Teekay LNG Partners Reports Second Quarter 2015 Results
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HAMILTON, BERMUDA -- (Marketwired) -- 08/06/15 -- Highlights
-- Generated distributable cash flow of $65.8 million in the second quarter
of 2015, up 7 percent from the same period of the previous year.
-- Declared second quarter 2015 cash distribution of $0.70 per unit.
-- In June 2015, secured 13-year charter contract with BP Shipping Limited
for up to two LNG carrier newbuildings, which increases Teekay LNG's
forward fixed-rate revenues to $11.4 billion; ordered two MEGI LNG
carrier newbuildings, with an option for one additional vessel.
Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), today reported the Partnership's results for the quarter ended June 30, 2015. During the second quarter of 2015, the Partnership generated distributable cash flow(1) of $65.8 million, compared to $61.5 million in the same period of the prior year. The increase in distributable cash flow was primarily due to lower interest expense resulting from the December 2014 termination of capital leases for, and the subsequent refinancing of, three 70 percent-owned liquefied natural gas (LNG) carriers and an increase in the charter rates for the Partnership's four 33 percent-owned LNG carriers servicing the Angola LNG project and two of the Partnership's Suezmax tankers. These increases were partially offset by the termination of the charter contract for the Partnership's 52 percent-owned Magellan Spirit LNG carrier in March 2015 (which termination the Partnership's Malt Joint Venture is currently disputing), the scheduled expiration of the charter contract for the Partnership's 52 percent-owned Methane Spirit LNG carrier in March 2015 and the sale of one 2001-built conventional tanker in August 2014.
On July 2, 2015, the Partnership declared a cash distribution of $0.70 per unit for the quarter ended June 30, 2015. The cash distribution will be paid on August 14, 2015 to all unitholders of record on July 14, 2015.
CEO Commentary
"The Partnership generated stronger than expected cash flow coverage for the second quarter, primarily due to higher than expected revenues from our Exmar LPG and Angola joint ventures," commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. "We also successfully secured contracts with BP for its Freeport LNG volumes. This is our second U.S. LNG export project and will add to the Partnership's strong portfolio of long-term fee-based contracted cash flows with up to two vessels operating under fixed-rate contracts commencing in 2019. This transaction further supports our belief that fuel-efficient MEGI LNG carriers are becoming the new standard in global LNG shipping."
Mr. Evensen continued, "The Partnership's cash flows are stable and growing, supported by a large and diversified portfolio of long-term fee-based contracts of $11.4 billion with an average remaining contract duration of approximately 13 years and no direct commodity price exposure. Despite the current volatility in the energy markets, the long-term fundamentals in the LNG market remain attractive. With a strong pipeline of contracted growth projects and access to competitive bank financing and multiple capital markets, we believe the Partnership is well-positioned for further distributable cash flow growth."
(1) Adjusted net income attributable to the partners is a non-GAAP
financial measure. Please refer to Appendix A to this release for a
reconciliation of this non- GAAP measure to the most directly
comparable financial measure under GAAP and information about specific
items affecting net income which are typically excluded by securities
analysts in their published estimates of the Partnership's financial
results.
Recent Transactions
Charter Contacts with BP for up to Two LNG Carrier Newbuilds
In June 2015, Teekay LNG entered into a 13-year charter contract with BP Shipping Limited (BP) for one LNG carrier newbuilding, plus an option exercisable by BP by the end of the third quarter of 2015 for one additional LNG carrier charter under similar terms. The vessels, including the optional charter if exercised by BP, will primarily provide LNG transportation of BP's LNG volumes from the Freeport LNG project located on Quintana Island near Freeport, Texas, which is scheduled for start-up in 2018 and will consist of three LNG trains with a total capacity of 13.2 million metric tonnes per annum.
In connection with the signing of the BP contracts, the Partnership ordered two fuel-efficient 174,000 cubic meter LNG carrier newbuildings to be constructed by Hyundai Samho Heavy Industries Co., Ltd. of South Korea for a fully built-up cost of approximately $425 million, scheduled for delivery in the first quarter of 2019. As part of the order, the Partnership received an option to order one additional vessel. These newbuildings will be constructed with M-type, Electronically Controlled, Gas Injection (MEGI) twin engines, which are designed to be significantly more fuel-efficient and have lower emission levels than engines currently used in LNG shipping.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $39.5 million for the quarter ended June 30, 2015, compared to $42.6 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net income by $18.6 million and $1.1 million for the three months ended June 30, 2015 and 2014, respectively, primarily relating to unrealized gains and losses on derivative instruments and foreign currency exchange gains and losses, as detailed in Appendix A to this release. Including these items, the Partnership reported net income attributable to the partners, on a GAAP basis, of $58.1 million and $43.6 million for the three months ended June 30, 2015 and 2014, respectively.
Adjusted net income attributable to the partners for the three months ended June 30, 2015 decreased from the same period in the prior year, primarily due to the Magellan Spirit LNG carrier grounding incident and disputed off- hire and related charter contract termination during the first quarter of 2015, the scheduled expiration of the charter contract for the Methane Spirit LNG carrier in mid-March 2015 and the sale of one conventional tanker in August 2014, partially offset by the termination of capital leases for, and the subsequent refinancing at a lower interest rate of, three LNG carriers owned by the Partnership's RasGas II Joint Venture in December 2014, and the acquisition of one LPG carrier, the Norgas Napa, in November 2014.
For accounting purposes, the Partnership is required to recognize the changes in the fair value of its outstanding derivative instruments that are not designated as hedges for accounting purposes in net income. This method of accounting does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized gains or losses on the consolidated statements of income as detailed in notes 1, 2 and 3 to the Consolidated Statements of Income and Comprehensive Income included in this release.
(1) Adjusted net income attributable to the partners is a non-GAAP
financial measure. Please refer to Appendix A to this release for a
reconciliation of this non-GAAP measure to the most directly comparable
financial measure under GAAP and information about specific items
affecting net income which are typically excluded by securities
analysts in their published estimates of the Partnership's financial
results.
Operating Results
The following table highlights certain financial information for Teekay LNG's two segments: the Liquefied Gas Segment and the Conventional Tanker Segment (please refer to the "Teekay LNG's Fleet" section of this release below and Appendices C through F for further details).
----------------------------------------------------------------------------
Three Months Ended
June 30, 2015
(unaudited)
-------------------------------------
Liquefied Conventional
(in thousands of U.S. Dollars) Gas Tanker Total
Segment Segment
----------------------------------------------------------------------------
Net voyage revenues(i) 77,466 20,769 98,235
Vessel operating expenses (16,127) (7,975) (24,102)
Depreciation and amortization (18,004) (5,205) (23,209)
----------------------------------------------------------------------------
CFVO from consolidated vessels(ii) 60,290 11,466 71,756
CFVO from equity accounted vessels(iii) 47,942 - 47,942
Total CFVO(ii)(iii) 108,232 11,466 119,698
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended
June 30, 2014
(unaudited)
-------------------------------------
Liquefied Conventional
(in thousands of U.S. Dollars) Gas Tanker Total
Segment Segment
----------------------------------------------------------------------------
Net voyage revenues(i) 76,897 23,259 100,156
Vessel operating expenses (14,746) (9,574) (24,320)
Depreciation and amortization (17,888) (5,642) (23,530)
----------------------------------------------------------------------------
CFVO from consolidated vessels(ii) 61,947 9,703 71,650
CFVO from equity accounted vessels(iii) 50,894 - 50,894
Total CFVO(ii)(iii) 112,841 9,703 122,544
----------------------------------------------------------------------------
(i) Net voyage revenues represents voyage 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 voyage
revenues is a non-GAAP financial measure used by certain investors to
measure the financial performance of shipping companies. Please see
Appendix C for a reconciliation of this non-GAAP measure as used in
this release to the most directly comparable GAAP financial measure.
(ii) Cash flow from vessel operations (CFVO) from consolidated vessels
represents income from vessel operations before (a) depreciation and
amortization expense, (b) amortization of in-process revenue
contracts included in voyage revenues, (c) adjustments for direct
financing leases to a cash basis, realized gains or losses on the
Toledo Spirit derivative contract and the revenue for two Suezmax
tankers recognized on a cash basis. CFVO is included because certain
investors use this measure to assess a company's financial
performance. CFVO is not required by GAAP and should not be
considered as an alternative to net income, equity income or any
other indicator of the Partnership's performance required by GAAP.
Please see Appendix E for a reconciliation of CFVO from consolidated
vessels (a non-GAAP measure) as used in this release to the most
directly comparable GAAP financial measure.
(iii) The Partnership's equity accounted investments for the three months
ended June 30, 2015 and 2014 includes the Partnership's proportionate
share of its equity accounted vessels' CFVO. Please see Appendix F
for a description and reconciliation of CFVO from equity accounted
vessels (a non-GAAP measure) as used in this release to the most
directly comparable GAAP financial measure.
Liquefied Gas Segment
Cash flow from vessel operations from the Partnership's Liquefied Gas segment, excluding equity accounted vessels, was $60.3 million in the second quarter of 2015 compared to $61.9 million in the same quarter of the prior year. The decrease was primarily due to the depreciation of the Euro against the U.S. Dollar compared to the same quarter of the prior year and increased project-related costs. These decreases were partially offset by the acquisition of the Norgas Napa in November 2014 and charter rate adjustments associated with the Arctic Spirit and Polar Spirit.
Cash flow from vessel operations from the Partnership's equity accounted vessels in the Liquefied Gas segment was $47.9 million in the second quarter of 2015 compared to $50.9 million in the same quarter of the prior year. The decrease was primarily due to the disputed termination of the charter contract for the Magellan Spirit in March 2015 and the scheduled expiration of the charter contract for the Methane Spirit in mid-March 2015. Both the Magellan Spirit and Methane Spirit are owned through the Partnership's 52 percent interest in the Malt Joint Venture with Marubeni Corporation. The decreases were partially offset by increased charter rates for the Partnership's four 33 percent-owned LNG carriers servicing the Angola LNG project and increased cash flows from the Partnership's 50 percent-owned LPG joint venture, Exmar LPG BVBA, as a result from the addition of four LPG newbuildings delivered during 2014 and early 2015, net of the sale of four older LPG carriers during 2014.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment increased to $11.5 million in the second quarter of 2015 compared to $9.7 million in the same quarter of the prior year. The increase is due to higher charter rates earned by the Partnership's two Suezmax tankers, the Bermuda Spirit and Hamilton Spirit, which reverted back to their original higher rates in October 2014 after a two-year reduction, partially offset by the sale of one 2001-built Suezmax tanker in August 2014.
Teekay LNG's Fleet
The following table summarizes the Partnership's fleet as of August 1, 2015:
----------------------------------------------------------------------------
Number of Vessels
----------------------------------------------------
In-
Owned Chartered
Vessels Vessels Newbuildings Total
----------------------------------------------------
LNG Carrier Fleet 29(i) - 21(i) 50
LPG/Multigas Carrier
Fleet 19(ii) 3(iii) 8(iii) 30
Conventional Tanker
Fleet 8 - - 8
----------------------------------------------------------------------------
Total 56 3 29 88
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(i) The Partnership's ownership interests in these vessels range from 20
percent to 100 percent.
(ii) The Partnership's ownership interests in these vessels range from 50
percent to 99 percent.
(iii) The Partnership's interest in these vessels is 50 percent.
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 second quarter of 2015, the Partnership sold an aggregate of 279,792 common units under the COP, generating net proceeds of approximately $9.6 million. Since initiation of the program, the Partnership has sold an aggregate of 1,614,326 common units under the COP, generating net proceeds of approximately $63.0 million (including the general partner's 2 percent contribution and net of offering costs).
As of June 30, 2015, the Partnership had total liquidity of $244.1 million (comprised of $107.0 million in cash and cash equivalents and $137.1 million in undrawn credit facilities).
Conference Call
The Partnership plans to host a conference call on Thursday, August 6, at 11:00 a.m. (ET) to discuss the results for the second quarter of 2015. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
-- By dialing (800) 505-9573 or (416) 204-9498, if outside North America,
and quoting conference ID code 9263289.
-- By accessing the webcast, which will be available on Teekay LNG's
website at www.teekay.com (the archive will remain on the web site for a
period of 30 days).
A supporting Second Quarter 2015 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.
The conference call will be recorded and made available until Thursday, August 20, 2015. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 9263289.
About Teekay LNG Partners L.P.
Teekay LNG Partners is one of the world's largest independent owners and operators of LNG carriers, providing LNG, LPG and crude oil marine transportation services primarily under long-term, fixed-rate charter contracts through its interests in 50 LNG carriers (including one LNG regasification unit and 21 newbuildings), 30 LPG/Multigas carriers (including three in-chartered LPG carriers and eight newbuildings) and eight conventional tankers. The Partnership's interests in these vessels range from 20 to 100 percent. Teekay LNG Partners L.P. is a publicly-traded master limited partnership (MLP) formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.
Teekay LNG Partners' common units trade on the New York Stock Exchange under the symbol "TGP".
Teekay LNG Partners L.P.
Consolidated Statements Of Income And Comprehensive Income
(in thousands of U.S. Dollars, except units outstanding)
Three Months Ended Six Months Ended
------------------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Voyage revenues 98,608 97,326 101,323 195,934 202,813
Voyage expenses (373) (318) (1,167) (691) (2,500)
Vessel operating
expenses (24,102) (21,634) (24,320) (45,736) (48,576)
Depreciation and
amortization (23,209) (23,569) (23,530) (46,778) (47,640)
General and
administrative (7,068) (6,708) (6,254) (13,776) (12,662)
----------------------------------------------------------------------------
Income from
vessel
operations 43,856 45,097 46,052 88,953 91,435
Equity income(1) 29,002 18,058 32,924 47,060 53,297
Interest expense (11,153) (10,104) (15,068) (21,257) (29,899)
Interest income 611 734 572 1,345 1,220
Realized and
unrealized gain
(loss) on
derivative
instruments(2) 10,888 (14,032) (16,335) (3,144) (23,856)
Foreign exchange
(loss) gain (3) (9,546) 25,930 (66) 16,384 (845)
Other income 335 443 208 778 426
----------------------------------------------------------------------------
Net income
before tax
(expense)
recovery 63,993 66,126 48,287 130,119 91,778
Income tax
(expense)
recovery (258) 225 (375) (33) (770)
----------------------------------------------------------------------------
Net income 63,735 66,351 47,912 130,086 91,008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other
comprehensive
income (loss):
Unrealized gain
(loss) on
qualifying cash
flow hedging
instrument in
equity
accounted joint
ventures net of
amounts
reclassified to
equity income,
net of tax 919 (611) (730) 308 (1,282)
----------------------------------------------------------------------------
Comprehensive
income 64,654 65,740 47,182 130,394 89,726
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-controlling
interest in net
income 5,642 3,283 4,263 8,925 9,113
General
Partner's
interest in net
income 8,568 8,642 7,528 17,210 14,683
Limited
partners'
interest in net
income 49,525 54,426 36,121 103,951 67,212
Weighted-average
number of
common units
outstanding:
- Basic 78,590,812 78,514,335 74,212,834 78,552,784 74,206,221
- Diluted 78,659,264 78,553,194 74,255,543 78,609,057 74,252,842
Total number of
common units
outstanding at
end of period 78,813,676 78,537,584 74,212,891 78,813,676 74,212,891
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Equity income includes unrealized gains/losses on non-designated
derivative instruments, any ineffectiveness for derivative instruments
designated as hedges for accounting purposes and gains on sale of
vessels as detailed in the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
----------------------------------------------------
Equity income 29,002 18,058 32,924 47,060 53,297
Proportionate share of
unrealized (gain) loss
on non-designated
derivative instruments (8,082) 1,126 979 (6,956) 2,032
Proportionate share of
ineffective portion of
hedge accounted
interest rate swap (394) 394 - - -
Proportionate share of
gains on sale of
vessels - - (9,772) - (8,806)
----------------------------------------------------
Equity income excluding
unrealized gains/losses
on designated and non-
designated derivative
instruments and gains
on sale of vessels 20,526 19,578 24,131 40,104 46,523
----------------------------------------------------
----------------------------------------------------
(2) The realized losses relate to the amounts the Partnership actually paid
to settle derivative instruments and the unrealized gains (losses)
relate to the change in fair value of such derivative instruments as
detailed in the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
------------------------------------------------------
Realized losses
relating to:
Interest rate swaps (7,319) (7,305) (10,020) (14,624) (19,264)
Toledo Spirit time-
charter derivative
contract - (570) (224) (570) (224)
------------------------------------------------------
(7,319) (7,875) (10,244) (15,194) (19,488)
------------------------------------------------------
Unrealized gains
(losses) relating to:
Interest rate swap
agreements 17,424 (4,357) (5,391) 13,067 (1,368)
Interest rate swaption 593 - - 593 -
Toledo Spirit time-
charter derivative
contract 190 (1,800) (700) (1,610) (3,000)
------------------------------------------------------
18,207 (6,157) (6,091) 12,050 (4,368)
------------------------------------------------------
Total realized and
unrealized gains
(losses) on
derivative
instruments 10,888 (14,032) (16,335) (3,144) (23,856)
------------------------------------------------------
------------------------------------------------------
(3) 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 translation gains or losses in the
Consolidated Statements of Income and Comprehensive Income.
Foreign exchange (loss) gain includes realized (losses) gains relating
to the amounts the Partnership (paid) received to settle the
Partnership's non-designated cross-currency swaps that were entered
into as economic hedges in relation to the Partnership's Norwegian
Kroner (NOK) denominated unsecured bonds. The Partnership issued NOK
700 million, NOK 900 million, and NOK 1,000 million of unsecured bonds
between May 2012 and May 2015. Foreign exchange (loss) gain also
includes unrealized gains (losses) relating to the change in fair value
of such derivative instruments, partially offset by unrealized gains
(losses) on the revaluation of the NOK bonds as detailed in the table
below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
-----------------------------------------------------
Realized losses on
cross-currency swaps (1,488) (1,401) (275) (2,889) (640)
Unrealized losses on
cross-currency swaps (1,741) (17,045) (7,729) (18,786) (3,812)
Unrealized gains
(losses) on
revaluation of NOK
bonds 1,415 16,216 6,307 17,631 2,654
Teekay LNG Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
As at June As at March As at
30, 31, December 31,
2015 2015 2014
(unaudited) (unaudited) (unaudited)
------------------------------------------
ASSETS
Current
Cash and cash equivalents 106,991 106,410 159,639
Restricted cash - current 8,899 8,999 3,000
Accounts receivable 14,519 12,536 11,265
Prepaid expenses 4,055 5,390 3,975
Current portion of net investments
in direct financing leases 19,759 19,350 15,837
Advances to affiliates 10,714 17,254 11,942
----------------------------------------------------------------------------
Total current assets 164,937 169,939 205,658
----------------------------------------------------------------------------
Restricted cash - long-term 46,323 47,633 42,997
Vessels and equipment
At cost, less accumulated
depreciation 1,623,301 1,641,227 1,659,807
Vessels under capital leases, at
cost, less accumulated
depreciation 89,040 90,500 91,776
Advances on newbuilding contracts 379,035 298,362 237,647
----------------------------------------------------------------------------
Total vessels and equipment 2,091,376 2,030,089 1,989,230
----------------------------------------------------------------------------
Investment in and advances to
equity accounted joint ventures 885,550 851,807 891,478
Net investments in direct
financing leases 653,673 661,764 666,658
Other assets 42,343 42,897 44,679
Derivative assets 1,958 - 441
Intangible assets - net 83,219 85,433 87,646
Goodwill - liquefied gas segment 35,631 35,631 35,631
----------------------------------------------------------------------------
Total assets 4,005,010 3,925,193 3,964,418
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current
Accounts payable 771 1,200 643
Accrued liabilities 29,561 31,161 39,037
Unearned revenue 16,704 18,271 16,565
Current portion of long-term debt 154,631 117,677 157,235
Current obligations under capital
lease 61,354 62,456 4,422
Current portion of in-process
contracts 9,296 8,084 4,736
Current portion of derivative
liabilities 39,476 36,562 57,678
Advances from affiliates 35,274 52,749 43,205
----------------------------------------------------------------------------
Total current liabilities 347,067 328,160 323,521
----------------------------------------------------------------------------
Long-term debt 1,805,778 1,735,394 1,766,889
Long-term obligations under
capital lease - - 59,128
Long-term unearned revenue 32,178 32,561 33,938
Other long-term liabilities 73,833 73,546 74,734
In-process contracts 25,773 28,246 32,660
Derivative liabilities 152,633 170,055 126,177
----------------------------------------------------------------------------
Total liabilities 2,437,262 2,367,962 2,417,047
----------------------------------------------------------------------------
Equity
Limited partners 1,493,532 1,489,685 1,482,647
General Partner 56,767 56,658 56,508
Accumulated other comprehensive
loss (1,095) (2,014) (1,403)
----------------------------------------------------------------------------
Partners' equity 1,549,204 1,544,329 1,537,752
Non-controlling interest (1) 18,544 12,902 9,619
----------------------------------------------------------------------------
Total equity 1,567,748 1,557,231 1,547,371
----------------------------------------------------------------------------
Total liabilities and total equity 4,005,010 3,925,193 3,964,418
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-controlling interest includes: a 30 percent equity interest in the
RasGas II Joint Venture (which owns three LNG carriers); a 31 percent
equity interest in Teekay BLT Corporation (a joint venture which owns
two LNG carriers); and a one percent equity interest in two LNG
carriers (Arctic Spirit and Polar Spirit), the Excalibur joint venture
(which owns one LNG carrier), six LPG/Multigas carriers that are
chartered out to Skaugen, and two LNG carriers chartered out to Awilco
LNG ASA (Awilco), which in each case represents the ownership interest
not owned by the Partnership.
Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
Six Months Ended
June 30, June 30,
2015 2014
(unaudited) (unaudited)
----------------------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 130,086 91,008
Non-cash items:
Unrealized (gain) loss on derivative
instruments (12,050) 4,368
Depreciation and amortization 46,778 47,640
Unrealized foreign currency exchange gain (20,051) (66)
Equity income, net of dividends received of
$45,000 (2014 - $2,600) (2,060) (50,690)
Amortization of deferred debt issuance costs
and other (1,475) 742
Change in operating assets and liabilities (20,767) 9,452
Expenditures for dry docking (1,424) (7,931)
----------------------------------------------------------------------------
Net operating cash flow 119,037 94,523
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 233,175 209,215
Debt issuance costs (1,796) -
Scheduled repayments of long-term debt (66,600) (48,320)
Prepayments of long-term debt (90,000) (130,000)
Scheduled repayments of capital lease
obligations (2,196) (3,396)
Proceeds from equity offerings, net of offering
costs 16,166 -
Increase in restricted cash (9,930) (1,197)
Cash distributions paid (127,239) (117,803)
Novation of derivative liabilities - 2,985
Dividends paid to non-controlling interest - (7,295)
----------------------------------------------------------------------------
Net financing cash flow (48,420) (95,811)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Additional capital contributions in equity
accounted investments (3,235) (1)
Repayments by equity accounted joint ventures 13,987 -
Receipts from direct financing leases 9,063 5,114
Expenditures for vessels and equipment (143,080) (21,648)
----------------------------------------------------------------------------
Net investing cash flow (123,265) (16,535)
----------------------------------------------------------------------------
Decrease in cash and cash equivalents (52,648) (17,823)
Cash and cash equivalents, beginning of the
period 159,639 139,481
----------------------------------------------------------------------------
Cash and cash equivalents, end of the period 106,991 121,658
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix A - Specific Items Affecting Net 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 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.
Three Months Ended
----------------------------
June 30, June 30,
2015 2014
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net income - GAAP basis 63,735 47,912
Less:
Net income attributable to non-controlling
interests (5,642) (4,263)
----------------------------------------------------------------------------
Net income attributable to the partners 58,093 43,649
Add (subtract) specific items affecting net
income:
Unrealized foreign currency exchange losses
(gains)(1) 8,722 (265)
Unrealized (gains) losses from derivative
instruments(2) (18,207) 6,091
Unrealized gains from non-designated
derivative instruments and other items from
equity accounted investees(3) (8,476) (8,793)
Amended charter contract in equity accounted
investee(4) (2,626) -
Non-controlling interests' share of items
above(5) 1,958 1,906
----------------------------------------------------------------------------
Total adjustments (18,629) (1,061)
----------------------------------------------------------------------------
Adjusted net income attributable to the partners 39,464 42,588
----------------------------------------------------------------------------
(1) Unrealized foreign exchange losses (gains) primarily relate to the
Partnership's revaluation of all foreign currency-denominated monetary
assets and liabilities based on the prevailing exchange rate at the end
of each reporting period and unrealized (gains) losses on the cross-
currency swaps economically hedging the Partnership's NOK bonds and
excludes the realized gains/(losses) relating to the cross currency
swaps for the NOK bonds.
(2) Reflects the unrealized (gains) losses due to changes in the mark-to-
market value of derivative instruments that are not designated as
hedges for accounting purposes.
(3) Reflects the unrealized gains due to changes in the mark-to-market
value of derivative instruments that are not designated as hedges for
accounting purposes and any ineffectiveness for derivative instruments
designated as hedges for accounting purposes within the Partnership's
equity-accounted investments. See note 1 to the Consolidated Statements
of Income and Comprehensive Income included in this release for further
details.
(4) Reflects the impact related to years prior to 2015 resulting from
amended charter contracts associated with the Partnership's 33 percent
interest in four LNG carriers servicing the Angola LNG project. The
charterer agreed to amend the charter contract to a cost pass-through
basis retroactive to 2011, resulting in the inclusion of a cumulative
adjustment from 2011 which increased equity income in the quarter ended
June 30, 2015.
(5) Items affecting net income include items from the Partnership's
consolidated non-wholly-owned subsidiaries. The specific items
affecting net income are analyzed to determine whether any of the
amounts originated from a consolidated non-wholly-owned subsidiary.
Each amount that originates from a consolidated non-wholly-owned
subsidiary is multiplied by the non-controlling interests' percentage
share in this subsidiary to arrive at the non-controlling interests'
share of the amount. The amount identified as "non- controlling
interests' share of items listed above" in the table above is the
cumulative amount of the non-controlling interests' proportionate share
of items listed in the table.
Teekay LNG Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures Distributable
Cash Flow (DCF)
(in thousands of U.S. Dollars)
Distributable cash flow represents net income adjusted for depreciation and amortization expense, non -cash items, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, distributions relating to equity financing of newbuilding installments, equity income, adjustments for direct financing leases to a cash basis, and 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 required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net income.
----------------------------------------------------------------------------
Three Months Three Months
Ended Ended
June 30, 2015 June 30, 2014
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net income: 63,735 47,912
Add:
Depreciation and amortization 23,209 23,530
Partnership's share of equity accounted joint
ventures' DCF net of estimated maintenance
and capital expenditures(1) 26,394 29,411
Unrealized foreign exchange loss (gain) 8,722 (265)
Direct finance lease payments received in
excess of revenue recognized 4,465 4,256
Distributions relating to equity financing of
newbuildings 4,097 1,822
Less:
Unrealized (gain) loss on derivatives (18,207) 6,091
Estimated maintenance capital expenditures (11,778) (11,632)
Equity income (29,002) (32,924)
Deferred income tax and other non-cash items (648) (2,447)
----------------------------------------------------------------------------
Distributable Cash Flow before Non-controlling
interest 70,987 65,754
Non-controlling interests' share of DCF before
estimated maintenance capital expenditures (5,219) (4,258)
----------------------------------------------------------------------------
Distributable Cash Flow 65,768 61,496
----------------------------------------------------------------------------
(1) The estimated maintenance capital expenditures relating to the
Partnership's share of equity accounted joint ventures for the three
months ended June 30, 2015 and 2014 were $7.2 million and $7.3 million,
respectively.
Teekay LNG Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measures Net Voyage
Revenues
(in thousands of U.S. Dollars)
Net voyage revenues represents voyage 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 voyage revenues is included because certain investors use this data to measure the financial performance of shipping companies. Net voyage revenues is not required by GAAP and should not be considered as an alternative to voyage revenues or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended June 30, 2015
(unaudited)
----------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Voyage revenues 77,466 21,142 98,608
Voyage expenses - (373) (373)
----------------------------------------------------------------------------
Net voyage revenues 77,466 20,769 98,235
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2014
(unaudited)
-----------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Voyage revenues 77,602 23,721 101,323
Voyage expenses (705) (462) (1,167)
----------------------------------------------------------------------------
Net voyage revenues 76,897 23,259 100,156
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix D - Supplemental Segment Information
(in thousands of U.S. Dollars)
Three Months Ended June 30, 2015
(unaudited)
----------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net voyage revenues (See
Appendix C) 77,466 20,769 98,235
Vessel operating expenses (16,127) (7,975) (24,102)
Depreciation and amortization (18,004) (5,205) (23,209)
General and administrative (5,514) (1,554) (7,068)
----------------------------------------------------------------------------
Income from vessel operations 37,821 6,035 43,856
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2014
(unaudited)
----------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net voyage revenues (See
Appendix C) 76,897 23,259 100,156
Vessel operating expenses (14,746) (9,574) (24,320)
Depreciation and amortization (17,888) (5,642) (23,530)
General and administrative (4,460) (1,794) (6,254)
----------------------------------------------------------------------------
Income from vessel operations 39,803 6,249 46,052
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures 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 (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts included in voyage revenues, and includes (c) adjustments for direct financing leases to a cash basis, realized gains or losses on the Toledo Spirit derivative contract, and the revenue for two Suezmax tankers recognized to a cash basis. The Partnership's direct financing leases for the periods indicated relates to the Partnership's 69 percent interest in two LNG carriers, the Tangguh Sago and Tangguh Hiri, and the two LNG carriers acquired from Awilco. The Partnership's cash flow from vessel operations from consolidated vessels does not include the Partnership's cash flow from vessel operations from its equity accounted joint ventures. Cash flow from vessel operations 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 consolidated vessels. Cash flow from vessel operations from consolidated vessels is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended June 30, 2015
(unaudited)
--------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel operations
(See Appendix D) 37,821 6,035 43,856
Depreciation and amortization 18,004 5,205 23,209
Amortization of in-process
revenue contracts included in
voyage revenues - (278) (278)
Direct finance lease payments
received in excess of revenue
recognized 4,465 - 4,465
Cash flow adjustment for two
Suezmax tankers(1) - 504 504
----------------------------------------------------------------------------
Cash flow from vessel operations
from consolidated vessels 60,290 11,466 71,756
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2014
(unaudited)
------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
----------------------------------------------------------------------------
Income from vessel operations (See
Appendix D) 39,803 6,249 46,052
Depreciation and amortization 17,888 5,642 23,530
Amortization of in-process revenue
contracts included in voyage
revenues - (278) (278)
Direct finance lease payments
received in excess of revenue
recognized 4,256 - 4,256
Realized loss on Toledo Spirit
derivative contract - (224) (224)
Cash flow adjustment for two
Suezmax tankers(1) - (1,686) (1,686)
----------------------------------------------------------------------------
Cash flow from vessel operations
from consolidated vessels 61,947 9,703 71,650
----------------------------------------------------------------------------
(1) The Partnership's charter contracts for two of its Suezmax tankers, the
Bermuda Spirit and Hamilton Spirit, were amended in 2012, which had the
effect of reducing the daily charter rates by $12,000 per day for a
duration of 24 months ended September 30, 2014. The cash impact of the
change in hire rates is not fully reflected in the Partnership's
statements of income and comprehensive income as the change in the
lease payments is being recognized on a straight-line basis over the
term of the lease.
Teekay LNG Partners L.P.
Appendix F - Reconciliation of Non-GAAP Financial Measures 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 (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts, (c) gain on sale of vessels and includes (d) adjustments for direct financing leases to a cash basis. 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.
Three Months Ended June Three Months Ended June
30, 2015 30, 2014
(unaudited) (unaudited)
--------------------------------------------------
At Partnership's At Partnership's
100% Portion(1) 100% Portion(1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net voyage revenues 147,118 65,940 154,330 71,534
Vessel operating expenses (40,977) (19,114) (45,505) (21,398)
Depreciation and
amortization (22,833) (11,565) (22,970) (11,643)
Gains on sale of vessels - - 19,543 9,772
----------------------------------------------------------------------------
Income from vessel
operations of equity
accounted vessels 83,308 35,261 105,398 48,265
Interest expense - net (19,341) (9,013) (19,888) (9,250)
Realized and unrealized
gain (loss) on derivative
instruments 10,253 3,363 (17,355) (5,793)
Other expense - net (1,264) (609) (501) (298)
----------------------------------------------------------------------------
Net income / equity income
of equity accounted
vessels 72,956 29,002 67,654 32,924
----------------------------------------------------------------------------
----------------------------------------------------------------------------
---------------------------------------------------------------------------=
Income from vessel
operations 83,308 35,261 105,398 48,265
Depreciation and
amortization 22,833 11,565 22,970 11,643
Gains on sale of vessels - - (19,543) (9,772)
Direct finance lease
payments received in
excess of revenue
recognized 8,296 3,010 7,697 2,792
Amortization of in-process
revenue contracts (3,719) (1,894) (4,002) (2,034)
----------------------------------------------------------------------------
Cash flow from vessel
operations from equity
accounted vessels 110,718 47,942 112,520 50,894
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's equity accounted vessels for the three months ended
June 30, 2015 and 2014 include: the Partnership's 40 percent interest
in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the
Partnership's 50 percent interest in the Excalibur and Excelsior joint
ventures, which owns one LNG carrier and one regasification unit,
respectively; the Partnership's 33 percent interest in four LNG
carriers servicing the Angola LNG project; the Partnership's 52 percent
interest in Malt LNG Netherlands Holding B.V., the joint venture
between the Partnership and Marubeni Corporation, the Partnership's 50
percent interest in Exmar LPG BVBA, which owns and in-charters 24
vessels, including eight newbuildings, as at June 30, 2015, and 25
vessels, including 10 newbuildings, as at June 30, 2014; the
Partnership's 30 percent interest in two LNG carrier newbuildings and
20 percent interest in two LNG carrier newbuildings for BG Group
acquired in June 2014; and the Partnership's 50 percent interest in six
LNG newbuildings in the joint venture between the Partnership and China
LNG Shipping (Holdings) Limited established in July 2014.
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 expected future revenues and remaining average contract duration; fundamentals in the liquefied gas industry; the delivery timing and total cost of newbuilding vessels, the commencement of related time charter contracts and the effect of these contracts on the Partnership's distributable cash flows; the timing and certainty of BP contracting one additional LNG carrier on similar terms as the first vessel; expected fuel-efficiency and emission levels associated with the MEGI engines; the timing and certainty of exercising the Partnership's existing option to order one additional MEGI LNG carrier newbuilding; the outcome of the Partnership's dispute over the Magellan Spirit offhire incident and claimed charter contract termination; the Partnership's access to competitive bank financing; and the timing of the commencement of operations of the Freeport LNG project and the expected total LNG production capacity of the project. 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: potential shipyard construction delays, newbuilding specification changes or cost overruns; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels; actual performance of the MEGI engines; factors affecting the outcome of the Partnership's dispute over the Magellan Spirit; the Partnership's ability to raise financing for its existing newbuildings or to purchase additional vessels or to pursue other projects; timely completion of the Freeport LNG project as currently designed; and other factors discussed in Teekay LNG Partners' 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 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: For Investor Relations enquiries: Ryan Hamilton +1 (604) 609-6442 www.teekay.com
Source: Teekay LNG Partners L.P.
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