Teekay Offshore Partners Reports Third Quarter 2015 Results

(firmenpresse) - HAMILTON, BERMUDA -- (Marketwired) -- 11/05/15 -- Teekay Offshore Partners L.P. (NYSE: TOO)
Highlights
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO), today reported the Partnership's results for the quarter ended September 30, 2015. During the third quarter of 2015, the Partnership generated distributable cash flow(1) of $58.8 million, compared to $45.2 million in the same period of the prior year. The increase in distributable cash flow was primarily due to the acquisition of the Petrojarl Knarr (Knarr) floating production, storage and offloading (FPSO) unit in July 2015, the acquisition of six long-distance towing and offshore installation vessels during the first seven months of 2015, and the commencement of the Arendal Spirit Unit for Maintenance and Safety (UMS) charter contract in early-June 2015. These increases were partially offset by the expiration of two shuttle tanker contracts in the second quarter of 2015, as well as the temporary shut-down on the Piranema Spirit FPSO unit for unscheduled repairs, which were completed during the third quarter of 2015.
On October 2, 2015, the Partnership declared a cash distribution of $0.56 per unit for the quarter ended September 30, 2015, an increase of 4 percent compared to the cash distribution paid in the prior quarter. The cash distribution will be paid on November 13, 2015 to all unitholders of record on October 13, 2015.
CEO Commentary
"For the third quarter, we increased the Partnership's cash distributions per unit by four percent based primarily on the cash flow contribution from the Petrojarl Knarr FPSO which was acquired in early July from Teekay Corporation," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC.
"The Partnership's third quarter distributable cash flow was in-line with our expectations; however, the results included the impact of seasonal maintenance of the North Sea oil fields, as well as downtime associated with the Piranema Spirit FPSO and our new UMS, which if excluded, would have resulted in approximately $11 million of additional distributable cash flow generated in the quarter," Mr. Evensen continued. "Looking ahead to the fourth quarter, with our fleet operating at near full capacity, we expect our distributable cash flow and coverage ratio to increase."
Mr. Evensen added, "Despite the current weakness in global energy markets, Teekay Offshore's distributable cash flow remains relatively stable and growing. The Partnership's diversified portfolio of fee-based contracts, which is servicing our customers' oil production requirements and with no direct link to oil prices, comprises fixed forward revenues of approximately $8.2 billion."
Summary of Recent Events
Completed Acquisition of Knarr FPSO
On July 1, 2015, the Partnership completed the acquisition of the Knarr FPSO from Teekay Corporation, which is operating under a long-term charter contract with BG Norge Limited in the North Sea. The purchase price for the Knarr FPSO, which is based on a fully built-up cost of approximately $1.26 billion, was fully financed through the assumption of an existing $745 million long-term debt facility, $300 million of common units issued to Teekay Corporation, and $250 million of convertible preferred units issued in a private placement.
Commenced Strategic East Coast Canada Shuttle Tanker Contract
On June 1, 2015, the Partnership commenced 15-year contracts, plus extension options, with a group of companies (including Chevron Canada, Exxon Mobil, Husky Energy, Mosbachar Operating Ltd., Murphy Oil, Nalcor Energy, Statoil and Suncor Energy) to provide shuttle tanker services on the East Coast of Canada. These contracts were initially serviced by three third-party owned shuttle tankers that were operating on the East Coast of Canada, which were in-chartered by the Partnership. One of these vessels was subsequently replaced by one of the Partnership's existing shuttle tankers, the Navion Hispania, during the third quarter of 2015. In connection with entering the 15-year contracts for this project in early-June 2015, the Partnership entered into shipbuilding contracts to construct three Suezmax-size, dynamic positioning 2 (DP2) shuttle tanker newbuildings with a South Korean shipyard for a fully built-up cost of approximately $370 million, with an option to order one additional vessel should a fourth vessel be required. The three ordered vessels are expected to be delivered in the fourth quarter of 2017 through the first half of 2018.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $32.1 million for the quarter ended September 30, 2015, compared to $28.8 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $86.8 million and $0.3 million for the quarters ended September 30, 2015 and 2014, respectively, as detailed in Appendix A to this release. Including these items, the Partnership reported, on a GAAP basis, net loss attributable to the partners of $54.7 million for the third quarter of 2015, compared to net income attributable to the partners of $28.5 million in the same period of the prior year. Net revenues(2) increased to $285.9 million for the third quarter of 2015, compared to $229.8 million in the same period of the prior year.
Adjusted net income attributable to the partners for the three months ended September 30, 2015 increased from the same period in the prior year mainly due to the acquisition of the Knarr FPSO unit on July 1, 2015, the acquisition of six long-distance towing and offshore installation vessels during the first seven months of 2015, and the Arendal Spirit UMS commencing its charter contract in early-June 2015. These increases were partially offset by the expiration of two shuttle tanker contracts in the second quarter of 2015, and the temporary shut-down on the Piranema Spirit FPSO for unscheduled repairs, which were completed during the quarter.
For accounting purposes, the Partnership is required to recognize, through the consolidated statements of (loss) income, changes in the fair value of derivative instruments as unrealized gains or losses. This revaluation does not affect the economics of any hedging transactions nor does it have any impact on the Partnership's actual cash flows or the calculation of its distributable cash flow.
The Partnership has recast its financial results to include the financial results of the Knarr FPSO unit relating to the period prior to its acquisition by the Partnership from Teekay Corporation when it was under common control, which pre-acquisition results are referred to in this release as the Dropdown Predecessor. In accordance with GAAP, business acquisitions of entities under common control that have begun operations are required to be accounted for in a manner whereby the Partnership's financial statements are retroactively adjusted to include the historical results of the acquired vessels from the date the vessels were originally under the control of Teekay Corporation. For these purposes, the Knarr FPSO unit was under common control by Teekay Corporation from March 9, 2015 to July 1, 2015, when it was sold to the Partnership.
Operating Results
The following table highlights certain financial information for Teekay Offshore's six segments: the Shuttle Tanker segment, the FPSO segment, the FSO segment, the Conventional Tanker segment, the Towage segment and the UMS segment (please refer to the "Teekay Offshore's Fleet" section of this release below and Appendices C through F for further details).
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's Shuttle Tanker segment decreased to $54.3 million for the third quarter of 2015 compared to $65.7 million for the same period of the prior year, primarily due to the expirations of a long-term contract of affreightment and a time-charter out contract since the second quarter of 2015, partially offset by lower operating costs from lower maintenance, reduced crewing expenses following a change in crew composition, and the impact from the strengthening of the U.S. Dollar associated with foreign currency-denominated expenditures.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO segment (which also includes the results from two equity-accounted FPSO units), increased to $74.0 million for the third quarter of 2015 compared to $46.9 million for the same period of the prior year, primarily due to the acquisition of the Knarr FPSO unit from Teekay Corporation in July 2015, partially offset by the temporary shut-down on the Piranema Spirit FPSO unit for unscheduled repairs, which were completed during the third quarter of 2015.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO segment increased to $8.6 million for the third quarter of 2015 compared to $4.1 million for the same period of the prior year, primarily due to the scheduled drydocking of the Navion Saga FSO in the third quarter of 2014 and the commencement of the charter contract for the Suksan Salamander FSO in August 2014.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment increased to $5.5 million for the third quarter of 2015 compared to $4.1 million for the same period of the prior year, primarily due to the scheduled drydocking of the Kilimanjaro Spirit in the third quarter of 2014.
Towage Segment
Cash flow used for vessel operations from the Partnership's Towage segment of $0.9 million for the third quarter of 2015 primarily relates to a $2.2 million business development fee paid to Teekay Corporation in the third quarter of 2015 in connection with the acquisition of the six towage vessels, which commenced operations during the first seven months of 2015. Excluding this fee, towage operations generated $1.3 million of cash flow from operations during the third quarter of 2015.
UMS Segment
Cash flow from vessel operations from the Partnership's UMS segment of $3.2 million for the third quarter of 2015 relates to the Arendal Spirit UMS, which commenced its charter contract with Petrobras in June 2015 net of a $2.0 million business development fee paid to Teekay Corporation in the third quarter of 2015 in connection with the acquisition of the Arendal Spirit UMS and unscheduled off-hire of 13 days due to damages to the gangway, which have since been repaired.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of November 1, 2015.
Liquidity and Continuous Offering Program Update
In 2013, the Partnership implemented a continuous offering program (COP) under which the Partnership may issue new common units at market prices up to a maximum aggregate amount of $100 million. During the third quarter of 2015, the Partnership sold 187,141 common units under the COP, generating net proceeds of approximately $3.2 million. Since the initiation of the program, the Partnership has sold an aggregate of 510,190 common units under the COP, generating proceeds of approximately $10.0 million (including the Partnership's general partner's two percent proportionate capital contribution and net of offering costs).
In July 2015, the Partnership completed a $250 million, 8.6 percent convertible preferred unit private placement. The proceeds from the private placement were used to partially finance the acquisition of the Knarr FPSO from Teekay Corporation.
As of September 30, 2015, the Partnership had total liquidity of $305.3 million (comprised of $251.1 million in cash and cash equivalents and $54.2 million in undrawn credit facilities).
Conference Call
The Partnership plans to host a conference call on Thursday, November 5, 2015 at noon (ET) to discuss the results for the third quarter of 2015. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
A supporting Third Quarter 2015 Earnings Presentation will also be available at in advance of the conference call start time.
The conference call will be recorded and available until Thursday, November 19, 2015. This recording can be accessed following the live call by dialing 1-888-203-1112 or 647-436-0148, if outside North America, and entering access code 4150302.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production, storage, long-distance towing and offshore installation and maintenance and safety services to the offshore oil industry, primarily focusing on the growing deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) with consolidated assets of approximately $5.9 billion, comprised of 68 offshore assets, including shuttle tankers, floating production, storage and offloading (FPSO) units, floating storage and offtake (FSO) units, units for maintenance and safety (UMS), long-distance towing and offshore installation vessels and conventional tankers. The majority of Teekay Offshore's fleet is employed on medium-term, stable contracts.
Teekay Offshore's common units trade on the New York Stock Exchange under the symbol "TOO".
Teekay Offshore Partners L.P.
Summary Consolidated Statements of (Loss) Income
(in thousands of U.S. dollars, except unit data)
Teekay Offshore Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. dollars)
Teekay Offshore Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
Teekay Offshore Partners L.P.
Appendix A - Specific Items Affecting Net (Loss) Income
(in thousands of U.S. dollars)
Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net (loss) income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.
Teekay Offshore Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measure
Distributable Cash Flow
(in thousands of U.S. dollars)
Distributable cash flow represents net (loss) income adjusted for depreciation and amortization expense, non-controlling interests, non-cash items, distributions relating to equity financing of newbuilding installments, distributions on our preferred units, vessel and business acquisition costs, estimated maintenance capital expenditures, write-down of vessels, unrealized gains and losses from derivatives, realized losses on termination of interest rate swaps, non-cash income taxes and unrealized foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is not defined by GAAP and should not be considered as an alternative to net (loss) income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net (loss) income for the quarters ended September 30, 2015 and September 30, 2014, respectively.
Teekay Offshore Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measure
Net Revenues
(in thousands of U.S. dollars)
Net revenues represents 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. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies, however, it is not required by GAAP and should not be considered as an alternative to revenues or any other indicator of the Partnership's performance required by GAAP.
Teekay Offshore Partners L.P.
Appendix D - Supplemental Segment Information
(in thousands of U.S. dollars)
Teekay Offshore Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measure
Cash Flow From Vessel Operations From Consolidated Vessels
(in thousands of U.S. dollars)
Cash flow from vessel operations from consolidated vessels represents income from vessel operations before depreciation and amortization expense, write-down of vessels, and amortization of the non-cash portion of revenue contracts, and includes the realized gains and losses on the settlement of foreign exchange forward contracts and adjusts for direct financing leases to a cash basis. Cash flow from vessel operations is included because certain investors use this data to measure a company's financial performance. Cash flow from vessel operations is not required by GAAP and should not be considered as an alternative to net (loss) income or any other indicator of the Partnership's performance required by GAAP.
Teekay Offshore Partners L.P.
Appendix F - Reconciliation of Non-GAAP Financial Measure
Cash Flow From Vessel Operations From Equity Accounted Vessels
(in thousands of U.S. dollars)
Cash flow from vessel operations from equity accounted vessels represents income from vessel operations before depreciation and amortization expense. Cash flow from equity accounted vessel represents the Partnership's proportionate share of cash flow from vessel operations from its equity-accounted vessels, the Cidade de Itajai FPSO unit and the Libra FPSO conversion project. Cash flow from vessel operations from equity accounted vessels is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity accounted joint ventures. Cash flow from vessel operations from equity accounted vessels is not required by GAAP and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.
Forward Looking Statements
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the Partnership's expectations for its fourth quarter distributable cash flow and coverage ratio; the stability and growth of the Partnership's future distributable cash flows; expected forward revenues from the Partnership's fee-based contract portfolio; the timing of newbuilding, conversion and upgrade vessel or offshore unit deliveries and commencement of their respective charter contracts; and the estimated cost of building vessels. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea, Brazil and East Coast of Canada offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion and upgrade delays and cost overruns; changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; delays in the commencement of time-charters; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore's general partner to approve the acquisition of vessels offered from Teekay Corporation, or third parties; the Partnership's ability to raise adequate financing to purchase additional assets and complete organic growth projects; and other factors discussed in Teekay Offshore's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2014. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts:
Investor Relations Enquiries
Ryan Hamilton
+1 (604) 609-6442
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