Teekay Offshore Partners L.P. (NYSE: TOO):
Highlights
- Completed the initial public offering of 8.05 million common units on December 19, 2006
- Declared a cash distribution of $1.0 million, or $0.05 per unit, for the period from December 19, 2006 to December 31, 2006 ($1.40 per unit on an annualized basis)
- Generated $1.2 million in distributable cash flow during the period from December 19, 2006 to December 31, 2006.
Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) today reported its financial results for the three months ended December 31, 2006. On December 19, 2006, Teekay Offshore completed its initial public offering (IPO) of 8.05 million common units at $21 per unit, raising net proceeds of approximately $155.3 million that it used to repay debt owed to its parent company, Teekay Shipping Corporation (Teekay).
Teekay Offshore owns a 26% interest in Teekay Offshore Operating L.P. (OPCO), which owns and operates the world's largest fleet of shuttle tankers, in addition to floating storage and offtake (FSO) units and double-hull conventional oil tankers. Teekay Offshore controls OPCO through the ownership of its general partner, and Teekay owns the remaining 74% interest in OPCO. Since Teekay Offshore controls OPCO through its ownership of its general partner, the Partnership's financial statements includes the consolidated results of both Teekay Offshore and OPCO. Initially, Teekay Offshore will conduct all operations through OPCO and its subsidiaries, however in the future, the Partnership intends to conduct additional operations through wholly-owned subsidiaries.
Net income for the period from December 19, 2006 to December 31, 2006 was $0.9 million, which included a $0.1 million foreign exchange loss. During this period, the Partnership generated $1.2 million of distributable cash flow(1). On February 1, 2007, Teekay Offshore GP LLC, the general partner of Teekay Offshore, declared a cash distribution of $0.05 per unit ($1.40 per unit on an annualized basis) for the period from December 19, 2006 to December 31, 2006, representing a total cash distribution of $1.0 million. The cash distribution was paid on February 14, 2007 to all unitholders of record on February 9, 2007.
Net loss for the three months ended December 31, 2006 was $48.2 million, compared to net income of $32.3 million for the three months ended September 30, 2006. The results for the fourth quarter of 2006 included foreign currency translation losses of $55.5 million, primarily relating to a Norwegian Kroner-denominated loan owing by a subsidiary of OPCO to Teekay commencing in October 2006 and up to the date of the initial public offering. Teekay sold this loan receivable to OPCO immediately before the IPO and as a result, foreign currency translation gains and losses are expected to be lower subsequent to the IPO date. The results for the third quarter of 2006 included a foreign currency translation gain of $7.5 million.
For accounting purposes the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period. This revaluation does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency exchange gains or losses in the income statement, as reflected in the foreign currency translation losses and gains discussed above for the three months ended December 31, 2006 and September 30, 2006, respectively.
(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 A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.
Future Growth Opportunities
Teekay is obligated to offer Teekay Offshore certain shuttle tankers, FSO and floating production storage and offtake (FPSO) units it may acquire in the future, provided the contracts are in excess of three years. Teekay Offshore also has visible near term built-in growth opportunities in each of its business segments:
Shuttle Tankers
Teekay is obligated to offer the Partnership the opportunity to acquire two shuttle tankers currently undergoing conversion from conventional tankers. These vessels must be offered to the Partnership within one year from their date of delivery, which is expected to be in the first and second quarters of 2007. The two shuttle tankers will operate under 13-year fixed-rate charters with Petrobras of Brazil.
In January 2007, Teekay ordered two Aframax shuttle tanker newbuildings, which are scheduled to deliver during the third quarter of 2010, for a total delivered cost of approximately $240 million. It is anticipated that these vessels will be offered to OPCO and will be used to service either new long-term, fixed-rate contracts Teekay may be awarded prior to delivery or OPCO's contracts-of-affreightment in the North Sea.
FSO Units
Teekay is obligated to offer Teekay Offshore the opportunity to acquire one FSO unit currently being upgraded. This vessel must be offered to the Partnership within one year from its date of delivery, which is expected to be in the second quarter of 2007. The FSO unit will operate under a 7-year time charter to Apache Corporation of Australia.
FPSO Units
Teekay is obligated to offer the Partnership its interest in certain future FPSO projects, some of which may be acquired from Teekay Petrojarl ASA (Teekay Petrojarl). As of December 31, 2006, Teekay owned 64.5% of Teekay Petrojarl, which currently owns four FPSO units operating in the North Sea. In addition, Petrobras awarded Teekay Petrojarl a two-year charter contract for an FPSO commencing in the first quarter of 2008.
Drop-downs of Teekay's Interest in OPCO
Teekay may offer to Teekay Offshore additional limited partner interests in OPCO that Teekay owns. Teekay currently owns 74% of OPCO and Teekay Offshore owns the remaining 26%.
Operating Results
The following table highlights certain financial information for Teekay Offshore's three main segments: the shuttle tanker segment, the conventional tanker segment, and the floating storage and offtake (FSO) segment (Please read the ?OPCO Fleet? section of this release below and Appendix B for further details):
Three Months Ended December 31, 2006 | Three Months Ended September 30, 2006 | ||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
(in thousands of U.S. dollars) |
Shuttle Tanker Segment | Conventional Tanker Segment |
FSO Segment | Total |
Shuttle Tanker Segment | Conventional Tanker Segment |
FSO Segment | Total | |||||||
Net voyage revenues | 118,819 | 23,577 | 4,973 | 147,369 | 110,194 | 13,177 | 5,149 | 128,520 | |||||||
Vessel operating expenses | 22,801 | 4,419 | 1,704 | 28,924 | 19,099 | 3,928 | 1,493 | 24,520 | |||||||
Time-charter hire expense | 39,925 | - | - | 39,925 | 39,093 | - | - | 39,093 | |||||||
Depreciation & amortization | 18,272 | 4,994 | 2,466 | 25,732 | 17,283 | 5,432 | 2,243 | 24,958 | |||||||
Cash flow from vessel operations(1) | 42,911 | 17,593 | 2,927 | 63,431 | 40,450 | 6,863 | 3,258 | 50,571 |
(1) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense and gain on sale of vessels and equipment. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Partnership's Web site at www.teekayoffshore.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.
Shuttle Tanker Segment
Cash flow from vessel operations from the Partnership's shuttle tanker segment increased to $42.9 million for the fourth quarter of 2006, compared to $40.5 million for the previous quarter, primarily due to higher utilization and an increase in average charter rates in the fourth quarter of 2006, partially offset by an increase in vessel operating expenses due to higher repair and maintenance activity.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's conventional tanker segment increased to $17.6 million for the fourth quarter of 2006, compared to $6.9 million for the previous quarter, primarily due to the Partnership entering into new fixed-rate time charters with Teekay in the fourth quarter of 2006 for nine conventional tankers at market-based charter rates for terms of five to twelve years. In the third quarter of 2006, seven of these nine conventional tankers were employed on time-charter agreements with Teekay at lower average rates.
FSO Segment
Cash flow from vessel operations from the Partnership's FSO segment for the fourth quarter of 2006 was virtually unchanged from the prior quarter.
OPCO Fleet
The following table summarizes OPCO's fleet as of December 31, 2006:
Number of Vessels | |||||
Owned Vessels | Chartered-in Vessels | Total | |||
Shuttle Tanker Segment (1) | 24 | 12 | 36 | ||
Conventional Tanker Segment | 9 | - | 9 | ||
FSO Segment | 4 | - | 4 | ||
Total | 37 | 12 | 49 |
(1) Includes five shuttle tankers in which the Partnership's ownership interest is 50%
Liquidity
As of December 31, 2006, the Partnership had total liquidity of $429.0 million, comprising $114.0 million in cash and cash equivalents and $315.0 million in undrawn medium-term revolving credit facilities.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Shipping Corporation (NYSE: TK), is an international provider of marine transportation and storage services to the offshore oil industry. Teekay Offshore Partners owns a 26.0% interest in and controls Teekay Offshore Operating L.P., a Marshall Islands limited partnership with a fleet of 36 shuttle tankers (including 12 chartered-in vessels), four floating storage and offtake units and nine conventional crude oil Aframax tankers. Teekay Offshore Partners L.P. also has rights to participate in certain floating production, storage and offloading (FPSO) opportunities involving Teekay Petrojarl ASA.
Teekay Offshore Partners' common units trade on the New York Stock Exchange under the symbol ?TOO?.
Earnings Conference Call
The Partnership plans to host a conference call at 12:00 p.m. eastern time on Friday February 23, 2007, to discuss the Partnership's results and the outlook for its business activities. The Partnership's earnings presentation will be available on the Partnership's website at www.teekayoffshore.com prior to the call. All unitholders and interested parties are invited to participate in the conference call by dialing 866-234-7330, or 706-634-5011, or listen to the live conference call through the website at www.teekayoffshore.com. The Partnership plans to make available a recording of the conference call until midnight March 2, 2007 by dialing 800-642-1687 of 706-645-9291, access code 7234611 or via the Partnership's website until March 26, 2007.
TEEKAY OFFSHORE PARTNERS L.P. SUMMARY CONSOLIDATED STATEMENTS OF INCOME (LOSS) (1) (in thousands of U.S. dollars, except unit data) | ||||||||
Oct. 1, 2006 to Dec. 18, 2006 | Dec. 19, 2006 to Dec. 31, 2006 | Three Months Ended Dec. 31, 2006 | Three Months Ended Sept. 30, 2006 | |||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||
VOYAGE REVENUES | 145,396 | 23,926 | 169,322 | 152,646 | ||||
OPERATING EXPENSES | ||||||||
Voyage expenses | 18,851 | 3,102 | 21,953 | 24,126 | ||||
Vessel operating expenses | 24,837 | 4,087 | 28,924 | 24,520 | ||||
Time-charter hire expense | 34,284 | 5,641 | 39,925 | 39,093 | ||||
Depreciation and amortization | 22,096 | 3,636 | 25,732 | 24,958 | ||||
General and administrative | 12,960 | 2,129 | 15,089 | 13,983 | ||||
Gain on sale of vessels and equipment | (114) | - | (114) | (6,509) | ||||
Restructuring charge | - | - | - | 353 | ||||
112,914 | 18,595 | 131,509 | 120,524 | |||||
Income from vessel operations | 32,482 | 5,331 | 37,813 | 32,122 | ||||
OTHER ITEMS | ||||||||
Interest expense | (28,876) | (2,200) | (31,076) | (13,845) | ||||
Interest income | 835 | 191 | 1,026 | 1,041 | ||||
Income tax recovery (expense) | 572 | (99) | 473 | 4,518 | ||||
Equity income from joint ventures | 1,606 | - | 1,606 | 1,365 | ||||
Foreign exchange gain (loss) | (55,378) | (131) | (55,509) | 7,492 | ||||
Other ? net | (305) | 169 | (136) | (392) | ||||
Income (loss) before non-controlling interest | (49,064) | 3,261 | (45,803) | 32,301 | ||||
Non-controlling interest | - | (2,413) | (2,413) | - | ||||
Net income (loss) | (49,064) | 848 | (48,216) | 32,301 | ||||
Limited partners' units outstanding: | ||||||||
Weighted-average number of common units outstanding
- Basic and diluted (2) | 2,800,000 | 9,800,000 | 3,789,130 | 2,800,000 | ||||
Weighted-average number of subordinated units outstanding - Basic and diluted (2) | 9,800,000 | 9,800,000 | 9,800,000 | 9,800,000 | ||||
Weighted-average number of total units outstanding - Basic and diluted | 12,600,000 | 19,600,000 | 13,589,130 | 12,600,000 |
(1) During August 2006, Teekay Shipping Corporation (Teekay) formed Teekay Offshore, as part of its strategy to expand in the marine transportation, processing and storage sectors of the offshore oil industry. Teekay Offshore owns a 26% interest in Teekay Offshore Operating L.P. (OPCO), which owns and operates the world's largest fleet of shuttle tankers, in addition to FSO units and double-hull conventional tankers. Teekay Offshore controls OPCO through its ownership of OPCO's general partner and Teekay owns the remaining 74% interest in OPCO. Prior to the closing of Teekay Offshore's initial public offering on December 19, 2006, Teekay transferred eight Aframax-class conventional crude oil tankers to a subsidiary of Norsk Teekay Holdings Ltd. (Norsk Teekay) and one FSO unit to Teekay Offshore Australia Trust. Subsequently, Teekay transferred to OPCO all of the outstanding interests of four wholly-owned subsidiaries, Norsk Teekay, Teekay Nordic Holdings Inc., Teekay Offshore Australia Trust and Pattani Spirit LLC (collectively referred to as Teekay Offshore Partners Predecessor). Combined consolidated financial results for periods prior to December 19, 2006 are attributable primarily to Teekay Offshore Partners Predecessor.
(2) For periods prior to the Partnership's IPO on December 19, 2006, represents the number of units received by Teekay in exchange for a 26% interest in OPCO at the time of the IPO.
TEEKAY OFFSHORE PARTNERS L.P. SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) | |||
As at | As at | ||
December 31, 2006 | December 31, 2005 | ||
(unaudited) | (unaudited) | ||
ASSETS | |||
Cash and cash equivalents | 113,986 | 128,986 | |
Other current assets | 78,739 | 97,358 | |
Vessels and equipment | 1,524,842 | 1,300,064 | |
Other assets | 130,216 | 148,558 | |
Intangible assets | 66,425 | 78,502 | |
Goodwill | 127,113 | 130,549 | |
Total Assets | 2,041,321 | 1,884,017 | |
LIABILITIES AND PARTNERS' EQUITY / OWNER'S EQUITY | |||
Accounts payable and accrued liabilities | 50,353 | 47,558 | |
Current portion of long-term debt | 17,656 | 1,355 | |
Advances from affiliate | 16,951 | 559,250 | |
Long-term debt | 1,285,696 | 431,250 | |
Other long-term liabilities | 103,746 | 92,366 | |
Non-controlling interest / Minority interest | 427,977 | 11,859 | |
Partners' equity / Owner's equity | 138,942 | 740,379 | |
Total Liabilities and Partners' Equity / Owner's Equity | 2,041,321 | 1,884,017 |
TEEKAY OFFSHORE PARTNERS L.P. APPENDIX A - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (in thousands of U.S. dollars) |
Description of Non-GAAP Financial Measure ? Distributable Cash Flow (DCF)
Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-co