Highlights
- Reported GAAP net loss attributable to the partners and preferred unitholders of $168.5 million (impacted by $181.4 million of non-cash asset impairments) and adjusted net loss attributable to the partners and preferred unitholders(1) of $0.7 million (excluding items listed in Appendix A to this release) in the second quarter of 2018.
- Incurred GAAP loss from vessel operations of $132.0 million (impacted by $181.4 million of non-cash asset impairments) and generated total cash flow from vessel operations(1) of $162.2 million in the second quarter of 2018.
- Generated distributable cash flow(1) of $25.3 million, or $0.06 per common unit, in the second quarter of 2018.
- Entered into contract extensions for the Voyageur Spirit FPSO to April 2020 and the Petrojarl Cidade de Rio das Ostras (Ostras) FPSO to November 2018, plus extension options.
- In July 2018, refinanced 2019 bond maturities and a 2022 promissory note with a $700 million private placement of 8.5% senior unsecured notes maturing in 2023.
- In July 2018, entered into shipbuilding contracts to construct two LNG-fueled Aframax DP2 shuttle tanker newbuildings from Samsung Heavy Industries for delivery in late-2020 and early-2021, bringing the Partnership’s orderbook to six shuttle tankers.
HAMILTON, Bermuda, Aug. 02, 2018 (GLOBE NEWSWIRE) — Teekay Offshore GP LLC (TOO GP), 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 June 30, 2018.
| Three Months Ended | |||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||
| 2018 | 2018 (2) | 2017 | |||||||||||||
| (in thousands of U.S. Dollars) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
| GAAP FINANCIAL COMPARISON | |||||||||||||||
| Revenues | 320,354 | 323,199 | 264,792 | ||||||||||||
| (Loss) income from vessel operations | (132,019 | ) | 19,498 | 46,218 | |||||||||||
| Equity income | 8,346 | 13,998 | 3,425 | ||||||||||||
| Net (loss) income | (168,492 | ) | 16,060 | (16,466 | ) | ||||||||||
| Net (loss) income attributable to the partners and preferred unitholders | (168,500 | ) | 23,919 | (20,005 | ) | ||||||||||
| NON-GAAP FINANCIAL COMPARISON | |||||||||||||||
| Total cash flow from vessel operations (CFVO) (1) | 162,242 | 161,538 | 134,601 | ||||||||||||
| Distributable cash flow (DCF) (1) | 25,327 | 39,359 | 27,242 | ||||||||||||
| Adjusted net (loss) income attributable to the partners and preferred unitholders (1) | (732 | ) | 13,701 | 10,427 | |||||||||||
| (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). | |
| (2) | Please refer to Appendices to the release announcing the results for the first quarter of 2018 attached as Exhibit 1 to the Form 6-K filed with the Securities and Exchange Commission on May 17, 2018, for a reconciliation of these non-GAAP measures to the most directly comparable financial measures under GAAP. | |
GAAP net loss and non-GAAP adjusted net loss increased for the second quarter of 2018, compared to the same quarter of the prior year. Lower earnings resulted from the Voyageur Spirit and Ostras FPSO units operating at reduced rates on their contract extensions, the expiration of two dynamic positioning (DP)1 bareboat shuttle tanker charters in August and October 2017, a change in the estimated useful life of the tanker component for all shuttle tankers from 25 years to 20 years, effective January 1, 2018, and more dry-docking days in the second quarter of 2018. These decreases were partially offset by the start-up and contract commencement of the Randgrid FSO in October 2017, the Pioneiro de Libra FPSO in November 2017, and the Petrojarl I FPSO in early-May 2018, the redelivery by the Partnership of one in-chartered shuttle tanker in early 2018 and stronger results from the towage segment reflecting higher rates and utilization from a large tow assist and installation project for the Kaombo Norte FPSO. GAAP net loss for the second quarter of 2018, compared to the same quarter of the prior year, was also negatively impacted by the write-down of the Piranema Spirit and Ostras FPSO units as a result of a reassessment of the future redeployment assumptions for both units.
CEO Commentary
“For the second quarter, our results came in better than our guidance driven mainly by stronger than expected results from our shuttle tanker contract of affreightment (CoA) fleet and lower operating expenses on various FPSO units,” commented Ingvild Sæther, President and CEO of Teekay Offshore Group Ltd. “However, as expected, our overall results were down from the previous quarter primarily driven by lower rates on the Voyageur Spirit and Ostras FPSO units as a result of contract extensions, higher interest expense and liquidated damages received from a towage newbuilding delivery last quarter, partially offset by the start-up of the Petrojarl I FPSO in May 2018.”
“Since reporting earnings in May 2018, we have continued to successfully secure new charter contract extensions. We entered into a second contract extension for the Voyageur Spirit FPSO to at least April 2020, and an extension on the Ostras FPSO to November 2018, plus extension options. These valuable extensions provide additional forward fixed revenues totaling over $70 million, plus upside from a formula based on both oil price, and production volume, with no incremental investment by the Partnership, while also extending the timeframe available to find appropriate redeployment opportunities.”
“In July 2018, we refinanced our 2019 bond maturities and the $200 million promissory note due in 2022 with a new $700 million unsecured bond offering, which significantly improves the Partnership’s debt maturity profile and further highlights Brookfield’s continued strong support of the Partnership with $300 million of new capital provided by Brookfield towards this bond offering. Following the bond offering, Brookfield exercised its option to acquire an additional 2% of our general partner, bringing its ownership interest in our general partner to 51%. We look forward to continuing our pursuit of our near- and longer-term objectives with the ongoing support of our sponsors, Brookfield and Teekay Corporation.”
“Last week, we reached another important milestone for our shuttle tanker franchise with the order of two LNG-fueled Aframax DP2 shuttle tanker newbuildings, which we expect will further strengthen our position as the leading provider of CoA shuttle tanker services in the North Sea. Our customers require a reliable, long-term solution for securing offtake services from a large proportion of current and future production in the North Sea and these state-of-the-art newbuildings, together with our four existing newbuildings under construction, demonstrate our ongoing commitment to our shuttle tanker franchise and our customers.”
Ms. Sæther concluded, “Looking ahead, with a stronger balance sheet, market-leading positions, operational excellence and strong and supportive sponsors, we believe Teekay Offshore is well-positioned to benefit from the expected strong demand for offshore production, storage and transportation.”
Summary of Recent Events
Recontracting of FPSO Units
In July 2018, the Partnership secured a further one-year contract extension with Premier Oil to extend the employment of the Voyageur Spirit FPSO on the Huntington field to April 2020. Compared to the current contract, the new one-year extension, which takes effect in April 2019, maintains the same fixed charter rate and oil production tariff elements, but provides additional upside from a formula based on oil price, regardless of production volume, which provides incremental cash flow upside to the Partnership.
In July 2018, the Partnership agreed to a contract extension with Petrobras to extend the employment of the Ostras FPSO to November 2018, with options to extend up to January 2019, at an increased rate relative to the option period of the previous contract extension.
In both cases, these contract extensions represent material incremental cash flow contribution with no incremental investment by the Partnership. These activities also extend the timeframe available to secure appropriate future redeployment opportunities and potentially delay or eliminate costs associated with lay-up between employment opportunities. The Partnership continues to explore options for future redeployment opportunities for both assets.
Financing Update
In July 2018, the Partnership completed an upsized $700 million private placement of 8.5% senior unsecured notes maturing in 2023 (the Notes). Brookfield Business Partners L.P., together with its institutional partners (Brookfield), the holder of approximately 60% of Teekay Offshore’s outstanding common units, purchased $500 million principal amount of the Notes. The Partnership used a portion of the net proceeds from the issuance to (a) repurchase $225.2 million of the $300 million aggregate principal of its outstanding 6% senior notes maturing in 2019, (b) repurchase approximately NOK 910 million of the NOK 1,000 million aggregate principal of its NOK senior notes maturing in 2019 (the NOK notes) and settle approximately $40 million of the cross currency swaps which were an economic hedge to the NOK notes, and (c) repay at par an outstanding $200 million 10% promissory note held by Brookfield maturing in 2022 along with an associated $12 million early termination fee.
New Growth Project
In late-July 2018, the Partnership entered into shipbuilding contracts with Samsung Heavy Industries Co. Ltd. to construct two Aframax DP2 shuttle tanker newbuildings. These newbuildings will be constructed based on Teekay Offshore’s New Shuttle Spirit design which incorporates proven technologies to increase fuel efficiency and reduce emissions, including LNG propulsion technology. Upon expected delivery in late-2020 through early-2021, these vessels will join the Partnership’s CoA shuttle tanker portfolio in the North Sea to provide needed capacity to meet its customers’ needs.
Arendal Spirit UMS loan extension
In August 2018, the Partnership extended the mandatory prepayment date for the Arendal Spirit UMS debt facility to September 30, 2019 in exchange for a principal prepayment of $18 million, which is expected to be paid in the third quarter of 2018.
Operating Results
The following table highlights certain financial information for Teekay Offshore’s six segments: the FPSO segment, the shuttle tanker segment, the FSO segment, the 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).
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2018 | |||||||||||||||||||||||||||||||||||
| (in thousands of U.S. Dollars) | (unaudited) | ||||||||||||||||||||||||||||||||||
| FPSO Segment |
Shuttle Tanker Segment |
FSO Segment |
UMS Segment |
Towage Segment |
Conventional Tanker Segment |
Total | |||||||||||||||||||||||||||||
| GAAP FINANCIAL COMPARISON | |||||||||||||||||||||||||||||||||||
| Revenues | 124,053 | 142,047 | 33,840 | — | 15,510 | 4,904 | 320,354 | ||||||||||||||||||||||||||||
| (Loss) income from vessel operations | (156,506 | ) | 22,553 | 11,284 | (3,861 | ) | (3,077 | ) | (2,412 | ) | (132,019 | ) | |||||||||||||||||||||||
| Equity income | 8,346 | — | — | — | — | — | 8,346 | ||||||||||||||||||||||||||||
| NON-GAAP FINANCIAL COMPARISON | |||||||||||||||||||||||||||||||||||
| CFVO from (used for) consolidated vessels (i) | 56,939 | 61,101 | 24,232 | (2,208 | ) | 2,034 | (2,412 | ) | 139,686 | ||||||||||||||||||||||||||
| CFVO from equity-accounted vessels (i) | 22,556 | — | — | — | — | — | 22,556 | ||||||||||||||||||||||||||||
| Total CFVO (i) | 79,495 | 61,101 | 24,232 | (2,208 | ) | 2,034 | (2,412 | ) | 162,242 | ||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, 2017 | |||||||||||||||||||||||||||||||||||
| (in thousands of U.S. Dollars) | (unaudited) | ||||||||||||||||||||||||||||||||||
| FPSO Segment |
Shuttle Tanker Segment |
FSO Segment |
UMS Segment |
Towage Segment |
Conventional Tanker Segment |
Total | |||||||||||||||||||||||||||||
| GAAP FINANCIAL COMPARISON | |||||||||||||||||||||||||||||||||||
| Revenues | 110,247 | 132,964 | 10,798 | 3,089 | 4,229 | 3,465 | 264,792 | ||||||||||||||||||||||||||||
| Income (loss) from vessel operations | 31,601 | 38,293 | 1,178 | (17,050 | ) | (7,021 | ) | (783 | ) | 46,218 | |||||||||||||||||||||||||
| Equity income | 3,425 | — | — | — | — | — | 3,425 | ||||||||||||||||||||||||||||
| NON-GAAP FINANCIAL COMPARISON | |||||||||||||||||||||||||||||||||||
| CFVO from (used for) consolidated vessels (i) | 64,015 | 68,063 | 6,719 | (6,528 | ) | (3,446 | ) | (783 | ) | 128,040 | |||||||||||||||||||||||||
| CFVO from equity-accounted vessels (i) | 6,561 | — | — | — | — | — | 6,561 | ||||||||||||||||||||||||||||
| Total CFVO (i) | 70,576 | 68,063 | 6,719 | (6,528 | ) | (3,446 | ) | (783 | ) | 134,601 | |||||||||||||||||||||||||
| (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 decreased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to the write-down of the Piranema Spirit and Ostras FPSO units and lower charter rates from the Voyageur Spirit and Ostras FPSO units contract extensions.
Total cash flow from vessel operations (including equity-accounted vessels) increased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to the commencement of operations of the Pioneiro de Libra FPSO in late-November 2017 and the Petrojarl I FPSO in early-May 2018, partially offset by the lower charter rates from the Voyageur Spirit FPSO and Ostras FPSO units contract extensions.
Shuttle Tanker Segment
Income from vessel operations and cash flow from vessel operations decreased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to more dry-docking days during the second quarter of 2018 and the redelivery to the Partnership of two DP1 shuttle tankers on bareboat contracts, the Nordic Brasilia and Nordic Rio in August and October 2017, respectively (which are currently trading in the weak spot conventional tanker market), partially offset by the redelivery of an in-chartered vessel in January 2018 and the uplift from the East Coast of Canada charter contracts resulting from the delivery and start-up of the Beothuk Spirit, Norse Spirit and Dorset Spirit newbuildings in December 2017, January 2018 and May 2018, respectively.
FSO Segment
Income from vessel operations and cash flow from vessel operations increased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to the commencement of the Randgrid FSO charter contract in October 2017.
UMS Segment
Income from vessel operations and cash flow from vessel operations increased for the three months ended June 30, 2018, compared to the same quarter of the prior year, due to lower operating expenses as a result of the lay-up of the Arendal Spirit UMS since the fourth quarter of 2017.
Towage Segment
Income from vessel operations and cash flow from vessel operations increased for the three months ended June 30, 2018, compared to the same quarter of the prior year, due to the delivery of ALP Sweeper and ALP Keeper in October 2017 and February 2018, respectively, and higher charter rates and fleet utilization from the Kaombo Norte FPSO mobilization and field installation contract, which used a total of five vessels during the second quarter.
Conventional Tanker Segment
Income from vessel operations and cash flow from vessel operations decreased for the three months ended June 30, 2018, compared to the same quarter of the prior year, primarily due to the termination of the Blue Power time-charter-out contract in the fourth quarter of 2017 and subsequent trading of the vessel in the weak spot conventional tanker market during 2018. The time-charter-in contracts for both of the conventional tankers included in this segment are scheduled to expire in March 2019.
Teekay Offshore’s Fleet
The following table summarizes Teekay Offshore’s fleet as of August 1, 2018.
| Number of Vessels | |||||||||||||||||||||||||||||
| Owned Vessels | Chartered-in Vessels | Committed Newbuildings | Total | ||||||||||||||||||||||||||
| FPSO Segment | 8 | (i) | — | — | 8 | ||||||||||||||||||||||||
| Shuttle Tanker Segment | 29 | (ii) | 2 | 6 | (iii) | 37 | |||||||||||||||||||||||
| FSO Segment | 6 | — | — | 6 | |||||||||||||||||||||||||
| UMS Segment | 1 | — | — | 1 | |||||||||||||||||||||||||
| Towage Segment | 10 | — | — | 10 | |||||||||||||||||||||||||
| Conventional Segment | — | 2 | — | 2 | |||||||||||||||||||||||||
| Total | 54 | 4 | 6 | 64 | |||||||||||||||||||||||||
| (i) | Includes two FPSO units, the Cidade de Itajai and Pioneiro de Libra, in which Teekay Offshore’s ownership interest is 50 percent. | |
| (ii) | Includes six shuttle tankers in which Teekay Offshore’s ownership interest is 50 percent and one HiLoad DP unit. | |
| (iii) | Includes six DP2 shuttle tanker newbuildings scheduled for delivery in late-2019 through early-2021, two of which will operate under Teekay Offshore’s master agreement with Equinor (formerly Statoil) and four of which will join Teekay Offshore’s CoA portfolio in the North Sea. | |
Liquidity Update
As of June 30, 2018, the Partnership had total liquidity of $241.2 million. Pro forma for the Partnership’s $700 million bond offering, repayment of existing bonds and promissory note and various fees completed in July 2018, the Partnership’s total liquidity as of June 30, 2018 would have been approximately $350 million.
Conference Call
The Partnership plans to host a conference call on Thursday, August 2, 2018 at 12:00 p.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 1-888-394-8218 or 647-484-0475, if outside North America, and quoting conference ID code 9279971.
- 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 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.
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 March 21, 2018. Copies of this report are available on Teekay Offshore’s website, under “Investors – Teekay Offshore – 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 Offshore’s Investor Relations.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is a leading international midstream services provider to the offshore oil production industry, focused on the ownership and operation of critical infrastructure assets 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 with consolidated assets of approximately $5.4 billion, comprised of 64 offshore assets, including floating production, storage and offloading (FPSO) units, shuttle tankers (including six newbuildings), floating storage and offtake (FSO) units, long distance towing and offshore installation vessels, a unit for maintenance and safety (UMS) and conventional tankers. The majority of Teekay Offshore’s fleet is employed on medium-term, stable contracts.
Teekay Offshore’s common units and preferred units trade on the New York Stock Exchange under the symbols “TOO”, “TOO PR A”, “TOO PR B” and “TOO PR E”, 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, 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 (Used For) Vessel Operations (CFVO) represents (loss) income 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, write-off of deferred revenues and operating expenses and 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. 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 (loss) 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, 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 expense or recovery, vessel write-downs, gains or losses on the sale of vessels, vessel and business acquisition costs, distributions relating to equity financing of newbuilding installments and conversion costs, pre-operational expenses, distributions on the Partnership’s preferred units, gains on extinguishment of contingent liabilities and losses on non-cash accruals of contingent liabilities, amortization of the non-cash portion of revenue contracts, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, unrealized foreign exchange gains and losses, ineffectiveness for derivative instruments designated as hedges for accounting purposes, 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 and non-controlling interests proportionate share of such interests. 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 (loss) income, the most directly comparable GAAP measure reflected in the Pa