Highlights
- GAAP net income attributable to the partners and preferred unitholders of $2.7 million (impacted by non-cash items) and GAAP net loss per common unit of $0.05 for the three months ended June 30, 2018.
- Adjusted net income attributable to the partners and preferred unitholders(1) of $13.5 million and adjusted net income per common unit of $0.09 for the three months ended June 30, 2018.
- Generated total cash flow from vessel operations(1) of $115.0 million in the second quarter of 2018.
- Generated distributable cash flow(1) of $31.1 million, or $0.39 per common unit, in the second quarter of 2018.
- Since the beginning of 2018, the Partnership has taken delivery of six LNG carrier newbuildings, all on long-term charters.
HAMILTON, Bermuda, Aug. 02, 2018 (GLOBE NEWSWIRE) — 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, 2018.
| Three Months Ended | ||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||
| (in thousands of U.S. Dollars) | (unaudited) | (unaudited) | (unaudited) | |||
| GAAP FINANCIAL COMPARISON | ||||||
| Voyage revenues | 122,315 | 115,306 | 100,904 | |||
| Income from vessel operations | 10,505 | 25,142 | 29,871 | |||
| Equity income (loss) | 11,194 | 26,724 | (507 | ) | ||
| Net income (loss) attributable to the partners and preferred unitholders | 2,734 | (6,894 | ) | (16,073 | ) | |
| Limited partners’ interest in net loss per common unit | (0.05 | ) | (0.16 | ) | (0.23 | ) |
| NON-GAAP FINANCIAL COMPARISON | ||||||
| Adjusted net income attributable to the partners and preferred unitholders (1) | 13,535 | 22,058 | 17,860 | |||
| Limited partners’ interest in adjusted net income per common unit (1) | 0.09 | 0.19 | 0.19 | |||
| Total cash flow from vessel operations (CFVO) (1) | 115,005 | 117,595 | 106,252 | |||
| Distributable cash flow (DCF) (1) | 31,116 | 35,341 | 40,623 | |||
(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 income (loss) and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended June 30, 2018, compared to the same quarter in the prior year, were positively impacted by the deliveries of seven liquefied natural gas (LNG) and three LPG carrier newbuildings between July 2017 and May 2018 and the commencement of short-term charter contracts for certain of the vessels in the Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the Teekay LNG-Marubeni Joint Venture). These increases were partially offset by the sale of a conventional tanker and a liquefied petroleum gas (LPG) carrier in the first quarter of 2018, lower rates earned in 2018 on two conventional tankers upon the expiration of their fixed-rate charter contracts in 2017, and a decrease in earnings in 2018 on seven Multi-gas carriers following the termination of their previous charter contracts.
In addition, GAAP net income (loss) was positively impacted for the three months ended June 30, 2018, compared to the same quarter of the prior year, by various items, including increases in unrealized gains on derivative instruments and foreign currency exchange gains during the three months ended June 30, 2018 and the write-down of a conventional tanker during the three months ended June 30, 2017. These increases were partially offset by the write-down of four Multi-gas carriers in the second quarter of 2018.
CEO Commentary
“As expected, we experienced another quarter of increased earnings and cash flow from our LNG carriers,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “We have taken delivery of nine LNG carriers over the past nine months, including the Myrina and the Megara in early-May and mid-July 2018, respectively, both of which are on long-term, fixed-rate charters to Shell, and we are anticipating the delivery of the Bahrain Spirit FSU later this month.” Mr. Kremin continued, “The Yamal LNG consortium has asked us to deliver our second ARC7 LNG carrier earlier than the scheduled November 2018 date, and we are making arrangements to meet this request in order to service the project’s second LNG train, which is expected to come online in September 2018. Looking ahead, we have nine LNG newbuilding carriers and the Bahrain LNG terminal project still to deliver over the next 18 months, which we expect will help drive further cash flow growth and the delevering of our balance sheet.”
Mr. Kremin continued, “Unfortunately, the results from the seven Multi-gas carriers we took back in late-2017 due to non-payment of charter-hire are continuing to underperform and have continued to significantly impact our quarterly results. We are evaluating pooling arrangements and potentially other adjacent transportation markets for employing these vessels; however, we are not anticipating a significant turnaround relating to these vessels over the near-term. As a result, we have taken an accounting impairment on four of these vessels during the second quarter of 2018.”
Mr. Kremin added, “We have now completed all of our 2018 secured debt refinancings and expect to commence the process to refinance our 364-day unsecured revolver shortly, which has been refinanced three times previously. In addition, we are making good progress on our 2019 financing and refinancings. Looking ahead, we believe Teekay LNG is well-positioned to take advantage of the strong LNG demand fundamentals we see developing over the medium-term.”
Summary of Recent Events
LNG and Mid-sized LPG Carrier Newbuilding Deliveries
In July 2018, the Partnership’s 20 percent-owned joint venture with China LNG Shipping (Holdings) Limited (China LNG), CETS Investment Management (HK) Co. Ltd. (an affiliate of China National Offshore Oil Corporation (CNOOC)) and BW LNG Investments Pte. Ltd., took delivery of one LNG carrier newbuilding, the Pan Europe, which immediately commenced its 20-year charter contract with Royal Dutch Shell (Shell).
In May and July 2018, the Partnership took delivery of two M-Type, Electronically Controlled, Gas Injection (MEGI) LNG carrier newbuildings, the Myrina and Megara, which immediately commenced their six to eight-year charter contracts with Shell.
In May and July 2018, the Partnership’s 50 percent-owned joint venture with Exmar NV (the Exmar LPG Joint Venture) took delivery of its remaining LPG carrier newbuildings, the Koksijde and the Wepion, which are currently trading in the spot market.
Debt Financing Update
In May 2018, the Teekay LNG-Marubeni Joint Venture refinanced an outstanding $105 million debt facility secured by the Woodside Donaldson LNG carrier, which reduced its financing cost and extended the maturity date from 2021 to 2026.
In June 2018, the Partnership refinanced an outstanding $57 million debt facility maturing in 2018 and secured by the Polar Spirit and Arctic Spirit LNG carriers with a new $40 million debt facility maturing in 2022.
In July 2018, the Partnership refinanced an outstanding debt facility of 107 million Euro ($125 million) maturing in 2018 and secured by the Madrid Spirit LNG carrier with a new 100 million Euro ($117 million) debt facility maturing in 2024.
In July 2018, the Partnership’s 50 percent-owned Exmar LPG joint venture completed a three-year, $35 million debt facility maturing in 2021 for its final LPG carrier newbuilding, the Wepion, which delivered on July 31, 2018.
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, 2018 | June 30, 2017 | |||||||||||
| (in thousands of U.S. Dollars) | (unaudited) | (unaudited) | ||||||||||
| Liquefied Gas Segment | Conventional Tanker Segment | Total | Liquefied Gas Segment | Conventional Tanker Segment | Total | |||||||
| GAAP FINANCIAL COMPARISON | ||||||||||||
| Voyage revenues | 112,172 | 10,143 | 122,315 | 89,431 | 11,473 | 100,904 | ||||||
| Income (loss) from vessel operations | 9,445 | 1,060 | 10,505 | 40,043 | (10,172 | ) | 29,871 | |||||
| Equity income (loss) | 11,194 | — | 11,194 | (507 | ) | — | (507 | ) | ||||
| NON-GAAP FINANCIAL COMPARISON | ||||||||||||
| CFVO from consolidated vessels(i) | 72,356 | 2,235 | 74,591 | 68,456 | 4,970 | 73,426 | ||||||
| CFVO from equity-accounted vessels(i) | 40,414 | — | 40,414 | 32,826 | — | 32,826 | ||||||
| Total CFVO(i) | 112,770 | 2,235 | 115,005 | 101,282 | 4,970 | 106,252 | ||||||
- 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 decreased and CFVO from consolidated vessels increased, in each case for the liquefied gas segment for the three months ended June 30, 2018, compared to the same quarter of the prior year. Results were positively impacted primarily by the deliveries of four LNG carrier newbuildings, the Macoma, Murex, Magdala and Myrina between October 2017 and May 2018 and due to the chartering of the Torben Spirit at higher rates in 2018. These increases were partially offset by lower earnings on seven of the Partnership’s Multi-gas carriers following the Partnership’s termination of their charter contracts due to non-payment by the charterer. In addition, income from vessel operations was impacted by the write-downs of four Multi-gas carriers in the three months ended June 30, 2018 as a result of the Partnership’s evaluation of alternative strategies for these assets during the second quarter of 2018, combined with the current charter rate environment and the outlook for charter rates for these vessels.
Equity income (loss) was positively impacted and CFVO from equity-accounted vessels increased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to higher fleet utilization in the Teekay LNG-Marubeni Joint Venture since certain of the joint venture’s vessels commenced short-term charter contracts at higher rates; the delivery of the Eduard Toll ARC7 LNG carrier in January 2018 to the Yamal LNG Joint Venture; the deliveries of the Pan Asia and Pan Americas LNG carriers in October 2017 and January 2018, respectively, in the Partnership’s 30 percent-owned joint venture with China LNG and CETS; and the deliveries of three LPG carriers in the Exmar LPG Joint Venture. These increases were partially offset by the sale of the Courcheville LPG carrier in January 2018; lower rates earned in the Exmar LPG Joint Venture; and the sale of the S/S Excelsior LNG carrier in the Partnership’s 50 percent-owned joint venture with Exmar NV (the Excelsior Joint Venture) in January 2018. Equity income (loss) was also positively impacted by an increase in net unrealized gains on designated and non-designated derivative instruments in our equity-accounted vessels.
Conventional Tanker Segment
Income (loss) from vessel operations improved and CFVO from consolidated vessels decreased for the conventional tanker segment for the three months ended June 30, 2018, compared to the same quarter of the prior year. These results were impacted by: the sale of the Teide Spirit in February 2018 and associated restructuring charges as a result of the sale; and lower rates earned in 2018 on the African Spirit and European Spirit upon the expiration of their fixed-rate charter contracts in 2017. In addition, income (loss) from vessel operations for the three months ended June 30, 2018 compared to the same quarter of the prior year was positively impacted by a write-down in 2017 of the European Spirit conventional tanker to its estimated fair value.
Teekay LNG’s Fleet
The following table summarizes the Partnership’s fleet as of August 1, 2018, excluding the Partnership’s 30 percent interest in a regasification terminal currently under construction:
| Number of Vessels | |||
| Owned and In-Chartered Vessels(i) | Newbuildings | Total | |
| LNG Carrier Fleet | 40(ii) | 9(iii) | 49 |
| LPG/Multi-gas Carrier Fleet | 29(iv) | — | 29 |
| Conventional Tanker Fleet | 4(v) | — | 4 |
| Total | 73 | 9 | 82 |
- Owned vessels includes vessels accounted for as vessels related to capital leases.
- The Partnership’s ownership interests in these vessels range from 20 percent to 100 percent.
- The Partnership’s ownership interests in these newbuildings, range from 20 percent to 100 percent.
- The Partnership’s ownership interests in these vessels range from 50 percent to 99 percent.
- Two of the Partnership’s conventional tankers, the African Spirit and European Spirit are classified as held for sale.
Liquidity
As of June 30, 2018, the Partnership had total liquidity of $443.6 million (comprised of $177.1 million in cash and cash equivalents and $266.5 million in undrawn credit facilities).
Availability of 2017 Annual Report
The Partnership filed its 2017 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 16, 2018. Copies of this report are available on Teekay LNG’s website, under “Investors – Teekay LNG – Financials & Presentations”, at www.teekay.com. Unitholders may request a printed copy of this Annual Report, including the complete audited financial statements, free of charge by contacting Teekay LNG’s Investor Relations Department.
Conference Call
The Partnership plans to host a conference call on Thursday, August 2, 2018 at 11:00 a.m. (ET) to discuss the results for the second quarter of 2018. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
- By dialing (888) 882-4478 or (647) 484-0475, if outside North America, and quoting conference ID code 7938223.
- 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 2018 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 49 LNG carriers (including nine newbuildings), 22 LPG carriers, seven Multi-gas carriers, and four conventional tankers. The Partnership’s ownership interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in a regasification teminal, which is currently under construction. Teekay LNG Partners is a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.
Teekay LNG Partners’ common units and preferred units trade on the New York Stock Exchange under the symbols “TGP”, “TGP PR A” and “TGP PR B”, respectively.
For Investor Relations
enquiries contact:
Ryan Hamilton
Tel: +1 (604) 609-2963
Website: www.teekay.com
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 across companies, and therefore 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, gain and losses on the sales 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 Partnership 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 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, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net income (loss), and refer to footnote (3) of the Consolidated Statements of Income (Loss) for a reconciliation of adjusted equity income to equity income (loss), the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.
Distributable Cash Flow (DCF) represents GAAP net income adjusted for write-down of vessels, 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, distributions relating to preferred units, 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. DCF 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 net income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.
Teekay LNG Partners L.P.
Consolidated Statements of Income (Loss)
(in thousands of U.S. Dollars, except unit and per unit data)
| Three Months Ended | Six Month Ended | |||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | ||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||
| Voyage revenues | 122,315 | 115,306 | 100,904 | 237,621 | 202,084 | |||||
| Voyage expenses | (7,951 | ) | (5,801 | ) | (996 | ) | (13,752 | ) | (2,433 | ) |
| Vessel operating expenses | (33,969 | ) | (28,467 | ) | (26,001 | ) | (62,436 | ) | (49,389 | ) |
| Depreciation and amortization | (29,794 | ) | (29,267 | ) | (26,794 | ) | (59,061 | ) | (52,914 | ) |
| General and administrative expenses | (7,096 | ) | (6,571 | ) | (4,642 | ) | (13,667 | ) | (8,799 | ) |
| Write-down of vessels(1) | (33,000 | ) | (18,662 | ) | (12,600 | ) | (51,662 | ) | (12,600 | ) |
| Restructuring charges (2) | — | (1,396 | ) | — | (1,396 | ) | — | |||
| Income from vessel operations | 10,505 | 25,142 | 29,871 | 35,647 | 75,949 | |||||
| Equity income (loss)(3) | 11,194 | 26,724 | (507 | ) | 37,918 | 5,380 | ||||
| Interest expense | (28,171 | ) | (24,706 | ) | (20,525 | ) | (52,877 | ) | (37,513 | ) |
| Interest income | 902 | 914 | 579 | 1,816 | 1,433 | |||||
| Realized and unrealized gain (loss) on non-designated derivative instruments(4) | 4,302 | 8,001 | (7,384 | ) | 12,303 | (6,197 | ) | |||
| Foreign currency exchange gain (loss)(5) | 8,443 | (1,273 | ) | (15,825 | ) | 7,170 | (19,393 | ) | ||
| Other income (expense) (6) | 350 | (52,582 | ) | 390 | (52,232 | ) | 781 | |||
| Net income (loss) before tax expense | 7,525 | (17,780 | ) | (13,401 | ) | (10,255 | ) | 20,440 | ||
| Income tax expense | (843 | ) | (779 | ) | (236 | ) | (1,622 | ) | (393 | ) |
| Net income (loss) | 6,682 | (18,559 | ) | (13,637 | ) | (11,877 | ) | 20,047 | ||
| Non-controlling interest in net income (loss) | 3,948 | (11,665 | ) | 2,436 | (7,717 | ) | 7,063 | |||
| Preferred unitholders’ interest in net income (loss) | 6,426 | 6,425 | 2,813 | 12,851 | 5,625 | |||||
| General Partner’s interest in net income (loss) | (68 | ) | (272 | ) | (378 | ) | (340 | ) | 147 | |
| Limited partners’ interest in net income (loss) | (3,624 | ) | (13,047 | ) | (18,508 | ) | (16,671 | ) | 7,212 | |
| Limited partners’ interest in net income (loss) per common unit: | ||||||||||
| • Basic | (0.05 | ) | (0.16 | ) | (0.23 | ) | (0.21 | ) | 0.09 | |
| • Diluted | (0.05 | ) | (0.16 | ) | (0.23 | ) | (0.21 | ) | 0.09 | |
| Weighted-average number of common units outstanding: | ||||||||||
| • Basic | 79,687,499 | 79,637,607 | 79,626,819 | |||||||