HAMILTON, BERMUDA—(Marketwired – Aug 7, 2014) –
Highlights
Generated distributable cash flow of $40.1 million in the second quarter of 2014.
Declared second quarter 2014 cash distribution of $0.5384 per common unit.
In August 2014, completed acquisition of Logitel Offshore, an offshore floating accommodation company using the Sevan cylindrical hull design.
Completed the conversion of the Salamander FSO in July 2014, which is expected to commence full operations under its charter contract by mid–August 2014.
Remora HiLoad DP unit is expected to complete its testing during August 2014 at which time it is expected to commence its ten–year charter contract.
Teekay Offshore's 50/50 joint venture with Odebrecht was recently nominated by Petrobras as the lead commercial bidder on the Libra FPSO project in Brazil, subject to final contract negotiations.
Liquidity of approximately $531 million as at June 30, 2014.
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO), today reported the Partnership's results for the quarter ended June 30, 2014. During the second quarter of 2014, the Partnership generated distributable cash flow(1) of $40.1 million, compared to $43.0 million in the same period of the prior year. The decrease in the distributable cash flow was primarily due to the expiration of time–charter contracts relating to four existing shuttle tankers since the first quarter of 2013, operating expenses relating to the HiLoad DP unit in the second quarter of 2014, the drydocking of the Dampier Spirit FSO unit during the second quarter of 2014 and due to the sale of three conventional tankers since the first quarter of 2013, partially offset by additional cash flows relating to the acquisition of the Voyageur Spirit FPSO unit and a 50 percent interest in the Cidade de Itajai FPSO unit in May 2013 and June 2013, respectively, and the delivery of the four BG Shuttle Tanker newbuildings in June, August and November 2013 and January 2014.
(1)
Distributable cash flow is a non–GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B for a reconciliation of distributable cash flow to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP).
On July 9, 2014, a cash distribution of $0.5384 per common unit was declared for the quarter ended June 30, 2014. The cash distribution is payable on August 8, 2014 to all unitholders of record on July 25, 2014.
“The reduction in the Partnership's second quarter distributable cash flow mainly reflects a combination of temporary operational issues and cash flow timing differences related to certain of our offshore contracts,” commented Peter Evensen, Teekay Offshore GP LLC's Chief Executive Officer. “While these matters have now largely been resolved, on a full–quarter basis, the affected fixed–rate contracts would have generated an additional $8 million of distributable cash flow during the second quarter of 2014.”
“Looking forward, since reporting our first quarter results in May, the Partnership has completed its acquisition of Logitel Offshore and has made significant progress on its existing organic growth projects,” Mr. Evensen continued. “The Logitel Offshore acquisition solidifies Teekay Offshore's entry into the high–specification floating accommodation sector, which provides the Partnership with further diversification and a complementary new channel for future distributable cash flow growth. In July, the conversion project of the Salamander FSO was completed and the unit has been installed on the Bualuang field in Thailand where it is currently undergoing testing in preparation for the expected commencement of its ten–year charter contract during August. And lastly, the operational testing of the innovative Remora HiLoad DP unit, the first of its kind, has been successful so far and is also expected to be completed in August, at which point the unit will commence its ten–year charter contract with Petrobras.”
Mr. Evensen added, “In addition to these and other growth projects which provide a pipeline of direct growth for the Partnership between 2014 and 2017, we also have a number of dropdown growth opportunities available from our sponsor, Teekay Corporation, including up to five FPSO units, which must be offered to us once they are operating under eligible fixed–rate contracts. The largest and most near–term dropdown candidate, the Petrojarl Knarr FPSO, left the South Korean shipyard in July and is currently in transit to its North Sea field in preparation for its scheduled start–up in the fourth quarter of 2014.”
Summary of Recent Events
Completed Logitel Acquisition
In August 2014, the Partnership acquired Logitel Offshore Holdings Ltd. (Logitel), a Norway–based company focused on the high–end floating accommodation market. Logitel is currently constructing two newbuilding floating accommodation units (FAUs), based on the Sevan Marine ASA (Sevan) cylindrical hull design, at the COSCO (Nantong) Shipyard (COSCO) in China. The Partnership intends to immediately exercise one of its existing six options with COSCO to construct a third FAU, subject to final documentation. Prior to the acquisition, Logitel secured a three–year fixed–rate charter contract, plus extension options, with Petroleo Brasileiro SA (Petrobras) in Brazil for the first FAU, which is scheduled to deliver in the first quarter of 2015. The Partnership expects to secure charter contracts for the remaining two newbuilding FAUs prior to their respective scheduled deliveries in the fourth quarter of 2015 and the third quarter of 2016. The construction agreements with COSCO for the newbuilding FAUs have a favorable payment schedule, with the majority of the purchase price due upon delivery. 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.
Libra FPSO Project
Odebrecht Oil & Gas S.A (Odebrecht), on behalf of the Partnership's 50/50 joint venture with Odebrecht, was recently nominated by Petrobras as the lead commercial bidder on the Libra FPSO project in Brazil, and has been invited by Petrobras to conclude contract negotiations. The FPSO unit is expected to be owned and operated by the Partnership's 50/50 joint venture with Odebrecht and will service the Libra pre–salt field in the Santos Basin offshore Brazil, which is expected to commence operations in early–2017. The final contract negotiations are expected to be completed during the third quarter of 2014.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of August 1, 2014.
Number of Vessels
Owned
Vessels
Chartered–in Vessels
Committed Newbuildings /
Conversions
Conversion Candidates
Total
Shuttle Tanker Segment
31(i) (ii)
2
–
2(iii)
35
FPSO Segment
5(iv)
–
–
–
5
FSO Segment
6
–
–
–
6
Conventional Tanker Segment
4
–
–
–
4
Towage Segment
–
–
4(v)
–
4
Floating Accommodation Segment
–
–
3(vi)
–
3
Total
46
2
7
2
57
(i)
Includes six shuttle tankers in which Teekay Offshore's ownership interest is 50 percent and three shuttle tankers in which Teekay Offshore's ownership interest is 67 percent. One of the 67 percent owned shuttle tankers, the Randgrid, will commence its conversion to an FSO unit for the Gina Krog FSO project after its current shuttle tanker charter contract expires in 2015.
(ii)
Includes one HiLoad DP unit expected to commence its 10–year contract in the third quarter of 2014 once operational testing has been completed.
(iii)
Includes two shuttle tankers which are currently in lay–up and are candidates for conversion to offshore assets.
(iv)
Includes one FPSO unit in which Teekay Offshore's ownership interest is 50 percent.
(v)
Includes four long–haul towing and anchor handling vessel newbuildings scheduled to deliver in 2016.
(vi)
Includes three FAU newbuildings scheduled to deliver between the first quarter of 2015 and the third quarter of 2016.
Other Future Growth Opportunities
Pursuant to an omnibus agreement that the Partnership entered into in connection with our initial public offering in December 2006, Teekay Corporation is obligated to offer to the Partnership its interest in certain shuttle tankers, FSO units and FPSO units Teekay Corporation owns or may acquire in the future, provided the vessels are servicing contracts with remaining durations of greater than three years. The Partnership may also acquire other vessels that Teekay Corporation may offer it from time to time and also intends to pursue direct acquisitions from third parties and new organic offshore projects.
Shuttle Tankers (including HiLoad DP Units)
In September 2013, the Partnership acquired a 2010–built HiLoad Dynamic Positioning (DP) unit from Remora AS (Remora), a Norway–based offshore marine technology company, for a total purchase price of approximately $60 million, including modification and mobilization costs. The HiLoad DP unit is currently in the final stages of the charterer's operational testing, which is expected to be completed during the third quarter of 2014. Upon completion of the testing, the unit will commence its ten–year time–charter contract with Petrobras in Brazil. Under the terms of an agreement between Remora and Teekay Offshore, the Partnership has a right of first refusal to acquire any future HiLoad DP projects developed by Remora. In July 2013, Remora was awarded a contract by BG E&P Brasil Ltd. to perform 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 the capability to maneuver vessels larger than Suezmax conventional tankers.
FPSO Units
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, Petrojarl Knarr, which completed construction in late–June 2014. On July 11, 2014, the Petrojarl Knarr FPSO sailed away from the Samsung shipyard for the North Sea and following installation and offshore testing, the unit is expected to commence its ten–year time–charter contract with BG. Pursuant to the omnibus agreement, Teekay Corporation is obligated to offer to the Partnership its interest in the Petrojarl Knarr FPSO project at Teekay Corporation's fully built–up cost within a year after the commencement of the charter, which commencement is expected to occur in the fourth quarter of 2014.
Pursuant to the omnibus agreement and subsequent agreements, Teekay Corporation is obligated to offer to sell to the Partnership the Petrojarl Foinaven FPSO unit, an existing unit owned by Teekay Corporation and operating under a long–term contract in the North Sea, subject to approvals required from the charterer. The purchase price for the Petrojarl Foinaven would be based on fair market value.
Teekay Corporation owns three additional FPSO units, the Hummingbird Spirit FPSO, the Petrojarl Banff FPSO and the Petrojarl 1 FPSO, which may also be offered to the Partnership in the future pursuant to the omnibus agreement.
In May 2011, Teekay Corporation entered into a joint venture agreement with Odebrecht (a member of the Odebrecht group) to jointly pursue FPSO projects in Brazil. Odebrecht is a well–established Brazil–based company that operates in the engineering and construction, petrochemical, bioenergy, energy, oil and gas, real estate and environmental engineering sectors, with over 120,000 employees and a presence in over 20 countries. Through the joint venture agreement, Odebrecht became a 50 percent partner in the Cidade de Itajai FPSO and the Partnership is currently working with Odebrecht on other FPSO project opportunities.
FSO Units
In May 2013, the Partnership entered into a ten–year charter contract, plus extension options, with Salamander Energy plc (Salamander) to supply an FSO unit in Asia. In July 2014, the Partnership completed the conversion of its 1993–built shuttle tanker, the Navion Clipper, into an FSO unit for an estimated fully built–up cost of approximately $73 million, including mobilization costs. The unit is currently undergoing field installation and is expected to commence its charter contract with Salamander in the third quarter of 2014.
In May 2013, the Partnership entered into an agreement with Statoil Petroleum AS (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 the Partnership currently owns through a 67 percent–owned subsidiary and will acquire full ownership of the vessel prior to its conversion. The FSO conversion project is expected to cost approximately $280 million, including amounts reimbursable upon delivery of the unit relating to installation and mobilization, and the cost of acquiring the remaining 33 percent ownership interest in the Randgrid shuttle tanker. Following scheduled completion in early–2017, the newly converted FSO unit will commence operations under a three–year time–charter contract to Statoil, which includes 12 additional one–year extension options.
Towage Vessels
In March 2014, Teekay Offshore acquired ALP Maritime Services B.V. (ALP), a Netherlands–based provider of long–haul ocean towage and offshore installation services to the global offshore oil and gas industry. ALP currently provides these services through a fleet of third–party owned vessels. As part of the 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, which will be equipped with dynamic positioning capability, for a fully built–up cost of approximately $261 million, which includes the cost of acquiring ALP. These newbuildings will be capable of ultra–long distance towing and offshore unit installation and decommissioning of large floating exploration, production and storage units, including FPSO units, floating liquefied natural gas (FLNG) units and floating drill rigs and are scheduled to deliver throughout 2016.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $23.8 million for the quarter ended June 30, 2014, compared to $9.7 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $29.2 million and increasing net income by $47.9 million for the quarters ended June 30, 2014 and 2013, 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 $5.5 million for the second quarter of 2014, compared to net income of $57.6 million in the same period of the prior year. Net revenues(2) increased to $215.1 million for the second quarter of 2014, compared to $199.1 million in the same period of the prior year.
The Partnership reported adjusted net income attributable to the partners(1) of $54.9 million for the six months ended June 30, 2014, compared to $28.6 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $53.0 million and increasing net income by $49.2 million for the six months ended June 30, 2014 and 2013, respectively, as detailed in Appendix A to this release. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $1.9 million for the six months ended June 30, 2014, compared to $77.7 million in the same period of the prior year. Net revenues(2) increased to $440.9 million for the six months ended June 30, 2014, compared to $388.3 million in the same period of the prior year.
(1)
Adjusted net income attributable to the partners is a non–GAAP financial measure. Please refer to Appendix A included in this release for a reconciliation of this non–GAAP measure to the most directly comparable financial measure under GAAP and information about specific items affecting net (loss) income that are typically excluded by securities analysts in their published estimates of the Partnership's financial results.
(2)
Net revenues is a non–GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please refer to Appendix C included in this release for a reconciliation of this non–GAAP measure to the most directly comparable financial measure under GAAP.
Adjusted net income attributable to the partners for the three and six months ended June 30, 2014 increased from the same periods in the prior year, mainly due to the acquisitions of the Voyageur Spirit FPSO unit and a 50 percent interest in the Cidade de Itajai FPSO unit in the second quarter of 2013 and the commencement of the time–charters with a subsidiary of BG Group plc for four newbuilding shuttle tankers (BG Shuttle Tankers) in June, August and November 2013 and January 2014. These increases were partially offset by the sale or lay–up of four older shuttle and conventional tankers during 2013 and 2014 as their related charter contracts expired or terminated. For the three and six months ended June 30, 2013, the indemnification payments received from Teekay Corporation for the Voyageur Spirit FPSO off–hire of $12.5 million was not included in adjusted net income but rather accounted for as an equity adjustment.
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.
Operating Results
The following table highlights certain financial information for Teekay Offshore's four segments: the Shuttle Tanker segment, the FPSO segment, the FSO segment, and the Conventional Tanker segment (please refer to the “Teekay Offshore's Fleet” section of this release above and Appendices C through F for further details).
Three Months Ended
June 30, 2014
(unaudited)
(in thousands of U.S. dollars)
Shuttle Tanker Segment
FPSO Segment
FSO Segment
Conventional Tanker Segment
Total (4)
Net revenues(1)
112,226
83,984
11,524
7,412
215,146
Vessel operating expenses
39,715
39,472
7,532
1,465
88,184
Time–charter hire expense
4,975
–
–
–
4,975
Depreciation and amortization
27,378
18,186
1,298
1,612
48,474
CFVO from consolidated vessels(2)
61,167
33,606
3,966
5,635
102,774
CFVO from equity accounted vessel(3)
–
7,135
–
–
7,135
Total CFVO(2)(3)
61,167
40,741
3,966
5,635
109,909
Three Months Ended
June 30, 2013
(unaudited)
(in thousands of U.S. dollars)
Shuttle Tanker Segment
FPSO Segment
FSO Segment
Conventional Tanker Segment
Total
Net revenues(1)
110,947
65,260
15,053
7,879
199,139
Vessel operating expenses
36,511
40,074
8,315
1,619
86,519
Time–charter hire expense
14,093
–
–
–
14,093
Depreciation and amortization
28,165
17,789
2,743
1,568
50,265
CFVO from consolidated vessels(2)
54,422
17,234
6,749
11,810
90,215
CFVO from equity accounted vessel(3)
–
1,311
–
–
1,311
Total CFVO(2)(3)
54,422
18,545
6,749
11,810
91,526
(1)
Net revenues is a non–GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please refer to Appendix C, included in this release for a reconciliation of this non–GAAP measure to the most directly comparable GAAP financial measure.
(2)
Cash flow from vessel operations (CFVO) from consolidated vessels represents income from vessel operations before depreciation and amortization expense and amortization of in–process revenue contracts and deferred gains, and includes the realized gains (losses) on the settlement of foreign exchange forward contracts, and cash flow from vessel operations relating to its discontinued operations and adjustments for direct financing leases to a cash basis. CFVO is a non–GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please refer to Appendix E included in this release for a description and reconciliation of this non–GAAP measure to the most directly comparable GAAP financial measure.
(3)
CFVO from equity accounted vessel represents the Partnership's 50 percent share of CFVO from the Cidade deItajai FPSO unit. Please see Appendix F for a description and reconciliation of CFVO from equity accounted vessel (a non–GAAP measure) as used in this release to the most directly comparable GAAP financial measure.
(4)
The total column includes a $1.6 million fee paid to Teekay Corporation associated with the Partnership's acquisition of ALP Maritime Services B.V. (ALP) in CFVO from consolidated vessels and Total CFVO. This fee was recognized in general and administrative expenses in the consolidated statement of (loss) income for the three months ended June 30, 2014. The towage segment has not been disaggregated as its results are not material.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's Shuttle Tanker segment increased to $61.2 million in the second quarter of 2014 compared to $54.4 million for the same period of the prior year, primarily due to the delivery of the four BG Shuttle Tanker newbuildings in June, August and November 2013 and January 2014, partially offset by the expiration of time–charter out contracts relating to four existing shuttle tankers since the first quarter of 2013 and operating expenses relating to the HiLoad DP unit, which commenced operations during the second quarter of 2014. Revenue on the HiLoad DP unit, retroactive to April 11, 2014, will be recorded following completion of tests for Petrobras, which is expected in late August 2014.
FPSO Segment
Cash flow from vessel operations from the Partnership's FPSO segment, including one equity–accounted FPSO unit, increased to $40.7 million for the second quarter of 2014 compared to $18.5 million for the same period of the prior year, primarily due to additional cash flows related to the acquisition of the Voyageur Spirit FPSO unit and a 50 percent interest in the Cidade de Itajai FPSO unit in May 2013 and June 2013, respectively. Cash received related to the Voyageur Spirit indemnification of $12.5 million during the three months ended June 30, 2013 was not included as part of cash flow from vessel operations.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO segment decreased to $4.0 million in the second quarter of 2014 compared to $6.7 million for the same period of the prior year, primarily due the drydocking of the Dampier Spirit FSO in the second quarter of 2014 for upgrades required for its 10–year contract extension with Apache Energy. The unit returned on–hire in late–June 2014.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $5.6 million in the second quarter of 2014 compared to $11.8 million for the same period of the prior year, primarily due to the sale of three conventional tankers since the first quarter of 2013.
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, representing limited partner interests, at market prices up to a maximum aggregate amount of $100 million. During the second quarter of 2014, the Partnership sold 211,350 common units under the COP, generating proceeds of approximately $7.6 million (including the general partner's 2 percent proportionate capital contribution). The net proceeds from the issuance of these common units were used for general partnership purposes.
In May 2014, the partnership issued $300.0 million in new senior unsecured, non–rated bonds in the United States bond market, which mature in January 2019. The bonds are listed on the New York Stock Exchange and pay a fixed coupon of 6.0 percent per annum. Net proceeds from the bond offering were used for general partnership purposes.
As of June 30, 2014, the Partnership had total liquidity of $530.7 million, which consisted of $251.6 million in cash and cash equivalents and $279.1 million in undrawn revolving credit facilities.
Conference Call
The Partnership plans to host a conference call on Friday, August 8, 2014 at noon (ET) to discuss the results for the second quarter of 2014. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
By dialing 1–800–524–8850 or 416–204–9702, if outside North America, and quoting conference ID code 9278679.
By accessing the webcast, which will be available on Teekay Offshore's website at www.teekayoffshore.com (the archive will remain on the website for a period of 30 days).
A supporting Second Quarter 2014 Earnings Presentation will also be available at www.teekayoffshore.com in advance of the conference call start time.
The conference call will be recorded and available until Friday, August 15, 2014. 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 9278679.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production and storage services to the offshore oil industry focusing on the fast–growing, deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore is structured as a publicly–traded master limited partnership (MLP) and owns interests in 34 shuttle tankers (including two chartered–in vessels), five floating production, storage and offloading (FPSO) units, six floating storage and offtake (FSO) units (excluding one committed FSO conversion unit), one HiLoad Dynamic Positioning (DP) unit, four long–haul towing and anchor handling vessel newbuildings, three floating accommodation unit newbuildings and four conventional oil tankers. The majority of Teekay Offshore's fleet is employed on long–term, stable contracts. In addition, Teekay Offshore also has rights to participate in certain other FPSO, shuttle tanker and HiLoad DP opportunities provided by Teekay Corporation (NYSE: TK), Sevan Marine ASA (Oslo Bors: SEVAN) and Remora AS.
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)
Three Months Ended
Six Months Ended
June 30, 2014
March 31, 2014
June 30, 2013(1)
June 30, 2014
June 30, 2013(1)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
REVENUES
241,402
259,234
222,412
500,636
434,524
OPERATING EXPENSES
Voyage expenses
26,256
33,454
23,273
59,710
46,221
Vessel operating expenses
88,184
88,130
86,519
176,314
163,843
Time–charter hire expense
4,975
11,412
14,093
16,387
28,870
Depreciation and amortization
48,474
48,488
50,265
96,962
94,775
General and administrative
18,054
14,849
10,417
32,903
20,807
Restructuring charge (2)
(821
)
559
1,395
(262
)
2,054
Total operating expenses
185,122
196,892
185,962
382,014
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