock was appointed Executive Vice-President of Fednav and President and Chief Operating Officer of Fednav International Ltd., the Groups principal operating subsidiary. Though retired, he
continues to serve as a Director. Mr. Peacock has over 40 years accounting experience, and prior to joining Fednav was a partner with Clarkson Gordon (now Ernst & Young) in Montreal, Canada. He also serves as Chair of the McGill
University Health Centre Foundation.
B. Compensation
Executive Compensation
Peter Evensen, the Chief Executive Officer and Chief Financial Officer of our general partner, and Kenneth Hvid, a director of our general
partner, are each an employee of a subsidiary of Teekay Corporation. Each executives compensation (other than any awards under the long-term incentive plan described below) is set and paid by the Teekay Corporation subsidiary, and we reimburse
the Teekay Corporation subsidiary for time he spends on our partnership matters.
Michael Balaski was the Vice President of our general
partner from December 2011 until his resignation on August 20, 2014. His compensation was set and paid by our general partner, and we reimbursed the general partner for time he spent on our partnership matters.
During 2014, the aggregate amount for which we reimbursed Teekay Corporation for compensation expenses of the officers of the general partner
incurred on our behalf excluding any long-term incentive plan awards issued directly by the Partnership as described below, was $1.1 million.
Compensation of Directors
Officers of our general partner or Teekay Corporation who also serve as directors of our general partner
do not receive additional compensation for their service as directors. Each of our non-employee directors receives compensation for attending meetings of the Board of Directors, as well as committee meetings. During 2014, each non-employee director,
other than the Chair, received a director fee of $50,000 for the year and an award of
59
common units with an aggregate maximum value of approximately $70,000 for the year. The Chair received a director fee of $50,000 and an additional annual fee of $37,500 for the year and an award
of common units with a value of approximately $87,500 for the year. In addition, members of the audit and conflicts committees each received an additional committee fee of $5,000 for the year, and the chairs of the audit committee, conflicts
committee and governance committee received an additional fee of $12,000, $12,000, and $10,000, respectively, for the year for serving in that role. In addition, each director was reimbursed for out-of-pocket expenses in connection with attending
meetings of the Board of Directors or committees. Each director is fully indemnified by us for actions associated with being a director to the extent permitted under Marshall Islands law.
During 2014, the four non-employee directors received, in the aggregate, $297,500 in cash fees for their services as directors, plus
reimbursement of their out-of-pocket expenses. For the year ended December 31, 2014, an aggregate of 9,482 common units, with a grant date fair value of $0.3 million, based on our closing unit price on the grant date, were granted and issued to
the non-employee directors of the general partner as part of their annual compensation for 2014.
2006 Long-Term Incentive
Plan
Our general partner adopted the Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan for employees and directors of and
consultants to our general partner and employees and directors of and consultants to its affiliates, who perform services for us. The plan provides for the award of restricted units, phantom units, unit options, unit appreciation rights and other
unit or cash-based awards. In March 2014, our general partner awarded 67,782 restricted units to certain employees of its affiliates with a grant date fair value of $2.1 million, based on our closing unit price on the grant date. Each restricted
unit is equal in value to one unit of our common units plus reinvested distributions from the grant date to the vesting date. The restricted units vest evenly over a three year period from the grant date. Any portion of a restricted unit award that
is not vested on the date of a recipients termination of service is cancelled, unless their termination arises as a result of the recipients retirement and in this case the restricted unit award will continue to vest in accordance with
the vesting schedule. Upon vesting, the value of the restricted units is paid to each grantee in the form of common units or cash.
C. Board Practices
Teekay Offshore GP L.L.C., our general partner, manages our operations and activities. Unitholders generally
are not entitled to elect the directors of our general partner or directly or indirectly participate in our management or operation.
Our
general partners Board of Directors (or the Board) currently consists of six members. Directors are appointed to serve until their successors are appointed or until they resign or are removed.
There are no service contracts between us and any of our directors providing for benefits upon termination of their employment or service.
The Board has the following three committees: Audit Committee, Conflicts Committee, and Corporate Governance Committee. The membership of
these committees and the function of each of the committees are described below. Each of the committees is currently comprised solely of independent members, and operates under a written charter adopted by the Board, other than the Conflicts
Committee. The committee charters for the Audit Committee, the Conflicts Committee and the Corporate Governance Committee are available under Investors Teekay Offshore Partners L.P. - Governance from the home page of our web site
at www.teekay.com. During 2014, the Board held eight meetings. Each director attended all Board meetings, except for one director who missed one meeting. For the Corporate Governance committee all members attended all meeting. For the Audit
Committee, one board member missed one meeting. For the Conflicts Committee, two members missed four meetings and one member missed one meeting.
Audit Committee. The Audit Committee of our general partner is composed of three or more directors, each of whom must meet the
independence standards of the NYSE, the SEC and any other applicable laws and regulations governing independence from time to time. This committee is currently comprised of directors John J. Peacock (Chair), David L. Lemmon and Carl Mikael L.L. von
Mentzer. All members of the committee are financially literate and the Board has determined that Mr. Peacock qualifies as an audit committee financial expert.
The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of:
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the integrity of our financial statements; |
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our compliance with legal and regulatory requirements; |
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the qualifications and independence of our independent auditor; and |
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the performance of our internal audit function and our independent auditor. |
Conflicts Committee. The Conflicts Committee of our general partner is composed of the same directors constituting the Audit Committee,
being David L. Lemmon (Chair), John J. Peacock, and Carl Mikael L.L. von Mentzer. The members of the Conflicts Committee may not be officers or employees of our general partner or directors, officers or employees of its affiliates, and must meet the
heightened NYSE and SEC director independence standards applicable to audit committee membership and certain other requirements.
The
Conflicts Committee:
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reviews specific matters that the Board believes may involve conflicts of interest; and |
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determines if the resolution of the conflict of interest is fair and reasonable to us. |
60
Any matters approved by the Conflicts Committee will be conclusively deemed to be fair and
reasonable to us, approved by all of our partners, and not a breach by our general partner of any duties it may owe us or our unit holders. The Board is not obligated to seek approval of the Conflicts Committee on any matter, and may determine the
resolution of any conflict of interest itself.
Corporate Governance Committee. The Corporate Governance Committee of our general
partner is composed of at least two directors. This committee is currently comprised of directors Carl Mikael L.L. von Mentzer (Chair), David L. Lemmon, John J. Peacock, and C. Sean Day.
The Corporate Governance Committee:
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oversees the operation and effectiveness of the Board and its corporate governance; |
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develops, updates and recommends to the Board corporate governance principles and policies applicable to us and our general partner and monitors
compliance with these principles and policies; and |
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oversees director compensation and the long-term incentive plan described above. |
D. Employees
Crewing and
Staff
As of December 31, 2014, approximately 1,602 seagoing staff served on our vessels. Certain subsidiaries of Teekay
Corporation employ the crews, who serve on the vessels pursuant to agreements with the subsidiaries. As of December 31, 2014, approximately 149 staff served on shore in technical, commercial and administrative roles in Norway, Singapore and
Brazil, compared to approximately 125 staff in Norway, Singapore and Brazil as of December 31, 2013. Teekay Corporation subsidiaries also provide on-shore advisory, operational and administrative support to our operating subsidiaries pursuant
to service agreements. Please see Item 7 - Major Unitholders and Related Party transactions - Certain Relationships and Related Party Transactions.
Teekay Corporation regards attracting and retaining motivated seagoing personnel as a top priority, and offers seafarers what we believe are
highly competitive employment packages and comprehensive benefits and opportunities for personal and career development, which relates to a philosophy of promoting internally.
Teekay Corporation has entered into a Collective Bargaining Agreement with the Philippine Seafarers Union, an affiliate of the
International Transport Workers Federation (or ITF), and a Special Agreement with ITF London, which covers substantially all of the officers and seamen that operate our Bahamian-flagged vessels. Substantially all officers and seamen for
the Norway-flagged vessels are covered by a collective bargaining agreement with Norwegian unions (Norwegian Maritime Officers Association, Norwegian Union of Marine Engineers and the Norwegian Seafarers Union). Teekay Corporation has
entered into a Collective Bargaining Agreement with Sindicato dos Trabalhadores Offshore do Brasil (or SINDITOB), which covers substantially all Brazilian resident offshore employees on board our FPSO units Rio das Ostras and
Piranema Spirit. Teekay Corporation has entered into a Collective Bargaining Agreement with Norwegian offshore unions (SAFE, Industry Energi and DSO), through our membership in Norwegian Shipowners Association (or NSA). The agreement
covers substantially all of the offshore employees on board our FPSOs on the Norwegian Continental Shelf. We believe Teekay Corporations relationships with these local labor unions are good.
Our commitment to training is fundamental to the development of the highest caliber of seafarers for marine operations. Teekay
Corporations cadet training approach is designed to balance academic learning with hands-on training at sea. Teekay Corporation has relationships with training institutions in Canada, Croatia, India, Norway, Philippines, Turkey and the United
Kingdom. After receiving formal instruction at one of these institutions, cadet training continues on board vessels. Teekay Corporation also has a career development plan that was devised to ensure a continuous flow of qualified officers who are
trained on its vessels and familiarized with its operational standards, systems and policies. We believe that high-quality crewing and training policies will play an increasingly important role in distinguishing larger independent shipping companies
that have in-house or affiliate capabilities from smaller companies that must rely on outside ship managers and crewing agents on the basis of customer service and safety.
E. Unit Ownership
The following table sets forth certain information regarding beneficial ownership, as of December 31, 2014, of our units by all directors
and officers of our general partner as a group. The information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a person beneficially owns any units that the person has the right to acquire as of
March 1, 2015 (60 days after December 31, 2014) through the exercise of any unit option or other right. Unless otherwise indicated, each person has sole voting and investment power (or shares such powers with his or her spouse) with
respect to the units set forth in the following table. Information for all persons listed below is based on information delivered to us.
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Identity of Person or Group |
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Common Units Owned |
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Percentage of Common Units Owned(3) |
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All directors and officers as a group (6 persons) (1) (2) |
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250,105 |
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0.27 |
% |
(1) |
Excludes units owned by Teekay Corporation, which controls us and on the board of which serve the directors of our general partner, C. Sean Day and
Peter Evensen. Peter Evensen is also the Chief Executive Officer of Teekay Corporation and the Chief Executive Officer of Teekay Offshore GP L.L.C., and a Director of Teekay Offshore GP L.L.C. and Teekay GP L.L.C. Kenneth Hvid is a Director of
Teekay Offshore GP L.L.C. and Teekay GP L.L.C. Mr. Hvid is also Executive Vice President and Chief Strategy Officer of Teekay Corporation. Please read Item 7: Major Unitholders and Related Party Transactions Certain Relationships
and Related Party Transactions for more detail. |
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|
(2) |
Each director, executive officer and key employee beneficially owns less than 1% of the outstanding units. |
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(3) |
Excludes the 2% general partner interest held by our general partner, a wholly owned subsidiary of Teekay Corporation. |
Item 7. |
Major Unitholders and Related Party Transactions |
A. Major Unitholders
The following table sets forth the beneficial ownership, as of December 31, 2014, of our units by each person we know to
beneficially own more than 5% of the outstanding units. The number of units beneficially owned by each person is determined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC
rules a person beneficially owns any units as to which the person has or shares voting or investment power. In addition, a person beneficially owns any units that the person or entity has the right to acquire as of March 1, 2015 (60 days after
December 31, 2014) through the exercise of any unit option or other right. Unless otherwise indicated, each unitholder listed below has sole voting and investment power with respect to the units set forth in the following table.
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Identity of Person or Group |
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Common Units Owned |
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Percentage of Common Units Owned |
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Teekay Corporation (1) |
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23,809,468 |
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25.8 |
% |
Goldman Sachs Asset Management, L.P. and GS Investment Strategies, LLC, as a group
(2) |
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10,276,307 |
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11.1 |
% |
Neuberger Berman Group LLC and Neuberger Berman, LLC, as a group (3) |
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8,844,967 |
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9.6 |
% |
(1) |
Excludes the 2% general partner interest held by our general partner, a wholly owned subsidiary of Teekay Corporation. |
(2) |
Includes shared voting power as to 10,275,007 units and shared dispositive power as to 10,276,307 units. The holdings belong to certain operating
units (collectively, the Goldman Sachs Reporting Units) of The Goldman Sachs Group, Inc. and its subsidiaries and affiliates (collectively, CSG). This information is based on the Schedule 13G/A filed by this group with the
SEC on February 13, 2015. |
(3) |
Includes shared voting power as to 8,591,073 units and shared dispositive power as to 8,844,967 units. Both Neuberger Berman Group LLC and
Neuberger Berman LLC have shared dispositive power. Neuberger Berman, LLC and Neuberger Berman Management LLC serve as a sub-advisor and investment manager, respectively, of Neuberger Berman Group LLCs various registered mutual funds which
hold such shares. The holdings belonging to clients of Neuberger Berman Trust Co N.A., Neuberger Berman Trust Co of Delaware N.A., Neuberger Berman Fixed Income LLC and NB Alternatives Advisers LLC, and affiliates of Neuberger Berman LLC. This
information is based on the Schedule 13G/A filed by this group with the SEC on February 11, 2015. |
We are
controlled by Teekay Corporation. We are not aware of any arrangements, the operation of which may at a subsequent date result in a change in control of us.
B. Certain Relationships and Related Party Transactions
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a) |
C. Sean Day is the Chairman of our general partner, Teekay Offshore GP L.L.C. He also is the Chairman of Teekay Corporation, and Teekay GP L.L.C.,
the general partner of Teekay LNG. |
Peter Evensen is the President and Chief Executive Officer of Teekay
Corporation, the Chief Executive Officer and Chief Financial Officer of Teekay Offshore GP L.L.C and Teekay GP L.L.C., and a Director of Teekay Corporation, Teekay GP L.L.C. and Teekay Offshore GP L.L.C.
Kenneth Hvid is a Director of Teekay Offshore GP L.L.C. and Teekay GP L.L.C. Mr. Hvid is also Executive Vice President and
Chief Strategy Officer of Teekay Corporation.
Because Mr. Evensen and Mr. Hvid are employees of a subsidiary of
Teekay Corporation, their compensation (other than any awards under the long-term incentive plan) is set and paid by the Teekay Corporation subsidiary. Pursuant to our partnership agreement, we have agreed to reimburse Teekay Corporation for time
spent by Mr. Evensen and Mr. Hvid on our partnership matters.
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b) |
We have entered into an amended and restated omnibus agreement with our general partner, Teekay Corporation, Teekay LNG and related parties. The
following discussion describes certain provisions of the omnibus agreement. |
Noncompetition. Under
the omnibus agreement, Teekay Corporation and Teekay LNG have agreed, and have caused their controlled affiliates (other than us) to agree, not to own, operate or charter certain Offshore Vessels. This restriction does not prevent Teekay
Corporation, Teekay LNG or any of their other controlled affiliates from, among other things:
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owning, operating or chartering Offshore Vessels if the remaining duration of the time charter or contract of affreightment for the vessel,
excluding any extension options, is less than three years; |
62
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acquiring Offshore Vessels and related time charters or contracts of affreightment as part of a business or package of assets and operating or
chartering those vessels if a majority of the value of the total assets or business acquired is not attributable to the Offshore Vessels and related contracts, as determined in good faith by the board of directors of Teekay Corporation or the
conflicts committee of the board of directors of Teekay LNGs general partner; however, if Teekay Corporation or Teekay LNG completes such an acquisition, it must, within one year after completing the acquisition, offer to sell the Offshore
Vessels and related contracts to us for their fair market value plus any additional tax or other similar costs to Teekay Corporation or Teekay LNG that would be required to transfer the Offshore Vessels and contracts to us separately from the
acquired business or package of assets; |
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owning, operating or chartering Offshore Vessels and related time charters and contracts of affreightment that relate to tenders, bids or awards
for an offshore project that Teekay Corporation or any of its subsidiaries submits or receives; however, at least one year after the delivery date of any such Offshore Vessel, Teekay Corporation must offer to sell the Offshore Vessel and related
contract to us, with the vessel valued (i) for newbuildings originally contracted by Teekay Corporation, at its fully-built-up cost (which represents the aggregate expenditures incurred (or to be incurred prior to delivery to
us) by Teekay Corporation to acquire, construct, and/or convert and bring such Offshore Vessel to the condition and location necessary for our intended use, plus project development costs for completed projects and projects that were not completed
but, if completed, would have been subject to an offer to us pursuant to the omnibus agreement) and (ii) for any other vessels, Teekay Corporations cost to acquire a newbuilding from a third party or the fair market value of any existing
vessel, as applicable, plus in each case any subsequent expenditures that would be included in the fully-built-up cost of converting the vessel prior to delivery to us; |
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acquiring, operating or chartering Offshore Vessels if our general partner has previously advised Teekay Corporation or Teekay LNG that the
board of directors of our general partner has elected, with the approval of its conflicts committee, not to cause us or our subsidiaries to acquire or operate the vessels; or |
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owning shares of Teekay Petrojarl. |
In addition, under the omnibus agreement we have agreed not to own, operate or charter crude oil tankers or liquefied natural
gas (or LNG) carriers. This restriction does not apply to any of the Aframax tankers in our current fleet, and the ownership, operation or chartering of any oil tankers that replace any of those oil tankers in connection with certain events.
In addition, the restriction does not prevent us from, among other things:
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acquiring oil tankers or LNG carriers and any related time charters as part of a business or package of assets and operating or chartering those
vessels, if a majority of the value of the total assets or business acquired is not attributable to the oil tankers and LNG carriers and any related charters, as determined in good faith by the conflicts committee of our general partners board
of directors; however, if at any time we complete such an acquisition, we are required to promptly offer to sell to Teekay Corporation the oil tankers and time charters or to Teekay LNG the LNG carriers and time charters for fair market value plus
any additional tax or other similar costs to us that would be required to transfer the vessels and contracts to Teekay Corporation or Teekay LNG separately from the acquired business or package of assets; or |
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acquiring, operating or chartering oil tankers or LNG carriers if Teekay Corporation or Teekay LNG, respectively, has previously advised our
general partner that it has elected not to acquire or operate those vessels. |
Rights of First Offer on
Conventional Tankers, LNG Carriers and Offshore Vessels. Under the omnibus agreement, we have granted to Teekay Corporation and Teekay LNG a 30-day right of first offer on certain (a) sales, transfers or other dispositions of any of our
Aframax tankers, in the case of Teekay Corporation, or certain LNG carriers in the case of Teekay LNG, or (b) re-charterings of any of our Aframax tankers or LNG carriers pursuant to a time charter or contract of affreightment with a term of at
least three years if the existing charter expires or is terminated early. Likewise, each of Teekay Corporation and Teekay LNG has granted a similar right of first offer to us for any Offshore Vessels it might own that, at the time of the proposed
offer, is subject to a time charter or contract of affreightment with a remaining term, excluding extension options, of at least three years. These rights of first offer do not apply to certain transactions.
The omnibus agreement and a subsequent agreement also obligated Teekay Corporation to offer to sell to us the Foinaven
FPSO, an existing unit of Teekay Petrojarl, a wholly-owned subsidiary of Teekay Corporation, subject to approvals required from the charterer. The purchase price for the Foinaven FPSO would be its fair market value.
Please read Item 18. Financial Statements: Note 11 Related Party Transactions for a description of our
various related-party transactions.
Item 8. |
Financial Information |
Consolidated Financial Statements and Other
Financial Information
Consolidated Financial Statements and Notes
Please see Item 18 below for additional information required to be disclosed under this Item.
Legal Proceedings
On November 13, 2006, one of our shuttle tankers, the Navion Hispania, collided with the Njord Bravo, an FSO unit, while
preparing to load an oil cargo from the Njord Bravo. The Njord Bravo services the Njord field, which is operated by Statoil and is located off the Norwegian coast. At the time of the incident, Statoil was chartering the Navion
Hispania from us. The Navion Hispania and the Njord Bravo both incurred damage as a result of the collision. In November 2007, Navion Offshore Loading AS (or NOL) and Teekay Navion Offshore Loading Pte Ltd. (or TNOL),
subsidiaries of ours, and Teekay Shipping Norway AS (or TSN), a subsidiary of Teekay Corporation, were named as co-defendants in a legal action filed by Norwegian Hull Club (the hull and machinery insurers of the Njord Bravo), several
other insurance underwriters and various licensees in the Njord field.
63
Following a lower court ruling, the appellate court in June 2013 held that NOL, TNOL and TSN were
jointly and severally responsible towards the plaintiffs for all the losses as a result of the collision, plus interests accrued on the amount of damages. In addition, Statoil was held not to be required to indemnify NOL, TNOL and TSN for the
losses. NOL, TNOL and TSN were also held liable for legal costs associated with court proceedings. We and Teekay Corporation maintain protection and indemnity insurance for damages to the Navion Hispania and insurance for collision-related
costs and claims. Thus, we recognized total liability of NOK 216,400,000 (approximately $29.0 million) of damages and legal costs and a receivable of NOK 216,400,000 (approximately $29.0 million) as at December 31, 2013.
In 2014, we and the insurer entered into a settlement agreement with the plaintiffs, which reduced our liability and related receivable to NOK
117,500,000 (approximately $15.8 million). The insurer paid the settlement amount to the plaintiffs during November 2014. Thus, there is no liability or receivable recorded on our consolidated balance sheets as at December 31, 2014.
In addition, occasionally we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of our
business, principally personal injury and property casualty claims. These claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any legal proceedings or claims that we
believe will have, individually or in the aggregate, a material adverse effect on us.
Cash Distribution Policy
Rationale for Our Cash Distribution Policy
Our cash distribution policy reflects a basic judgment that our common unitholders are better served by our distributing our cash available (as
defined in our partnership agreement and after deducting expenses, including estimated maintenance capital expenditures and reserves) rather than our retaining it. Because we believe we will generally finance any expansion capital expenditures from
external financing sources, we believe that our common unitholders investors are best served by our distributing all of our available cash. Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that
we distribute all of our available cash quarterly (after deducting expenses, including estimated maintenance capital expenditures and reserves).
Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictions
and may be changed at any time, including:
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Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our partnership agreement to
distribute available cash on a quarterly basis, which is subject to our general partners broad discretion to establish reserves and other limitations. |
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While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions requiring us
to make cash distributions contained therein, may be amended with the approval of a majority of the outstanding common units. |
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Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the
decision to make any distribution is determined by the Board of Directors of our general partner, taking into consideration the terms of our partnership agreement. |
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Under Section 51 of the Marshall Islands Limited Partnership Act, we may not make a distribution to unitholders if the distribution would
cause our liabilities to exceed the fair value of our assets. |
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We may lack sufficient cash to pay distributions to our unitholders due to decreases in net revenues or increases in operating expenses, principal
and interest payments on outstanding debt, tax expenses, working capital requirements, maintenance capital expenditures or anticipated cash needs. |
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Our distribution policy may be affected by restrictions on distributions under our credit facility agreements, which contain material financial
tests and covenants that must be satisfied. Should we be unable to satisfy these restrictions included in the credit agreements or if we are otherwise in default under the credit agreements, we would be prohibited from making cash distributions,
which would materially hinder our ability to make cash distributions to unitholders, notwithstanding our stated cash distribution policy. |
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If we make distributions out of capital surplus, as opposed to operating surplus (as such terms are defined in our partnership agreement), those
distributions will constitute a return of capital and will result in a reduction in the minimum quarterly distribution and the target distribution levels under our partnership agreement. We do not anticipate that we will make any distributions from
capital surplus. |
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from
operating surplus (as defined in our partnership agreement) after the minimum quarterly distribution to our common unitholders and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution
rights, but may transfer these rights separately from its general partner interest, subject to restrictions in our partnership agreement. Except for transfers of incentive distribution rights to an affiliate or another entity as part of our general
partners merger or consolidation with or into, or sale of all or substantially all of its assets to such entity, the approval of a majority of our common units (excluding common units held by our general partner and its affiliates), voting
separately as a class, generally is required for a transfer of the incentive distributions rights to a third party prior to December 31, 2016.
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The following table illustrates the percentage allocations of the additional available cash from
operating surplus among the common unitholders and our general partner up to the various target distribution levels. The amounts set forth under Marginal Percentage Interest in Distributions are the percentage interests of the
common unitholders and our general partner in any available cash from operating surplus we distribute up to and including the corresponding amount in the column Total Quarterly Distribution Target Amount, until available cash from
operating surplus we distribute reaches the next target distribution level, if any. The percentage interests shown for the common unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly distribution. The percentage interests shown for our general partner include its 2.0% general partner interest and assume the general partner has contributed any capital necessary to
maintain its 2.0% general partner interest and has not transferred the incentive distribution rights.
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Marginal Percentage Interest in Distributions |
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Total Quarterly Distribution Target Amount |
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Unitholders |
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General Partner
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Minimum Quarterly Distribution |
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$0.35 |
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98.0% |
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2.0% |
First Target Distribution |
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Up to $0.4025 |
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98.0% |
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2.0% |
Second Target Distribution |
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Above $0.4025 up to $0.4375 |
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85.0% |
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15.0% |
Third Target Distribution |
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Above $0.4375 up to $0.525 |
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75.0% |
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25.0% |
Thereafter |
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Above $0.525 |
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50.0% |
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50.0% |
Item 9. |
The Offer and Listing |
Our common units are traded on the NYSE under the symbol
TOO. The following table sets forth the high and low closing sales prices for our common units on the NYSE for each of the periods indicated:
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Year Ended |
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Dec. 31, 2014 |
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Dec. 31, 2013 |
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Dec. 31, 2012 |
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Dec. 31, 2011 |
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Dec. 31, 2010 |
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High |
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$ |
37.03 |
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$ |
35.91 |
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$ |
29.94 |
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$ |
31.19 |
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$ |
29.79 |
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Low |
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$ |
21.61 |
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$ |
26.86 |
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$ |
24.75 |
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$ |
22.70 |
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$ |
17.79 |
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Quarter Ended |
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Mar. 31, 2015 |
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Dec. 31, 2014 |
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Sep. 30, 2014 |
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Jun. 30, 2014 |
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Mar. 31, 2014 |
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Dec. 31, 2013 |
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Sep. 30, 2013 |
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Jun. 30, 2013 |
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Mar. 31, 2013 |
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High |
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$ |
26.00 |
|
|
$ |
32.66 |
|
|
$ |
36.31 |
|
|
$ |
37.03 |
|
|
$ |
32.92 |
|
|
$ |
34.75 |
|
|
$ |
35.91 |
|
|
$ |
33.44 |
|
|
$ |
30.19 |
|
Low |
|
$ |
19.99 |
|
|
$ |
21.61 |
|
|
$ |
33.31 |
|
|
$ |
33.18 |
|
|
$ |
31.12 |
|
|
$ |
29.81 |
|
|
$ |
31.10 |
|
|
$ |
29.16 |
|
|
$ |
26.86 |
|
|
|
|
|
|
|
|
|
|
|
Month Ended |
|
Mar. 31, 2015 |
|
|
Feb. 28, 2015 |
|
|
Jan. 31, 2015 |
|
|
Dec. 31, 2014 |
|
|
Nov. 30, 2014 |
|
|
Oct. 31, 2014 |
|
|
Sep. 30, 2014 |
|
|
|
|
|
|
|
High |
|
$ |
22.66 |
|
|
$ |
21.94 |
|
|
$ |
26.00 |
|
|
$ |
27.13 |
|
|
$ |
29.57 |
|
|
$ |
32.66 |
|
|
$ |
34.74 |
|
|
|
|
|
|
|
|
|
Low |
|
$ |
20.04 |
|
|
$ |
19.99 |
|
|
$ |
20.03 |
|
|
$ |
21.61 |
|
|
$ |
25.71 |
|
|
$ |
26.62 |
|
|
$ |
33.55 |
|
|
|
|
|
|
|
|
|
|
Our Series A Preferred Units are traded on the NYSE under the symbol TOOPA. The following table sets forth the high and low closing
sales prices for our Series A Preferred Units on the NYSE for each of the periods indicated: |
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Dec. 31, 2014 |
|
|
Dec. 31, 2013 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
26.83 |
|
|
$ |
26.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low |
|
$ |
21.86 |
|
|
$ |
24.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Mar. 31, 2015 |
|
|
Dec. 31, 2014 |
|
|
Sep. 30, 2014 |
|
|
Jun. 30, 2014 |
|
|
Mar. 31, 2014 |
|
|
Dec. 31, 2013 |
|
|
Sep. 30, 2013 |
|
|
Jun. 30, 2013 (2) |
|
|
High |
|
$ |
23.86 |
|
|
$ |
25.85 |
|
|
$ |
26.83 |
|
|
$ |
26.59 |
|
|
$ |
25.75 |
|
|
$ |
25.74 |
|
|
$ |
25.80 |
|
|
$ |
26.00 |
|
|
Low |
|
$ |
22.20 |
|
|
$ |
21.86 |
|
|
$ |
24.78 |
|
|
$ |
25.29 |
|
|
$ |
24.50 |
|
|
$ |
24.10 |
|
|
$ |
24.23 |
|
|
$ |
25.00 |
|
|
Month Ended |
|
Mar. 31, 2015 |
|
|
Feb. 28, 2015 |
|
|
Jan. 31, 2015 |
|
|
Dec. 31, 2014 |
|
|
Nov. 30, 2014 |
|
|
Oct. 31, 2014 |
|
|
Sep. 30, 2014 |
|
|
|
|
|
High |
|
$ |
23.24 |
|
|
$ |
23.60 |
|
|
$ |
23.86 |
|
|
$ |
23.90 |
|
|
$ |
25.85 |
|
|
$ |
25.85 |
|
|
$ |
25.38 |
|
|
|
|
|
|
Low |
|
$ |
22.50 |
|
|
$ |
22.20 |
|
|
$ |
22.86 |
|
|
$ |
21.86 |
|
|
$ |
24.15 |
|
|
$ |
23.90 |
|
|
$ |
24.78 |
|
|
|
|
|
|
65
(1) |
Period from May 2, 2013 through December 31, 2013. |
(2) |
Period from May 2, 2013 through June 30, 2013. |
Item 10. |
Additional Information |
Memorandum and Articles of Association
The information required to be disclosed under Item 10B is incorporated by reference to our Registration Statement on Form 8-A/A filed
with the SEC on May 8, 2008.
Material Contracts
The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which
we or any of our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits in Item 19:
|
a) |
Amended and Restated Omnibus Agreement, dated December 19, 2006, among us, our general partner, Teekay Corporation, Teekay LNG and related
parties. Please read Item 7 Major Unitholders and Related Party Transactions Certain Relationships and Related Party Transactions for a summary of certain contract terms. |
|
b) |
We and certain of our operating subsidiaries have entered into services agreements with certain subsidiaries of Teekay Corporation pursuant to
which the Teekay Corporation subsidiaries provide us, and our operating subsidiaries with administrative, advisory, technical, strategic consulting services, business development and ship management services for a reasonable fee that includes
reimbursement of their direct and indirect expenses incurred in providing these services. Please read Item 7 Major Unitholders and Related Party Transactions Certain Relationships and Related Party Transactions for a summary of
certain contract terms. |
|
c) |
Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan. Please read Item 6 Directors, Senior Management and Employees 2006
Long-term Incentive Plan for a summary of certain plan terms. |
|
d) |
Agreement, dated January 25, 2012, for NOK 600,000,000 Senior Unsecured Bonds due January 2017, among us and Norsk Tillitsman ASA. All
payments are at NIBOR plus 5.75% per annum. |
|
e) |
Agreement, dated February 23, 2012, for a U.S. $130,000,000 debt facility between Piranema L.L.C. and Den Norske Bank ASA. This facility bears
interest at LIBOR plus a margin of 3%. The amount available under the facility reduces quarterly, with a bullet reduction of $65.0 million on maturity in February 2017. |
|
f) |
Agreement, dated September 11, 2012, between Teekay Corporation and Teekay Offshore Partners L.P., relating to the purchase of the Voyageur
Spirit. |
|
g) |
Agreement, dated January 25, 2013, for NOK 500,000,000 Senior Unsecured Bonds due January 2016, among us and Norsk Tillitsman ASA. All
payments are at NIBOR plus 4.00% per annum. |
|
h) |
Agreement, dated January 25, 2013, for NOK 800,000,000 Senior Unsecured Bonds due January 2018, among us and Norsk Tillitsman ASA. All
payments are at NIBOR plus 4.75% per annum. |
|
i) |
Agreement, dated February 27, 2013, for a commercial facility of U.S. $260,000,000 and a GIEK facility of $70,000,000 between Voyageur L.L.C.
and ING Capital L.L.C. The total amount of the debt facility is U.S. $330,000,000. The commercial facility bears interest at LIBOR plus a margin of 3.25%. The amount available under the commercial facility reduces quarterly, with a bullet reduction
of $78.8 million on maturity in April, 2018. The GIEK facility bears interest at LIBOR plus a margin of 2.92%. The amount available under the GIEK facility reduces quarterly, with a bullet reduction of $1.7 million on maturity in July 2020.
|
|
j) |
Agreement, dated September 10, 2013, for $174,150,000 senior secured bonds due December 2013 between Teekay Shuttle Tanker Finance L.L.C. and
Wells Fargo. |
|
k) |
Agreement, dated January 30, 2014, for NOK 1,000,000,000 Senior Unsecured Bonds due January 2019, between us and Norsk Tillitsman ASA. All
payments are at NIBOR plus 4.25% per annum. |
|
l) |
Indenture, dated May 30 2014, for U.S. $300,000,000 Senior Unsecured Bonds due July 2019 in the U.S. bond market, between us and The Bank of
New York Mellon. The interest payments on the bonds are fixed at a rate of 6.0%. |
|
m) |
Agreement, dated October 14, 2014, for a U.S. $330,000,000 Revolving Credit Facility between us, Den Norske Bank Capital LLC and various other
banks. This facility bears interest at LIBOR plus a margin of 2.25%. The purpose of this facility is to refinance the OPCO U.S. $940,000,000 revolving credit facility and the Norsk Teekay Holdings U.S. $455,000,000 revolving credit facility. The
amount available under the facility reduces quarterly. As at December 31, 2014, our obligations under the facility are secured by first-priority mortgages granted on 13 of our shuttle tankers and two of our conventional tankers, together with
other related security. |
66
Exchange Controls and Other Limitations Affecting Unitholders
We are not aware of any governmental laws, decrees or regulations, including foreign exchange controls, in the Republic of The Marshall Islands
that restrict the export or import of capital, or that affect the remittance of dividends, interest or other payments to non-resident holders of our securities.
We are not aware of any limitations on the right of non-resident or foreign owners to hold or vote our securities imposed by the laws of the
Republic of The Marshall Islands or our partnership agreement.
Material U.S. Federal Income Tax Considerations
The following is a discussion of the certain material U.S. federal income tax considerations that may be relevant to unitholders. This
discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (or the Code), legislative history, applicable U.S. Treasury Regulations (or Treasury Regulations), judicial authority and administrative
interpretations, all as in effect on the date of this Annual Report, and which are subject to change, possibly with retroactive effect, or are subject to different interpretations. Changes in these authorities may cause the tax consequences to vary
substantially from the consequences described below. Unless the context otherwise requires, references in this section to we, our or us are references to Teekay Offshore Partners L.P.
This discussion is limited to unitholders who hold their units as capital assets for tax purposes. This discussion does not address all tax
considerations that may be important to a particular unitholder in light of the unitholders circumstances, or to certain categories of unitholders that may be subject to special tax rules, such as:
|
|
|
dealers in securities or currencies, |
|
|
|
traders in securities that have elected the mark-to-market method of accounting for their securities, |
|
|
|
persons whose functional currency is not the U.S. dollar, |
|
|
|
persons holding our units as part of a hedge, straddle, conversion or other synthetic security or integrated transaction,
|
|
|
|
certain U.S. expatriates, |
|
|
|
financial institutions, |
|
|
|
persons subject to the alternative minimum tax, |
|
|
|
persons that actually or under applicable constructive ownership rules own 10% or more of our units; and |
|
|
|
entities that are tax-exempt for U.S. federal income tax purposes. |
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our units, the tax
treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. Partners in partnerships holding our units should consult their own tax advisors to determine the appropriate tax treatment of the
partnerships ownership of our units.
This discussion does not address any U.S. estate tax considerations or tax considerations
arising under the laws of any state, local or non-U.S. jurisdiction. Each unitholder is urged to consult its own tax advisor regarding the U.S. federal, state, local and other tax consequences of the ownership or disposition of our units.
United States Federal Income Taxation of U.S. Holders
As used herein, the term U.S. Holder means a beneficial owner of our units that is for U.S. federal income tax purposes: (i) a U.S.
citizen or U.S. resident alien (or a U.S. Individual Holder), (ii) a corporation or other entity taxable as a corporation, that was created or organized under the laws of the United States, any state thereof or the District of Columbia,
(iii) an estate whose income is subject to U.S. federal income taxation regardless of its source, or (iv) a trust that either is subject to the supervision of a court within the United States and has one or more U.S. persons with authority
to control all of its substantial decisions or has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
Distributions
We have elected to be
taxed as a corporation for U.S. federal income tax purposes. Subject to the discussion of passive foreign investment companies (or PFICs) below, any distributions made by us to a U.S. Holder generally will constitute dividends,
which may be taxable as ordinary income or qualified dividend income as described in more detail below, to the extent of our current and accumulated earnings and profits allocated to the U.S. Holders units, as determined under
U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits allocated to the U.S. Holders units will be treated first as a nontaxable return of capital to the extent of the
U.S. Holders tax basis in our units and thereafter as capital gain, which will be either long term or short term capital gain depending upon whether the U.S. Holder has held the units for more than one year. U.S. Holders that are
corporations for U.S. federal income tax purposes generally will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. For purposes of computing allowable foreign tax credits for U.S. federal
income tax purposes, dividends paid with respect to our units will be treated as foreign source income and generally will be treated as passive category income.
Dividends paid on our units to a U.S. Holder who is an individual, trust or estate (or a Non-Corporate U.S. Holder) will be
treated as qualified dividend income that is taxable to such Non-Corporate U.S. Holder at preferential capital gain tax rates provided that: (i) our units are readily tradable on an established securities market in the United States
(such as the New York Stock Exchange on which our common and preferred units are traded); (ii) we are not classified as a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (we intend to take
the position that we are not now and have never been classified as a PFIC, as discussed below); (iii) the Non-Corporate U.S. Holder has owned the units for more than 60 days in the 121-day period beginning 60 days before the date on
which the units become ex-dividend; (iv) the Non-Corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property;
67
and (v) certain other conditions are met. There is no assurance that any dividends paid on our units will be eligible for these preferential rates in the hands of a Non-Corporate U.S.
Holder. Any dividends paid on our units not eligible for these preferential rates will be taxed as ordinary income to a Non-Corporate U.S. Holder.
Special rules may apply to any extraordinary dividend paid by us. Generally, an extraordinary dividend is a dividend with respect
to a share of stock if the amount of the dividend is equal to or in excess of 10% of a common stockholders, or 5% of a preferred stockholders adjusted tax basis (or fair market value in certain circumstances) in such stock. In addition,
extraordinary dividends include dividends received within a one year period that, in the aggregate, equal or exceed 20% of a shareholders adjusted tax basis (or fair market value in certain circumstances). If we pay an extraordinary
dividend on our units that is treated as qualified dividend income, then any loss recognized by a Non-Corporate U.S. Holder from the sale or exchange of such units will be treated as long-term capital loss to the extent of the
amount of such dividend.
Certain Non-Corporate U.S. Holders are subject to a 3.8% tax on certain investment income, including
dividends. Non-Corporate U.S. Holders should consult their tax advisors regarding the effect, if any, of this tax on their ownership of our units.
Sale, Exchange or Other Disposition of Units
Subject to the discussion of PFICs below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other
disposition of our units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holders tax basis in such units. Subject to the discussion of
extraordinary dividends above, such gain or loss generally will be treated as (a) long-term capital gain or loss if the U.S. Holders holding period is greater than one year at the time of the sale, exchange or other disposition, or
short-term capital gain or loss otherwise and (b) U.S.-source gain or loss, as applicable, for foreign tax credit purposes. Non-Corporate U.S. Holders may be eligible for preferential rates of U.S. federal income tax in respect of long-term
capital gains. A U.S. Holders ability to deduct capital losses is subject to certain limitations.
Certain Non-Corporate U.S.
Holders are subject to a 3.8% tax on certain investment income, including capital gains from the sale or other disposition of units. Non-Corporate U.S. Holders should consult their tax advisors regarding the effect, if any, of this tax on their
disposition of our units.
Consequences of Possible PFIC Classification
A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a PFIC in any taxable year in
which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to a look through rule, either: (i) at least 75% of its gross income is passive income; or (ii) at least
50% of the average value of its assets is attributable to assets that produce passive income or are held for the production of passive income.
For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment
property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. By contrast, income derived from the performance of services does not constitute
passive income.
There are legal uncertainties involved in determining whether the income derived from our time-chartering
activities constitutes rental income or income derived from the performance of services, including legal uncertainties arising from the decision in Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), which held that income derived
from certain time-chartering activities should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of the Code. However, the Internal Revenue Service (or IRS) stated in an Action on
Decision (AOD 2010-01) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated that the time charters at issue in
Tidewater would be treated as producing services income for PFIC purposes. The IRSs statement with respect to Tidewater cannot be relied upon or otherwise cited as precedent by taxpayers. Consequently, in the absence of any
binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court would not follow the Tidewater decision in interpreting the PFIC provisions of the Code.
Nevertheless, based on our and our subsidiaries current assets and operations, we intend to take the position that we are not now and have never been a PFIC. No assurance can be given, however, that the IRS, or a court of law, will accept our
position or that we would not constitute a PFIC for any future taxable year if there were to be changes in our or our subsidiaries assets, income or operations.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder generally would be subject to different
taxation rules depending on whether the U.S. Holder makes a timely and effective election to treat us as a Qualified Electing Fund (a QEF election). As an alternative to making a QEF election, a U.S. Holder should be able to make
a mark-to-market election with respect to our units, as discussed below.
Taxation of U.S. Holders Making a Timely QEF
Election. If a U.S. Holder makes a timely QEF election (an Electing Holder), the Electing Holder must report each taxable year for U.S. federal income tax purposes the Electing Holders pro rata share of our ordinary earnings and net
capital gain, if any, for each taxable year for which we are a PFIC that ends with or within the Electing Holders taxable year, regardless of whether or not the Electing Holder received distributions from us in that year. Such income
inclusions would not be eligible for the preferential tax rates applicable to qualified dividend income. The Electing Holders adjusted tax basis in our units will be increased to reflect taxed but undistributed earnings and profits.
Distributions of earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holders adjusted tax basis in our units and will not be taxed again once distributed. An Electing Holder generally will
recognize capital gain or loss on the sale, exchange or other disposition of our units. A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with the U.S. Holders timely filed U.S. federal
income tax return (including extensions).
If a U.S. Holder has not made a timely QEF election with respect to the first year in the U.S.
Holders holding period of our units during which we qualified as a PFIC, the U.S. Holder may be treated as having made a timely QEF election by filing a QEF election with the U.S. Holders timely filed U.S. federal income tax return
(including extensions) and, under the rules of Section 1291 of the Code, a deemed sale election to include in income as an excess distribution (described below) the amount of any gain that the U.S. Holder would otherwise
recognize if the U.S. Holder sold the U.S. Holders units on the qualification date. The qualification date is the first day of our taxable year in which we qualified as a qualified electing fund with respect to such
U.S. Holder. In addition to the above rules, under very limited circumstances, a U.S. Holder may make a
68
retroactive QEF election if the U.S. Holder failed to file the QEF election documents in a timely manner. If a U.S. Holder makes a timely QEF election for one of our taxable years, but did not
make such election with respect to the first year in the U.S. Holders holding period of our units during which we qualified as a PFIC and the U.S. Holder did not make the deemed sale election described above, the U.S. Holder also will be
subject to the more adverse rules described below.
A U.S. Holders QEF election will not be effective unless we annually provide the
U.S. Holder with certain information concerning our income and gain, calculated in accordance with the Code, to be included with the U.S. Holders U.S. federal income tax return. We have not provided our U.S. Holders with such information in
prior taxable years and do not intend to provide such information in the current taxable year. Accordingly, U.S. Holders will not be able to make an effective QEF election at this time. If, contrary to our expectations, we determine that we are or
will be a PFIC for any taxable year, we will provide U.S. Holders with the information necessary to make an effective QEF election with respect to our units.
Taxation of U.S. Holders Making a Mark-to-Market Election. If we were to be treated as a PFIC for any taxable year and, as
we anticipate, our units were treated as marketable stock, then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a mark-to-market election with respect to our units, provided the U.S. Holder
completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made for the first year a U.S. Holder holds or is deemed to hold our units and for which we are a PFIC, the
U.S. Holder generally would include as ordinary income in each taxable year that we are a PFIC the excess, if any, of the fair market value of the U.S. Holders units at the end of the taxable year over the U.S. Holders adjusted tax basis
in the units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holders adjusted tax basis in the units over the fair market value thereof at the end of the taxable year that we are a PFIC,
but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holders tax basis in our units would be adjusted to reflect any such income or loss recognized. Gain recognized on the
sale, exchange or other disposition of our units in taxable years that we are a PFIC would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the units in taxable years that we are a PFIC would be
treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. Because the mark-to-market election only applies to marketable stock, however, it would not apply to
a U.S. Holders indirect interest in any of our subsidiaries that were also determined to be PFICs.
If a U.S. Holder makes a
mark-to-market election for one of our taxable years and we were a PFIC for a prior taxable year during which such U.S. Holder held our units and for which (i) we were not a QEF with respect to such U.S. Holder and (ii) such U.S. Holder
did not make a timely mark-to-market election, such U.S. Holder would also be subject to the more adverse rules described below in the first taxable year for which the mark-to-market election is in effect and also to the extent the fair market value
of the U.S. Holders units exceeds the U.S. Holders adjusted tax basis in the units at the end of the first taxable year for which the mark-to-market election is in effect.
Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election. If we were to be treated as a PFIC for any taxable year, a
U.S. Holder who does not make either a QEF election or a mark-to-market election for that year (a Non-Electing Holder) would be subject to special rules resulting in increased tax liability with respect to (i) any excess
distribution (i.e., the portion of any distribution received by the Non-Electing Holder on our units in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years or,
if shorter, the Non-Electing Holders holding period for our units), and (ii) any gain realized on the sale, exchange or other disposition of our units. Under these special rules:
|
|
the excess distribution or gain would be allocated ratably over the Non-Electing Holders aggregate holding period for our units;
|
|
|
the amount allocated to the current taxable year and any taxable year prior to the taxable year we were first treated as a PFIC with respect to the
Non-Electing Holder would be taxed as ordinary income in the current taxable year; |
|
|
the amount allocated to each of the other taxable years would be subject to U.S. federal income tax at the highest rate of tax in effect for the
applicable class of taxpayer for that year; and |
|
|
an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
|
Additionally, for each year during which a U.S. Holder owns units, we are a PFIC, and the total value of all PFIC units
that such U.S. Holder directly or indirectly exceeds certain thresholds, such U.S. Holder will be required to file IRS Form 8621 with its annual U.S. federal income tax return to report its ownership of our units. In addition, if a Non-Electing
Holder who is an individual dies while owning our units, such Non-Electing Holders successor generally would not receive a step-up in tax basis with respect to such units.
U.S. Holders are urged to consult their own tax advisors regarding the PFIC rules, including the PFIC annual reporting requirements as well
as the applicability, availability and advisability of, and procedure for, making QEF, Mark-to-Market Elections and other available elections with respect to us, and the U.S. federal income tax consequences of making such elections.
U.S. Return Disclosure Requirements for U.S. Individual Holders
U.S. Individual Holders who hold certain specified foreign financial assets, including stock in a foreign corporation that is not held in an
account maintained by a financial institution, with an aggregate value in excess of $50,000, on the last day of a taxable year, or $75,000 at any time during that taxable year, may be required to report such assets on IRS Form 8938 with their U.S.
federal income tax return for that taxable year. This reporting requirement does not apply to U.S. Individual Holders who report their ownership of our units under the PFIC annual reporting rules described above. Penalties apply for failure to
properly complete and file Form 8938. U.S. Individual Holders are encouraged to consult with their own tax advisor regarding the possible application of this disclosure requirement.
United States Federal Income Taxation of Non-U.S. Holders
A beneficial owner of our units (other than a partnership, including any entity or arrangement treated as a partnership for U.S. federal income
tax purposes) that is not a U.S. Holder is a Non-U.S. Holder.
69
Distributions
In general, a Non-U.S. Holder will not be subject to U.S. federal income tax on distributions received from us with respect to our units unless
the distributions are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the Non-U.S.
Holder maintains in the United States). If a Non-U.S. Holder is engaged in a U.S. trade or business and the distributions are deemed to be effectively connected to that trade or business, the Non-U.S. Holder generally will be subject to U.S. federal
income tax on those distributions in the same manner as if it were a U.S. Holder.
Sale, Exchange or Other Disposition of Units
In general, a non-U.S. Holder is not subject to U.S. federal income tax on any gain resulting from the disposition of our units unless
(a) such gain is effectively connected with the Non-U.S. Holders conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the Non-U.S.
Holder maintains in the United States) or (b) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year in which such disposition occurs and meets certain other requirements. If a
Non-U.S. Holder is engaged in a U.S. trade or business and the disposition of our units is deemed to be effectively connected to that trade or business, the Non-U.S. Holder generally will be subject to U.S. federal income tax on the resulting gain
in the same manner as if it were a U.S. Holder.
Information Reporting and Backup Withholding
In general, payments of distributions or the proceeds of a disposition of units to a Non-Corporate U.S. Holder will be subject to information
reporting requirements. These payments to a Non-Corporate U.S. Holder also may be subject to backup withholding if the Non-Corporate U.S. Holder:
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fails to timely provide an accurate taxpayer identification number; |
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is notified by the IRS that it has failed to report all interest or distributions required to be shown on its U.S. federal income tax returns; or
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in certain circumstances, fails to comply with applicable certification requirements. |
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding on payments made to them
within the United States, or through a U.S. payor, by certifying their status on IRS Form W-8BEN, W-8BEN-EW-8ECI or W-8IMY, as applicable.
Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against its liability
for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by accurately completing and timely filing a U.S. federal income tax return with the IRS.
Non-United States Tax Consequences
Marshall Islands Tax Consequences. Because we and our subsidiaries do not, and we do not expect that we and our subsidiaries
will, conduct business or operations in the Republic of The Marshall Islands, and because all documentation related to our initial public offering was executed outside of the Republic of The Marshall Islands, under current Marshall Islands law, no
taxes or withholdings will be imposed by the Republic of the Marshall Islands on distributions, including upon a return of capital, made to unitholders, so long as such persons do not reside in, maintain offices in, nor engage in business in the
Republic of The Marshall Islands. Furthermore, no stamp, capital gains or other taxes will be imposed by the Republic of The Marshall Islands on the purchase, ownership or disposition by such persons of our common units.
Canadian Federal Income Tax Considerations. The following discussion is a summary of the material Canadian federal income tax
considerations under the Income Tax Act (Canada) (or the Canada Tax Act) that we believe are relevant to holders of units who, for the purposes of the Canada Tax Act and the Canada-United States Tax Convention 1980 (or the
Canada-U.S. Treaty), are at all relevant times resident in the United States and entitled to all of the benefits of the Canada-U.S. Treaty and who deal at arms length with us and Teekay Corporation (or U.S. Resident
Holders). This discussion takes into account all proposed amendments to the Canada Tax Act and the regulations thereunder that have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof and assumes
that such proposed amendments will be enacted substantially as proposed. However, no assurance can be given that such proposed amendments will be enacted in the form proposed or at all.
We are considered to be a partnership under Canadian federal income tax law and therefore not a taxable entity for Canadian income tax
purposes. A U.S. Resident Holder will not be liable to tax under the Canada Tax Act on any income or gains allocated by us to the U.S. Resident Holder in respect of such U.S. Resident Holders units, provided that (a) we do not carry on
business in Canada for purposes of the Canada Tax Act and (b) such U.S. Resident Holder does not hold such units in connection with a business carried on by such U.S. Resident Holder through a permanent establishment in Canada for purposes
of the Canada-U.S. Treaty.
A U.S. Resident Holder will not be liable to tax under the Canada Tax Act on any income or gain from the
sale, redemption or other disposition of such U.S. Resident Holders units, provided that, for purposes of the Canada-U.S. Treaty, such units do not, and did not at any time in the twelve-month period preceding the date of disposition, form
part of the business property of a permanent establishment in Canada of such U.S. Resident Holder.
70
We believe that our activities and affairs and the activities and affairs of OPCO, a Marshall
Island limited partnership in which we own a 100% limited partnership interest, are conducted in such a manner that both we and OPCO are not carrying on business in Canada and that U.S. Resident Holders should not be considered to be carrying
on business in Canada for purposes of the Canada Tax Act or the Canada-U.S. Treaty solely by reason of the acquisition, holding, disposition or redemption of our units. We intend that this is and continues to be the case, notwithstanding that Teekay
Shipping Limited (a subsidiary of Teekay Corporation that is resident and based in Bermuda) provides certain services to Teekay Offshore Partners L.P. and OPCO and obtains some or all such services under subcontracts with Canadian service providers.
If the arrangements we have entered into result in our being considered to carry on business in Canada for purposes of the Canada Tax Act, U.S. Resident Holders would be considered to be carrying on business in Canada and may be required to file
Canadian tax returns and, subject to any relief provided under the Canada-U.S. Treaty, would be subject to taxation in Canada on any income that is considered to be attributable to the business carried on by us in Canada. The Canada-U.S. Treaty
contains a treaty benefit denial rule which may have the effect of denying relief thereunder from Canadian taxation to U.S. Resident Holders in respect of any income attributable to a business carried on by us in Canada.
Although we do not intend to do so, there can be no assurance that the manner in which we and OPCO carry on our respective activities will not
change from time to time as circumstances dictate or warrant in a manner that may cause U.S. Resident Holders to be carrying on business in Canada for purposes of the Canada Tax Act. Further, the relevant Canadian federal income tax law may change
by legislation or judicial interpretation and the Canadian taxing authorities may take a different view than we have of the current law.
Documents on Display
Documents concerning us that are referred to herein may be inspected at our principal executive headquarters
at 4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda. Those documents electronically filed via the SECs Electronic Data Gathering, Analysis, and Retrieval (or EDGAR) system may also be obtained from the SECs
website at www.sec.gov, free of charge, or from the SECs Public Reference Section at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC public reference rooms may be obtained by
calling the SEC at 1-800-SEC-0330.
Item 11. |
Quantitative and Qualitative Disclosures About Market Risk |
Interest Rate
Risk
We are exposed to the impact of interest rate changes primarily through our floating-rate borrowings that require us to make
interest payments based on LIBOR or NIBOR. Significant increases in interest rates could adversely affect operating margins, results of operations and our ability to service our debt. From time to time, we use interest rate swaps to reduce our
exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our floating-rate debt.
We are exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In order to minimize
counterparty risk, we only enter into derivative transactions with counterparties that are rated A- or better by Standard & Poors or A3 or better by Moodys at the time of the transactions. In addition, to the extent possible and
practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.
The table below provides
information about financial instruments as at December 31, 2014 that are sensitive to changes in interest rates. For long-term debt, the table presents principal payments and related weighted-average interest rates by expected contractual
maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by expected contractual maturity dates.
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Expected Maturity Date |
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2015 |
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2016 |
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2017 |
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2018 |
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2019 |
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There- after |
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Total |
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Fair Value Liability |
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Rate (1) |
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(in millions of U.S. dollars, except percentages) |
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Long-Term Debt: |
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Variable Rate ($U.S.)(2) |
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237.6 |
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271.4 |
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338.5 |
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333.6 |
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131.3 |
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241.7 |
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1,554.1 |
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1,547.8 |
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2.2 |
% |
Variable Rate (NOK)(3) |
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67.1 |
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80.5 |
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107.3 |
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134.2 |
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389.1 |
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374.9 |
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6.3 |
% |
Fixed Rate Debt ($U.S.) |
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20.4 |
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20.9 |
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13.7 |
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13.9 |
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315.3 |
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108.6 |
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492.8 |
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477.6 |
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5.3 |
% |
Interest Rate Swaps: |
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Contract Amount (4) |
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666.4 |
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156.9 |
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128.9 |
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137.7 |
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14.7 |
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648.2 |
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1,752.8 |
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216.5 |
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3.6 |
% |
Average Fixed Pay Rate(2) |
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3.6 |
% |
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3.2 |
% |
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1.2 |
% |
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1.1 |
% |
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2.8 |
% |
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4.8 |
% |
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3.6 |
% |
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(1) |
Rate relating to long-term debt refers to the weighted-average effective interest rate for our debt, including the margin paid on our floating-rate
debt. Rate relating to interest rate swaps refers to the average fixed pay rate for interest rate swaps. The average fixed pay rate for interest rate swaps excludes the margin paid on the floating-rate debt, which as of December 31, 2014 ranged
between 0.3% and 3.25% based on LIBOR and between 4.00% and 5.75% based on NIBOR. |
(2) |
Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR. |
71
(3) |
Interest payments on NOK-denominated debt and interest rate swaps are based on NIBOR. Our NOK-denominated debt has been economically hedged with
four cross currency swaps, to swap all interest and principal payments at maturity into U.S. Dollars. Please see the table in the Foreign Currency Fluctuation Risk section below and read Item 18 Financial Statements: Note 12
Derivative Instruments. |
(4) |
The average variable receive rate for interest rate swaps is set quarterly at the 3-month LIBOR or semi-annually at the 6-month LIBOR.
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Foreign Currency Fluctuation Risk
Our functional currency is the U.S. Dollars because virtually all of our revenues and most of our operating costs are in U.S. Dollars. We
incur certain vessel operating expenses and general and administrative expenses in foreign currencies, the most significant of which is the Norwegian Kroner and, to a lesser extent, Australian Dollars, Brazilian Reals, British Pounds, Euros and
Singapore Dollars. For the years ended December 31, 2014 and 2013, approximately 44.6% and 51.1%, respectively, of vessel operating costs and general and administrative expenses were denominated in Norwegian Kroner. There is a risk that
currency fluctuations will have a negative effect on the value of cash flows.
We may continue to seek to hedge these currency fluctuation
risks in the future. At December 31, 2014, we were committed to the following foreign currency forward contracts:
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Contract Amount in Foreign Currency (thousands) |
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Average Forward Rate (1) |
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Expected Maturity |
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Fair Value /
Carrying Amount of Asset (Liability) (in thousands of U.S. Dollars) Non-hedge |
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2015 |
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2016 |
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(in thousands of U.S. Dollars) |
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Norwegian Kroner |
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558,500 |
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6.50 |
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55,193 |
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30,807 |
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(11,268 |
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(1) |
Average forward rate represents the contracted amount of foreign currency one U.S. Dollar will buy. |
We incur interest expense on our Norwegian Kroner-denominated bonds. We have entered into cross currency swaps to economically hedge the
foreign exchange risk on the principal and interest for these bonds. Please read Item 18 Financial Statements: Note 12 Derivative Instruments.
As at December 31, 2014, we were committed to the following cross currency swaps:
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Principal
Amount |
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Principal
Amount |
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Floating Rate Receivable |
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Fair Value /
Carrying Amount of Asset
(Liability) |
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NOK |
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USD |
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Reference
Rate |
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Margin |
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Fixed Rate Payable |
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Remaining Term (years) |
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(Thousands) |
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(Thousands of U.S. Dollars) |
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600,000 |
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101,351 |
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NIBOR |
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5.75 |
% |
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7.49 |
% |
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(24,731 |
) |
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2.1 |
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500,000 |
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89,710 |
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NIBOR |
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4.00 |
% |
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4.80 |
% |
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(23,843 |
) |
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1.1 |
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800,000 |
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143,536 |
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NIBOR |
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4.75 |
% |
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5.93 |
% |
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(38,898 |
) |
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3.1 |
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1,000,000 |
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162,200 |
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NIBOR |
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4.25 |
% |
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6.28 |
% |
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(33,031 |
) |
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4.1 |
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(120,503 |
) |
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Commodity Price Risk
We are exposed to changes in forecasted bunker fuel costs for certain vessels being time-chartered-out and for vessels servicing certain
contracts of affreightment. We may use bunker fuel swap contracts as economic hedges to protect against changes in bunker fuel costs. As at December 31, 2014, we were not committed to any bunker fuel swap contracts.
Item 12. |
Description of Securities Other than Equity Securities |
Not applicable.
PART II
Item 13. |
Defaults, Dividend Arrearages and Delinquencies |
Not Applicable.
Item 14. |
Material Modifications to the Rights of Unitholders and Use of Proceeds |
Not applicable.
72
Item 15. |
Controls and Procedures |
We maintain disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the U.S. Securities and Exchange Act of 1934, as amended (or the Exchange Act)) that are designed to ensure that (i) information required to be disclosed in our reports that are filed or submitted under the
Exchange Act, are recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commissions rules and forms, and (ii) information required to be disclosed by us in the reports we file
or submit under the Exchange Act is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
We conducted an evaluation of our disclosure controls and procedures under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31,
2014.
The Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will
prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, a control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining for us adequate internal controls over financial reporting.
Our internal controls were designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and
presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal controls over financial reporting include those policies and procedures that:
1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and the directors; and 3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
We conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of
the operating effectiveness of controls and a conclusion on this evaluation.
Because of its inherent limitations, internal controls over
financial reporting may not prevent or detect misstatements even when determined to be effective and can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. However, based on the evaluation,
management has concluded that our internal controls over financial reporting were effective as of December 31, 2014.
Our independent
auditors, KPMG LLP, a registered public accounting firm, has audited the accompanying consolidated financial statements and our internal control over financial reporting. Their attestation report on the effectiveness of our internal control over
financial reporting can be found on page F-2 of this Annual Report.
There were no changes in our internal controls that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a 15 (f) under the Exchange Act) that occurred during the year ended December 31, 2014.
Item 16A. |
Audit Committee Financial Expert |
The board of directors of our general partner has
determined that director John J. Peacock qualifies as an audit committee financial expert and is independent under applicable NYSE and SEC standards.
We have adopted a Standards of Business Conduct that applies to all our
employees and the employees and directors of our general partner. This document is available under Investors Teekay Offshore Partners L.P. - Governance from the Home Page of our web site (www.teekay.com). We intend to
disclose, under Investors Teekay Offshore Partners L.P. - Governance in the Investors section of our web site, any waivers to or amendments of the Code of Ethics for the benefit of any directors and executive officers of our
general partner.
Item 16C. |
Principal Accountant Fees and Services |
Our principal accountant for 2014 and 2013 was
KPMG LLP, Chartered Accountants. The following table shows the fees we paid or accrued for audit services provided by KPMG LLP for 2014 and 2013.
73
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2014 |
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2013 |
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(in thousands of U.S. dollars) |
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Audit Fees (1) |
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$ |
841 |
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$ |
771 |
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Audit-related Fees (2) |
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24 |
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|
10 |
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Tax Fees (3) |
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|
34 |
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|
31 |
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Total |
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$ |
899 |
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$ |
812 |
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(1) |
Audit fees represent fees for professional services provided in connection with the audit of our consolidated financial statements, review of our
quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings, including professional services in connection with the review of our regulatory filings for our follow-on offering of
common units. |
(2) |
For 2014, audit-related fees relate primarily to assistance with general accounting issues. |
(3) |
For 2014 and 2013, tax fees relate primarily to corporate tax compliance fees. |
The Audit Committee of our general partners Board of Directors has the authority to pre-approve permissible audit-related and non-audit
services not prohibited by law to be performed by our independent auditors and associated fees. Engagements for proposed services either may be separately pre-approved by the Audit Committee or entered into pursuant to detailed pre-approval policies
and procedures established by the Audit Committee, as long as the Audit Committee is informed on a timely basis of any engagement entered into on that basis. The Audit Committee separately pre-approved all engagements and fees paid to our principal
accountant in 2014.
Item 16D. |
Exemptions from the Listing Standards for Audit Committees |
Not applicable.
Item 16E. |
Purchases of Units by the Issuer and Affiliated Purchasers |
Not applicable.
Item 16F. |
Change in Registrants Certifying Accountant |
Not applicable
Item 16G. |
Corporate Governance |
There are no significant ways in which our corporate governance
practices differ from those followed by domestic companies under the listing requirements of the New York Stock Exchange.
Item 16H. |
Mine Safety Disclosure |
Not applicable.
PART III
Item 17. |
Financial Statements |
Not applicable.
Item 18. |
Financial Statements |
The following financial statements, together with the related
reports of KPMG LLP, Independent Registered Public Accounting Firm thereon, are filed as part of this Annual Report:
74
All schedules for which provision is made in the applicable accounting regulations of the SEC are
not required, are inapplicable or have been disclosed in the Notes to the Consolidated Financial Statements and therefore have been omitted.
The following exhibits are filed as part of this Annual Report:
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1.1 |
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Certificate of Limited Partnership of Teekay Offshore Partners L.P. (1) |
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1.2 |
|
Second Amended and Restated Agreement of Limited Partnership of Teekay Offshore Partners L.P. (2) |
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1.3 |
|
Certificate of Formation of Teekay Offshore GP L.L.C. (1) |
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1.4 |
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Amended and Restated Limited Liability Company Agreement of Teekay Offshore GP L.L.C. (1) |
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|
1.5 |
|
Certificate of Limited Partnership of Teekay Offshore Operating L.P. (1) |
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|
1.6 |
|
Amended and Restated Agreement of Limited Partnership of Teekay Offshore Operating Partners L.P. (1) |
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|
1.7 |
|
Certificate of Formation of Teekay Offshore Operating GP L.L.C. (1) |
|
|
1.8 |
|
Amended and Restated Limited Liability Company Agreement of Teekay Offshore Operating GP L.L.C. (1) |
|
|
2.1 |
|
Agreement, dated January 25, 2012, among Teekay Offshore Partners L.P. and Norsk Tillitsman ASA for NOK 600,000,000 Senior Unsecured Bonds due 2017. (6) |
|
|
2.2 |
|
Agreement, dated January 25, 2013, among Teekay Offshore Partners L.P. and Norsk Tillitsman ASA for NOK 500,000,000 Senior Unsecured Bonds due 2016. (6) |
|
|
2.3 |
|
Agreement, dated January 25, 2013, among Teekay Offshore Partners L.P. and Norsk Tillitsman ASA for NOK 800,000,000 Senior Unsecured Bonds due 2018. (6) |
|
|
2.4 |
|
Agreement, dated May 29, 2013, between Teekay Offshore Partners L.P. and J.P. Morgan Securities L.L.C. to offer and sell common units having an aggregate offering price of up to $100,000,000 under the Continuous Offering Program.
(7) |
|
|
2.5 |
|
Agreement, dated September 10, 2013, between Teekay Shuttle Tanker Finance L.L.C. and Wells Fargo for senior secured bonds $174,150,000 due 2023. (8) |
|
|
2.6 |
|
Agreement, dated January 30, 2014, for NOK 1,000,000,000 Senior Unsecured Bonds due January 2019, between Teekay Offshore Partners L.P. and Norsk Tillitsman ASA. All payments are at NIBOR plus 4.25% per annum. |
|
|
2.7 |
|
Indentures, dated May 30 2014, for U.S. $300,000,000 Senior Unsecured Bonds due July 2019 in the U.S. bond market, between Teekay Offshore Partners L.P. and The Bank of New York Mellon. (9) |
|
|
2.8 |
|
First Supplemental Indenture, dated as of May 30, 2014, among Teekay Offshore Partners L.P., Teekay Offshore Finance Corp. and The Bank of New York Mellon, as trustee. (9) |
|
|
2.9 |
|
Agreement, dated October 14, 2014, for a U.S. $330,000,000 Revolving Credit Facility between Teekay Offshore Partners L.P., Den Norske Bank Capital LLC and various other banks. |
|
|
4.1 |
|
Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan. (1) |
|
|
4.2 |
|
Amended and Restated Omnibus Agreement. (1) |
|
|
4.3 |
|
Administrative Services Agreement between Teekay Offshore Operating Partners L.P. and Teekay Limited. (3) |
|
|
4.4 |
|
Advisory, Technical and Administrative Services Agreement between Teekay Offshore Operating Partners L.P. and Teekay Limited. (3) |
|
|
4.5 |
|
Administrative Services Agreement between Teekay Offshore Partners L.P. and Teekay Limited. (3) |
|
|
4.6 |
|
Agreement, dated March 8, 2011, between Teekay Holdings Limited and Teekay Offshore Partners L.P., relating to the purchase of limited partner interests of Teekay Offshore Operating L.P. (4) |
|
|
4.7 |
|
Agreement, dated February 23, 2012, among Piranema L.L.C. and Den Norske Bank ASA for a U.S. $130,000,000 debt facility maturing in 2017.(6) |
|
|
4.8 |
|
Business Development Services Agreement between Teekay Offshore Holdings L.L.C. and Teekay Shipping Limited. (6) |
|
|
4.9 |
|
Agreement, dated September 11, 2012, between Teekay Corporation and Teekay Offshore Partners L.P., relating to the purchase of the Voyageur Spirit. (5) |
|
|
4.10 |
|
Agreement, dated February 27, 2013, between Voyageur L.L.C. and ING Capital L.L.C. for U.S. $ 330,000,000 debt facility due 2020. (8) |
|
|
8.1 |
|
List of Subsidiaries of Teekay Offshore Partners L.P. |
|
|
10.1 |
|
Common Unit Purchase Agreement, dated November 24, 2014, by and among Teekay Offshore Partners L.P. and the purchasers named therein. (10) |
|
|
12.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Teekay Offshore Partners L.P.s Chief Executive Officer. |
|
|
12.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Teekay Offshore Partners L.P.s Chief Financial Officer. |
|
|
13.1 |
|
Teekay Offshore Partners L.P. Certification of Peter Evensen, Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
15.1 |
|
Consent of KPMG LLP, as independent registered public accounting firm. |
|
|
15.2 |
|
Consolidated Financial Statements of OOG TKP FPSO GmbH & Co KG and subsidiaries. |
|
|
101.INS |
|
XBRL Instance Document |
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema |
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
(1) |
Previously filed as an exhibit to our Registration Statement on Form F-1 (File No. 333-139116), filed with the SEC on December 4, 2006,
and hereby incorporated by reference to such Registration Statement. |
(2) |
Previously filed as Exhibit 4.1 to the Registration Statement of Teekay Offshore Partners L.P. on Form 8-A filed on April 25, 2013 (File no.
333-33198), and hereby incorporated by reference. |
(3) |
Previously filed as an exhibit to our Amendment No. 1 to Registration Statement on Form F-1 (File No. 333-139116), filed with the SEC on
December 8, 2006, and hereby incorporated by reference to such Registration Statement. |
75
(4) |
Previously filed as an exhibit to our Annual Report on Form 20-F (File No.1-33198), filed with the SEC on April 11, 2011, and hereby
incorporated by reference to such Report. |
(5) |
Previously filed as an exhibit to our Report on Form 6-K (File No.1-33198), filed with the SEC on September 11, 2012, and hereby incorporated
by reference to such Report. |
(6) |
Previously filed as an exhibit to our Annual Report on Form 20-F (File No. 33198), filed with the SEC on April 11, 2013, and hereby
incorporated by reference to such Report. |
(7) |
Previously filed as an exhibit to our Report on Form 6-K (File No. 1-33198), filed with the SEC on May 29, 2013, and hereby incorporated
by reference to such Report. |
(8) |
Previously filed as an exhibit to our Report on Form 20-F (File No.1-33198), filed with the SEC on April 29, 2014, and hereby incorporated by
reference to such Report. |
(9) |
Previously filed as an exhibit to our Report on Form 6-K (File No. 1-33198), filed with the SEC on May 30, 2014, and hereby incorporated
by reference to such Report. |
(10) |
Previously filed as an exhibit to our Report on Form 6-K (File No. 1-33198), filed with the SEC on November 29, 2014, and hereby
incorporated by reference to such Report. |
76
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
|
|
|
|
|
|
|
|
|
|
|
TEEKAY OFFSHORE PARTNERS L.P. |
|
|
|
|
|
|
|
|
By: |
|
Teekay Offshore GP L.L.C., its General Partner |
|
|
|
|
Date: April 2, 2015 |
|
|
|
By: |
|
/s/ Peter Evensen |
|
|
|
|
|
|
Peter Evensen |
|
|
|
|
|
|
Chief Executive Officer |
77
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Unitholders of
Teekay Offshore Partners L.P.
We have audited the accompanying consolidated balance sheets of Teekay Offshore Partners L.P. and subsidiaries (the Partnership)
as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, cash flows, and changes in total equity for each of the years in the three-year period ended December 31, 2014. These consolidated
financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Partnership as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Partnerships internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated April 2, 2015 expressed an unqualified opinion on the effectiveness of the Partnerships internal control over financial reporting.
|
|
|
Vancouver, Canada |
|
/s/ KPMG LLP |
April 2, 2015 |
|
Chartered Accountants |
F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Unitholders of
Teekay Offshore
Partners L.P.
We have audited Teekay Offshore Partners L.P. and subsidiaries (the Partnership) internal control over
financial reporting as of December 31, 2014, based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Partnerships management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Report on
Internal Control over Financial Reporting in the accompanying Form 20-F. Our responsibility is to express an opinion on the Partnerships internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
An entitys
internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. An entitys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the entitys assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Partnership maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2014 based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Partnership as at December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, cash flows, and changes in total equity for each of
the years in the three-year period ended December 31, 2014, and our report dated April 2, 2015, expressed an unqualified opinion on those consolidated financial statements.
|
|
|
Vancouver, Canada |
|
/s/ KPMG LLP |
April 2, 2015 |
|
Chartered Accountants |
F - 2
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES (notes 1 and 3)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. dollars, except unit and per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
|
Year Ended December 31, 2012 $ |
|
Revenues (note 11) |
|
|
1,019,539 |
|
|
|
930,739 |
|
|
|
901,227 |
|
|
|
|
|
Voyage expenses |
|
|
(112,540 |
) |
|
|
(103,643 |
) |
|
|
(110,483 |
) |
Vessel operating expenses (notes 11 and 12) |
|
|
(352,209 |
) |
|
|
(344,128 |
) |
|
|
(317,576 |
) |
Time-charter hire expense |
|
|
(31,090 |
) |
|
|
(56,682 |
) |
|
|
(56,989 |
) |
Depreciation and amortization |
|
|
(198,553 |
) |
|
|
(199,006 |
) |
|
|
(189,364 |
) |
General and administrative (notes 11, 12 and 17) |
|
|
(67,516 |
) |
|
|
(44,473 |
) |
|
|
(34,581 |
) |
(Write down) and gain (loss) on sale of vessels (note 19) |
|
|
(1,638 |
) |
|
|
(76,782 |
) |
|
|
(24,542 |
) |
Restructuring recovery (charge) (note 10) |
|
|
225 |
|
|
|
(2,607 |
) |
|
|
(1,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
256,218 |
|
|
|
103,418 |
|
|
|
166,577 |
|
|
|
|
|
Interest expense (notes 8 and 11) |
|
|
(88,381 |
) |
|
|
(62,855 |
) |
|
|
(47,508 |
) |
Interest income (note 11) |
|
|
719 |
|
|
|
2,561 |
|
|
|
1,027 |
|
Realized and unrealized (losses) gains on derivative instruments (note 12) |
|
|
(143,703 |
) |
|
|
34,820 |
|
|
|
(26,349 |
) |
Equity income |
|
|
10,341 |
|
|
|
6,731 |
|
|
|
|
|
Foreign currency exchange loss (note 12) |
|
|
(16,140 |
) |
|
|
(5,278 |
) |
|
|
(315 |
) |
Loss on bond repurchase (note 8) |
|
|
|
|
|
|
(1,759 |
) |
|
|
|
|
Other income net |
|
|
781 |
|
|
|
1,144 |
|
|
|
1,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax (expense) recovery |
|
|
19,835 |
|
|
|
78,782 |
|
|
|
94,970 |
|
Income tax (expense) recovery (note 13) |
|
|
(2,179 |
) |
|
|
(2,225 |
) |
|
|
10,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
|
|
17,656 |
|
|
|
76,557 |
|
|
|
105,447 |
|
Net (loss) income from discontinued operations (notes 11 and 19) |
|
|
|
|
|
|
(4,642 |
) |
|
|
17,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
17,656 |
|
|
|
71,915 |
|
|
|
123,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests in net income |
|
|
10,503 |
|
|
|
(19,089 |
) |
|
|
58 |
|
Dropdown Predecessors interest in net income (note 3) |
|
|
|
|
|
|
(2,225 |
) |
|
|
|
|
Preferred unitholders interest in net income (note 16) |
|
|
10,875 |
|
|
|
7,250 |
|
|
|
|
|
General Partners interest in net income from continuing operations |
|
|
15,658 |
|
|
|
14,126 |
|
|
|
12,827 |
|
General Partners interest in net (loss) income from discontinued operations |
|
|
|
|
|
|
(452 |
) |
|
|
(1,772 |
) |
General Partners interest in net income |
|
|
15,658 |
|
|
|
13,674 |
|
|
|
11,055 |
|
Limited partners interest in net income from continuing operations |
|
|
(19,380 |
) |
|
|
76,495 |
|
|
|
92,562 |
|
Limited partners interest in net income from continuing operations per common unit: |
|
|
|
|
|
|
|
|
|
|
|
|
- basic (note 16) |
|
|
(0.22 |
) |
|
|
0.93 |
|
|
|
1.26 |
|
- diluted (note 16) |
|
|
(0.22 |
) |
|
|
0.93 |
|
|
|
1.26 |
|
Limited partners interest in net (loss) income from discontinued operations |
|
|
|
|
|
|
(4,190 |
) |
|
|
19,340 |
|
Limited partners interest in net (loss) income from discontinued operations per common unit: |
|
|
|
|
|
|
|
|
|
|
|
|
- basic (note 16) |
|
|
|
|
|
|
(0.05 |
) |
|
|
0.26 |
|
- diluted (note 16) |
|
|
|
|
|
|
(0.05 |
) |
|
|
0.26 |
|
Limited partners interest in net income |
|
|
(19,380 |
) |
|
|
72,305 |
|
|
|
111,902 |
|
Limited partners interest in net income per common unit: |
|
|
|
|
|
|
|
|
|
|
|
|
- basic (note 16) |
|
|
(0.22 |
) |
|
|
0.88 |
|
|
|
1.52 |
|
- diluted (note 16) |
|
|
(0.22 |
) |
|
|
0.88 |
|
|
|
1.52 |
|
Weighted-average number of common units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
- basic |
|
|
86,212,290 |
|
|
|
82,634,000 |
|
|
|
73,750,951 |
|
- diluted |
|
|
86,212,290 |
|
|
|
82,659,179 |
|
|
|
73,750,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash distributions declared per unit |
|
|
2.15 |
|
|
|
2.11 |
|
|
|
2.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party transactions (note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements
F - 3
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES (notes 1 and 3)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
|
Year Ended December 31, 2012 $ |
|
Net income |
|
|
17,656 |
|
|
|
71,915 |
|
|
|
123,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized net gain on qualifying cash flow hedging instruments (note 12) |
|
|
|
|
|
|
6 |
|
|
|
713 |
|
Realized net loss (gain) on qualifying cash flow hedging instruments (note 12) |
|
|
|
|
|
|
52 |
|
|
|
(217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
58 |
|
|
|
496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
17,656 |
|
|
|
71,973 |
|
|
|
123,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest in comprehensive income |
|
|
10,503 |
|
|
|
(19,089 |
) |
|
|
58 |
|
Preferred unitholders interest in comprehensive income |
|
|
10,875 |
|
|
|
7,250 |
|
|
|
|
|
Dropdown Predecessors interest in comprehensive income (note 3) |
|
|
|
|
|
|
(2,225 |
) |
|
|
|
|
General and limited partners interest in comprehensive income |
|
|
(3,722 |
) |
|
|
86,037 |
|
|
|
123,453 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES (notes 1 and 3)
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014 $ |
|
|
As at December 31, 2013 $ |
|
ASSETS |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
252,138 |
|
|
|
219,126 |
|
Restricted cash (note 12) |
|
|
4,704 |
|
|
|
|
|
Accounts receivable, including non-trade of $6,825 (December 31, 2013 - $40,043) (note 12) |
|
|
103,665 |
|
|
|
176,265 |
|
Net investments in direct financing leases - current (notes 4b and 9) |
|
|
4,987 |
|
|
|
5,104 |
|
Prepaid expenses |
|
|
30,211 |
|
|
|
31,675 |
|
Due from affiliates (note 11k) |
|
|
44,225 |
|
|
|
15,202 |
|
Current portion of derivative instruments (note 12) |
|
|
|
|
|
|
500 |
|
Advances to joint venture (note 20) |
|
|
5,225 |
|
|
|
|
|
Other current assets |
|
|
4,626 |
|
|
|
3,051 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
449,781 |
|
|
|
450,923 |
|
|
|
|
|
|
|
|
|
|
Restricted cash - long-term (note 12) |
|
|
42,056 |
|
|
|
|
|
|
|
|
Vessels and equipment |
|
|
|
|
|
|
|
|
At cost, less accumulated depreciation of $1,202,663 (December 31, 2013 - $1,016,812) |
|
|
2,966,104 |
|
|
|
3,059,770 |
|
Advances on newbuilding contracts and conversion costs (notes 14c, 14d, 14e, 14g, 18a and 18b) |
|
|
217,361 |
|
|
|
29,812 |
|
Net investments in direct financing leases (notes 4b and 9) |
|
|
17,471 |
|
|
|
22,463 |
|
Investment in equity accounted joint ventures (note 20) |
|
|
54,955 |
|
|
|
52,120 |
|
Derivative instruments (note 12) |
|
|
4,660 |
|
|
|
10,323 |
|
Deferred tax asset (note 13) |
|
|
5,959 |
|
|
|
7,854 |
|
Other assets |
|
|
51,362 |
|
|
|
35,272 |
|
Intangible assets net (note 6b) |
|
|
6,410 |
|
|
|
10,436 |
|
Goodwill (note 6a) |
|
|
129,145 |
|
|
|
127,113 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
3,945,264 |
|
|
|
3,806,086 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
15,064 |
|
|
|
15,753 |
|
Accrued liabilities (notes 7, 10, 12 and 17) |
|
|
68,013 |
|
|
|
138,156 |
|
Deferred revenues |
|
|
25,669 |
|
|
|
29,075 |
|
Due to affiliates (note 11k) |
|
|
108,941 |
|
|
|
121,864 |
|
Current portion of derivative instruments (note 12) |
|
|
85,318 |
|
|
|
47,944 |
|
Current portion of long-term debt (note 8) |
|
|
258,014 |
|
|
|
806,009 |
|
Current portion of in-process revenue contracts (note 6c) |
|
|
12,744 |
|
|
|
12,744 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
573,763 |
|
|
|
1,171,545 |
|
|
|
|
|
|
|
|
|
|
Long-term debt (note 8) |
|
|
2,178,009 |
|
|
|
1,562,967 |
|
Derivative instruments (note 12) |
|
|
257,754 |
|
|
|
121,135 |
|
In-process revenue contracts (note 6c) |
|
|
75,805 |
|
|
|
88,550 |
|
Other long-term liabilities |
|
|
44,238 |
|
|
|
23,984 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,129,569 |
|
|
|
2,968,181 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (notes 8, 9, 12 and 14) |
|
|
|
|
|
|
|
|
|
|
|
Redeemable non-controlling interest (note 14b) |
|
|
12,842 |
|
|
|
16,564 |
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Limited partners - common units (92.4 million and 85.5 million units issued and outstanding at December 31, 2014 and
December 31, 2013, respectively) |
|
|
589,165 |
|
|
|
621,002 |
|
Limited partners - preferred units (6.0 million units issued and outstanding at December 31, 2014 and December 31, 2013,
respectively) (note 16) |
|
|
144,800 |
|
|
|
144,800 |
|
General Partner |
|
|
21,038 |
|
|
|
21,242 |
|
|
|
|
|
|
|
|
|
|
Partners equity |
|
|
755,003 |
|
|
|
787,044 |
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
47,850 |
|
|
|
34,297 |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
802,853 |
|
|
|
821,341 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and total equity |
|
|
3,945,264 |
|
|
|
3,806,086 |
|
|
|
|
|
|
|
|
|
|
Subsequent events (note 21)
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES (notes 1 and 3)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents provided by (used for) |
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
|
Year Ended December 31, 2012 $ |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
17,656 |
|
|
|
71,915 |
|
|
|
123,015 |
|
Non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss (gain) on derivative instruments (note 12) |
|
|
180,156 |
|
|
|
(91,837 |
) |
|
|
(39,538 |
) |
Equity income, net of dividends received of $16,803 (2013 - $nil, 2012 - $nil) |
|
|
6,462 |
|
|
|
(6,731 |
) |
|
|
|
|
Depreciation and amortization |
|
|
198,553 |
|
|
|
200,242 |
|
|
|
194,631 |
|
Write down and (gain) loss on sale of vessels (note 19) |
|
|
1,638 |
|
|
|
95,247 |
|
|
|
32,217 |
|
Deferred income tax expense (recovery) (note 13) |
|
|
889 |
|
|
|
2,150 |
|
|
|
(8,808 |
) |
Amortization of in-process revenue contracts |
|
|
(12,744 |
) |
|
|
(12,744 |
) |
|
|
(12,714 |
) |
Foreign currency exchange (gain) loss and other |
|
|
(84,719 |
) |
|
|
(35,522 |
) |
|
|
15,260 |
|
Change in non-cash working capital items related to operating activities (note 15a) |
|
|
(111,484 |
) |
|
|
51,999 |
|
|
|
(17,447 |
) |
Expenditures for dry docking |
|
|
(36,221 |
) |
|
|
(19,332 |
) |
|
|
(19,122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating cash flow |
|
|
160,186 |
|
|
|
255,387 |
|
|
|
267,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
|
1,350,096 |
|
|
|
1,140,237 |
|
|
|
318,645 |
|
Scheduled repayments of long-term debt |
|
|
(804,704 |
) |
|
|
(266,874 |
) |
|
|
(146,162 |
) |
Prepayments of long-term debt |
|
|
(418,625 |
) |
|
|
(466,781 |
) |
|
|
(445,698 |
) |
Debt issuance costs |
|
|
(15,555 |
) |
|
|
(14,797 |
) |
|
|
(4,361 |
) |
Equity contribution from joint venture partners |
|
|
27,267 |
|
|
|
4,750 |
|
|
|
2,750 |
|
Proceeds from issuance of common units (note 16) |
|
|
186,353 |
|
|
|
119,588 |
|
|
|
265,393 |
|
Proceeds from issuance of preferred units (note 16) |
|
|
|
|
|
|
150,000 |
|
|
|
|
|
Expenses relating to equity offerings |
|
|
(228 |
) |
|
|
(5,837 |
) |
|
|
(8,164 |
) |
Increase in restricted cash (note 4) |
|
|
(46,760 |
) |
|
|
|
|
|
|
|
|
Cash distributions paid by the Partnership |
|
|
(214,656 |
) |
|
|
(192,142 |
) |
|
|
(160,905 |
) |
Cash distributions paid by subsidiaries to non-controlling interests |
|
|
(27,939 |
) |
|
|
(7,750 |
) |
|
|
(8,787 |
) |
Advance to joint venture (note 20) |
|
|
(5,225 |
) |
|
|
|
|
|
|
|
|
Purchase of Voyageur LLC from Teekay Corporation (net of $6.2 million indemnification by Teekay Corporation (2013 - $34.9 million) and
cash acquired of $nil (2013 - $0.9 million))(notes 11f and 15e) |
|
|
6,181 |
|
|
|
(234,125 |
) |
|
|
|
|
Purchase of VOC equipment from Teekay Corporation (note 11b) |
|
|
|
|
|
|
|
|
|
|
(12,848 |
) |
Equity contribution from Teekay Corporation to Dropdown Predecessor |
|
|
|
|
|
|
5,596 |
|
|
|
|
|
Other |
|
|
974 |
|
|
|
|
|
|
|
(5,870 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing cash flow |
|
|
37,179 |
|
|
|
231,865 |
|
|
|
(206,007 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for vessels and equipment, including advances on newbuilding contracts and conversion costs |
|
|
(172,169 |
) |
|
|
(455,578 |
) |
|
|
(87,408 |
) |
Purchase of equity investment in Itajai FPSO joint venture (net of cash acquired of $1.3 million) (note 11g and
15e) |
|
|
|
|
|
|
(52,520 |
) |
|
|
|
|
Proceeds from sale of vessels and equipment |
|
|
13,364 |
|
|
|
27,986 |
|
|
|
35,235 |
|
Investments in equity accounted joint ventures |
|
|
(12,413 |
) |
|
|
|
|
|
|
|
|
Direct financing lease payments received |
|
|
5,097 |
|
|
|
5,647 |
|
|
|
17,091 |
|
Acquisition of ALP Maritime Services B.V. (net of cash acquired of $0.3 million) (note 18a) |
|
|
(2,322 |
) |
|
|
|
|
|
|
|
|
Acquisition of Logitel Offshore Holding AS (net of cash acquired of $8.1 million) (note 18b) |
|
|
4,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investing cash flow |
|
|
(164,353 |
) |
|
|
(474,465 |
) |
|
|
(35,082 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
33,012 |
|
|
|
12,787 |
|
|
|
26,405 |
|
Cash and cash equivalents, beginning of the year |
|
|
219,126 |
|
|
|
206,339 |
|
|
|
179,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the year |
|
|
252,138 |
|
|
|
219,126 |
|
|
|
206,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosure (note 15)
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES (notes 1 and 3)
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. dollars and units)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTNERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dropdown Predecessor Equity $ |
|
|
Common Units # |
|
|
Common Units and Additional Paid-in Capital $ |
|
|
Preferred Units # |
|
|
Preferred Units $ |
|
|
General Partner $ |
|
|
Accumulated Other Comprehensive Income (Note 12) $ |
|
|
Non- controlling Interests $ |
|
|
Total Equity $ |
|
|
Redeemable Non- controlling Interest $ |
|
Balance as at December 31, 2011 |
|
|
|
|
|
|
70,627 |
|
|
|
429,536 |
|
|
|
|
|
|
|
|
|
|
|
15,129 |
|
|
|
(554 |
) |
|
|
40,622 |
|
|
|
484,733 |
|
|
|
38,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
111,902 |
|
|
|
|
|
|
|
|
|
|
|
11,055 |
|
|
|
|
|
|
|
58 |
|
|
|
123,015 |
|
|
|
|
|
Reclassification of redeemable non-controlling interest in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,520 |
|
|
|
4,520 |
|
|
|
(4,520 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496 |
|
|
|
|
|
|
|
496 |
|
|
|
|
|
Cash distributions |
|
|
|
|
|
|
|
|
|
|
(149,631 |
) |
|
|
|
|
|
|
|
|
|
|
(11,274 |
) |
|
|
|
|
|
|
|
|
|
|
(160,905 |
) |
|
|
|
|
Distribution of capital to joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,815 |
) |
|
|
(3,815 |
) |
|
|
(4,972 |
) |
Contribution of capital by joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,750 |
|
|
|
2,750 |
|
|
|
|
|
Proceeds from equity offering, net of offering costs (note 16) |
|
|
|
|
|
|
9,479 |
|
|
|
251,921 |
|
|
|
|
|
|
|
|
|
|
|
5,308 |
|
|
|
|
|
|
|
|
|
|
|
257,229 |
|
|
|
|
|
Purchase of VOC equipment from Teekay Corporation (note 11b) |
|
|
|
|
|
|
|
|
|
|
(2,738 |
) |
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
(2,794 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2012 |
|
|
|
|
|
|
80,106 |
|
|
|
640,990 |
|
|
|
|
|
|
|
|
|
|
|
20,162 |
|
|
|
(58 |
) |
|
|
44,135 |
|
|
|
705,229 |
|
|
|
28,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
(2,225 |
) |
|
|
|
|
|
|
72,305 |
|
|
|
|
|
|
|
7,250 |
|
|
|
13,674 |
|
|
|
|
|
|
|
(19,089 |
) |
|
|
71,915 |
|
|
|
|
|
Reclassification of redeemable non-controlling interest in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,391 |
|
|
|
6,391 |
|
|
|
(6,391 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
58 |
|
|
|
|
|
Cash distributions |
|
|
|
|
|
|
|
|
|
|
(172,150 |
) |
|
|
|
|
|
|
(5,891 |
) |
|
|
(14,101 |
) |
|
|
|
|
|
|
|
|
|
|
(192,142 |
) |
|
|
|
|
Distribution of capital to joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,890 |
) |
|
|
(1,890 |
) |
|
|
(5,860 |
) |
Contribution of capital by joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750 |
|
|
|
4,750 |
|
|
|
|
|
Equity based compensation |
|
|
|
|
|
|
|
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
946 |
|
|
|
|
|
Proceeds from equity offering, net of offering costs (note 16) |
|
|
|
|
|
|
3,900 |
|
|
|
115,762 |
|
|
|
6,000 |
|
|
|
144,800 |
|
|
|
3,189 |
|
|
|
|
|
|
|
|
|
|
|
263,751 |
|
|
|
|
|
Purchase of Voyageur LLC from Teekay Corporation (note 11f) |
|
|
(201,752 |
) |
|
|
|
|
|
|
(76,019 |
) |
|
|
|
|
|
|
|
|
|
|
(1,551 |
) |
|
|
|
|
|
|
|
|
|
|
(279,322 |
) |
|
|
|
|
Net proceeds from equity offering to Teekay Corporation for purchase of Voyageur LLC (note 11f) |
|
|
|
|
|
|
1,447 |
|
|
|
44,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,268 |
|
|
|
|
|
Net change in Teekay Corporations equity in Dropdown Predecessor (note 11f) |
|
|
203,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203,977 |
|
|
|
|
|
Distribution of capital to Teekay Corporation related to acquisition of equity investment in Itajai FPSO joint venture (note
11g) |
|
|
|
|
|
|
|
|
|
|
(6,459 |
) |
|
|
|
|
|
|
|
|
|
|
(131 |
) |
|
|
|
|
|
|
|
|
|
|
(6,590 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
1,359 |
|
|
|
|
|
|
|
(1,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2013 |
|
|
|
|
|
|
85,453 |
|
|
|
621,002 |
|
|
|
6,000 |
|
|
|
144,800 |
|
|
|
21,242 |
|
|
|
|
|
|
|
34,297 |
|
|
|
821,341 |
|
|
|
16,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
(19,380 |
) |
|
|
|
|
|
|
10,875 |
|
|
|
15,658 |
|
|
|
|
|
|
|
10,503 |
|
|
|
17,656 |
|
|
|
|
|
Reclassification of redeemable non-controlling interest in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,777 |
) |
|
|
(7,777 |
) |
|
|
7,777 |
|
Cash distributions |
|
|
|
|
|
|
|
|
|
|
(184,286 |
) |
|
|
|
|
|
|
(10,875 |
) |
|
|
(19,495 |
) |
|
|
|
|
|
|
|
|
|
|
(214,656 |
) |
|
|
|
|
Distribution of capital to joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,440 |
) |
|
|
(16,440 |
) |
|
|
(11,499 |
) |
Contribution of capital from joint venture partner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,267 |
|
|
|
27,267 |
|
|
|
|
|
Indemnification payment on Voyageur LLC from Teekay Corporation (note 11f) |
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
|
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
6,181 |
|
|
|
|
|
Proceeds from equity offering, net of offering costs (note 16) |
|
|
|
|
|
|
6,918 |
|
|
|
182,398 |
|
|
|
|
|
|
|
|
|
|
|
3,727 |
|
|
|
|
|
|
|
|
|
|
|
186,125 |
|
|
|
|
|
Distribution of capital to Teekay Corporation related to the equity investment in Itajai FPSO joint venture (note
11g) |
|
|
|
|
|
|
|
|
|
|
(6,082 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,082 |
) |
|
|
|
|
Distribution of capital to Teekay Corporation related to the purchase of Petrojarl I FPSO unit (note 11i) |
|
|
|
|
|
|
|
|
|
|
(12,166 |
) |
|
|
|
|
|
|
|
|
|
|
(248 |
) |
|
|
|
|
|
|
|
|
|
|
(12,414 |
) |
|
|
|
|
Equity based compensation and other (note 11h and 17) |
|
|
|
|
|
|
15 |
|
|
|
1,622 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
1,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2014 |
|
|
|
|
|
|
92,386 |
|
|
|
589,165 |
|
|
|
6,000 |
|
|
|
144,800 |
|
|
|
21,038 |
|
|
|
|
|
|
|
47,850 |
|
|
|
802,853 |
|
|
|
12,842 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
1. |
Summary of Significant Accounting Policies |
Basis of presentation
The consolidated financial statements have been prepared in accordance with United States generally accepted accounting
principles (or GAAP). These financial statements include the accounts of Teekay Offshore Partners L.P., which is a limited partnership organized under the laws of the Republic of The Marshall Islands, its wholly owned or controlled
subsidiaries and the Dropdown Predecessor (see note 3).
The preparation of consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
The Partnership presents non-controlling ownership interests in subsidiaries in the consolidated financial statements within
the equity section, but separate from the Partners equity. However, the holder of the non-controlling interest of one of the Partnerships subsidiaries holds a put option which, if exercised, would obligate the Partnership to purchase the
non-controlling interest (see note 14b). As a result, the non-controlling interest that is subject to this redemption feature is not included on the Partnerships consolidated balance sheet as part of the total equity and is presented as
redeemable non-controlling interest above the equity section but below the liabilities section on the Partnerships consolidated balance sheet.
In the current period the Partnership has presented the conversion costs for the Partnerships committed vessel
conversions in Advances on newbuilding contracts and conversion costs. Prior to 2014, the Partnership included these amounts in Vessels and equipment At cost, less accumulated depreciation. All such costs incurred in comparative periods have
been reclassified from Vessels and equipment At cost, less accumulated depreciation to Advances on newbuilding contracts and conversion costs to conform to the presentation adopted in the current period. The amount reclassified as at
December 31, 2013 was $29.8 million.
Foreign currency
The consolidated financial statements are stated in U.S. Dollars and the functional currency of the Partnership and its
subsidiaries is the U.S. Dollar. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and
liabilities that are denominated in currencies other than the U.S. Dollar are translated to reflect the year-end exchange rates. Resulting gains or losses are reflected separately in the accompanying consolidated statements of income.
Operating revenues and expenses
Contracts of Affreightment and Voyage Charters
Revenues from contracts of affreightment and voyage charters are recognized on a proportionate performance method. Shuttle
tanker voyages servicing contracts of affreightment with offshore oil fields commence with tendering of notice of readiness at a field, within the agreed lifting range, and ends with tendering of notice of readiness at a field for the next lifting.
The Partnership uses a discharge-to-discharge basis in determining proportionate performance for all voyage charters, whereby it recognizes revenue ratably from when product is discharged (unloaded) at the end of one voyage to when it is discharged
after the next voyage. The Partnership does not begin recognizing revenue until a charter has been agreed to by the customer and the Partnership, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next
voyage.
Time Charters, Bareboat Charters and FPSO Contracts
Operating Leases - The Partnership recognizes revenues from the time charters, bareboat charters and floating,
production, storage and offloading (or FPSO) contracts accounted for as operating leases on a straight-line basis daily over the term of the charter as the applicable vessel operates under the charter. Receipt of incentive-based revenue from
the Partnerships FPSO units is dependent upon its operating performance and such revenue is recognized when earned by fulfillment of the applicable performance criteria. The Partnership does not recognize revenue during days that the vessel is
off hire unless the contract provides for compensation while off hire.
Direct Financing Leases - Charter contracts
that are accounted for as direct financing leases are reflected on the consolidated balance sheets as net investments in direct financing leases. The lease revenue is recognized on an effective interest rate method over the lease term and is
included in revenues. Revenue from rendering of services are recognized as the service is performed. Revenues are not recognized during days that the vessel is off hire unless the contract provides for compensation while off hire.
The consolidated balance sheets reflect the deferred portion of revenues and expenses, which will be earned or incurred,
respectively, in subsequent periods.
Operating Expenses
Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and
unloading expenses, canal tolls, agency fees and commissions. Vessel operating expenses include crewing, ship management services, repairs and maintenance, insurance, stores, lube oils and communication expenses. Voyage expenses and vessel operating
expenses are recognized when incurred.
F - 8
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Cash and cash equivalents
The Partnership classifies all highly liquid investments with an original maturity date of three months or less when purchased
as cash and cash equivalents.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the
Partnerships best estimate of the amount of probable credit losses in existing accounts receivable. The Partnership determines the allowance based on historical write-off experience and customer economic data. The Partnership reviews the
allowance for doubtful accounts regularly and past due balances are reviewed for collectability. Account balances are charged off against the allowance when the Partnership believes that the receivable will not be recovered.
Investment in equity accounted joint ventures
The Partnerships investment in joint ventures is accounted for using the equity method of accounting. Under the equity
method of accounting, the initial cost of the investment is adjusted for subsequent additional investments and the Partnerships proportionate share of earnings or losses and distributions. The Partnership evaluates its investments in the joint
ventures for impairment when events or circumstances indicate that the carrying value of such investments may have experienced an other-than-temporary decline in value below carrying value. If the estimated fair value is less than the carrying
value, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Partnerships consolidated statements of income.
Vessels and equipment
All pre-delivery costs incurred during the construction of newbuildings and conversions, including interest, supervision and
technical costs, are capitalized. The acquisition cost and all costs incurred to restore used vessels purchased by the Partnership to the standards required to properly service the Partnerships customers are capitalized.
Vessel capital modifications include the addition of new equipment or can encompass various modifications to the vessel which
are aimed at improving and/or increasing the operational efficiency and functionality of the asset. This type of expenditure is amortized over the estimated useful life of the modification. Expenditures covering recurring routine repairs or
maintenance are expensed as incurred.
Depreciation is calculated on a straight-line basis over a vessels estimated
useful life, less an estimated residual value. Shuttle and conventional tankers are depreciated using an estimated useful life of 20 to 25 years commencing the date the vessel is delivered from the shipyard, or for a shorter period if
regulations prevent the Partnership from operating the vessel for the estimated useful life. FPSO units are depreciated using an estimated useful life of 20 to 25 years commencing the date the unit is installed at the oil field and is in a condition
that is ready to operate. Floating storage and off take (or FSO) units are depreciated over the term of the contract. Floating accommodation units (or FAUs) will be depreciated over an estimated useful life of 35 years commencing
the date the unit is delivered from the shipyard. Towage vessels will be depreciated over an estimated useful life of 25 years commencing the date the vessel is delivered from the shipyard. Depreciation of vessels and equipment from continuing
operations (including depreciation attributable to the Dropdown Predecessor) for the years ended December 31, 2014, 2013 and 2012, totalled $171.8 million, $171.4 million, and $158.0 million, respectively. Depreciation and amortization includes
depreciation on all owned vessels.
Interest costs capitalized to vessels and equipment for the years ended
December 31, 2014, 2013 and 2012 totaled $2.3 million, $19.6 million and $1.5 million, respectively.
Generally, the
Partnership dry docks each shuttle tanker, conventional oil tanker, towage vessel and FAU every two and a half to five years. FSO and FPSO units are generally not dry docked. The Partnership capitalizes a portion of the costs incurred during dry
docking and amortizes those costs on a straight-line basis from the completion of a dry docking over the estimated useful life of the dry dock. Included in capitalized dry docking are costs incurred as part of the dry docking to meet regulatory
requirements, or expenditures that either add economic life to the vessel, increase the vessels earning capacity or improve the vessels operating efficiency. The Partnership expenses costs related to routine repairs and maintenance
performed during dry docking that do not improve operating efficiency or extend the useful lives of the assets.
Dry-docking activity for the three years ended December 31, 2014, 2013 and 2012 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
|
Year Ended December 31, 2012 $ |
|
Balance at beginning of the year |
|
|
41,535 |
|
|
|
45,909 |
|
|
|
60,158 |
|
Cost incurred for dry docking |
|
|
36,221 |
|
|
|
19,020 |
|
|
|
19,101 |
|
Dry-docking amortization relating to continuing operations |
|
|
(22,682 |
) |
|
|
(22,559 |
) |
|
|
(25,267 |
) |
Dry-docking amortization relating to discontinued operations |
|
|
|
|
|
|
(360 |
) |
|
|
(2,087 |
) |
Write down / sale of capitalized dry-dock expenditure |
|
|
(815 |
) |
|
|
(475 |
) |
|
|
(5,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of the year |
|
|
54,259 |
|
|
|
41,535 |
|
|
|
45,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 9
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Vessels and equipment that are held and used are assessed for
impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. If the assets net carrying value exceeds the net undiscounted cash flows expected to be generated over its remaining useful life, the
carrying amount of the asset is reduced to its estimated fair value. The estimated fair value for the Partnerships impaired vessels is determined using discounted cash flows or appraised values. In cases where an active second hand sale and
purchase market does not exist, the Partnership uses a discounted cash flow approach to estimate the fair value of an impaired vessel. In cases where an active second hand sale and purchase market exists an appraised value is used to estimate the
fair value of an impaired vessel. An appraised value is generally the amount the Partnership would expect to receive if it were to sell the vessel. Such appraisal is normally completed by the Partnership.
Direct financing leases
The Partnership employs a number of vessels on long-term time charters and assembles, installs, operates and leases equipment
that reduces volatile organic compound emissions (or VOC equipment) during loading, transportation and storage of oil and oil products. The long-term time charters and the leasing of some VOC equipment are accounted for as direct financing
leases, with lease payments received by the Partnership being allocated between the net investment in the lease and revenue or other income using the effective interest method so as to produce a constant periodic rate of return over the lease term.
The VOC equipment leases were completed during 2014 and, as of December 31, 2014, there is one vessel employed on a long-term time charter that is accounted for as a direct financing lease.
Debt issuance costs
Debt issuance costs, including fees, commissions and legal expenses, are deferred and presented as other non-current assets and
amortized on an effective interest rate method over the term of the relevant loan. Amortization of debt issuance costs is included in interest expense.
Goodwill and intangible assets
Goodwill is not amortized, but reviewed for impairment at the reporting unit level on an annual basis or more frequently if an
event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. When goodwill is reviewed for impairment, the Partnership may elect to assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, the Partnership may bypass this step and use a fair value approach to identify potential goodwill
impairment and, when necessary, measure the amount of impairment. The Partnership uses a discounted cash flow model to determine the fair value of reporting units, unless there is a readily determinable fair market value. Intangible assets are
assessed for impairment when and if impairment indicators exist. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value.
The Partnerships intangible assets are amortized over their respective lives with the amount amortized each year being
weighted based on the projected revenue to be earned under the contracts.
Derivative instruments
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying
consolidated balance sheets and subsequently remeasured to fair value, regardless of the purpose or intent for holding the derivative. The method of recognizing the resulting gain or loss is dependent on whether the derivative contract is designed
to hedge a specific risk and also qualifies for hedge accounting. The Partnership does not apply hedge accounting to its derivative instruments, except for certain foreign exchange currency contracts and certain types of interest rate swaps that it
may enter into in the future (see note 12).
When a derivative is designated as a cash flow hedge, the Partnership formally
documents the relationship between the derivative and the hedged item. This documentation includes the strategy and risk management objective for undertaking the hedge and the method that will be used to assess the effectiveness of the hedge. Any
hedge ineffectiveness is recognized immediately in earnings, as are any gains and losses on the derivative that are excluded from the assessment of hedge effectiveness. The Partnership does not apply hedge accounting if it is determined that the
hedge was not effective or will no longer be effective, the derivative was sold or exercised, or the hedged item was sold, repaid or no longer possible of occurring.
For derivative financial instruments designated and qualifying as cash flow hedges, changes in the fair value of the effective
portion of the derivative financial instruments are initially recorded as a component of accumulated other comprehensive income in equity. In the periods when the hedged items affect earnings, the associated fair value changes on the hedging
derivatives are transferred from equity to the corresponding earnings line item in the consolidated statements of income. The ineffective portion of the change in fair value of the derivative financial instruments is immediately recognized in the
consolidated statements of income. If a cash flow hedge is terminated and the originally hedged item is still considered possible of occurring, the gains and losses initially recognized in equity remain there until the hedged item impacts earnings,
at which point they are transferred to the corresponding earnings line item in the consolidated statements of income. If the hedged item is no longer possible of occurring, amounts recognized in equity are immediately transferred to the earnings
line item in the consolidated statements of income.
For derivative financial instruments that are not designated or that
do not qualify as accounting hedges under Financial Accounting Standards Board (or FASB) Accounting Standards Codification (or ASC) 815, Derivatives and Hedging, the changes in the fair value of the derivative financial
instruments are recognized in earnings. Gains and losses from the Partnerships non-designated foreign currency forward contracts and interest rate swaps are recorded in realized and unrealized (losses) gains on derivative instruments in the
consolidated statements of income. Gains and losses from the Partnerships non-designated cross currency swaps are recorded in foreign currency exchange loss in the consolidated statements of income.
F - 10
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Unit-based compensation
The Partnership grants restricted unit-based compensation awards as incentive-based compensation to certain employees of Teekay
Corporations subsidiaries that provide services to the Partnership (see note 17). The Partnership measures the cost of such awards using the grant date fair value of the award and recognizes that cost, net of estimated forfeitures, over the
requisite service period. The requisite service period consists of the period from the grant date of the award to the earlier of the date of vesting or the date the recipient becomes eligible for retirement. For unit-based compensation awards
subject to graded vesting, the Partnership calculates the value of the award as if it was one single award with one expected life and amortizes the calculated expense for the entire award on a straight-line basis over the requisite service period.
Unit-based compensation expenses are recorded under general and administrative expenses in the Partnerships consolidated statements of income.
Income taxes
The Partnership is subject to income taxes relating to its subsidiaries in Norway, Australia, Brazil, the United Kingdom,
Singapore, Qatar and the Netherlands. The Partnership accounts for such taxes using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences
between the financial statement basis and the tax basis of the Partnerships assets and liabilities using the applicable jurisdictional tax rates. A valuation allowance for deferred tax assets is recorded when it is more likely than not that
some or all of the benefit from the deferred tax asset will not be realized.
Recognition of uncertain tax positions is
dependent upon whether it is more-likely-than-not that a tax position taken or expected to be taken in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the consolidated financial statements based on guidance in the interpretation. The
Partnership recognizes interest and penalties related to uncertain tax positions in income tax (expense) recovery.
2. |
Accounting Pronouncement Not Yet Adopted |
In May 2014, the Financial Accounting Standards Board (or FASB) issued Accounting Standards Update
2014-09, Revenue from Contracts with Customers, (or ASU 2014-09). ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the
contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and
(v) recognizing revenue as each performance obligation is satisfied. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016 and shall be applied, at the Partnerships option, retrospectively to each
period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is not permitted. The Partnership is evaluating the effect of adopting this new accounting guidance.
In April 2014, the FASB issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of
Disposals of Components of an Entity (or ASU 2014-08) which raises the threshold for disposals to qualify as discontinued operations. A discontinued operation is now defined as: (i) a component of an entity or group of components
that has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on an entitys operations and financial results; or (ii) an acquired business that is classified as held for
sale on the acquisition date. ASU 2014-08 also requires additional disclosures regarding discontinued operations, as well as material disposals that do not meet the definition of discontinued operations. ASU 2014-08 is effective for fiscal years
beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in the financial statements previously issued
or available for issuance. The impact, if any, of adopting ASU 2014-08 on the Partnerships financial statements will depend on the occurrence and nature of disposals that occur after ASU 2014-08 is adopted.
The Partnership has accounted for the acquisition of interests in vessels from Teekay Corporation as a
transfer of net assets between entities under common control. The method of accounting for such transfers is similar to the pooling of interests method of accounting. Under this method, the carrying amount of net assets recognized in the balance
sheets of each combining entity are carried forward to the balance sheet of the combined entity, and no other assets or liabilities are recognized as a result of the combination. The excess of the proceeds paid, if any, by the Partnership over
Teekay Corporations historical cost is accounted for as an equity distribution to Teekay Corporation. In addition, acquisition of vessels from Teekay Corporation that are businesses are accounted for as if the acquisition occurred on the date
that the Partnership and the acquired vessels were both under the common control of Teekay Corporation and had begun operations. As a result, the Partnerships financial statements prior to the date the interests in these vessels were actually
acquired by the Partnership are retroactively adjusted to include the results of these vessels during the periods they were under common control of Teekay Corporation and had begun operations.
On May 2, 2013, the Partnership acquired from Teekay Corporation its 100% interest in Voyageur LLC for an original
purchase price of $540.0 million that was effectively reduced to $503.1 million (see note 11f). The Voyageur LLC owns the Voyageur Spirit (referred to herein as the Dropdown Predecessor), an FPSO unit, which operates on the Huntington
Field in the North Sea under a five-year contract, plus up to 10 one-year
F - 11
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
extension options, with E.ON Ruhrgas UK GP Limited (or E.ON). To account for the common control transfer of the Voyageur Spirit FPSO unit as if the Partnership had acquired the unit
when it began operations on April 13, 2013, the Partnerships financial statements have been adjusted to decrease the Partnerships net income and comprehensive income by $2.2 million for the year ended December 31, 2013.
Teekay Corporation uses a centralized treasury system. As a result, cash and cash equivalents attributable to the operations of
the Dropdown Predecessor were in certain cases co-mingled with cash and cash equivalents from other operations of Teekay Corporation. This cash and cash equivalents are not reflected in the balance sheet of the Dropdown Predecessor. However, any
cash transactions from these bank accounts that were made on behalf of companies in the Dropdown Predecessor, which were acquired by the Partnership, are reflected as increases or decreases of advances from affiliates. Any other cash transactions
from these bank accounts that were directly related to the operations of the Dropdown Predecessor are reflected as increases or decreases in owners equity in the Partnerships financial statements.
The consolidated financial statements reflect the consolidated financial position, results of operations and cash flows of the
Partnership and its subsidiaries, including, as applicable, the Dropdown Predecessor. In the preparation of these consolidated financial statements interest expense and realized and unrealized (losses) gains on derivative instruments were not
identifiable as relating solely to each specific vessel. Amounts have been allocated to the Dropdown Predecessor for interest expense of $0.3 million and realized and unrealized losses (gains) on derivative instruments of $0.1 million for the year
ended December 31, 2013. Management believes these allocations reasonably present the interest expense and realized and unrealized (losses) gains on derivative instruments of the Dropdown Predecessor. Estimates have been made when allocating
expenses from Teekay Corporation to the Dropdown Predecessor and such estimates may not be reflective of actual results.
a) |
Fair value measurements |
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents and restricted cash - The fair value of the Partnerships cash and cash equivalents and
restricted cash approximate their carrying amounts reported in the accompanying consolidated balance sheets.
Vessels
and equipment The estimated fair value of the Partnerships vessels and equipment is determined based on discounted cash flows or appraised values. In cases where an active second hand sale and purchase market does not exist,
the Partnership uses a discounted cash flow approach to estimate the fair value of an impaired vessel. In cases where an active second hand sale and purchase market exists, an appraised value is generally the amount the Partnership would expect to
receive if it were to sell the vessel. Such appraisal is normally completed by the Partnership.
Contingent consideration liabilities
In August 2014, the Partnership acquired 100% of the outstanding shares of Logitel Offshore Holding AS (or
Logitel), a Norway-based company focused on the high-end floating accommodation market, from Cefront Technology AS (or Cefront) for $4 million, which was paid in cash at closing, plus a potential additional amount of up to $27.6
million, depending upon certain performance criteria, which is payable from early-2015 to early-2018 (see note 18b).
The
Partnership will owe an additional amount of up to $27.6 million if there are no yard cost overruns, and no charterer late delivery penalties; the two unfixed floating accommodation units (or FAUs) under construction are chartered above
specified daily rates; and no material defects from construction are identified up until one year after the delivery of each FAU. To the extent such events occur, the potential additional amount of $27.6 million will be reduced in accordance with
the terms of the purchase agreement. The estimated fair value of the contingent consideration liability of $27.6 million is the amount the Partnership expects to pay to Cefront discounted to its present value using a weighted average cost of capital
rate of 10%. As of December 31, 2014, the amount of the expected payments for each FAU was based upon the construction status for each FAU, the state of the charter market for FAUs, the expectation of potential material defects and to a lesser
extent, the timing of delivery of each FAU. An increase (decrease) in the Partnerships estimates of yard cost overruns, charterer late delivery penalties, material defects and the discount rate, as well as a decrease (increase) in the
Partnerships estimates of day rates at which it expects to charter the two unchartered FAUs, will decrease (increase) the estimated fair value of the contingent consideration liability.
Changes in the estimated fair value of the Partnerships contingent consideration liability relating to the acquisition of
Logitel, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3), during the year-ended December 31, 2014 is as follows:
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
Balance at beginning of period |
|
|
|
|
Acquisition of Logitel |
|
|
(21,170 |
) |
Unrealized gain included in Other income net |
|
|
(278 |
) |
|
|
|
|
|
Balance at end of period |
|
|
(21,448 |
) |
|
|
|
|
|
F - 12
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
On October 1, 2011, the Partnership acquired from Teekay Corporation a
newbuilding shuttle tanker, the Scott Spirit, for $116.0 million. The purchase price was subject to an adjustment of up to an additional $12 million based upon incremental shuttle tanker revenues above projections used for the sales
price valuation generated during the two years following the acquisition. The fair value of the liability was the estimated amount that the Partnership would pay Teekay Corporation on September 30, 2012 and 2013, taking into account the
Partnerships secured contracts, new projects, and forecasted revenues for the vessel. The estimated amount was the present value of the remaining future cash flows.
Changes in the estimated fair value of the Partnerships contingent consideration liability relating to the acquisition of
the Scott Spirit, which was measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, 2013 |
|
|
December 31, 2012 |
|
|
|
$ |
|
|
$ |
|
Balance at beginning of period |
|
|
(5,681 |
) |
|
|
(10,894 |
) |
Settlement of liability |
|
|
6,000 |
|
|
|
5,870 |
|
Unrealized loss included in Other income net |
|
|
(319 |
) |
|
|
(657 |
) |
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
|
|
|
|
|
(5,681 |
) |
|
|
|
|
|
|
|
|
|
The estimated fair value of the Partnerships contingent consideration liability was based
in part upon the Partnerships projection of incremental revenue secured during the period from September 1, 2011 to October 1, 2013, based primarily on the estimated number of new ship days, the daily rate for those new ship days,
pursuant to new contracts, and the change in rate on existing ship days. On October 1, 2012, the Partnership repaid a portion of the liability, which at the repayment date was $5.9 million. On October 1, 2013, the Partnership repaid
the remainder of the liability, which at the repayment date was $6.0 million.
Long-term debt The fair values
of the Partnerships variable-rate long-term debt are either based on quoted market prices or estimated using discounted cash flow analyses, based on rates currently available for debt with similar terms and remaining maturities and the current
credit worthiness of the Partnership.
Derivative instruments The fair value of the Partnerships
derivative instruments is the estimated amount that the Partnership would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange rates and the current credit worthiness of both
the Partnership and the derivative counterparties. The estimated amount is the present value of future cash flows. The Partnership transacts all of its derivative instruments through investment-grade rated financial institutions at the time of the
transaction and requires no collateral from these institutions. Given the current volatility in the credit markets, it is reasonably possible that the amount recorded as a derivative liability could vary by a material amount in the near term.
The Partnership categorizes its fair value estimates using a fair value hierarchy based on the inputs used to measure fair
value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
The following table includes the estimated fair value and carrying value of those assets and liabilities that
are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the Partnerships financial instruments that are not accounted for at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
Fair Value Hierarchy Level |
|
|
Carrying Amount Asset (Liability) |
|
|
Fair
Value Asset (Liability) |
|
|
Carrying Amount Asset (Liability) |
|
|
Fair
Value Asset (Liability) |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Recurring: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash |
|
|
Level 1 |
|
|
|
298,898 |
|
|
|
298,898 |
|
|
|
219,126 |
|
|
|
219,126 |
|
Logitel contingent consideration (see above) |
|
|
Level 3 |
|
|
|
(21,448 |
) |
|
|
(21,448 |
) |
|
|
|
|
|
|
|
|
Derivative instruments (note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
|
Level 2 |
|
|
|
(216,488 |
) |
|
|
(216,488 |
) |
|
|
(141,143 |
) |
|
|
(141,143 |
) |
Cross currency swap agreement |
|
|
Level 2 |
|
|
|
(120,503 |
) |
|
|
(120,503 |
) |
|
|
(25,433 |
) |
|
|
(25,433 |
) |
Foreign currency forward contracts |
|
|
Level 2 |
|
|
|
(11,268 |
) |
|
|
(11,268 |
) |
|
|
(842 |
) |
|
|
(842 |
) |
F - 13
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Recurring: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels and equipment (note 19) |
|
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
17,250 |
|
|
|
17,250 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt - public (note 8) |
|
|
Level 1 |
|
|
|
(855,255 |
) |
|
|
(825,628 |
) |
|
|
(487,097 |
) |
|
|
(496,609 |
) |
Long-term debt - non-public (note 8) |
|
|
Level 2 |
|
|
|
(1,580,768 |
) |
|
|
(1,574,649 |
) |
|
|
(1,881,879 |
) |
|
|
(1,835,218 |
) |
The following table contains a summary of the Partnerships financing receivables by type of borrower and the method by
which the Partnership monitors the credit quality of its financing receivables on a quarterly basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicator |
|
|
Grade |
|
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
Direct financing leases |
|
|
Payment activity |
|
|
|
Performing |
|
|
|
22,458 |
|
|
|
27,567 |
|
The Partnership is engaged in the international marine transportation of crude oil, the offshore processing
and storage of crude oil, long-haul ocean towage and offshore installation services, and the high-end floating accommodation market through the operation of its oil tankers, FSO units, FPSO units, towage vessels and FAUs. The Partnerships
revenues are earned in international markets.
The Partnership has six reportable segments: its shuttle tanker segment; its
FPSO segment; its FSO segment; its conventional tanker segment; its towage segment; and its FAU segment. The Partnerships shuttle tanker segment consists of shuttle tankers operating primarily on fixed-rate contracts of affreightment,
time-charter contracts or bareboat charter contracts. The Partnerships FPSO segment consists of its FPSO units to service its FPSO contracts. The Partnerships FSO segment consists of its FSO units subject to fixed-rate, time-charter
contracts or bareboat charter contracts. The Partnerships conventional tanker segment consists of conventional tankers operating on fixed-rate, time-charter contracts or bareboat charter contracts. The Partnerships towage segment
consists of four long-haul towing and anchor handling vessel newbuildings scheduled for delivery in 2016 and six on-the-water long-distance towing and anchor handling vessels, of which three vessels delivered in early-2015, with the remaining three
vessels expected to deliver during the second quarter of 2015, and which are expected to operate on time-charter or voyage-charter towage contracts. The Partnerships FAU segment consists of three FAUs, of which one FAU delivered in February
2015 and the remaining two units are scheduled to deliver in 2016. These FAUs are expected to operate on fixed-rate time-charter contracts. The results below exclude results included in discontinued operations. Segment results are evaluated based on
income from vessel operations. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Partnerships consolidated financial statements.
The following table presents revenues and percentage of consolidated revenues for customers that accounted for more than 10% of
the Partnerships consolidated revenues from continuing operations during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
(U.S. dollars in millions) |
|
Year Ended December 31, 2014 |
|
|
Year Ended December 31, 2013 |
|
|
Year Ended December 31, 2012 |
|
Petrobras Transporte S.A(1) |
|
$ |
228.1 or 22 |
% |
|
$ |
228.9 or 25 |
% |
|
$ |
259.3 or 28 |
% |
Statoil ASA(2) |
|
$ |
194.3 or 19 |
% |
|
$ |
183.0 or 20 |
% |
|
$ |
198.0 or 21 |
% |
E.ON(3) |
|
$ |
120.2 or 12 |
% |
|
|
|
(4) |
|
|
|
(4) |
Talisman Energy Inc(3) |
|
$ |
112.6 or 11 |
% |
|
$ |
122.1 or 13 |
% |
|
$ |
123.0 or 13 |
% |
(1) |
Shuttle tanker and FPSO segments |
(2) |
Shuttle tanker segment |
(4) |
Percentage of consolidated revenue was less than 10% |
The following tables include results for the Partnerships shuttle tanker segment, FPSO unit segment, FSO unit segment,
conventional tanker segment, towage segment and FAU segment for the periods presented in these consolidated financial statements. The results below exclude six conventional tankers determined to be discontinued operations (see note 19).
F - 14
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shuttle Tanker Segment |
|
|
FPSO Segment(1) |
|
|
FSO Segment |
|
|
Conventional Tanker Segment |
|
|
Towage Segment |
|
|
FAU Segment |
|
|
Total |
|
Revenues |
|
|
577,064 |
|
|
|
354,518 |
|
|
|
53,868 |
|
|
|
33,566 |
|
|
|
523 |
|
|
|
|
|
|
|
1,019,539 |
|
Voyage expenses |
|
|
(105,562 |
) |
|
|
|
|
|
|
(1,500 |
) |
|
|
(5,373 |
) |
|
|
(105 |
) |
|
|
|
|
|
|
(112,540 |
) |
Vessel operating expenses |
|
|
(159,438 |
) |
|
|
(158,216 |
) |
|
|
(28,649 |
) |
|
|
(5,906 |
) |
|
|
|
|
|
|
|
|
|
|
(352,209 |
) |
Time-charter hire expense |
|
|
(31,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,090 |
) |
Depreciation and amortization |
|
|
(110,686 |
) |
|
|
(72,905 |
) |
|
|
(8,282 |
) |
|
|
(6,680 |
) |
|
|
|
|
|
|
|
|
|
|
(198,553 |
) |
General and administrative (2)(3) |
|
|
(29,154 |
) |
|
|
(27,406 |
) |
|
|
(3,870 |
) |
|
|
(2,136 |
) |
|
|
(4,328 |
) |
|
|
(622 |
) |
|
|
(67,516 |
) |
Write down and gain on sale of vessel |
|
|
(1,638 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,638 |
) |
Restructuring recovery (4) |
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from vessel operations |
|
|
139,721 |
|
|
|
95,991 |
|
|
|
11,567 |
|
|
|
13,471 |
|
|
|
(3,910 |
) |
|
|
(622 |
) |
|
|
256,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity income |
|
|
|
|
|
|
10,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,341 |
|
Investment in joint venture |
|
|
|
|
|
|
54,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,955 |
|
Expenditures for vessels and equipment (5) |
|
|
50,096 |
|
|
|
17,022 |
|
|
|
33,734 |
|
|
|
251 |
|
|
|
59,516 |
|
|
|
11,550 |
|
|
|
172,169 |
|
Expenditures for dry docking |
|
|
22,552 |
|
|
|
|
|
|
|
11,560 |
|
|
|
2,109 |
|
|
|
|
|
|
|
|
|
|
|
36,221 |
|
|
|
|
|
|
|
|
|
Year ended December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shuttle Tanker Segment |
|
|
FPSO Segment(1) |
|
|
FSO Segment |
|
|
Conventional Tanker Segment |
|
|
Towage Segment |
|
|
FAU Segment |
|
|
Total |
|
Revenues |
|
|
552,019 |
|
|
|
284,932 |
|
|
|
59,016 |
|
|
|
34,772 |
|
|
|
|
|
|
|
|
|
|
|
930,739 |
|
Voyage expenses |
|
|
(99,543 |
) |
|
|
|
|
|
|
432 |
|
|
|
(4,532 |
) |
|
|
|
|
|
|
|
|
|
|
(103,643 |
) |
Vessel operating expenses |
|
|
(152,986 |
) |
|
|
(152,616 |
) |
|
|
(32,713 |
) |
|
|
(5,813 |
) |
|
|
|
|
|
|
|
|
|
|
(344,128 |
) |
Time-charter hire expense |
|
|
(56,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,682 |
) |
Depreciation and amortization |
|
|
(115,913 |
) |
|
|
(66,404 |
) |
|
|
(10,178 |
) |
|
|
(6,511 |
) |
|
|
|
|
|
|
|
|
|
|
(199,006 |
) |
General and administrative (2) |
|
|
(21,821 |
) |
|
|
(17,742 |
) |
|
|
(2,553 |
) |
|
|
(2,357 |
) |
|
|
|
|
|
|
|
|
|
|
(44,473 |
) |
Write down and loss on sale of vessels |
|
|
(76,782 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76,782 |
) |
Restructuring charge |
|
|
(2,169 |
) |
|
|
|
|
|
|
|
|
|
|
(438 |
) |
|
|
|
|
|
|
|
|
|
|
(2,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
26,123 |
|
|
|
48,170 |
|
|
|
14,004 |
|
|
|
15,121 |
|
|
|
|
|
|
|
|
|
|
|
103,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity income |
|
|
|
|
|
|
6,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,731 |
|
Investment in joint venture |
|
|
|
|
|
|
52,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,120 |
|
Expenditures for vessels and equipment (6) |
|
|
427,069 |
|
|
|
28,260 |
|
|
|
181 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
455,578 |
|
Expenditures for dry docking |
|
|
17,487 |
|
|
|
|
|
|
|
|
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
|
|
19,020 |
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shuttle Tanker Segment |
|
|
FPSO Segment |
|
|
FSO Segment |
|
|
Conventional Tanker Segment |
|
|
Towage Segment |
|
|
FAU Segment |
|
|
Total |
|
Revenues |
|
|
569,519 |
|
|
|
231,688 |
|
|
|
62,901 |
|
|
|
37,119 |
|
|
|
|
|
|
|
|
|
|
|
901,227 |
|
Voyage expenses |
|
|
(104,394 |
) |
|
|
|
|
|
|
(400 |
) |
|
|
(5,689 |
) |
|
|
|
|
|
|
|
|
|
|
(110,483 |
) |
Vessel operating expenses |
|
|
(160,957 |
) |
|
|
(111,855 |
) |
|
|
(38,255 |
) |
|
|
(6,509 |
) |
|
|
|
|
|
|
|
|
|
|
(317,576 |
) |
Time-charter hire expense |
|
|
(56,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,989 |
) |
Depreciation and amortization |
|
|
(122,921 |
) |
|
|
(50,905 |
) |
|
|
(9,038 |
) |
|
|
(6,500 |
) |
|
|
|
|
|
|
|
|
|
|
(189,364 |
) |
General and administrative (2) |
|
|
(20,146 |
) |
|
|
(11,208 |
) |
|
|
(1,838 |
) |
|
|
(1,389 |
) |
|
|
|
|
|
|
|
|
|
|
(34,581 |
) |
Write down and loss on sale of vessels |
|
|
(24,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,542 |
) |
Restructuring charge |
|
|
(647 |
) |
|
|
|
|
|
|
|
|
|
|
(468 |
) |
|
|
|
|
|
|
|
|
|
|
(1,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from vessel operations |
|
|
78,923 |
|
|
|
57,720 |
|
|
|
13,370 |
|
|
|
16,564 |
|
|
|
|
|
|
|
|
|
|
|
166,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for vessels and equipment |
|
|
83,491 |
|
|
|
3,055 |
|
|
|
264 |
|
|
|
598 |
|
|
|
|
|
|
|
|
|
|
|
87,408 |
|
Expenditures for dry docking |
|
|
14,977 |
|
|
|
|
|
|
|
4,054 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
19,101 |
|
(1) |
Income from vessel operations for the year ended December 31, 2014 excludes $3.1 million of the Voyageur Spirit FPSO unit
indemnification payments received from Teekay Corporation relating to the production shortfall during the period January 1, 2014 through February 21, 2014 and a further $0.4 million relating to unreimbursed vessel operating expenses
incurred before the unit was declared on-hire as of February 22, 2014. |
Income from vessel
operations for the year ended December 31, 2013 excludes $31.3 million of indemnification payments received from Teekay Corporation relating to production shortfalls for both the Dropdown Predecessor period from April 13, 2013 to
May 1, 2013 and the period during which the unit was owned by the Partnership from May 2, 2013 to December 31, 2013 as the Voyageur Spirit FPSO unit was declared off-hire retroactive to first oil given the delay in achieving
final acceptance from the charterer.
These indemnification payments received from Teekay Corporation have effectively been
treated as a reduction to the purchase price of the Voyageur Spirit (see note 11f).
(2) |
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated
use of corporate resources). |
(3) |
Includes a $1.0 million fee to a third party associated with the acquisition of ALP Maritime Services B.V. (or ALP) and a $1.6 million
business development fee to Teekay Corporation for assistance with the acquisition of ALP, both included in the Partnerships towage segment. Also includes a $2.1 million fee to Teekay Corporation for assistance with securing a charter contract
for the Petrojarl I FPSO unit (or Petrojarl I) included in the Partnerships FPSO segment, which was recognized in general and administrative expenses in the consolidated statement of income for the year ended December 31,
2014 (see note 18a). |
F - 15
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
(4) |
Restructuring recovery for the year ended December 31, 2014 includes a $0.8 million reimbursement received during the second quarter of 2014,
for the reorganization of the Partnerships shuttle tanker marine operations, which was completed during 2013 and a restructuring charge of $0.6 million related to the reflagging of one shuttle tanker which commenced in January 2014 and was
completed in March 2014 (see note 10). |
(5) |
Excludes the vessel and equipment acquired in conjunction with the purchase of Logitel (note 18b) and Petrojarl I (note 11i).
|
(6) |
Excludes the purchase of the Voyageur Spirit (note 11f) and the Itajai (note 11g) FPSO units. |
A reconciliation of total segment assets to total assets presented in the accompanying consolidated balance sheets is as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
Shuttle tanker segment |
|
|
1,936,809 |
|
|
|
2,004,505 |
|
FPSO segment |
|
|
1,267,076 |
|
|
|
1,303,229 |
|
FSO segment |
|
|
133,925 |
|
|
|
102,452 |
|
Conventional tanker segment |
|
|
150,109 |
|
|
|
144,723 |
|
Towage segment |
|
|
61,795 |
|
|
|
|
|
Floating accommodation unit segment |
|
|
62,017 |
|
|
|
|
|
Unallocated: |
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash |
|
|
298,898 |
|
|
|
219,126 |
|
Other assets |
|
|
34,635 |
|
|
|
32,051 |
|
|
|
|
|
|
|
|
|
|
Consolidated total assets |
|
|
3,945,264 |
|
|
|
3,806,086 |
|
|
|
|
|
|
|
|
|
|
6. |
Goodwill, Intangible Assets and In-Process Revenue Contracts |
The carrying amount of goodwill for the shuttle tanker segment was $127.1 million as at December 31, 2014 and 2013. In
2014, 2013 and 2012, the Partnership conducted a goodwill impairment review of its shuttle tanker segment and concluded that no impairment had occurred.
The carrying amount of goodwill for the towage segment was $2.0 million as at December 31, 2014. In 2014, the Partnership
conducted a goodwill impairment review of its towage segment and concluded that no impairment had occurred.
As at December 31, 2014, intangible assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Customer contracts (shuttle tanker segment) |
|
|
124,250 |
|
|
|
(118,230 |
) |
|
|
6,020 |
|
Other intangible assets (FPSO segment) |
|
|
390 |
|
|
|
|
|
|
|
390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,640 |
|
|
|
(118,230 |
) |
|
|
6,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2013, intangible assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
Customer contracts (shuttle tanker segment) |
|
|
124,250 |
|
|
|
(114,204 |
) |
|
|
10,046 |
|
Customer contracts (FPSO segment) |
|
|
353 |
|
|
|
(353 |
) |
|
|
|
|
Other intangible assets (FPSO segment) |
|
|
390 |
|
|
|
|
|
|
|
390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,993 |
|
|
|
(114,557 |
) |
|
|
10,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate amortization expense of intangible assets for the year ended December 31, 2014
was $4.0 million (2013 - $5.1 million, 2012 - $6.0 million), included in depreciation and amortization on the consolidated statements of income. Amortization of intangible assets for the five years subsequent to December 31, 2014 is expected to
be $3.0 million (2015), $2.0 million (2016), $1.0 million (2017) and nil thereafter. Other intangible assets is a trade name which is not amortized.
F - 16
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
c) |
In-Process Revenue Contracts |
As part of the Partnerships acquisition of the Piranema Spirit on November 30, 2011, the
Partnership assumed an FPSO service contract with terms that were less favorable than the then prevailing market terms. As at December 31, 2014, the Partnership has a liability based on the estimated fair value of the contract. The Partnership
is amortizing this liability over the estimated remaining term of the contract on a weighted basis based on the projected revenue to be earned under the contract.
Amortization of in-process revenue contracts for the year ended December 31, 2014 was $12.7 million (2013 - $12.7 million,
2012 - $12.7 million), which is included in revenues on the consolidated statements of income. Amortization for the five years subsequent to December 31, 2014 is expected to be $12.7 million (2015), $12.8 million (2016), $12.7 million (2017),
$9.1 million (2018), $7.8 million (2019) and $33.4 million (thereafter).
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 $ |
|
|
December 31, 2013 $ |
|
Voyage and vessel expenses |
|
|
33,845 |
|
|
|
72,481 |
|
Audit, legal and other general expenses |
|
|
3,344 |
|
|
|
37,473 |
|
Interest including interest rate swaps |
|
|
20,946 |
|
|
|
20,185 |
|
Payroll and benefits |
|
|
8,461 |
|
|
|
6,803 |
|
Income tax payable and other |
|
|
1,417 |
|
|
|
1,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,013 |
|
|
|
138,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 $ |
|
|
December 31, 2013 $ |
|
U.S. Dollar-denominated Revolving Credit Facilities due through 2018 |
|
|
544,969 |
|
|
|
743,494 |
|
Norwegian Kroner Bonds due through 2019 |
|
|
389,157 |
|
|
|
312,947 |
|
U.S. Dollar-denominated Term Loans due through 2018 |
|
|
158,547 |
|
|
|
188,854 |
|
U.S. Dollar-denominated Term Loans due through 2023 |
|
|
850,433 |
|
|
|
949,531 |
|
U.S. Dollar Non-Public Bond due through 2017 |
|
|
26,819 |
|
|
|
|
|
U.S. Dollar Bonds due through 2023 |
|
|
466,098 |
|
|
|
174,150 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,436,023 |
|
|
|
2,368,976 |
|
Less current portion |
|
|
258,014 |
|
|
|
806,009 |
|
|
|
|
|
|
|
|
|
|
Long-term portion |
|
|
2,178,009 |
|
|
|
1,562,967 |
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014, the Partnership had six long-term revolving credit facilities,
which, as at such date, provided for borrowings of up to $644.6 million (2013 - $855.4 million), of which $99.6 million (2013 - $111.9 million) was undrawn. The total amount available under the revolving credit facilities reduces by $143.9
million (2015), $206.6 million (2016), $105.6 million (2017), $139.0 million (2018), and $49.5 million (2019). Four of the revolving credit facilities are guaranteed by the Partnership and certain of its subsidiaries for all outstanding
amounts and contain covenants that require the Partnership to maintain the greater of a minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of at least $75.0 million and
5.0% of the Partnerships total consolidated debt. Two revolving credit facilities are guaranteed by Teekay Corporation and contain covenants that require Teekay Corporation to maintain the greater of a minimum liquidity (cash and cash
equivalents) of at least $50.0 million and 5.0% of Teekay Corporations total consolidated debt which has recourse to Teekay Corporation. The revolving credit facilities are collateralized by first-priority mortgages granted on 21 of the
Partnerships vessels, together with other related security.
In January 2014, the Partnership issued Norwegian Kroner
(or NOK) 1,000 million in senior unsecured bonds that mature in January 2019 in the Norwegian bond market. As of December 31, 2014, the carrying amount of the bonds was $134.2 million. The bonds are listed on the Oslo Stock
Exchange. The interest payments on the bonds are based on NIBOR plus a margin of 4.25%. The Partnership entered into a cross currency swap to swap all interest and principal payments into U.S. dollars, with the interest payments fixed at a rate of
6.28%, and the transfer of the principal amount fixed at $162.2 million upon maturity in exchange for NOK 1,000 million (see note 12).
In January 2013, the Partnership issued NOK 1,300 million in senior unsecured bonds in the Norwegian bond market. The
bonds were issued in two tranches maturing in January 2016 (NOK 500 million) and January 2018 (NOK 800 million). As at December 31, 2014, the carrying amount of the bonds was $174.5 million. The bonds are listed on the Oslo Stock Exchange.
Interest payments on the tranche maturing in 2016 are based on NIBOR plus a margin of 4.00%. Interest payments on the tranche maturing in 2018 are based on NIBOR plus a margin of 4.75%. The Partnership entered into cross currency rate swaps to swap
all interest and principal payments into USD, with interest payments fixed at a rate of 4.80% on the tranche maturing in 2016 and 5.93% on the tranche maturing in 2018 and the transfer of the principal amount fixed at $89.7 million upon maturity in
exchange for NOK 500 million on the tranche maturing in 2016 and fixed at $143.5 million upon maturity in
F - 17
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
exchange for NOK 800 million on the tranche maturing in 2018 (see note 12). As part of this bond issuance, the Partnership repurchased, at a premium, NOK 388.5 million of a then
outstanding NOK 600 million bonds with a maturity date in November 2013. In connection with this repurchase of bonds, the Partnership terminated a similar notional amount of the related cross currency swap (see note 12). The Partnership
recorded a loss in relation to this repurchase of $1.8 million in its consolidated statement of income for the year ended December 31, 2013.
In January 2012, the Partnership issued NOK 600 million in senior unsecured bonds that mature in January 2017 in the
Norwegian bond market. As at December 31, 2014, the carrying amount of the bonds was $80.5 million. The bonds are listed on the Oslo Stock Exchange. The interest payments on the bonds are based on NIBOR plus a margin of 5.75%. The Partnership
entered into a cross currency rate swap to swap all interest and principal payments into U.S. dollars, with the interest payments fixed at a rate of 7.49%, and the transfer of the principal amount fixed at $101.4 million upon maturity in exchange
for NOK 600 million (see note 12).
As at December 31, 2014, four of the Partnerships 50% owned
subsidiaries each had an outstanding term loan, which in the aggregate totaled $158.5 million. The term loans reduce over time with quarterly and semi-annual payments and have varying maturities through 2018. These term loans are collateralized by
first-priority mortgages on the four shuttle tankers to which the loans relate, together with other related security. As at December 31, 2014, the Partnership had guaranteed $43.0 million of these term loans, which represents its 50% share of
the outstanding term loans of three of these 50% owned subsidiaries. The other owner and Teekay Corporation have guaranteed $79.3 million and $36.2 million, respectively.
As at December 31, 2014, the Partnership had term loans outstanding for the shuttle tankers the Amundsen Spirit,
the Nansen Spirit, the Peary Spirit, the Scott Spirit, the Samba Spirit and the Lambada Spirit, for the Suksan Salamander FSO unit and for the Piranema Spirit and the Voyageur Spirit FPSO
units, which in aggregate totaled $850.4 million. For the term loans for the Amundsen Spirit and the Nansen Spirit, one tranche reduces in semi-annual payments while the other tranche correspondingly is drawn up every six months with
final bullet payments of $29.0 million due in 2022 and $29.1 million due in 2023, respectively. The Peary Spirit, the Scott Spirit, the Samba Spirit, the Lambada Spirit, the Suksan Salamander, the Piranema
Spirit and the Voyageur Spirit term loans reduce over time with quarterly or semi-annual payments. These term loans have varying maturities through 2023 and are collateralized by first-priority mortgages on the vessels to which the loans
relate, together with other related security. As at December 31, 2014, the Partnership had guaranteed $529.3 million of these term loans and Teekay Corporation had guaranteed $321.1 million.
In August 2014, the Partnership assumed Logitels obligations under a bond agreement from Sevan Marine ASA (or
Sevan) as part of the Logitel acquisition (see note 18b). The bonds are redeemable at par at any time by Logitel. As of December 31, 2014, the carrying amount of the bond was $26.8 million.
In May 2014, the Partnership issued $300.0 million in five-year senior unsecured bonds that mature in July 2019 in the U.S.
bond market. As at December 31, 2014, the carrying amount of the bonds was $300.0 million. The bonds are listed on the New York Stock Exchange. The interest payments on the bonds are fixed at a rate of 6.0%.
In September 2013 and November 2013, the Partnership issued a total of $174.2 million of ten-year senior unsecured bonds that
mature in December 2023 and that were issued in a U.S. private placement to finance the Bossa Nova Spirit and the Sertanejo Spirit shuttle tankers. The bonds accrue interest at a fixed combined rate of 4.96%. The bonds are
collateralized by first-priority mortgages on the two vessels to which the bonds relate, together with other related security. During 2014, the Partnership made semi-annual repayments on the bonds and as of December 31, 2014, the carrying
amount of the bonds was $166.1 million.
Interest payments on the revolving credit facilities and the term loans are based
on LIBOR plus a margin. At December 31, 2014, and 2013, the margins ranged between 0.30% and 3.25%. The weighted-average effective interest rate on the Partnerships variable rate long-term debt as at December 31, 2014 was 3.5%
(December 31, 2013 2.7%). This rate does not include the effect of the Partnerships interest rate swaps (see note 12).
The aggregate annual long-term debt principal repayments required to be made subsequent to December 31, 2014 are $258.0
million (2015), $359.4 million (2016), $432.7 million (2017), $454.8 million (2018), $580.8 million (2019) and $350.3 million (thereafter).
The Partnership and a subsidiary of Teekay Corporation are borrowers under a loan arrangement and are jointly and severally
liable for the obligations to the lender. The obligations resulting from long-term debt joint and several liability arrangements are measured at the sum of the amount the Partnership agreed to pay, on the basis of its arrangement with the
co-obligor, and any additional amount the Partnership expects to pay on behalf of the co-obligor. As of December 31, 2014, this loan arrangement had an outstanding balance of $89.3 million, of which $54.3 million was the Partnerships
obligation. Teekay Corporation has indemnified the Partnership in respect of any losses and expenses arising from any breach by the co-obligor of the terms and conditions of the loan facility.
Obligations under the Partnerships credit facilities are secured by certain vessels, and if the Partnership is unable to
repay debt under the credit facilities, the lenders could seek to foreclose on those assets. The Partnership has two revolving credit facilities that require the Partnership to maintain vessel values to drawn principal balance ratio of a minimum of
105% and 120%, respectively. As at December 31, 2014, these ratios were 151.0%. and 137.0%, respectively. The vessel values used in these ratios are the appraised values prepared by the Partnership based on second hand sale and purchase market
data. Changes in the conventional tanker market could negatively affect these ratios.
As at December 31, 2014 the
Partnership and Teekay Corporation were in compliance with all covenants in the credit facilities and long-term debt.
F - 18
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Charters-out
Time charters and bareboat charters of the Partnerships vessels to customers are accounted for as operating leases. The
cost, accumulated depreciation and carrying amount of the vessels accounted for as operating leases at December 31, 2014 were $3.4 billion, $0.9 billion and $2.5 billion, respectively. As at December 31, 2014, minimum scheduled future
revenues under these time charters and bareboat charters to be received by the Partnership, then in place were approximately $3.6 billion, comprised of $636.5 million (2015), $606.8 million (2016), $633.7 million (2017), $470.1 million (2018),
$371.8 million (2019) and $894.6 million (thereafter).
The minimum scheduled future revenues should not be construed
to reflect total charter hire revenues for any of the years. Minimum scheduled future revenues do not include revenue generated from new contracts entered into after December 31, 2014, revenue from unexercised option periods of contracts that
existed on December 31, 2014, or variable or contingent revenues. In addition, minimum scheduled future revenues presented in this paragraph have been reduced by estimated off-hire time for period maintenance. The amounts may vary given
unscheduled future events such as vessel maintenance.
Direct Financing Lease
Leasing of the Falcon Spirit FSO unit is accounted for as a direct financing lease. As at December 31, 2014, the
minimum lease payments receivable under the direct financing lease approximated $21.2 million (2013 - $29.9 million), including unearned income of $7.3 million (2013 - $11.8 million). The estimated unguaranteed residual value of the leased vessel is
$8.5 million. As at December 31, 2014, future scheduled payments under the direct financing lease to be received by the Partnership were approximately $21.2 million, comprised of $8.6 million (2015), $8.8 million (2016) and $3.8
million (2017).
Charters-in
As at December 31, 2014, minimum commitments owing by the Partnership under vessel operating leases by which the
Partnership charters-in vessels were approximately $30.0 million, comprised of $18.4 million (2015) and $11.6 million (2016). The Partnership recognizes the expense from these charters, which is included in time-charter hire expense,
on a straight-line basis over the firm period of the charters.
During the year ended December 31, 2014, the Partnership recorded a restructuring charge reimbursement
of $0.8 million for the reorganization of the Partnerships shuttle tanker marine operations, which was completed during 2013. During the year ended December 31, 2014, the Partnership incurred $0.6 million of restructuring charges related
to the reflagging of one shuttle tanker which restructuring commenced in January 2014 and was completed in March 2014.
During the years ended December 31, 2013 and 2012, the Partnership recognized restructuring charges of $1.6 million and
$0.6 million, respectively, relating to the reorganization of the Partnerships shuttle tanker marine operations and restructuring charges of $0.4 million and $0.5 million, respectively, relating to the reorganization of the Partnerships
conventional tanker marine operations. The purpose of the restructuring was to create better alignment with its marine operations resulting in a lower cost organization going forward. Both reorganizations were completed in 2013. Under these plans,
the Partnership recorded restructuring charges in total of $1.4 million and $0.9 million, respectively, since these plans began in 2012.
During the year ended December 31, 2013, the Partnership incurred $0.6 million of restructuring charges related to the
reflagging of one shuttle tanker which commenced in September 2013 and was completed in October 2013.
As of
December 31, 2014 and 2013, restructuring liabilities of $nil and $0.7 million, respectively, were recorded in accrued liabilities on the consolidated balance sheets.
11. |
Related Party Transactions |
|
a) |
The Partnership has entered into an omnibus agreement with Teekay Corporation, Teekay LNG Partners L.P., the general partner and others governing,
among other things, when the Partnership, Teekay Corporation and Teekay LNG Partners L.P. may compete with each other and certain rights of first offering on liquefied natural gas carriers, oil tankers, shuttle tankers, FSO units and FPSO units.
|
|
b) |
On October 1, 2012, the Partnership acquired from Teekay Corporation the VOC equipment on board the Amundsen Spirit, the Nansen
Spirit, the Peary Spirit and the Scott Spirit for $12.8 million. On December 31, 2012, the Partnership recognized this liability in due to affiliates. The purchase price was financed with cash. The excess of $2.8 million of
the purchase price over the net carrying value of the equipment is accounted for as an equity distribution to Teekay Corporation. |
|
c) |
In June 2011, the Partnership entered into a long-term contract with a subsidiary of BG Group plc (or BG) to provide shuttle tanker services
in Brazil. The contract with BG is serviced with four newbuilding shuttle tankers (or the BG Shuttle Tankers) under ten-year time charter contracts. The Partnership took delivery of the four BG Shuttle Tankers in the second half of 2013. The
Partnership received shipbuilding and site supervision services from certain subsidiaries of Teekay Corporation relating to the BG Shuttle Tankers. These costs were capitalized and are included in vessels and equipment. Total shipbuilding and site
supervision costs paid to Teekay Corporation subsidiaries for this project amounted to $14.2 million. |
F - 19
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
d) |
In May 2013, the Partnership entered into a ten-year charter contract, plus extension options, with Salamander Energy plc (or Salamander) to
supply a FSO unit in Asia. The Partnership converted its 1993-built shuttle tanker, the Navion Clipper, into an FSO unit, which commenced its charter contract with Salamander in August 2014. The Partnership received project management and
execution services from certain subsidiaries of Teekay Corporation relating to the FSO conversion. These costs were capitalized and are included in vessels and equipment. Project management and execution costs paid to Teekay Corporation subsidiaries
amounted to $3.3 million as of December 31 2014. |
|
e) |
In May 2013, the Partnership entered into an agreement with Statoil, on behalf of the field license partners, to provide an 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 that will be converted from the Randgrid shuttle tanker, which the Partnership currently owns through a 67% owned subsidiary and which the
Partnership intends to acquire full ownership prior to its conversion. The Partnership received project management and engineering services from certain subsidiaries of Teekay Corporation relating to this FSO unit conversion. These costs are
capitalized and included as part of advances on newbuilding contracts and will be reclassified to vessels and equipment upon completion of the conversion in early-2017. Project management and engineering costs paid to Teekay Corporation subsidiaries
amounted to $2.2 million as of December 31, 2014. |
|
f) |
On May 2, 2013, the Partnership acquired from Teekay Corporation its 100% interest in Voyageur LLC, which owns the Voyageur Spirit FPSO
unit, which operates on the Huntington Field in the North Sea under a five-year contract, plus up to 10 one-year extension options, with E.ON, for an original purchase price of $540.0 million. Due to a defect encountered in one of its two gas
compressors, the FPSO unit was unable to achieve final acceptance by E.ON within the allowable timeframe, resulting in the FPSO unit being declared off-hire by the charterer retroactive to April 13, 2013. |
On September 30, 2013, the Partnership entered into an interim agreement with E.ON whereby the Partnership was compensated
for production beginning August 27, 2013 until the receipt of final acceptance by E.ON. Until receipt of final acceptance, Teekay Corporation agreed to indemnify the Partnership for certain production shortfalls and unreimbursed vessel
operating expenses. For the period from April 13, 2013 to December 31, 2013, Teekay Corporation indemnified the Partnership a total of $34.9 million for production shortfalls and unreimbursed repair costs. During 2014, Teekay Corporation
indemnified the Partnership for $3.5 million for production shortfalls and unrecovered repair costs to address the compressor issues, and paid a further $2.7 million in late-2014 relating to a final settlement of pre-acquisition capital expenditures
for the Voyageur Spirit FPSO unit. On April 4, 2014, the Partnership received the certificate of final acceptance from the charterer, which declared the unit on-hire retroactive to February 22, 2014.
Amounts paid as indemnification from Teekay Corporation to the Partnership were effectively treated as a reduction in the
purchase price paid by the Partnership for the FPSO unit. The original purchase price of $540.0 million has effectively been reduced to $503.1 million ($273.1 million net of assumed debt of $230.0 million) to reflect total indemnification payments
from Teekay Corporation of $41.1 million, partially offset by the excess value of $4.3 million relating to the 1.4 million common units issued as part of the purchase price to Teekay Corporation on the date of closing of the transaction in May
2013 compared to the value of the common units at the date Teekay Corporation offered to sell the FPSO unit to the Partnership. The excess of the purchase price (net of assumed debt) over the book value of the net assets of $201.8 million has been
accounted for as an equity distribution to Teekay Corporation of $71.4 million.
|
g) |
On June 10, 2013, the Partnership acquired Teekay Corporations 50% interest in OOG-TKP FPSO GmbH & Co KG, a joint venture with
Odebrecht Oil & Gas S.A (or Odebrecht), which owns the Cidade de Itajai (or Itajai ) FPSO unit, for a purchase price of $53.8 million, which was paid in cash. The Partnerships investment in the Itajai FPSO unit is
accounted for using the equity method. The Itajai FPSO unit achieved first oil in February 2013, at which time the unit commenced operations under a nine-year, fixed-rate time-charter contract with Petroleo Brasileiro SA (Petrobras),
with six additional one-year extension options exercisable by Petrobras. The excess of the purchase price over Teekay Corporations carrying value of its 50% interest in the Itajai FPSO has been accounted for as an equity distribution to
Teekay Corporation of $6.6 million. The Partnerships investment in the Itajai FPSO unit is accounted for using the equity method. |
The purchase price was based on an estimate of the fully built-up cost of the Itajai FPSO unit, including certain
outstanding contractual items. During the second quarter of 2014, the joint venture received in connection with the resolution of these contractual items, an aggregate of $6.1 million in reimbursements from the charterer and insurer, which was
originally deducted from the Partnerships purchase price of the Itajai FPSO unit. As a result of these reimbursements, this amount was remitted to Teekay Corporation.
|
h) |
The long-term bareboat contracts relating to two conventional tankers of the Partnership with a joint venture in which Teekay Corporation has a 50%
interest were novated under the same terms to a subsidiary of Teekay Corporation in January 2014 and March 2014, respectively. The excess of the contractual rates over the market rates at the time of the novation was $1.0 million for 2014, and is
accounted for as an equity contribution from Teekay Corporation. |
|
i) |
In December 2014, the Partnership entered into an agreement with a consortium led by Queiroz Galvão Exploração e
Produção SA (or QGEP) to provide an FPSO unit for the Atlanta field located in the Santos Basin offshore Brazil. In connection with the contract with QGEP, the Partnership acquired the Petrojarl I FPSO from Teekay
Corporation for a purchase price of $57 million. The purchase price was financed by means of an intercompany loan payable to a subsidiary of Teekay Corporation (see note 11k). The Petrojarl I is currently undergoing upgrades at the Damen
Shipyard Groups DSR Schiedam Shipyard in the Netherlands for an estimated cost of approximately $232 million, which includes the cost of acquiring the Petrojarl I (note 14g). The excess of the purchase price over Teekay
Corporations carrying value of the Petrojarl I FPSO unit has been accounted for as an equity distribution to Teekay Corporation of $12.4 million. |
|
j) |
During 2014, four conventional tankers, two shuttle tankers and three FSO units of the Partnership were employed on long-term time-charter-out
contracts with subsidiaries of Teekay Corporation. In 2013 and 2012, the Partnership terminated the long-term time-charter-out contracts under which three of its conventional tankers were employed with a subsidiary of Teekay Corporation. The
Partnership received early termination fees from Teekay Corporation of $11.3 million and $14.7 million, respectively, which is recorded in net (loss) income from discontinued operations on the consolidated statements of income (see note 19).
|
F - 20
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
k) |
Teekay Corporation and its wholly-owned subsidiaries provide substantially all of the Partnerships commercial, technical, crew training,
strategic, business development and administrative service needs. In addition, the Partnership reimburses the general partner for expenses incurred by the general partner that are necessary or appropriate for the conduct of the Partnerships
business. Such related party transactions were as follows for the periods indicated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenues(1) |
|
|
68,172 |
|
|
|
71,905 |
|
|
|
64,166 |
|
Vessel operating expenses(2) |
|
|
(39,237 |
) |
|
|
(39,820 |
) |
|
|
(44,024 |
) |
General and administrative(3)(4) |
|
|
(42,396 |
) |
|
|
(29,528 |
) |
|
|
(21,184 |
) |
Interest income(5) |
|
|
|
|
|
|
1,217 |
|
|
|
|
|
Interest expense(6) |
|
|
(933 |
) |
|
|
(818 |
) |
|
|
(568 |
) |
Other expense(7) |
|
|
|
|
|
|
(319 |
) |
|
|
(657 |
) |
Net income from related party transactions |
|
|
|
|
|
|
|
|
|
|
|
|
from discontinued operations(8) |
|
|
|
|
|
|
19,255 |
|
|
|
59,872 |
|
(1) |
Includes revenue from long-term time-charter-out contracts and short-term time-charter-out contracts with subsidiaries or affiliates of Teekay
Corporation, including management fees from ship management services provided by the Partnership to a subsidiary of Teekay Corporation. |
(2) |
Includes ship management and crew training services provided by Teekay Corporation. |
(3) |
Includes commercial, technical, strategic, business development and administrative management fees charged by Teekay Corporation and reimbursements
to Teekay Corporation and our general partner for costs incurred on the Partnerships behalf. |
(4) |
Includes business development fees of $1.6 million and $2.1 million to Teekay Corporation in connection with the acquisition of ALP and the
Petrojarl I, respectively, during the year ended December 31, 2014, and a $1.0 million business development fee to Teekay Corporation in connection with the acquisition of the 2010-built HiLoad Dynamic Positioning unit from Remora AS
during the year ended December 31, 2013. |
(5) |
Interest income for the year ended December 31, 2013 relates to the interest received from Teekay Corporation and our general partner on a
$150 million partial prepayment for the Voyageur Spirit. The Partnership received interest at a rate of LIBOR plus a margin of 4.25% on the prepaid funds to Teekay Corporation from February 26, 2013 until the Partnership acquired the
FPSO unit on May 2, 2013. |
(6) |
Includes a guarantee fee related to the final bullet payment of the Piranema Spirit FPSO debt facility guaranteed by Teekay Corporation and
interest expense incurred on due to affiliates balances. |
(7) |
Unrealized loss from the change in fair value of the Partnerships contingent consideration liability relating to the acquisition of the
Scott Spirit (see note 4a). |
(8) |
Related party transactions relating to six conventional tankers determined to be discontinued operations. This includes revenue from long-term
time-charter-out contracts with subsidiaries or affiliates of Teekay Corporation, including the early termination fees described above; crew training fees charged by Teekay Corporation accounted for as vessel operating expenses; and commercial,
technical, strategic and business development management fees charged by Teekay Corporation. |
|
l) |
At December 31, 2014, due from affiliates totaled $44.2 million (December 31, 2013 - $15.2 million) and due to affiliates totaled $108.9
million (December 31, 2013 - $121.9 million). Due to and from affiliates are generally non-interest bearing and unsecured and are expected to be settled within the next fiscal year in the normal course of operations. Included in the due to
affiliates balance is a loan from Teekay Corporation of $51 million used to finance the purchase of the Petrojarl I FPSO unit (see note 11i), which is interest bearing at 6.5% and is expected to be settled during 2015. |
12. |
Derivative Instruments |
The Partnership uses derivatives to manage certain risks in accordance with its overall risk management
policies.
Foreign Exchange Risk
The Partnership economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign
currency forward contracts. The Partnership has not designated, for accounting purposes, any of the foreign currency forward contracts held during the years ended December 31, 2014, 2013 and 2012, as cash flow hedges.
As at December 31, 2014, the Partnership was committed to the following foreign currency forward contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Amount
in Foreign |
|
|
Fair Value / Carrying Amount of Asset/(Liability) |
|
|
Average |
|
|
Expected Maturity |
|
|
Currency |
|
|
(in thousands of U.S. Dollars) |
|
|
Forward |
|
|
2015 |
|
|
2016 |
|
|
|
(thousands) |
|
|
Non-hedge |
|
|
Rate(1) |
|
|
(in thousands of U.S. Dollars) |
|
Norwegian Kroner |
|
|
558,500 |
|
|
|
(11,268 |
) |
|
|
6.50 |
|
|
|
55,193 |
|
|
|
30,807 |
|
(1) |
Average forward rate represents the contracted amount of foreign currency one U.S. Dollar will buy. |
F - 21
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
The Partnership enters into cross currency swaps and pursuant to these swaps
the Partnership receives the principal amount in NOK on the maturity date of the swap, in exchange for payment of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR
plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and principal at maturity of the Partnerships Norwegian
Kroner Bonds due from 2016 through 2019. In addition, the cross currency swaps due from 2016 through 2019 economically hedge the interest rate exposure on the Norwegian Kroner Bonds due from 2016 through 2019. The Partnership has not designated, for
accounting purposes, these cross currency swaps as cash flow hedges of its Norwegian Kroner Bonds due from 2016 through 2019. As at December 31, 2014, the Partnership was committed to the following cross currency swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
Principal |
|
|
Floating Rate Receivable |
|
|
|
|
|
Fair Value / |
|
|
Remaining Term (years) |
|
Amount NOK |
|
|
Amount USD |
|
|
Reference Rate |
|
|
Margin |
|
|
Fixed Rate Payable |
|
|
Asset (Liability) |
|
|
|
600,000 |
|
|
|
101,351 |
|
|
|
NIBOR |
|
|
|
5.75 |
% |
|
|
7.49 |
% |
|
|
(24,731 |
) |
|
|
2.1 |
|
|
500,000 |
|
|
|
89,710 |
|
|
|
NIBOR |
|
|
|
4.00 |
% |
|
|
4.80 |
% |
|
|
(23,843 |
) |
|
|
1.1 |
|
|
800,000 |
|
|
|
143,536 |
|
|
|
NIBOR |
|
|
|
4.75 |
% |
|
|
5.93 |
% |
|
|
(38,898 |
) |
|
|
3.1 |
|
|
1,000,000 |
|
|
|
162,200 |
|
|
|
NIBOR |
|
|
|
4.25 |
% |
|
|
6.28 |
% |
|
|
(33,031 |
) |
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Risk
The Partnership enters into interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest
to reduce the Partnerships exposure to interest rate variability on its outstanding floating-rate debt. The Partnership has not designated, for accounting purposes, its interest rate swaps as cash flow hedges of its U.S. Dollar LIBOR
denominated borrowings.
As at December 31, 2014, the Partnership was committed to the following interest rate swap
agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Index |
|
|
Notional Amount $ |
|
|
Fair Value / Carrying Amount of Assets (Liability) $ |
|
|
Weighted- Average Remaining Term (years)
|
|
|
Fixed Interest Rate (%)(1) |
|
U.S. Dollar-denominated interest rate swaps(2) |
|
|
LIBOR |
|
|
|
800,000 |
|
|
|
(161,830 |
) |
|
|
8.1 |
|
|
|
4.7 |
|
U.S. Dollar-denominated interest rate swaps(3) |
|
|
LIBOR |
|
|
|
772,831 |
|
|
|
(46,023 |
) |
|
|
5.7 |
|
|
|
2.5 |
|
U.S. Dollar-denominated interest rate swaps(4) |
|
|
LIBOR |
|
|
|
180,000 |
|
|
|
(8,635 |
) |
|
|
0.1 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,752,831 |
|
|
|
(216,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes the margin the Partnership pays on its variable-rate debt, which as at December 31, 2014, ranged from 0.30% and 3.25%.
|
(2) |
Notional amount remains constant over the term of the swap. |
(3) |
Principal amount reduces quarterly or semi-annually. |
(4) |
The interest rate swap is being used to economically hedge expected interest payments on new debt that is planned to be outstanding from 2016 to
2028. The interest rate swap is subject to mandatory early termination in early-2015 whereby the swap will be settled based on its fair value at that time. |
As at December 31, 2014, the Partnership had multiple interest rate swaps and cross currency swaps governed by the same
master agreement. Each of these master agreements provides for the net settlement of all swaps subject to that master agreement through a single payment in the event of default or termination of any one swap. The fair value of these interest rate
swaps are presented on a gross basis in the Partnerships consolidated balance sheets. As at December 31, 2014, these interest rate swaps and cross currency swaps had an aggregate fair value liability amount of $303.8 million. As at
December 31, 2014, the Partnership had $46.8 million on deposit with the relevant counterparties as security for swap liabilities under certain master agreements. The deposit is presented in restricted cash and restricted cash -long-term on the
consolidated balance sheet.
F - 22
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Tabular disclosure
The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on
the Partnerships balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable |
|
|
Current portion of derivative assets |
|
|
Derivative assets |
|
|
Accrued liabilities |
|
|
Current portion of derivative liabilities |
|
|
Derivative liabilities |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
As at December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,490 |
) |
|
|
(2,778 |
) |
Cross currency swap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,105 |
) |
|
|
(6,496 |
) |
|
|
(112,902 |
) |
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
4,660 |
|
|
|
(8,742 |
) |
|
|
(70,332 |
) |
|
|
(142,074 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,660 |
|
|
|
(9,847 |
) |
|
|
(85,318 |
) |
|
|
(257,754 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
213 |
|
|
|
4 |
|
|
|
|
|
|
|
(976 |
) |
|
|
(83 |
) |
Cross currency swap |
|
|
12 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
(311 |
) |
|
|
(25,421 |
) |
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
10,319 |
|
|
|
(9,174 |
) |
|
|
(46,657 |
) |
|
|
(95,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
500 |
|
|
|
10,323 |
|
|
|
(9,174 |
) |
|
|
(47,944 |
) |
|
|
(121,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and unrealized (losses) gains of interest rate swaps and foreign currency forward
contracts that are not designated for accounting purposes as cash flow hedges, are recognized in earnings and reported in realized and unrealized (losses) gains on derivative instruments in the consolidated statements of income. The effect of the
(losses) gains on these derivatives on the consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 |
|
|
Year ended December 31, 2013 |
|
|
Year ended December 31, 2012 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Realized (losses) gains relating to: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap termination |
|
|
|
|
|
|
(31,798 |
) |
|
|
|
|
Interest rate swaps |
|
|
(55,588 |
) |
|
|
(63,050 |
) |
|
|
(58,596 |
) |
Foreign currency forward contracts |
|
|
(1,912 |
) |
|
|
(824 |
) |
|
|
2,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,500 |
) |
|
|
(95,672 |
) |
|
|
(55,627 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains relating to: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
(75,777 |
) |
|
|
133,488 |
|
|
|
26,100 |
|
Foreign currency forward contracts |
|
|
(10,426 |
) |
|
|
(2,996 |
) |
|
|
3,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,203 |
) |
|
|
130,492 |
|
|
|
29,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized and unrealized (losses) gains on derivative instruments |
|
|
(143,703 |
) |
|
|
34,820 |
|
|
|
(26,349 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and unrealized (losses) gains of the cross currency swaps are recognized in earnings
and reported, including the impact of the partial termination of a cross currency swap in connection with the repurchase of NOK bonds (see note 8), in foreign currency exchange loss in the consolidated statements of income. The effect of the (loss)
gain on cross currency swaps on the consolidated statements of income for the years ended 2014, 2013 and 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 |
|
|
Year ended December 31, 2013 |
|
|
Year ended December 31, 2012 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Realized gain on partial termination of cross-currency swap |
|
|
|
|
|
|
6,800 |
|
|
|
|
|
Realized (losses) gains |
|
|
(1,992 |
) |
|
|
1,563 |
|
|
|
2,992 |
|
Unrealized (losses) gains |
|
|
(93,953 |
) |
|
|
(38,596 |
) |
|
|
10,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized and unrealized (losses) gains on cross currency swaps |
|
|
(95,945 |
) |
|
|
(30,233 |
) |
|
|
13,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 23
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
The Partnership is exposed to credit loss in the event of non-performance by
the counterparties, all of which are financial institutions, to the foreign currency forward contracts and the interest rate swap agreements. In order to minimize counterparty risk, the Partnership only enters into derivative transactions with
counterparties that are rated A- or better by Standard & Poors or A3 or better by Moodys at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different
counterparties to reduce concentration risk.
The significant components of the Partnerships deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Tax losses carried forward(1) |
|
|
146,851 |
|
|
|
182,085 |
|
Other |
|
|
3,726 |
|
|
|
7,296 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets: |
|
|
150,577 |
|
|
|
189,381 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Vessels and equipment |
|
|
12,514 |
|
|
|
19,555 |
|
Long-term debt |
|
|
2,295 |
|
|
|
22,008 |
|
Other |
|
|
1,371 |
|
|
|
3,234 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
16,180 |
|
|
|
44,797 |
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
134,397 |
|
|
|
144,584 |
|
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(128,438 |
) |
|
|
(136,730 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets(2) |
|
|
5,959 |
|
|
|
7,854 |
|
|
|
|
|
|
|
|
|
|
Disclosed in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset |
|
|
5,959 |
|
|
|
7,854 |
|
|
|
|
|
|
|
|
|
|
(1) |
As at December 31, 2014, the income tax net operating losses carried forward of $559 million ($689.1 million December 31, 2013)
are available to offset future taxable income in the applicable jurisdictions, and can be carried forward indefinitely. |
(2) |
The change in the net deferred tax assets is related to the change in temporary differences, foreign exchange gains and the utilization of income
tax net operating losses carried forward. |
The components of the provision for income taxes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 |
|
|
Year ended December 31, 2013 |
|
|
Year ended December 31, 2012 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Current |
|
|
(1,290 |
) |
|
|
(75 |
) |
|
|
1,669 |
|
Deferred |
|
|
(889 |
) |
|
|
(2,150 |
) |
|
|
8,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) recovery |
|
|
(2,179 |
) |
|
|
(2,225 |
) |
|
|
10,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Partnership operates in countries that have differing tax laws and rates. Consequently a
consolidated weighted average tax rate will vary from year to year according to the source of earnings or losses by country and the change in applicable tax rates. Reconciliations of the tax charge related to the current year at the applicable
statutory income tax rates and the actual tax charge related to the current year are as follows:
F - 24
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
|
Year ended December 31, 2013 $ |
|
|
Year ended December 31, 2012 $ |
|
Net income before taxes |
|
|
19,835 |
|
|
|
78,782 |
|
|
|
94,970 |
|
Net (loss) income not subject to taxes |
|
|
(72,469 |
) |
|
|
41,100 |
|
|
|
77,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income subject to taxes |
|
|
92,304 |
|
|
|
37,682 |
|
|
|
17,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At applicable statutory tax rates |
|
|
12,484 |
|
|
|
2,559 |
|
|
|
(6,292 |
) |
Permanent differences |
|
|
(4,677 |
) |
|
|
(3,619 |
) |
|
|
(12,245 |
) |
Adjustments related to currency differences |
|
|
3,349 |
|
|
|
(14,231 |
) |
|
|
6,437 |
|
Valuation allowance |
|
|
(8,977 |
) |
|
|
17,516 |
|
|
|
1,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense (recovery) related to current year |
|
|
2,179 |
|
|
|
2,225 |
|
|
|
(10,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a tabular reconciliation of the Partnerships total amount of
unrecognized tax benefits at the beginning and end of 2014, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
|
Year ended December 31, 2013 $ |
|
|
Year ended December 31, 2012 $ |
|
Balance of unrecognized tax benefits as at beginning of the year |
|
|
7,037 |
|
|
|
3,692 |
|
|
|
6,231 |
|
Decreases for positions related to prior years |
|
|
(258 |
) |
|
|
(336 |
) |
|
|
(2,539 |
) |
Increase for positions attributable to the Dropdown Predecessor |
|
|
|
|
|
|
3,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance of unrecognized tax benefits as at end of the year |
|
|
6,779 |
|
|
|
7,037 |
|
|
|
3,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Partnership does not presently anticipate such uncertain tax positions will significantly
increase or decrease in the next 12 months; however, actual developments could differ from those currently expected. The tax years 2010 through 2014 remain open to examination by some of the taxing jurisdictions in which the Partnership is subject
to tax.
The interest and penalties on unrecognized tax benefits included in the tabular reconciliation above were not
material.
14. |
Commitments and Contingencies |
|
a) |
On November 13, 2006, one of the Partnerships shuttle tankers, the Navion Hispania, collided with the Njord Bravo, an FSO
unit, while preparing to load an oil cargo from the Njord Bravo. The Njord Bravo services the Njord field, which is operated by Statoil Petroleum AS (or Statoil) and is located off the Norwegian coast. At the time of the
incident, Statoil was chartering the Navion Hispania from the Partnership. The Navion Hispania and the Njord Bravo both incurred damage as a result of the collision. In November 2007, Navion Offshore Loading AS (or NOL)
and Teekay Navion Offshore Loading Pte Ltd. (or TNOL), subsidiaries of the Partnership, and Teekay Shipping Norway AS (or TSN), a subsidiary of Teekay Corporation, were named as co-defendants in a legal action filed by Norwegian Hull
Club (the hull and machinery insurers of the Njord Bravo), several other insurance underwriters and various licensees in the Njord field. |
Following a lower court ruling, the appellate court in June 2013 held that NOL, TNOL and TSN were jointly and severally
responsible towards the plaintiffs for all the losses as a result of the collision, plus interests accrued on the amount of damages. In addition, Statoil was held not to be required to indemnify NOL, TNOL and TSN for the losses. NOL, TNOL and TSN
were also held liable for legal costs associated with court proceedings. The Partnership and Teekay Corporation maintain protection and indemnity insurance for damages to the Navion Hispania and insurance for collision-related costs and
claims. Thus, the Partnership recognized total liability of NOK 216,400,000 (approximately $29.0 million) of damages and legal costs and a receivable of NOK 216,400,000 (approximately $29.0 million) as at December 31, 2013.
In 2014, the Partnership and the insurer entered into a settlement agreement with the plaintiffs, which reduced the
Partnerships liability and related receivable to NOK 117,500,000 (approximately $15.8 million). The insurer paid the settlement amount to the plaintiffs during November 2014. Thus, there is no liability or receivable recorded on the
Partnerships consolidated balance sheets as at December 31, 2014.
|
b) |
During 2010, an unrelated party contributed a 1995-built shuttle tanker, the Randgrid, to a subsidiary of the Partnership for a 33% equity
interest in the subsidiary. The non-controlling interest owner in the subsidiary holds a put option which, if exercised, would obligate the Partnership to purchase the non-controlling interest owners 33% share in the entity for cash in
accordance with a defined formula. The redeemable non-controlling interest is subject to remeasurement if the formulaic redemption amount exceeds the carrying value. No remeasurement was required as at December 31, 2014. |
F - 25
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
c) |
In May 2013, the Partnership entered into an agreement with Statoil, on behalf of the field license partners, to provide an 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 that will be converted from the Randgrid shuttle tanker, which the Partnership currently owns through a 67%-owned subsidiary and of which the
Partnership intends to acquire full ownership prior to its conversion. The FSO conversion project is expected to cost approximately $276 million, including amounts reimbursable upon delivery of the unit relating to installation and mobilization, and
the cost of acquiring the remaining 33% ownership interest in the Randgrid shuttle tanker. As at December 31, 2014, payments made towards this commitment totaled $53.4 million and the remaining payments required to be made are $120.1
million (2015), $100.9 million (2016) and $1.7 million (2017). Following scheduled completion of the conversion in early-2017, the newly converted FSO unit will commence operations under a three-year time-charter contract to Statoil, which
includes 12 additional one-year extension options. |
|
d) |
In March 2014, the Partnership acquired 100% of the shares of ALP, a Netherlands-based provider of long-haul ocean towage and offshore installation
services to the global offshore oil and gas industry. Concurrently with this transaction, the Partnership and ALP entered into an agreement with Niigata Shipbuilding & Repair of Japan for the construction of four state-of-the-art SX-157
Ulstein Design ultra-long distance towing and anchor handling vessel newbuildings. These vessels will be equipped with dynamic positioning capability and are scheduled for delivery in 2016. The Partnership has agreed to acquire these newbuildings
for a total cost of approximately $258 million. As at December 31, 2014, payments made towards these commitments totaled $59.7 million and the remaining payments required to be made under these newbuilding contracts are $77.9 million
(2015) and $120.8 million (2016). The Partnership intends to continue financing the newbuilding installments through its existing liquidity and expects to secure long-term debt financing for these vessels prior to their scheduled deliveries in
2016. |
In October 2014, the Partnership, through its wholly-owned subsidiary ALP, agreed to acquire six
on-the-water, long-distance towing and anchor handling vessels for approximately $220 million. The vessels were built between 2006 and 2010 and are all equipped with dynamic positioning capabilities. The Partnership took delivery of three vessels in
early-2015 and expects to take delivery of the remaining three vessels during the second quarter of 2015.
|
e) |
In August 2014, the Partnership acquired 100% of the outstanding shares of Logitel Offshore Holding AS, a Norway-based company focused on the
high-end floating accommodation market. Concurrently with this transaction, the Partnership acquired three FAU newbuildings ordered from COSCO (Nantong) Shipyard (COSCO) in China for a total cost of approximately $558 million, including
estimated site supervision costs and license fees to be paid to Sevan to allow for use of its cylindrical hull design in these FAUs. As at December 31, 2014, payments made towards these commitments totaled $26.8 million and the remaining
payments required to be made under these newbuilding contracts are $170.5 million (2015), $348.4 million (2016), $10.1 million (2017) and $1.9 million (2018). The Partnership took delivery of one FAU in February 2015 and expects to take
delivery of the remaining two units in 2016. The Partnership intends to finance the initial newbuilding payments through its existing liquidity and expects to secure long-term debt financing for the units prior to their scheduled deliveries.
|
|
f) |
In October 2014, the Partnership sold a 1995-built shuttle tanker, the Navion Norvegia, to a 50/50 joint venture with Odebrecht. The vessel
is committed to a new FPSO conversion for the Libra field located in the Santos Basin offshore Brazil. The conversion project will be completed at Sembcorp Marines Jurong Shipyard in Singapore and the FPSO unit is scheduled to commence
operations in early-2017 under a 12-year fixed-rate contract with Petrobras. The FPSO conversion is expected to cost approximately $1.0 billion. As at December 31, 2014, payments made by the joint venture towards these commitments totaled $35.0
million and the remaining payments required to be made by the joint venture are $398.6 million (2015) and $552.0 million (2016). The Partnership intends to finance its share of the conversion through its existing liquidity and through long-term
debt financing within the joint venture. The joint venture secured a $248 million short-term loan in late-2014 and expects to secure additional long-term debt financing for the FPSO unit prior to its scheduled delivery. |
|
g) |
In December 2014, the Partnership acquired the Petrojarl I FPSO unit from Teekay Corporation for $57 million (see note 11i). The
Petrojarl I is undergoing upgrades at the Damen Shipyard Groups DSR Schiedam Shipyard in the Netherlands with an estimated cost of approximately $232 million, which includes the cost of acquiring the Petrojarl I. The FPSO is
scheduled to commence operations in the first half of 2016 under a five-year fixed-rate charter contract with QGEP. As at December 31, 2014, payments made towards these commitments, excluding the acquisition of the Petrojarl I FPSO unit
from Teekay Corporation, totaled $1.4 million and the remaining payments required to be made are $157.4 million (2015) and $16.3 million (2016). The Partnership intends to finance the upgrade payments through its existing liquidity, and an
existing loan from Teekay Corporation, and expects to secure long-term debt financing for the FPSO unit prior to its scheduled delivery. |
15. |
Supplemental Cash Flow Information |
|
a) |
The changes in non-cash working capital items related to operating activities for the years ended December 31, 2014, 2013 and 2012 are as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
|
Year ended December 31, 2013 $ |
|
|
Year ended December 31, 2012 $ |
|
Accounts receivable |
|
|
73,020 |
|
|
|
(59,003 |
) |
|
|
(8,750 |
) |
Prepaid expenses and other assets |
|
|
1,899 |
|
|
|
(2,884 |
) |
|
|
6,075 |
|
Accounts payable and accrued liabilities |
|
|
(87,597 |
) |
|
|
46,266 |
|
|
|
35 |
|
Advances from (to) affiliate |
|
|
(98,806 |
) |
|
|
67,620 |
|
|
|
(14,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(111,484 |
) |
|
|
51,999 |
|
|
|
(17,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 26
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
b) |
Cash interest paid (including interest paid by the Dropdown Predecessor and realized losses on interest rate swaps) during the years ended
December 31, 2014, 2013 and 2012 totaled $135.4 million, $146.0 million, and $102.1 million, respectively. |
|
c) |
Taxes paid (including taxes paid by the Dropdown Predecessor) during the years ended December 31, 2014, 2013 and 2012 totaled $2.1 million,
$0.6 million and $5.7 million, respectively. |
|
d) |
The Partnerships consolidated statement of cash flows for the years ended December 31, 2013 reflects the Dropdown Predecessor as if the
Partnership had acquired the Dropdown Predecessor when the vessel began operations under the ownership of Teekay Corporation. For non-cash charges related to the Dropdown Predecessor, see note 11f. |
|
e) |
The cash portion of the purchase price of vessels acquired from Teekay Corporation is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
|
Year ended December 31, 2013 $ |
|
|
Year ended December 31, 2012 $ |
|
Voyageur Spirit (net of cash acquired of $0.9 million)(1)(2) (note
11f) |
|
|
6,181 |
|
|
|
(234,125 |
) |
|
|
|
|
Cidade de Itajai (net of cash acquired of $1.3 million) (note 11g) |
|
|
|
|
|
|
(52,520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,181 |
|
|
|
(286,645 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
As at December 31, 2014, the cash portion of the original purchase price of the Voyageur Spirit FPSO unit of $270.0 million was
effectively reduced to reflect the $41.1 million indemnification from Teekay Corporation recorded during 2014 and 2013 (see note 11f). |
(2) |
The cash portion of the purchase price does not include the issuance of $44.3 million of the Partnerships common units to Teekay Corporation
to partially finance the acquisition of the Voyageur Spirit FPSO (see note 16), which includes a $4.3 million excess value of the common units when comparing valuation of the common units at the date of closing the transaction to the
valuation of the common units as the date Teekay Corporation offered to sell the Voyageur Spirit FPSO to the Partnership (see note 11f). |
|
f) |
Contribution of capital from Teekay Corporation to the Dropdown Predecessor included in other financing activities on the consolidated statements
of cash flows is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014 $ |
|
|
Year ended December 31, 2013 $ |
|
|
Year ended December 31, 2012 $ |
|
Relating to Voyageur Spirit (note 11f) |
|
|
|
|
|
|
5,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. |
Partners Equity and Net Income Per Unit |
At December 31, 2014, a total of 74.2% of the Partnerships common units outstanding were held by
the public. The remaining common units, as well as the 2% general partner interest, were held by a subsidiary of Teekay Corporation. All of the Partnerships Series A Preferred Units (defined below) outstanding are held by the public.
Limited Partners Rights
Significant rights of the limited partners include the following:
|
|
|
Right of common unitholders to receive distribution of available cash within approximately 45 days after the end of each quarter.
|
|
|
|
No limited partner shall have any management power over the Partnerships business and affairs; the general partner shall conduct, direct and
manage our activities. |
|
|
|
The general partner may be removed if such removal is approved by common unitholders holding at least 66 2/3% of the outstanding units voting as a
single class, including units held by the general partner and its affiliates. |
F - 27
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Incentive Distribution Rights
The general partner is entitled to incentive distributions if the amount the Partnership distributes to common unitholders with
respect to any quarter exceeds specified target levels shown below:
|
|
|
|
|
|
|
|
|
Quarterly Distribution Target Amount (per unit) |
|
Common Unitholders |
|
|
General Partner |
|
Minimum quarterly distribution of $0.35 |
|
|
98 |
% |
|
|
2 |
% |
Up to $0.4025 |
|
|
98 |
% |
|
|
2 |
% |
Above $0.4025 up to $0.4375 |
|
|
85 |
% |
|
|
15 |
% |
Above $0.4375 up to $0.525 |
|
|
75 |
% |
|
|
25 |
% |
Above $0.525 |
|
|
50 |
% |
|
|
50 |
% |
During the year ended December 31, 2014, cash distributions exceeded $0.4025 per common
unit and, consequently, the assumed distribution of net income resulted in the use of the increasing percentages to calculate the general partners interest in net income for the purposes of the net income per common unit calculation.
In the event of a liquidation, all property and cash in excess of that required to discharge all liabilities and liquidation
amounts on the Series A Preferred Units will be distributed to the common unitholders and the general partner in proportion to their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of the
Partnerships assets in liquidation in accordance with the partnership agreement.
Net Income Per Unit
Limited partners interest in net income per common unit basic is determined by dividing net income, after
deducting the amount of net income attributable to the Dropdown Predecessor, the non-controlling interests, the general partners interest and the distributions on the Series A Preferred Units, by the weighted-average number of common units
outstanding during the period. The distributions payable and paid on the preferred units for the year ended December 31, 2014 totaled $10.9 million (2013 - $7.3 million). The computation of limited partners interest in net income per
common unit diluted assumes the exercise of all dilutive restricted units using the treasury stock method. The computation of limited partners interest in net loss per common unit diluted does not assume such exercises as the
effect would be anti-dilutive.
The general partners and common unitholders interests in net income are
calculated as if all net income was distributed according to the terms of the Partnerships partnership agreement, regardless of whether those earnings would or could be distributed. The partnership agreement does not provide for the
distribution of net income; rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter less the amount of cash reserves established by the
Partnerships board of directors to provide for the proper conduct of the Partnerships business including reserves for maintenance and replacement capital expenditure, anticipated capital requirements and any accumulated distributions on
the Series A Preferred Units (defined below). Unlike available cash, net income is affected by non-cash items such as depreciation and amortization, unrealized gains and losses on derivative instruments and unrealized foreign currency translation
gains and losses.
The Partnership allocates the limited partners interest in net income, including both distributed
and undistributed net income, between continuing operations and discontinued operations based on the proportion of net income from continuing and discontinued operations to total net income.
Preferred Units
In April 2013, the Partnership issued 6.0 million 7.25% Series A Cumulative Redeemable Preferred Units (or Series A
Preferred Units) in a public offering for net proceeds of $144.8 million.
Pursuant to the partnership agreement,
distributions on the Series A Preferred Units to preferred unitholders are cumulative from the date of original issue and are payable quarterly in arrears, when, as and if declared by the board of directors of the general partner. At any time on or
after April 30, 2018, the Series A Preferred Units may be redeemed by the Partnership at a redemption price of $25.00 per unit plus an amount equal to all accumulated and unpaid distributions to the date of redemption. These units are listed on
the New York Stock Exchange.
Public and Private Offerings of Common Units
The following table summarizes the issuances of common units over the three years ending December 31, 2014:
F - 28
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering |
|
|
Number of Common Units |
|
|
Offering |
|
|
Gross Proceeds (i) |
|
|
Net Proceeds |
|
|
Teekay Corporations Ownership After the |
|
|
|
Date |
|
Type |
|
|
Issued |
|
|
Price |
|
|
(in millions of U.S. Dollars) |
|
|
Offering(ii) |
|
|
Use of
Proceeds |
|
|
|
|
|
|
|
|
July 2012 |
|
|
Private |
|
|
|
1,700,022 |
|
|
$ |
26.47 |
|
|
|
45.9 |
|
|
|
45.8 |
|
|
|
32.30 |
% |
|
Partially finance shipyard installments for four newbuilding shuttle tankers |
|
|
|
|
|
|
|
|
September 2012 |
|
|
Public |
|
|
|
7,778,832 |
|
|
$ |
27.65 |
|
|
|
219.5 |
|
|
|
211.4 |
|
|
|
29.36 |
% |
|
Prepayment of revolving credit facilities |
|
|
|
|
|
|
|
|
April 2013 |
|
|
Private |
|
|
|
2,056,202 |
|
|
$ |
29.18 |
|
|
|
61.2 |
|
|
|
61.2 |
|
|
|
28.67 |
% |
|
Partially finance four newbuilding shuttle tankers installments and for general partnership purposes. |
|
|
|
|
|
|
|
|
May 2013 |
|
|
Private |
|
|
|
1,446,654 |
|
|
$ |
30.60 |
|
|
|
45.1 |
|
|
|
45.1 |
|
|
|
29.91 |
% |
|
Partially finance the acquisition of Voyageur Spirit FPSO unit |
|
|
|
|
|
|
|
|
During 2013 |
|
|
COP |
|
|
|
85,508 |
|
|
|
(iii |
) |
|
|
2.8 |
|
|
|
2.4 |
|
|
|
(iii |
) |
|
General partnership purposes |
|
|
|
|
|
|
|
|
December 2013 |
|
|
Private |
|
|
|
1,750,000 |
|
|
$ |
30.50 |
|
|
|
54.5 |
|
|
|
54.4 |
|
|
|
29.31 |
% |
|
For general partnership purposes, which may include funding vessel conversion projects and future vessel acquisitions. |
|
|
|
|
|
|
|
|
During 2014 |
|
|
COP |
|
|
|
213,350 |
|
|
|
(iii |
) |
|
|
7.8 |
|
|
|
7.6 |
|
|
|
(iii |
) |
|
General partnership purposes |
|
|
|
|
|
|
|
|
November 2014 |
|
|
Private |
|
|
|
6,704,888 |
|
|
$ |
26.10 |
|
|
|
178.6 |
|
|
|
178.5 |
|
|
|
27.26 |
% |
|
For general partnership purposes, which may include funding vessel conversion projects and finance newbuilding FAUs and towage vessels. |
(i) |
Including General Partners 2% proportionate capital contribution |
(ii) |
Including Teekay Corporations indirect 2% general partner interest |
(iii) |
In May 2013, the Partnership implemented a continuous offering program (or COP), under which the Partnership may issue new common units,
representing limited partner interests, at market prices up to a maximum aggregate amount of $100 million. |
17. |
Unit Based Compensation |
During the year ended December 31, 2014, a total of 9,482 common units, with an aggregate value of $0.3
million, were granted and issued to the non-management directors of the general partner as part of their annual compensation for 2014.
The Partnership grants restricted unit-based compensation awards as incentive-based compensation to certain employees of Teekay
Corporations subsidiaries that provide services to the Partnership. During March 2014 and 2013, the Partnership granted restricted unit-based compensation awards with respect to 67,782 and 63,309 units, respectively, with grant date fair
values of $2.1 million and $1.8 million, respectively, based on the Partnerships closing unit price on the grant date. Each award represents the specified number of the Partnerships common units plus reinvested distributions from the
grant date to the vesting date. The awards vest equally over three years from the grant date. Any portion of an award that is not vested on the date of a recipients termination of service is cancelled, unless their termination arises as a
result of the recipients retirement and, in this case, the award will continue to vest in accordance with the vesting schedule. Upon vesting, the awards are paid to each grantee in the form of common units or cash. During the year ended
December 31, 2014, restricted unit-based awards with respect to total of 20,988 common units with a fair value of $0.6 million, based on the Partnerships closing unit price on the grant date, vested and the amount paid to the grantees was
made by issuing 6,584 common units and by paying $0.3 million in cash. During the year ended December 31, 2014 and 2013, the Partnership recorded unit-based compensation expense of $1.9 million and $0.9 million, respectively, in general and
administrative expenses in the Partnerships consolidated statements of income. As of December 31, 2014 and 2013, liabilities relating to cash settled restricted unit-based compensation awards of $1.0 million and $nil, respectively, were
recorded in accrued liabilities on the Partnerships consolidated balance sheets. As at December 31, 2014 the Partnership had $1.0 million of non-vested awards not yet recognized, which the Partnership expects to recognize over a weighted
average period of 1.1 years.
|
a) |
Acquisition of ALP Maritime Services B.V. |
On March 14, 2014, the Partnership acquired 100% of the shares of ALP. Concurrently with this transaction, the Partnership
and ALP entered into an agreement with Niigata Shipbuilding & Repair of Japan for the construction of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and anchor handling vessel newbuildings. These vessels will be
equipped with dynamic positioning capability and are scheduled for delivery in 2016. The Partnership is committed to acquire these newbuildings for a total cost of approximately $258 million (see note 14d).
The Partnership acquired ALP for a purchase price of $2.6 million, which was paid in cash, and also entered into an arrangement
to pay additional compensation to three former shareholders of ALP if certain requirements are satisfied. This contingent compensation consists of $2.4 million, which is payable upon the delivery and employment of ALPs four newbuildings, which
are scheduled throughout 2016, and a further amount of up to $2.6 million, which is payable if ALPs annual operating results from 2017 to 2021 meet certain targets. The Partnership has the option to pay up to 50% of this compensation through
the issuance of common units of the Partnership. Each of the contingent compensation amounts are payable only if the three shareholders are employed by ALP at the time performance conditions are met. For the year ended December 31, 2014,
compensation cost was $0.5 million and was recorded in general and administrative expenses in the Partnerships consolidated statements of income. The Partnership also incurred a $1.0 million fee to a third party associated with the acquisition
of ALP and a $1.6 million business development fee to Teekay Corporation (see note 11j) for assistance with the acquisition, which have been recognized in general and administrative expenses during 2014.
F - 29
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
This acquisition of ALP and the related newbuilding orders represent the
Partnerships entrance into the long-haul ocean towage and offshore installation services business. This acquisition allows the Partnership to combine its infrastructure and access to capital with ALPs experienced management team to
further grow this niche business, which is in an adjacent sector to the Partnerships FPSO and shuttle tanker businesses. The acquisition of ALP was accounted for using the purchase method of accounting, based upon finalized estimates of fair
value.
The following table summarizes the finalized estimates of fair values of the ALP assets acquired and liabilities
assumed by the Partnership on the acquisition date.
|
|
|
|
|
(in thousands of U.S. dollars) |
|
As at March 14, 2014 |
|
|
|
$ |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
|
294 |
|
Other current assets |
|
|
404 |
|
Advances on newbuilding contracts |
|
|
164 |
|
Other assets - long-term |
|
|
395 |
|
Goodwill (towage segment) |
|
|
2,032 |
|
|
|
|
|
|
Total assets acquired |
|
|
3,289 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
387 |
|
Other long-term liabilities |
|
|
286 |
|
|
|
|
|
|
Total liabilities assumed |
|
|
673 |
|
|
|
|
|
|
Net assets acquired |
|
|
2,616 |
|
|
|
|
|
|
Consideration |
|
|
2,616 |
|
|
|
|
|
|
The goodwill recognized in connection with the ALP acquisition is attributable primarily to the
assembled workforce of ALP, including their experience, skills and abilities. Operating results of ALP are reflected in the Partnerships financial statements commencing March 14, 2014, the effective date of the acquisition. For the year
ended December 31, 2014, the Partnership recognized $0.5 million of revenue and $2.3 million of net loss resulting from this acquisition. The following table shows comparative summarized consolidated pro forma financial information for the
Partnership for the years ended December 31, 2014 and 2013, giving effect to the Partnerships acquisition of ALP as if it had taken place on January 1, 2013:
|
|
|
|
|
|
|
|
|
(in thousands of U.S. dollars, except per unit data) |
|
Pro Forma |
|
|
Pro Forma |
|
|
|
Year ended |
|
|
Year ended |
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
Revenues |
|
|
1,019,674 |
|
|
|
938,309 |
|
Net income from continuing operations |
|
|
17,495 |
|
|
|
76,044 |
|
Limited partners interest in net income from continuing operations per common unit: |
|
|
|
|
|
|
|
|
- Basic |
|
|
(0.23 |
) |
|
|
0.92 |
|
- Diluted |
|
|
(0.23 |
) |
|
|
0.92 |
|
b) |
Acquisition of Logitel Offshore Holding AS |
On August 11, 2014, the Partnership acquired 100% of the outstanding shares of Logitel. The purchase price for the shares
of Logitel consisted of $4.0 million in cash paid at closing and a potential additional cash amount of $27.6 million, subject to reductions of some or all of this potential additional amount if certain performance criteria are not met,
primarily relating to the construction of the three FAUs ordered from COSCO in China (see note 4a).
The Partnership is
committed to acquire the three FAUs ordered from COSCO for a total cost of approximately $588 million, including estimated site supervision costs and license fees to be paid to Sevan to allow for use of its cylindrical hull design in these FAUs
(see note 14e), and $30.0 million from the Partnerships assumption of Logitels obligations under a bond agreement from Sevan. Prior to the acquisition, Logitel secured a three-year fixed-rate charter contract, plus extension
options, with Petrobras in Brazil for the first FAU which delivered in February 2015. The FAU is expected to commence its contract with Petrobras during the second quarter of 2015. The second FAU is currently under construction and in August 2014,
the Partnership exercised one of its existing six options with COSCO to construct a third FAU. The Partnership expects to secure charter contracts for the remaining two newbuilding FAUs prior to their respective scheduled deliveries in the first and
the fourth quarters of 2016.
The Partnership has assumed Logitels obligations under a bond agreement from Sevan as
part of this acquisition. The bond is non-interest bearing and is repayable in amounts of $10.0 million within six months of delivery of each of the three FAUs ordered from COSCO, for a total of $30.0 million. If Logitel orders additional
FAUs with the Sevan cylindrical design, Logitel will be required to pay Sevan up to $11.9 million for each of the next three FAUs ordered. If the fourth of six options with COSCO is not exercised by its option expiry date on
November 30, 2016, Sevan has a one-time option to receive the remaining two options with COSCO.
F - 30
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
The acquisition of Logitel represents the Partnerships entrance into
the FAU business, which is in an adjacent sector to the Partnerships FPSO and shuttle tanker businesses. The acquisition of Logitel was accounted for using the purchase method of accounting, based upon preliminary estimates of fair value.
The following table summarizes the preliminary estimates of fair values of the Logitel assets acquired and liabilities assumed
by the Partnership on the acquisition date. The Partnership is continuing to obtain information to finalize estimated fair value of the Logitel assets acquired and liabilities assumed and expects to complete this process as soon as practicable, but
no later than one year from the acquisition date.
|
|
|
|
|
(in thousands of U.S. dollars) |
|
As at August 11, 2014 $ |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
|
8,089 |
|
Prepaid expenses |
|
|
640 |
|
Advances on newbuilding contracts |
|
|
46,809 |
|
|
|
|
|
|
Total assets acquired |
|
|
55,538 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Accrued liabilities |
|
|
4,098 |
|
Long-term debt |
|
|
26,270 |
|
|
|
|
|
|
Total liabilities assumed |
|
|
30,368 |
|
|
|
|
|
|
Net assets acquired |
|
|
25,170 |
|
|
|
|
|
|
Cash consideration |
|
|
4,000 |
|
|
|
|
|
|
Contingent consideration |
|
|
21,170 |
|
|
|
|
|
|
Operating results of Logitel are reflected in the Partnerships financial statements
commencing August 11, 2014, the effective date of acquisition. For the year ended December 31 2014, the Partnership recognized $nil revenue and $1.0 million of net loss resulting from this acquisition. The following table shows comparative
summarized consolidated pro forma financial information for the Partnership for the years ended December 31, 2014 and 2013, giving effect to the Partnerships acquisition of Logitel as if it had taken place on January 1, 2013:
|
|
|
|
|
|
|
|
|
(in thousands of U.S. dollars, except per unit data) |
|
Pro Forma Year Ended December 31, 2014 |
|
|
Pro Forma Year Ended December 31, 2013 |
|
Revenues |
|
|
1,019,539 |
|
|
|
930,739 |
|
Net income from continuing operations |
|
|
16,717 |
|
|
|
75,827 |
|
|
|
|
Limited partners interest in net income from continuing operations per common unit: |
|
|
|
|
|
|
|
|
-Basic |
|
|
(0.24 |
) |
|
|
0.92 |
|
-Diluted |
|
|
(0.24 |
) |
|
|
0.92 |
|
19. |
(Write-down) and Gain (Loss) on Sale of Vessels and Discontinued Operations |
(Write-down) and Gain (Loss) on Sale of Vessels
In 2014, the carrying value of one of the Partnerships 1990s-built shuttle tankers was written down to its estimated fair
value, using an appraised value. The write-down was the result of the vessel charter contract expiring in early-2015. The Partnerships consolidated statement of income for the year ended December 31, 2014, includes a $4.8 million
write-down related to this vessel. The write-down is included in the Partnerships shuttle tanker segment. In the fourth quarter of 2014, the Partnership sold a 1995-built shuttle tanker, the Navion Norvegia, to a joint venture between
the Partnership and a joint venture partner (see note 20). The Partnerships consolidated statement of income for the year ended December 31, 2014, includes a $3.1 million gain related to the sale of this vessel. The gain on sale of vessel
is included in the Partnerships shuttle tanker segment.
In 2013, the carrying value of six of the Partnerships
1990s-built shuttle tankers were written down to their estimated fair value using appraised values. Of the six vessels, during the third quarter of 2013, four of the shuttle tankers were written down as the result of the re-contracting of one of the
vessels, which the Partnership owns through a 50%-owned subsidiary, at lower rates than expected during the third quarter of 2013, the cancellation of a short-term contract which occurred in September 2013 and a change in expectations for the
contract renewal for two of the shuttle tankers, one operating in Brazil, and the other, which the Partnership owns through a 50%-owned subsidiary, in the North Sea. In the fourth quarter of 2013, two shuttle tankers, which the Partnership owns
through a 67%-owned subsidiary, were written down due to a cancellation of a contract renewal and expected sale of an aging vessel to their estimated fair value. One of these two vessels was also written down in 2012. The Partnerships
consolidated statement of income for 2013 includes a total write-down of $76.8 million related to these vessels, of which $37.2 million relates to two shuttle tankers, which the Partnership owns through a 50%-owned subsidiary, and $19.3 million
relates to two shuttle tankers, which the Partnership owns through a 67%-owned subsidiary.
F - 31
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
In 2012, the carrying value of five of the Partnerships shuttle tankers
were written down to their estimated fair value. In the third quarter of 2012, a 1993-built shuttle tanker was written down to its estimated fair value due to a change in the operating plan for the vessel. In the third and fourth quarters of 2012,
two shuttle tankers, which were written down in 2011, were further written down to their estimated fair value upon sale in 2012. In the fourth quarter of 2012, a 1992-built shuttle tanker, which was written down in 2010, was further written down to
its estimated fair value and classified as held-for-sale as at December 31, 2012. The vessel was sold in 2013. In the fourth quarter of 2012, a 1995-built shuttle tanker was written down to its estimated fair value due to the age of the vessel
and the requirements of trading in the North Sea and Brazil and the weak tanker market. The estimated fair value of the vessel was determined using discounted cash flows. The estimated fair value for each of the other four vessels written down in
2012 was determined using appraised values. The Partnerships consolidated statement of income for 2012 includes a total write-down and loss on sale of vessels of $24.5 million.
Discontinued Operations
Prior to being considered discontinued operations, the operations of the Hamane Spirit, the Torben Spirit, the
Luzon Spirit, the Leyte Spirit, the Poul Spirit and the Gotland Spirit were reported within the conventional tanker segment. The Hamane Spirit, the Torben Spirit, and the Luzon Spirit, were sold
during the second quarter of 2012, the fourth quarter of 2012, and the fourth quarter of 2012, respectively. The Leyte Spirit, which was written down in 2012 and was sold in the first quarter of 2013. The Poul Spirit was written down
to its estimated fair value in the first quarter of 2013 and further written down upon sale in the second quarter of 2013. The Gotland Spirit was written down to its estimated fair value in the second quarter of 2013 and a gain was recognized
upon its sale in the third quarter of 2013. The estimated fair value for each of these vessels was determined using appraised values.
In the second quarter and first quarter of 2013 and the second quarter of 2012, the Partnership terminated the long-term
time-charter-out contracts employed by the Gotland Spirit, the Poul Spirit, and the Hamane Spirit, respectively, with a subsidiary of Teekay Corporation. The Partnership received early termination fees from Teekay Corporation of
$4.5 million, $6.8 million and $14.7 million in the second quarter and first quarter of 2013 and the second quarter of 2012, respectively.
The following table summarizes the net (loss) income from discontinued operations for the periods presented in the consolidated
statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 $ |
|
|
Year Ended December 31, 2013 $ |
|
|
Year Ended December 31, 2012 $ |
|
Revenues |
|
|
|
|
|
|
20,238 |
|
|
|
62,967 |
|
|
|
|
|
Voyage expenses |
|
|
|
|
|
|
(682 |
) |
|
|
(16,201 |
) |
Vessel operating expenses |
|
|
|
|
|
|
(3,903 |
) |
|
|
(14,286 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(1,236 |
) |
|
|
(5,267 |
) |
General and administrative |
|
|
|
|
|
|
(479 |
) |
|
|
(1,178 |
) |
Write down and loss on sale of vessels |
|
|
|
|
|
|
(18,465 |
) |
|
|
(7,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from vessel operations |
|
|
|
|
|
|
(4,527 |
) |
|
|
18,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(110 |
) |
|
|
(822 |
) |
Foreign currency exchange (loss) gain |
|
|
|
|
|
|
(4 |
) |
|
|
2 |
|
Other (expense) income - net |
|
|
|
|
|
|
(1 |
) |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from discontinued operations |
|
|
|
|
|
|
(4,642 |
) |
|
|
17,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. |
Investment in Equity Accounted Joint Ventures and Advances to Joint Venture |
In October 2014, the Partnership sold a 1995-built shuttle tanker, the Navion Norvegia, to the OOG-TK
Libra GmbH & Co KG (or Libra JV), a joint venture with Odebrecht. The vessel is committed to a new FPSO unit conversion for the Libra field. The FPSO unit is scheduled to commence operations in early-2017 (see note 14f). In
conjunction with the conversion project, the Libra JV entered into a $248 million loan facility. The interest payments of the loan facility are based on LIBOR, plus margins which range between 2.00% to 2.65%. The final payment under the loan
facility is due October 2015. The Partnership has guaranteed its 50% share of the loan facility.
In June 2013, the
Partnership acquired Teekay Corporations 50% interest in OOG-TKP FPSO GmbH & Co KG, a joint venture with Odebrecht, which owns the Itajai FPSO unit (see note 11g). As of December 31, 2014, the Partnership had an advance of
$5.2 million to the joint venture, which was subsequently repaid in early-2015.
As at December 31, 2014 and 2013, the
Partnership had total investments of $55.0 million and $52.1 million, respectively, in joint ventures. No indicators of impairment existed at December 31, 2014.
F - 32
TEEKAY OFFSHORE PARTNERS L.P. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
|
a) |
The Partnership has approved the acquisition of the Petrojarl Knarr FPSO unit (or the Petrojarl Knarr) from Teekay Corporation,
subject to the unit completing certain operational tests and commencing its charter contract at full rate. The purchase price for the Petrojarl Knarr, which is based on a fully built-up cost of approximately $1.25 billion, is expected to be
financed through the assumption of an existing $815 million long-term debt facility and up to $450 million of a combination of units issued and short-term credit financing from Teekay Corporation. The Partnership expects to complete the acquisition
of the Petrojarl Knarr during the second quarter of 2015. |
|
b) |
In March 2015, the Partnership sold a 1997-built shuttle tanker, the Navion Svenita, for gross proceeds of $8.8 million. During 2014, the
vessel was written down to its estimated fair value, using an appraised value. The Partnership will record a modest gain on sale of the vessel during the first quarter of 2015. |
F - 33
Exhibit 2.6
ISIN NO 0010700909
BOND
AGREEMENT
between
Teekay Offshore Partners L.P.
(Issuer)
and
Norsk Tillitsmann ASA
(Bond Trustee)
on behalf of
the Bondholders
in the
bond issue
FRN Teekay Offshore Partners L.P.
Senior Unsecured Bond Issue 2014/2019
Norsk Tillitsmann ASA
TABLE OF CONTENTS
|
|
|
|
|
|
|
1 |
|
Interpretation |
|
|
3 |
|
2 |
|
The Bonds |
|
|
9 |
|
3 |
|
Listing |
|
|
9 |
|
4 |
|
Registration in a Securities Register |
|
|
9 |
|
5 |
|
Purchase and transfer of Bonds |
|
|
10 |
|
7 |
|
Representations and Warranties |
|
|
12 |
|
8 |
|
Status of the Bonds and security |
|
|
14 |
|
9 |
|
Interest |
|
|
15 |
|
10 |
|
Maturity of the Bonds and Change of Control |
|
|
15 |
|
11 |
|
Payments |
|
|
16 |
|
12 |
|
Issuers acquisition of Bonds |
|
|
17 |
|
13 |
|
Covenants |
|
|
17 |
|
14 |
|
Fees and expenses |
|
|
21 |
|
15 |
|
Events of Default |
|
|
21 |
|
16 |
|
Bondholders meeting |
|
|
24 |
|
17 |
|
The Bond Trustee |
|
|
26 |
|
18 |
|
Miscellaneous |
|
|
28 |
|
2
Norsk Tillitsmann ASA
This bond agreement has been entered into on 30 January 2014 between
|
(1) |
Teekay Offshore Partners L.P. (a limited partnership organized in the Marshall Islands with Company No. 950010), as issuer (the
Issuer), and |
|
(2) |
Norsk Tillitsmann ASA (a company incorporated in Norway with Company No. 963 342 624), as bond trustee (the Bond Trustee).
|
In this Bond Agreement the following terms shall have the following meanings (certain terms relevant for Clauses 1.2 and 18.2
and other Clauses may be defined in the relevant Clause):
Account Manager means a Bondholders
account manager in the Securities Register.
Attachment means any attachments to this Bond Agreement.
Bond Agreement means this bond agreement, including any Attachments to which it refers, and any
subsequent amendments and additions agreed between the Parties.
Bond Issue means the bond issue
constituted by the Bonds.
Bond Reference Rate means 3 months NIBOR.
Bondholder means a holder of Bond(s), as registered in the Securities Register, from time to time.
Bondholders Meeting means a meeting of Bondholders, as set forth in Clause 16.
Bonds means the securities issued by the Issuer pursuant to this Bond Agreement, representing the
Bondholders underlying claim on the Issuer.
Business Day means any day on which commercial banks
are open for general business, and can settle foreign currency transactions in Oslo, London or New York.
Business
Day Convention means that if the relevant Interest Payment Date falls on a day that is not a Business Day, that date will be the first following day that is a Business Day unless that day falls in the next calendar month, in which case
that date will be the first preceding day that is a Business Day (Modified Following Business Day Convention).
3
Norsk Tillitsmann ASA
Change of Control Event means:
|
(1) |
if all management powers over the business and affairs of the Issuer are vested exclusively in its general partner, an event where:
|
|
a. |
The General Partner ceases to be the general partner of the Issuer; or |
|
b. |
Teekay Corporation ceases to own, directly or indirectly, a minimum of 50 percent (50%) of the voting rights in the General Partner;
|
or
|
(2) |
if all management powers over the business and affairs of the Issuer become vested exclusively in a board of directors of the Issuer, an event
where Teekay Corporation ceases to own, directly or indirectly, a minimum of 50 percent (50%) of the voting rights to elect the members of that board of directors. |
Costs means all costs, expenses, disbursements, payments, charges, losses, demands, claims, liabilities,
penalties, fines, damages, judgments, orders, sanctions, fees (including travel expenses, VAT, court fees and legal fees) and any other outgoings of whatever nature.
Default means an Event of Default or any event or circumstance specified in Clause 15.1 (Events of Default)
which would (with the giving of notice, lapse of time, determination of materiality or the fulfillment of any other applicable condition or any combination of the foregoing) be an Event of Default under any Finance Document.
Encumbrance means any encumbrance, mortgage, pledge, lien, charge (whether fixed or floating), assignment by
way of security, finance lease, sale and repurchase or sale and leaseback arrangement, sale of receivables on a recourse basis or security interest or any other agreement or arrangement having the effect of conferring security.
Event of Default means the occurrence of an event or circumstance specified in Clause 15.1.
Exchange means securities exchange or other reputable marketplace for securities, on which the Bonds are
listed, or where the Issuer has applied for listing of the Bonds.
Finance Documents means (i) this
Bond Agreement, (ii) the agreement between the Bond Trustee and the Issuer referred to in Clause 14.2, and (iii) any other document (whether creating a security interest or not) which is executed at any time by the Issuer in relation to
any amount payable under this Bond Agreement.
Financial Indebtedness means any indebtedness incurred in
respect of:
|
(a) |
moneys borrowed, including acceptance credit; |
|
(b) |
any bond, note, debenture, loan stock or other similar instrument; |
4
Norsk Tillitsmann ASA
|
(c) |
the amount of any liability in respect of any lease, hire purchase contract which would, in accordance with GAAP, be treated as a finance or
capital lease; |
|
(d) |
receivables sold or discounted (other than any receivables sold on a non-recourse basis); |
|
(e) |
any sale and lease-back transaction, or similar transaction which is treated as indebtedness under GAAP; |
|
(f) |
the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the deferred payment is
arranged primarily as a method of raising finance or financing the acquisition of that asset; |
|
(g) |
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price, including without
limitation currency or interest rate swaps, caps or collar transactions (and, when calculating the value of the transaction, only the mark-to-market value of the applicable derivative shall be taken into account); |
|
(h) |
any amounts raised under any other transactions having the commercial effect of a borrowing or raising of money, whether recorded in the balance
sheet or not (including any forward sale of purchase agreement); |
|
(i) |
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued
by a bank or financial institutions; and |
|
(j) |
(without double counting) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any of the items
referred to in (a) through (i) above. |
Financial Statements means the
audited unconsolidated and consolidated annual accounts and financial statements of the Issuer for any financial year, drawn up according to GAAP, such accounts to include a profit and loss account, balance sheet and cash flow statement.
Free Liquidity means, at any time, cash, cash equivalents and marketable securities (with investment grade
rating from S&P and/or Moodys Investors Service) of maturities less than one (1) year, to which the Group shall have free, immediate and direct access each as reflected in the Issuers most recent quarterly, consolidated
financial statements. For the avoidance of doubt, Free Liquidity shall not be subject to any Encumbrance.
GAAP means the generally accepted accounting principles in the United States of America, in force from time
to time.
GP or the General Partner means Teekay Offshore GP L.L.C., a Marshall Islands
limited liability company with Company No. 960881, which is the general partner of the Issuer, which is a limited partnership formed under the Marshall Islands Limited Partnership Act and governed by a limited partnership agreement. Under such
Act and partnership agreement, the GP manages the operations and activities of the Issuer.
Group means
the Issuer and its Subsidiaries, and a Group Company means the Issuer or any of its Subsidiaries.
5
Norsk Tillitsmann ASA
Interest Payment Date means 30 January,
30 April, 30 July and 30 October each year and the Maturity Date. Any adjustment will be made according to the Business Day Convention.
ISIN means International Securities Identification Numbering system the identification number of the
Bonds.
Issue Date means 30 January 2014.
Issuers Bonds means Bonds owned by the Issuer, any party or parties who has decisive influence over
the Issuer, or any party or parties over whom the Issuer has decisive influence.
Manager means the
managers for the Bond Issue.
Margin means 4.25 percentage points per annum.
Material Adverse Effect means a material adverse effect on: (a) the business, financial condition or
operations of the Issuer and/or the Group taken as a whole, (b) the Issuers ability to perform and comply with its obligations under the Bond Agreement; or (c) the validity or enforceability of the Bond Agreement.
Material Subsidiary means:
|
(i) |
any Subsidiary whose total consolidated assets represent at least 10 % of the total consolidated assets of the Group, or
|
|
(ii) |
any Subsidiary whose total consolidated revenues represent at least 10 % of the total consolidated net sales of the Group.
|
Maturity Date means 30 January 2019 or an earlier maturity date as provided for
in this Bond Agreement. Any further adjustment may be made according to the Business Day Convention.
NIBOR means that the rate for an interest period will be the rate for deposits in Norwegian Kroner for a
period as defined under Bond Reference Rate which appears on the Reuters Screen NIBR Page as of 12.00 noon, Oslo time, on the day that is two Business Days preceding that Interest Payment Date. If such rate does not appear on the Reuters Screen NIBR
Page, the rate for that Interest Payment Date will be determined as if the Bond Reference Rate is 3 months NIBOR Reference Rate as the applicable floating rate option.
NIBOR Reference Rate means that the rate for an interest period will be determined on the basis of the rates
at which deposits in Norwegian Kroner are offered by four large authorised exchange banks in the Oslo market (the Reference Banks) at approximately 12.00 noon, Oslo time, on the day that is two Business Days preceding that
Interest Payment Date to prime banks in the Oslo interbank market for a period as defined under Bond Reference Rate commencing on that Interest Payment Date and in a representative amount. The Bond Trustee will request the principal Oslo office of
each Reference Bank to provide a quotation of its rate. If
6
Norsk Tillitsmann ASA
at least two such quotations are provided, the rate for that Interest Payment Date shall be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate
for that Interest Payment Date will be the arithmetic mean of the rates quoted by major banks in Oslo, selected by the Bond Trustee, at approximately 12.00 noon, Oslo time, on that Interest Payment Date for loans in Norwegian kroner to leading
European banks for a period as defined under Bond Reference Rate commencing on that Interest Payment Date and in a representative amount.
NOK means Norwegian kroner, being the lawful currency of Norway.
Outstanding Bonds means the aggregate principal amount of the total number of Bonds not redeemed or
otherwise discharged.
QIB means a qualified institutional buyer as defined in
Rule 144A under the US Securities Act.
Party means a party to this Bond Agreement (including its
successors and permitted transferees).
Paying Agent means any legal entity as appointed by the Issuer
and approved by the Bond Trustee who acts as paying agent on behalf of the Issuer with respect to the Bonds.
Payment Date means a date for payment of principal or interest.
Quarter Date means each 31 March, 30 June, 30 September and 31 December.
Quarterly Financial Reports means the unaudited unconsolidated and consolidated financial statements of the
Issuer as of each Quarter Date, prepared in accordance with GAAP, such accounts to include a profit and loss account, balance sheet and cash flow statement.
Securities Register means the securities register in which the Bond Issue is registered.
Securities Register Act means the Norwegian Act relating to Registration of Financial Instruments of
5 July 2002 No. 64.
Subsidiary means an entity over which another entity or person has a
determining influence due to (i) direct and indirect ownership of shares or other ownership interests, (ii) control of the general partner of any such other entity that is a limited partnership and/or (iii) agreement, understanding or
other arrangement. An entity shall always be considered to be the subsidiary of another entity or person if such entity or person has such number of shares or ownership interests so as to represent the majority of the votes in the entity, or has the
right to elect or dismiss a majority of the directors in the entity.
Taxes means all present and future
taxes, levies, imposts, duties, charges, fees, deductions and withholdings, and any restrictions and or conditions resulting in a charge together with interest thereon and penalties in respect thereof and Tax and
Taxation shall be construed accordingly.
7
Norsk Tillitsmann ASA
Total Debt means, at any time, on a consolidated basis of
the Group, the aggregate of:
|
(i) |
the amount calculated in accordance with GAAP shown as each of long term debt, short term debt and current portion of
long term debt on the latest consolidated balance sheet of the Issuer; and |
|
(ii) |
the amount of any liability in respect of any lease or hire purchase contract entered into by the Issuer or any of its Subsidiaries which would, in
accordance with GAAP, be treated as a finance or capital lease (excluding any amounts applicable to leases to the extent that the lease obligations are secured by a security deposit which is held on the balance sheet under restricted
cash). |
US Person has the meaning ascribed to such term in Regulation S
under the US Securities Act.
US Securities Act means the U.S. Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
USD means US Dollars, being the legal currency of the
United States of America.
Voting Bonds means the Outstanding Bonds less the Issuers Bonds.
In this Bond Agreement, unless the context otherwise requires:
|
(a) |
headings are for ease of reference only; |
|
(b) |
words denoting the singular number shall include the plural and vice versa; |
|
(c) |
references to Clauses are references to the Clauses of this Bond Agreement; |
|
(d) |
references to a time is a reference to Oslo time unless otherwise stated herein; |
|
(e) |
references to a provision of law is a reference to that provision as it may be amended or re-enacted, and to any regulations made by the
appropriate authority pursuant to such law, including any determinations, rulings, judgments and other binding decisions relating to such provision or regulation; |
|
(f) |
references to control means the power to appoint a majority of the board of directors of the entity or to direct the management
and policies of an entity, whether through the ownership of voting capital, by contract or otherwise; and |
|
(h) |
references to a person shall include any individual, firm, partnership, joint venture, company, corporation, trust, fund, body
corporate, unincorporated body of persons, or any state or any agency of a state or association (whether or not having separate legal personality). |
8
Norsk Tillitsmann ASA
2.1 |
Binding nature of the Bond Agreement |
2.1.1 |
The Bondholders are, through their subscription, purchase or other transfer of Bonds bound by the terms of the Bond Agreement and other Finance
Documents, and grant authority to the Bond Trustee to finalize and execute the Bond Agreement on the Bondholders behalf as set out in the subscription documents, term sheet, sales documents or in any other way, and all Bond transfers are subject to
the terms of this Bond Agreement and all Bond transferees are, in taking transfer of Bonds, deemed to have accepted the terms of the Bond Agreement and the other Finance Documents and will automatically become parties to the Bond Agreement upon the
completed transfer having been registered, without any further action required to be taken or formalities to be complied with, see also Clause 18.1. |
2.1.2 |
The Bond Agreement is available to anyone and may be obtained from the Bond Trustee or the Issuer. The Issuer shall ensure that the Bond Agreement
is available to the general public throughout the entire term of the Bonds. |
2.2.1 |
The Issuer has resolved to issue a series of Bonds in the maximum amount of NOK 1,000,000,000 (Norwegian kroner one-thousand-million).
|
The Bonds will be in denominations of NOK 1,000,000 each and rank pari passu between themselves.
The Bond Issue will be described as FRN Teekay Offshore Partners L.P.
Senior Unsecured Bond Issue 2014/2019.
The International Securities Identification Number (ISIN) of the Bond Issue will be NO 0010700909.
The tenor of the Bonds is from and including the Issue Date to the Maturity Date.
2.3 |
Purpose and utilization |
2.3.1 |
The net proceeds of the Bonds shall be employed for general partnership purposes. |
3.1 |
The Issuer shall apply for listing of the Bonds on Oslo Børs. |
3.2 |
If the Bonds are listed, the Issuer shall ensure that the Bonds remain listed until they have been discharged in full. |
4 |
Registration in a Securities Register |
4.1 |
The Bond Issue and the Bonds shall prior to disbursement be registered in the Securities Register according to the Securities Register Act and the
conditions of the Securities Register. |
9
Norsk Tillitsmann ASA
4.2 |
The Issuer shall promptly arrange for notification to the Securities Register of any changes in the terms and conditions of this Bond Agreement.
The Bond Trustee shall receive a copy of the notification. |
4.3 |
The Issuer is responsible for the implementation of correct registration in the Securities Register. The registration may be executed by an agent
for the Issuer provided that the agent is qualified according to relevant regulations. |
4.4 |
The Bonds have not been registered under the US Securities Act, and the Issuer is under no obligation to arrange for registration of the Bonds
under the US Securities Act. |
5 |
Purchase and transfer of Bonds |
5.1 |
Subject to the restrictions set forth in this Clause 5, the Bonds are freely transferable and may be pledged. |
5.2 |
Bondholders may be subject to purchase or transfer restrictions with regard to the Bonds, as applicable from time to time under local laws to which
a Bondholder may be subject (due e.g. to its nationality, its residency, its registered address, its place(s) for doing business). Each bondholder must ensure compliance with local laws and regulations applicable at own cost and expense. Without
limiting the generality of the foregoing: |
Bondholders that are US Persons or located in the United
States will not be permitted to transfer the Bonds except (a) subject to an effective registration statement under the US Securities Act, (b) to a person that the Bondholder reasonably believes is a QIB within the meaning of Rule 144A
under the US Securities Act that is purchasing for its own account, or the account of another QIB, to whom notice is given that the resale, pledge or other transfer may be made in reliance on Rule 144A, (c) outside the United States in
accordance with Regulation S under the US Securities Act in a transaction on the Oslo Børs, and (d) pursuant to an exemption from registration under the US Securities Act provided by Rule 144 thereunder (if available). The Bonds may not
be purchased by, or for the benefit of, persons resident in Canada.
5.3 |
Notwithstanding the above, a Bondholder which has purchased the Bonds in contradiction to mandatory restrictions applicable may nevertheless
utilize its voting rights under this Bond Agreement. |
6.1 |
Disbursement of the net proceeds of the Bonds to the Issuer will be subject to the Bond Trustee having received the following documents, in form
and substance satisfactory to it, at least two Business Days prior to the Issue Date: |
|
(a) |
this Bond Agreement duly executed by all parties thereto; |
|
(b) |
certified copies of all necessary corporate resolutions of the Issuer to issue the Bonds and execute the Finance Documents to which it is a party;
|
10
Norsk Tillitsmann ASA
|
(c) |
a power of attorney from the Issuer to relevant individuals for its execution of the relevant Finance Documents, or extracts from the relevant
register or similar documentation evidencing the individuals authorized to sign on behalf of the Issuer; |
|
(d) |
certified copies of the Certificate of Formation for the Issuer, and the partnership agreement for the Issuer; |
|
(e) |
the latest Financial Statements for the Issuer, and the Issuers latest Quarterly Financial Report; |
|
(f) |
confirmation that the requirements set forth in Chapter 7 of the Norwegian Securities Trading Act (implementing the EU prospectus directive
(2003/71 EC) concerning prospectuses have been fulfilled or do not apply to the Bond Issue; |
|
(g) |
to the extent necessary, any public authorisations required for the Bond Issue; |
|
(h) |
confirmation from the Paying Agent that the Bonds have been registered in the Securities Register; |
|
(i) |
written confirmation in accordance with Clause 7.3 (if required); |
|
(j) |
the agreement set forth in Clause 14.2, duly executed; |
|
(k) |
documentation on the granting of authority to the Bond Trustee as set out in Clause 2.1 and copies of any written documentation made public by the
Issuer or the Manager in connection with the Bond Issue; and |
|
(l) |
legal opinions in a form and content acceptable to the Bond Trustee from local counsel acceptable to the Bond Trustee, confirming inter alia
(i) that the Issuer is legally organised and validly existing under its jurisdiction of organisation, (ii) the valid execution by the Issuer of the Finance Documents and the enforceability of the Finance Documents, (iii) that the
Issuer has full partnership power and capacity to enter into and perform the duties under the Finance Documents, and (iv) that there are no other consents, approvals, authorisations or orders required by the Issuer from any governmental or
other regulatory agencies in the jurisdictions of organisation of the Issuer in connection with the issue and offering of the Bonds and the performance by Issuer of its obligations under the Finance Documents. |
6.2 |
The Bond Trustee may, in its reasonable opinion, waive the deadline or requirements for documentation as set forth in Clause 6.1.
|
6.3 |
Disbursement of the net proceeds from the Bonds is subject to the Bond Trustees written notice to the Issuer, the Manager and the Paying
Agent that the documents have been received and that the required conditions precedent are fulfilled or have been waived. |
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Norsk Tillitsmann ASA
6.4 |
On the Issue Date, subject to receipt of confirmation from the Bond Trustee pursuant to Clause 6.3, the Manager shall make the net proceeds from
the Bond Issue available to the Issuer. |
7 |
Representations and Warranties |
7.1 |
The Issuer represents and warrants to the Bond Trustee (on behalf of the Bondholders) that: |
It is a limited partnership, duly organized and validly existing under the law of the jurisdiction in which it is incorporated,
and has the power to own its assets and carry on its business as it is being conducted.
It has the power to enter into and perform, and has taken all necessary partnership action to authorise its entry into,
performance and delivery of this Bond Agreement and any other Finance Document to which it is a party and the transactions contemplated by those Finance Documents.
|
(c) |
Valid, binding and enforceable obligations |
This Bond Agreement and any other Finance Document to which it is a party constitute (or will constitute, when executed by the
respective parties thereto) legal, valid and binding obligations of the Issuer, enforceable in accordance with their terms, and (save as provided for therein) no further registration, filing, payment of Tax or fees or other formalities are necessary
to render the said documents enforceable against the Issuer.
|
(d) |
Non-conflict with other obligations |
The entry into and performance by the Issuer of the Bond Agreement and any other Finance Document to which it is a party and
the transactions contemplated thereby do not and will not conflict with (i) any present law or regulation or present judicial or official order; (ii) its Certificate of Formation or partnership agreement; or (iii) any document or
agreement which is binding on the Issuer or any of its assets.
No Default exists, and no other circumstances exist which constitute or (with the giving of notice, lapse of time,
determination of materiality or the fulfillment of any other applicable condition, or any combination of the foregoing) would constitute a default under any document which is binding on the Issuer or any of its assets, and which would reasonably be
expected to have a Material Adverse Effect.
|
(f) |
Authorizations and consents |
All authorisations, consents, licenses or approvals of any governmental authorities required for the Issuer in connection with
the execution, performance, validity or enforceability of this Bond Agreement or any other Finance Document, and the transactions contemplated thereby, have been obtained and are valid and in full force and effect. All material authorisations,
consents, licenses or approvals of any governmental authorities required for the Issuer to carry on its business as presently conducted and as contemplated by this Bond Agreement, have been obtained and are in full force and effect.
12
Norsk Tillitsmann ASA
No litigation, arbitration or administrative proceeding of or before any court, arbitral body or agency is pending or, to the
best of the Issuers knowledge, threatened which, if adversely determined, would reasonably be expected to have a Material Adverse Effect.
The most recently audited Financial Statements and the most recent unaudited Quarterly Financial Reports for the Issuer, fairly
and accurately represent in all material respects the assets and liabilities and financial condition as at their respective dates, and have been prepared in accordance with GAAP, consistently applied from one year to another.
|
(i) |
No undisclosed liabilities |
As of the date of the most recent balance sheet included in the Financial Statements and Quarterly Financial Report, the Issuer
had no material liabilities, direct or indirect, actual or contingent, that are required by GAAP to be included in such balance sheet and that are not disclosed by or reserved against in the Financial Statements or in the notes thereto.
|
(j) |
No Material Adverse Effect |
Since the date of the most recent Financial Statements and Quarterly Financial Report, there has been no change in the
business, assets or financial condition of the Issuer that would reasonably be expected to have a Material Adverse Effect.
|
(k) |
No misleading information |
All documents and information which have been provided by the Issuer or with the agreement of the Issuer to the subscribers or
the Bond Trustee in connection with this Bond Issue represent the latest publicly available financial information concerning the Group, and there has been no change in the Groups financial position since the date of the latest Quarterly
Financial Report of the Issuer which could reasonably be expected to have a Material Adverse Effect.
|
(l) |
Environmental compliance |
The Issuer and each Group Company is in compliance with any relevant applicable environmental law or regulation and no
circumstances have occurred which would prevent such compliance in a manner which, in each case, has had or would reasonably be expected to have a Material Adverse Effect.
|
(m) |
Intellectual property |
The Group has valid and good title to (a) its material patents, trade marks, service marks, designs, business names,
copyrights, design rights, inventions, confidential information and other intellectual property rights and interests (whether registered or unregistered), and (b) the benefit of all applications and rights to use such assets.
13
Norsk Tillitsmann ASA
The Issuer is not required to make any deduction or withholding for or on account of any Taxes levied by the United States,
Canada or the Republic of the Marshall Islands, or any political subdivision thereof or Taxing or other authority therein, or any political subdivision or Taxing or other authority in any jurisdiction from or through which the Issuer effects any
payments hereunder, from any payment which it may become obliged to make to the Bond Trustee (on behalf of the Bondholders) or the Bondholders under this Bond Agreement; provided, however, that, notwithstanding any provision in this Agreement to the
contrary, the Issuer shall not be liable under this Agreement or have any obligation to indemnify any Bondholder for or with respect to any Taxes that are imposed due to any of the following:
|
(i) |
the Bondholder has some connection with the Taxing jurisdiction other than merely holding the Bonds or receiving principal or interest payments on
the Bonds (such as citizenship, nationality, residence, domicile, or existence of a business, a permanent establishment, a dependent agent, a place of business or a place of management present or deemed present within the Taxing jurisdiction); and
|
|
(ii) |
any Tax imposed on, or measured by net income. |
The Issuers payment obligations under this Bond Agreement or any other Finance Document to which it is a party rank at
least pari passu with the claims of its other unsecured and unsubordinated creditors, except for claims which are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application and for other obligations that are
mandatorily preferred by law applying to companies generally.
7.2 |
The representations and warranties set out in Clause 7.1 shall apply for the Issuer and are made on the execution date of this Bond Agreement, and
shall be deemed to be repeated on the Issue Date. |
7.3 |
The Bond Trustee may prior to disbursement require a written statement from the Issuer confirming compliance with Clause 7.1.
|
7.4 |
In the event of misrepresentation, the Issuer shall indemnify the Bond Trustee for any economic losses suffered, both prior to the disbursement of
the Bonds, and during the term of the Bonds, as a result of its reliance on the representations and warranties provided by the Issuer herein. |
8 |
Status of the Bonds and security |
8.1 |
The Bonds shall be senior unsecured debt of the Issuer. The Bonds shall rank at least pari passu with all other senior unsecured obligations
of the Issuer (save for such claims which are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application and for other obligations that are mandatorily preferred by law) and shall rank ahead of subordinated debt.
|
8.2 |
The Bonds are unsecured. |
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Norsk Tillitsmann ASA
9.1 |
The Issuer shall pay interest on the aggregate outstanding principal amount of the Bonds from, and including, the Issue Date at the Bond Reference
Rate plus the Margin (together the Floating Rate). |
9.2 |
Interest payments shall be made in arrears on the Interest Payment Dates each year; the first Interest Payment Date falls in April 2014.
|
9.3 |
The relevant interest payable amount shall be calculated based on a period from, and including, one Interest Payment Date to, but excluding, the
next following applicable Interest Payment Date. |
9.4 |
The day count fraction in respect of the calculation of the payable interest amount shall be Actual/360, which refers to the actual
number of days in the calculation period for which interest is payable divided by 360. |
9.5 |
The applicable Floating Rate on the Bonds is set/reset on each Interest Payment Date by the Bond Trustee commencing on the Interest Payment Date at
the beginning of the relevant calculation period. |
When the interest rate is set for the first time and
on subsequent interest rate resets, the next Interest Payment Date, the interest rate applicable up to the next Interest Payment Date and the actual number of calendar days up to that date shall be determined by the Bond Trustee and promptly
notified to the Bondholders, the Issuer, the Paying Agent, and if the Bonds are listed, the Exchange.
9.6 |
The payable interest amount per Bond for a relevant calculation period shall be calculated as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
= |
|
Face |
|
x |
|
Floating |
|
x |
|
Floating Rate |
Amount |
|
|
|
Value |
|
|
|
Rate |
|
|
|
Day Count Fraction |
10 |
Maturity of the Bonds and Change of Control |
The Bonds shall mature in full on the Maturity Date, and shall be repaid at par (100%) by the Issuer.
10.2.1 |
Upon the occurrence of a Change of Control Event each Bondholder shall have a right of pre-payment (a Put Option) of its Bonds
at a price of 100 % of par plus accrued and unpaid interest. |
15
Norsk Tillitsmann ASA
10.2.2 |
The Put Option must be exercised within 60 days after the Issuer has given notification to the Bond Trustee and the Bondholders of a Change of
Control Event. Such notification shall be given as soon as possible after a Change of Control Event has taken place. |
The Put Option may be exercised by the Bondholders by giving written, irrevocable notice of the request to its Account Manager.
The Account Manager shall notify the Paying Agent of the pre-payment request. The settlement date of the Put Option shall be fifteen 15 Business Days following the date when the Paying Agent received the repayment request.
10.2.3 |
On the settlement date of the Put Option, the Issuer shall pay to each of the Bondholders holding Bonds to be pre-paid, the principal amount of
each such Bond and any unpaid interest accrued up to (but not including) the settlement date. |
11.1.1 |
The Issuer shall pay all amounts due to the Bondholders under the Bonds and this Bond Agreement by crediting the bank account nominated by each
Bondholder in connection with its securities account in the Securities Register. |
11.1.2 |
Payment shall be considered to have been made once the amount has been credited to the bank which holds the bank account nominated by the
Bondholder in question, but if the paying bank and the receiving bank are the same, payment shall be considered to have been made once the amount has been credited to the bank account nominated by the Bondholder in question, see however Clause 11.2.
|
11.2.1 |
If the Bonds are denominated in currencies other than NOK, each Bondholder must provide the Paying Agent (either directly or through its Account
Manager) with specific payment instructions, including foreign exchange bank account details. Depending on the currency exchange settlement agreements between the Bondholders bank and the Paying Agent, cash settlement may be delayed, in which
case no default interest or other penalty shall accrue for the benefit of the Bondholders. |
11.2.2 |
Except as otherwise expressly provided, all amounts payable under this Bond Agreement and any other Finance Document shall be payable in the same
currency as the Bonds are denominated in. If, however, the Bondholder has not given instruction as set out in Clause 11.2.1, within 5 Business Days prior to a Payment Date, the cash settlement will be exchanged into NOK and credited to the NOK bank
account registered with the Bondholders account in the Securities Register. |
11.2.3 |
Amounts payable in respect of costs, expenses, Taxes and other liabilities shall be payable in the currency in which they are incurred.
|
16
Norsk Tillitsmann ASA
11.3 |
Set-off and counterclaims |
11.3.1 |
The Issuer may apply or perform any counterclaims or set-off against any payment obligations pursuant to this Bond Agreement or any other Finance
Document. |
11.4 |
Interest in the event of late payment |
11.4.1 |
In the event that payment of interest or principal is not made on the relevant Payment Date, the unpaid amount shall bear interest from the Payment
Date at an interest rate equivalent to the interest rate according to Clause 9 plus 5.00 percentage points. |
11.4.2 |
The interest charged under this Clause 11.4 shall be added to the defaulted amount on each respective Interest Payment Date relating thereto until
the defaulted amount has been repaid in full. |
11.4.3 |
The unpaid amounts shall bear interest as stated above until payment is made, whether or not the Bonds are declared to be in default pursuant to
Clause 15.1 (a), cf. Clauses 15.215.4. |
11.5.1 |
In case of interest payments made on a date other than the regularly scheduled payment date, the Bond Trustee may instruct the Issuer or
Bondholders of other payment mechanisms than described in Clause 11.1 or 11.2 above. The Bond Trustee may also obtain payment information regarding Bondholders accounts from the Securities Register or Account Managers. |
12 |
Issuers acquisition of Bonds |
12.1 |
The Issuer has the right to acquire and own Bonds (Issuers Bonds). The Issuers Bonds may at the Issuers discretion be retained by
the Issuer, sold or discharged. |
13.1.1 |
The Issuer has undertaken the covenants in this Clause 13 to the Bond Trustee (on behalf of the Bondholders), as further stated below.
|
13.1.2 |
Subject to Section 18.2, the covenants in this Clause 13 shall remain in force from the date of this Bond Agreement and until such time that
no amounts are outstanding under this Bond Agreement and any other Finance Document, unless the Bond Trustee (or Bondholders by action at a Bondholders Meeting, as the case may be), has agreed in writing to waive any covenant, and then only to the
extent of such waiver, and on the terms and conditions set forth in such waiver. |
17
Norsk Tillitsmann ASA
13.2 |
Information Covenants |
|
(a) |
without being requested to do so, immediately inform the Bond Trustee of any Default or Event of Default as well as of any circumstances which the
Issuer understands would reasonably be expected to lead to an Event of Default; |
|
(b) |
without being requested to do so, inform the Bond Trustee of any other event which could reasonably be expected to have a Material Adverse Effect;
|
|
(c) |
without being requested to do so, inform the Bond Trustee if the Issuer intends to sell or dispose of all or a substantial part of its assets or
operations, or change the nature of its business; |
|
(d) |
without being requested to do so, produce Financial Statements annually and Quarterly Financial Reports quarterly and make them available on its
website in the English language as soon as they become available, and not later than 120 days after the end of the financial year and 60 days after the end of the relevant quarter, in each case subject to any exemption, waiver or extension granted
by the Exchange or as permitted by any amendment to the Exchange listing rules; |
|
(e) |
at the request of the Bond Trustee, report the balance of the Issuers Bonds; |
|
(f) |
without being requested to do so, send a copy to the Bond Trustee of its notices to the Exchange (if listed) which are of relevance for the
Issuers liabilities pursuant to this Bond Agreement; |
|
(g) |
without being requested to do so, inform the Bond Trustee of changes in the registration of the Bonds in the Securities Register; and
|
|
(h) |
within a reasonable time, provide such information about the Issuers financial condition as the Bond Trustee may reasonably request.
|
13.2.2 |
The Issuer shall at the request of the Bond Trustee provide the documents and information necessary to maintain the listing and quotation of the
Bonds on the Exchange (if listed) and to otherwise enable the Bond Trustee to carry out its rights and duties pursuant to this Bond Agreement and the other Finance Documents, as well as applicable laws and regulations. |
13.2.3 |
The Issuer shall in connection with the issue of its Financial Statements and Quarterly Reports under Clause 13.2.1. (d), confirm to the Bond
Trustee in writing the Issuers compliance with the covenants in Clause 13. Such confirmation shall be undertaken in a compliance certificate, substantially in the format set out in Attachment 1 hereto, signed by the Chief Executive Officer or
Chief Financial Officer of the Issuer. In the event of non-compliance, the compliance certificate shall describe the non-compliance, the reasons therefore as well as the steps which the Issuer has taken and will take in order to rectify the
non-compliance. |
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Norsk Tillitsmann ASA
The Issuers obligations under this Bond Agreement and any other Finance Document shall at all times rank at least pari
passu with the claims of all its other unsecured and unsubordinated creditors save for those whose claims that are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application and for other obligations
that are mandatorily preferred by law applying to companies generally.
The Issuer shall not, and shall ensure that no Group Company shall, carry out any merger or other business combination or
corporate reorganization involving consolidating the assets and obligations of any of the Group Companies with any other companies or entities not being a member of the Group if such transaction would have a Material Adverse Effect. The Issuer shall
notify the Bond Trustee of any such transaction, providing relevant details thereof, as well as, if applicable, its reasons for believing that the proposed transaction would not have a Material Adverse Effect.
The Issuer shall not, and shall ensure that no Group Company shall, carry out any de-merger or other corporate reorganization
involving splitting any Group Company into two or more separate companies or entities, if such transaction would have a Material Adverse Effect. The Issuer shall notify the Bond Trustee of any such transaction, providing relevant details thereof, as
well as, if applicable, its reasons for believing that the proposed transaction would not have a Material Adverse Effect.
|
(d) |
Continuation of business |
|
(i) |
The Issuer shall not cease to carry on the general nature or scope of its business. The Issuer shall ensure that no Group Company shall cease to
carry on the general nature or scope of its business, if such cessation would have a Material Adverse Effect. |
|
(ii) |
The Issuer shall procure that no material change is made to the general nature or scope of the business of the Group from that carried on at the
date of this Bond Agreement, or as contemplated by this Bond Agreement. |
The Issuer shall not, and shall ensure that no Group Companies shall, be entitled to sell or otherwise dispose of all or a
substantial part of the Groups aggregate assets or operations, unless
|
(i) |
the transaction is carried out at fair market value, on terms and conditions customary for such transactions; and |
|
(ii) |
such transaction would not have a Material Adverse Effect. |
13.4 |
Corporate and operational matters |
|
(a) |
Related party transactions |
The Issuer shall not engage in, or permit any member of the Group to engage in, directly or indirectly, any transaction with
any affiliate of Teekay Corporation that is not a Group Company (without limitation, the purchase, sale or exchange of assets or
19
Norsk Tillitsmann ASA
the rendering of any service), except (i) pursuant to existing agreements and arrangements with such affiliates or (ii) transactions that are (A) approved by a majority of the
members of the conflicts committee of the board of directors of the GP, (B) on terms no less favorable to the Issuer or such Group member than those generally being provided to or available from unrelated third parties, (C) fair and
reasonable to the Issuer or such Group member, taking into account the totality of the relationships between the Group and the other parties involved (including other transactions that may be particularly favorable or advantageous to the Group) or
(D) immaterial in amount or significance to the Issuer or the Group.
The Issuer shall not, and shall ensure that no Group Company changes its type of organization or jurisdiction of organization
unless such change in type or jurisdiction of organization would not have a Material Adverse Effect. Notwithstanding the foregoing, no change shall be made to the Issuers type of organization or jurisdiction of organization or incorporation
without prior delivery to the Bond Trustee of legal opinions in a form and content acceptable to the Bond Trustee from local counsel acceptable to the Bond Trustee, confirming inter alia (i) that the Issuer is legally organized or incorporated
(as applicable) and validly existing under their new jurisdictions of organization or incorporation, (ii) the execution by the Issuer of the Finance Documents and the enforceability of the Finance Documents will remain valid and enforceable
under the new jurisdiction of organization or incorporation, (iii) that the Issuer has full partnership or corporate power and capacity to enter into and perform the duties under the Finance Documents under its new jurisdiction of organization
or incorporation, and (iv) that there are no other consents, approvals, authorisations or orders that have not been obtained and are required by the Issuer with respect to such change of its type of organization or jurisdiction of organization
from any governmental or other regulatory agencies in the jurisdictions of organization or incorporation of the Issuer in connection with the Bonds and the performance by the Issuer of its obligations under the Finance Documents.
The Issuer shall (and shall ensure that all Group Companies shall) comply in all material respects with all laws and
regulations it or they may be subject to from time to time (including any environmental laws and regulations).
The Issuer shall, promptly upon becoming aware of them, send the Bond Trustee such relevant details of any:
|
(i) |
material litigations, arbitrations or administrative proceedings which have been started by or against any Group Company; and
|
|
(ii) |
other events which have occurred which have had or would reasonably be expected to have a Material Adverse Effect, as the Bond Trustee may
reasonably request. |
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Norsk Tillitsmann ASA
13.5 |
Financial Covenants and listing |
The Issuer shall, at any time during the term of the Bonds, ensure that the Group on a consolidated basis maintains the
following financial covenants:
|
(i) |
aggregate Free Liquidity and undrawn committed revolving credit lines available to the Group (but excluding committed revolving credit lines with
less than six months to maturity) of a minimum of USD 75,000,000; and |
|
(ii) |
the aggregate of such Free Liquidity and undrawn committed revolving credit lines shall not be less than 5% of Total Debt. |
|
(b) |
Listing of Issuers common units |
The Issuer shall ensure that the Issuers common units remain listed on the New York Stock Exchange or another recognized
stock exchange.
14.1 |
The Issuer shall cover all its own expenses in connection with this Bond Agreement and fulfillment of its obligations under this Bond Agreement,
including preparation of this Bond Agreement, preparation of the Finance Documents and any registration or notifications relating thereto, listing of the Bonds on the Exchange (if applicable), and the registration and administration of the Bonds in
the Securities Register. |
14.2 |
The expenses and fees payable to the Bond Trustee shall be paid by the Issuer and are set forth in a separate agreement between the Issuer and the
Bond Trustee. Fees and expenses payable to the Bond Trustee which, due to the Issuers insolvency or similar, are not reimbursed in any other way may be covered by making an equivalent reduction in the payments to the Bondholders.
|
14.3 |
The Issuer shall cover all public fees in connection with the Bonds and the Finance Documents; provided, however, that any public fees levied on
the trade of Bonds in the secondary market shall be paid by the Bondholders, unless otherwise provided by law or regulation, and the Issuer is not responsible for reimbursing any such fees. |
14.4 |
In addition to the fee due to the Bond Trustee pursuant to Clause 14.2 and normal expenses pursuant to Clauses 14.1 and 14.3, the Issuer shall, on
demand, cover extraordinary expenses incurred by the Bond Trustee in connection with the Bonds, as determined in a separate agreement between the Issuer and the Bond Trustee. |
14.5 |
The Issuer is responsible for withholding any withholding tax imposed by applicable law on any payments to the Bondholders. |
15.1 |
Subject to Clause 15.2 or 15.3, the Bonds may be declared by the Bond Trustee to be in default upon occurrence of any of the following events
(which shall be referred to as an Event of Default) if: |
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Norsk Tillitsmann ASA
The Issuer fails to fulfill any payment obligation under this Bond Agreement or any Finance Document when due, unless, in the
opinion of the Bond Trustee, it is obvious that such failure will be remedied, and payment in full of any such late payment is made, within 5 five Business Days following the original due date.
|
(b) |
Breach of other obligations |
The Issuer or any other Group Company fails to duly perform any other covenant or obligation pursuant to this Bond Agreement or
any of the Finance Documents, and such failure is not remedied within 10 ten Business Days after notice thereof is given to the Issuer by the Bond Trustee.
The aggregate amount of Financial Indebtedness or committed Financial Indebtedness of the Group or any Group Company falling
within paragraphs (i) to (iv) below exceeds a total of USD 100 million, or the equivalent thereof in other currencies;
|
(i) |
any Financial Indebtedness is not paid when due and after giving effect to any applicable grace period, |
|
(ii) |
any Financial Indebtedness is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of
default (however described), |
|
(iii) |
any commitment for any Financial Indebtedness is cancelled or suspended by a creditor as a result of an event of default (however described) and
such cancellation and suspension would have a Material Adverse Effect, or |
|
(iv) |
any creditor becomes entitled to declare any Financial Indebtedness due and payable prior to its specified maturity as a result of an event of
default (however described). |
Any representation, warranty or statement (including statements in compliance certificates) made under this Bond Agreement or
in connection therewith, taken as a whole with all other such representations, warranties and statements, is or proves to have been incorrect, inaccurate or misleading in any material respect when made or deemed to have been made.
The following occurs in respect of the Issuer or Material Subsidiary:
|
(i) |
general suspension of payments, or a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary
arrangement, scheme of arrangement or otherwise) under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, |
|
(ii) |
a composition, compromise, assignment or arrangement with any creditor which has a material adverse effect on the Issuers ability to perform
its payment obligations under this Bond Agreement, or |
22
Norsk Tillitsmann ASA
|
(iii) |
the appointment of a liquidator (other than in respect of a solvent liquidation), receiver, administrative receiver, administrator, compulsory
manager or other similar officer of any substantial part of its assets. |
The Issuer or any Material Subsidiary has a substantial portion of its assets impounded, confiscated, attached or subject to
distraint, or is subject to enforcement of any security over any substantial portion of its assets.
|
(g) |
Dissolution, appointment of liquidator or analogous proceedings |
The Issuer or any Material Subsidiary is resolved to be dissolved or a liquidator, administrator or the like is appointed or
requested to be appointed under any law relating to bankruptcy, insolvency or reorganization or relief of debtors.
|
(h) |
Impossibility or illegality |
It is or becomes impossible or unlawful for any Group Company or the Issuer to fulfill or perform any of the material terms of
the Finance Documents to which it is a party.
Any claim, litigation, arbitration or administrative proceedings against any Group Company or the Issuer is adversely
determined against the Group Company or the Issuer and has (or, in the reasonable opinion of the Bond Trustee, after consultations with the Issuer, would reasonably be expected to have) a Material Adverse Effect.
|
(j) |
Material adverse effect |
Any event or series of events occurs which, in the reasonable opinion of the Bond Trustee, after consultations with the Issuer,
has a Material Adverse Effect.
15.2 |
In the event that one or more of the circumstances mentioned in Clause 15.1 occurs and is continuing, the Bond Trustee can, in order to protect the
interests of the Bondholders, declare the Outstanding Bonds including accrued interest and expenses to be in default and due for immediate payment. |
The Bond Trustee may at its discretion, on behalf of the Bondholders, take every measure necessary to recover the amounts due
under the Outstanding Bonds, and all other amounts outstanding under the Bond Agreement and any other Finance Document.
15.3 |
In the event that one or more of the circumstances mentioned in Clause 15.1 occurs and is continuing, the Bond Trustee shall declare the
Outstanding Bonds including accrued interest and expenses to be in default and due for payment if: |
|
(a) |
the Bond Trustee receives a demand in writing with respect to the above from Bondholders representing at least 1/5 of the aggregate principal
amount of Voting Bonds, and the Bondholders Meeting has not decided on other solutions, or |
|
(b) |
the Bondholders pursuant to action at a Bondholders Meeting have decided to declare the Outstanding Bonds in default and due for payment.
|
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Norsk Tillitsmann ASA
In either case the Bond Trustee shall on behalf of the Bondholders take every
measure necessary to recover the amounts due under the Outstanding Bonds. The Bond Trustee can request satisfactory security for any possible liability and anticipated expenses, from those Bondholders who requested that the declaration of default be
made pursuant to sub clause (a) above and/or those who voted in favour of the decision pursuant to sub clause (b) above.
15.4 |
In the event that the Bond Trustee pursuant to the terms of Clauses 15.2 or 15.3 declares the Outstanding Bonds to be in default and due for
payment, the Bond Trustee shall immediately deliver to the Issuer a notice demanding payment of interest and principal due to the Bondholders under the Outstanding Bonds including accrued interest and interest on overdue amounts and expenses.
|
16.1 |
Authority of the Bondholders meeting |
16.1.1 |
The Bondholders Meeting represents the supreme authority of the Bondholders community in all matters relating to the Bonds. If a resolution
by or an approval of the Bondholders is required, resolution of such shall be passed at a Bondholders Meeting. Resolutions passed at Bondholders Meetings shall be binding upon and prevail for all the Bonds and Bondholders.
|
16.2 |
Procedural rules for Bondholders meetings |
16.2.1 |
A Bondholders Meeting shall be held at the request of: |
|
(b) |
Bondholders representing at least 1/10 of the aggregate principal amount of Voting Bonds, |
|
(c) |
the Exchange, if the Bonds are listed, or |
16.2.2 |
The Bondholders Meeting shall be summoned by the Bond Trustee. A request for a Bondholders Meeting shall be made in writing to the Bond
Trustee, and shall clearly state the matters to be discussed. |
16.2.3 |
If the Bond Trustee has not summoned a Bondholders Meeting within 10 ten Business Days after having received such a request,
then the requesting party may summons the Bondholders Meeting itself. |
16.2.4 |
Summons to a Bondholders Meeting shall be dispatched no later than 10 ten Business Days prior to the Bondholders Meeting. The
summons and a confirmation of each Bondholders holdings of Bonds shall be sent to all Bondholders registered in the Securities Register at the time of distribution, with a copy to the Issuer. The summons shall also be sent to the Exchange for
publication. |
16.2.5 |
The summons shall specify the agenda of the Bondholders Meeting. The Bond Trustee may in the summons also set forth other matters on the
agenda than those requested. If amendments to this Bond Agreement have been proposed, the main content of the proposal shall be stated in the summons. |
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Norsk Tillitsmann ASA
16.2.6 |
The Bond Trustee may restrict the Issuer from making any changes of Voting Bonds in the period from distribution of the summons until the
Bondholders Meeting, by serving notice to it to such effect. |
16.2.7 |
Matters that have not been reported to the Bondholders in accordance with the procedural rules for summoning of a Bondholders Meeting may
only be adopted with the approval of all Voting Bonds. |
16.2.8 |
The Bondholders Meeting shall be held on premises designated by the Bond Trustee. The Bondholders Meeting shall be opened and shall,
unless otherwise decided by the Bondholders Meeting, be chaired by the Bond Trustee. If the Bond Trustee is not present, the Bondholders Meeting shall be opened by a Bondholder, and be chaired by a representative elected by the
Bondholders Meeting. |
16.2.9 |
Minutes of the Bondholders Meeting shall be kept. The minutes shall state the numbers of Bondholders represented at the Bondholders
Meeting, the resolutions passed at the meeting, and the result of the voting. The minutes shall be signed by the chairman and at least one other person elected by the Bondholders Meeting. The minutes shall be deposited with the Bond Trustee
and shall be available to the Bondholders. |
16.2.10 |
The Bondholders, the Bond Trustee and provided the Bonds are listedrepresentatives of the Exchange, have the right to attend the
Bondholders Meeting. The chairman may grant access to the meeting to other parties, unless the Bondholders Meeting decides otherwise. Bondholders may attend by a representative holding proxy. Bondholders have the right to be assisted by
an advisor. In case of dispute the chairman shall decide who may attend the Bondholders Meeting and vote the Bonds. |
16.2.11 |
Representatives of the Issuer have the right to attend the Bondholders Meeting. The Bondholders Meeting may resolve that the
Issuers representatives may not participate in particular matters. The Issuer has the right to be present during the voting. |
16.3 |
Resolutions passed at Bondholders meetings |
16.3.1 |
At the Bondholders Meeting each Bondholder may cast one vote for each Voting Bond owned at close of business on the day prior to the date of
the Bondholders Meeting in accordance with the records registered in the Securities Register. Whoever opens the Bondholders Meeting shall adjudicate any question concerning which Bonds shall count as the Issuers Bonds. The
Issuers Bonds shall not have any voting rights. |
16.3.2 |
In all matters, the Issuer, the Bond Trustee and any Bondholder have the right to demand vote by ballot. In case of parity of votes, the chairman
shall have the deciding vote, regardless of the chairman being a Bondholder or not. |
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Norsk Tillitsmann ASA
16.3.3 |
In order to form a quorum, at least half (1/2) of the aggregate principal amount of the Voting Bonds must be represented at the meeting, see
however Clause 16.4. Even if less than half (1/2) of the aggregate principal amount of the Voting Bonds are represented, the Bondholders Meeting shall be held and voting completed. |
16.3.4 |
If a quorum exists, resolutions shall be passed by simple majority of the Voting Bonds represented at the Bondholders Meeting, unless
otherwise set forth in Clause 16.3.5. |
16.3.5 |
In the following matters, approval by the holders of at least 2/3 of the aggregate principal amount of the Voting Bonds represented at the
Bondholders Meeting is required: |
|
(a) |
amendment of the terms of this Bond Agreement regarding the interest rate, the tenor, redemption price and other terms and conditions directly
affecting the cash flow of the Bonds; |
|
(b) |
transfer of rights and obligations of this Bond Agreement to another issuer (Issuer), or |
|
(c) |
change of Bond Trustee. |
16.3.6 |
The Bondholders Meeting may not adopt resolutions which may give certain Bondholders or others an unreasonable advantage at the expense of
other Bondholders. |
16.3.7 |
The Bond Trustee shall ensure that resolutions passed at the Bondholders Meeting are properly implemented. |
16.3.8 |
The Issuer, the Bondholders and the Exchange shall be notified of resolutions passed at the Bondholders Meeting. |
16.4 |
Repeated Bondholders meeting |
16.4.1. |
If the Bondholders Meeting does not form a quorum pursuant to Clause 16.3.3, a repeated Bondholders Meeting may be summoned to vote on
the same matters. The attendance and the voting result of the first Bondholders Meeting shall be specified in the summons for the repeated Bondholders Meeting. |
16.4.2 |
When a matter is tabled for discussion at a repeated Bondholders Meeting, a valid resolution may be passed even though less than half
(1/2) of the aggregate principal amount of the Voting Bonds are represented. |
17.1 |
The role and authority of the Bond Trustee |
17.1.1 |
The Bond Trustee shall monitor the compliance by the Issuer of its obligations under this Bond Agreement and applicable laws and regulations which
are relevant to the terms of this Bond Agreement, including supervision of timely and correct payment of principal or interest, inform the Bondholders, the Paying Agent and the Exchange of relevant information which is obtained and received in its
capacity as Bond |
26
Norsk Tillitsmann ASA
|
Trustee (however, this shall not restrict the Bond Trustee from discussing matters of confidentiality with the Issuer), arrange Bondholders Meetings, and make the decisions and implement
the measures resolved pursuant to this Bond Agreement. The Bond Trustee is not obligated to assess the Issuers financial situation beyond what is directly set forth in this Bond Agreement. |
17.1.2 |
The Bond Trustee may take any step necessary to ensure the rights of the Bondholders in all matters pursuant to the terms of this Bond Agreement.
The Bond Trustee may postpone taking action until such matter has been put forward to the Bondholders Meeting. |
17.1.3 |
Except as provided for in Clause 17.1.5 the Bond Trustee may reach decisions binding for all Bondholders concerning this Bond Agreement, including
amendments to the Bond Agreement and waivers or modifications of certain provisions, which in the opinion of the Bond Trustee, do not have a Material Adverse Effect on the rights or interests of the Bondholders pursuant to this Bond Agreement.
|
17.1.4 |
Except as provided for in Clause 17.1.5, the Bond Trustee may reach decisions binding for all Bondholders in circumstances other than those
mentioned in Clause 17.1.3 provided prior notification has been made to the Bondholders. Such notice shall contain a proposal of the amendment and the Bond Trustees evaluation. Further, such notification shall state that the Bond Trustee may
not reach a decision binding for all Bondholders in the event that any Bondholder submits a written protest against the proposal within a deadline set by the Bond Trustee. Such deadline may not be less than five (5) Business Days following the
dispatch of such notification. |
17.1.5 |
The Bond Trustee may not reach decisions pursuant to Clauses 17.1.3 or 17.1.4 for matters set forth in Clause 16.3.5 except to rectify obvious
incorrectness, vagueness or incompleteness. |
17.1.6 |
The Bond Trustee may not adopt resolutions which may give certain Bondholders or others an unreasonable advantage at the expense of other
Bondholders. |
17.1.7 |
The Issuer, the Bondholders and the Exchange shall be notified of decisions made by the Bond Trustee pursuant to Clause 17.1 unless such notice
obviously is unnecessary. |
17.1.8 |
The Bondholders through action at a Bondholders Meeting may replace the Bond Trustee without the Issuers approval, as provided for in
Clause 16.3.5. |
17.2 |
Liability and indemnity |
17.2.1 |
The Bond Trustee is liable only for direct losses incurred by Bondholders or the Issuer as a result of negligence or willful misconduct by the Bond
Trustee in performing its functions and duties as set forth in this Bond Agreement. The Bond Trustee is not liable for the content of information provided to the Bondholders on behalf of the Issuer. |
27
Norsk Tillitsmann ASA
17.2.2 |
The Issuer is liable for, and shall indemnify the Bond Trustee fully in respect of, all losses, expenses and liabilities incurred by the Bond
Trustee as a result of negligence by the Issuer (including its directors, management, officers, employees, agents and representatives) to fulfill its obligations under the terms of this Bond Agreement and any other Finance Documents, including
losses incurred by the Bond Trustee as a result of the Bond Trustees actions based on misrepresentations made by the Issuer in connection with the establishment and performance of this Bond Agreement and the other Finance Documents.
|
17.3 |
Change of Bond Trustee |
17.3.1 |
Change of Bond Trustee shall be carried out pursuant to the procedures set forth in Clause 16. The Bond Trustee shall continue to carry out its
duties as bond trustee until such time that a new Bond Trustee is elected. |
17.3.2 |
The fees and expenses of a new bond trustee shall be covered by the Issuer pursuant to the terms set out in Clause 14, but may be recovered wholly
or partially from the Bond Trustee if the change is due to a breach of the Bond Trustee duties pursuant to the terms of this Bond Agreement or other circumstances for which the Bond Trustee is liable. |
17.3.3 |
The Bond Trustee undertakes to co-operate so that the new bond trustee receives without undue delay following the Bondholders Meeting the
documentation and information necessary to perform the functions as set forth under the terms of this Bond Agreement. |
18.1 |
The community of Bondholders |
18.1 |
By virtue of holding Bonds, which are governed by this Bond Agreement (which pursuant to Clause 2.1.1 is binding upon all Bondholders), a community
exists between the Bondholders, implying, inter alia, that |
|
(a) |
the Bondholders are bound by the terms of this Bond Agreement, |
|
(b) |
the Bond Trustee has power and authority to act on behalf of the Bondholders, |
|
(c) |
the Bond Trustee has, in order to administer the terms of this Bond Agreement, access to the Securities Register to review ownership of Bonds
registered in the Securities Register, |
|
(d) |
this Bond Agreement establishes a community between Bondholders meaning that; |
|
(i) |
the Bonds rank pari passu between each other, |
|
(ii) |
the Bondholders may not, based on this Bond Agreement, act directly towards the Issuer and may not themselves institute legal proceedings against
the Issuer, provided, however that this provision shall not restrict the Bondholders from exercising any of their individual rights derived from the Bond Agreement. |
|
(iii) |
the Issuer may not, based on this Bond Agreement, act directly towards the Bondholders, |
28
Norsk Tillitsmann ASA
|
(iv) |
the Bondholders may not cancel the Bondholders community, and |
|
(v) |
an individual Bondholder may not resign from the Bondholders community. |
18.2.1 |
The Issuer may, at its option and at any time, elect to have certain obligations discharged (see Clause 18.2.2) upon complying with the following
conditions (Covenant Defeasance); |
|
(a) |
the Issuer shall have irrevocably pledged to the Bond Trustee for the benefit of the Bondholders cash or government obligations acceptable by the
Bond Trustee (the Defeasance Pledge) in such amounts as will be sufficient for the payment of principal and interest on the Outstanding Bonds to Maturity Date; |
|
(b) |
the Issuer shall, if required by the Bond Trustee, provide a legal opinion reasonably acceptable to the Bond Trustee to the effect that the
Bondholders will not recognize income, gain or loss for income tax purposes (under US federal or Norwegian tax law, if applicable) as a result of the Defeasance Pledge and Covenant Defeasance, and will be subject to such income tax on the same
amount and in the same manner and at the same times as would have been the case if the Defeasance Pledge had not occurred; |
|
(c) |
no Event of Default shall have occurred and be continuing on the date of establishment of the Defeasance Pledge, or insofar as Events of Default
from bankruptcy or insolvency events are concerned, at any time in the period ending on the 181st day after the date of establishment of the Defeasance Pledge; |
|
(d) |
neither the Defeasance Pledge nor the Covenant Defeasance results in a breach or violation of any material agreement or instrument binding upon the
Issuer, or the certificate of association or partnership agreement governing the Issuer; |
|
(e) |
the Issuer shall have delivered to the Bond Trustee a certificate signed by the Chief Financial Officer of the GP that the Defeasance Pledge was
not made by the Issuer with the intent of preferring the Bondholders over any other creditors of the Issuer or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Issuer or others; |
|
(f) |
the Issuer shall have delivered to the Bond Trustee any certificate or legal opinion reasonably required regarding the Covenant Defeasance or
Defeasance Pledge (including certificate from the Chief Financial Officer of the GP and a legal opinion from its legal counsel to the effect that all conditions for Covenant Defeasance have been complied with; and that (i) the Defeasance Pledge
will not be subject to any rights of creditors of the Issuer, (ii) the Defeasance Pledge will constitute a valid, perfected and enforceable security interest in favour of the Bond Trustee for the benefit of the Bondholders, and (iii) after
the 181st day following the establishment of the Defeasance Pledge, the funds and assets so pledged will not be subject to the effects of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors rights generally under the laws of the jurisdiction where the Defeasance Pledge was established and the corporate domicile of the Issuer. |
29
Norsk Tillitsmann ASA
18.2.2 |
Upon the exercise by the Issuer of its option under Clause 18.2.1; |
|
(a) |
the Issuer shall be released from their obligations under all provisions in Clause 13, except 13.2.1 (a), (g) and (h). |
|
(b) |
the Issuer shall not (and shall ensure that all Group Companies shall not) take any actions that may cause the value of the security interest
created by this Covenant Defeasance to be reduced, and shall at the request of the Bond Trustee execute, or cause to be executed, such further documentation and perform such other acts as the Bond Trustee may reasonably require in order for the
security interests to remain valid, enforceable and perfected by the Bond Trustee for the account of the Bondholders; |
|
(c) |
any guarantor of the Issuers obligations under the Bonds shall be discharged from their obligations under the related guarantee, and the
guarantee(s) shall cease to have any legal effect; |
|
(d) |
all other provisions of the Bond Agreement (except to the extend indicated in clauses (a) (c) above) shall remain fully in force
without any modifications. |
18.2.3 |
All moneys covered by the Defeasance Pledge shall be applied by the Bond Trustee, in accordance with the provisions of this Bond Agreement, to the
payment to the Bondholders of all sums due to them under this Bond Agreement on the due date thereof. |
Any excess funds not required for the payment of principal, premium and interest to the Bondholders (including any expenses and
fees due to the Bond Trustee hereunder) shall be returned to the Issuer.
18.3 |
Limitation of claims |
18.3.1 |
All claims under the Bonds and this Bond Agreement for payment, including interest and principal, shall be subject to the time-bar provisions of
the Norwegian Limitation Act of May 18, 1979 No. 18. |
18.4 |
Access to information |
18.4.1 |
The Bond Agreement is available to anyone and copies may be obtained from the Bond Trustee or the Issuer. The Issuer shall ensure that the Bond
Agreement is available in copy form to the general public until all the Bonds have been fully discharged. |
18.4.2 |
The Bond Trustee shall, in order to carry out its functions and obligations under the Bond Agreement, have access to the Securities Register for
the purposes of reviewing ownership of the Bonds registered in the Securities Register. |
30
Norsk Tillitsmann ASA
18.5.1 |
All amendments of this Bond Agreement shall be made in writing, and shall unless otherwise provided for by this Bond Agreement, only be made with
the approval of all parties hereto. |
18.6 |
Notices, contact information |
18.6.1 |
Written notices, warnings, summons and other communications to the Bondholders made by the Bond Trustee shall be sent via the Securities Register
with a copy to the Issuer and the Exchange. Information to the Bondholders may, in lieu of the requirement in the immediately preceding sentence, be published at the web site www.stamdata.no. |
18.6.2 |
The Issuers written notifications to the Bondholders shall be sent via the Bond Trustee, or alternatively through the Securities Register
with a copy to the Bond Trustee and the Exchange. |
18.6.3 |
Unless otherwise specifically provided, all notices or other communications under or in connection with this Bond Agreement between the Bond
Trustee and the Issuer shall be given or made in writing, by letter, or facsimile. Any such notice or communication shall be deemed to be given or made as follows: |
|
(a) |
if by letter, when delivered at the address of the relevant Party; |
|
(b) |
if by facsimile, when received. |
However, a notice given in accordance with the above but received on a day which is not a business day in the place of receipt,
or after 5:00 p.m. on such a business day, shall only be deemed to be given at 9:00 a.m. on the next business day in that place.
18.6.4 |
The Issuer and the Bond Trustee shall ensure that the other party is kept informed of changes in postal address, e-mail address, telephone and fax
numbers and contact persons. |
18.7 |
Dispute resolution and legal venue |
18.7 |
This Bond Agreement and all disputes arising out of, or in connection with this Bond Agreement between the Bond Trustee, the Bondholders and the
Issuer, shall be governed by Norwegian law. |
All disputes arising out of, or in connection with this Bond
Agreement between the Bond Trustee, the Bondholders and the Issuer, shall be exclusively resolved by the courts of Norway, with the District Court of Oslo as sole legal venue.
18.8.1 |
Without prejudice to any other mode of service, the Issuer: |
|
(a) |
irrevocably appoints Teekay Shipping Norway AS (a limited liability company incorporated in Norway with Company No. 964 111 723) as its agent for
service of process relating to any proceedings before the Norwegian courts in connection with any Finance Document; |
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Norsk Tillitsmann ASA
|
(b) |
agrees that failure by the process agent to notify it of the process will not invalidate the proceedings concerned; and |
|
(c) |
consents to the service of process relating to any such proceedings before the Norwegian courts by prepaid posting of a copy of the process to its
address stated in this Bond Agreement. |
*****
32
Norsk Tillitsmann ASA
This Bond Agreement has been executed in two originals, of which the Issuer and the Bond Trustee retain one
each.
|
|
|
The Issuer: TEEKAY OFFSHORE PARTNERS
L.P. By: Teekay Offshore GP L.L.C., its general
partner
By:
Position: |
|
The Bond Trustee: NORSK TILLITSMANN
ASA
By:
Position: |
33
Norsk Tillitsmann ASA
Attachment 1
COMPLIANCE CERTIFICATE
Norsk Tillitsmann
ASA
P.O. Box 1470 Vika
N-0116 Oslo
Norway
Fax: + 47 22 87 94 10
E-mail: mail@trustee.no
[date]
Dear Sirs,
TEEKAY OFFSHORE PARTNERS L.P. BOND
AGREEMENT 2014/2019 ISIN 0010700909
We refer to the Bond Agreement for the above mentioned Bond Issue made between Norsk
Tillitsmann ASA as Bond Trustee on behalf of the Bondholders, and the undersigned as Issuer under which a Compliance Certificate shall be issued. This letter constitutes the Compliance Certificate for the period [PERIOD].
Capitalised words and expressions are used herein as defined in the Bond Agreement.
With reference to Clause 13.2.3 we hereby certify that:
1. |
all information contained herein is true and accurate and there has been no change which would reasonably be expected to have a material adverse
effect on the financial condition of the Issuer since the date of the last accounts or the last Compliance Certificate submitted to you. |
2. |
the covenants set out in Clause 13 are satisfied in all material respects; |
3. |
in accordance with Clause 13.5(a)(i), the Free Liquidity and undrawn committed revolving credit lines available to the Group (but excluding
committed revolving credit lines with less than six months to maturity) is [ ] |
4. |
in accordance with Clause 13.5(a)(ii), the percentage of Free Liquidity and undrawn committed revolving credit lines to Total Debt is [ ]
|
Copies of our latest consolidated [annual audited/quarterly unaudited] accounts are enclosed.
34
Norsk Tillitsmann ASA
Yours faithfully,
Teekay Offshore Partners L.P.
By: Teekay Offshore GP L.L.C.,
its general partner
|
|
Name of authorized person |
Enclosure: [copy of any written documentation]
35
Exhibit 2.9
US$330,000,000 Senior Secured Revolving Credit Facility Agreement
Dated 14 October 2014
(1) |
Teekay Offshore Partners L.P. |
(as Borrower)
Nordea Bank Finland Plc, New York Branch
Scotiabank Europe plc
ABN AMRO Capital USA LLC
BNP Paribas
Swedbank AB (publ)
and others
(as Lenders)
Nordea Bank Finland Plc, New York Branch
Scotiabank Europe plc
ABN AMRO Capital USA LLC
BNP Paribas
Swedbank AB (publ)
and others
(as Mandated Lead Arrangers)
Nordea Bank Finland Plc, New York Branch
(as Bookrunners)
(5) |
DNB Bank ASA, New York Branch |
(as Agent)
Contents
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Page |
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1 |
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Definitions and Interpretation |
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1 |
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2 |
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The Loan and its Purposes |
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20 |
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3 |
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Conditions of Utilisation |
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21 |
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4 |
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Advance |
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24 |
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5 |
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Repayment |
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25 |
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6 |
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Prepayment |
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25 |
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7 |
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Interest |
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26 |
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8 |
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Indemnities |
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28 |
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9 |
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Fees |
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34 |
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10 |
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Security and Application of Moneys |
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35 |
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11 |
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Representations and Warranties |
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37 |
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12 |
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Undertakings and Covenants |
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41 |
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13 |
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Events of Default |
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48 |
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14 |
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Assignment and Sub-Participation |
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52 |
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15 |
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The Agent and the Lenders |
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54 |
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16 |
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Set-Off |
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67 |
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17 |
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Payments |
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67 |
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18 |
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Notices |
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69 |
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19 |
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Partial Invalidity |
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71 |
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20 |
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Remedies and Waivers |
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71 |
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21 |
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Miscellaneous |
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71 |
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22 |
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Confidentiality |
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72 |
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23 |
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Law and Jurisdiction |
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75 |
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Schedule 1 |
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Part I: The Lenders and the Commitments |
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77 |
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Part II: Mandated Lead Arrangers |
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80 |
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Schedule 2 |
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Conditions Precedent and Subsequent |
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82 |
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Part I (A): Conditions precedent to First Drawdown Date |
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82 |
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Part I (B): Conditions precedent to subsequent Drawdown Dates |
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85 |
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Part II: Conditions subsequent to the First Drawdown Date |
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86 |
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Schedule 3 |
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Form of Drawdown Notice |
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87 |
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Schedule 4 |
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Form of Transfer Certificate |
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88 |
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Schedule 5 |
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Form of Compliance Certificate |
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91 |
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Schedule 6 |
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The Collateral Vessels |
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93 |
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Schedule 7 |
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The Collateral Owners |
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95 |
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Loan Agreement
Dated 14 October 2014
Between:
(1) |
Teekay Offshore Partners L.P., a limited partnership formed and existing under the laws of the Republic of the Marshall Islands whose
registered office is at The Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands, MH96960 (the Borrower); and |
(2) |
The banks, financial institutions and other institutional lenders listed in Schedule 1, Part I each acting through its office at the address
indicated against its name in Schedule 1, Part I (together the Lenders and each a Lender); and |
(3) |
The entities listed in Schedule 1, Part II, each acting through its office at the address indicated against its name in Schedule 1, Part II, acting
as mandated lead arrangers (in that capacity each an MLA and together the MLAs); and |
(4) |
DNB Markets, Inc., acting through its office at 200 Park Avenue, New York, NY10166-0396, United States of America and Nordea Bank Finland
Plc, New York Branch acting through its office at 437 Madison Avenue, 21st Floor, New York, NY10022, United States of America (in that capacity each a Bookrunner and
together the Bookrunners); and |
(5) |
DNB Bank ASA, New York Branch, acting as agent and security trustee through its office at 200 Park Avenue, New York, NY10166-0396, United
States of America acting as agent and security trustee (in that capacity the Agent); and |
Whereas:
Each of the Lenders has agreed to advance to the Borrower its Commitment (aggregating, with all the other Commitments, a revolving credit
facility in an amount of three hundred and thirty million Dollars ($330,000,000)) to assist the Borrower to refinance the Existing Loans and for general working capital purposes.
It is agreed as follows:
1 |
Definitions and Interpretation |
Acceptable Bank means a bank or financial institution which has a rating for its long-term unsecured and
non-credit-enhanced debt originations of A+ or higher by Standard & Poors Ranking Services or Fitch Ratings Ltd or A1 or higher by Moodys Investors Services Limited or a comparable rating from an internationally recognised
credit rating agency.
Accounts means the consolidated financial accounts of the Borrower to be provided
to the Agent pursuant to Clauses 12.1.1 and Clause 12.1.3.
Page 1
Account Holders means DNB Bank ASA, New York Branch and DNB
Bank ASA, Oslo Branch each in its capacity as account bank and Account Holder means either one of them.
Account Security Deeds means the account security deeds over the Earnings Accounts granted by the Collateral
Owners, referred to in Clause 10.1.4.
Affiliate means, in relation to any entity, a Subsidiary of that
entity, a Holding Company of that entity or any other Subsidiary of that Holding Company.
Approved Broker
means Fearnleys, RS Platou, H. Clarkson & Co. Ltd, Simpson Spence & Young Shipbrokers Ltd. and P. F. Bassoe AS or such other reputable and independent consultancy or ship broker firm approved by the Agent (acting on the
instructions of the Majority Lenders).
Approved Managers means any member of the Group or the Teekay
Group, or such other commercial and/or technical managers of the Collateral Vessels nominated by the Borrower as the Agent may approve (acting on the instructions of the Majority Lenders).
Assignments means all the forms of assignment referred to in Clause 10.1.2 and Assignment
means any one of them.
Authorisation means an authorisation, consent, approval, resolution,
licence, exemption, filing, notarisation or registration.
Break Costs means all sums payable by the
Borrower from time to time under Clause 8.3.
Business Day means a day on which banks are open for
business of a nature contemplated by this Agreement (and not authorised by law to close) in New York, London, Oslo and Paris.
Change of Control means:
|
(a) |
in relation to the Borrower: |
|
(i) |
where all management powers over the business and affairs of the Borrower are vested exclusively in its general partner: |
|
(A) |
Teekay ceases to own, directly or indirectly, a minimum of fifty per cent (50%) of the voting rights in Teekay Offshore GP LLC; or
|
|
(B) |
Teekay Offshore GP LLC ceases to be the general partner of the Borrower; or |
|
(ii) |
where all management powers over the business and affairs of the Borrower are vested exclusively in the board of directors of the Borrower, Teekay
ceases to be the holder, directly or indirectly, of a minimum of fifty per cent (50%) of the voting rights to elect the members of that board of directors or of the voting rights to elect a minimum of fifty per cent (50%) of that board of
directors; and |
Page 2
|
(b) |
in relation to any other Security Party, where there is a change in the legal or beneficial ownership of any such company from that previously
advised to the Agent unless following such change the legal and beneficial ownership of that company remains, directly or indirectly, in the ownership of a member of the Group or, in the case of Petrojarl UK, either the Group or the Teekay Group.
|
Charged Property means all of the assets of the Security Parties which from time to
time are, or are expressed to be, the subject of the Security Documents.
Charters means the Head
Charters and the Sub-Charters and each a Charter.
Code means the US Internal Revenue
Code of 1986.
Collateral Owners means the companies listed in Schedule 7, being the owners of the
Collateral Vessels and Collateral Owner means either one of them.
Collateral Vessels
means the vessels listed in Schedule 6, each registered under the flag and in the name and ownership of the Collateral Owner indicated in that Schedule and Collateral Vessel means any one of them.
Commitment means, in relation to each Lender, the aggregate amount of the Loan which that Lender agrees to
advance to the Borrower as its several liability as indicated against the name of that Lender in Schedule 1, Part I and/or, where the context permits, the amount of the Loan advanced by that Lender and remaining outstanding and
Commitments means more than one of them.
Commitment Commission means the commitment
commission to be paid by the Borrower to the Agent on behalf of the Lenders pursuant to Clause 9.
Commitment
Termination Date means the date being three (3) months before the Maturity Date or such later date as the Lenders may in their discretion agree.
Companies means each ISM Company and each ISPS Company (each a Company).
Compliance Certificate means a certificate substantially in the form set out in Schedule 5.
Confidential Information means all information relating to any Security Party, any other member of the
Group, the Finance Documents or the Loan of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party
under, the Finance Documents or the Loan from either:
|
(a) |
any Security Party, any other member of the Group or any of its advisers; or |
Page 3
|
(b) |
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Security Party, any other member of
the Group or any of its advisers, |
in whatever form, and includes information given orally and any
document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
|
(i) |
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 22; or
|
|
(ii) |
is identified in writing at the time of delivery as non-confidential by any Security Party, any other member of the Group or any of its advisers;
or |
|
(iii) |
is known by that Finance Party before the date the information is disclosed to it in accordance with (a) or (b) or is lawfully obtained
by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with any Security Party or any other member of the Group and which, in either case, as far as that Finance Party is aware, has not been
obtained in breach of, and is not otherwise subject to, any obligation of confidentiality. |
Confidentiality Undertaking means a confidentiality undertaking substantially in a recommended form of the
Loan Market Association at the relevant time.
Currency of Account means, in relation to any payment to
be made to a Finance Party under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document.
Deeds of Covenants means the deeds of covenants referred to in Clause 10.1.1 and Deed of
Covenant means any one of them.
Default means an Event of Default or any event or
circumstance specified in Clause 13.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
Defaulting Lender means any Lender:
|
(a) |
which has failed to make its participation in a Drawing available (or has notified the Agent or the Borrower (which has notified the Agent) that it
will not make its participation in the relevant Drawing available) by the Drawdown Date in accordance with Clause 4.2 or |
|
(b) |
which has otherwise rescinded or repudiated a Finance Document; or |
|
(c) |
with respect to which an Insolvency Event has occurred and is continuing, |
unless, in the case of (a):
|
(i) |
its failure to pay is caused by: |
|
(A) |
administrative or technical error; or |
|
(B) |
a Disruption Event; and |
payment is made within three Business Days of its due date; or
Page 4
|
(ii) |
the Lender is disputing in good faith whether it is contractually obliged to make the payment in question. |
Disruption Event means either or both of:
|
(a) |
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in
order for payments to be made in connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
|
|
(b) |
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations
of a Party preventing that, or any other Party: |
|
(i) |
from performing its payment obligations under the Finance Documents; or |
|
(ii) |
from communicating with other Parties in accordance with the terms of the Finance Documents, |
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Dollars, US$ and $ each means available and freely transferable and
convertible funds in lawful currency of the United States of America.
Drawdown Date means the date on
which a Drawing is advanced under Clause 4.
Drawdown Notice means a notice substantially in the form
set out in Schedule 3.
Drawing means any one amount advanced or to be advanced pursuant to a Drawdown
Notice or, where the context permits, the amount advanced and for the time being outstanding and Drawings means more than one of them.
Earnings means all hires, freights, pool income and other sums payable to or for the account of a Collateral
Owner and/or a Head Charterer in respect of a Collateral Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any
requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Collateral Vessel.
Earnings Accounts means together the bank account numbered 15760001 in the name of TNOL with the
relevant Account Holder and designated TNOL - Earnings Account and the bank account numbered 50010443102 in the name of NOL with the relevant Account Holder and designated NOL - Earnings Account.
Encumbrance means a mortgage, charge, assignment, pledge, lien, or other security interest securing any
obligation of any person or any other agreement or arrangement having a similar effect.
Page 5
Environmental Approvals means any present or future permit,
licence, approval, ruling, variance, exemption or other authorisation required under the applicable Environmental Laws.
Environmental Claim means any and all enforcement, clean-up, removal, administrative, governmental,
regulatory or judicial actions, orders, demands or investigations instituted or completed pursuant to any Environmental Laws or Environmental Approvals.
Environmental Incident means:
|
(a) |
any release, emission, spill or discharge from a Collateral Vessel or into or upon the air, sea, land or soils (including the seabed) or surface
water of Environmentally Sensitive Material within or from a Collateral Vessel; or |
|
(b) |
any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils
(including the seabed) or surface water from a vessel other than a Collateral Vessel and which involves a collision between a Collateral Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection
with which a Collateral Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or a Collateral Vessel and/or any Security Party and/or any operator or manager of a Collateral Vessel or any of its officers or
employees is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or |
|
(c) |
any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils
(including the seabed) or surface water otherwise than from a Collateral Vessel and in connection with which a Collateral Vessel is actually or potentially liable to be arrested and/or where any Security Party and/or any operator or manager of a
Collateral Vessel or any of its officers or employees is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval. |
Environmental Laws means all present and future laws, regulations, treaties and conventions of any
applicable jurisdiction which:
|
(a) |
have as a purpose or effect the protection of, and/or prevention of harm or damage to, the environment; |
|
(b) |
relate to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;
|
|
(c) |
provide remedies or compensation for harm or damage to the environment; or |
|
(d) |
relate to Environmentally Sensitive Materials or health or safety matters. |
Environmentally Sensitive Material means (i) oil and oil products and (ii) any other waste,
pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the environment or a nuisance to any person or that may make the enjoyment, ownership or
other territorial control of any affected land, property or waters more costly for such person to a material degree.
Page 6
Event of Default means any of the events or circumstances set
out in Clause 13.1.
Execution Date means the date on which this Agreement is executed by each of the
parties hereto.
Existing Loan Agreements means (i) the $940,000,000 secured reducing revolving
credit facility agreement dated 2 October 2006 (as amended and/or supplemented from time to time) made between Teekay Offshore Operating L.P. as borrower, the banks listed in Schedule 1 thereto as lenders, DNB Bank ASA (formerly known as DnB
NOR Bank ASA) as agent, DNB Bank ASA (formerly known as DnB NOR Bank ASA), Nordea Bank Norge ASA, New York Branch and BNP Paribas (as legal successor to Fortis Capital Corp.) as mandated lead arrangers, DNB Bank ASA (formerly known as DnB NOR Bank
ASA) and Nordea Bank Norge ASA, New York Branch as bookrunners and Commerzbank Aktiengesellschaft (as legal successor to Deutsche Schiffsbank AG by way of merger by absorption) as security agent and (ii) the $455,000,000 (reduced from an initial
$550,000,000) amended and restated secured reducing revolving credit facility agreement dated 26 June 2003 (as further amended and restated and/or supplemented from time to time) made between Norsk Teekay Holdings Ltd. as borrower, the banks
referred to therein as lenders, the banks referred to therein as mandated lead arrangers, Citigroup Global Markets Limited and DNB Bank ASA (formerly known as DnB NOR Bank ASA) as book runners and DNB Bank ASA (formerly known as DnB NOR Bank ASA) as
security trustee.
Existing Loans means the aggregate amount advanced and outstanding under the Existing
Loan Agreements on the First Drawdown Date.
Facility means the reducing revolving credit facility made
available by the Lenders to the Borrower pursuant to this Agreement.
Facility Office means:
|
(a) |
in respect of a Lender, the office or offices notified by that Lender to the Agent in writing on or before the date it becomes a Lender (or,
following that date, by not less than five (5) Business Days written notice) as the office or offices through which it will perform its obligations under this Agreement; or |
|
(b) |
in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes. |
Facility Period means the period beginning on the Execution Date and ending on the date when the whole of
the Indebtedness has been repaid in full, all commitments have been terminated and the Security Parties have ceased to be under any further actual or contingent liability to the Finance Parties under or in connection with the Finance Documents.
Page 7
Fair Market Value means the average of two (2) Valuations
of the fair market value of a Collateral Vessel obtained from two (2) Approved Brokers (selected by the Borrower), each addressed to the Agent.
FATCA means:
|
(a) |
sections 1471 to 1474 of the Code or any associated regulations or other official guidance; |
|
(b) |
any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the
US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or |
|
(c) |
any agreement pursuant to the implementation of paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or
any governmental or taxation authority in any other jurisdiction. |
FATCA Application
Date means:
|
(a) |
in relation to a withholdable payment described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain
other payments from sources within the US), 1 July 2014; |
|
(b) |
in relation to a withholdable payment described in section 1473(1)(A)(ii) of the Code (which relates to gross proceeds from
the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or |
|
(c) |
in relation to a passthru payment described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above,
1 January 2017, |
or, in each case, such other date from which such payment may become subject to a
deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA.
FATCA Exempt Party means a Party that is entitled to receive payments free from any FATCA Deduction.
FATCA FFI means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if
any Finance Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
Fee Letter
means any letter or letters dated on or about the date of this Agreement between the Borrower and the Agent setting out any of the fees referred to in Clause 9.
FICBV means Fronape International Company B.V. of 3rd
Floor, Weena 722, Rotterdam, 3014 DA, Netherlands.
Page 8
Finance Documents means this Agreement, the Security
Documents, the Fee Letter and any other document designated as such by the Agent and the Borrower and Finance Document means any one of them.
Finance Parties means the Agent, the MLAs, the Bookrunners and the Lenders and Finance Party
means any one of them.
Financial Indebtedness means any indebtedness for or in respect of:
|
(b) |
any acceptance credit; |
|
(c) |
any bond, note, debenture, loan stock or other similar instrument; |
|
(d) |
any redeemable preference share to the extent such shares can be redeemed before the Maturity Date; |
|
(e) |
any finance or capital lease; |
|
(f) |
receivables sold or discounted (otherwise than on a non-recourse basis); |
|
(g) |
any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the
then mark to market value of the derivative transaction will be used to calculate its amount); |
|
(h) |
any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing; |
|
(i) |
any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or
financial institution; or |
|
(j) |
any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to in paragraphs (a) to
(i) above. |
First Drawdown Date means the date on which the first Drawing is
advanced under Clause 4.
Free Liquidity means cash, cash equivalents and marketable securities of
maturities less than one (1) year to which the Group shall have free, immediate and direct access each as reflected in the Borrowers most recent quarterly management accounts forming part of the Accounts.
GAAP means generally accepted accounting principles in the United States of America.
Group means the Borrower and all of its Subsidiaries.
Guarantee means the guarantee and indemnity from each of the Collateral Owners referred to in Clause 10.1.3.
Page 9
Head Charter Rights in relation to certain Collateral Vessels
means all rights and benefits accruing to the Collateral Owner of that Collateral Vessel under or pursuant to the relevant Head Charter and not forming part of the Earnings.
Head Charters means the charters identified in Schedule 6 for certain of the Collateral Vessels only with at
any relevant time more than thirty six (36) months remaining and entered into between the relevant Collateral Owner and the relevant Head Charterer, and each a Head Charter.
Head Charterer in respect of certain Collateral Vessels only, means either UNS, TKN, Petrojarl UK or TNOL as
identified against the names of the relevant Collateral Vessels in Schedule 6.
Holding Company means,
in relation to any entity, any other entity in respect of which it is a Subsidiary.
Impaired Agent
means the Agent at any time when:
|
(a) |
it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due
date for payment; |
|
(b) |
the Agent otherwise rescinds or repudiates a Finance Document; |
|
(c) |
(if the Agent is also a Lender) it is a Defaulting Lender under (a) or (b) of the definition of Defaulting Lender; or
|
|
(d) |
an Insolvency Event has occurred and is continuing with respect to the Agent; |
unless, in the case of (a):
|
(i) |
its failure to pay is caused by: |
|
(A) |
administrative or technical error; or |
|
(B) |
a Disruption Event; and |
payment is made within three (3) Business Days of its due date; or
|
(ii) |
the Agent is disputing in good faith whether it is contractually obliged to make the payment in question. |
Indebtedness means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and
unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) which from time to time may be payable by the Borrower to any of the Finance Parties under all or any of the Finance
Documents.
Initial Reduction Amounts means the amount of sixteen million five hundred thousand Dollars
($16,500,000) by which the Maximum Amount shall be reduced on each Reduction Date and Initial Reduction Amount means any one of them.
Page 10
Insolvency Event in relation to an entity means that the
entity:
|
(a) |
is dissolved (other than pursuant to a consolidation, amalgamation or merger); |
|
(b) |
becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;
|
|
(c) |
makes a general assignment, arrangement or composition with or for the benefit of its creditors; |
|
(d) |
institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory
jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official; |
|
(e) |
has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or
presented by a person or entity not described in (d) and: |
|
(i) |
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation;
or |
|
(ii) |
is not dismissed, discharged, stayed or restrained in each case within thirty (30) days of the institution or presentation thereof;
|
|
(f) |
has exercised in respect of it one or more of the stabilisation powers pursuant to Part 1 of the Banking Act 2009 and/or has instituted against it
a bank insolvency proceeding pursuant to Part 2 of the Banking Act 2009 or a bank administration proceeding pursuant to Part 3 of the Banking Act 2009; |
|
(g) |
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);
|
|
(h) |
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets (other than, for so long as it is required by law or regulation not to be publicly disclosed, any such appointment which is to be made, or is made, by a person or entity described in (d));
|
|
(i) |
has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;
|
Page 11
|
(j) |
causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the
events specified in (a) to (i); or |
|
(k) |
takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.
|
Insurances means all policies and contracts of insurance (including all entries in
protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with a Collateral Vessel or her increased value or her Earnings and (where the context permits) all benefits
under such contracts and policies, including all claims of any nature and returns of premium.
Interest Payment
Date means each date for the payment of interest in accordance with Clause 7.6.
Interest Period
means each period for the payment of interest selected by the Borrower or agreed by the Agent pursuant to Clause 7.
Interpolated Screen Rate means, in relation to LIBOR, the rate which results from interpolating on a linear
basis between:
|
(a) |
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period; and
|
|
(b) |
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period,
|
each as of 11.00 a.m. London time on the Quotation Day.
ISM Code means the International Management Code for the Safe Operation of Ships and for Pollution
Prevention.
ISM Company means, at any given time, the company responsible for a Collateral
Vessels compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
ISPS Code means the
International Ship and Port Facility Security Code.
ISPS Company means, at any given time, the company
responsible for a Collateral Vessels compliance with the ISPS Code.
ISSC means a valid
international ship security certificate for a Collateral Vessel issued under the ISPS Code.
law or
Law means any law, statute, treaty, convention, regulation, instrument or other subordinate legislation or other legislative or quasi-legislative rule or measure, or any order or decree of any government, judicial or public or
other body or authority, or any directive, code of practice, circular, guidance note or other direction issued by any competent authority or agency (whether or not having the force of law).
Page 12
LIBOR means, in relation to any Drawing:
|
(a) |
the applicable Screen Rate; or |
|
(b) |
(if no Screen Rate is available for the relevant Interest Period) the Interpolated Screen Rate for that Drawing; or |
|
(i) |
no Screen Rate is available; or |
|
(ii) |
no Screen Rate is available for the relevant Interest Period and it is not possible to calculate an Interpolated Screen Rate for that Drawing;
|
the Reference Bank Rate,
as of, in case of paragraphs (a) and (b) above, 11.00 a.m. London time on the Quotation Day for the offering of
deposits in Dollars and for a period equal in length to the relevant Interest Period, provided that if any such rate is below zero, LIBOR will be deemed to be zero.
Loan means the aggregate amount advanced or to be advanced by the Lenders to the Borrower under Clause 4 or,
where the context permits, the amount advanced and for the time being outstanding.
Loan Outstandings
means the amount of any Drawings made and outstanding at any relevant time, to the extent not reduced by repayments, prepayments, cancellations and voluntary reductions.
Majority Lenders means a Lender or Lenders whose Commitments aggregate equal to or greater than sixty six
and two thirds per cent (66 2/3%) of the aggregate of all the Commitments.
Management Agreements means
the agreement(s) for the commercial and/or technical management of the Collateral Vessels entered into between (i) the Collateral Owners or the Head Charterers and (ii) any Approved Managers which are not members of the Group or the Teekay
Group.
Managers Confirmations means the written confirmation of any Approved Managers which are
not members of the Group or the Teekay Group that throughout the Facility Period unless otherwise agreed by the Agent:
|
(a) |
they will not, without the prior written consent of the Agent, subcontract or delegate the commercial or technical management of the Collateral
Vessels (as the case may be) to any third party; and |
|
(b) |
following the occurrence of an Event of Default which is continuing unremedied and unwaived, all claims of the Approved Managers against the
Collateral Owners and/or the Head Charterer (less any agreed reasonable deductible) shall be subordinated to the claims of the Finance Parties under the Finance Documents. |
Page 13
Margin means two point two five per cent (2.25%) per
annum.
Material Adverse Effect means a material adverse change in, or a material adverse effect on:
|
(a) |
the financial condition, assets, prospects or business of any Security Party or on the consolidated financial condition, assets, prospects or
business of the Group; |
|
(b) |
the ability of any Security Party to perform and comply with its obligations under any Security Document or to avoid any Event of Default;
|
|
(c) |
the validity, legality or enforceability of any Security Document; or |
|
(d) |
the validity, legality or enforceability of any security expressed to be created pursuant to any Security Document or the priority and ranking of
any such security, |
provided that, in determining whether any of the foregoing circumstances shall
constitute such a material adverse change or material adverse effect for the purposes of this definition, the Finance Parties shall consider such circumstance in the context of (x) the Group taken as a whole and (y) the ability of the
Borrower and the Collateral Owners to perform each of their obligations under the Security Documents.
Maturity
Date means the earlier of (i) the date falling five (5) years after the First Drawdown Date and (ii) 30 September 2019.
Maximum Amount means three hundred and thirty million Dollars ($330,000,000), as reduced from time to time
in accordance with the provisions of this Agreement.
Mortgages means the first priority statutory or
first preferred mortgages (as the case may be) referred to in Clause 10.1.1 together with the Deeds of Covenants (if applicable) and Mortgage means any one of them.
Necessary Authorisations means all Authorisations of any person including any government or other regulatory
authority required by applicable Law to enable it to:
|
(a) |
lawfully enter into and perform its obligations under the Security Documents to which it is party; |
|
(b) |
ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation, of such
Security Documents to which it is party; and |
|
(c) |
carry on its business from time to time. |
Negative Pledges means the negative pledges from the Shareholders referred to in Clause 10.1.5 and
Negative Pledge means any one of them.
Page 14
NOL means Navion Offshore Loading AS, a company incorporated
according to the law of Norway whose registered office is at Verven 4, N4014 Stavenger, Norway.
Party
means a party to this Agreement.
Permitted
Encumbrance means (i) any Encumbrance which has the prior written approval of the Agent acting on the instructions of the Majority Lenders, or (ii) any liens for current
crews wages and salvage and liens securing obligations incurred in the ordinary course of trading and/or operating a Collateral Vessel up to an aggregate amount at any time not exceeding five million Dollars (US$5,000,000) and not more than
thirty (30) days overdue.
Petrojarl UK means Teekay Petrojarl UK Limited of 20-22 Bedford Row,
London WC1R 4JS, England (formerly known as Golar-Nor (UK) Limited).
Pre-Approved Classification Society
means any of DNV GL, Lloyds Register, America Bureau of Shipping (ABS) or Bureau Veritas or such other classification society approved by the Majority Lenders, acting reasonably.
Pre-Approved Flag means Marshall Islands, Norwegian International Ship Registry, Liberia, Cayman Islands,
Bermuda, Bahamas or Singapore, or (in the case of m.v. NAVION STAVANGER, m.v. NORDIC BRASILIA and mv. NORDIC SPIRIT and any other Collateral Vessel on charter to Transpetro) Registro Especial Brasileiro.
Proportionate Share means, at any time, the proportion which a Lenders Commitment (whether or not
advanced) then bears to the aggregate Commitments of all the Lenders (whether or not advanced) being on the Execution Date the percentage indicated against the name of that Lender in Schedule 1.
Protected Party means a Finance Party which is or will be subject to any liability or required to make any
payment for or on account of Tax in relation to a sum required or receivable (or any sum deemed for the purpose of Tax to be received or receivable) under a Finance Document.
Quiet Enjoyment Letters means, where relevant and applicable, the letters between the Agent and the relevant
Sub-Charterer relating to those Collateral Vessels subject to Sub-Charters, in form and substance satisfactory to the Agent (on behalf of the Lenders).
Quotation Day means, in relation to any period for which an interest rate is to be determined two
(2) Business Days (in London) before the first day of that period, unless market practice differs in the Relevant Interbank Market, in which case the Quotation Day will be determined by the Agent in accordance with market practice in the
Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).
Reduction Date means each date falling at consecutive three (3) monthly intervals after the First
Drawdown Date with the first Reduction Date being no later than 31 December 2014.
Page 15
Reference Banks means, in relation to LIBOR, DNB Bank ASA, New
York Branch, Nordea Bank Finland plc, New York Branch and ABN AMRO Capital USA LLC or such other banks as may be appointed by the Agent in consultation with the Borrower.
Reference Bank Rate means the arithmetic mean of the rates (rounded upwards to four decimal places) as
supplied to the Agent at its request by the Reference Banks as the rate at which each of the relevant Reference Banks would borrow funds in the London interbank market in the relevant currency and for the relevant period, were it to do so by asking
for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
Related Fund in relation to a fund (the first fund), means a fund which is managed or
advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment
manager or investment adviser of the first fund.
Relevant Documents means the Finance Documents, the
Charters, the Quiet Enjoyment Letters, any Management Agreements and any Managers Confirmations, specified in Part I of Schedule 2.
Relevant Interbank Market means the London interbank market.
Relevant Percentage in relation to any Collateral Vessel, means the percentage indicated against the name of
that Collateral Vessel in Schedule 6 divided by the aggregate percentages shown against all Collateral Vessels subject to a Mortgage at the relevant date.
Relevant Reduction Amount means, in respect of each Collateral Vessel, the amount which is obtained by
multiplying the Maximum Amount at the time of making the calculation by the Relevant Percentage for such Collateral Vessel.
Representative means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
Requisition Compensation means all compensation or other money which may from time to time be payable
to a Collateral Owner and/or Head Charterer as a result of a Collateral Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
Restricted Party means a person that (i) is listed on any Sanctions List, (ii) is located in or
incorporated under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions, (iii) is directly or indirectly owned or controlled by, or acting on behalf of, a person referred to in (i) and/or
(ii) above or (iv) with whom a subject of a Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities.
Same Day Drawing means, in respect of the first drawing only, a Drawing requested by the Borrower prior to
1000 hours (New York time) on the day before the First Drawdown Date and made by the Lenders on the First Drawdown Date.
Page 16
Sanctioned Country means a country or territory that is, or
whose government is, the subject of Sanctions including, without limitation, Cuba, Iran, Myanmar, North Korea, Sudan and Syria.
Sanctions means the economic sanctions laws, regulations, embargoes or restrictive measures administered,
enacted or enforced by (i) the Norwegian Government, (ii) the United States Government, (iii) the United Nations, (iv) the European Union and the (v) the United Kingdom, and with regard to (i)(v) above, the
respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury (OFAC), the United States Department of State and Her
Majestys Treasury (HMT); (together the Sanctions Authorities).
Sanctions List means the Specially Designated Nationals and Blocked Persons list maintained by
OFAC, the Consolidated List of Financial Sanctions Targets maintained by HMT or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities, including, but not limited to, the
Norwegian Government, the European Union or the United Nations.
Screen Rate means the London interbank
offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any
replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or the service ceases to be available, the Agent may
specify another page or service displaying the relevant rate after consultation with the Borrower.
Security
Documents means the Guarantee, the Account Security Deeds, the Mortgages, the Deeds of Covenants, the Assignments, the Negative Pledges or (where the context permits) any one or more of them and any other agreement or document which may at
any time be executed by any person as security for the payment of all or any part of the Indebtedness and Security Document means any one of them.
Security Parties means the Borrower, each Collateral Owner, the Head Charterers and any other person who may
at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness (but, for the avoidance of doubt, not any Approved Managers and not the Shareholders), and Security Party means any
one of them.
Shareholders means together Teekay Norway AS (in relation to NOL) and Teekay Offshore
Operating Pte. Ltd and NOL (in relation to TNOL).
SMC means a valid safety management certificate
issued for a Collateral Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
Sub-Charter Rights in relation to those Collateral Vessels for the time being subject to a Sub-Charter,
means all rights and benefits accruing to the Head Charterer of that Collateral Vessel under or pursuant to the relevant Sub-Charter and not forming part of the Earnings.
Page 17
Sub-Charterer in respect of certain Collateral Vessels only,
means FICBV and Transpetro as identified against the names of the relevant Collateral Vessels in Schedule 6.
Sub-Charters means the charters identified in Schedule 6 for certain of the Collateral Vessels only with at
any relevant time more than thirty six (36) months remaining on the terms and subject to the conditions of which the relevant Head Charterer will charter its Collateral Vessel to the relevant Sub-Charterer and each a
Sub-Charter.
Subsidiary means a subsidiary undertaking, as defined in section 1159
Companies Act 2006 or any analogous definition under any other relevant system of law.
Tax means any
tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) and Taxation shall be interpreted
accordingly.
Teekay means Teekay Corporation, a corporation incorporated under the laws of the Republic
of the Marshall Islands whose registered office is at The Trust Company Complex, Ajeltake Road, Ajeltake Island, P.O. Box 1405, Majuro, The Marshall Islands MH96960.
Teekay Group means Teekay and each of its Subsidiaries.
TKN means Teekay Norway AS of Verven 4, N-4014, P.O. Box 8035, N-4068, Stavanger, Norway.
TNOL means Teekay Navion Offshore Loading Pte. Ltd., a company incorporated according to the law of
Singapore whose registered office is at 8 Shenton Way, #41-01, AXA Tower, Singapore 068811.
Total Debt
means the aggregate of:-
|
(a) |
the amount calculated in accordance with GAAP shown as each of long term debt, short term debt and current portion of
long term debt on the latest consolidated balance sheet of the Borrower; and |
|
(b) |
the amount of any liability in respect of any lease or hire purchase contract entered into by the Borrower or any of its Subsidiaries which would,
in accordance with GAAP, be treated as a finance or capital lease (excluding any amounts applicable to leases to the extent that the lease obligations are secured by a security deposit which is held on the balance sheet under Restricted
Cash). |
Total Loss means:
|
(a) |
an actual, constructive, arranged, agreed or compromised total loss of a Collateral Vessel; or |
|
(b) |
the requisition for title or compulsory acquisition of a Collateral Vessel by any government or other competent authority (other than by way of
requisition for hire); or |
Page 18
|
(c) |
the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of a Collateral Vessel (not falling
within (b)), unless that Collateral Vessel is released and returned to the possession of the relevant Collateral Owner, Head Charterer or Sub-Charterer within 90 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as
prize, confiscation or forfeiture in question. |
Transfer Certificate means a
certificate substantially in the form set out in Schedule 4 or any other form agreed between the Agent and the Borrower.
Transfer Date means, in relation to any Transfer Certificate, the date for the making of the Transfer
specified in the schedule to such Transfer Certificate.
Transpetro means Petrobras Transporte
S.A.Transpetro of Av Presidente Vargas, 328, 20091-060 Rio de Janeiro, R.J. Brazil.
Trust
Property means:
|
(a) |
all benefits derived by the Agent from Clause 10; and |
|
(b) |
all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,
|
with the exception of any benefits arising solely for the benefit of the Agent.
UNS means Ugland Nordic Shipping AS of P.O. Box 54, 3201 Sandefjord, Norway a company formed by the merger
under Norwegian law of Ugland Nordic Investment AS and Ugland Nordic Shipping AS.
US Tax Obligor means:
|
(a) |
a Security Party which is resident for tax purposes in the United States of America; |
|
(b) |
a Security Party some or all of whose payments under the Finance Documents are from sources within the United States for US federal income tax
purposes. |
Valuation means, in relation to a Collateral Vessel, the written valuation
of that Collateral Vessel expressed in Dollars prepared by one of the Approved Brokers to be nominated by the Borrower. Such valuation shall be prepared without a physical inspection, on the basis of a sale for prompt delivery for cash at arms
length between a willing buyer and a willing seller without the benefit of any charterparty or other engagement.
VAT means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar
nature.
WSJ Prime Rate means the Prime Rate as published in the printed copy of the Wall
Street Journal on any particular day as the same may be adjusted from time to time.
Page 19
|
1.2.1 |
words denoting the plural number include the singular and vice versa; |
|
1.2.2 |
words denoting persons include corporations, partnerships, associations of persons (whether incorporated or not) or governmental or
quasi-governmental bodies or authorities and vice versa; |
|
1.2.3 |
references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement; |
|
1.2.4 |
references to this Agreement include the Recitals and the Schedules; |
|
1.2.5 |
the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the
interpretation of this Agreement; |
|
1.2.6 |
references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires,
references to that document as amended, supplemented, novated or replaced from time to time; |
|
1.2.7 |
references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or
re-enacted; |
|
1.2.8 |
references to any Finance Party include its successors, transferees and assignees; |
|
1.2.9 |
a time of day (unless otherwise specified) is a reference to New York time; |
|
1.2.10 |
a person includes any individual firm, company, corporation, government, state or agency of a state or any association, trust,
joint venture, consortium, partnership or other entity (whether or not having separate legal personality); and |
|
1.2.11 |
a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of
any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation. |
This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this
Agreement exchanged between any Finance Party and the Borrower or their respective representatives prior to the date of this Agreement.
2 |
The Loan and its Purposes |
2.1 |
Amount Subject to the terms of this Agreement, each of the Lenders agrees to make available to the Borrower its Commitment of a revolving
credit facility in an aggregate amount not exceeding the Maximum Amount at any one time. |
Page 20
2.2 |
Finance Parties rights and obligations |
|
2.2.1 |
The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the
Finance Documents does not affect the obligations of any other party to the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents. |
|
2.2.2 |
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
|
2.3 |
Purposes The Borrower shall apply the Loan for the purposes referred to in the Recital. |
2.4 |
Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed under this Agreement.
|
3 |
Conditions of Utilisation |
3.1 |
Conditions precedent Before any Lender shall have any obligation to advance (a) the first Drawing under the Facility, the Borrower
shall deliver or cause to be delivered to or to the order of the Agent all of the documents and other evidence listed in Part I(A) of Schedule 2 and (b) any subsequent Drawing under the Facility the Borrower shall deliver to or to the order of
the Agent all of the documents and other evidence listed in Part I(B) of Schedule 2. |
3.2 |
Further conditions precedent The Lenders will only be obliged to advance a Drawing if on the date of the Drawdown Notice:
|
|
3.2.1 |
no Default is continuing or would result from the advance of that Drawing; and |
|
3.2.2 |
the representations made by the Borrower under Clause 11 (other than those at Clauses 11.2, 11.6, 11.7 and 11.22 for Drawdown Dates other than the
First Drawdown Date) are true in all material respects. |
3.3 |
Drawing limit The Lenders will only be obliged to advance a Drawing if: |
|
3.3.1 |
no other Drawing has been made on the same Business Day; |
|
3.3.2 |
that Drawing is not less than ten million Dollars ($10,000,000); and |
|
3.3.3 |
that Drawing will not amount to more than the Maximum Amount or increase the outstanding amount of the Loan to a sum in excess of the Maximum
Amount. |
|
3.4.1 |
The Maximum Amount shall be reduced on each Reduction Date by the relevant Initial Reduction Amount. On the Maturity Date, the Maximum Amount shall
be reduced to zero. If, as a result of any such reduction, the Loan outstanding would exceed the Maximum Amount, the Borrower shall, on the Reduction Date, prepay such amount of the Loan as will ensure that the Loan outstanding is not greater than
the Maximum Amount. The |
Page 21
|
mandatory reductions in the amount of the Loan available for drawing required pursuant to this Clause will be made in the amounts and at the times specified whether or not the Maximum Amount is
reduced pursuant to Clause 3.4.2, Clause 3.4.3, Clause 3.4.4, Clause 3.4.5, Clause 6.1 or Clause 7.10. PROVIDED ALWAYS THAT any reductions pursuant to Clause 3.4.2, Clause 3.4.3, Clause 3.4.4 or Clause 3.4.5 shall be applied to the remaining
mandatory reductions hereunder on a pro rata basis. |
|
3.4.2 |
The Borrower may voluntarily cancel the Maximum Amount in whole or in part in an amount of not less than five million Dollars ($5,000,000) (or as
otherwise may be agreed by the Agent), provided that it has first given to the Agent not fewer than five (5) Business Days prior written notice expiring on a Business Day (the Cancellation Date) of its desire to reduce
the Maximum Amount; such notice once received by the Agent shall be irrevocable and shall oblige the Borrower to make payment of all interest and Commitment Commission accrued on the amount so cancelled up to and including the Cancellation Date
together with any Break Costs in respect of such cancelled amount if the Cancellation Date is not the final day of an Interest Period. Any such reduction in the Maximum Amount shall not be reversed. If, as a result of any such cancellation, the Loan
outstanding would exceed the Maximum Amount, the Borrower shall, on the Cancellation Date, prepay such amount of the Loan as will ensure that the Loan outstanding is not greater than the Maximum Amount. |
|
3.4.3 |
In the event of a sale or disposal of a Collateral Vessel or the Agent having received not less than 5 Business Days notice from the Borrower
requesting that the security relating to a Collateral Vessel be released and discharged (a Released Vessel), and subject always to the further provisions of this Clause 3.4.3, the Maximum Amount shall be reduced by (a) in the
case of a sale or disposal of a Collateral Vessel, an amount equal to the higher of (i) the sale proceeds in respect of that Collateral Vessel and (ii) the Relevant Reduction Amount applicable to that Collateral Vessel and (b) in the
case of a Released Vessel, an amount equal to the Relevant Reduction Amount applicable to that Released Vessel, such reduction to be applied on a pro rata basis against the Initial Reduction Amounts as reduced from time to time in accordance with
this Clause 3.4. Such reduction shall be made in the case of a sale or disposal of such Collateral Vessel on the date of such sale or disposal and in the case of a Released Vessel on the date proposed by the Borrower for release and discharge of the
security relating to that Collateral Vessel unless the Collateral Vessel in question is sold to another Collateral Owner and in such case any security held by the Agent (whether directly or indirectly) from the Collateral Owner or any other Security
Party and over such Collateral Vessel is reconstituted immediately after the sale to the other Collateral Owner in substantially identical form, and the Agent obtains favourable legal opinions in respect of such reconstituted security. If, as a
result of any reduction in the Maximum Amount pursuant to this Clause, the Loan outstanding would exceed the Maximum Amount, the Borrower shall, on the date of the sale, disposal or release, prepay such amount of the Loan as will ensure that the
Loan outstanding is not greater than the Maximum Amount. Any such prepayment shall oblige the Borrower |
Page 22
|
to make payment of all interest and Commitment Commission accrued on the amount so reduced up to and including the date of reduction together with any Break Costs in respect of such reduced
amount if the date of such reduction is not the final day of an Interest Period. Any such reduction in the Maximum Amount shall not be reversed. |
|
3.4.4 |
In the event that any Collateral Vessel becomes a Total Loss, on the earlier to occur of (a) the date of receipt of the proceeds of the Total
Loss and (b) the date falling one hundred and eighty (180) days after the occurrence of the Total Loss (the Total Loss Reduction Date), the Maximum Amount shall (subject to the proviso hereto) be reduced by an amount
equal to the higher of (i) the proceeds of the Total Loss and (ii) the Relevant Reduction Amount in respect of such Collateral Vessel, such reduction to be applied on a pro rata basis against the Initial Reduction Amounts as reduced from
time to time in accordance with this Clause 3.4. Any such reductions in the Maximum Amount shall not be reversed. If, as a result of any reduction in the Maximum Amount pursuant to this Clause the Loan outstanding would exceed the Maximum Amount,
the Borrower shall, on the earlier to occur of (i) the date on which the Collateral Owner receives the proceeds of such Total Loss and (ii) the one hundred and eightieth day after the date of such Total Loss occurring, prepay such amount of the
Loan as will ensure that the Loan outstanding is equal to or less than the Maximum Amount. Any such prepayment shall not be reborrowed and Clause 8.3 shall apply to any such prepayment. |
|
3.4.5 |
If a Change of Control occurs with respect to any Security Party, the Borrower shall immediately notify the Agent in writing of such event.
Following such event, if required by the Agent (acting on the instructions of the Majority Lenders), the Maximum Amount shall be reduced (i) in the case of a Change of Control with respect to a Collateral Owner, by an amount equivalent to the
Relevant Reduction Amounts applicable to the Collateral Vessels owned by that Collateral Owner and (ii) in the case of a Change of Control with respect to the Borrower, to zero such reductions to be applied on a pro rata basis against the
Initial Reduction Amounts as reduced from time to time in accordance with this Clause 3.4. If, as a result of any reduction in the Maximum Amount pursuant to this Clause, the Loan outstanding would exceed the Maximum Amount, the Borrower shall
immediately prepay such amount of the Loan as will ensure that the Loan outstanding is not greater than the Maximum Amount. Any such prepayment shall oblige the Borrower to make payment of all interest and Commitment Commission accrued on the amount
so reduced up to and including the date of reduction together with any Break Costs in respect of such reduced amount if the date of such reduction is not the final day of an Interest Period. Any such reduction in the Maximum Amount shall not be
reversed. |
|
3.4.6 |
To the extent that prepayments made by the Borrower to the Agent in accordance with this Agreement reduce the Loan outstanding to less than the
Maximum Amount, the Borrower shall again be entitled to make Drawings up to the Commitment Termination Date in accordance with and subject to the terms of this Agreement. Any part of the Facility which is undrawn on the Commitment Termination Date
shall be automatically cancelled. |
Page 23
|
3.4.7 |
Simultaneously with each reduction of the Maximum Amount in accordance with Clause 3.4.1, Clause 3.4.2, Clause 3.4.3, Clause 3.4.4 or Clause 3.4.5
(as the case may be), the Commitment of each Lender will reduce so that the Commitments of the Lenders in respect of the reduced Maximum Amount remain in accordance with their respective Proportionate Shares. |
3.5 |
Termination Date No Lender shall be under any obligation to advance all or any part of its Commitment after the Commitment Termination Date.
|
3.6 |
Conditions subsequent The Borrower undertakes to deliver or to cause to be delivered to the Agent on, or as soon as practicable after, the
First Drawdown Date items 1 and 2 listed in Part II of Schedule 2 and within ninety (90) days after the First Drawdown Date items 3 and 4 listed in Part II of Schedule 2. |
3.7 |
No Waiver If the Lenders in their sole discretion agree to advance the first Drawing under the Loan Agreement to the Borrower before all of
the documents and evidence required by Clause 3.1 have been delivered to or to the order of the Agent, the Borrower undertakes to deliver all outstanding documents and evidence to or to the order of the Agent no later than thirty (30) days
after the First Drawdown Date or such other date specified by the Agent (acting on the instructions of the Lenders). |
The advance of all or any part of the Loan under this Clause 3.7 shall not be taken as a waiver of the Lenders right to
require production of all the documents and evidence required by Clause 3.1.
3.8 |
Form and content All documents and evidence delivered to the Agent under this Clause 3 shall: |
|
3.8.1 |
be in form and substance reasonably acceptable to the Agent; and |
|
3.8.2 |
if reasonably required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent. |
4.1 |
Drawdown Request The Borrower may request a Drawing to be advanced in one amount on any Business Day prior to the Commitment Termination
Date, by delivering to the Agent a duly completed Drawdown Notice not more than ten (10) Business Days and not later than 12:00 noon (New York time) three (3) Business Days before the proposed Drawdown Date save in the case of a Same Day
Drawing. |
4.2 |
Lenders participation Subject to Clause 2 and Clause 3, the Agent shall promptly notify each Lender of the receipt of a Drawdown
Notice, following which each Lender shall advance its Proportionate Share of the relevant Drawing to the Borrower through the Agent not later than 11:00am (New York time) on the relevant Drawdown Date. |
Page 24
5.1 |
Repayment of each Drawing The Borrower agrees to repay each Drawing to the Agent for the account of the Lenders on the last day of the
Interest Period in respect of that Drawing unless the Borrower selects a further Interest Period for that Drawing in accordance with Clause 7, provided that the Borrower shall not be permitted to select such a further Interest Period if an Event of
Default has occurred and is continuing unremedied and unwaived and shall then be obliged to repay such Drawing on the last day of its then current Interest Period. The Borrower shall on the Maturity Date repay to the Agent as agent for the Lenders
all Loan Outstandings. |
6.1 |
Illegality If it becomes unlawful in any jurisdiction (other than by reason of Sanctions) for a Lender to fund or maintain its Commitment as
contemplated by this Agreement or to fund or maintain the Loan: |
|
6.1.1 |
that Lender shall promptly notify the Agent of that event; |
|
6.1.2 |
upon the Agent notifying the Borrower, the Commitment of that Lender (to the extent not already advanced) will be immediately cancelled; and
|
|
6.1.3 |
the Borrower shall repay that Lenders Proportionate Share of any Drawing on the last day of its current Interest Period or, if earlier, the
date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrower (being no earlier than the last day of any applicable grace period permitted by law) and the Maximum Amount shall be reduced by the amount
of that Lenders Commitment. Prior to the date on which repayment is required to be made under this Clause 6.1.3 the affected Lender shall negotiate in good faith with the Borrower to find an alternative method or lending base in order to
maintain the Loan. |
6.2 |
Voluntary prepayment of Loan The Borrower may prepay the whole or any part of a Drawing (but, if in part, such prepayment shall be in an
amount that reduces the Loan by a minimum amount of one million Dollars ($1,000,000) provided that it gives the Agent not less than five (5) Business Days prior notice. |
6.3 |
Restrictions Any notice of prepayment given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this
Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment. |
Any prepayment under this Agreement shall be made together with all interest and Commitment Commission accrued on the amount so
reduced up to and including the date of reduction together with any Break Costs in respect of such reduced amount if the date of such reduction is not the final day of an Interest Period.
Any reduction in the Maximum Amount made as a result of, and in equivalent amounts to, any cancellation under this Agreement
shall be applied as against the remaining mandatory reductions hereunder on a pro rata basis and shall not be reversed.
Page 25
If the Agent receives a notice under this Clause 6 it shall promptly forward a copy of that notice to the Borrower or the Lenders, as appropriate.
6.4 |
Mandatory Prepayment If at any time the Loan Outstandings shall exceed the Maximum Amount the Borrower shall immediately prepay to the Agent
on behalf of the Lenders such amounts as will ensure that the Loan Outstandings do not exceed the Maximum Amount and shall pay to the Lenders all interest accrued on the amount prepaid up to and including the date on which such prepayment occurred.
|
6.5 |
Reborrowing Amounts of the Loan which are repaid or prepaid shall be available for reborrowing in accordance with Clause 3 prior to the
Commitment Termination Date. |
7.1 |
Interest Periods The period during which each Drawing shall be outstanding under this Agreement shall be an Interest Period of one, three or
six months duration, as selected by the Borrower in the Drawdown Notice in respect of the Drawing in question, or such other duration as may be agreed by the Agent (acting on the instructions of all the Lenders). |
7.2 |
Beginning and end of Interest Periods The first Interest Period in respect of each Drawing shall begin on the Drawdown Date of that Drawing
and shall end on the last day of the Interest Period selected in accordance with Clause 7.1. Any subsequent Interest Period selected in respect of each Drawing shall commence on the day following the last day of its previous Interest Period and
shall end on the last day of its current Interest Period selected in accordance with Clause 7.1. |
7.3 |
Interest Periods to meet Maturity Date If an Interest Period for a Drawing would otherwise expire after the Maturity Date, the Interest
Period for that Drawing shall expire on the Maturity Date. |
7.4 |
Non-Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on
the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not). |
7.5 |
Interest rate During each Interest Period interest shall accrue on the relevant Drawing at the rate determined by the Agent to be:
|
|
(i) |
the WSJ Prime Rate in the case of a Same Day Drawing; or |
|
(ii) |
the aggregate of (a) the Margin and (b) LIBOR. |
7.6 |
Accrual and payment of interest Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual
number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrower to the Agent for the account of the Lenders on the last day of each Interest Period
and, if the Interest Period is longer than six (6) months, on the dates falling at three (3) monthly intervals after the first day of that Interest Period. |
Page 26
7.7 |
Default interest If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on
the overdue amount from the due date, subject to any applicable grace period, up to the date of actual payment (both before and after judgment) at a rate which is one point five per cent (1.5%) higher than the rate which would have been payable
if the overdue amount had, during the period of non-payment, constituted a Drawing for successive Interest Periods, each selected by the Agent (acting reasonably). Any interest accruing under this Clause 7.7 shall be immediately payable by the
Borrower on demand by the Agent. If unpaid, any such interest will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable. |
7.8 |
Absence of quotations Subject to Clause 7.9, if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not
supply a quotation by 11.00 am on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks. |
7.9 |
Market disruption If a Market Disruption Event occurs for any Interest Period, then the rate of interest on each Lenders share of the
relevant Drawing for that Interest Period shall be the percentage rate per annum which is the sum of: |
|
7.9.2 |
the rate notified to the Agent by that Lender as soon as practicable, and in any event by close of business on the date falling 10 Business Days
after the Quotation Day (or, if earlier, on the date falling 10 Business Days prior to the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to that
Lender of funding its participation in the relevant Drawing from the London Interbank Market or (without any obligation on the relevant Lender to seek cheaper funding from an alternative source), if cheaper, whatever alternative source it may
reasonably select. |
In this Agreement Market Disruption Event means:
|
(a) |
at or about noon on the Quotation Day for the relevant Interest Period LIBOR is to be determined by reference to the Reference Banks and none or
only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for dollars and the relevant Interest Period; or |
|
(b) |
before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders
(whose participations in the relevant Drawing exceed 50 per cent of that Drawing) that the cost to it of funding its participation in that Drawing from the London Interbank Market or (without any obligation on the relevant Lender to seek
cheaper funding from an alternative source), if cheaper, from whatever other source it may reasonably select, would be in excess of LIBOR. |
7.10 |
Alternative basis of interest or funding |
|
7.10.1 |
If a Market Disruption Event occurs and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a
period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest. |
Page 27
|
7.10.2 |
Any alternative basis agreed pursuant to Clause 7.10.1 shall, with the prior consent of all the Lenders and the Borrower, be binding on all
Parties. |
|
7.10.3 |
If an alternative basis is not agreed pursuant to Clause 7.10.1, the relevant Lender shall cease to be obliged to advance its Proportionate Share
of that Drawing, but, if it has already been advanced, the Borrower will immediately prepay that Proportionate Share of that Drawing, together with Break Costs, and the Maximum Amount of the Loan shall be reduced by the amount of that Lenders
Proportionate Share of that Drawing. |
7.11 |
Determinations conclusive The Agent shall promptly notify the Borrower of the determination of a rate of interest under this Clause 7 and
each such determination shall (save in the case of manifest error) be final and conclusive. |
8.1 |
Transaction expenses The Borrower will, within fourteen (14) days of the Agents written demand, pay the Agent (for the account of
the Finance Parties) the amount of all reasonable out of pocket costs and expenses (including legal fees and VAT or any similar or replacement tax if applicable) reasonably incurred by the Finance Parties or any of them in connection with:
|
|
8.1.1 |
the negotiation, preparation, printing, execution and registration of the Finance Documents (whether or not any Finance Document is actually
executed or registered and whether or not a Drawing is advanced); |
|
8.1.2 |
any amendment, addendum or supplement to any Finance Document (whether or not completed); and |
|
8.1.3 |
any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled
to call for or obtain under any Finance Document. |
8.2 |
Funding costs The Borrower shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the
Agents written demand, against all losses and costs incurred or sustained by that Finance Party if, for any reason due to a default or other action by the Borrower, a Drawing is not advanced to the Borrower after the relevant Drawdown Notice
has been given to the Agent, or is advanced on a date other than that requested in the Drawdown Notice. |
8.3 |
Break Costs The Borrower shall indemnify each Finance Party, by payment to the Agent (for the account of that Finance Party) on the
Agents written demand, against all documented costs, losses, premiums or penalties incurred by that Finance Party as a result of its receiving any prepayment of all or any part of a Drawing (whether pursuant to Clause 6 or otherwise) on a day
other than the last day of an Interest Period for that Drawing, or any other payment under or in relation to the Finance Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or
costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of |
Page 28
|
a Drawing, and any liabilities, expenses or losses incurred by that Finance Party in terminating or reversing, or otherwise in connection with, any interest rate and/or currency swap, transaction
or arrangement entered into by that Finance Party with any member of the Group to hedge any exposure arising under this Agreement, or in terminating or reversing, or otherwise in connection with, any open position arising under this Agreement.
|
8.4 |
Currency indemnity In the event of a Finance Party receiving or recovering any amount payable under a Finance Document in a currency other
than the Currency of Account, and if the amount received or recovered is insufficient when converted into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrower shall, on the Agents written demand, pay
to the Agent for the account of the relevant Finance Party such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Agent on behalf of the relevant Finance Party as
a separate debt under this Agreement. |
|
8.5.1 |
The Borrower shall (or shall procure that a Security Party will), within three Business Days of demand, indemnify each Finance Party against any
cost, loss or liability reasonably incurred by it as a result of: |
|
(a) |
a failure by a Security Party to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or
liability arising as a result of Clause 15.22; |
|
(b) |
a Drawing (or part of a Drawing) not being prepaid in accordance with a notice of prepayment given by the Borrower. |
|
8.6.1 |
The Borrower hereby agrees at all times to pay promptly or, as the case may be, indemnify and hold the Finance Parties and their respective
officers, directors, representatives, agents and employees (together the Indemnified Parties) harmless on a full indemnity basis from and against each and every loss suffered or incurred by or imposed on any Indemnified Party
related to or arising out of: |
|
(a) |
the use of proceeds of the Loan; |
|
(b) |
the execution and delivery of any commitment letter, engagement letter, fee letter, the Finance Documents or any other document connected therewith
or the performance of the respective obligations thereunder, including without limitation environmental liabilities; or |
|
(c) |
any claim, action, suit, investigation or proceeding relating to the foregoing or the Security Parties, whether or not any Indemnified Party is a
party thereto or target thereof, or the Indemnified Parties roles in connection therewith, and will reimburse the Indemnified Parties, on demand, for all reasonable expenses |
Page 29
|
(including reasonable counsel fees and expenses) as they are incurred by the Indemnified Parties in connection with investigating, preparing for or defending any such claim, action, suit or
proceeding (including any security holder actions or proceeding, inquiry or investigation), whether or not in connection with pending or threatened litigation in which the Security Parties are a party. |
|
8.6.2 |
The Borrower will not, however, be responsible for any claims, liabilities, losses, damages or expenses of an Indemnified Party that are finally
judicially determined by a court of competent jurisdiction to have resulted principally from the wilful misconduct or gross negligence of such Indemnified Party. |
|
8.6.3 |
The foregoing shall be in addition to any rights that the Indemnified Parties may have at common law or otherwise and shall extend upon the same
terms to and inure to the benefit of any affiliate, director, officer, employee, agent or controlling person of an Indemnified Party. |
|
8.7.1 |
Subject to Clause 8.9, the Borrower shall, within three Business Days of a demand by the Agent, pay to the Agent for the account of a Finance Party
the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or
(ii) compliance with any law or regulation made after the date of this Agreement (including Basel III (as defined in Clause 8.9) and any other which relates to capital adequacy or liquidity controls or which affects the manner in which that
Finance Party allocates capital resources to obligations under this Agreement) or (iii) any change in the risk weight allocation by that Finance Party to the Borrower after the date of this Agreement. |
|
8.7.2 |
In this Agreement Increased Costs means: |
|
(i) |
a reduction in the rate of return from the Loan or on a Finance Partys (or its Affiliates) overall capital; |
|
(ii) |
an additional or increased cost; or |
|
(iii) |
a reduction of any amount due and payable under any Finance Document, |
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that
Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document.
8.8 |
Increased cost claims |
|
8.8.1 |
A Finance Party intending to make a claim pursuant to Clause 8.7 shall notify the Agent of the event giving rise to the claim, following which the
Agent shall promptly notify the Borrower. |
Page 30
|
8.8.2 |
Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
|
8.9 |
Exceptions to increased costs Clause 8.7 does not apply to the extent any Increased Costs is: |
|
8.9.1 |
compensated for by a payment made under Clause 8.12; or |
|
8.9.2 |
compensated for by a payment made under Clause 17.3; or |
|
8.9.3 |
attributable to a FATCA Deduction required to be made by a Party; or |
|
8.9.4 |
attributable to the wilful breach by the relevant Finance Party (or an Affiliate of that Finance Party) of any law or regulation; or
|
|
8.9.5 |
attributable to the implementation or application of, or compliance with, the International Convergence of Capital Measurement and Capital
Standards, a Revised Framework published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (Basel II) or any
other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or of its Affiliates). |
In this Clause 8.9, Basel III means (a) the agreements on capital requirements, a leverage ratio and
liquidity standards contained in Basel III: A global regulatory framework for more resilient banks and banking systems, Basel III: International framework for liquidity risk measurement, standards and monitoring and
Guidance for national authorities operating the countercyclical capital buffer published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated, (b) the rules for global
systemically important banks contained in Global systemically important banks: assessment methodology and the additional loss absorbency requirementRules text published by the Basel Committee on Banking Suspension in November 2011
and (c) any further guidance or standards published by the Basel Committee on Banking Supervision relating to Basel III; and
8.10 |
Events of Default The Borrower shall indemnify each Finance Party from time to time, by payment to the Agent (for the account of that
Finance Party) on the Agents written demand, against all losses and costs incurred or sustained by that Finance Party as a consequence of any Event of Default. |
8.11 |
Enforcement costs The Borrower shall pay to the Agent (for the account of each Finance Party) on the Agents written demand the amount
of all costs and expenses (including legal fees) incurred by a Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document including (without limitation) any losses, costs and expenses which
that Finance Party may from time to time sustain, incur or become liable for by reason of that Finance Party being a lender to the Borrower. No such indemnity will be given where any such loss or cost has occurred due to gross negligence or wilful
misconduct on the part of that Finance Party; however, this shall not affect the right of any other Finance Party to receive such indemnity. |
Page 31
|
8.12.1 |
The Borrower shall (within three (3) Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or
cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document. |
|
8.12.2 |
Clause 8.12.1 above shall not apply: |
|
(a) |
with respect to any Tax assessed on a Finance Party: |
|
(i) |
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that
Finance Party is treated as resident for tax purposes; or |
|
(ii) |
under the law of the jurisdiction in which that Finance Partys Facility Office is located in respect of amounts received or receivable in
that jurisdiction, |
if that Tax is imposed on or calculated by reference to the net income received or
receivable (but not any sum deemed to be received or receivable) by that Finance Party;
|
(b) |
to the extent a loss, liability or cost is compensated for by an increased payment under Clause 17.3; or |
|
(c) |
to the extent a loss, liability or cost relates to a FATCA Deduction required to be made by a Party. |
|
8.12.3 |
A Protected Party making, or intending to make a claim under Clause 8.12.1 shall promptly notify the Agent of the event which will give, or has
given, rise to the claim, following which the Agent shall notify the Borrower. |
|
8.12.4 |
A Protected Party shall, on receiving a payment from a Security Party under this Clause 8.12, notify the Agent. |
|
8.13.1 |
All amounts set out or expressed in a Finance Document to be payable by any Party or any Security Party to a Finance Party which (in whole or in
part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on such supply or supplies, and accordingly, subject to paragraph (b) below, if VAT is or becomes
chargeable on any supply made by any Finance Party to any Party under a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount
of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party). |
Page 32
|
8.13.2 |
If VAT is or becomes chargeable on any supply made by any Finance Party (the Supplier) to any other Finance Party (the
Recipient) under a Finance Document, and any Party other than the Recipient (the Subject Party) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the
Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Party shall also pay to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT. The
Recipient will promptly pay to the Subject Party an amount equal to any credit or repayment obtained by the Recipient from the relevant tax authority which the Recipient reasonably determines is in respect of such VAT. |
|
8.13.3 |
Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or
indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment
in respect of such VAT from the relevant tax authority. |
|
8.13.4 |
Any reference in this Clause 8.13 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include
(where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term representative member to have the same meaning as in the Value Added Tax Act 1994).
|
The provisions in this clause 8.14 shall apply after the FATCA Application Date.
|
8.14.1 |
Subject to clause 8.14.3 below, each Party shall, within ten (10) Business Days of a reasonable request by another Party:
|
|
(a) |
confirm to that other Party whether it is: |
|
(i) |
a FATCA Exempt Party; or |
|
(ii) |
not a FATCA Exempt Party; and |
|
(b) |
supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable
passthru payment percentage or other information required under the US Treasury Regulations or other official guidance including intergovernmental agreements) as that other Party reasonably requests for the purposes of that other
Partys compliance with FATCA. |
|
8.14.2 |
If a Party confirms to another Party pursuant to clause 8.14.1(a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it
is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly. |
Page 33
|
8.14.3 |
Clause 8.14.1 above shall not oblige any Party to do anything which would or might in its reasonable opinion constitute a breach of:
|
|
(a) |
any law or regulation; |
|
(b) |
any fiduciary duty; or |
|
(c) |
any duty of confidentiality. |
|
8.14.4 |
If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with clause 8.14.1 above
(including, for the avoidance of doubt, where clause 8.14.3 above applies), then: |
|
(a) |
if that Party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such Party shall be treated for the purposes of the
Finance Documents as if it is not a FATCA Exempt Party; and |
|
(b) |
if that Party failed to confirm its applicable passthru payment percentage then such Party shall be treated for the purposes of the
Finance Documents (and payments made thereunder) as if its applicable passthru payment percentage is 100%, |
until (in each case) such time as the Party in question provides the requested confirmation, forms, documentation or other
information.
|
8.15.1 |
Each Party may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and no
Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. |
|
8.15.2 |
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such
FATCA Deduction) notify the Party to whom it is making the payment and, in addition, shall notify the Borrower, the Agent and the other Finance Parties. |
9.1 |
Commitment fee The Borrower shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at the
rate of forty per cent (40%) of the Margin on the undrawn amount of the Maximum Amount from time to time for the period beginning on the Execution Date until the Commitment Termination Date. The accrued commitment fee is payable on
(i) 31 December 2014, (ii) on the last day of each successive period of three months after 31 December 2014 and (iii) on the Commitment Termination Date. |
9.2 |
Other fees The Borrower shall pay to the Agent and the Lenders the fees in the amounts and at the times agreed in the Fee Letter.
|
Page 34
10 |
Security and Application of Moneys |
10.1 |
Security Documents As security for the payment of the Indebtedness, the Borrower shall execute and deliver to the Agent or cause to be
executed and delivered to the Agent, the following documents in such forms and containing such terms and conditions as the Agent shall require: |
|
10.1.1 |
a first priority statutory or preferred mortgage (as the case may be) over each Collateral Vessel together with a collateral deed of covenants (if
applicable), and if such mortgage is required to specify the amount secured, such amount shall be no less than 120% of the Indebtedness; |
|
10.1.2 |
a first priority deed of assignment of the Insurances, Earnings and Requisition Compensation of each Collateral Vessel and, where applicable, Head
Charter Rights and Sub-Charter Rights from the Collateral Owners and, where applicable, the relevant Head Charterer, including (in the case of the Head Charterer) an agreement whereby its interests under the relevant Head Charter are subordinated to
the interests of the Finance Parties under the relevant Mortgage; |
|
10.1.3 |
a guarantee and indemnity from the Collateral Owners; |
|
10.1.4 |
a first priority account security deed in respect of all amounts from time to time standing to the credit of each of the Earnings Accounts,
effective only on the occurrence of an Event of Default; and |
|
10.1.5 |
negative pledges from the Shareholders in respect of all membership interests or issued shares (as the case may be) of each Collateral Owner.
|
10.2 |
Earnings Accounts The Borrower shall procure that the Collateral Owners maintain the Earnings Accounts with the Account Holders for the
duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents. |
10.3 |
Earnings The Borrower shall procure that all Earnings and any Requisition Compensation are credited to the Earnings Account.
|
10.4 |
Restriction on withdrawal At any time following the occurrence and during the continuation of an Event of Default which is unremedied and
unwaived no sum may be withdrawn from the Earnings Accounts without the prior written consent of the Agent. |
10.5 |
Relocation of Accounts At any time following the occurrence and during the continuation of an Event of Default, the Agent may without the
consent of the Borrower relocate the Earnings Accounts to any other branch of the Agent, without prejudice to the continued application of this Clause 10 and the rights of the Finance Parties under the Finance Documents. |
10.6 |
Access to information The Borrower agrees to procure that the Agent (and its nominees) may from time to time during the Facility Period
review the records held by the Account Holders (whether in written or electronic form) in relation to the Earnings Accounts, and irrevocably waives any right of confidentiality which may exist in relation to those records. |
Page 35
10.7 |
Application after acceleration From and after the giving of notice to the Borrower by the Agent under Clause 13.2, the Borrower shall
procure that all sums from time to time standing to the credit of the Earnings Accounts are immediately transferred to the Agent for application in accordance with Clause 10.8 and the Borrower irrevocably authorises the Agent to instruct the Account
Holders to make those transfers. |
10.8 |
General application of moneys Whilst an Event of Default is continuing unremedied or unwaived the Borrower irrevocably authorises the Agent
to apply (and the Agent agrees to apply) all sums which it may receive under or in connection with any Security Document, in or towards satisfaction, or by way of retention on account, of the Indebtedness, as follows: |
|
10.8.1 |
first in payment of all outstanding amounts payable to the Agent; |
|
10.8.2 |
secondly in or towards payment of all outstanding interest hereunder; |
|
10.8.3 |
thirdly in or towards payment of all outstanding principal hereunder; |
|
10.8.4 |
fourthly in or towards payment of all other Indebtedness hereunder; |
|
10.8.5 |
fifthly the balance, if any, shall be remitted to the Borrower or whoever may be entitled thereto. |
10.9 |
Additional security If at any time, following the delivery of any Valuations pursuant to Clause 12.1.34, the aggregate of the Fair Market
Value of the Collateral Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged
assets), and determined by the Agent, acting reasonably (in all other cases)) for the time being provided to the Agent under this Clause 10.9 is less than one hundred and twenty five per cent (125%) of the amount of the Loan then outstanding,
the Borrower shall, within thirty (30) days of the Agents request (which the Agent will submit if requested by the Majority Lenders), at the Borrowers option: |
|
10.9.1 |
pay to the Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Agent as additional security for
the payment of the Indebtedness; or |
|
10.9.2 |
give to the Agent other additional security in amount and form acceptable to the Agent (acting on the instructions of all of the Lenders); or
|
|
10.9.3 |
prepay the Loan in the amount of the shortfall. |
Clause 6.3 shall apply, mutatis mutandis, to any prepayment made under this Clause 10.9 and the value of any additional
security provided shall be determined as stated above.
Page 36
11 |
Representations and Warranties |
The Borrower represents and warrants to each of the Finance Parties at the Execution Date and (by reference to the facts and
circumstances then pertaining) at the date of each Drawdown Notice, at each Drawdown Date and at each Interest Payment Date as follows (except that the representation and warranty contained at Clause 11.7 shall only be made on the Execution Date and
the First Drawdown Date and the representations and warranties at Clause 11.2, Clause 11.6, Clause 11.22 and Clause 11.29 shall only be made on the Execution Date):
11.1 |
Status and Due Authorisation Each of the Security Parties is a corporation or limited partnership duly incorporated or formed under the laws
of its jurisdiction of incorporation or formation (as the case may be) with power to enter into the Finance Documents and to exercise its rights and perform its obligations under the Finance Documents and all corporate and other action required to
authorise its execution of the Finance Documents and its performance of its obligations thereunder has been duly taken. |
11.2 |
No Deductions or Withholding Under the laws of the Security Parties respective jurisdictions of incorporation or formation in force at
the date hereof, none of the Security Parties will be required to make any deduction or withholding from any payment it may make under any of the Finance Documents. |
11.3 |
Claims Pari Passu Under the laws of the Security Parties respective jurisdictions of incorporation or formation in force at the date
hereof, the Indebtedness will, to the extent that it exceeds the realised value of any security granted in respect of the Indebtedness, rank at least pari passu with all the Security Parties other unsecured indebtedness save that which
is preferred solely by any bankruptcy, insolvency or other similar laws of general application. |
11.4 |
No Immunity In any proceedings taken in any of the Security Parties respective jurisdictions of incorporation or formation in relation
to any of the Finance Documents, none of the Security Parties will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process. |
11.5 |
Governing Law and Judgments In any proceedings taken in any of the Security Parties jurisdiction of incorporation or formation in
relation to any of the Finance Documents in which there is an express choice of the law of a particular country as the governing law thereof, that choice of law and any judgment or (if applicable) arbitral award obtained in that country will be
recognised and enforced. |
11.6 |
Validity and Admissibility in Evidence As at the date hereof, all acts, conditions and things required to be done, fulfilled and performed
in order (a) to enable each of the Security Parties lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Finance Documents, (b) to ensure that the obligations
expressed to be assumed by each of the Security Parties in the Finance Documents are legal, valid and binding and (c) to make the Finance Documents admissible in evidence in the jurisdictions of incorporation or formation of each of the
Security Parties, have been done, fulfilled and performed. |
11.7 |
No Filing or Stamp Taxes Under the laws of the Security Parties respective jurisdictions of incorporation or formation in force at the
date hereof, it is not necessary that any of the Finance Documents be filed, recorded or enrolled with any court or other authority in its jurisdiction of incorporation or formation (other than the Registrar of Companies for England and Wales or the
relevant maritime registry, to the extent applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Finance Documents. |
Page 37
11.8 |
Binding Obligations The obligations expressed to be assumed by each of the Security Parties in the Finance Documents are legal and valid
obligations, binding on each of them in accordance with the terms of the Finance Documents and no limit on any of their powers will be exceeded as a result of the borrowings, granting of security or giving of guarantees contemplated by the Finance
Documents or the performance by any of them of any of their obligations thereunder. |
11.9 |
No misleading information To the best of its knowledge, any factual information provided by any Security Party to any Finance Party in
connection with the Loan was true and accurate in all material respects as at the date it was provided and is not misleading in any respect. |
11.10 |
No Winding-up None of the Security Parties has taken any corporate or limited partnership action nor have any other steps been taken or
legal proceedings been started or (to the best of the Borrowers knowledge and belief) threatened against any Security Party for its winding-up, dissolution, administration or reorganisation or for the appointment of a receiver, administrator,
administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues which might have a Material Adverse Effect. |
|
11.11.1 |
None of the Security Parties nor the Group taken as a whole is unable, or admits or has admitted its inability, to pay its debts or has suspended
making payments in respect of any of its debts. |
|
11.11.2 |
None of the Security Parties by reason of actual or anticipated financial difficulties, has commenced, or intends to commence, negotiations with
one or more of its creditors with a view to rescheduling any of its indebtedness. |
|
11.11.3 |
The value of the assets of each Security Party and the Group taken as a whole is not less than the liabilities of such entity or the Group taken as
a whole (as the case may be) (taking into account contingent and prospective liabilities). |
|
11.11.4 |
No moratorium has been, or may, in the reasonably foreseeable future be, declared in respect of any indebtedness of any Security Party.
|
11.12 |
No Material Defaults |
|
11.12.1 |
Without prejudice to Clause 11.12.2, none of the Security Parties is in breach of or in default under any agreement to which it is a party or which
is binding on it or any of its assets to an extent or in a manner which might have a Material Adverse Effect. |
|
11.12.2 |
No Event of Default is continuing or might reasonably be expected to result from the advance of any Drawing. |
11.13 |
No Material Proceedings No action or administrative proceeding of or before any court, arbitral body or agency which is not covered by
adequate insurance or which might have a Material Adverse Effect has been started or is reasonably likely to be started. |
Page 38
11.14 |
Accounts All financial statements relating to the Group required to be delivered under Clause 12.1.1, were prepared in accordance with GAAP,
give (in conjunction with the notes thereto) a true and fair view of (in the case of annual financial statements) or fairly represent (in the case of quarterly accounts) the financial condition of the Group at the date as of which they were prepared
and the results of the Groups operations during the financial period then ended. |
11.15 |
No Material Adverse Change Since the publication of the last financial statements relating to the Group delivered pursuant to Clause 12.1.1,
there has been no change that has a Material Adverse Effect. |
11.16 |
No Undisclosed Liabilities As at the date to which the Accounts were prepared none of the Security Parties had any material liabilities
(contingent or otherwise) which were not disclosed thereby (or by the notes thereto) or reserved against therein nor any unrealised or anticipated losses arising from commitments entered into by it which were not so disclosed or reserved against
therein. |
11.17 |
No Obligation to Create Security The execution of the Finance Documents by the Security Parties and their exercise of their rights and
performance of their obligations thereunder will not result in the existence of nor oblige any Security Party to create any Encumbrance over all or any of their present or future revenues or assets, other than pursuant to the Security Documents.
|
11.18 |
No Breach The execution of the Finance Documents by each of the Security Parties and their exercise of their rights and performance of their
obligations under any of the Finance Documents do not constitute and will not result in any breach of any agreement or treaty to which any of them is a party. |
11.19 |
Security Each of the Security Parties is the legal and beneficial owner of all assets and other property which it purports to charge,
mortgage, pledge, assign or otherwise secure pursuant to each Security Document and those Security Documents to which it is a party create and give rise to valid and effective security having the ranking expressed in those Security Documents.
|
11.20 |
Necessary Authorisations The Necessary Authorisations required by each Security Party are in full force and effect, and each Security Party
is in compliance with the material provisions of each such Necessary Authorisation relating to it and, to the best of its knowledge, none of the Necessary Authorisations relating to it are the subject of any pending or threatened proceedings or
revocation. |
11.21 |
Money Laundering Any amount borrowed hereunder, and the performance of the obligations of the Security Parties under the Finance Documents,
will be for the account of members of the Group and will not involve any breach by any of them of any law or regulatory measure relating to money laundering as defined in Article 1 of the Directive (2005/60/EEC) of the Council of
the European Communities. |
11.22 |
Disclosure of material facts The Borrower is not aware of any material facts or circumstances which have not been disclosed to the Agent and
which might, if disclosed, have reasonably been expected to adversely affect the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrower. |
Page 39
|
11.23.1 |
None of the Security Parties has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.
|
|
11.23.2 |
No labour disputes are current or (to the best of the Borrowers knowledge and belief) threatened against any member of the Group which have
or are reasonably likely to have a Material Adverse Effect. |
|
11.24.1 |
Each member of the Group is in compliance with Clause 12.1.9 and (to the best of its knowledge and belief) no circumstances have occurred which
would prevent such compliance in a manner or to an extent which has or is reasonably likely to have a Material Adverse Effect. |
|
11.24.2 |
No Environmental Claim has been commenced or (to the best of the Borrowers knowledge and belief) is threatened against any member of the
Group where that claim has or is reasonably likely, if determined against that member of the Group, to have a Material Adverse Effect. |
11.25 |
Use of Facility The Loan will be used for the purposes specified in the Recital. |
|
11.26.1 |
The Borrower is not overdue in the payment of any amount in respect of Tax of $5,000,000 (or its equivalent in any other currency) or more, save in
the case of Taxes which are being contested on bona fide grounds. |
|
11.26.2 |
No claims or investigations are being made or conducted against the Borrower with respect to Taxes such that a liability of, or claim against, the
Borrower of $5,000,000 (or its equivalent in any other currency) or more is reasonably likely to arise. |
11.27 |
FATCA None of the Security Parties is a FATCA FFI or US Tax Obligor. |
11.28 |
Sanctions No Security Party, nor any Affiliate of any Security Party, nor any of their respective directors, officers or employees:
|
|
(a) |
is a Restricted Party; or |
|
(b) |
has received notice of or is aware of any claim, action, suit, proceeding or investigation against it with respect to Sanctions by any Sanctions
Authority; or |
|
(c) |
is located, organised or resident in a country or territory that is, or whose government is, the subject of Sanctions and/or a Sanctioned Country.
|
11.29 |
Charters The details set out at Schedule 6 give a full and accurate description of any Charter currently in place in respect of a Collateral
Vessel and no Collateral Owner has entered into, or agreed to enter into, any other charter in respect of a Collateral Vessel the term of which has more than thirty six (36) months remaining. |
Page 40
11.30 |
Representations Limited The representation and warranties of the Borrower in this Clause 11 are subject to: |
|
11.30.1 |
the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court; |
|
11.30.2 |
the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and
other laws generally affecting or limiting the rights of creditors; |
|
11.30.3 |
the time barring of claims under any applicable limitation acts; |
|
11.30.4 |
the possibility that a court may strike out provisions for a contract as being invalid for reasons of oppression, undue influence or similar; and
|
|
11.30.5 |
any other reservations or qualifications of law expressed in any legal opinions obtained by the Agent in connection with the Loan.
|
12 |
Undertakings and Covenants |
The undertakings and covenants in this Clause 12 remain in force for the duration of the Facility Period.
12.1 |
General Undertakings |
|
12.1.1 |
Financial statements The Borrower shall supply to the Agent as soon as the same become available, but in any event within one hundred and
eighty (180) days after the end of each of its financial years, its audited consolidated financial statements for that financial year together with a Compliance Certificate, signed by a duly authorised representative of the Borrower, evidencing
compliance with Clause 12.2 as at the date as at which those financial statements were drawn up. |
|
12.1.2 |
Requirements as to financial statements Each set of financial statements delivered by the Borrower under Clause 12.1.1:
|
|
(a) |
shall be certified by an authorised signatory of the Borrower as fairly representing its financial condition as at the date as at which those
financial statements were drawn up; and |
|
(b) |
shall be prepared in accordance with GAAP. |
|
12.1.3 |
Interim financial statements The Borrower shall supply to the Agent as soon as the same become available, but in any event within one
hundred and twenty (120) days after the end of the first, second and third quarter during each of its financial years, its unaudited consolidated quarterly financial statements for that quarter together with a Compliance Certificate, signed by
a duly authorised representative of the Borrower, evidencing compliance with Clause 12.2 as at the date as at which those financial statements were drawn up. |
Page 41
|
12.1.4 |
Information: miscellaneous The Borrower shall, and shall procure that each of the other Security Parties shall, supply to the Agent:
|
|
(a) |
promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings which are current, threatened
or pending against any Security Party, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect; |
|
(b) |
promptly, details of any capture, seizure, arrest, confiscation or detention of any Collateral Vessel which remains in existence five (5) Business
Days after the initial capture, seizure, arrest, confiscation or detention (as the case may be); |
|
(c) |
promptly upon becoming aware of it, notification that it, any of its Subsidiaries, or any of their respective directors, officers, or employees,
has become a Restricted Party; and |
|
(d) |
promptly, such further information regarding the financial condition, business and operations of any Security Party as the Agent may reasonably
request. |
|
12.1.5 |
Maintenance of Legal Validity The Borrower shall, and shall procure that each of the other Security Parties shall, comply with the terms of
and do all that is necessary to maintain in full force and effect all Authorisations required in or by the laws and regulations of its jurisdiction of formation or incorporation and all other applicable jurisdictions, to enable it lawfully to enter
into and perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence of the Finance Documents in its jurisdiction of incorporation, formation or organisation and all other
applicable jurisdictions. |
|
12.1.6 |
Notification of Default The Borrower shall promptly, upon becoming aware of the same, inform the Agent in writing of the occurrence of any
Event of Default and, upon receipt of a written request to that effect from the Agent, confirm to the Agent that, save as previously notified to the Agent or as notified in such confirmation, no Event of Default has occurred. |
|
12.1.7 |
Claims Pari Passu The Borrower shall, and shall procure that each of the other Security Parties shall, ensure that at all times the claims
of the Finance Parties against it under the Security Documents rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation, winding-up or other
similar laws of general application. |
|
12.1.8 |
Necessary Authorisations Without prejudice to any specific provision of the Security Documents relating to an Authorisation, the Borrower
shall, and shall procure that each of the other Security Parties shall, (i) obtain, comply with and do all that is necessary to maintain in full force and effect all Necessary Authorisations if a failure to do the same may cause a Material
Adverse Effect; and (ii) promptly upon request, supply certified copies to the Agent of all Necessary Authorisations. |
Page 42
|
12.1.9 |
Compliance with Applicable Laws The Borrower shall, and will procure that each Security Party shall, comply with all applicable laws,
including Environmental Laws, to which it may be subject (except as regards Sanctions, to which Clause 12.1.10 applies, and anti-corruption laws to which Clause 12.1.10 applies) if a failure to do the same may have a Material Adverse Effect.
|
|
(a) |
The Borrower shall, and shall procure that each of the other Security Parties will, ensure that no part of the proceeds of the Loan or other
transaction(s) contemplated by any Finance Document shall, directly or indirectly, be used or otherwise made available: |
|
(i) |
to fund any trade, business or other activity involving any Restricted Party or any country or territory that at the time of such funding, is a
Sanctioned Country; |
|
(ii) |
for the direct or indirect benefit of any Restricted Party; or |
|
(iii) |
in any other manner that would reasonably be expected to result in (i) the occurrence of an Event of Default under Clause 13.1.25 or
(ii) any Party (other than the Security Parties) or any Affiliate of such party or any other person being party to or which benefits from any Finance Document being in breach of any Sanction (if and to the extent applicable to either of them)
or becoming a Restricted Party. |
|
(b) |
Each Security Party shall ensure that its assets, the assets subject to the Security Documents or the Collateral Vessels shall not be used directly
or indirectly: |
|
(i) |
by or for the direct or indirect benefit of any Restricted Party; or |
|
(ii) |
in any trade which is prohibited under applicable Sanctions or which is likely to expose any Security Party, its assets, any asset subject to the
Security Documents, the Collateral Vessels, any Finance Party or any other person being party to or which benefits from any Finance Document, any Head Charterer or any Approved Managers (except for any Approved Managers that are not a member of the
Group) to enforcement proceedings or any other consequences whatsoever arising from Sanctions. |
|
(c) |
Each Security Party shall ensure that the Collateral Vessels shall not be trading to Iranian ports or carrying or storing/warehousing crude oil,
petroleum products or petrochemical products or other products subject to Sanctions if they originate in Iran, or are being exported from Iran to any other country. |
Page 43
|
12.1.11 |
Anti-corruption and anti-bribery laws The Borrower shall, and shall procure that each of the Security Parties shall, conduct its business in
compliance with applicable anti-corruption and anti-bribery laws. |
|
12.1.12 |
Environmental compliance |
The Borrower shall, and shall procure that each of the Security Parties will:
|
(a) |
comply with all Environmental Laws; |
|
(b) |
obtain, maintain and ensure compliance with all requisite Environmental Approvals; |
|
(c) |
implement procedures to monitor compliance with and to prevent liability under any Environmental Law; |
|
(d) |
ensure that any Collateral Vessel owned by it with the intention of being scrapped by its Collateral Owner, is recycled at a recycling yard which
conducts its recycling business in a socially and environmentally responsible manner, |
where failure to
do so has or is reasonably likely to have a Material Adverse Effect.
|
12.1.13 |
Environmental claims |
The Borrower shall, and shall procure that each of the Security Parties will, promptly upon becoming aware of the same, inform
the Agent in writing of:
|
(a) |
any Environmental Claim against any member of the Group which is current, pending or threatened; and |
|
(b) |
any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the
Group, |
where the claim, if determined against that member of the Group, has or is reasonably likely to
have a Material Adverse Effect.
|
(a) |
The Borrower shall, and shall procure that each Security Party will, pay and discharge all Taxes imposed upon it or its assets within the time
period allowed without incurring penalties unless and only to the extent that: |
|
(i) |
such payment is being contested in good faith; |
|
(ii) |
adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial
statements delivered to the Agent under Clause 12.1.1 and 12.1.3; and |
Page 44
|
(iii) |
such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.
|
|
(b) |
No Security Party may change its residence for Tax purposes without the prior consent of the Agent (acting on the instructions of the Lenders).
|
|
12.1.15 |
Loans or other financial commitments The Borrower shall procure that no Collateral Owner makes any loan or enters into any guarantee and
indemnity or otherwise voluntarily assumes any actual or contingent liability in respect of any obligation of any other person except for the Loan, the Existing Loans, loans made to other members of the Group and loans made in the ordinary course of
business in connection with the chartering, operation or repair of its Collateral Vessel. |
|
12.1.16 |
Further Assurance The Borrower shall, and shall procure that each of the Security Parties shall, at its own expense, promptly take all such
action as the Agent may reasonably require for the purpose of perfecting or protecting any Finance Partys rights with respect to the security created or evidenced (or intended to be created or evidenced) by the Security Documents.
|
|
12.1.17 |
Other information The Borrower will, and will procure that each of the Security Parties will, promptly supply to the Agent such financial
information and explanations as the Majority Lenders may from time to time reasonably require in connection with the Security Parties, including the unaudited consolidated annual financial statements of such Security Parties as soon as such
financial statements have been drawn up. |
|
12.1.18 |
Inspection of records The Borrower will, and will procure that each other Security Party will, permit the inspection of its financial
records and accounts on reasonable notice from time to time during business hours by the Agent or its nominee. |
|
12.1.19 |
Insurance The Borrower shall procure that all of the assets, operation and liability of the members of the Group are insured against such
risks, liabilities and for amounts as normally adopted by the industry for similar assets and liabilities and, in the case of the Collateral Vessels, in accordance with the terms of the Security Documents. |
|
12.1.20 |
Merger and Demerger The Borrower shall not, and shall ensure that no other Security Party will, enter into any amalgamation, merger,
demerger or corporate restructuring without the prior written consent of all Lenders (such consent not to be unreasonably withheld). |
|
12.1.21 |
Transfer of Assets The Borrower shall not, and shall procure that no other Security Party will, sell or transfer any of its material assets
other than on arms length terms PROVIDED ALWAYS that sales of certain Collateral Vessels (as detailed in Schedule 6) from one Collateral Owner to the other Collateral Owner are permitted subject to compliance with the relevant provision of
Clause 3.4.3. |
Page 45
|
12.1.22 |
Change of Business The Borrower shall not, without the prior written consent of the Majority Lenders, make any substantial change to the
general nature of its shipping business from that carried on at the date of this Agreement. |
|
12.1.23 |
Negative Pledge The Borrower shall procure that neither of the Collateral Owners creates, or permits to subsist, any Encumbrance (other than
pursuant to the Security Documents) over all or any part of the Collateral Vessels or the Insurances other than a Permitted Encumbrance. |
|
12.1.24 |
Know your customer checks If: |
|
(a) |
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this
Agreement; |
|
(b) |
any change in the status of the Borrower after the date of this Agreement; or |
|
(c) |
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to
such assignment or transfer, |
obliges the Agent or any Lender (or, in the case of (c) above, any
prospective new Lender) to comply with know your customer or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Agent or
any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender for itself (or, in the case of (c) above, on behalf of any
prospective new Lender) in order for the Agent or that Lender (or, in the case of (c) above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary know your customer or other similar checks
under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
|
12.1.25 |
Intercompany borrowings The Borrower shall procure that the Collateral Owners will only borrow from other members of the Group on a
subordinated and unsecured basis, provided that the Collateral Owners may only repay such subordinated unsecured loans as long as no Event of Default has occurred and is continuing. |
|
12.1.26 |
Dividends The Borrower shall procure that none of the Collateral Owners shall pay any dividends or make other distributions to its
shareholders at any time after the occurrence of an Event of Default which remains unremedied or unwaived. |
|
12.1.27 |
Listing The Borrower shall throughout the Facility Period maintain its listing as a publically-traded master limited partnership on the New
York Stock Exchange or such other recognised stock exchange reasonably acceptable to the Agent (acting on the instructions of the Majority Lenders). |
Page 46
|
12.1.28 |
Application of FATCA The Borrower shall promptly notify the Agent if any Security Party becomes or ceases to be a FATCA FFI or a US Tax
Obligor. |
|
12.1.29 |
Management of Collateral Vessels The Borrower shall ensure that (a) each Collateral Vessel is at all times technically and commercially
managed by Approved Managers and (b) at any time that the Approved Managers of the Collateral Vessels are not members of the Group or the Teekay Group, such Approved Managers provide a written confirmation confirming that, among other things,
following the occurrence of an Event of Default which is continuing unremedied and unwaived, all claims of the Approved Managers against a Collateral Owner shall be subordinated to the claims of the Finance Parties under the Finance Documents. The
Borrower shall promptly inform the Agent in writing of any proposed change of an Approved Manager. |
|
12.1.30 |
Classification The Borrower shall ensure that each Collateral Vessel maintains the highest classification required for the purpose of the
relevant trade of such Collateral Vessel which shall be with a Pre-Approved Classification Society, in each case, free from any material overdue recommendations and adverse notations affecting that Collateral Vessels class.
|
|
12.1.31 |
Certificate of Financial Responsibility The Borrower shall procure that each Collateral Owner shall, if required, obtain and maintain a
certificate of financial responsibility in relation to any Collateral Vessel which is to call at the United States of America. |
|
12.1.32 |
Registration The Borrower shall not change or permit a change to the flag of any Collateral Vessel during the Facility Period other than to
a Pre-Approved Flag or under such other flag as may be approved by the Agent acting on the instructions of the Majority Lenders, such approval not to be unreasonably withheld or delayed. |
|
12.1.33 |
ISM and ISPS Compliance The Borrower shall ensure that the relevant Company and the relevant manager (as applicable) complies in all
material respects with the ISM Code and the ISPS Code or any replacements thereof and in particular (without prejudice to the generality of the foregoing) shall ensure that such Company and relevant manager holds (i) a valid and current
Document of Compliance issued pursuant to the ISM Code, (ii) a valid and current SMC issued in respect of each Collateral Vessel pursuant to the ISM Code, and (iii) an ISSC in respect of each Collateral Vessel, and the Borrower shall
promptly, upon request, supply the Agent with copies of the same. |
|
12.1.34 |
Valuations The Borrower (at its own cost) will deliver to the Agent Valuations (in accordance with the definition of, and sufficient to
establish, Fair Market Value) of each Collateral Vessel (i) on 30 April and 31 October during each of the Borrowers financial years (unless either such day is not a Business Day in which case the Valuations shall be provided on
the next preceding Business Day) and (ii) following the occurrence of an Event of Default which is continuing unremedied and unwaived, on such other occasions as the Agent may request (acting on the instructions of the Majority Lenders).
|
Page 47
12.2 |
Financial covenants Throughout the Facility Period the Group shall: |
|
12.2.1 |
maintain a Free Liquidity together with undrawn committed revolving credit lines available to be drawn by members of the Group (including under
this Agreement but excluding undrawn committed revolving credit lines with less than six (6) months to maturity) of not less than seventy five million Dollars ($75,000,000); and |
|
12.2.2 |
ensure that the aggregate of the Free Liquidity and undrawn committed revolving credit lines available to be drawn by members of the Group
(including under this Agreement, but excluding undrawn committed revolving credit lines with less than six (6) months to maturity) will not be less than five per cent (5%) of the Total Debt of the Group. |
PROVIDED THAT following any change in the applicable accounting policies for the Borrower from GAAP the Agent (acting on the
instructions of the Majority Lenders and in consultation with the Borrower) may require an amendment to this Clause 12.2 as the Agent deems logical and necessary having regard to the nature of such changes in policy and the intended substance of
this Clause 12.2.
13.1 |
Events of Default Each of the events or circumstances set out in this Clause 13.1 is an Event of Default. |
|
13.1.1 |
Borrowers Failure to Pay under this Agreement The Borrower fails to pay any amount due from it under this Agreement at the time, in
the currency and otherwise in the manner specified herein provided that, if the Borrower can demonstrate to the reasonable satisfaction of the Agent that all necessary instructions were given to effect such payment and the non-receipt thereof is
attributable solely to an administrative or technical error by the Agent or an error in the banking system or a Disruption Event, such payment shall instead be deemed to be due, solely for the purposes of this paragraph, within three
(3) Business Days of the date on which it actually fell due under this Agreement (if a payment of principal), five (5) Business Days (if a payment of interest) or ten (10) Business Days (if a sum payable on demand); or
|
|
13.1.2 |
Misrepresentation Any representation or statement made by any Security Party in any Finance Document to which it is a party or in any notice
or other document, certificate or statement delivered by it pursuant thereto or in connection therewith is or proves to have been incorrect or misleading in any material respect, where the circumstances causing the same give rise to a Material
Adverse Effect; or |
|
13.1.3 |
Specific Covenants A Security Party fails duly to perform or comply with any of the obligations expressed to be assumed by or procured by
the Borrower under Clauses 10.9, 12.1.6, 12.1.10, 12.1.19, 12.1.23, 12.1.27, 12.1.30 and 12.1.32; or |
Page 48
|
13.1.4 |
Financial Covenants The Borrower is in breach of either of the financial covenants set out in Clause 12.2 at any time; or
|
|
13.1.5 |
Other Obligations A Security Party fails duly to perform or comply with any of the obligations expressed to be assumed by it in any Finance
Document (other than those referred to in Clause 13.1.3, or Clause 13.1.4) and such failure is not remedied within 30 days after the earlier of (i) the Agent having given notice thereof to the Borrower, and (ii) the Borrower becoming aware
of such Default; or |
|
13.1.6 |
Cross Default Any Financial Indebtedness of any Security Party is not paid when due (or within any applicable grace period) or any Financial
Indebtedness of any Security Party is declared, or is capable of being declared, to be or otherwise becomes due and payable prior to its specified maturity where (in either case) the aggregate of all such unpaid or accelerated indebtedness
(i) of the Borrower is equal to or greater than one hundred million Dollars ($100,000,000) or its equivalent in any other currency; or (ii) of any Collateral Owner is equal to or greater than twenty five million Dollars ($25,000,000) or
its equivalent in any other currency; or (iii) of any other Security Party is equal to or greater than fifteen million Dollars ($15,000,000) or its equivalent in any other currency; or |
|
13.1.7 |
Insolvency and Rescheduling A Security Party is unable to pay its debts as they fall due, commences negotiations with any one or more of its
creditors with a view to the general readjustment or rescheduling of its indebtedness or makes a general assignment for the benefit of its creditors or a composition with its creditors; or |
|
13.1.8 |
Winding-up A Security Party files for initiation of formal restructuring proceedings, is wound up or declared bankrupt or takes any
corporate action or other steps are taken or legal proceedings are started for its winding-up, dissolution, administration or re-organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator,
custodian, trustee or similar officer of it or of any or all of its revenues or assets or any moratorium is declared or sought in respect of any of its indebtedness; or |
|
13.1.9 |
Execution or Distress |
|
(a) |
Any Security Party fails to comply with or pay any sum due from it (within 30 days of such amount falling due) under any final judgment or any
final order made or given by any court or other official body of a competent jurisdiction in an aggregate (i) in respect of the Borrower equal to or greater than one hundred million Dollars ($100,000,000) or its equivalent in any other
currency; or (ii) in respect of any Collateral Owner equal to or greater than twenty five million Dollars ($25,000,000) or its equivalent in any other currency; or (iii) in respect of any other Security Party equal to or greater than
fifteen million Dollars ($15,000,000) or its equivalent in any other currency, being a judgment or order against which there is no right of appeal or if a right of appeal exists, where the time limit for making such appeal has expired.
|
Page 49
|
(b) |
Any execution or distress is levied against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets
of a Security Party in an aggregate amount (i) in respect of the Borrower equal to or greater than one hundred million Dollars ($100,000,000) or its equivalent in any other currency; or (ii) in respect of any Collateral Owner equal to or
greater than twenty five million Dollars ($25,000,000) or its equivalent in any other currency; or (iii) in respect of any other Security Party equal to or greater than fifteen million Dollars ($15,000,000) or its equivalent in any other
currency, other than any execution or distress which is being contested in good faith and which is either discharged within 30 days or in respect of which adequate security has been provided within 30 days to the relevant court or other authority to
enable the relevant execution or distress to be lifted or released; or |
|
13.1.10 |
Similar Event Any event occurs which, under the laws of any jurisdiction, has a similar or analogous effect to any of those events mentioned
in Clauses 13.1.7, 13.1.8 or 13.1.9; or |
|
13.1.11 |
Repudiation Any Security Party repudiates any Finance Document to which it is a party or does or causes to be done any act or thing
evidencing an intention to repudiate any such Finance Document; or |
|
13.1.12 |
Validity and Admissibility At any time any act, condition or thing required to be done, fulfilled or performed in order:
|
|
(a) |
to enable any Security Party lawfully to enter into, exercise its rights under and perform the respective obligations expressed to be assumed by it
in the Finance Documents; |
|
(b) |
to ensure that the obligations expressed to be assumed by each of the Security Parties in the Finance Documents are legal, valid and binding; or
|
|
(c) |
to make the Finance Documents admissible in evidence in any applicable jurisdiction |
is not done, fulfilled or performed within 30 days after notification from the Agent to the relevant Security Party requiring
the same to be done, fulfilled or performed; or
|
13.1.13 |
Illegality At any time it is or becomes unlawful for any Security Party to perform or comply with any or all of its obligations under the
Finance Documents to which it is a party or any of the obligations of the Borrower hereunder are not or cease to be legal, valid and binding and such illegality is not remedied or mitigated to the satisfaction of the Agent within thirty
(30) days after it has given notice thereof to the relevant Security Party; or |
Page 50
|
13.1.14 |
Material Adverse Change At any time there shall occur any event or change which has a Material Adverse Effect in respect of any Security
Party and such event or change, if capable of remedy, is not so remedied within 30 days of the delivery of a notice confirming such event or change by the Agent to the relevant Security Party; or |
|
13.1.15 |
Qualifications of Financial Statements The auditors of the Borrower qualify their report on any audited consolidated financial statements of
the Borrower in any regard which, in the reasonable opinion of the Agent, has a Material Adverse Effect; or |
|
13.1.16 |
Conditions Precedent and Subsequent If (a) any of the conditions set out in Clause 3.1 is not satisfied by the relevant time or such
other time period specified by the Agent in its discretion, or (b) any of the conditions set out in Clause 3.6 is not satisfied within thirty (30) days or such other time period specified by the Agent in its discretion; or
|
|
13.1.17 |
Revocation or Modification of consents etc. If any Necessary Authorisation which is now or which at any time during the Facility Period
becomes necessary to enable any of the Security Parties to comply with any of their obligations in or pursuant to any of the Finance Documents is revoked, withdrawn or withheld, or modified in a manner which the Agent reasonably considers is, or may
be, prejudicial to the interests of a Finance Party in a material manner, or if such Necessary Authorisation ceases to remain in full force and effect; or |
|
13.1.18 |
Cessation of Business Any of the Security Parties ceases, or threatens to cease, to carry on all or a substantial part of its business; or
|
|
13.1.19 |
Curtailment of Business if the business of any of the Security Parties is wholly or materially curtailed by any intervention by or under
authority of any government, or if all or a substantial part of the undertaking, property or assets of any of the Security Parties is seized, nationalised, expropriated or compulsorily acquired by or under authority of any government or any Security
Party disposes or threatens to dispose of a substantial part of its business or assets; or |
|
13.1.20 |
Reduction of Capital if the Borrower reduces its committed or subscribed capital; or |
|
13.1.21 |
Notice of Termination if any Security Party (that has given a guarantee and indemnity pursuant to this Agreement) gives notice to the Agent
to determine its obligations under its Guarantee; or |
|
13.1.22 |
Environmental Matters |
|
(a) |
any Environmental Claim is made against a Collateral Owner or a Head Charterer or in connection with a Collateral Vessel, where such Environmental
Claim has a Material Adverse Effect. |
Page 51
|
(b) |
any actual Environmental Incident occurs in connection with a Collateral Vessel, where such Environmental Incident has a Material Adverse Effect;
or |
|
13.1.23 |
Arrest of Collateral Vessel any capture, arrest, seizure, confiscation, detention or similar proceeding is commenced against any Collateral
Vessel in any jurisdiction and such Collateral Vessel is not released within thirty (30) days of such capture, arrest, seizure, confiscation, detention or similar proceedings being commenced; or |
|
13.1.24 |
Loss of Property all or a substantial part of the business or assets of any Security Party is destroyed, abandoned, seized, appropriated or
forfeited for any reason, and such occurrence in the reasonable opinion of the Agent (acting on the instructions of the Majority Lenders) has or could reasonably be expected to have a Material Adverse Effect; or |
|
13.1.25 |
Sanctions any Security Party, any Affiliate of any Security Party or any of their respective directors, officers, employees becomes a
Restricted Party. |
13.2 |
Acceleration If an Event of Default is continuing unremedied or unwaived the Agent may (with the consent of the Majority Lenders) and shall
(at the request of the Majority Lenders) by notice to the Borrower cancel any part of the Maximum Amount not then advanced and: |
|
13.2.1 |
declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due
and payable, whereupon they shall become immediately due and payable; and/or |
|
13.2.2 |
declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Agent; and/or |
|
13.2.3 |
declare the Commitments terminated and the Maximum Amount reduced to zero. |
14 |
Assignment and Sub-Participation |
14.1 |
Lenders rights A Lender may assign any of its rights under this Agreement or transfer by novation any of its rights and obligations
under this Agreement to any other branch or Affiliate of that Lender or to any other Lender (or an Affiliate of another Lender) or (subject to the prior written consent of the Borrower, such consent not to be unreasonably withheld but not to be
required at any time after an Event of Default which is continuing unremedied or unwaived) to any other bank, financial institution or institutional lender, or any trust, fund or other entity which is regularly engaged in, or established for the
purpose of, making, purchasing or investing in loans, securities or other financial assets, and may grant sub- participations in all or any part of its Commitment provided that where any such assignment, transfer or sub-participation relates to only
part of a Lenders Commitment, (i) it shall be in an amount of no less than five million Dollars ($5,000,000) and (ii) such assignment, transfer or sub-participation of only part of a Lenders Commitment shall not result in such
Lender holding a Commitment of less than five million Dollars ($5,000,000). Where the consent of the Borrower is required, the Borrower shall be deemed to have given its consent if no express refusal is given within five (5) Business Days of
its receipt of the request. |
Page 52
14.2 |
Borrowers co-operation The Borrower will co-operate fully with a Lender in connection with any assignment, transfer or
sub-participation by that Lender; will execute and procure the execution of such documents as that Lender may require in that connection including, but not limited to, re-executing any Security Documents (if required); and irrevocably authorises any
Finance Party to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all
information relating to the Security Parties, the Loan and the Relevant Documents which any Finance Party may in its discretion consider necessary or desirable (subject to any duties of confidentiality applicable to the Lenders generally).
|
14.3 |
Rights of assignee Any assignee of a Lender shall (unless limited by the express terms of the assignment) take the full benefit of every
provision of the Finance Documents benefiting that Lender provided that an assignment will only be effective on notification by the Agent to that Lender and the assignee that the Agent is satisfied it has complied with all necessary
Know your customer or other similar checks under all applicable laws and regulations in relation to the assignment to the assignee. |
14.4 |
Transfer Certificates If a Lender wishes to transfer any of its rights and obligations under or pursuant to this Agreement, it may do so by
delivering to the Agent a duly completed Transfer Certificate, in which event on the Transfer Date: |
|
14.4.1 |
to the extent that that Lender seeks to transfer its rights and obligations, the Borrower (on the one hand) and that Lender (on the other) shall be
released from all further obligations towards the other; |
|
14.4.2 |
the Borrower (on the one hand) and the transferee (on the other) shall assume obligations towards the other identical to those released pursuant to
Clause 14.4.1; and |
|
14.4.3 |
the Agent, each of the Lenders and the transferee shall have the same rights and obligations between themselves as they would have had if the
transferee had been an original party to this Agreement as a Lender |
provided that the Agent
shall only be obliged to execute a Transfer Certificate once:
|
(a) |
it is satisfied it has complied with all necessary know your customer or other similar checks under all applicable laws and regulations
in relation to the transfer to the transferee; and |
|
(b) |
the transferee has paid to the Agent for its own account a transfer fee of seven thousand five hundred Dollars ($7,500) (or, in the case of a
transfer to another branch of the transferor, a transfer fee of three thousand seven hundred and fifty Dollars ($3,750)). |
Page 53
The Agent shall, as soon as reasonably practicable after it has executed a
Transfer Certificate, send to the Borrower and the Lenders a copy of that Transfer Certificate.
14.5 |
Finance Documents Unless otherwise expressly provided in any Finance Document or otherwise expressly agreed between a Lender and any
proposed transferee and notified by that Lender to the Agent on or before the relevant Transfer Date, there shall automatically be assigned to the transferee with any transfer of a Lenders rights and obligations under or pursuant to this
Agreement the rights of that Lender under or pursuant to the Finance Documents (other than this Agreement) which relate to the portion of that Lenders rights and obligations transferred by the relevant Transfer Certificate.
|
14.6 |
No assignment or transfer by the Borrower The Borrower may not assign any of its rights or transfer any of its rights or obligations under
the Finance Documents. |
14.7 |
Security over Lenders rights In addition to the other rights provided to Lenders under this Clause 14, each Lender may without
consulting with or obtaining consent from any Security Party, at any time charge, assign or otherwise create an Encumbrance in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure
obligations of that Lender including, without limitation: |
|
14.7.1 |
any charge, assignment or other Encumbrance to secure obligations to a federal reserve or central bank; and |
|
14.7.2 |
in the case of any Lender which is a fund, any charge, assignment or other Encumbrance granted to any holders (or trustee or representatives of
holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities, |
except that no such charge, assignment or Encumbrance shall:
|
(a) |
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or other
Encumbrance for the Lender as a party to any of the Finance Documents; or |
|
(b) |
require any payments to be made by any Security Party or grant to any person any more extensive rights than those required to be made or granted to
the relevant Lender under the Finance Documents. |
15 |
The Agent and the Lenders |
|
15.1.1 |
Each Lender appoints the Agent to act as its agent and/or security trustee under and in connection with the Finance Documents.
|
|
15.1.2 |
Each Lender authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection
with the Finance Documents together with any other incidental rights, powers, authorities and discretions. |
Page 54
15.2 |
Authority Each Lender irrevocably authorises the Agent and the Agent hereby agrees (subject to Clauses 15.5.1, 15.24 and this Clause 15.2):
|
|
15.2.1 |
to execute any Finance Document (other than this Agreement) on its behalf; |
|
15.2.2 |
to collect, receive, release or pay any money on its behalf; |
|
15.2.3 |
acting on the instructions from time to time of the Majority Lenders (save where the terms of any Finance Document expressly provide otherwise) to
give or withhold any waivers, consents or approvals under or pursuant to any Finance Document; |
|
15.2.4 |
acting on the instructions from time to time of the Majority Lenders (save where the terms of any Finance Document expressly provide otherwise) to
exercise, or refrain from exercising, any rights, powers, authorities or discretions under or pursuant to any Finance Document; and |
The Agent shall have no duties or responsibilities as agent or as security trustee other than those expressly conferred on it
by the Finance Documents and shall not be obliged to act on any instructions from the Lenders or the Majority Lenders if to do so would, in the opinion of the Agent (in its sole discretion), be contrary to any provision of the Finance Documents or
to any law, or would expose the Agent to any actual or potential liability to any third party.
15.3 |
Trust The Agent agrees and declares, and each of the other Finance Parties acknowledges, that, subject to the terms and conditions of this
Clause 15.3, the Agent holds the Trust Property on trust for the Finance Parties absolutely. Each of the other Finance Parties agrees that the obligations, rights and benefits vested in the Agent shall be performed and exercised in accordance with
this Clause 15.3. The Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as Agent for the Finance Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the
extent not inconsistent with this Agreement). In addition: |
|
15.3.1 |
the Agent and any attorney, agent or delegate of the Agent may indemnify itself or himself out of the Trust Property against all liabilities,
costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and
discretions vested in the Agent or any other such person by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents other than as a result of its gross negligence
or wilful misconduct; |
|
15.3.2 |
the other Finance Parties acknowledge that the Agent shall be under no obligation to insure any property nor to require any other person to insure
any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance; and |
Page 55
|
15.3.3 |
the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of 125 years from the
date of this Agreement. |
15.4.1 |
Subject to Clause 15.5, any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Borrower
and any such amendment or waiver will be binding on all Parties. |
15.4.2 |
The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 15. |
15.4.3 |
Without prejudice to the generality of Clause 15.14.4, the Agent may engage, pay for and rely on the services of lawyers in determining the consent
level required for and effecting any amendment, waiver or consent under this Agreement. |
|
15.5.1 |
An amendment, waiver or (in the case of a Security Document) a consent of, or in relation to, any term of any Finance Document that has the effect
of changing or which relates to: |
|
(a) |
the definitions of Majority Lenders, Maximum Amount, Fair Market Value and
Proportionate Share in Clause 1.1; |
|
(b) |
an extension to the date of payment of any amount under the Finance Documents; |
|
(c) |
a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable; |
|
(d) |
a change in currency of payment of any amount under the Finance Documents; |
|
(e) |
an increase in any Commitment, an extension of the Commitment Termination Date or any requirement that a cancellation of Commitments reduces the
Commitments of the Lenders rateably; |
|
(f) |
any provision which expressly requires the consent of all the Lenders; |
|
(g) |
Clause 2.2, Clause 14, this Clause 15 or Clause 23; |
|
(h) |
(other than as expressly permitted by the provisions of any Finance Document) the nature or scope of: |
|
(ii) |
the Charged Property; or |
Page 56
|
(iii) |
the manner in which the proceeds of enforcement of the Security Documents are distributed in accordance with Clause 10.8; |
|
(i) |
the release of any Guarantee or of any Encumbrance created or expressed to be created or evidenced by the Security Documents unless permitted under
this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of any Encumbrance created or expressed to be created or evidenced by the Security Documents where such sale or disposal is expressly
permitted under this Agreement or any other Finance Document; or |
|
(j) |
the pro rata application of payments made by the Borrower under the Finance Documents or sharing of payments or Commitment reductions;
|
shall not be made, or given, without the prior consent of all the Lenders.
|
15.5.2 |
An amendment or waiver which relates to the rights or obligations of the Agent or the MLAs (each in their capacity as such) may not be effected
without the consent of the Agent or, as the case may be, the MLAs. |
15.6 |
Excluded Commitments |
If:
|
15.6.1 |
any Defaulting Lender fails to respond to a request for a consent, waiver, amendment of or in relation to any term of any Finance Document or any
other vote of Lenders under the terms of this Agreement within twenty (20) Business Days of that request being made; or |
|
15.6.2 |
any Lender which is not a Defaulting Lender fails to respond to such a request (other than an amendment, waiver or consent referred to in Clauses
15.5.1(b), 15.5.1(c) and 15.5.1(e)) or other or such a vote within twenty (20) Business Days of that request being made, |
(unless, in either case, the Borrower and the Agent agree to a longer time period in relation to any request):
|
(a) |
its Commitment(s) shall not be included for the purpose of calculating the aggregate of the Commitments when ascertaining whether any relevant
percentage (including, for the avoidance of doubt, unanimity) of the aggregate of the Commitments has been obtained to approve that request; and |
|
(b) |
its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been
obtained to approve that request. |
Page 57
15.7 |
Replacement of Lender |
|
(a) |
any Lender becomes a Non-Consenting Lender (as defined in Clause 15.7.4); or |
|
(b) |
the Borrower or any other Security Party becomes obliged to repay any amount in accordance with Clause 6.1 or to pay additional amounts pursuant to
Clause 17.3, Clause 8.12.1 or Clause 8.6 to any Lender, |
then the Borrower may, on ten
(10) Business Days prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 14 all (and not part only) of its
rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a Replacement Lender) selected by the Borrower, which confirms its willingness to assume and does
assume all the obligations of the transferring Lender in accordance with Clause 14 for a purchase price in cash payable at the time of transfer in an amount equal to the outstanding principal amount of such Lenders participation in the
outstanding Loan and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.
|
15.7.2 |
The replacement of a Lender pursuant to this Clause 15.7 shall be subject to the following conditions: |
|
(a) |
the Borrower shall have no right to replace the Agent; |
|
(b) |
neither the Agent nor the Lender shall have any obligation to the Borrower to find a Replacement Lender; |
|
(c) |
in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than thirty (30) Business Days after the
date on which that Lender is deemed a Non- Consenting Lender; |
|
(d) |
in no event shall the Lender replaced under this Clause 15.7 be required to pay or surrender to such Replacement Lender any of the fees received by
such Lender pursuant to the Finance Documents; and |
|
(e) |
the Lender shall only be obliged to transfer its rights and obligations pursuant to Clause 15.7.1 once it is satisfied that it has complied with
all necessary know your customer or other similar checks under all applicable laws and regulations in relation to that transfer. |
|
15.7.3 |
A Lender shall perform the checks described in Clause 15.7.2(e) as soon as reasonably practicable following delivery of a notice referred to in
Clause 15.7.1 and shall notify the Agent and the Borrower when it is satisfied that it has complied with those checks. |
Page 58
|
15.7.4 |
In the event that: |
|
(a) |
the Borrower or the Agent (at the request of the Borrower) has requested the Lenders to give a consent in relation to, or to agree to a waiver or
amendment of, any provisions of the Finance Documents; |
|
(b) |
the consent, waiver or amendment in question requires the approval of all the Lenders; and |
|
(c) |
Lenders whose Commitments aggregate more than ninety per cent. (90%) of the aggregate of the Commitments (or, if the aggregate of the Commitments
have been reduced to zero, aggregated more than ninety per cent. (90%) of the aggregate of the Commitments prior to that reduction) have consented or agreed to such waiver or amendment, |
then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a
Non-Consenting Lender.
Notwithstanding any other provision to this Agreement, if a FATCA Deduction is or will be required to be made by any Party
under Clause 8.15 in respect of a payment to any Lender which is a FATCA FFI (a FATCA Non-Exempt Lender), the FATCA Non-Exempt Lender may either:
|
(a) |
transfer its entire interest in the Loan to a U.S. branch or affiliate; or |
|
(b) |
(subject to the prior written consent of the Borrower in the case of a transferee which is not already a Lender, such consent not to be
unreasonably withheld or delayed) nominate one or more transferee lenders who upon becoming a Lender would be a FATCA Exempt Party, by notice in writing to the Agent and the Borrower specifying the terms of the proposed transfer, and cause such
transferee lender(s) to purchase all of the FATCA Non-Exempt Lenders interest in the Loan. |
15.9 |
Disenfranchisement of Defaulting Lenders |
|
15.9.1 |
For so long as a Defaulting Lender has any Commitment in ascertaining: |
|
(a) |
the Majority Lenders; or |
|
(i) |
any given percentage (including, for the avoidance of doubt, unanimity) of the aggregate of the Commitments; or |
|
(ii) |
the agreement of any specified group of Lenders, |
has been obtained to approve any request for a consent, waiver, amendment or other vote of Lenders under the Finance
Documents, that Defaulting Lenders Commitment will be reduced by the amount of its participation in the Loan it has failed to make available and, to the extent that that reduction results in that Defaulting Lenders Commitment being zero,
that Defaulting Lender shall be deemed not to be a Lender for the purposes of (i) and (ii).
Page 59
|
15.9.2 |
For the purposes of this Clause 15.9, the Agent may assume that the following Lenders are Defaulting Lenders: |
|
(a) |
any Lender which has notified the Agent that it has become a Defaulting Lender; |
|
(b) |
any Lender in relation to which it is aware that any of the events or circumstances referred to in (a), (b) or (c) of the definition of
Defaulting Lender has occurred, |
unless it has received notice to the contrary from the
Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
15.10 |
Replacement of a Defaulting Lender |
|
15.10.1 |
The Borrower may, at any time a Lender has become and continues to be a Defaulting Lender, by giving ten (10) Business Days prior
written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 14 all (and not part only) of its rights and obligations under this
Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a Replacement Lender) selected by the Borrower which confirms its willingness to assume and does assume all the obligations, or all the
relevant obligations, of the transferring Lender in accordance with Clause 14 for a purchase price in cash payable at the time of transfer which is either: |
|
(a) |
in an amount equal to the outstanding principal amount of such Lenders participation in the outstanding Loan and all accrued interest, Break
Costs and other amounts payable in relation thereto under the Finance Documents; or |
|
(b) |
in an amount agreed between that Defaulting Lender, the Replacement Lender and the Borrower and which does not exceed the amount described in (a).
|
|
15.10.2 |
Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 15.10 shall be subject to the following conditions:
|
|
(a) |
the Borrower shall have no right to replace the Agent; |
|
(b) |
neither the Agent nor the Defaulting Lender shall have any obligation to the Borrower to find a Replacement Lender; |
|
(c) |
the transfer must take place no later than thirty (30) Business Days after the notice referred to in Clause 15.10.1; |
Page 60
|
(d) |
in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender
pursuant to the Finance Documents; and |
|
(e) |
the Defaulting Lender shall only be obliged to transfer its rights and obligations pursuant to 15.10.1 once it is satisfied that it has complied
with all necessary know your customer or other similar checks under all applicable laws and regulations in relation to that transfer to the Replacement Lender. |
|
15.10.3 |
The Defaulting Lender shall perform the checks described in Clause 15.10.2 as soon as reasonably practicable following delivery of a notice
referred to in Clause 15.10.1 and shall notify the Agent and the Borrower when it is satisfied that it has complied with those checks. |
15.11 |
Liability Neither the Agent nor any of its directors, officers, employees or agents shall be liable to the Lenders for anything done or
omitted to be done by the Agent under or in connection with any of the Relevant Documents unless as a result of the Agents gross negligence or wilful misconduct. |
15.12 |
Acknowledgement Each Lender acknowledges that: |
|
15.12.1 |
it has not relied on any representation made by the Agent or any of the Agents directors, officers, employees or agents or by any other
person acting or purporting to act on behalf of the Agent to induce it to enter into any Finance Document; |
|
15.12.2 |
it has made and will continue to make without reliance on the Agent, and based on such documents and other evidence as it considers appropriate,
its own independent investigation of the financial condition and affairs of the Security Parties in connection with the making and continuation of the Loan; |
|
15.12.3 |
it has made its own appraisal of the creditworthiness of the Security Parties; and |
|
15.12.4 |
the Agent shall not have any duty or responsibility at any time to provide it with any credit or other information relating to any Security Party
unless that information is received by the Agent pursuant to the express terms of a Finance Document. |
Each Lender agrees that it will not assert nor seek to assert against any director, officer, employee or agent of the Agent or
against any other person acting or purporting to act on behalf of the Agent any claim which it might have against them in respect of any of the matters referred to in this Clause 15.12.
15.13 |
Limitations on responsibility The Agent shall have no responsibility to any Security Party or to any Lender on account of:
|
|
15.13.1 |
the failure of a Lender or of any Security Party to perform any of its obligations under a Finance Document; nor |
|
15.13.2 |
the financial condition of any Security Party; nor |
Page 61
|
15.13.3 |
the completeness or accuracy of any statements, representations or warranties made in or pursuant to any Finance Document, or in or pursuant to any
document delivered pursuant to or in connection with any Finance Document; nor |
|
15.13.4 |
the negotiation, execution, effectiveness, genuineness, validity, enforceability, admissibility in evidence or sufficiency of any Finance Document
or of any document executed or delivered pursuant to or in connection with any Finance Document. |
15.14 |
The Agents rights The Agent may: |
|
15.14.1 |
assume that all representations or warranties made or deemed repeated by any Security Party in or pursuant to any Finance Document are true and
complete, unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary; |
|
15.14.2 |
assume (unless it has received notice to the contrary in its capacity as Agent) that no Default has occurred unless, in the case of Clause 13.1.1
only, it, in its capacity as the Agent, has acquired actual knowledge to the contrary; |
|
15.14.3 |
rely on any document or notice believed by it to be genuine; |
|
15.14.4 |
rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers selected or approved by it;
|
|
15.14.5 |
rely as to any factual matters which might reasonably be expected to be within the knowledge of any Security Party on a certificate signed by or on
behalf of that Security Party; and |
|
15.14.6 |
refrain from exercising any right, power, discretion or remedy unless and until instructed to exercise that right, power, discretion or remedy and
as to the manner of its exercise by the Lenders (or, where applicable, by the Majority Lenders) and unless and until the Agent has received from the Lenders any payment which the Agent may require on account of, or any security which the Agent may
require for, any costs, claims, expenses (including legal and other professional fees) and liabilities which it considers it may incur or sustain in complying with those instructions. |
15.15 |
The Agents duties The Agent shall inform the Lenders promptly of any Event of Default under Clause 13.1.1 of which the Agent has
actual knowledge. |
15.16 |
No deemed knowledge The Agent shall not be deemed to have actual knowledge of the falsehood or incompleteness of any representation or
warranty made or deemed repeated by any Security Party or actual knowledge of the occurrence of any Default (other than a Default under Clause 13.1.1) unless a Lender or a Security Party shall have given written notice thereof to the Agent in its
capacity as the Agent. Any information acquired by the Agent other than specifically in its capacity as the Agent shall not be deemed to be information acquired by the Agent in its capacity as the Agent. |
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15.17 |
Other business The Agent may, without any liability to account to the Lenders, generally engage in any kind of banking or trust business
with a Security Party or with a Security Partys subsidiaries or associated companies or with a Lender as if it were not the Agent. |
15.18 |
Indemnity The Lenders shall, promptly on the Agents request, reimburse the Agent in their respective Proportionate Share, for, and
keep the Agent fully indemnified in respect of all liabilities, damages, costs and claims sustained or incurred by the Agent in connection with the Finance Documents, or the performance of its duties and obligations, or the exercise of its rights,
powers, discretions or remedies under or pursuant to any Finance Document, to the extent not paid by the Security Parties and not arising from the Agents gross negligence or wilful misconduct. |
15.19 |
Employment of agents In performing its duties and exercising its rights, powers, discretions and remedies under or pursuant to the Finance
Documents, the Agent shall be entitled to employ and pay agents to do anything which the Agent is empowered to do under or pursuant to the Finance Documents (including the receipt of money and documents and the payment of money) and to act or
refrain from taking action in reliance on the opinion of, or advice or information obtained from, any lawyer, banker, broker, accountant, valuer or any other person believed by the Agent in good faith to be competent to give such opinion, advice or
information. |
15.20 |
Distribution of payments The Agent shall pay promptly to the order of each Lender that Lenders Proportionate Share of every sum of
money received by the Agent pursuant to the Finance Documents (with the exception of any amounts payable pursuant to Clause 9 and/or any Fee Letter and any amounts which, by the terms of the Finance Documents, are paid to the Agent for the account
of the Agent alone or specifically for the account of one or more Lenders) and until so paid such amount shall be held by the Agent on trust absolutely for that Lender. |
15.21 |
Reimbursement The Agent shall have no liability to pay any sum to a Lender until it has itself received payment of that sum. If, however,
the Agent does pay any sum to a Lender on account of any amount prospectively due to that Lender pursuant to Clause 15.20 before it has itself received payment of that amount, and the Agent does not in fact receive payment within five
(5) Business Days after the date on which that payment was required to be made by the terms of the Finance Documents, that Lender will, on demand by the Agent, refund to the Agent an amount equal to the amount received by it, together with an
amount sufficient to reimburse the Agent for any amount which the Agent may certify that it has been required to pay by way of interest on money borrowed to fund the amount in question during the period beginning on the date on which that amount was
required to be paid by the terms of the Finance Documents and ending on the date on which the Agent receives reimbursement. |
15.22 |
Redistribution of payments Unless otherwise agreed between the Lenders and the Agent, if at any time a Lender receives or recovers by way of
set-off, the exercise of any lien or otherwise from any Security Party, an amount greater than that Lenders Proportionate Share of any sum due from that Security Party to the Lenders under the Finance Documents (the amount of the excess being
referred to in this Clause 15.22 and in Clause 15.23 as the Excess Amount) then: |
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|
15.22.1 |
that Lender shall promptly notify the Agent (which shall promptly notify each other Lender); |
|
15.22.2 |
that Lender shall pay to the Agent an amount equal to the Excess Amount within ten (10) days of its receipt or recovery of the Excess Amount;
and |
|
15.22.3 |
the Agent shall treat that payment as if it were a payment by the Security Party in question on account of the sum due from that Security Party to
the Lenders and shall account to the Lenders in respect of the Excess Amount in accordance with the provisions of this Clause 15.22. |
However, if a Lender has commenced any legal proceedings to recover sums owing to it under the Finance Documents and, as a
result of, or in connection with, those proceedings has received an Excess Amount, the Agent shall not distribute any of that Excess Amount to any other Lender which had been notified of the proceedings and had the legal right to, but did not, join
those proceedings or commence and diligently prosecute separate proceedings to enforce its rights in the same or another court.
15.23 |
Rescission of Excess Amount If all or any part of any Excess Amount is rescinded or must otherwise be restored to any Security Party or to
any other third party, the Lenders which have received any part of that Excess Amount by way of distribution from the Agent pursuant to Clause 15.22 shall repay to the Agent for the account of the Lender which originally received or recovered the
Excess Amount, the amount which shall be necessary to ensure that the Lenders share rateably in accordance with their Proportionate Shares in the amount of the receipt or payment retained, together with interest on that amount at a rate equivalent
to that (if any) paid by the Lender receiving or recovering the Excess Amount to the person to whom that Lender is liable to make payment in respect of such amount, and Clause 15.22.3 shall apply only to the retained amount. |
15.24 |
Instructions Where the Agent is authorised or directed to act or refrain from acting in accordance with the instructions of the Lenders or
of the Majority Lenders each of the Lenders shall provide the Agent with instructions within five (5) Business Days of the Agents request (which request must be in writing). If a Lender does not provide the Agent with instructions within
that period, that Lender shall be bound by the decision of the Agent. Nothing in this Clause 15.24 shall limit the right of the Agent to take, or refrain from taking, any action without obtaining the instructions of the Lenders or the Majority
Lenders if the Agent in its discretion considers it necessary or appropriate to take, or refrain from taking, such action in order to preserve the rights of the Lenders under or in connection with the Finance Documents. In that event, the Agent will
notify the Lenders of the action taken by it as soon as reasonably practicable, and the Lenders agree to ratify any action taken by the Agent pursuant to this Clause 15.24. |
15.25 |
Payments All amounts payable to a Lender under this Clause 15 shall be paid to such account at such bank as that Lender may from time to
time direct in writing to the Agent. |
15.26 |
Know your customer checks Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such
documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary know your customer or other similar checks under all applicable
laws and regulations pursuant to the transactions contemplated in the Finance Documents. |
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|
15.27.1 |
The Agent may resign as agent and/or security trustee at any time without assigning any reason by giving to the Borrower and the Lenders notice of
its intention to do so, in which event the following shall apply: |
|
(a) |
with the consent of the Borrower not to be unreasonably withheld (but such consent not to be required at any time after an Event of Default which
is continuing unremedied or unwaived) the Lenders may within thirty (30) days after the date of the notice from the Agent appoint a successor to act as agent and/or security trustee or, if they fail to do so with the consent of the Borrower,
not to be unreasonably withheld (but such consent not to be required at any time after an Event of Default which is continuing unremedied or unwaived), the Agent may appoint any other bank or financial institution as its successor provided that if
no successor is appointed pursuant to this Clause 15.27.1(a) the Lenders shall act as successor to the Agent and take on the roles as agent and security trustee; |
|
(b) |
the resignation of the Agent shall take effect simultaneously with the appointment of its successor on written notice of that appointment being
given to the Borrower and the Lenders; |
|
(c) |
the Agent shall thereupon be discharged from all further obligations as agent but shall remain entitled to the benefit of the provisions of this
Clause 15; |
|
(d) |
the successor of the Agent and each of the other parties to this Agreement shall have the same rights and obligations amongst themselves as they
would have had if that successor had been a party to this Agreement; and |
|
(e) |
if no successor has been so appointed by the Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be
agreed by the Lenders) the Resignation Effective Date), then such resignation shall nonetheless become effective in accordance with such notice on the Resignation Effective Date provided that in the case of any collateral security
held by the Agent on behalf of the Lenders under any of the Finance Documents, the resigning Agent shall continue to hold such collateral security until such time as they may be transferred to a successor Agent or to the Lenders (the resigning Agent
and the Lenders making reasonable efforts to effect such transfer). |
|
15.27.2 |
The Agent shall resign and the Majority Lenders (after consultation with the Borrower) shall appoint a successor Agent in accordance with clause
15.27 if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either: |
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|
(a) |
the Agent fails to respond to a request under clause 8.14 and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a
FATCA Exempt Party on or after that FATCA Application Date; |
|
(b) |
the information supplied by the Agent pursuant to clause 8.14 indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party
on or after that FATCA Application Date; or |
|
(c) |
the Agent notifies the Borrower and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA
Application Date, |
and (in each case) a Lender reasonably believes that a Party will be required to make
a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
15.28 |
Replacement of the Agent |
|
15.28.1 |
After consultation with the Borrower, the Majority Lenders may, by giving thirty (30) days notice to the Agent (or, at any time the
Agent is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Agent by appointing a successor Agent. |
|
15.28.2 |
The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor
Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its function as Agent under the Finance Documents. |
|
15.28.3 |
The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As
from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 15.28.2 but shall remain entitled to the benefit of this Clause 15 (and any agency fees
for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). |
|
15.28.4 |
Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such
successor had been an original Party. |
15.29 |
No fiduciary relationship Except as provided in Clauses 15.3 and 15.20, the Agent shall not have any fiduciary relationship with or be
deemed to be a trustee of or for any other person and nothing contained in any Finance Document shall constitute a partnership between any two or more Lenders or between the Agent and any other person. |
Page 66
15.30 |
No other Duties Notwithstanding anything to the contrary hereunder, neither the Bookrunners nor the MLAs shall have any powers, duties or
responsibilities under any of the Finance Documents, except in their respective capacities, as applicable, as Bookrunners or MLAs. |
A Finance Party may set off any matured obligation due from the Borrower under any Finance Document (to the extent beneficially
owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, that Finance
Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
17.1 |
Payments Each amount payable by the Borrower under a Finance Document shall be paid to such account at such bank as the Agent may from time
to time direct to the Borrower in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment. Payment shall be deemed to have been received by the Agent on
the date on which the Agent receives authenticated advice of receipt, unless that advice is received by the Agent on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Agent in its reasonable discretion
considers that it is impossible or impracticable for the Agent to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Agent on the Business Day next following the
date of receipt of advice by the Agent. |
17.2 |
No deductions or withholdings Each payment (whether of principal or interest or otherwise) to be made by the Borrower under a Finance
Document shall, subject only to Clause 17.3, be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature, other than FATCA Deductions.
|
17.3 |
Grossing-up If at any time any law requires (or is interpreted to require) the Borrower to make any deduction or withholding from any
payment, other than a FATCA Deduction, or to change the rate or manner in which any required deduction or withholding is made under a Finance Documents, the Borrower will promptly notify the Agent and, simultaneously with making that payment, will
pay to the Agent whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or
withholding, the relevant Finance Parties receive a net sum equal to the sum which they would have received had no deduction or withholding been made. |
17.4 |
Evidence of deductions If at any time the Borrower is required by law to make any deduction or withholding from any payment to be made by it
under a Finance Document, the Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment,
deliver to the Agent an original receipt issued by the relevant authority, or other evidence reasonably acceptable to the Agent, evidencing the payment to that authority of all amounts required to be deducted or withheld. |
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17.5 |
Rebate If the Borrower pays any additional amount under Clause 8.12 or Clause 17.3, and a Finance Party subsequently receives a refund or
allowance from any tax authority which that Finance Party identifies as being referable to that increased amount so paid by the Borrower, that Finance Party shall, as soon as reasonably practicable, pay to the Borrower an amount equal to the amount
of the refund or allowance received, if and to the extent that it may do so without prejudicing its right to retain that refund or allowance and without putting itself in any worse financial position than that in which it would have been had the
relevant deduction or withholding not been required to have been made. Nothing in this Clause 17.5 shall be interpreted as imposing any obligation on any Finance Party to apply for any refund or allowance nor as restricting in any way the manner in
which any Finance Party organises its tax affairs, nor as imposing on any Finance Party any obligation to disclose to the Borrower any information regarding its tax affairs or tax computations. |
17.6 |
Adjustment of due dates If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on a
Drawing, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next
preceding Business Day). Any such variation of time shall be taken into account in computing any interest in respect of that payment. |
17.7 |
Control Account The Agent shall open and maintain on its books a control account in the name of the Borrower showing the advance of the Loan
and the computation and payment of interest and all other sums due under this Agreement. The Borrowers obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to
time made in the control account opened and maintained under this Clause 17.7 and those entries will, in the absence of manifest error, be conclusive and binding. |
|
17.8.1 |
If, at any time, the Agent becomes an Impaired Agent, a Security Party or a Lender which is required to make a payment under the Finance Documents
to the Agent in accordance with Clause 17.1 may instead either: |
|
(a) |
pay that amount direct to the required recipient(s); or |
|
(b) |
if in its absolute discretion it considers that it is not reasonably practicable to pay that amount direct to the required recipient(s), pay that
amount or the relevant part of that amount to an interest- bearing account held with an Acceptable Bank in relation to which no Insolvency Event has occurred and is continuing, in the name of the Security Party or the Lender making the payment (the
Paying Party) and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents (the Recipient Party or Recipient
Parties). |
Page 68
In each case such payments must be made on the due date for payment under the
Finance Documents.
|
17.8.2 |
All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the Recipient Party or the Recipient
Parties pro rata to their respective entitlements. |
|
17.8.3 |
A Party which has made a payment in accordance with this Clause 17.8 shall be discharged of the relevant payment obligation under the Finance
Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account. |
|
17.8.4 |
Promptly upon the appointment of a successor Agent in accordance with Clause 15.28, each Paying Party shall (other than to the extent that that
Party has given an instruction pursuant to Clause 17.8.5) give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution to the
relevant Recipient Party or Recipient Parties in accordance with Clause 15.20. |
|
17.8.5 |
A Paying Party shall, promptly upon request by a Recipient Party and to the extent: |
|
(a) |
it has not given an instruction pursuant to Clause 17.8.4; and |
|
(b) |
that it has been provided with the necessary information by that Recipient Party, |
give all requisite instructions to the bank with whom the trust account is held to transfer the relevant amount (together with
any accrued interest) to that Recipient Party.
18.1 |
Communications in writing Any communication to be made under or in connection with this Agreement shall be made in writing and, unless
otherwise stated, may be made by fax or letter or (subject to Clause 18.6) electronic mail. |
18.2 |
Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each
party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are: |
|
18.2.1 |
in the case of the Borrower, c/o Teekay Shipping (Canada) Ltd Suite 2000, Bentall 5, 550 Burrard Street, Vancouver, B.C., Canada V6C 2K2 (fax no: +
1 604 681 3011) marked for the attention of Renee Eng, Treasury Manager; |
|
18.2.2 |
in the case of each Lender, those appearing opposite its name in Schedule 1; and |
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|
18.2.3 |
in the case of the Agent, 200 Park Avenue, 31st Floor, New York, New York 10166-0396, United
States of America (fax no: +1 212 681 3900) marked for the attention of Credit Middle Office; |
or any
substitute address, fax number, department or officer as any party may notify to the Agent (or the Agent may notify to the other parties, if a change is made by the Agent) by not less than five (5) Business Days notice.
18.3 |
Delivery Any communication or document made or delivered by one party to this Agreement to another under or in connection this Agreement
will only be effective: |
|
18.3.1 |
if by way of fax, when received in legible form; or |
|
18.3.2 |
if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in
an envelope addressed to it at that address; or |
|
18.3.3 |
if by way of electronic mail, in accordance with Clause 18.6; |
and, if a particular department or officer is specified as part of its address details provided under Clause 18.2, if addressed
to that department or officer.
Any communication or document to be made or delivered to the Agent will be effective only
when actually received by the Agent.
All notices from or to the Borrower shall be sent through the Agent.
18.4 |
Notification of address and fax number Promptly upon receipt of notification of an address, fax number or change of address, pursuant to
Clause 18.2 or changing its own address or fax number, the Agent shall notify the other parties to this Agreement. |
18.5 |
English language Any notice given under or in connection with this Agreement must be in English. All other documents provided under or in
connection with this Agreement must be: |
|
18.5.2 |
if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will
prevail unless the document is a constitutional, statutory or other official document. |
18.6 |
Electronic communication |
|
(a) |
Any communication to be made in connection with this Agreement may be made by electronic mail or other electronic means, if the Borrower and the
relevant Finance Party: |
|
(i) |
agree that, unless and until notified to the contrary, this is to be an accepted form of communication; |
|
(ii) |
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of
information by that means; and |
Page 70
|
(iii) |
notify each other of any change to their address or any other such information supplied by them. |
|
(b) |
Any electronic communication made between the Borrower and the relevant Finance Party will be effective only when actually received in readable
form and acknowledged by the recipient (it being understood that any system generated responses do not constitute an acknowledgement) and in the case of any electronic communication made by the Borrower to a Finance Party only if it is addressed in
such a manner as the Finance Party shall specify for this purpose. |
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any
law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance
Document shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative
and not exclusive of any rights or remedies provided by law.
21.1 |
No oral variations No variation or amendment of a Finance Document shall be valid unless in writing and signed on behalf of all the Finance
Parties. |
21.2 |
Further Assurance If any provision of a Finance Document shall be invalid or unenforceable in whole or in part by reason of any present or
future law or any decision of any court, or if the documents at any time held by or on behalf of the Finance Parties or any of them are considered by the Lenders for any reason insufficient to carry out the terms of this Agreement, then from time to
time the Borrower will promptly, on demand by the Agent, execute or procure the execution of such further documents as in the opinion of the Lenders are necessary to provide adequate security for the repayment of the Indebtedness.
|
21.3 |
Rescission of payments etc. Any discharge, release or reassignment by a Finance Party of any of the security constituted by, or any of the
obligations of a Security Party contained in, a Finance Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made
is subsequently wholly or partially rescinded or avoided by operation of any law. |
21.4 |
Certificates Any certificate or statement signed by an authorised signatory of the Agent purporting to show the amount of the Indebtedness
(or any part of the Indebtedness) or any other amount referred to in any Finance Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrower of that amount. |
Page 71
21.5 |
Counterparts This Agreement may be executed in any number of counterparts each of which shall be original but which shall together
constitute the same instrument. |
21.6 |
Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Agreement (other than the Indemnified Parties) has no right
under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement. |
22.1 |
Confidential Information Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save
to the extent permitted by Clause 22.2 and Clause 22.3, and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information. |
22.2 |
Disclosure of Confidential Information Any Finance Party may disclose: |
|
22.2.1 |
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and
Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 22.2.1 is informed in writing of its confidential nature and
that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the
information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information; |
|
(a) |
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more
Finance Documents or which succeeds (or which may potentially succeed) it as agent or security trustee and, in each case, to any of that persons Affiliates, Related Funds, Representatives, auditors and professional advisers;
|
|
(b) |
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any
other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Security Parties and to any of that persons Affiliates, Related Funds, Representatives, auditors and
professional advisers; |
Page 72
|
(c) |
appointed by any Finance Party or by a person to whom Clause 22.2.2(a) or 22.2.2(b) applies to receive communications, notices, information or
documents delivered pursuant to the Finance Documents on its behalf; |
|
(d) |
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in
Clause 22.2.2(a) or 22.2.2(b); |
|
(e) |
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other
regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation; |
|
(f) |
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other
investigations, proceedings or disputes; |
|
(g) |
to whom or for whose benefit that Finance Party charges, assigns or otherwise creates security (or may do so) pursuant to Clause 14.7;
|
|
(i) |
with the consent of the Borrower; |
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
|
(i) |
in relation to Clauses 22.2.2(a), 22.2.2(b) and 22.2.2(c), the person to whom the Confidential Information is to be given has entered into a
Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential
Information; |
|
(ii) |
in relation to Clause 22.2.2(d), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or
is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information; |
|
(iii) |
in relation to Clauses 22.2.2(e), 22.2.2(f) and 22.2.2(g), the person to whom the Confidential Information is to be given is informed of its
confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the
circumstances; and |
Page 73
|
22.2.3 |
to any person appointed by that Finance Party or by a person to whom Clause 22.2.2(a) or 22.2.2(b) applies to provide administration or settlement
services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable
such service provider to provide any of the services referred to in this Clause 22.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking. |
22.3 |
Disclosure to numbering service providers |
|
22.3.1 |
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide
identification numbering services in respect of this Agreement, the Loan and/or one or more Security Parties the following information: |
|
(a) |
names of Security Parties; |
|
(b) |
country of domicile of Security Parties; |
|
(c) |
place of incorporation of Security Parties; |
|
(d) |
date of this Agreement; |
|
(f) |
the names of the Agent and the MLAs; |
|
(g) |
date of each amendment and restatement of this Agreement; |
|
(i) |
currencies of the Loan; |
|
(l) |
Commitment Termination Date for the Loan; |
|
(m) |
changes to any of the information previously supplied pursuant to (a) to (l); and |
|
(n) |
such other information agreed between such Finance Party and that Security Party, |
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
|
22.3.2 |
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Security Parties by a
numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider. |
Page 74
|
22.3.3 |
The Borrower represents that none of the information set out in Clauses 22.3.1(a) to 22.3.1(n) is, nor will at any time be, unpublished
price-sensitive information. |
|
22.3.4 |
The Agent shall notify the Borrower and the other Finance Parties of: |
|
(a) |
the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Loan and/or one or more Security Parties; and
|
|
(b) |
the number or, as the case may be, numbers assigned to this Agreement, the Loan and/or one or more Security Parties by such numbering service
provider. |
Each of the Finance Parties hereby notifies each Security Party that pursuant to the requirements of the USA Patriot Act, it
may be required to obtain, verify and record information that identifies each Security Party, which information includes the name and address of each Security Party and other information that will allow such Finance Party to identify such Security
Party in accordance with the terms of the USA Patriot Act. As used herein, USA Patriot Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56 (as amended).
23.1 |
Governing law This Agreement and any non-contractual obligations arising from or in connection with it shall in all respects be governed by
and interpreted in accordance with English law. |
23.2 |
Jurisdiction For the exclusive benefit of the Finance Parties, the parties to this Agreement irrevocably agree that the courts of England
are to have jurisdiction to settle any dispute (a) arising from or in connection with this Agreement or (b) relating to any non-contractual obligations arising from or in connection with this Agreement and that any proceedings may be
brought in those courts. |
23.3 |
Alternative jurisdictions Nothing contained in this Clause 23 shall limit the right of the Finance Parties to commence any proceedings
against the Borrower in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrower in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether
concurrently or not. |
23.4 |
Waiver of objections The Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any
proceedings in any court referred to in this Clause 23, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be
conclusive and binding on it and may be enforced in the courts of any other jurisdiction. |
23.5 |
Service of process Without prejudice to any other mode of service allowed under any relevant law, the Borrower: |
Page 75
|
23.5.1 |
irrevocably appoints Teekay Shipping (UK) Ltd of 2nd Floor, 86 Jermyn Street, London SW1Y 6JD,
England as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and |
|
23.5.2 |
agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned. |
Page 76
Schedule 1
Part I: The Lenders and the Commitments
|
|
|
|
|
|
|
|
|
The Lenders |
|
Commitments
(US$) |
|
|
The Proportionate Share
(%) |
|
|
|
|
DNB Capital LLC
200 Park Avenue
31st Floor
New York, NY10166
United States of America
Fax no. +1 212 681 4123
Attn: Sanjiv Nayar |
|
|
45,000,000 |
|
|
|
13.636363636 |
% |
|
|
|
Nordea Bank Finland Plc, New York
Branch 437 Madison Avenue
21st Floor
New York, NY 10022
United States of America
Fax no. +1 212 421 4420
Attn: Henning Christiansen |
|
|
45,000,000 |
|
|
|
13.636363636 |
% |
|
|
|
Scotiabank Europe plc
201 Bishopsgate, 6th Floor
London EC2M 3NS
Fax no: +44 207 826 5707
Attn: Matt Tuskin/Jasper Schuring |
|
|
45,000,000 |
|
|
|
13.636363636 |
% |
|
|
|
ABN AMRO Capital USA LLC
100 Park Avenue
New York, NY 10017
United States of America
Fax no.: +1 917 284 6697
Attn.: Francis Birkeland/Passchier Veefkind |
|
|
45,000,000 |
|
|
|
13.636363636 |
% |
|
|
|
BNP Paribas
16 Boulevard de Italiens
75009 Paris
France
Fax no: +33 (0)1 42 98 43 55
Attn: TGMO Shipping |
|
|
30,000,000 |
|
|
|
9.090909091 |
% |
Page 77
|
|
|
|
|
|
|
|
|
Crédit Industriel et Commercial
520 Madison Avenue, 37th Floor
New York, NY 10022
United States of America
Fax no.: +1 212 715 4535
Attn.: Andrew McKuin/Adrienne Molloy |
|
|
15,000,000 |
|
|
|
4.545454545 |
% |
|
|
|
Danske Bank, Norwegian Branch
Søndre Gate 13-15
7466 Trondheim
Norway
Attn.: Einar Stavrum/Stian Hjelmland |
|
|
30,000,000 |
|
|
|
9.090909091 |
% |
|
|
|
Sumitomo Mitsui Banking Corporation
Neo Building
Rue Montoyer 51, Box no 6
100 Brussels
Belgium |
|
|
30,000,000 |
|
|
|
9.090909091 |
% |
For credit matters:
20
rue de la Ville IEvêque
75008 Paris
France
Attention: Touf-itri Akdime/Hélène Ly/
Gaelle Humbert
Fax No: +33 1 44 71 40 50
Email:
touf-itri_akdime@fr.smbcgroup.com
helene_ly@fr.smbcgroup.com
gaelle_humbert@fr.smbcgroup.com
and
Neo Building,
Rue Montoyer 51, Box no 6
100 Brussels
Belgium
Attention: Francoise Bouchat/Nadine Boudart
Fax No: +33 2 502 07 80
Email:
francoise_bouchat@be.smbcgroup.com
Nadine_boudart@be.smbcgroup.com
For administrative matters:
European Loan Operations
Sumitomo Mitsui Banking Corporation
Europe Limited
99 Queen Victoria Street
London EC4V 4EH
Fax: + 44 207 786 1569
(fax correspondence only)
Page 78
|
|
|
|
|
|
|
|
|
Santander Bank, N.A.
601 Penn Street
Reading
PA 19601
United States of America
Fax no.: +1 610 208 8661
Attn.: Dan OConnor/Angela Rabanal |
|
|
15,000,000 |
|
|
|
4.545454545 |
% |
|
|
|
Swedbank AB (publ)
Large Corporations & Institutions
Loans & Syndications/Loan Agency
SE-105 34 Stockholm
Sweden
Fax no.: +46 (0) 8 700 84 09
Email: agency@swedbank.se |
|
|
30,000,000 |
|
|
|
9.090909091 |
% |
Page 79
Part II: Mandated Lead Arrangers
DNB Markets, Inc.
200 Park Avenue
31st Floor
New York, NY10166
United States of America
Fax no. +1 212 681 3880
Attn: Tor Ivar Hansen
Nordea Bank Finland Plc, New York Branch
437 Madison
Avenue
21st Floor
New York, NY10022
United States of America
Fax no. +1 212 421 4420
Attn: Henning Christiansen
Scotiabank Europe plc
201 Bishopsgate, 6th Floor
London EC2M 3NS
Fax No: +44 207 826 5707
Attn: Matt Tuskin/Jasper Schuring
BNP Paribas
16 Boulevard de Italiens
75009 Paris
France
Fax no: +33 (0)1 42 98 43 55
Attn: TGMO Shipping
ABN AMRO Capital USA LLC
100 Park Avenue
New York, NY10017
United States of America
Fax no: +1 917 284 6697
Attn: Francis Birkeland/Passchier
Veefkind
Page 80
Danske Bank A/S
Holmens Kanal 2-12
1092 Cph K
Denmark
Attn.: Einar Stavrum/Stian Hjelmland
Sumitomo Mitsui Banking Corporation
Neo Building
Rue Montoyer 51, Box no 6
100 Brussels
Belgium
Swedbank AB (publ)
Large Corporations & Institutions
Loans &
Syndications/Loan Agency
SE-105 34 Stockholm
Sweden
Fax no.: +46 (0) 8 700 84 09
Email: agency@swedbank.se
Page 81
Schedule 2
Conditions Precedent and Subsequent
Part I (A):
Conditions precedent to First Drawdown Date
|
(a) |
Constitutional Documents Copies of the constitutional documents of each Security Party together with such other evidence as the Agent may
reasonably require that each Security Party is duly formed or incorporated in its country of formation or incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is
to become a party. |
|
(b) |
Certificates of good standing A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).
|
|
(c) |
Board resolutions A copy of a resolution of the board of directors of each Security Party (or its sole member or general partner):
|
|
(i) |
approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party, and ratifying or resolving that it
execute those Relevant Documents; |
|
(ii) |
if required authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or
despatched under those documents) on its behalf. |
|
(d) |
Shareholder resolutions If required by any legal advisor to the Agent, a copy of a resolution signed by all the holders of the issued shares
in each Security Party, approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party. |
|
(e) |
Officers certificates A certificate of a duly authorised officer or representative of each Security Party certifying that each copy
document relating to it specified in this Part 1(A) of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and setting out the names of the directors and officers of that Security
Party (or its sole member or general partner) and the proportion of shares held by each shareholder. |
|
(f) |
Powers of attorney The notarially attested and legalised (where necessary for registration purposes) power of attorney of each Security
Party under which any documents are to be executed or transactions undertaken by that Security Party. |
2 |
Security and related documents |
|
(a) |
Vessel Documents In respect of each Collateral Vessel photocopies, certified as true, accurate and complete by a duly authorised
representative of the relevant Collateral Owner, of: |
Page 82
|
(ii) |
any Management Agreements; |
|
(iii) |
evidence of the Collateral Vessels current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act
1990 (if applicable); |
|
(iv) |
each Collateral Vessels current SMC; and |
|
(v) |
each Collateral Vessels current ISSC; |
(in each case with all addenda, amendments and supplements).
|
(b) |
Evidence of Collateral Owners title Evidence that on the First Drawdown Date (i) each Collateral Vessel is registered under its
current flag in the ownership of the relevant Collateral Owner and (ii) the Mortgages are registered against the relevant Collateral Vessels with first priority. |
|
(c) |
Evidence of insurance Evidence that each Collateral Vessel is insured in the manner required by the Security Documents and that letters of
undertaking will be issued in the manner required by the Security Documents, together with an insurance report by an insurance adviser appointed by the Agent, in form and substance satisfactory to the Agent. |
|
(d) |
Confirmation of class Certificates of Confirmation of Class for hull and machinery confirming that each Collateral Vessel is classed with
the highest class applicable to vessels of her type with a Pre-Approved Classification Society free of material overdue recommendations affecting class. |
|
(e) |
Security Documents The Security Documents, together with all other documents required by any of them, including, without limitation,
(i) all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients and (ii) all share certificates, certified copy share registers or registers of members, transfer forms, proxy forms,
letters of resignation and letters of undertaking. |
|
(f) |
Other Relevant Documents Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I(A) of
Schedule 2. |
|
(g) |
Managers confirmation The written confirmation of any Approved Managers which are not members of the Group or the Teekay Group that,
throughout the Facility Period unless otherwise agreed by the Agent, it will remain the commercial and technical managers of the Collateral Vessels and confirming that, following the occurrence of an Event of Default, all claims of such Approved
Managers, against a Collateral Owner shall be subordinated to the claims of the Finance Parties under the Finance Documents. |
Confirmation satisfactory to the Agent that legal opinions substantially in the form provided to the Agent prior to the First
Drawdown Date will be given promptly following the First Drawdown Date, namely:
|
(a) |
a legal opinion on matters of English law of Stephenson Harwood LLP; |
Page 83
|
(b) |
a legal opinion on matters of Bahamas law of Lennox Patton; |
|
(c) |
a legal opinion on matters of Marshall Islands law of Watson, Farley & Williams LLP, New York; |
|
(d) |
a legal opinion on matters of Singapore law from Virtus Law LLP; and |
|
(e) |
a legal opinion on matters of Norwegian law from Wikborg Rein. |
4 |
Other documents and evidence |
|
(a) |
Process agent Evidence that any process agent referred to in Clause 23.5 and any process agent appointed under any other Finance Document
has accepted its appointment. |
|
(b) |
Other authorisations A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or
desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.
|
|
(c) |
Fees Evidence that the fees, costs and expenses then due from the Borrower under Clause 8 and Clause 9 have been paid or will be paid by the
Execution Date. |
|
(d) |
Know your customer documents Such documentation and other evidence in respect of the Security Parties as is reasonably requested
by the Agent in order for the Lenders to comply with all necessary know your customer or similar identification procedures in relation to the transactions contemplated in the Finance Documents. |
|
(e) |
Drawdown Notice A duly completed Drawdown Notice. |
|
(f) |
Existing Loan Agreements Evidence satisfactory to the Agent that on or by the First Drawdown Date, the Borrower has repaid or shall repay
the Existing Loans in full together with accrued interest and all other amounts accrued or outstanding under the Existing Loan Agreements and that any Security Documents (as defined in the Existing Loan Agreements) and any Encumbrance securing
either of the Existing Loans or the obligations under either of the Existing Loans will have been released and discharged. |
Page 84
Part I (B): Conditions precedent to subsequent Drawdown Dates
1 |
Drawdown Notice A Drawdown Notice for the relevant Drawing. |
2 |
Other Documents Any documents and evidence under Part I (A) to the extent not already provided to the Agent. |
Page 85
Part II: Conditions subsequent to the First Drawdown Date
1 |
Acknowledgements of notices If it is not possible to deliver the same before the First Drawdown Date, acknowledgements of all notices of
assignment and/or charge given pursuant to the Security Documents. |
2 |
Companies Act registrations If it is not possible to deliver the same before the First Drawdown Date, evidence that the prescribed
particulars of the Security Documents have been delivered to the Registrar of Companies of England and Wales within the statutory time limit. |
3 |
Quiet Enjoyment Letters Original of any relevant Quiet Enjoyment Letters, duly executed, together with such evidence of the authority of the
signatory of the relevant Sub-Charterer to sign the Quiet Enjoyment Letters as the Agent may reasonably require. |
4 |
Sub-Charterers Subordination Original of the written confirmation of the Sub-Charterer that (i) all its rights under each
Sub-Charter shall, subject to the conditions of the relevant Quiet Enjoyment Letters, when and as long as such Quiet Enjoyment Letters are in force, in all respects be subordinated to the relevant Mortgage and (ii) undertaking for the duration of
the Sub-Charters to perform all of the relevant Collateral Owners obligations under contained in clause 5 (Insurances) and clause 6 (Operation and Maintenance) of the relevant Deeds of Covenant. |
Page 86
Schedule 3
Form of Drawdown Notice
To: |
DNB Bank ASA, New York Branch |
From: |
Teekay Offshore Partners L.P. |
[Date]
Dear Sirs,
Drawdown Notice
We refer to the Loan Agreement dated
2014 made between, amongst others,
ourselves and yourselves (the Agreement).
Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.
Pursuant to Clause 4.1 of the Agreement, we irrevocably request that you advance a Drawing in the sum of
[
] to us on 2014,
which is a Business Day, by paying the amount of the Drawing to [ ].
We warrant that the representations and
warranties contained in Clause 11 of the Agreement save those contained in Clauses 11.2, 11.6 and 11.22 are true and correct at the date of this Drawdown Notice and will be true and correct
on 2014, that no Default has occurred and is continuing unremedied or unwaived, and that no Default will result from the advance of the sum requested in
this Drawdown Notice.
We select the period of [ ] months as the Interest Period in respect of the said Drawing.
|
Yours faithfully |
|
|
For and on behalf of |
Teekay Offshore Partners L.P.
Page 87
Schedule 4
Form of Transfer Certificate
To: |
DNB Bank ASA, New York Branch |
Transfer Certificate
This transfer
certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated the Loan Agreement) dated
[ ] 2014, on the terms and subject to the conditions of which a secured revolving credit facility was made available to Teekay
Offshore Partners L.P., by a syndicate of banks on whose behalf you act as agent and security trustee.
1 |
Terms defined in the Loan Agreement shall, unless otherwise expressly indicated, have the same meaning when used in this certificate. The terms
Transferor and Transferee are defined in the schedule to this certificate. |
|
2.1 |
confirms that the details in the Schedule under the heading Transferors Commitment accurately summarise its
Commitment; and |
|
2.2 |
requests the Transferee to accept by way of novation the transfer to the Transferee of the amount of the Transferors Commitment specified in
the Schedule by counter-signing and delivering this certificate to the Agent at its address for communications specified in the Loan Agreement. |
3 |
The Transferee requests the Agent to accept this certificate as being delivered to the Agent pursuant to and for the purposes of clause 14 of the
Loan Agreement so as to take effect in accordance with the terms of that clause on the Transfer Date specified in the Schedule. |
4 |
The Agent confirms its acceptance of this certificate for the purposes of clause 14 of the Loan Agreement. |
5 |
The Transferee confirms that: |
|
5.1 |
it has received a copy of the Loan Agreement together with all other information which it has required in connection with this transaction;
|
|
5.2 |
it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to check or enquire on its behalf into
the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information; and |
|
5.3 |
it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to keep under review on its behalf the
financial condition, creditworthiness, condition, affairs, status or nature of any Security Party. |
6 |
Execution of this certificate by the Transferee constitutes its representation and warranty to the Transferor and to all other parties to the Loan
Agreement that it has the power to become a party to the Loan Agreement as a Lender on the terms of the Loan Agreement and has taken all steps to authorise execution and delivery of this certificate. |
Page 88
7 |
The Transferee undertakes with the Transferor and each of the other parties to the Loan Agreement that it will perform in accordance with their
terms all those obligations which by the terms of the Loan Agreement will be assumed by it after delivery of this certificate to the Agent and the satisfaction of any conditions subject to which this certificate is expressed to take effect.
|
8 |
The Transferor makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or
enforceability of any Finance Document or any document relating to any Finance Document, and assumes no responsibility for the financial condition of any Finance Party or for the performance and observance by any Security Party of any of its
obligations under any Finance Document or any document relating to any Finance Document and any conditions and warranties implied by law are expressly excluded. |
9 |
The Transferee acknowledges that nothing in this certificate or in the Loan Agreement shall oblige the Transferor to: |
|
9.1 |
accept a re-transfer from the Transferee of the whole or any part of the rights, benefits and/or obligations transferred pursuant to this
certificate; or |
|
9.2 |
support any losses directly or indirectly sustained or incurred by the Transferee for any reason including, without limitation, the non-performance
by any party to any Finance Document of any obligations under any Finance Document. |
10 |
The address and fax number of the Transferee for the purposes of clause 18 of the Loan Agreement are set out in the Schedule.
|
11 |
This certificate may be executed in any number of counterparts each of which shall be original but which shall together constitute the same
instrument. |
12 |
This certificate shall be governed by and interpreted in accordance with English law. |
The Schedule
15 |
Transfer Date (not earlier that the fifth Business Day after the date of delivery of the Transfer Certificate to the Agent):
|
16 |
Transferors Commitment: |
18 |
Transferees address and fax number for the purposes of clause 18 of the Loan Agreement: |
Page 89
|
|
|
[name of Transferor] |
|
[name of Transferee] |
|
|
By: |
|
By: |
|
|
Date: |
|
Date: |
|
|
DNB Bank ASA, New York Branch as Agent |
|
|
|
|
By: |
|
|
|
|
Date: |
|
|
Page 90
Schedule 5
Form of Compliance Certificate
To: |
DNB Bank ASA, New York Branch |
From: |
Teekay Offshore Partners L.P. |
Dear Sirs,
We refer to an agreement (the Agreement) dated [
] 2014 and made between (inter alia) (1) Teekay Offshore Partners L.P. as borrower and (2) yourselves as agent (as from
time to time amended, varied, novated or supplemented).
Terms defined or construed in the Agreement have the same meanings and constructions in this
Certificate.
We attach the relevant calculation details applicable on the last day of our financial [year][quarter] ending [] (the
Relevant Period) which confirm that:
1 |
Free Liquidity together with undrawn committed revolving credit lines available to be drawn by members of the Group (including under the Agreement
but excluding undrawn committed revolving credit lines with less than six (6) months to maturity) was at all times [equal to or greater than] [fell below] seventy five million Dollars ($75,000,000). Therefore the condition contained in Clause
12.2.1 of the Agreement [has] [has not] been complied with in respect of the Relevant Period. |
2 |
The aggregate of Free Liquidity and undrawn committed revolving credit lines available to be drawn by members of the Group (including under the
Agreement, but excluding undrawn committed revolving credit lines with less than six (6) months to maturity) was at all times [equal to or greater than] [fell below] five per cent (5%) of the Total Debt of the Group. Therefore the
condition contained in Clause 12.2.2 of the Agreement [has] [has not] been complied with in respect of the Relevant Period. |
3 |
The aggregate of the Fair Market Value of the Collateral Vessels is [] and the value of any additional security previously provided under
Clause 10.9 of the Agreement is [] which in aggregate is not less than 125% of the Loan outstanding in respect of the Relevant Period. Therefore, the requirements of Clause 10.9 of the Agreement have been complied with in respect of the
Relevant Period. |
The Fair Market Value of each Collateral Vessel is as follows at [date]:
|
|
|
|
|
|
|
|
|
Name of Collateral Vessel |
|
Name of first
shipbroker providing
valuation |
|
Name of second
shipbroker providing
valuation |
|
Name of third
shipbroker providing
valuation (if applicable) |
|
Average market
value |
[] |
|
[] |
|
[] |
|
[] |
|
[] |
Page 91
|
|
|
Signed: |
|
|
|
|
Duly authorised representative of |
|
|
Teekay Offshore Partners L.P. |
Page 92
Schedule 6
The Collateral Vessels
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel |
|
Type |
|
Flag |
|
Owner |
|
Charter(s) (where relevant) |
|
Relevant Percentage |
|
Fuji Spirit |
|
Conventional
Tanker |
|
Bahamas |
|
TNOL |
|
Time charter dated 29 September 2006 made between TNOL as owner and Teekay Chartering Limited as charterer. |
|
|
3.98% |
|
|
|
|
|
|
|
Kilimanjaro
Spirit |
|
Conventional
Tanker |
|
Bahamas |
|
TNOL |
|
Time charter dated 1 October 2006 made between TNOL as owner and Teekay Chartering Limited as charterer. |
|
|
4.75% |
|
|
|
|
|
|
|
Navion
Marita |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
|
|
|
5.74% |
|
|
|
|
|
|
|
Navion
Svenita |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
|
|
|
4.34% |
|
|
|
|
|
|
|
Navion
Stavanger |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
(i) Bareboat charter dated 16 January 2006 made between
Navion Stavanger L.L.C. as owner and TKN as charterer as novated pursuant to a novation agreement dated 2 October 2006 made between Navion Stavanger L.L.C. as original owner, TNOL as now owner and TKN as charter; and
(ii) Bareboat charter dated 16 January 2006 granted by TKN as charterer in
favour of Fronape International Company (FIC) of the Cayman Islands and Transpetro as original bareboat charterers as novated pursuant to a novation agreement dated as of 1 January 2013 entered into between TKN as charterer, FIC
and Transpetro as original bareboat charterers and Transpetro and FICBV as new bareboat charterers. |
|
|
10.81% |
|
Page 93
|
|
|
|
|
|
|
|
|
|
|
|
|
Nordic
Brasilia |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
|
|
|
12.00% |
|
|
|
|
|
|
|
Nordic Spirit |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
(i) Bareboat charter dated 20 December 2002 made
between Nordic Spirit L.L.C. as owner and UNS as charterer as novated pursuant to a novation agreement dated 2 October 2006 made between Nordic Spirit L.L.C. as original owner, TNOL as new owner and UNS as charterer; and
(ii) Bareboat charter dated 5 August 2002 granted by UNS as charterer in favour
of FIC and Transpetro as original bareboat charterers as novated pursuant to a novation agreement dated as of 1 January 2013 entered into between UNS as charterer, FIC and Transpetro as original charterers and Transpetro and FICBV as new bareboat
charterers; |
|
|
9.27% |
|
|
|
|
|
|
|
Petroatlantic |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
|
|
|
8.37% |
|
|
|
|
|
|
|
Petronordic |
|
Shuttle
Tanker |
|
Bahamas |
|
TNOL |
|
|
|
|
7.64% |
|
|
|
|
|
|
|
Navion
Britannia* |
|
Shuttle
Tanker |
|
Bahamas |
|
NOL |
|
|
|
|
5.61% |
|
|
|
|
|
|
|
Navion
Scandia* |
|
Shuttle
Tanker |
|
Bahamas |
|
NOL |
|
|
|
|
5.61% |
|
|
|
|
|
|
|
Navion
Hispania* |
|
Shuttle
Tanker |
|
Bahamas |
|
NOL |
|
|
|
|
6.42% |
|
|
|
|
|
|
|
Navion
Oceania* |
|
Shuttle
Tanker |
|
Bahamas |
|
NOL |
|
|
|
|
6.42% |
|
|
|
|
|
|
|
Navion
Anglia* |
|
Shuttle
Tanker |
|
Bahamas |
|
NOL |
|
|
|
|
6.42% |
|
|
|
|
|
|
|
Navion Saga |
|
FSO |
|
Bahamas |
|
NOL |
|
|
|
|
2.62% |
|
* |
Collateral Vessels to be transferred from NOL to TNOL on or around 1 January 2015. |
Page 94
Schedule 7
The Collateral Owners
|
|
|
Name |
|
Registered Office Address |
|
|
Teekay Navion Offshore Loading Pte. Ltd. |
|
AXA Tower |
|
|
8 Shenton Way #41-01 |
|
|
Singapore 068811 |
|
|
Navion Offshore Loading AS |
|
Verven 4 |
|
|
N-4014 Stavanger |
|
|
Norway |
Page 95
In witness of which the parties to this Agreement have executed this Agreement the day and
year first before written.
|
|
|
|
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|
|
Signed by |
|
Patrick Smith |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
Patrick Smith |
Teekay Offshore Partners L.P. |
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
DNB Bank ASA, New York Branch |
|
) |
|
David Metzger |
(as Agent) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
DNB Capital LLC |
|
|
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Nordea Bank Finland Plc, New York Branch |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
David Metzger |
Scotiabank Europe plc |
|
) |
|
|
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 96
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
BNP Paribas |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Credit Industriel et Commercial |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Danske Bank, Norwegian Branch |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Sumitomo Mitsui Banking Corporation |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 97
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
ABN AMRO Capital USA LLC |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DANIEL OCONNOR |
|
) |
|
|
as duly authorized |
|
Managing Director |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Santander Bank, N.A. |
|
) |
|
Authorized Officer: Daniel OConnor |
(as a Lender) |
|
|
|
) |
|
Title: Managing Director |
in the presence of: |
|
/s/ DANIEL RUSSELL |
|
) |
|
|
|
|
DANIEL RUSSELL |
|
|
|
|
|
|
SANTANDER BANK 75 STATE STREET
BOSTON, MA 02109 |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Swedbank AB (publ) |
|
) |
|
David Metzger |
(as a Lender) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
DNB Markets, Inc. |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 98
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Nordea Bank Finland Plc, New York Branch |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Scotiabank Europe plc |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
BNP Paribas |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
ABN AMRO Capital USA LLC |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 99
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Danske Bank A/S |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Sumitomo Mitsui Banking Corporation |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Swedbank AB (publ) |
|
) |
|
David Metzger |
(as an MLA) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
DNB Markets, Inc. |
|
) |
|
David Metzger |
(as Bookrunner) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 100
|
|
|
|
|
|
|
Signed by |
|
DAVID METZGER |
|
) |
|
|
as duly authorized |
|
Attorney-in-Fact |
|
) |
|
|
for and on behalf of |
|
|
|
) |
|
|
Nordea Bank Finland Plc, New York Branch |
|
) |
|
David Metzger |
(as Bookrunner) |
|
|
|
) |
|
|
in the presence of: |
|
/s/ ROSY CHAN |
|
) |
|
|
|
|
ROSY CHAN |
|
|
|
|
|
|
STEPHENSON HARWOOD LLP 1 FINSBURY CIRCUS
LONDON EC2M 7SH |
|
|
|
|
Page 101
LIST OF SIGNIFICANT SUBSIDIARIES
The following is a list of Teekay Offshore Partners L.P.s significant subsidiaries as at December 31, 2014:
|
|
|
|
|
Name of Significant Subsidiary |
|
State or Jurisdiction of Incorporation |
|
Proportion of Ownership Interest |
AMUNDSEN SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
BOSSA NOVA SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
NANSEN SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
NAVION OFFSHORE LOADING AS. |
|
NORWAY |
|
100.00% |
NORSK TEEKAY AS. |
|
NORWAY |
|
100.00% |
NORSK TEEKAY HOLDINGS LTD. |
|
MARSHALL ISLANDS |
|
100.00% |
PARTREDERIET TEEKAY SHIPPING PARTNERS DA |
|
NORWAY |
|
66.67% |
PEARY SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
PIRANEMA L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
SERTANEJO SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
SCOTT SPIRIT L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
SIRI HOLDINGS L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY EUROPEAN HOLDINGS S.A.R.L. |
|
LUXEMBOURG |
|
100.00% |
TEEKAY NAVION OFFSHORE LOADING PTE. LTD. |
|
SINGAPORE |
|
100.00% |
TEEKAY NETHERLANDS EUROPEAN HOLDINGS B.V. . |
|
NETHERLANDS |
|
100.00% |
TEEKAY NORDIC HOLDINGS INC. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY NORWAY AS. |
|
NORWAY |
|
100.00% |
TEEKAY OFFSHORE OPERATING L.P. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY OFFSHORE OPERATING PTE. LTD. |
|
SINGAPORE |
|
100.00% |
TEEKAY OFFSHORE FINANCE CORP. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY OFFSHORE HOLDINGS L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY OFFSHORE SHUTTLE TANKER FINANCE L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
TEEKAY PETROJARL OFFSHORE SIRI AS |
|
NORWAY |
|
100.00% |
TEEKAY SHIPPING PARTNERS HOLDING AS |
|
NORWAY |
|
100.00% |
TEEKAY VOYAGEUR PRODUCTION LTD |
|
UNITED KINGDOM |
|
100.00% |
TIRO SIDON HOLDINGS L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
TIRO SIDON L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
TIRO SIDON UK L.L.P. |
|
UNITED KINGDOM |
|
100.00% |
UGLAND NORDIC SHIPPING AS |
|
NORWAY |
|
100.00% |
VARG L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
VARG PRODUCTION AS |
|
NORWAY |
|
100.00% |
VOYAGEUR L.L.C. |
|
MARSHALL ISLANDS |
|
100.00% |
EXHIBIT 12.1
CERTIFICATION
I, Peter
Evensen, certify that:
1. |
I have reviewed this Annual Report on Form 20-F of Teekay Offshore Partners L.P. (the Registrant); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
I and the Registrants other certifying officer (which is also myself) are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting. |
|
5. |
I and the Registrants other certifying officer (which is also myself) have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrants auditors and the audit committee of the board of directors of the Registrants General Partner (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal
control over financial reporting. |
|
|
|
|
|
|
|
Dated: April 2, 2015 |
|
|
|
By: |
|
/s/ Peter Evensen |
|
|
|
|
|
|
Peter Evensen |
|
|
|
|
|
|
Chief Executive Officer |
EXHIBIT 12.2
CERTIFICATION
I, Peter
Evensen, certify that:
1. |
I have reviewed this Annual Report on Form 20-F of Teekay Offshore Partners L.P. ( the Registrant);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
I and the Registrants other certifying officer (which is also myself) are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the period covered by
the Registrants annual report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting. |
|
5. |
I and the Registrants other certifying officer (which is also myself) have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrants auditors and the audit committee of the board of directors of the Registrants General Partner (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal
control over financial reporting. |
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Peter Evensen |
Dated: April 2, 2015 |
|
|
|
|
|
Peter Evensen |
|
|
|
|
|
|
Chief Financial Officer |
EXHIBIT 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Teekay Offshore Partners L.P. (the Partnership) on Form 20-F for the year
ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Form 20-F), I, Peter Evensen, Chief Executive Officer and Chief Financial Officer of the Partnership, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
The Form 20-F fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and |
|
(2) |
The information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the
Partnership. |
|
|
|
|
|
|
|
Dated: April 2, 2015 |
|
|
|
By: |
|
/s/ Peter Evensen |
|
|
|
|
|
|
Peter Evensen |
|
|
|
|
|
|
Chief Executive Officer and Chief Financial Officer |
EXHIBIT 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of Teekay Offshore Partners L.P.:
|
(1) |
No. 333-147682 on Form S-8 pertaining to the Teekay Offshore Partners L.P. 2006 Long Term Incentive Plan; |
|
(2) |
No. 333-175685 on Form F-3 and related prospectus for the registration of 713,226 common units; |
|
(3) |
No. 333-178620 on Form F-3 and related prospectus for the registration of 7,122,974 common units; |
|
(4) |
No. 333-183225 on Form F-3 and related prospectus for the registration of 1,700,022 common units; |
|
(5) |
No. 333-188393 on Form F-3 and related prospectus for the registration of up to $100,000,000 of common units; |
|
(6) |
No. 333-188543 on Form F-3 and related prospectus for the registration of 2,056,202 common units; |
|
(7) |
No. 333-193301 on Form F-3 and related prospectus for the registration of 1,750,000 common units; |
|
(8) |
No. 333-196098 on Form F-3 and related prospectus for the registration of debt and equity securities; and |
|
(9) |
No. 333-197053 on Form F-3 and related prospectus for the registration of up to $500,000,000 of common units. |
of our reports dated April 2, 2015, with respect to the consolidated financial statements as at December 31, 2014 and 2013 and for each
of the years in the three-year period ended December 31, 2014 and the effectiveness of internal control over financial reporting as of December 31, 2014, of Teekay Offshore Partners L.P., and our report dated April 2, 2015, with respect to
the consolidated financial statements of OOG-TKP FPSO GmbH & Co KG and subsidiaries which reports appear in the December 31, 2014 Annual Report on Form 20-F of Teekay Offshore Partners L.P.
/s/ KPMG LLP
Chartered
Accountants
Vancouver, Canada
April 2, 2015
Exhibit 15.2
CONSOLIDATED FINANCIAL STATEMENTS OF OOG TKP FPSO GmbH & Co KG
INDEPENDENT AUDITORS REPORT
OOG TKP FPSO GmbH & Co KG:
Report on the
Financial Statements
We have audited the accompanying consolidated financial statements of OOG TKP FPSO GmbH & Co KG and
subsidiaries, which comprise the consolidated balance sheet as of December 31, 2014, and the related consolidated statements of income, partners equity, and cash flows for the year then ended, and the related notes to the consolidated
financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S.
generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance
with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the
consolidated financial statements referred to above present fairly in all material respects, the financial position of OOG TKP FPSO GmbH & Co KG and subsidiaries as of December 31, 2014, and the results of their operations and their
cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.
Other Matter
The accompanying consolidated balance sheet of OOG TKP FPSO GmbH & Co KG and subsidiaries as of December 31, 2013, and the
related consolidated statements of income, partners equity, and cash flows for the period from June 13, 2013 to December 31, 2013 were not audited, reviewed, or complied by us and, accordingly, we do not express an opinion or any
other form of assurance on them.
/s/ KPMG LLP
Chartered
Accountants
Vancouver, Canada
April 2, 2015
2
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2014 |
|
|
(unaudited)
From June 10, 2013 to December 31,
2013 |
|
|
|
$ |
|
|
$ |
|
Revenues |
|
|
84,304 |
|
|
|
42,752 |
|
|
|
|
|
|
|
|
|
|
Vessel operating expenses (note 9b) |
|
|
(24,933 |
) |
|
|
(14,232 |
) |
Depreciation (note 4) |
|
|
(15,545 |
) |
|
|
(7,999 |
) |
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
43,826 |
|
|
|
20,521 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(7,677 |
) |
|
|
(4,778 |
) |
Realized and unrealized (losses) gains on derivative instruments (note 7) |
|
|
(6,657 |
) |
|
|
1,242 |
|
Other (expense) income |
|
|
(449 |
) |
|
|
162 |
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income |
|
|
29,043 |
|
|
|
17,147 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
Related party transactions (note 9)
3
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
As at
December 31, |
|
|
(unaudited)
As at
December 31, |
|
|
|
2014 $ |
|
|
2013 $ |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents (note 6) |
|
|
27,277 |
|
|
|
33,832 |
|
Accounts receivable, including non-trade of $1,966 (2013 - $1,221) |
|
|
10,981 |
|
|
|
13,555 |
|
Due from related party (note 9a) |
|
|
|
|
|
|
3,928 |
|
Other current assets |
|
|
45 |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
38,303 |
|
|
|
51,691 |
|
|
|
|
|
|
|
|
|
|
Long-term assets |
|
|
|
|
|
|
|
|
Vessel and equipment (note 4) |
|
|
358,025 |
|
|
|
371,593 |
|
Other non-current assets |
|
|
11,430 |
|
|
|
14,047 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
407,758 |
|
|
|
437,331 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
1,985 |
|
|
|
3,112 |
|
Accrued liabilities (note 5) |
|
|
4,217 |
|
|
|
3,835 |
|
Due to related parties (note 9a) |
|
|
15,524 |
|
|
|
22,843 |
|
Deferred revenue current |
|
|
6,101 |
|
|
|
2,938 |
|
Current portion of long-term debt (note 6) |
|
|
26,400 |
|
|
|
25,050 |
|
Current portion of derivative liabilities (note 7) |
|
|
3,601 |
|
|
|
4,044 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
57,828 |
|
|
|
61,822 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Long-term debt (note 6) |
|
|
225,750 |
|
|
|
252,150 |
|
Deferred revenue long-term |
|
|
24,938 |
|
|
|
20,815 |
|
Derivative liabilities (note 7) |
|
|
3,954 |
|
|
|
2,692 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
312,470 |
|
|
|
337,479 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (notes 6, 7 and 9b) |
|
|
|
|
|
|
|
|
|
|
|
Partners equity (note 8) |
|
|
|
|
|
|
|
|
Capital contributions |
|
|
103,357 |
|
|
|
103,357 |
|
Deficit |
|
|
(8,069 |
) |
|
|
(3,505 |
) |
|
|
|
|
|
|
|
|
|
Total partners equity |
|
|
95,288 |
|
|
|
99,852 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners equity |
|
|
407,758 |
|
|
|
437,331 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
4
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 $ |
|
|
(unaudited) From June 10, 2013 to December 31, 2013 $ |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
|
|
29,043 |
|
|
|
17,147 |
|
Non-cash items: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
15,545 |
|
|
|
7,999 |
|
Unrealized losses (gains) on derivative instruments (note 7) |
|
|
819 |
|
|
|
(4,603 |
) |
Amortization of debt issuance costs |
|
|
974 |
|
|
|
602 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
2,574 |
|
|
|
(3,767 |
) |
Due from/to related parties |
|
|
(1,578 |
) |
|
|
4,321 |
|
Other current and non-current assets |
|
|
1,974 |
|
|
|
1,206 |
|
Accounts payable |
|
|
(1,127 |
) |
|
|
1,151 |
|
Accrued liabilities |
|
|
382 |
|
|
|
620 |
|
Deferred revenue |
|
|
7,286 |
|
|
|
3,666 |
|
|
|
|
|
|
|
|
|
|
Net operating cash flow |
|
|
55,892 |
|
|
|
28,342 |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Scheduled repayments of long-term debt |
|
|
(25,050 |
) |
|
|
(12,300 |
) |
Capital contributions from limited partners (note 8) |
|
|
|
|
|
|
28,109 |
|
Distributions to limited partners (note 8) |
|
|
(33,607 |
) |
|
|
(2,500 |
) |
|
|
|
|
|
|
|
|
|
Net financing cash flow |
|
|
(58,657 |
) |
|
|
13,309 |
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Expenditures for vessel and equipment |
|
|
(3,790 |
) |
|
|
(35,578 |
) |
|
|
|
|
|
|
|
|
|
Net investing cash flow |
|
|
(3,790 |
) |
|
|
(35,578 |
) |
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(6,555 |
) |
|
|
6,073 |
|
Cash and cash equivalents, beginning of the period |
|
|
33,832 |
|
|
|
27,759 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period |
|
|
27,277 |
|
|
|
33,832 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information (note 10)
See accompanying notes to the consolidated financial statements.
5
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS EQUITY
(in thousands of U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Contributions $ |
|
|
Deficit $ |
|
|
Total Limited Partners Equity $ |
|
Balance as at June 9, 2013 (unaudited) |
|
|
75,248 |
|
|
|
(20,652 |
) |
|
|
54,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income (unaudited) |
|
|
|
|
|
|
17,147 |
|
|
|
17,147 |
|
Capital contributions (note 8) (unaudited) |
|
|
28,109 |
|
|
|
|
|
|
|
28,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2013 (unaudited) |
|
|
103,357 |
|
|
|
(3,505 |
) |
|
|
99,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income |
|
|
|
|
|
|
29,043 |
|
|
|
29,043 |
|
Distributions (note 8) |
|
|
|
|
|
|
(33,607 |
) |
|
|
(33,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2014 |
|
|
103,357 |
|
|
|
(8,069 |
) |
|
|
95,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
6
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
1. Basis of Presentation and Significant Accounting Policies
The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (or US
GAAP). These consolidated financial statements include the accounts of OOG TKP FPSO GmbH & Co KG, which is a partnership formed under the laws of Austria, and its wholly owned subsidiaries (collectively, the Partnership). The following
is a list of the subsidiaries of OOG TKP FPSO GmbH & Co KG:
|
|
|
|
|
|
|
Name of Subsidiaries |
|
Jurisdiction of Incorporation |
|
Proportion of Ownership Interest |
|
OOG-TKP Producao de Petroleo Ltda. |
|
Brazil |
|
|
100 |
% |
OOG-TKP Operator Holdings Ltd. |
|
Cayman Islands |
|
|
100 |
% |
The Partnerships operations comprise of the ownership, day-to-day operation and charter of the floating,
production, storage and offloading FPSO unit Cidade de Itajai (or the FPSO Unit) to Petrobras Brasileiro S.A. for a period of nine years, renewable for another six years at the option of the charterer. The FPSO unit commenced operations on
February 8, 2013.
OOG TKP FPSO GmbH & Co KG is owned 50% by Tiro Sidon UK LLP, a wholly-owned subsidiary of Teekay Offshore
Partners L.P., and 50% by OOG Tiro & Sidon GmbH. Teekay Offshore Partners L.P. purchased its 50% interest in the Partnership on June 10, 2013. These financial statements cover the period after Teekay Offshore Partners L.P. purchased
its 50% ownership interest and consequently cover the fiscal period from June 10, 2013 to December 31, 2013 (or the 2013 Period) and the fiscal period from January 1, 2014 to December 31, 2014. The financial statements for the
2013 Period are unaudited. However, such financial statements reflect all adjustments consisting solely of normal recurring adjustments, necessary for a fair presentation of the period presented. Intercompany balances and transactions have been
eliminated upon consolidation.
The preparation of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The Partnership evaluated events and transactions occurring after the balance sheet date and through the day the financial statements were
available to be issued which was April 2, 2015.
Foreign currency
The consolidated financial statements are stated in U.S. Dollars and the functional currency of the Partnership is U.S. Dollars. Transactions
involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than
the U.S. Dollar are translated to reflect the year end exchange rates. Resulting gains and losses are reflected separately in the consolidated statements of income in other (expense) income.
Operating revenues and expenses
The
Partnership recognizes revenues from FPSO contracts accounted for as operating leases on a straight line basis daily over the term of the charter as the applicable vessel operates under the charter. Lump sum amounts received by the Partnership from
a charterer to compensate the Partnership for modifications done to the FPSO Unit specifically requested by the charterer are deferred and amortized to revenue on a straight-line basis over the remaining term of the charterer. Unamortized deferred
revenue is presented as deferred revenue in the consolidated balance sheets. Receipt of incentive-based revenue is dependent upon its operating performance and such revenue is recognized when earned by fulfillment of the applicable performance
criteria. Contingent revenue from inflation indexation is recognized as revenue upon resolution of the contingency. The Partnership does not recognize revenue during days that the vessel is off hire unless the contract provides for compensation
while off hire. Revenue is presented net of taxes, which consisted of $2.2 million during 2014 and $1.6 million during the 2013 Period.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. Vessel operating
expenses are recognized when incurred. The cost to import the FPSO Unit to Brazil is deferred and amortized to vessel operating expenses on a straight-line basis over the nine year term of the contract. The unamortized deferred cost is presented in
other non-current assets on the consolidated balance sheets.
Cash and cash equivalents
The Partnership classifies all highly-liquid investments with a maturity date of three months or less when purchased as cash.
7
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
Accounts receivable and allowance for doubtful accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Partnerships
best estimate of the amount of probable credit losses in existing accounts receivable. The Partnership determines the allowance based on historical write-off experience and customer economic data. The Partnership reviews the allowance for doubtful
accounts regularly and past due balances are reviewed for collectability. Account balances are charged off against the allowance when the Partnership believes that the receivable will not be recovered.
Vessel and equipment
All pre-delivery
costs incurred during the construction of newbuildings, including interest, supervision and technical costs, are capitalized. The acquisition cost and all costs incurred to restore used vessels purchased by the Partnership to the standard required
to properly service the Partnerships customers are capitalized.
Depreciation is calculated on a straight-line basis over a
vessels estimated useful life, less an estimated residual value. With the exemption of the anchors and mooring lines, which are depreciated using an estimated life of 18 years, depreciation is calculated using an estimated useful life of 25
years for the FPSO Unit, from the date the vessel is delivered from the shipyard.
Vessel capital modifications include the addition of
new equipment or can encompass various modifications to the vessel which are aimed at improving or increasing the operational efficiency and functionality of the asset. This type of expenditure is amortized over the estimated useful life of the
modification. Expenditures covering recurring routine repairs and maintenance are expensed as incurred.
Vessels and equipment are
assessed for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. If the assets net carrying value exceeds the net undiscounted cash flows expected to be generated over its remaining useful
life, the carrying amount of the asset is reduced to its estimated fair value. Estimated fair value is determined based on discounted cash flows or appraised values.
Debt issuance costs
Debt issuance costs,
including fees, commissions and legal expenses, relating to bank loan facilities are deferred and presented as other non-current assets. Debt issuance costs are amortized using the effective interest rate method over the term of the relevant loan.
Amortization of deferred debt issuance costs are included in interest expense in the consolidated statements of income.
Income taxes
The Partnerships Brazilian subsidiary is subject to income taxes. The Partnership accounts for such taxes using the liability method.
Under the liability method, deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Partnerships assets and liabilities
using the applicable jurisdictional tax rates. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.
Recognition of uncertain tax positions is dependent upon whether it is more-likely-than-not that a tax position taken or expected to be taken
in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is
measured to determine the amount of benefit to recognize in the consolidated financial statements based on guidance in the interpretation. The Partnership recognizes interest and penalties related to uncertain tax positions in income tax (expense)
recovery.
Derivative instruments
All
derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently remeasured to fair value, regardless of the purpose or intent for holding the derivative.
The method of recognizing the resulting gain or loss is dependent on whether the derivative contract is designed to hedge a specific risk and also qualifies for hedge accounting. The Partnership does not apply hedge accounting to its derivative
instruments.
For derivative financial instruments that are not designated or that do not qualify as accounting hedges under Financial
Accounting Standards Board (or FASB) Accounting Standards Codification (or ASC) 815, Derivatives and Hedging, the changes in the fair value of the derivative financial instruments are recognized in earnings. Gains and losses
from the Partnerships non-designated interest rate swaps are recorded in realized and unrealized (losses) gains on derivative instruments in the consolidated statements of income.
8
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
2. Accounting Pronouncement Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (or FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts
with Customers, (or ASU 2014-09). ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer,
(ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue as each
performance obligation is satisfied. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016 and shall be applied, at the Partnerships option, retrospectively to each period presented or as a
cumulative-effect adjustment as of the date of adoption. Early adoption is not permitted. The Partnership is evaluating the effect of adopting this new accounting guidance.
3. Fair Value Measurements
The following methods and
assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents - The fair value
of the Partnerships cash and cash equivalents approximate their carrying amounts reported in the accompanying consolidated balance sheets.
Long-term debt The fair values of the Partnerships variable-rate long-term debt are estimated using discounted cash flow
analyses, based on rates currently available for debt with similar terms and remaining maturities and the current credit worthiness of the Partnership.
Derivative instruments The fair value of the Partnerships derivative instruments is the estimated amount that the
Partnership would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current credit worthiness of both the Partnership and the derivative counterparties. The estimated amount is the
present value of future cash flows. The Partnership transacts all of its derivative instruments through investment-grade rated financial institutions at the time of the transaction and requires no collateral from these institutions. Given the
current volatility in the credit markets, it is reasonably possible that the amount recorded as a derivative liability could vary by a material amount in the near term.
The Partnership categorizes its fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair
value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:
Level 1.
Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active
markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or
no market data, which require the reporting entity to develop its own assumptions.
The following table includes the estimated fair value
and carrying value of those assets and liabilities that are measured at fair value on a recurring basis, as well as the estimated fair value of the Partnerships financial instruments that are not accounted for at fair value on a recurring
basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
Fair Value |
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
Hierarchy |
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
|
|
Level |
|
|
Asset |
|
|
Asset |
|
|
Asset |
|
|
Asset |
|
|
|
|
|
|
(Liability) |
|
|
(Liability) |
|
|
(Liability) |
|
|
(Liability) |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
(unaudited) |
|
Recurring: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
Level 1 |
|
|
|
27,277 |
|
|
|
27,277 |
|
|
|
33,832 |
|
|
|
33,832 |
|
Derivative instruments (note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
|
Level 2 |
|
|
|
(8,877 |
) |
|
|
(8,877 |
) |
|
|
(8,165 |
) |
|
|
(8,165 |
) |
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (note 6) |
|
|
Level 2 |
|
|
|
(252,150 |
) |
|
|
(248,327 |
) |
|
|
(277,200 |
) |
|
|
(276,882 |
) |
9
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
4. Vessel and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
Accumulated depreciation |
|
|
Net book value |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance, June 9, 2013 (unaudited) |
|
|
346,997 |
|
|
|
(4,796 |
) |
|
|
342,201 |
|
Additions (unaudited) |
|
|
37,391 |
|
|
|
|
|
|
|
37,391 |
|
Depreciation (unaudited) |
|
|
|
|
|
|
(7,999 |
) |
|
|
(7,999 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 (unaudited) |
|
|
384,388 |
|
|
|
(12,795 |
) |
|
|
371,593 |
|
Additions |
|
|
1,977 |
|
|
|
|
|
|
|
1,977 |
|
Depreciation |
|
|
|
|
|
|
(15,545 |
) |
|
|
(15,545 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 |
|
|
386,365 |
|
|
|
(28,340 |
) |
|
|
358,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Accrued Liabilities
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
(unaudited) |
|
Interest |
|
|
1,617 |
|
|
|
1,785 |
|
Interest rate swaps (see note 7) |
|
|
1,322 |
|
|
|
1,429 |
|
Other |
|
|
1,278 |
|
|
|
621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,217 |
|
|
|
3,835 |
|
|
|
|
|
|
|
|
|
|
6. Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
(unaudited) December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
U.S. Dollar denominated debt due through October 2021 |
|
|
252,150 |
|
|
|
277,200 |
|
Less current portion |
|
|
26,400 |
|
|
|
25,050 |
|
|
|
|
|
|
|
|
|
|
Long-term portion |
|
|
225,750 |
|
|
|
252,150 |
|
|
|
|
|
|
|
|
|
|
As at December 31, 2014, the Partnership had one loan facility, which reduces over time with semi-annual
payments and matures in October 2021. As of December 31, 2014, the remaining semi-annual payments range from $12.9 million to $17.6 million and there is a $54.0 million bullet amount owing upon maturity of the facility in October 2021. This
loan is collateralized by a first-priority mortgage on the FPSO Unit, together with other related security.
Interest payments on the loan
facility are based on LIBOR plus a margin. At December 31, 2014, and 2013, the margin was 2.15%. The margin increases to 2.45% on the fifth anniversary of the commencement of the existing charter contract, which occurs in 2018. The effective
interest rate on the Partnerships loan facility as at December 31, 2014 and 2013 was 2.5%. This rate does not include the effect of the Partnerships interest rate swaps (see note 7).
The aggregate annual long-term debt principal repayments required to be made subsequent to December 31, 2014 are $26.4 million (2015),
$27.8 million (2016), $29.3 million (2017), $30.6 million (2018), $32.3 million (2019) and $105.8 million (thereafter).
If the
Partnership is unable to repay debt under this loan facility, the lenders could seek to foreclose on this asset. The Partnerships loan facility requires the Partnership maintain debt service coverage ratio for each of the two prior six-month
periods of greater than 1.1 to 1.0. As at December 31, 2014 the Partnership was in compliance with all covenants of this loan facility.
As of December 31, 2014, the Partnership maintained $12.8 million ($12.8 million 2013) of cash balances in bank accounts required
for the payment of future operating expenses and debt repayments. Such amounts have been placed in such bank accounts pursuant to an accounts agreement with the lenders of the loan facility. The Partnership may obtain one or more letters of credit
in lieu of keeping such cash balances.
10
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
7. Derivative Instruments
The Partnership uses derivatives to manage certain risks in accordance with its overall risk management policies. The Partnership enters into
interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest to reduce the Partnerships exposure to interest rate variability on its outstanding floating-rate debt. The Partnership has not designated, for
accounting purposes, its interest rate swaps as cash flow hedges of its U.S. Dollar LIBOR denominated borrowings. As at December 31, 2014, the Partnership was committed to the following interest rate swap agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
|
Average |
|
|
Fixed |
|
|
|
Interest |
|
Notional |
|
|
Assets |
|
|
Remaining |
|
|
Interest |
|
|
|
Rate |
|
Amount |
|
|
(Liability) |
|
|
Term |
|
|
Rate |
|
|
|
Index |
|
$ |
|
|
$ |
|
|
(years) |
|
|
(%) (1) |
|
U.S. Dollar-denominated interest rate swaps (2) |
|
LIBOR |
|
|
225,266 |
|
|
|
(8,877 |
) |
|
|
6.6 |
|
|
|
2.63 |
|
(1) |
Excludes the margin the Partnership pays on its variable-rate debt, which as at December 31, 2014 was 2.15%. |
(2) |
Notional amount reduces semi-annually in amounts ranging from $11.5 million to $15.7 million. |
Tabular disclosure
The following table
presents the location and fair value amounts of the Partnerships interest rate swaps on the Partnerships balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
portion of |
|
|
|
|
|
|
|
|
|
Accrued |
|
|
derivative |
|
|
Derivative |
|
|
|
|
|
|
liabilities |
|
|
liabilities |
|
|
Liabilities |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
December 31, 2014 |
|
|
1,322 |
|
|
|
3,601 |
|
|
|
3,954 |
|
|
|
8,877 |
|
December 31, 2013 (unaudited) |
|
|
1,429 |
|
|
|
4,044 |
|
|
|
2,692 |
|
|
|
8,165 |
|
Realized and unrealized (losses) gains of interest rate swaps that are not designated for accounting purposes
as cash flow hedges, are recognized in earnings and reported in realized and unrealized (losses) gains on derivative instruments in the consolidated statements of income. The effect of the (losses) gains on these interest rate swap agreements on the
consolidated statements of income for the periods presented below are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 |
|
|
(unaudited) From June 10, 2013 to December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
Realized losses |
|
|
(5,838 |
) |
|
|
(3,361 |
) |
Unrealized (losses) gains |
|
|
(819 |
) |
|
|
4,603 |
|
|
|
|
|
|
|
|
|
|
Total realized and unrealized (losses) gains on derivative instruments |
|
|
(6,657 |
) |
|
|
1,242 |
|
|
|
|
|
|
|
|
|
|
The Partnership is exposed to credit loss in the event of non-performance by the six counterparties of the
interest rate swaps, all of which are financial institutions. In order to minimize counterparty risk, the Partnership only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poors or A3
or better by Moodys at the time of the transactions. In addition, to the extent possible and practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.
11
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
8. Partners Equity
OOG TKP FPSO GmgH & Co KG, a limited partnership, was formed in June 2011. Tiro Sidon UK LLP and OOG Tiro & Sidon GmbH are
the Partnerships Limited Partners, with each having a 50% share of the limited partner interests. The Partnerships General Partner is OOG-TKP FPSO GmbH. The Partnerships Limited Partners also have a 50% interest in the General
Partner. Tiro Sidon UK LLP is a wholly-owned subsidiary of Teekay Offshore Partners L.P. Teekay Corporation (or Teekay) is the ultimate parent company of both Teekay Offshore Partners L.P. and Tiro Sidon UK LLP. Odebrecht Oleo E Gas S.A. (or OOG) is
the ultimate parent company of OOG Tiro & Sidon GmbH.
The partnership interest of each Limited Partner is equal to the
proportion of each Limited Partners capital contributions. The General Partner neither participates in the profits nor losses or assets of the Partnership. However, the General Partner receives an amount equal to 10% of its registered share
capital as compensation for managing and representing the partnership. The Limited Partners are expressly excluded from managing or representing the Partnership.
The registered capital of the Partnership is two thousand euros. During December 2013, $28.1 million of capital contributions were made to the
Partnership by the Limited Partners. During June 2014 and October 2014, the Partnership declared distributions of $14.8 million and $18.8 million, respectively, to the Partnerships Limited Partners. In addition, the Partnership paid
distributions of $2.5 million to the Partnerships Limited Partners in June 2013 that were declared in May 2013.
9. Related Party Transactions
a. |
The amounts due to and from related parties are non-interest bearing, unsecured and have no fixed repayment terms. Balances with related parties
are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
December 31. 2014 |
|
|
December 31. 2013 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
OOG-TKP Oil Services Ltd. (1) |
|
|
|
|
|
|
1,570 |
|
|
|
3,928 |
|
|
|
3,272 |
|
Odebrecht Oleo E Gas S.A. |
|
|
|
|
|
|
1,002 |
|
|
|
|
|
|
|
3,479 |
|
Teekay Petrojarl Producao Petrolifera Do Brasil Ltda. (2) |
|
|
|
|
|
|
86 |
|
|
|
|
|
|
|
361 |
|
OOG-TKP FPSO GmbH |
|
|
|
|
|
|
85 |
|
|
|
|
|
|
|
|
|
Tiro Sidon L.L.C. (2) |
|
|
|
|
|
|
12,781 |
|
|
|
|
|
|
|
15,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,524 |
|
|
|
3,928 |
|
|
|
22,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
A jointly owned company of wholly-owned subsidiaries of Teekay Offshore Partners L.P. and Odebrecht Oleo E Gas S.A. |
(2) |
A wholly-owned subsidiary of Teekay Offshore Partners L.P. |
b. |
The Partnership has entered into a vessel maintenance agreement, services agreement, partnership agreement and secondment agreements with
subsidiaries of Teekay and OOG, or entities jointly controlled by Teekay and OOG. Pursuant to such agreements, these entities incur certain costs to operate the FPSO Unit and manage the business of the Partnership and charge such costs to the
Partnership either at a fixed fee or at cost plus a reasonable markup. These services are measured at the exchange adjustment amount between the parties. For the periods indicated, these amounts were as follows: |
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 |
|
|
(unaudited) From June 10, to December 31, 2013 |
|
|
|
$ |
|
|
$ |
|
Vessel operating expenses - OOG-TKP Oil Services Ltd. |
|
|
4,755 |
|
|
|
1,435 |
|
Vessel operating expenses - Odebrecht Oleo E Gas S.A. |
|
|
2,488 |
|
|
|
1,593 |
|
Vessel operating expenses - Teekay Petrojarl Producao Petrolifera Do Brasil Ltda. |
|
|
394 |
|
|
|
361 |
|
Vessel operating expenses - OOG-TKP FPSO GmbH |
|
|
85 |
|
|
|
|
|
12
OOG TKP FPSO GmbH & CO KG AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(in thousands of USD, unless indicated otherwise)
10. Supplemental Cash Flow Information
Cash paid for interest on long-term debt during the year ended December 31, 2014 and the 2013 Period totaled $6.9 million and $3.8 million
(unaudited), respectively.
11. Operating Lease
As at December 31, 2014, the minimum scheduled future amounts in the next five years to be received by the Partnership for the lease and
non-lease elements under the existing charter for the FPSO Unit is approximately $75.4 million (2015), $75.6 million (2016), $75.4 million (2017), $75.4 million (2018) and $75.4 million (2019).
Minimum scheduled future amounts do not include revenue generated from revenue from unexercised option periods as of December 31, 2014,
variable or contingent revenues and the amortization of deferred revenue received in periods prior to 2015. Therefore, the minimum scheduled future amounts should not be construed to reflect total charter hire revenues for any of the years. In
addition, the minimum scheduled future amounts to be received do not reflect estimated off-hire time. Actual off-hire time may vary given unscheduled future events such as vessel maintenance. Furthermore, the non-lease element of the existing
charter is denominated in Brazilian Real. As such, actual amounts received measured in US dollars will depend upon the prevailing currency exchange rate between the Brazilian Real and the US dollar.
13
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