Teekay Offshore Partners Reports Third Quarter 2016 Results
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HAMILTON, BERMUDA -- (Marketwired) -- 11/03/16 -- Highlights
-- Reported GAAP net income attributable to the partners and preferred
unitholders of $47.7 million and adjusted net income attributable to the
partners and preferred unitholders of $10.0 million (excluding items
listed in Appendix A to this release) in the third quarter of 2016.
-- Generated distributable cash flow of $31.8 million, or $0.23 per common
unit, in the third quarter of 2016.
-- Awarded a new three-year North Sea shuttle tanker contract of
affreightment in September 2016.
-- Took delivery of the ALP Striker, the first of four newbuilding towage
vessels, in September 2016.
-- Total liquidity of $398 million as of September 30, 2016.
Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO), today reported the Partnership's results for the quarter ended September 30, 2016.
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Three Months Ended
September 30, June 30, September 30,
2016 2016 2015
(in thousands of U.S. Dollars) (unaudited) (unaudited) (unaudited)
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GAAP FINANCIAL COMPARISON
Revenues 286,298 284,464 314,054
Income from vessel operations 61,739 24,271 71,518
Equity income (loss) 4,937 3,626 (7,052)
Net income (loss) 50,861 (100,129) (51,293)
Net income (loss) attributable
to the partners and preferred
unitholders 47,700 (102,625) (54,739)
NON-GAAP FINANCIAL COMPARISON
Total cash flow from vessel
operations (CFVO) (1) 139,188 144,208 144,692
Distributable cash flow (DCF)
(1) 31,780 45,885 58,842
Adjusted net income
attributable to the partners
and preferred unitholders (1) 10,004 23,566 32,052
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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).
CEO Commentary
"The Partnership's results for the third quarter of 2016 were negatively affected primarily by the seasonal maintenance of the North Sea oil fields, lower utilization in our towage fleet, higher operating expenses in our FPSO fleet, and the redelivery of the Varg FPSO at the end of July 2016 after operating on the Varg field for almost 18 years," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "Looking ahead to the fourth quarter of 2016, we expect our distributable cash flow to increase as a result of anticipated higher fleet utilization and lower operating costs."
"Also during the third quarter of 2016, our commercial team successfully secured the largest North Sea shuttle tanker contract award in five years," Mr. Evensen continued. "We secured a new three-year shuttle tanker contract of affreightment (CoA), plus extension options, with BP, Royal Dutch Shell and OMV Group. This contract further enhances our CoA contract portfolio and is expected to add future cash flow through higher shuttle tanker fleet utilization without the need for incremental capital expenditures. Looking ahead, the shuttle tanker market in the North Sea is expected to remain tight, supported by a combination of more lifting points from new fields coming on-line and limited fleet growth with no uncommitted shuttle tanker newbuildings on order."
"Looking ahead, we continue to focus on the execution of our existing growth projects, which are scheduled to deliver through early-2018," commented Mr. Evensen. "These projects are progressing well except we are expecting a delay and additional costs associated with the upgrade of the Petrojarl I FPSO for the Atlanta project in Brazil, which we are currently discussing with the charterer, shipyard and our lenders. Once delivered, these projects are expected to provide significant cash flow growth in the future."
Mr. Evensen added, "As announced last week, I have decided to retire after 10 years with the Partnership and I am confident that Ingvild Saether is the right person going forward as the President and CEO of Teekay Offshore Group Ltd. Ingvild has led a team that has consistently improved results from our shuttle tanker business as well as strategically positioned us for future opportunities within this segment. As a highly experienced leader, I am confident that Ingvild, in this broader role, will enable the teams to continue to create strong results. We are well-positioned with our market-leading businesses in the offshore oil production and transportation sector, a pipeline of growth projects which are expected to provide significant cash flow growth, and a great team now led by Ingvild, while Teekay's existing corporate finance team continues to be responsible for our financings."
Summary of Recent Events
New North Sea Shuttle Tanker Contracts
In September 2016, the Partnership was awarded a new three-year shuttle tanker CoA, plus extension options, with BP plc, Royal Dutch Shell and OMV Group, to service the new Glen Lyon FPSO unit located west of Shetland in the North Sea. This CoA is expected to commence in the first quarter of 2017 and requires the use of approximately two shuttle tankers from the Partnership's existing CoA shuttle tanker fleet.
Delivery of Newbuilding Towage Vessel
In September 2016, the Partnership took delivery of the ALP Striker, the first of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and offshore installation newbuildings being constructed by Niigata Shipbuilding & Repair in Japan. In connection with the delivery, the Partnership received cash compensation from the shipyard totaling approximately $7 million due to the delayed delivery, which was recognized in Teekay Offshore's distributable cash flow for the quarter ended September 30, 2016. The Partnership also expects to receive additional cash compensation for the remaining three towing and offshore installation newbuildings when they deliver in 2017.
Operating Results
The following table highlights certain financial information for Teekay Offshore's six segments: the floating production, storage and off-loading (FPSO) segment, the shuttle tanker segment, the floating storage and off-take (FSO) segment, the units for maintenance and safety (UMS) segment, the towage segment and the conventional tanker segment (please refer to the "Teekay Offshore's Fleet" section of this release below and Appendices C through E for further details).
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Three Months Ended
September 30, 2016
(in thousands of U.S.
Dollars) (unaudited)
Shuttle
FPSO Tanker FSO
Segment Segment Segment
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GAAP FINANCIAL COMPARISON
Revenues 121,294 128,482 14,251
Income (loss) from vessel
operations 30,929 30,281 5,664
Equity income 4,937 - -
NON-GAAP FINANCIAL COMPARISON
CFVO from consolidated
vessels (i) 63,064 59,745 9,431
CFVO from equity accounted
vessels (i) 7,401 - -
Total CFVO(i) 70,465 59,745 9,431
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Three Months Ended
September 30, 2015
(in thousands of U.S.
Dollars) (unaudited)
Shuttle
FPSO Tanker FSO
Segment Segment Segment
--------------------------------------------------------------
GAAP FINANCIAL COMPARISON
Revenues 137,888 131,381 14,234
Income (loss) from vessel
operations 34,695 31,149 4,028
Equity loss (7,052) - -
NON-GAAP FINANCIAL COMPARISON
CFVO from consolidated
vessels (i) 67,262 54,316 8,604
CFVO from equity accounted
vessels (i) 6,745 - -
Total CFVO(i) 74,007 54,316 8,604
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Three Months Ended
September 30, 2016
(in thousands of U.S.
Dollars) (unaudited)
Conventional
UMS Towage Tanker
Segment Segment Segment Total
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GAAP FINANCIAL COMPARISON
Revenues 13,395 5,345 3,531 286,298
Income (loss) from vessel
operations 777 (5,121) (791) 61,739
Equity income - - - 4,937
NON-GAAP FINANCIAL
COMPARISON
CFVO from consolidated
vessels (i) 2,424 (2,086) (791) 131,787
CFVO from equity accounted
vessels (i) - - - 7,401
Total CFVO(i) 2,424 (2,086) (791) 139,188
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Three Months Ended
September 30, 2015
(in thousands of U.S.
Dollars) (unaudited)
Conventional
UMS Towage Tanker
Segment Segment Segment Total
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GAAP FINANCIAL COMPARISON
Revenues 11,737 10,808 8,006 314,054
Income (loss) from vessel
operations 1,526 (3,677) 3,797 71,518
Equity loss - - - (7,052)
NON-GAAP FINANCIAL
COMPARISON
CFVO from consolidated
vessels (i) 3,203 (911) 5,473 137,947
CFVO from equity accounted
vessels (i) - - - 6,745
Total CFVO(i) 3,203 (911) 5,473 144,692
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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.
FPSO Segment
Income from vessel operations and cash flow from vessel operations were negatively affected by the redelivery and associated decommissioning costs of the Varg FPSO to the Partnership at the end of July 2016, after operating on the Varg field for almost 18 years, and higher operating expenses for the Knarr FPSO related to the successful completion of the final performance test in August 2016 as required under its charter contract, partially offset by a business development fee paid by the Partnership to Teekay Corporation in the third quarter of 2015 in connection with the acquisition of the Knarr FPSO.
Shuttle Tanker Segment
Income from vessel operations and cash flows from vessel operations were positively affected by an increase in charter rates under certain contracts, offset by the redelivery of the Navion Anglia to the Partnership in June 2016 upon completion of its time-charter out contract in Brazil, and higher operating expenses related to preparing this vessel for operating in the North Sea as it joins the CoA fleet to add needed capacity. Income from vessel operations in the third quarter of 2016 was also affected by higher vessel depreciation and amortization expense as a result of the change in the useful life estimate of the shuttle component of the Partnership's shuttle tankers effective January 1, 2016.
FSO Segment
Income from vessel operations and cash flow from vessel operations increased primarily due to lower operating expenses as a result of the strengthening of the U.S. Dollar relative to currencies in which such expenses are paid.
UMS Segment
Income from vessel operations and cash flow from vessel operations decreased mainly as a result of the timing of repairs and maintenance expenditures. This was partially offset by a retroactive increase in charter rates due to inflation indexation for the Arendal Spirit in the third quarter of 2016 and a business development fee paid by the Partnership to Teekay Corporation in the third quarter of 2015 in connection with the acquisition of the unit.
Towage Segment
Income from vessel operations and cash flow from vessel operations decreased primarily due to lower towage fleet charter rates and utilization, partially offset by a business development fee paid by the Partnership to Teekay Corporation in the third quarter of 2015 in connection with the acquisition of the six towage vessels, which commenced operations throughout 2015.
Conventional Tanker Segment
Income from vessel operations and cash flow from vessel operations decreased primarily due to the sale of the SPT Explorer and Navigator Spirit in the fourth quarter of 2015 and time-charter hire expenses of the Partnership arising after the sale-leaseback transactions related to the Fuji Spirit and Kilimanjaro Spirit during the first quarter of 2016. The Kilimanjaro Spirit is trading in the spot conventional tanker market and the Fuji Spirit is employed under a two-year fixed-rate time-charter contract.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of November 1, 2016.
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Number of Vessels
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Committed
Newbuildings/
Owned Chartered-in Conversions /
Vessels Vessels Upgrade Total
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FPSO Segment 6 (i) - 2 (ii) 8
Shuttle Tanker
Segment 29 (iii) 4 3 (iv) 36
FSO Segment 6 - 1 (v) 7
UMS Segment 1 - - 1
Towage Segment 7 - 3 (vi) 10
Conventional
Segment - 2 - 2
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Total 49 6 9 64
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(i) Includes one FPSO unit, the Cidade de Itajai, in which Teekay Offshore's
ownership interest is 50 percent.
(ii) Consists of the Petrojarl I FPSO upgrade project and Teekay Offshore's
50 percent ownership interest in the Libra FPSO conversion project, which
are scheduled to commence operations in mid-2017.
(iii) Includes six shuttle tankers in which Teekay Offshore's ownership
interest is 50 percent, one shuttle tanker in which Teekay Offshore's
ownership interest is 67 percent and one HiLoad DP unit.
(iv) Includes three Suezmax-size, DP2 shuttle tanker newbuildings scheduled
to be delivered in the third quarter of 2017 through the first half of 2018
for employment under the East Coast of Canada charter contracts.
(v) Consists of the Randgrid shuttle tanker, which is being converted into
an FSO unit for use with the Gina Krog FSO project and scheduled to deliver
in early-2017.
(vi) Consists of three long-distance towing and offshore installation vessel
newbuildings scheduled to deliver during the first half of 2017.
Liquidity and Continuous Offering Program Update
In August 2016, the Partnership implemented a continuous offering program (COP) under which the Partnership may issue new common units, representing limited partner interests, at market prices up to a maximum aggregate amount of $100 million. During the third quarter of 2016, the Partnership sold approximately 3.7 million common units under the COP, generating net proceeds of approximately $21.4 million (including the general partner's 2% proportionate capital contribution and net of offering costs). The net proceeds from the issuance of these common units are expected to be used for general partnership purposes.
As of September 30, 2016, the Partnership had total liquidity of $398.1 million (comprised of $222.9 million in cash and cash equivalents and $175.2 million in an undrawn credit facilities).
Conference Call
The Partnership plans to host a conference call on Thursday, November 3, 2016 at 12:00 p.m. (ET) to discuss the results for the third quarter of 2016. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
-- By dialing 1-800-524-8950 or 416-260-0113, if outside North America, and
quoting conference ID code 5250500.
-- By accessing the webcast, which will be available on Teekay Offshore's
website at www.teekay.com (the archive will remain on the website for a
period of 30 days).
An accompanying Third Quarter 2016 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 available until Thursday, November 17, 2016. This recording can be accessed following the live call by dialing 1-888-203-1112 or 647-436-0148, if outside North America, and entering access code 5250500.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production, storage, long-distance towing and offshore installation and maintenance and safety services to the oil industry, primarily focusing on oil production-related activities of its customers and operating in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) with consolidated assets of approximately $5.7 billion, comprised of 64 offshore assets, including floating production, storage and offloading (FPSO) units, shuttle tankers, floating storage and offtake (FSO) units, units for maintenance and safety (UMS), long-distance towing and offshore installation vessels and conventional tankers. The majority of Teekay Offshore's fleet is employed on medium-term, stable contracts.
Teekay Offshore's common units trade on the New York Stock Exchange under the symbol "TOO", and preferred units trade on the New York Stock Exchange under the symbols "TOO PR A " and "TOO PR B".
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. Cash Flow from (used for) Vessel Operations, Adjusted Net Income, and Distributable Cash Flow are non-GAAP financial measures. These measures 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.
Cash Flow from (used for) Vessel Operations
Cash flow from (used for) vessel operations (CFVO) represents income (loss) from vessel operations before depreciation and amortization expense, amortization of in-process revenue contracts, vessel write-downs, gains or losses on the sale of vessels, adjustments for direct financing leases to a cash basis, but includes realized gains or losses on the settlement of foreign currency forward contracts. 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. CFVO is a non-GAAP financial measure used by certain investors to measure the financial performance of companies. Please refer to Appendices D and E of this release for reconciliations of these non-GAAP financial measures to income (loss) 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
Adjusted net income excludes items of income or loss from GAAP net income (loss) 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. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net income (loss), the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Distributable Cash Flow
Distributable cash flow (DCF) represents GAAP net income (loss) adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, vessel write-downs and gains or losses on the sale of vessels, distributions relating to equity financing of newbuilding installments and conversion costs, distributions on the Partnership's preferred units, gains on extinguishment of contingent liabilities, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, ineffectiveness for derivative instruments designated as hedges for accounting purposes, adjustments to direct financing leases to a cash basis and unrealized foreign exchange related items, including the Partnership's proportionate share of such items in equity accounted 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. DCF is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating financial performance. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net income (loss), the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Teekay Offshore Partners L.P.
Summary Consolidated Statements of Income (Loss)
(in thousands of U.S. Dollars, except unit data)
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Three Months Ended
September 30, June 30, September 30,
2016 2016 2015
(unaudited) (unaudited) (unaudited)
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Revenues 286,298 284,464 314,054
Voyage expenses (21,495) (17,588) (28,166)
Vessel operating expenses (94,008) (90,761) (95,172)
Time-charter hire expenses (18,894) (18,829) (18,893)
Depreciation and amortization (74,159) (74,057) (72,827)
General and administrative (15,201) (13,821) (27,321)
(Write-down) and gain on sale
of vessels (2) - (43,650) -
Restructuring charge (802) (1,487) (157)
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Income from vessel operations 61,739 24,271 71,518
Interest expense (35,379) (33,347) (33,645)
Interest income 298 293 153
Realized and unrealized gains
(losses) on derivative
instruments (3) 20,247 (62,037) (77,102)
Equity income (loss) 4,937 3,626 (7,052)
Foreign currency exchange gain
(loss) (4) 817 (13,087) (10,257)
Other (expense) income - net
(2) (195) (21,286) (373)
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Income (loss) before income tax
(expense) recovery 52,464 (101,567) (56,758)
Income tax (expense) recovery (1,603) 1,438 5,465
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Net income (loss) 50,861 (100,129) (51,293)
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Non-controlling interests in
net income (loss) 3,161 2,496 3,446
Dropdown Predecessor's interest
in net income (1) - - -
Preferred unitholders' interest
in net income (loss) 12,386 10,314 10,349
General Partner's interest in
net income (loss) 706 (2,260) 5,738
Limited partners' interest in
net income (loss) 34,608 (110,679) (70,826)
Weighted-average number of
common units:
- basic 139,057,659 107,794,323 102,009,737
- diluted 157,914,277 107,794,323 102,009,737
Total number of common units
outstanding at end of period 143,059,606 137,430,180 107,003,043
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Nine Months Ended
September 30, September 30,
2016 2015(1)
(unaudited) (unaudited)
-------------------------------------------------------------
Revenues 877,470 890,271
Voyage expenses (57,427) (71,399)
Vessel operating expenses (280,121) (269,560)
Time-charter hire expenses (53,045) (36,638)
Depreciation and amortization (223,138) (202,625)
General and administrative (43,491) (58,423)
(Write-down) and gain on sale
of vessels (2) (43,650) (14,353)
Restructuring charge (2,289) (292)
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Income from vessel operations 174,309 236,981
Interest expense (104,752) (89,825)
Interest income 995 430
Realized and unrealized gains
(losses) on derivative
instruments (3) (102,280) (90,182)
Equity income (loss) 13,846 6,759
Foreign currency exchange gain
(loss) (4) (15,108) (16,640)
Other (expense) income - net
(2) (21,472) 266
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Income (loss) before income tax
(expense) recovery (54,462) 47,789
Income tax (expense) recovery 2,671 5,654
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Net income (loss) (51,791) 53,443
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Non-controlling interests in
net income (loss) 7,545 11,082
Dropdown Predecessor's interest
in net income (1) - 10,101
Preferred unitholders' interest
in net income (loss) 33,449 17,859
General Partner's interest in
net income (loss) (1,857) 15,655
Limited partners' interest in
net income (loss) (90,928) (1,254)
Weighted-average number of
common units:
- basic 118,046,087 95,640,284
- diluted 118,046,087 95,640,284
Total number of common units
outstanding at end of period 143,059,606 107,003,043
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(1) The Partnership has recast its financial results to include the
financial results of the Knarr FPSO unit relating to the period prior to its
acquisition by the Partnership from Teekay Corporation when it was under
common control, which pre-acquisition results are referred to in this
release as the Dropdown Predecessor. In accordance with GAAP, business
acquisitions of entities under common control that have begun operations are
required to be accounted for in a manner whereby the Partnership's financial
statements are retroactively adjusted to include the historical results of
the acquired vessels from the date the vessels were originally under the
control of Teekay Corporation. For these purposes, the Knarr FPSO unit was
under common control by Teekay Corporation from March 9, 2015 to July 1,
2015, when it was sold to the Partnership.
(2) In June 2016, as part of the Partnership's financing initiatives, the
Partnership canceled the UMS construction contracts for its two UMS
newbuildings. As a result, the Partnership incurred a $43.7 million write-
down related to these two UMS newbuildings, included in (Write-down) and
gain on sale of vessels for the three months ended June 30, 2016 and the
nine months ended September 30, 2016. In addition, the Partnership, in
accordance with GAAP, accrued for potential damages resulting from the
cancellations and reversed the contingent liabilities previously recorded
that were subject to the delivery of the UMS newbuildings. This net loss
provision of $23.4 million is reported in Other (expense) income - net for
the three months ended June 30, 2016 and the nine months ended September 30,
2016. The newbuilding contracts are held in separate subsidiaries of the
Partnership and obligations of these subsidiaries are non-recourse to Teekay
Offshore.
(3) Realized losses on derivative instruments relate to amounts the
Partnership actually paid to settle derivative instruments, and the
unrealized gains (losses) on derivative instruments relate to the change in
fair value of such derivative instruments, as detailed in the table below:
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Three Months Ended
September 30, June 30, September 30,
2016 2016 2015
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Realized losses relating to:
Interest rate swaps (13,507) (13,515) (15,857)
Interest rate swap termination - - (10,876)
Foreign currency forward
contracts (1,764) (1,687) (4,064)
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(15,271) (15,202) (30,797)
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Unrealized gains (losses)
relating to:
Interest rate swaps 31,894 (47,818) (43,453)
Foreign currency forward
contracts 3,624 983 (2,852)
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35,518 (46,835) (46,305)
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Total realized and unrealized
gains (losses) on derivative
instruments 20,247 (62,037) (77,102)
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Nine Months Ended
September 30, September 30,
2016 2015
-------------------------------------------------------------
Realized losses relating to:
Interest rate swaps (40,989) (45,378)
Interest rate swap termination - (10,876)
Foreign currency forward
contracts (6,384) (9,890)
-------------------------------------------------------------
(47,373) (66,144)
-------------------------------------------------------------
Unrealized gains (losses)
relating to:
Interest rate swaps (67,845) (22,303)
Foreign currency forward
contracts 12,938 (1,735)
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(54,907) (24,038)
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Total realized and unrealized
gains (losses) on derivative
instruments (102,280) (90,182)
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(4) The Partnership entered into cross currency swaps to economically hedge
the foreign currency exposure on the payment of interest and repayment of
principal amounts of the Partnership's Norwegian Kroner (NOK) bonds with
maturity dates through to 2019. In addition, the cross currency swaps
economically hedge the interest rate exposure on the NOK bonds. The
Partnership has not designated, for accounting purposes, these cross
currency swaps as cash flow hedges of its NOK bonds and, thus, foreign
currency exchange loss includes realized losses relating to the amounts the
Partnership paid to settle its non-designated cross currency swaps and
unrealized gains (losses) relating to the change in fair value of such
swaps, partially offset by unrealized (losses) gains on the revaluation of
the NOK bonds, as detailed in the table below. In addition, during the nine
months ended September 30, 2016, realized losses on cross-currency swaps
includes a $32.6 million loss on the maturity of the swap associated with
the NOK 500 million bond settled in January 2016, which was offset by a
$32.6 million gain on the settlement of the bond which is not included in
the table below.
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Three Months Ended
September 30, June 30, September 30,
2016 2016 2015
----------------------------------------------------------------------------
Realized losses on cross
currency swaps (3,330) (2,671) (2,840)
Unrealized gains (losses) on
cross currency swaps 19,803 (14,422) (32,649)
Unrealized (losses) gains on
revaluation of NOK bonds (13,613) 3,293 28,722
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Nine Months Ended
September 30, September 30,
2016 2015
-------------------------------------------------------------
Realized losses on cross
currency swaps (41,276) (7,173)
Unrealized gains (losses) on
cross currency swaps 58,276 (52,325)
Unrealized (losses) gains on
revaluation of NOK bonds (61,807) 48,602
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Teekay Offshore Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
As at As at As at
September 30, June 30, December 31,
2016 2016 2015
(unaudited) (unaudited) (unaudited)
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ASSETS
Current
Cash and cash equivalents 222,872 380,718 258,473
Restricted cash - current 31,403 7,403 51,431
Accounts receivable 130,716 145,902 153,662
Vessels held for sale 7,538 - 55,450
Net investments in direct
financing leases - current 5,227 6,766 5,936
Prepaid expenses 45,626 37,619 34,027
Due from affiliates 88,367 74,806 81,271
Other current assets 22,377 21,309 20,490
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Total current assets 554,126 674,523 660,740
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Restricted cash - long-term 15,227 21,127 9,089
Vessels and equipment
At cost, less accumulated
depreciation 4,168,926 4,178,593 4,348,535
Advances on newbuilding
contracts and conversion costs 576,173 516,754 395,084
Net investments in direct
financing leases 13,725 12,302 11,535
Investment in equity accounted
joint ventures 126,835 120,415 77,647
Deferred tax asset 34,367 33,511 30,050
Other assets 92,568 95,917 82,341
Goodwill 129,145 129,145 129,145
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Total assets 5,711,092 5,782,287 5,744,166
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LIABILITIES AND EQUITY
Current
Accounts payable 13,211 28,301 15,899
Accrued liabilities 155,434 138,896 91,065
Deferred revenues 61,091 54,431 54,378
Due to affiliates 112,369 97,438 304,583
Current portion of long-term
debt 528,568 574,575 485,069
Current portion of derivative
instruments 50,839 63,924 201,456
Current portion of in-process
revenue contracts 12,744 12,744 12,779
Other current liabilities 6,211 - -
----------------------------------------------------------------------------
Total current liabilities 940,467 970,309 1,165,229
----------------------------------------------------------------------------
Long-term debt 2,620,283 2,666,656 2,878,805
Derivative instruments 371,216 413,063 221,329
Due to affiliates 200,000 200,000 -
In-process revenue contracts 53,494 56,706 63,026
Other long-term liabilities 215,265 221,055 192,258
----------------------------------------------------------------------------
Total liabilities 4,400,725 4,527,789 4,520,647
----------------------------------------------------------------------------
Redeemable non-controlling
interest 3,292 2,367 3,173
Convertible Preferred Units 270,402 268,277 252,498
Equity
Limited partners - common units 697,102 645,259 629,264
Limited partners - preferred
units 266,925 266,925 266,925
General Partner 18,937 17,879 17,608
Warrants 13,797 13,797 -
Accumulated other comprehensive
(loss) income (17,009) (19,191) 696
Non-controlling interests 56,921 59,185 53,355
----------------------------------------------------------------------------
Total equity 1,036,673 983,854 967,848
----------------------------------------------------------------------------
Total liabilities and total
equity 5,711,092 5,782,287 5,744,166
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay Offshore Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Nine Months Ended
September 30, September 30,
2016 2015(1)
(unaudited) (unaudited)
----------------------------------------------------------------------------
Cash and cash equivalents provided by (used
for)
OPERATING ACTIVITIES
Net (loss) income (51,791) 53,443
Non-cash items:
Unrealized (gain) loss on derivative
instruments (4,353) 77,421
Equity income, net of dividends received of
$3,472 (2015 - $nil) (10,374) (6,759)
Depreciation and amortization 223,138 202,625
Write-down and (gain) on sale of vessels 43,650 14,353
Deferred income tax recovery (6,013) (6,399)
Amortization of in-process revenue contracts (9,567) (9,533)
Unrealized foreign currency exchange loss
and other 43,446 (84,622)
Change in non-cash working capital items
related to operating activities 68,277 51,300
Expenditures for dry docking (22,343) (8,485)
----------------------------------------------------------------------------
Net operating cash flow 274,070 283,344
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 283,828 547,707
Scheduled repayments of long-term debt (314,653) (251,646)
Prepayments of long-term debt (197,776) (83,606)
Debt issuance costs (10,988) (20,222)
Decrease (increase) in restricted cash 13,890 (2,590)
Purchase of Teekay Knarr AS and Knarr L.L.C
from Teekay Corporation (net of cash acquired
of $14.2 million) - (112,710)
Proceeds from issuance of common units 124,879 9,336
Proceeds from issuance of preferred units and
warrants 100,000 375,000
Expenses relating to equity offerings (5,911) (4,469)
Cash distributions paid by the Partnership (61,827) (176,592)
Cash distributions paid by subsidiaries to
non-controlling interests (4,610) (13,480)
Equity contribution from joint venture
partners 750 5,500
Settlement of contingent consideration
liability - (3,303)
Other - 873
----------------------------------------------------------------------------
Net financing cash flow (72,418) 269,798
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Net expenditures for vessels and equipment,
including advances on newbuilding contracts
and conversion costs (238,349) (563,260)
Proceeds from sale of vessels and equipment 55,450 8,918
Repayment from joint ventures - 5,225
Direct financing lease (investments) payments
received (1,481) 3,639
Investment in equity accounted joint ventures (52,873) (8,744)
----------------------------------------------------------------------------
Net investing cash flow (237,253) (554,222)
----------------------------------------------------------------------------
Decrease in cash and cash equivalents (35,601) (1,080)
Cash and cash equivalents, beginning of the
period 258,473 252,138
----------------------------------------------------------------------------
Cash and cash equivalents, end of the period 222,872 251,058
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) In accordance with GAAP, the Consolidated Statement of Cash Flows for
the nine months ended September 30, 2015 includes the cash flows relating to
the Knarr FPSO unit Dropdown Predecessor for the period from March 9, 2015
to June 30, 2015, when the vessel was under the common control of Teekay
Corporation, but prior to its acquisition by the Partnership.
Teekay Offshore Partners L.P.
Appendix A - Reconciliation of Non-GAAP Financial Measures
Specific Items Affecting Net Income (Loss)
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended
September 30, September 30,
2016 2015
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net income (loss) - GAAP basis 50,861 (51,293)
Adjustments:
Net income (loss) attributable to non-
controlling interests (3,161) (3,446)
----------------------------------------------------------------------------
Net income (loss) attributable to the partners
and preferred unitholders 47,700 (54,739)
----------------------------------------------------------------------------
Add (subtract) specific items affecting net
income (loss) :
Foreign currency exchange (gains) losses (1) (4,147) 7,417
Unrealized (gains) losses on derivative
instruments (2) (36,989) 56,838
Realized loss on swap termination - 10,876
Deferred income tax recovery relating to
Norwegian tax structure (3) - (5,834)
Pre-operational costs (4) 1,869 1,923
Business development fees, restructuring
charge and other (5) 1,262 14,513
Non-controlling interests' share of items
above (6) 309 1,058
----------------------------------------------------------------------------
Total adjustments (37,696) 86,791
----------------------------------------------------------------------------
Adjusted net income attributable to the
partners and preferred unitholders 10,004 32,052
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Foreign currency exchange (gains) losses 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 or losses related to the
Partnership's cross currency swaps related to the Partnership's NOK bonds
and excludes the realized gains and losses relating to the cross currency
swaps.
(2) Reflects the unrealized (gains) losses due to changes in the mark-to-
market value of interest rate swaps and foreign exchange forward contracts
that are not designated as hedges for accounting purposes, hedge
ineffectiveness from derivative instruments designated as hedges for
accounting purposes, the unrealized mark-to-market value of the interest
rate swaps within the Cidade de Itajai FPSO joint venture and hedge
ineffectiveness within the Libra FPSO equity accounted joint venture.
(3) Reflects the increase in the deferred income tax asset for one of the
Partnership's Norwegian tax structures.
(4) Reflects depreciation and amortization expense and vessel operating
expenses relating to the Petrojarl I FPSO unit while undergoing conversion
and realized losses (gains) on foreign currency forward contracts relating
to upgrade costs on the Petrojarl I FPSO unit and the conversion costs on
the Gina Krog FSO unit.
(5) Other items for the three months ended September 30, 2016 include a $0.8
million restructuring charge relating to the reorganization within the
Partnership's FPSO segment and $0.5 million relating to a write-off of UMS
newbuilding fees previously capitalized. Other items for the three months
ended September 30, 2015 include one-time business development fees of $13.9
million paid to Teekay Corporation relating to the purchases of the Knarr
FPSO unit, the six towage vessels, and the Arendal Spirit UMS, a write-down
of inventory asset, and seafarer redundancy costs.
(6) Items affecting net income (loss) include amounts attributable to the
Partnership's consolidated non-wholly-owned subsidiaries. Each item
affecting net income (loss) is 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 above"
in the table above is the cumulative amount of the non-controlling
interests' proportionate share of items affecting net income (loss) listed
in the table.
Teekay Offshore Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures
Distributable Cash Flow
(in thousands of U.S. Dollars, except per unit and per unit data)
----------------------------------------------------------------------------
Three Months Ended
September 30,
2016 2015
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net income (loss) 50,861 (51,293)
Add (subtract):
Depreciation and amortization 74,159 72,827
Vessel and business acquisition costs (1) - 13,920
Realized loss on termination of interest
rate swap - 10,876
Partnership's share of equity accounted
joint venture's distributable
cash flow net of estimated maintenance
capital expenditures (2) 4,818 4,434
Distributions relating to equity financing
of newbuildings
and conversion costs 4,571 6,994
Amortization of non-cash portion of revenue
contracts (4,032) (4,041)
Equity (income) loss from joint ventures (4,937) 7,052
Distributions relating to preferred units (12,386) (10,573)
Estimated maintenance capital expenditures
(3) (33,233) (38,739)
Unrealized (gains) losses on derivative
instruments (4) (35,518) 46,305
Foreign currency exchange and other, net (6,481) 5,801
----------------------------------------------------------------------------
Distributable cash flow before non-controlling
interests 37,822 63,563
Non-controlling interests' share of DCF (6,042) (4,721)
----------------------------------------------------------------------------
Distributable Cash Flow 31,780 58,842
Amount attributable to the General Partner (321) (8,407)
----------------------------------------------------------------------------
Limited partners' Distributable Cash Flow 31,459 50,435
Weighted-average number of common units
outstanding 139,057,659 102,009,737
----------------------------------------------------------------------------
Distributable Cash Flow per limited partner
unit 0.23 0.49
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See footnote (5) of Appendix A included in this release for further
details.
(2) Estimated maintenance capital expenditures relating to the Partnership's
equity accounted joint venture for the three months ended September 30, 2016
and 2015 were $1.0 million.
(3) Effective January 1, 2016, the Partnership changed the estimated useful
life of its shuttle tankers that are 17 years of age or older and the
shuttle component of its shuttle tankers from 25 years to 20 years. This
resulted in an increase in estimated maintenance capital expenditures of
$3.1 million for the three months ended September 30, 2016.
Estimated maintenance capital expenditures for the three months ended
September 30, 2016 also includes $7.0 million cash compensation received
from the shipyard in connection with the delayed delivery of the ALP Striker
in September 2016.
(4) Derivative instruments include interest rate swaps and foreign exchange
forward contracts.
Teekay Offshore Partners L.P.
Appendix C - Supplemental Segment Information
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended September 30, 2016
(unaudited)
Shuttle
FPSO Tanker FSO UMS
Segment Segment Segment Segment
----------------------------------------------------------------------------
Revenues 121,294 128,482 14,251 13,395
Voyage expenses - (18,898) (96) -
Vessel operating expenses (42,353) (33,062) (6,056) (8,331)
Time-charter hire expenses - (14,723) - -
Depreciation and amortization (37,180) (30,166) (2,205) (1,647)
General and administrative (10,235) (1,147) (230) (2,640)
Restructuring charge (597) (205) - -
----------------------------------------------------------------------------
Income (loss) from vessel
operations 30,929 30,281 5,664 777
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended September 30, 2015
(unaudited)
Shuttle
FPSO Tanker FSO UMS
Segment Segment Segment Segment
----------------------------------------------------------------------------
Revenues 137,888 131,381 14,234 11,737
Voyage expenses - (22,844) (217) -
Vessel operating expenses (47,542) (28,814) (6,511) (5,976)
Time-charter hire expenses - (18,893) - -
Depreciation and amortization (38,051) (25,362) (3,295) (1,677)
General and administrative (1) (17,600) (4,162) (183) (2,558)
Restructuring charge - (157) - -
----------------------------------------------------------------------------
Income (loss) from vessel
operations 34,695 31,149 4,028 1,526
----------------------------------------------------------------------------
----------------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended September 30,
2016
(unaudited)
Conventional
Towage Tanker
Segment Segment Total
---------------------------------------------------------------------
Revenues 5,345 3,531 286,298
Voyage expenses (2,440) (61) (21,495)
Vessel operating expenses (4,206) - (94,008)
Time-charter hire expenses - (4,171) (18,894)
Depreciation and amortization (2,961) - (74,159)
General and administrative (859) (90) (15,201)
Restructuring charge - - (802)
---------------------------------------------------------------------
Income (loss) from vessel
operations (5,121) (791) 61,739
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended September 30,
2015
(unaudited)
Conventional
Towage Tanker
Segment Segment Total
---------------------------------------------------------------------
Revenues 10,808 8,006 314,054
Voyage expenses (4,340) (765) (28,166)
Vessel operating expenses (4,709) (1,620) (95,172)
Time-charter hire expenses - - (18,893)
Depreciation and amortization (2,766) (1,676) (72,827)
General and administrative (1) (2,670) (148) (27,321)
Restructuring charge - - (157)
---------------------------------------------------------------------
Income (loss) from vessel
operations (3,677) 3,797 71,518
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) General and administrative expenses for the three months ended September
30, 2015 includes business development fees of $13.9 million.
Teekay Offshore Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Cash Flow From (Used For) Vessel Operations From Consolidated Vessels
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended September 30, 2016
(unaudited)
Shuttle
FPSO Tanker FSO UMS
Segment Segment Segment Segment
----------------------------------------------------------------------------
Income (loss) from vessel
operations
(See Appendix C) 30,929 30,281 5,664 777
Depreciation and amortization 37,180 30,166 2,205 1,647
Realized (losses) gains from the
settlements of non-designated
foreign exchange forward
contracts (1,013) (702) - -
Amortization of non-cash portion
of revenue contracts (4,032) - - -
Falcon Spirit revenue accounted
for as direct financing lease - - (640) -
Falcon Spirit cash flow from
time-charter contracts - - 2,202 -
----------------------------------------------------------------------------
Cash flow from (used for) vessel
operations from consolidated
vessels 63,064 59,745 9,431 2,424
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------
Three Months Ended September 30,
2016
(unaudited)
Conventional
Towage Tanker
Segment Segment Total
----------------------------------------------------------------------
Income (loss) from vessel
operations
(See Appendix C) (5,121) (791) 61,739
Depreciation and amortization 2,961 - 74,159
Realized (losses) gains from the
settlements of non-designated
foreign exchange forward
contracts 74 - (1,641)
Amortization of non-cash portion
of revenue contracts - - (4,032)
Falcon Spirit revenue accounted
for as direct financing lease - - (640)
Falcon Spirit cash flow from
time-charter contracts - - 2,202
----------------------------------------------------------------------
Cash flow from (used for) vessel
operations from consolidated
vessels (2,086) (791) 131,787
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended September 30, 2015
(unaudited)
Shuttle
FPSO Tanker FSO UMS
Segment Segment Segment Segment
----------------------------------------------------------------------------
Income (loss) from vessel operations
(See Appendix C) 34,695 31,149 4,028 1,526
Depreciation and amortization 38,051 25,362 3,295 1,677
Realized losses from the settlements
of non-designated foreign exchange
forward contracts (1,443) (2,195) - -
Amortization of non-cash portion of
revenue contracts (4,041) - - -
Falcon Spirit revenue accounted for
as direct financing lease - - (896) -
Falcon Spirit cash flow from time-
charter contracts - - 2,177 -
----------------------------------------------------------------------------
Cash flow from (used for) vessel
operations from consolidated
vessels 67,262 54,316 8,604 3,203
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------
Three Months Ended September 30,
2015
(unaudited)
Conventional
Towage Tanker
Segment Segment Total
----------------------------------------------------------------------
Income (loss) from vessel operations
(See Appendix C) (3,677) 3,797 71,518
Depreciation and amortization 2,766 1,676 72,827
Realized losses from the settlements
of non-designated foreign exchange
forward contracts - - (3,638)
Amortization of non-cash portion of
revenue contracts - - (4,041)
Falcon Spirit revenue accounted for
as direct financing lease - - (896)
Falcon Spirit cash flow from time-
charter contracts - - 2,177
----------------------------------------------------------------------
Cash flow from (used for) vessel
operations from consolidated
vessels (911) 5,473 137,947
----------------------------------------------------------------------
----------------------------------------------------------------------
Teekay Offshore 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 Three Months Ended
September 30, 2016 September 30, 2015
(unaudited) (unaudited)
Partnership's Partnership's
At 100% 50% At 100% 50%
----------------------------------------------------------------------------
Revenues 20,065 10,033 19,692 9,846
Vessel and other
operating expenses (5,264) (2,632) (6,205) (3,103)
Depreciation and
amortization (4,408) (2,204) (4,221) (2,111)
General and
administrative - - 4 2
Loss on sale of asset - - (579) (290)
----------------------------------------------------------------------------
Income from vessel
operations of equity
accounted vessels 10,393 5,197 8,691 4,344
Net interest expense (1,872) (936) (1,763) (882)
Realized and unrealized
gains (losses) on
derivative instruments
(1) 1,785 893 (20,151) (10,076)
Foreign currency
exchange loss (237) (119) (705) (352)
----------------------------------------------------------------------------
Total other items (324) (162) (22,619) (11,310)
Net income (loss) /
equity income (loss) of
equity accounted
vessels before income
tax expense 10,069 5,035 (13,928) (6,966)
Income tax expense (195) (98) (171) (86)
----------------------------------------------------------------------------
Net income (loss) /
equity income (loss) of
equity accounted
vessels 9,874 4,937 (14,099) (7,052)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations of equity
accounted vessels 10,393 5,197 8,691 4,344
Depreciation and
amortization 4,408 2,204 4,221 2,111
Write-down of equipment - - 579 290
----------------------------------------------------------------------------
Cash flow from vessel
operations from equity
accounted vessels 14,801 7,401 13,491 6,745
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Realized and unrealized gains (losses) on derivative instruments for the
three months ended September 30, 2016 and 2015 include total unrealized
gains of $2.7 million ($1.3 million at the Partnership's 50% share) and
unrealized losses of $19.0 million ($9.5 million at the Partnership's 50%
share), respectively, related to interest rate swaps for the Cidade de
Itajai FPSO unit and the Libra FPSO conversion project.
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: the Partnership's expectations for its fourth quarter 2016 distributable cash flow; the timing of start-up and the voyage requirements of the new CoA; the effect of the new CoA on the Partnership's future cash flows, including the Partnership's fleet utilization; the fundamentals in the shuttle tanker market; and the Partnership's timing of delivery and costs of various newbuildings and conversion projects, including potential delays and additional costs on the Petrojarl I FPSO and the outcome of associated discussions with the charterer, shipyard and lenders. 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: timing of the start-up of the CoA contract to service the Glen Lyon FPSO unit in the North Sea; vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea, Brazil and East Coast of Canada offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion and upgrade delays and cost overruns; changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; delays in the commencement of charter contracts; the inability of the Partnership to negotiate acceptable terms with the charterer, shipyard and lenders related to the delay of the Petrojarl I FPSO; and other factors discussed in Teekay Offshore's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2015. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts: For Investor Relations enquiries contact: Ryan Hamilton +1 (604) 609-6442 www.teekay.com
Source: Teekay Offshore Partners L.P.
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