Teekay LNG Partners Reports Second Quarter 2017 Results
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HAMILTON, BERMUDA -- (Marketwired) -- 08/03/17 -- Highlights
-- Reported GAAP net loss attributable to the partners and preferred
unitholders of $16.1 million and adjusted net income attributable to the
partners and preferred unitholders(1) of $17.9 million in the second
quarter of 2017.
-- Generated distributable cash flow(1) of $40.6 million, or $0.51 per
common unit, in the second quarter of 2017.
-- In June 2017, the Partnership entered into charter contract extensions
for two LNG carriers chartered to Awilco LNG to December 2019; in July
2017, the Partnership extended the loan facilities associated with these
vessels to June 2020, which were previously scheduled to mature in 2018.
-- As at June 30, 2017, the Partnership had total liquidity of
approximately $350 million.
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, 2017.
Three Months Ended
June 30, March 31, June 30,
2017 2017 2016
(in thousands of U.S. Dollars) (unaudited) (unaudited) (unaudited)
GAAP FINANCIAL COMPARISON
Voyage revenues 100,904 101,180 99,241
Income from vessel operations 29,871 46,078 47,554
Equity (loss) income (507) 5,887 29,567
Net (loss) income attributable to the
partners and preferred unitholders (16,073) 29,057 43,071
NON-GAAP FINANCIAL COMPARISON
Total cash flow from vessel operations
(CFVO)(1) 106,252 109,211 135,127
Distributable cash flow (DCF)(1) 40,623 43,227 76,067
Adjusted net income attributable to the
partners and preferred unitholders(1) 17,860 21,093 53,780
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(1) These are non-GAAP financial measures. Please refer to "Definitions and
Non-GAAP Financial Measures" and the Appendices to this release for
definitions of these terms and reconciliations of these non-GAAP
financial measures as used in this release to the most directly
comparable financial measures under United States generally accepted
accounting principles (GAAP).
GAAP net (loss) income and adjusted net income decreased in the second quarter of 2017 compared to the same period of the prior year primarily due to a favorable settlement in the second quarter of 2016 of a disputed charter contract termination in the Partnership's 52 percent-owned joint venture with Marubeni Corporation (the Teekay LNG-Marubeni Joint Venture); unscheduled off-hire in the second quarter of 2017 related to repairs for an LNG carrier; lower revenues from the Partnership's six LPG carriers chartered to I.M. Skaugen SE from uncollected hire; sales of three conventional tankers in the second quarter of 2016 through the first quarter of 2017; and lower spot rates earned for certain of the vessels in the Teekay LNG-Marubeni Joint Venture and in the Partnership's 50-percent owned joint venture with Exmar NV (the Exmar LPG Joint Venture). These decreases were partially offset by the deliveries of two MEGI LNG carrier newbuildings between August 2016 and March 2017 and deliveries of three LPG carriers between June 2016 and March 2017 in the Exmar LPG Joint Venture. GAAP net (loss) income was also affected in the second quarter of 2017 compared to the same period of the prior year by various non-cash items, such as the write-down of the European Spirit conventional tanker; an increase in unrealized foreign currency exchange losses relating to the Partnership's Euro and NOK-denominated debt; and a decrease in unrealized losses on non-designated derivative instruments.
CEO Commentary
"During the second quarter, the Partnership continued to generate stable cash flows supported by a diversified portfolio of long-term charters totaling $11.4 billion in forward fixed-rate revenues with a weighted-average remaining contract duration of 13 years," commented Mark Kremin, President and CEO of Teekay Gas Group Ltd.
"Since reporting earnings in May 2017, we continued to execute on our portfolio of committed growth projects," Mr. Kremin continued. "Last week, our Exmar LPG joint venture took delivery of a mid-size LPG carrier newbuilding, the Kruibeke, and during the quarter, our first joint venture LNG carrier chartered to Shell, the Pan Asia, successfully completed sea trials and is expected to deliver in the fourth quarter of 2017 at which time it will commence its 20-year charter contract. In addition, we continue to progress the financing for all our committed growth projects delivering through early-2020."
Mr. Kremin added, "We also continue to focus on our upcoming debt maturities and I am pleased to report that, following our Awilco LNG charter contract extensions to December 2019 on two modern LNG carriers, we were able to successfully extend approximately $180 million of 2018 debt maturities to mid-2020."
Summary of Recent Events
Charter Contract Extensions and Loan Refinancings
In June 2017, the Partnership completed charter contract extensions with Awilco LNG ASA (Awilco LNG) relating to the Wilpride and Wilforce LNG carriers. The contracts, which were previously set to expire in the fourth quarter of 2017 and the second quarter of 2018, have now both been extended to December 2019. Awilco LNG remains obligated to repurchase the vessels either during or at the end of the charter period. Additionally, as part of this extension, the Partnership has agreed to defer charter hire payments of an average of $15,600 per day per vessel commencing in July 2017 through the end of the charter period, with such deferred amounts added to the purchase obligation price.
In July 2017, the Partnership completed loan extensions on the facilities secured by the Wilpride and Wilforce vessels. The loans associated with these vessels, which were previously scheduled to mature between the second quarter of 2018 and the fourth quarter of 2018 with balloon amounts totaling approximately $180 million, were both extended to June 2020 on similar terms.
Teekay LNG-Marubeni Joint Venture Secures Short-term Charter Contracts
In July 2017, the Teekay LNG-Marubeni Joint Venture secured short-term charter contracts on two vessels, the Magellan Spirit and the Awra Spirit. The Magellan Spirit commenced a six-month contract (plus two three-month option periods) in July 2017 and the Awra Spirit will commence a 15-month charter contract in the fourth quarter of 2017.
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 E for further details).
Three Months Ended
June 30, 2017
(in thousands of U.S. Dollars) (unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
GAAP FINANCIAL COMPARISON
Voyage revenues 89,431 11,473 100,904
Income (loss) from vessel
operations 40,043 (10,172) 29,871
Equity (loss) income (507) - (507)
NON-GAAP FINANCIAL COMPARISON
CFVO from consolidated
vessels(i) 68,456 4,970 73,426
CFVO from equity-accounted
vessels(i) 32,826 - 32,826
Total CFVO(i) 101,282 4,970 106,252
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Three Months Ended
June 30, 2016
(in thousands of U.S. Dollars) (unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
GAAP FINANCIAL COMPARISON
Voyage revenues 84,497 14,744 99,241
Income (loss) from vessel
operations 42,484 5,070 47,554
Equity (loss) income 29,567 - 29,567
NON-GAAP FINANCIAL COMPARISON
CFVO from consolidated
vessels(i) 67,572 8,116 75,688
CFVO from equity-accounted
vessels(i) 59,439 - 59,439
Total CFVO(i) 127,011 8,116 135,127
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(i) These are non-GAAP financial measures. Please refer to "Definitions and
Non-GAAP Financial Measures" and the Appendices to this release for
definitions of these terms and reconciliations of these non-GAAP
financial measures as used in this release to the most directly
comparable financial measures under GAAP.
Liquefied Gas Segment
Income from vessel operations for the three months ended June 30, 2017, compared to the same quarter of the prior year, was impacted primarily by unscheduled off-hire in the second quarter of 2017 related to repairs required for an LNG carrier; and lower revenues from the Partnership's six LPG carriers on charter to I.M. Skaugen SE as a result of uncollected hire. These decreases were partially offset by the delivery of two MEGI LNG carrier newbuildings, the Oak Spirit and the Torben Spirit, which commenced their respective charter contracts ranging from 10 months to five years in duration between August 2016 and March 2017 and additional revenue recognized relating to the accelerated drydocking for two LNG carriers, the costs of which are recoverable from the charterer. Cash flow from vessel operations from consolidated vessels increased for the three months ended June 30, 2017 compared to the same quarter of the prior year as the effect of the increase in vessel deprecation from the MEGI LNG carrier newbuilding deliveries did not impact cash flow from vessel operations.
Equity (loss) income and cash flow from vessel operations from equity-accounted vessels for the three months ended June 30, 2017, compared to the same quarter of the prior year, were impacted primarily by a favorable settlement in 2016 of a disputed charter contract termination related to one of the vessels in the Teekay LNG-Marubeni Joint Venture, of which Teekay LNG's share was $20.3 million; and lower spot rates earned in 2017 on certain vessels in the Exmar LPG Joint Venture and certain of the LNG carriers in the Teekay LNG-Marubeni Joint Venture. These decreases were partially offset by deliveries of three LPG carriers in the Exmar LPG Joint Venture between June 2016 and March 2017. Equity (loss) income was also impacted by a greater amount of unrealized losses on designated and non-designated derivative instruments during the three months ended June 30, 2017 compared to the same period of the prior year.
Conventional Tanker Segment
Income (loss) from vessel operations and cash flow from vessel operations for the three months ended June 30, 2017 compared to the same quarter of the prior year were impacted by the sales of the Bermuda Spirit and Hamilton Spirit in the second quarter of 2016 and the sale of the Asian Spirit in the first quarter of 2017. Income (loss) from vessel operations for the three months ended June 30, 2017 was also impacted by the $12.6 million write-down of the European Spirit.
Teekay LNG's Fleet
The following table summarizes the Partnership's fleet as of August 1, 2017:
Number of Vessels
Owned and
In-Chartered
Vessels(i) Newbuildings Total
LNG Carrier Fleet 32(ii) 18(ii) 50
LPG/Multigas Carrier Fleet 27(iii) 3(iv) 30
Conventional Tanker Fleet 5(v) - 5
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Total 64 21 85
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(i) Owned vessels includes vessels accounted for under capital leases.
(ii) The Partnership's ownership interests in these vessels range from 20
percent to 100 percent.
(iii) The Partnership's ownership interests in these vessels range from 50
percent to 99 percent.
(iv) The Partnership's interest in these vessels is 50 percent.
(v) One of the Partnership's conventional tankers is held for sale.
Liquidity
As of June 30, 2017, the Partnership had total liquidity of $351.1 million (comprised of $191.1 million in cash and cash equivalents and $160.0 million in undrawn credit facilities).
Conference Call
The Partnership plans to host a conference call on Thursday, August 3, 2017 at 11:00 a.m. (ET) to discuss the results for the second quarter of 2017. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
-- By dialing (800) 347-6311 or (416) 204-1064, if outside North America,
and quoting conference ID code 9651022.
-- By accessing the webcast, which will be available on Teekay LNG's
website at www.teekay.com (the archive will remain on the website for a
period of one year).
An accompanying Second Quarter 2017 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.
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, fee-based charter contracts through its interests in 50 LNG carriers (including 18 newbuildings), 30 LPG/Multigas carriers (including three newbuildings) and five conventional tankers. The Partnership's interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in a regasification facility, which is currently under construction. 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 unit and preferred units trade on the New York Stock Exchange under the symbol "TGP" and "TGP PR A", respectively.
Definitions and Non-GAAP Financial Measures
This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the U.S. Securities and Exchange Commission. These non-GAAP financial measures, which include Cash Flow from Vessel Operations, Adjusted Net Income, and Distributable Cash Flow, are intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings, and may not be comparable to similar measures presented by other companies. The Partnership believes that certain investors use this information to evaluate the Partnership's financial performance, as does management.
Non-GAAP Financial Measures
Cash Flow from Vessel Operations (CFVO) represents income from vessel operations before depreciation and amortization expense, amortization of in-process revenue contracts, vessel write-downs, losses on the sale of vessels and adjustments for direct financing leases to a cash basis, but includes realized gains or losses on a derivative charter contract. CFVO from Consolidated Vessels represents CFVO from vessels that are consolidated on the Partnership's financial statements. CFVO from Equity-Accounted Vessels represents the Partnership's proportionate share of CFVO from its equity-accounted vessels. The Partnership does not control its equity-accounted vessels and as a result, the Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entities in which the Partnership holds the equity-accounted investments or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of such distributions to the Partnership and other owners. Consequently, readers are cautioned when using total CFVO as a liquidity measure as the amount contributed from CFVO from Equity-Accounted Vessels may not be available to the Company in the periods such CFVO is generated by its equity-accounted vessels. CFVO is a non-GAAP financial measure used by certain investors and management to measure the operational financial performance of companies. Please refer to Appendices D and E of this release for reconciliations of these non-GAAP financial measures to income from vessel operations and income from vessel operations of equity-accounted vessels, respectively, the most directly comparable GAAP measures reflected in the Partnership's consolidated financial statements.
Adjusted Net Income excludes items of income or loss from GAAP net (loss) income that are typically excluded by securities analysts in their published estimates of the Partnership's financial results. The Partnership believes that certain investors use this information to evaluate the Partnership's financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net (loss) income, and refer to footnotes (2) of the statement of (loss) income for a reconciliation of adjusted equity income to equity (loss) income, the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Distributable Cash Flow (DCF) represents GAAP net (loss) income adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, ineffectiveness for derivative instruments designated as hedges for accounting purposes, distributions relating to equity financing of newbuilding installments, adjustments for direct financing leases to a cash basis and foreign exchange related items, including the Partnership's proportionate share of such items in equity-accounted for investments. 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 and by management to assist in evaluating financial performance. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Teekay LNG Partners L.P.
Consolidated Statements of (Loss) 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,
2017 2017 2016 2017 2016
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Voyage revenues 100,904 101,180 99,241 202,084 195,012
Voyage expenses (996) (1,437) (542) (2,433) (999)
Vessel operating
expenses (26,001) (23,388) (22,412) (49,389) (44,265)
Depreciation and
amortization (26,794) (26,120) (22,869) (52,914) (46,480)
General and
administrative
expenses (4,642) (4,157) (5,864) (8,799) (11,292)
Write-down and
loss on sale of
vessels(1) (12,600) - - (12,600) (27,439)
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Income from
vessel
operations 29,871 46,078 47,554 75,949 64,537
Equity (loss)
income(2) (507) 5,887 29,567 5,380 39,065
Interest expense (20,525) (16,988) (13,269) (37,513) (27,266)
Interest income 579 854 545 1,433 1,147
Realized and
unrealized
(loss) gain on
non-designated
derivative
instruments(3) (7,384) 1,187 (17,321) (6,197) (55,410)
Foreign currency
exchange
loss(4) (15,825) (3,568) (525) (19,393) (10,643)
Other income 390 391 407 781 826
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Net (loss)
income before
tax expense (13,401) 33,841 46,958 20,440 12,256
Income tax
expense (236) (157) (252) (393) (513)
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Net (loss)
income (13,637) 33,684 46,706 20,047 11,743
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Non-controlling
interest in net
(loss) income 2,436 4,627 3,635 7,063 5,810
Preferred
unitholders'
interest in net
(loss) income 2,813 2,812 - 5,625 -
General
Partner's
interest in net
(loss) income (378) 525 862 147 119
Limited
partners'
interest in net
(loss) income (18,508) 25,720 42,209 7,212 5,814
Weighted-average
number of
common units
outstanding:
- Basic 79,626,819 79,590,153 79,571,820 79,608,587 79,564,846
- Diluted 79,626,819 79,690,391 79,695,804 79,741,256 79,640,818
Total number of
common units
outstanding at
end of period 79,626,819 79,626,819 79,571,820 79,626,819 79,571,820
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(1) Write-down and loss on sale of vessels for the six months ended June
30, 2016 relates to Centrofin Management Inc. exercising its purchase
options, under the 12-year charter contracts, to acquire the Bermuda
Spirit and Hamilton Spirit Suezmax tankers. In addition, the write-down
and loss on sale of vessels also relates to the European Spirit Suezmax
tanker, as the Partnership commenced marketing the vessel for sale upon
receiving notification from the charterer in late-June 2017 that it
will redeliver the vessel back to the Partnership in August 2017. As a
result, the vessel was written down to its estimated fair value less
costs to sell.
(2) The Partnership's proportionate share of items within equity (loss)
income as identified in Appendix A of this release is detailed in the
table below. By excluding these items from equity (loss) income, the
Partnership believes the resulting adjusted equity income is a
normalized amount that can be used to evaluate the financial
performance of the Partnership's equity-accounted investments. Adjusted
equity income is a non-GAAP financial measure.
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
Equity (loss) income (507) 5,887 29,567 5,380 39,065
Proportionate share of
unrealized loss (gain) on
non-designated derivative
instruments 182 (1,784) 1,741 (1,602) 5,642
Proportionate share of
ineffective portion of
hedge-accounted interest
rate swaps 4,109 (543) 514 3,566 674
Proportionate share of
other items 211 30 (5) 241 72
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Equity income adjusted for
items in Appendix A 3,995 3,590 31,817 7,585 45,453
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(3) The realized (losses) gains on non-designated derivative instruments
relate to the amounts the Partnership actually paid or received to
settle non-designated derivative instruments and the unrealized
(losses) gains on non-designated derivative instruments relate to the
change in fair value of such non-designated derivative instruments, as
detailed in the table below:
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
Realized (losses) gains
relating to:
Interest rate swap
agreements (4,610) (4,675) (6,613) (9,285) (13,256)
Interest rate swaption
agreements termination (1,005) 395 - (610) -
Toledo Spirit time-
charter derivative
contract (135) 15 - (120) 630
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(5,750) (4,265) (6,613) (10,015) (12,626)
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Unrealized (losses) gains
relating to:
Interest rate swap
agreements (1,866) 4,302 (6,220) 2,436 (26,877)
Interest rate swaption
agreements 112 30 (7,088) 142 (18,757)
Toledo Spirit time-
charter derivative
contract 120 1,120 2,600 1,240 2,850
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(1,634) 5,452 (10,708) 3,818 (42,784)
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Total realized and
unrealized (losses)
gains on non-designated
derivative instruments (7,384) 1,187 (17,321) (6,197) (55,410)
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(4) For accounting purposes, the Partnership is required to revalue all
foreign currency-denominated monetary assets and liabilities based on
the prevailing exchange rates 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 (Loss) Income.
Foreign currency exchange loss includes realized losses relating to the
amounts the Partnership paid to settle or terminate 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 and realized gains on bond repurchases.
Foreign currency exchange (loss) gain also includes unrealized gains
(losses) relating to the change in fair value of such derivative
instruments, partially offset by unrealized (losses) gains 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,
2017 2017 2016 2017 2016
Realized losses on cross-
currency swaps (2,084) (3,537) (2,329) (5,621) (4,620)
Realized losses on cross-
currency swaps
termination (25,733) - - (25,733) -
Realized gains on
repurchase of NOK bonds 25,733 - - 25,733 -
Unrealized gains (losses)
on cross-currency swaps 34,906 2,699 (6,571) 37,605 14,741
Unrealized (losses) gains
on revaluation of NOK
bonds (36,325) (606) 3,567 (36,931) (16,863)
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Teekay LNG Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
As at As at
June 30, March 31, December 31,
2017 2017 2016
(unaudited) (unaudited) (unaudited)
ASSETS
Current
Cash and cash equivalents 191,110 181,201 126,146
Restricted cash - current 5,896 9,155 10,145
Accounts receivable 20,600 24,270 25,224
Prepaid expenses 3,484 3,889 3,724
Vessel held for sale 17,000 - 20,580
Current portion of derivative assets 1,354 1,630 531
Current portion of net investments in
direct financing leases 9,487 149,291 150,342
Advances to affiliates 2,433 11,354 9,739
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Total current assets 251,364 380,790 346,431
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Restricted cash - long-term 102,347 97,746 106,882
Vessels and equipment
At cost, less accumulated
depreciation 1,340,138 1,363,980 1,374,128
Vessels under capital leases, at
cost, less accumulated depreciation 674,771 680,430 484,253
Advances on newbuilding contracts 388,366 361,179 357,602
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Total vessels and equipment 2,403,275 2,405,589 2,215,983
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Investment in and advances to equity-
accounted joint ventures 1,074,430 1,077,355 1,037,726
Net investments in direct financing
leases 624,484 488,561 492,666
Other assets 3,335 4,375 5,529
Derivative assets 2,576 2,258 4,692
Intangible assets - net 65,506 67,720 69,934
Goodwill - liquefied gas segment 35,631 35,631 35,631
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Total assets 4,562,948 4,560,025 4,315,474
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LIABILITIES AND EQUITY
Current
Accounts payable 2,884 5,364 5,562
Accrued liabilities 39,280 36,504 35,881
Unearned revenue 18,701 20,808 16,998
Current portion of long-term debt 205,881 187,111 188,511
Current obligations under capital
lease 95,355 81,780 40,353
Current portion of in-process
contracts 10,527 10,262 15,833
Current portion of derivative
liabilities 42,060 57,453 56,800
Advances from affiliates 11,474 23,690 15,492
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Total current liabilities 426,162 422,972 375,430
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Long-term debt 1,618,131 1,626,968 1,602,715
Long-term obligations under capital
lease 574,484 518,399 352,486
Long-term unearned revenue 9,682 10,007 10,332
Other long-term liabilities 59,338 60,646 60,573
In-process contracts 4,019 6,521 8,233
Derivative liabilities 102,165 118,187 128,293
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Total liabilities 2,793,981 2,763,700 2,538,062
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Equity
Limited partners - common units 1,548,935 1,578,503 1,563,852
Limited partners - preferred units 123,520 123,519 123,426
General partner 50,348 50,952 50,653
Accumulated other comprehensive
income 1,184 486 575
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Partners' equity 1,723,987 1,753,460 1,738,506
Non-controlling interest 44,980 42,865 38,906
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Total equity 1,768,967 1,796,325 1,777,412
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Total liabilities and total equity 4,562,948 4,560,025 4,315,474
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Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
Six Months Ended
June 30, June 30,
2017 2016
(unaudited) (unaudited)
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 20,047 11,743
Non-cash items:
Unrealized (gain) loss on non-designated
derivative instruments (3,818) 42,784
Depreciation and amortization 52,914 46,480
Write-down and loss on sale of vessels 12,600 27,439
Unrealized foreign currency exchange (gain) loss
and other (10,779) 4,888
Equity income, net of dividends received of
$21,281 (2016 - $4,191) 15,901 (34,874)
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense 747 914
Change in operating assets and liabilities 7,395 (14,590)
Expenditures for dry docking (11,042) (2,356)
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Net operating cash flow 83,965 82,428
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FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 166,663 131,645
Financing issuance costs (2,077) (420)
Scheduled repayments of long-term debt (103,343) (108,842)
Prepayments of long-term debt (63,704) (157,239)
Scheduled repayments of capital lease obligations (19,045) (9,319)
Decrease in restricted cash 6,222 2,284
Cash distributions paid (28,274) (22,732)
Dividends paid to non-controlling interest (658) (150)
Other (605) -
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Net financing cash flow (44,821) (164,773)
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INVESTING ACTIVITIES
Capital contributions to equity-accounted joint
ventures (96,960) (20,167)
Return of capital from equity-accounted joint
ventures 40,320 -
Receipts from direct financing leases 9,037 12,979
Proceeds from sale of vessels 20,580 94,311
Proceeds from sale-leaseback of vessels 297,230 179,434
Expenditures for vessels and equipment (244,387) (159,195)
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Net investing cash flow 25,820 107,362
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Increase in cash and cash equivalents 64,964 25,017
Cash and cash equivalents, beginning of the period 126,146 102,481
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Cash and cash equivalents, end of the period 191,110 127,498
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Teekay LNG Partners L.P.
Appendix A - Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income
(in thousands of U.S. Dollars)
Three Months Ended
June 30,
2017 2016
(unaudited) (unaudited)
Net (loss) income - GAAP basis (13,637) 46,706
Less: Net (loss) income attributable to non-
controlling interests (2,436) (3,635)
----------------------------------------------------------------------------
Net (loss) income attributable to the partners and
preferred unitholders (16,073) 43,071
----------------------------------------------------------------------------
Add (subtract) specific items affecting net
income:
Unrealized foreign currency exchange losses
(gains)(1) 13,939 (1,971)
Write-down of vessel(2) 12,600 -
Unrealized losses on non-designated derivative
instruments(3) 1,634 10,708
Interest rate swaption agreements termination 1,005 -
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense 747 (484)
Unrealized losses on non-designated and
designated derivative instruments and other
items from equity-accounted investees(4) 4,502 2,250
Non-controlling interests' share of items
above(5) (494) 206
----------------------------------------------------------------------------
Total adjustments 33,933 10,709
----------------------------------------------------------------------------
Adjusted net income attributable to the partners
and preferred unitholders 17,860 53,780
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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. This
amount excludes the realized losses relating to the cross-currency
swaps for the NOK bonds. See Note 4 to the Consolidated Statements of
(Loss) Income included in this release for further details.
(2) Write-down of vessel relate to the Partnership's expected sale of the
European Spirit. See note 1 to the Consolidated Statements of (Loss)
Income included in this release for further details.
(3) Reflects the unrealized losses due to changes in the mark-to-market
value of derivative instruments that are not designated as hedges for
accounting purposes. See Note 3 to the Consolidated Statements of
(Loss) Income included in this release for further details.
(4) Reflects the unrealized losses 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 2 to the Consolidated Statements
of (Loss) Income included in this release for further details.
(5) Items affecting net (loss) 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 the other specific items affecting net (loss) income 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, except units outstanding and per unit data)
Three Months Ended
June 30,
2017 2016
(unaudited) (unaudited)
Net (loss) income: (13,637) 46,706
Add:
Depreciation and amortization 26,794 22,869
Unrealized foreign currency exchange loss (gain) 13,939 (1,971)
Write-down of vessel 12,600 -
Partnership's share of equity-accounted joint
ventures' DCF net of estimated maintenance
capital expenditures(1) 12,229 39,442
Direct finance lease payments received in excess
of revenue recognized 5,056 4,969
Unrealized loss on non-designated derivative
instruments 1,634 10,708
Distributions relating to equity financing of
newbuildings 1,536 -
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense 747 (484)
Equity loss (income) 507 (29,567)
Less:
Estimated maintenance capital expenditures (13,190) (11,968)
Distributions relating to preferred units (2,813) -
Deferred income tax and other non-cash items 170 629
----------------------------------------------------------------------------
Distributable Cash Flow before Non-controlling
interest 45,572 81,333
Non-controlling interests' share of DCF before
estimated maintenance capital expenditures (4,949) (5,266)
----------------------------------------------------------------------------
Distributable Cash Flow 40,623 76,067
Amount of cash distributions attributable to the
General Partner (228) (227)
----------------------------------------------------------------------------
Limited partners' Distributable Cash Flow 40,395 75,840
Weighted-average number of common units
outstanding 79,626,819 79,571,820
----------------------------------------------------------------------------
Distributable Cash Flow per limited partner common
unit 0.51 0.95
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The estimated maintenance capital expenditures relating to the
Partnership's share of equity-accounted joint ventures were $8.0
million and $7.4 million for the three months ended June 30, 2017 and
2016, respectively.
Teekay LNG Partners L.P.
Appendix C - Supplemental Segment Information
(in thousands of U.S. Dollars)
Three Months Ended June 30, 2017
(unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
Voyage revenues 89,431 11,473 100,904
Voyage expenses (602) (394) (996)
Vessel operating expenses (21,374) (4,627) (26,001)
Depreciation and amortization (23,839) (2,955) (26,794)
General and administrative
expenses (3,573) (1,069) (4,642)
Write-down of vessel - (12,600) (12,600)
----------------------------------------------------------------------------
Income (loss) from vessel
operations 40,043 (10,172) 29,871
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
Voyage revenues 84,497 14,744 99,241
Voyage expenses (126) (416) (542)
Vessel operating expenses (16,734) (5,678) (22,412)
Depreciation and amortization (20,474) (2,395) (22,869)
General and administrative
expenses (4,679) (1,185) (5,864)
----------------------------------------------------------------------------
Income from vessel operations 42,484 5,070 47,554
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Consolidated Vessels
(in thousands of U.S. Dollars)
Three Months Ended June 30, 2017
(unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
Income (loss) from vessel
operations (See Appendix C) 40,043 (10,172) 29,871
Depreciation and amortization 23,839 2,955 26,794
Write-down of vessel - 12,600 12,600
Amortization of in-process
contracts included in voyage
revenues (482) (278) (760)
Direct finance lease payments
received in excess of revenue
recognized 5,056 - 5,056
Realized loss on Toledo Spirit
derivative contract - (135) (135)
----------------------------------------------------------------------------
Cash flow from vessel operations
from consolidated vessels 68,456 4,970 73,426
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
Liquefied Conventional
Gas Segment Tanker Segment Total
Income from vessel operations
(See Appendix C) 42,484 5,070 47,554
Depreciation and amortization 20,474 2,395 22,869
Amortization of in-process
contracts included in voyage
revenues (355) (278) (633)
Direct finance lease payments
received in excess of revenue
recognized 4,969 - 4,969
Cash flow adjustment for two
Suezmax tankers(1) - 929 929
----------------------------------------------------------------------------
Cash flow from vessel operations
from consolidated vessels 67,572 8,116 75,688
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's charter contracts for two of its former 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
effect of the change in hire rates was not fully reflected in the
Partnership's statements of (loss) income as the change in the lease
payments was being recognized on a straight-line basis over the term of
the lease. In addition, the charterer of these two Suezmax tankers
exercised its purchase options on these two vessels as permitted under
the charter contracts and the vessels were redelivered during the
second quarter of 2016.
Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Equity-Accounted Vessels
(in thousands of U.S. Dollars)
Three Months Ended
June 30, 2017 June 30, 2016
(unaudited) (unaudited)
At Partnership's At Partnership's
100% Portion(1) 100% Portion(1)
Voyage revenues 117,326 52,516 168,854 78,956
Voyage expenses (3,760) (1,923) (3,354) (1,682)
Vessel operating expenses (43,070) (20,010) (42,296) (19,669)
Depreciation and
amortization (26,156) (13,074) (25,474) (12,744)
----------------------------------------------------------------------------
Income from vessel
operations of equity-
accounted vessels 44,340 17,509 97,730 44,861
Other items, including
interest expense and
realized and unrealized
gain (loss) on derivative
instruments (45,480) (18,016) (36,247) (15,294)
----------------------------------------------------------------------------
Net (loss) income / equity
(loss) income of equity-
accounted vessels (1,140) (507) 61,483 29,567
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations of equity-
accounted vessels 44,340 17,509 97,730 44,861
Depreciation and
amortization 26,156 13,074 25,474 12,744
Direct finance lease
payments received in excess
of revenue recognized 9,303 3,361 8,868 3,219
Amortization of in-process
revenue contracts (2,168) (1,118) (2,704) (1,385)
----------------------------------------------------------------------------
Cash flow from vessel
operations from equity-
accounted vessels 77,631 32,826 129,368 59,439
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's equity-accounted vessels for the three months ended
June 30, 2017 and 2016 include: the Partnership's 40 percent ownership
interest in Teekay Nakilat (III) Corporation, which owns four LNG
carriers; the Partnership's ownership interests of 49 percent and 50
percent, respectively, in the Excalibur and Excelsior joint ventures,
which own one LNG carrier and one regasification unit, respectively;
the Partnership's 33 percent ownership interest in four LNG carriers
servicing the Angola LNG project; the Partnership's 52 percent
ownership interest in the Teekay LNG-Marubeni LNG Joint Venture, which
owns six LNG carriers; the Partnership's 50 percent ownership interest
in Exmar LPG BVBA, which owns and in-charters 23 vessels, including
four newbuildings, as at June 30, 2017, compared to 23 vessels owned
and in-chartered, including five newbuildings, as at June 30, 2016; the
Partnership's 30 percent ownership interest in two LNG carrier
newbuildings and 20 percent ownership interest in two LNG carrier
newbuildings for Shell; the Partnership's 50 percent ownership interest
in six ARC7 Ice-Class LNG carrier newbuildings in the joint venture
between the Partnership and China LNG Shipping (Holdings) Limited; and
the Partnership's 30 percent ownership interest in Bahrain LNG W.L.L.,
which owns an LNG receiving and regasification terminal under
construction in Bahrain.
Teekay LNG Partners L.P.
Appendix F - Summarized Financial Information of Equity-Accounted Joint
Ventures
(in thousands of U.S. Dollars)
As at June 30, 2017 As at December 31, 2016
(unaudited) (unaudited)
At Partnership's At Partnership's
100% Portion(1) 100% Portion(1)
Cash and restricted cash,
current and non-current 309,235 136,971 400,090 167,813
Other current assets 57,536 24,164 72,437 33,817
Vessels and equipment 2,196,062 1,131,149 2,174,467 1,121,293
Advances on newbuilding
contracts 1,021,890 367,836 824,534 303,162
Net investments in direct
financing leases, current
and non-current 1,798,417 659,046 1,816,365 665,599
Other non-current assets 56,256 40,546 73,814 44,177
----------------------------------------------------------------------------
Total assets 5,439,396 2,359,712 5,361,707 2,335,861
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current portion of long-
term debt and obligations
under capital lease 145,116 66,334 209,814 99,994
Current portion of
derivative liabilities 25,764 8,753 27,388 9,622
Other current liabilities 83,847 37,363 76,480 32,068
Long-term debt and
obligations under capital
lease 2,670,769 1,105,072 2,677,447 1,087,425
Shareholders' loans,
current and non-current 720,344 307,380 545,028 272,514
Derivative liabilities 85,558 28,279 82,738 27,526
Other long-term liabilities 76,278 39,481 80,170 41,500
Equity 1,631,720 767,050 1,662,642 765,212
----------------------------------------------------------------------------
Total liabilities and
equity 5,439,396 2,359,712 5,361,707 2,335,861
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Investments in equity-
accounted joint ventures 767,050 765,212
Advances to equity-
accounted joint ventures 307,380 272,514
----------------------------------------------------------------------------
Investments in and advances
to equity-accounted joint
ventures 1,074,430 1,037,726
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's equity-accounted joint ventures as at June 30, 2017
and December 31, 2016 include: the Partnership's 40 percent ownership
interest in Teekay Nakilat (III) Corporation, which owns four LNG
carriers; the Partnership's ownership interests of 49 percent and 50
percent, respectively, in the Excalibur and Excelsior joint ventures,
which own one LNG carrier and one regasification unit, respectively;
the Partnership's 33 percent ownership interest in four LNG carriers
servicing the Angola LNG project; the Partnership's 52 percent
ownership interest in the Teekay LNG-Marubeni Joint Venture, which owns
six LNG carriers; the Partnership's 50 percent ownership interest in
Exmar LPG BVBA, which owns and in-charters 23 vessels, including four
newbuildings, as at June 30, 2017, compared to 23 vessels owned and in-
chartered, including four newbuildings, as at December 31, 2016; the
Partnership's 30 percent ownership interest in two LNG carrier
newbuildings and 20 percent ownership interest in two LNG carrier
newbuildings for Shell; the Partnership's 50 percent ownership interest
in six ARC7 Ice-Class LNG carrier newbuildings in the joint venture
between the Partnership and China LNG Shipping (Holdings) Limited; and
the Partnership's 30 percent ownership interest in Bahrain LNG W.L.L.,
which owns an LNG receiving and regasification terminal under
construction in Bahrain.
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 forward fixed-rate revenues and weighted average remaining contract duration; the expected sale of the European Spirit; the amount, timing and certainty of completing financings for newbuilding vessels; and the timing of newbuilding vessel deliveries and the commencement of related contracts. 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 and project 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; the Partnership's and the Partnership's joint ventures' ability to secure financing for its existing newbuildings and projects; 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, 2016. 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: Ryan Hamilton Investor Relations enquiries +1 (604) 844-6654 www.teekay.com
Source: Teekay LNG Partners L.P.
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