HAMILTON, BERMUDA -- (Marketwired) -- 05/19/16 -- Highlights
-- Generated distributable cash flow of $54.4 million, or $0.68 per common
unit, in the first quarter of 2016.
-- Generated total cash flow from vessel operations of $114.4 million in
the first quarter of 2016 compared to $119.0 million from the same
period of the prior year.
-- Declared first quarter 2016 cash distribution of $0.14 per common unit.
-- In February 2016, the world's first MEGI LNG carrier newbuilding, Creole
Spirit, commenced its five-year, fixed-rate charter with Cheniere
Energy.
-- In April 2016, Yamal LNG announced they have secured plant financing for
the Yamal LNG Project.
-- Total liquidity of approximately $264 million as at March 31, 2016.
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 March 31, 2016. During the first quarter of 2016, the Partnership generated distributable cash flow(1) of $54.4 million, or $0.68 per common unit, compared to $66.2 million, or $0.73 per common unit, in the same period of the prior year. The decrease in distributable cash flow was primarily due to lower revenues from the Partnership's 52 percent-owned Malt LNG joint venture, lower revenues from two of the Partnership's Suezmax tankers upon the charterer exercising its one-year extension options between September 2015 and January 2016, and lower capitalized distributions relating to equity financing of newbuildings as a result of the temporary reduction in cash distributions on the Partnership's common units announced in December 2015. These decreases were partially offset by the Creole Spirit liquefied natural gas (LNG) carrier commencing its charter contract in late-February 2016.
On April 1, 2016, the Partnership declared a cash distribution of $0.14 per common unit for the quarter ended March 31, 2016. The cash distribution was paid on May 13, 2016 to all common unitholders of record on April 29, 2016.
(1) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP).
CEO Commentary
"The Partnership continued to generate strong cash flows in the first quarter of 2016, delivering results that were in line with our expectations," commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. "While there continues to be volatility in the energy markets and a weak spot LNG shipping market, our business remains stable with approximately 97 percent of the Partnership's LNG fleet fixed in 2016. In addition, the pace of LNG newbuilding orders remains low and long-term fundamentals in the LNG industry remain positive."
Mr. Evensen continued, "In the second quarter of 2016, the Partnership will begin to benefit from a full quarter of cash flow from our first MEGI LNG carrier newbuilding, the Creole Spirit, which delivered in late-February and subsequently transported its first U.S. shale gas cargo to Europe from Cheniere's Sabine Pass LNG export facility. The Partnership's second MEGI LNG carrier newbuilding is now undergoing sea trials and is on-track to commence its five-year charter with Cheniere in the third quarter of 2016."
Mr. Evensen added, "The sponsors of the Yamal LNG project recently announced a significant milestone for the project in securing long-term plant financing. Further, our jointly-owned ARC7 Ice-Class LNG carrier newbuildings with China LNG Shipping reached a milestone of our own during April when steel was cut on our first vessel which is scheduled to deliver in the first quarter of 2018. Executing on Teekay LNG's robust pipeline of profitable growth projects that are scheduled to deliver in 2016 through 2020 remains a top priority, and we continue to make significant progress on securing financing for these remaining newbuildings."
Summary of Recent Events
Delivery Update on the First Two MEGI LNG Carrier Newbuildings for Cheniere Energy
In late-February 2016, Teekay LNG's first MEGI LNG carrier newbuilding, Creole Spirit, commenced its five-year fee-based charter contract with Cheniere Energy. The Partnership's second MEGI LNG carrier newbuilding, Oak Spirit, has commenced sea trials and is on schedule to begin its five-year fee-based contract with Cheniere Energy in the third quarter of 2016. Each vessel is expected to earn annual cash flow from vessel operations(1) and distributable cash flow of approximately $50 million and $30 million, respectively. In early-February 2016, Teekay LNG secured a 10-year, $360 million long-term lease facility, which will be used to finance both vessels.
Sale of the Bermuda Spirit and Hamilton Spirit Suezmax Tankers
During February and March 2016, Centrofin, the charterer of the Bermuda Spirit and Hamilton Spirit Suezmax tankers, exercised its options under the charter contract to purchase both vessels for a total purchase price of approximately $94 million. The Bermuda Spirit was sold on April 15, 2016 and the Hamilton Spirit was sold on May 17, 2016 and we used substantially all of the proceeds from these sales to repay existing term loans associated with these vessels.
As described in note 1 of the Consolidated Statements of (Loss) Income included in this release, an accounting loss of approximately $27 million was recognized in the three months ended March 31, 2016 as a result of Centrofin exercising its purchase options to acquire the two vessels. The accounting loss was mainly as a result of a timing difference between the different amortization periods applied to the vessels (25 years) and the $50 million of upfront payments received from Centrofin at the inception of the charter contracts (12 years).
Yamal LNG Financing and Project Update
In July 2014, Teekay LNG, through a 50/50 joint venture with China LNG Shipping (Holdings) Limited (China LNG), finalized agreements to provide six internationally-flagged Ice-Class LNG carriers for the Yamal LNG Project in Northern Russia. Our joint venture's vessels, which are scheduled to deliver between the first quarter of 2018 and the first quarter of 2020, will operate under time-charter contracts until December 31, 2045, plus extension options. In April 2016, Yamal LNG announced it had secured approximately $16.2 billion equivalent in long-term external plant financing for the Yamal LNG Project from Chinese and Russian sources. Yamal LNG has announced that these loan facilities, combined with previous financing provided by the National Welfare Fund is the full external funding required for the Yamal LNG Project. As of March 31, 2016, the Yamal LNG Project is reported to be 51 percent complete, with the first LNG train being over 65 percent complete.
The Teekay LNG/China LNG joint venture is currently in discussions with lenders on the financing of its Ice-Class LNG carrier newbuildings.
(1) CFVO is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. CFVO is not required by GAAP and should not be considered as an alternative to net income, equity income or any other indicator of the Partnership's performance required by GAAP. Please see Appendix E for a reconciliation of CFVO from consolidated vessels (a non-GAAP measure) as used in this release to the most directly comparable GAAP financial measure.
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $34.2 million for the quarter ended March 31, 2016, compared to $43.9 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net loss attributable to partners by $71.3 million and increasing net income attributable to the partners by $19.1 million for the three months ended March 31, 2016 and 2015, respectively, primarily relating to unrealized losses on derivative instruments, foreign currency exchange gains and losses and loss on sale of vessels as detailed in Appendix A to this release. Including these items, the Partnership reported net loss attributable to the partners, on a GAAP basis, of $37.1 million for three months ended March 31, 2016 and net income attributable to the partners of $63.1 million for the three months ended March 31, 2015.
Adjusted net income attributable to the partners for the three months ended March 31, 2016 decreased from the same period in the prior year primarily due to a temporary deferral of a portion of the charter payments for the Partnership's 52 percent-owned Marib Spirit and Arwa Spirit LNG carriers effective January 2016, lower charter rate on the redeployment of the Partnership's 52 percent-owned Methane Spirit after its original time charter contract expired in March 2015 and lower charter rates upon the charterer exercising its one-year extension options between September 2015 to January 2016 for the European Spirit, African Spirit and Asian Spirit Suezmax tankers. These decreases were partially offset by the Creole Spirit LNG carrier commencing its charter contract in late-February 2016 and increased revenue days for the Magellan Spirit LNG carrier due to the disputed termination of its charter contract and unscheduled off-hire in the first quarter of 2015.
For accounting purposes, the Partnership is required to recognize the changes in the fair value of its outstanding derivative instruments that are not designated as hedges for accounting purposes and any ineffectiveness for derivative instruments designated as hedges for accounting purposes in net (loss) income. This method of accounting does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized gains or losses on derivative instruments on the consolidated statements of (loss) income as detailed in notes 3, 4, 5 and 6 to the Consolidated Statements of (Loss) Income included in this release.
(1) Adjusted net income attributable to the partners is a non-GAAP financial measure. Please refer to Appendix A to this release for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under GAAP and information about specific items affecting net (loss) income which are typically excluded by securities analysts in their published estimates of the Partnership's financial results.
Operating Results
The following table highlights certain financial information for Teekay LNG's two segments: the Liquefied Gas Segment and the Conventional Tanker Segment (please refer to the "Teekay LNG's Fleet" section of this release below and Appendices C through F for further details).
Three Months Ended
March 31, 2016
(unaudited)
Liquefied Conventional
(in thousands of U.S. Gas Tanker
Dollars) Segment Segment Total
Net voyage revenues(i) 78,468 16,846 95,314
Vessel operating expenses (15,232) (6,621) (21,853)
Depreciation and
amortization (18,685) (4,926) (23,611)
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CFVO from consolidated
vessels(ii) 63,132 10,548 73,680
CFVO from equity accounted
vessels(iii) 40,749 - 40,749
Total CFVO(ii)(iii) 103,881 10,548 114,429
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Three Months Ended
March 31, 2015
(unaudited)
Liquefied Conventional
(in thousands of U.S. Gas Tanker
Dollars) Segment Segment Total
Net voyage revenues(i) 75,934 21,074 97,008
Vessel operating expenses (14,306) (7,328) (21,634)
Depreciation and
amortization (18,306) (5,263) (23,569)
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CFVO from consolidated
vessels(ii) 60,704 12,001 72,705
CFVO from equity accounted
vessels(iii) 46,304 - 46,304
Total CFVO(ii)(iii) 107,008 12,001 119,009
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(i) Net voyage revenues represents voyage revenues less voyage expenses,
which comprise all expenses relating to certain voyages, including bunker
fuel expenses, port fees, cargo loading and unloading expenses, canal tolls,
agency fees and commissions. Net voyage revenues is a non-GAAP financial
measure used by certain investors to measure the financial performance of
shipping companies. Please see Appendix C for a reconciliation of this non-
GAAP measure as used in this release to the most directly comparable GAAP
financial measure.
(ii) Cash flow from vessel operations (CFVO) from consolidated vessels
represents income (loss) from vessel operations before (a) depreciation and
amortization expense, (b) loss on sale of vessels, (c) amortization of in-
process contracts included in voyage revenues, and includes (d) adjustments
for direct financing leases to a cash basis, realized gains or losses on the
Toledo Spirit derivative contract and the revenue for two Suezmax tankers
recognized on a cash basis. CFVO is a non-GAAP financial measure used by
certain investors to measure the financial performance of shipping
companies. CFVO is not required by GAAP and should not be considered as an
alternative to net (loss) income, equity income or any other indicator of
the Partnership's performance required by GAAP. Please see Appendix E for a
reconciliation of CFVO from consolidated vessels (a non-GAAP measure) as
used in this release to the most directly comparable GAAP financial measure.
(iii) The Partnership's equity accounted investments for the three months
ended March 31, 2016 and 2015 include the Partnership's proportionate share
of its equity accounted vessels' CFVO. Please see Appendix F for a
description and reconciliation of CFVO from equity accounted vessels (a non-
GAAP measure) as used in this release to the most directly comparable GAAP
financial measure.
Liquefied Gas Segment
Cash flow from vessel operations from the Partnership's Liquefied Gas segment, excluding equity accounted vessels, was $63.1 million in the first quarter of 2016, compared to $60.7 million in the same quarter of the prior year. The increase was primarily due to the Creole Spirit commencing its five-year charter contract with Cheniere Energy in late-February 2016, partially offset by scheduled off-hire relating to an in-water survey for the Catalunya Spirit in the first quarter of 2016.
Cash flow from vessel operations from the Partnership's equity accounted vessels in the Liquefied Gas segment was $40.7 million in the first quarter of 2016 compared to $46.3 million in the same quarter of the prior year. The decrease was primarily due to a temporary deferral of a portion of the charter payments for the Marib Spirit and Arwa Spirit effective January 2016 and lower charter rates on the redeployment of the Methane Spirit after its original time-charter contract expired in March 2015. These vessels are all owned through the Partnership's 52 percent interest in the Malt LNG joint venture with Marubeni Corporation. These decreases were partially offset by increased cash flows from the Partnership's 50 percent interest in Exmar LPG BVBA as a result of two LPG carrier newbuildings that delivered in November 2015 and February 2016, net of the redelivery of one in-chartered vessel during the fourth quarter of 2015, and increased revenue days for the Partnership's 52 percent-owned Magellan Spirit due to its disputed charter contract termination and unscheduled off-hire in the first quarter of 2015.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $10.5 million in the first quarter of 2016, compared to $12.0 million in the same quarter of the prior year. The decrease was primarily related to an adjustment upon finalization of the Partnership's 2015 profit share relating to the Teide Spirit recorded in the first quarter of 2016 and lower charter rates upon the charterer exercising its one-year extension options between September 2015 to January 2016 for the European Spirit, African Spirit and Asian Spirit.
Teekay LNG's Fleet
The following table summarizes the Partnership's fleet as of May 18, 2016:
Number of Vessels
Owned In-Chartered
Vessels Vessels Newbuildings Total
LNG Carrier Fleet 30 (i) - 20 (i) 50
LPG/Multigas Carrier
Fleet 21 (ii) 2 (iii) 6 (iii) 29
Conventional Tanker
Fleet 6 - - 6
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Total 57 2 26 85
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(i) The Partnership's ownership interests in these vessels range from 20
percent to 100 percent.
(ii) The Partnership's ownership interests in these vessels range from 50
percent to 99 percent.
(iii) The Partnership's interest in these vessels is 50 percent.
Liquidity
As of March 31, 2016, the Partnership had total liquidity of $264.1 million (comprised of $114.1 million in cash and cash equivalents and $150.0 million in an undrawn credit facility).
Availability of 2015 Annual Report
Teekay LNG Partners L.P. filed its 2015 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 27, 2016. Copies are available on Teekay LNG's website, under "Investors - Teekay LNG Partners L.P. - 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.
Conference Call
The Partnership plans to host a conference call on Friday, May 20, 2016 at 10:00 a.m. (ET) to discuss the results for the first 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 (800) 505-9568 or (416) 204-9271, if outside North America,
and quoting conference ID code 9220450.
-- By accessing the webcast, which will be available on Teekay LNG's
website at www.teekay.com (the archive will remain on the web site for a
period of 30 days).
An accompanying First Quarter Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.
The conference call will be recorded and made available until Friday, June 3, 2016. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 9220450.
About Teekay LNG Partners L.P.
Teekay LNG Partners is one of the world's largest independent owners and operators of LNG carriers, providing LNG, LPG and crude oil marine transportation services primarily under long-term, fixed-rate charter contracts through its interests in 50 LNG carriers (including one LNG regasification unit and 20 newbuildings), 29 LPG/Multigas carriers (including two in-chartered LPG carriers and six newbuildings) and six conventional tankers. The Partnership's interests in these vessels range from 20 to 100 percent. Teekay LNG Partners L.P. is a publicly-traded master limited partnership (MLP) formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.
Teekay LNG Partners' common units trade on the New York Stock Exchange under the symbol "TGP".
Teekay LNG Partners L.P.
Consolidated Statements of (Loss) Income
(in thousands of U.S. Dollars, except units outstanding)
Three Months Ended
March 31, December 31, March 31,
2016 2015 2015
(unaudited) (unaudited) (unaudited)
Voyage revenues 95,771 103,642 97,326
Voyage expenses (457) (215) (318)
Vessel operating expenses (21,853) (24,046) (21,634)
Depreciation and amortization (23,611) (23,002) (23,569)
General and administrative expenses (5,428) (5,666) (6,708)
Loss on sale of vessels(1) (27,439) - -
Restructuring charges(2) - (491) -
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Income from vessel operations 16,983 50,222 45,097
Equity income(3) 9,498 23,588 18,058
Interest expense(4) (13,997) (10,827) (10,104)
Interest income 602 539 734
Realized and unrealized (loss) gain on
non-designated derivative
instruments(5) (38,089) 9,957 (14,032)
Foreign currency exchange (loss)
gain(6) (10,118) 5,712 25,930
Other income 419 355 443
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Net (loss) income before tax expense (34,702) 79,546 66,126
Income tax (expense) recovery (261) (2,431) 225
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Net (loss) income (34,963) 77,115 66,351
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Non-controlling interest in net (loss)
income 2,175 4,891 3,283
General Partner's interest in net
(loss) income (743) 1,444 8,642
Limited partners' interest in net
(loss) income (36,395) 70,780 54,426
Weighted-average number of common
units outstanding:
- Basic 79,557,872 79,528,595 78,514,335
- Diluted 79,557,872 79,596,288 78,553,194
Total number of common units
outstanding at end of period 79,571,820 79,551,012 78,537,584
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(1) Loss on sale of vessels relates to Centrofin exercising its purchase
options to acquire the Bermuda Spirit and Hamilton Spirit Suezmax tankers
during the three months ended March 31, 2016. The Bermuda Spirit was sold to
Centrofin on April 15, 2016 and the Hamilton Spirit was sold to Centrofin on
May 17, 2016 for gross proceeds of $94 million. The Partnership received a
total of $50 million from Centrofin prior to the commencement of the two
charters and thus, the purchase option prices were lower than they would
have otherwise been. Such amounts received from Centrofin were accounted for
as deferred revenue (prepayment of future charter payments) instead of as a
reduction in the purchase price of the vessels, and was amortized to
revenues over the 12-year charter periods on a straight-line basis.
Approximately $28 million of $50 million has been recognized to revenues
since the inception of the charters, which approximates the $27 million loss
on sale recognized in the first quarter of 2016.
(2) Restructuring charges for the three months ended December 31, 2015 are
primarily related to seafarer severance payments upon the charterer's
request to change the crew nationality from an Australian crew to an
international crew on the Alexander Spirit. This restructuring charge was
reimbursed by the charterer, which was included in voyage revenues.
(3) Equity income includes unrealized gains/losses on non-designated
derivative instruments, any ineffectiveness for derivative instruments
designated as hedges for accounting purposes and gains or losses on sales of
vessels as detailed in the table below:
Three Months Ended
March 31, December 31, March 31,
2016 2015 2015
Equity income 9,498 23,588 18,058
Proportionate share of unrealized loss
(gain) on non-designated derivative
instruments 3,978 (6,798) 1,126
Proportionate share of ineffective
portion of hedge accounted interest
rate swaps 160 (357) 394
Proportionate share of loss on sale of
vessel - 1,228 -
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Equity income excluding unrealized
gains/losses on designated and non-
designated derivative instruments and
loss on sale of vessel 13,636 17,661 19,578
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(4) Included in interest expense is ineffectiveness for derivative
instruments designated as hedges for accounting purposes, as detailed in the
table below:
Three Months Ended
March 31, December 31, March 31,
2016 2015 2015
Ineffective portion on qualifying cash
flow hedging instruments (1,398) - -
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(5) The realized (losses) gains on non-designated derivative instruments
relate to the amounts the Partnership actually paid or received to settle
non-designated derivative instruments and the unrealized (losses) gains on
non-designated derivative instruments relate to the change in fair value of
such non-designated derivative instruments, as detailed in the table below:
Three Months Ended
March 31, December 31, March 31,
2016 2015 2015
Realized (losses) gains relating to:
Interest rate swap agreements (6,643) (7,112) (7,305)
Toledo Spirit time-charter derivative
contract 630 (3,185) (570)
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(6,013) (10,297) (7,875)
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Unrealized (losses) gains relating to:
Interest rate swap agreements (20,657) 13,933 (4,357)
Interest rate swaption agreements (11,669) 4,551 -
Toledo Spirit time-charter derivative
contract 250 1,770 (1,800)
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(32,076) 20,254 (6,157)
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Total realized and unrealized (losses)
gains on non-designated derivative
instruments (38,089) 9,957 (14,032)
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(6) For accounting purposes, the Partnership is required to revalue all
foreign currency-denominated monetary assets and liabilities based on the
prevailing exchange rate at the end of each reporting period. This
revaluation does not affect the Partnership's cash flows or the calculation
of distributable cash flow, but results in the recognition of unrealized
foreign currency translation gains or losses in the Consolidated Statements
of (Loss) Income.
Foreign currency exchange (loss) gain includes realized losses relating to
the amounts the Partnership paid to settle the Partnership's non-designated
cross-currency swaps that were entered into as economic hedges in relation
to the Partnership's Norwegian Kroner (NOK) denominated unsecured bonds. The
Partnership issued NOK 700 million, NOK 900 million, and NOK 1,000 million
of unsecured bonds between May 2012 and May 2015. Foreign currency exchange
(loss) gain also includes unrealized gains (losses) relating to the change
in fair value of such derivative instruments, partially offset by unrealized
(losses) gains on the revaluation of the NOK bonds as detailed in the table
below:
Three Months Ended
March 31, December 31, March 31,
2016 2015 2015
Realized losses on cross-currency
swaps (2,291) (2,472) (1,401)
Unrealized gains (losses) on cross-
currency swaps 21,312 (7,934) (17,045)
Unrealized (losses) gains on
revaluation of NOK bonds (20,430) 11,310 16,216
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Teekay LNG Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
As at As at
March 31, December 31,
2016 2015
(unaudited) (unaudited)
ASSETS
Current
Cash and cash equivalents 114,145 102,481
Restricted cash - current 6,100 6,600
Lease receivable 94,392 -
Accounts receivable 12,235 22,081
Prepaid expenses 5,470 4,469
Current portion of net investments in direct
financing leases 17,986 20,606
Advances to affiliates 15,524 13,026
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Total current assets 265,852 169,263
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Restricted cash - long-term 100,090 104,919
Vessels and equipment
At cost, less accumulated depreciation 1,444,950 1,595,077
Vessels under capital leases, at cost, less
accumulated depreciation 292,145 88,215
Advances on newbuilding contracts 368,825 424,868
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Total vessels and equipment 2,105,920 2,108,160
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Investment in and advances to equity accounted
joint ventures 892,492 883,731
Net investments in direct financing leases 640,836 646,052
Other assets 11,409 20,811
Derivative assets 3,016 5,623
Intangible assets - net 76,551 78,790
Goodwill - liquefied gas segment 35,631 35,631
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Total assets 4,131,797 4,052,980
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LIABILITIES AND EQUITY
Current
Accounts payable 2,345 2,770
Accrued liabilities 32,734 37,456
Unearned revenue 15,857 19,608
Current portion of long-term debt 135,551 197,197
Current obligations under capital lease 64,024 4,546
Current portion of in-process contracts 12,886 12,173
Current portion of derivative liabilities 39,229 52,083
Advances from affiliates 13,393 22,987
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Total current liabilities 316,019 348,820
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Long-term debt 1,851,788 1,802,012
Long-term obligations under capital lease 167,857 54,581
Long-term unearned revenue 11,319 30,333
Other long-term liabilities 70,118 71,152
In-process contracts 17,570 20,065
Derivative liabilities 210,128 182,338
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Total liabilities 2,644,799 2,509,301
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Equity
Limited partners 1,425,633 1,472,327
General Partner 47,833 48,786
Accumulated other comprehensive loss (11,618) (2,051)
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Partners' equity 1,461,848 1,519,062
Non-controlling interest (1) 25,150 24,617
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Total equity 1,486,998 1,543,679
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Total liabilities and total equity 4,131,797 4,052,980
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(1) Non-controlling interest includes: a 30 percent equity interest in the
RasGas II joint venture (which owns three LNG carriers); a 31 percent equity
interest in Teekay BLT Corporation (a joint venture which owns two LNG
carriers); and a one percent equity interest in several of the Partnership's
ship-owning subsidiaries or joint ventures, which in each case represents
the ownership interest not owned by the Partnership.
Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
Three Months Ended
March 31, March 31,
2016 2015
(unaudited) (unaudited)
Cash and cash equivalents provided by (used
for)
OPERATING ACTIVITIES
Net (loss) income (34,963) 66,351
Non-cash items:
Unrealized loss on non-designated derivative
instruments 32,076 6,157
Depreciation and amortization 23,611 23,569
Loss on sale of vessels 27,439 -
Unrealized foreign currency exchange loss
(gain) and other 9,366 (28,914)
Equity income, net of dividends received of
nil (2015 - $45,000) (9,498) 26,942
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense 1,398 -
Change in operating assets and liabilities (11,589) (6,097)
Expenditures for dry docking (155) (511)
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Net operating cash flow 37,685 87,497
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FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 3,364 38,967
Scheduled repayments of long-term debt (29,792) (21,733)
Prepayments of long-term debt (20,000) (40,000)
Scheduled repayments and prepayment of capital
lease obligations (6,681) (1,094)
Decrease (increase) in restricted cash 6,591 (12,146)
Proceeds from equity offerings, net of
offering costs - 6,753
Cash distributions paid (11,364) (63,609)
Dividends paid to non-controlling interest (23) -
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Net financing cash flow (57,905) (92,862)
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INVESTING ACTIVITIES
Additional capital contributions to equity
accounted joint ventures (4,029) (1,533)
Loan repayments from equity accounted joint
ventures - 13,987
Receipts from direct financing leases 7,836 1,381
Proceeds from sale-lease back 179,434 -
Expenditures for vessels and equipment (151,357) (61,699)
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Net investing cash flow 31,884 (47,864)
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Increase (decrease) in cash and cash
equivalents 11,664 (53,229)
Cash and cash equivalents, beginning of the
period 102,481 159,639
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Cash and cash equivalents, end of the period 114,145 106,410
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Teekay LNG Partners L.P.
Appendix A - Specific Items Affecting Net (Loss) Income
(in thousands of U.S. Dollars)
Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net (loss) income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.
Three Months Ended
March 31,
2016 2015
(unaudited) (unaudited)
Net (loss) income - GAAP basis (34,963) 66,351
Less:
Net income attributable to non-controlling
interests (2,175) (3,283)
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Net (loss) income attributable to the partners (37,138) 63,068
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Add (subtract) specific items affecting net
income:
Unrealized foreign currency exchange loss
(gain)(1) 7,740 (27,262)
Unrealized losses on non-designated
derivative instruments(2) 32,076 6,157
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense(3) 1,398 -
Unrealized losses on non-designated and
designated derivative instruments and other
items from equity accounted investees(4) 4,138 1,520
Loss on sale of vessels(5) 27,439 -
Non-controlling interests' share of items
above(6) (1,502) 436
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Total adjustments 71,289 (19,149)
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Adjusted net income attributable to the
partners 34,151 43,919
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(1) Unrealized foreign exchange losses (gains) primarily relate to the
Partnership's revaluation of all foreign currency-denominated monetary
assets and liabilities based on the prevailing exchange rate at the end of
each reporting period and unrealized losses (gains) on the cross-currency
swaps economically hedging the Partnership's NOK bonds and excludes the
realized (losses) gains relating to the cross currency swaps for the NOK
bonds.
(2) Reflects the unrealized losses due to changes in the mark-to-market
value of derivative instruments that are not designated as hedges for
accounting purposes. See note 5 to the Consolidated Statements of (Loss)
Income included in this release for further details.
(3) Reflects the ineffectiveness for derivative instruments designated as
hedges for accounting purposes. See note 4 to the Consolidated Statements of
(Loss) Income included in this release for further details
(4) Reflects the unrealized losses due to changes in the mark-to-market
value of derivative instruments that are not designated as hedges for
accounting purposes and any ineffectiveness for derivative instruments
designated as hedges for accounting purposes within the Partnership's
equity-accounted investments. See note 3 to the Consolidated Statements of
(Loss) Income included in this release for further details.
(5) Loss on sale of vessels relates to Centrofin exercising its purchase
options to acquire the Bermuda Spirit and Hamilton Spirit Suezmax tankers
during the three months ended March 31, 2016. The Bermuda Spirit was sold to
Centrofin on April 15, 2016 and the Hamilton Spirit was sold to Centrofin on
May 17, 2016 for gross proceeds of $94 million. The Partnership received a
total of $50 million from Centrofin prior to the commencement of the two
charters and thus, the purchase option prices were lower than they would
have otherwise been. Such amounts received from Centrofin were accounted for
as deferred revenue (prepayment of future charter payments) instead of as a
reduction in the purchase price of the vessels, and was amortized to
revenues over the 12-year charter periods on a straight-line basis.
Approximately $28 million of $50 million has been recognized to revenues
since the inception of the charters, which approximates the $27 million loss
on sale recognized in the first quarter of 2016.
(6) Items affecting net (loss) income include items from the Partnership's
consolidated non-wholly-owned subsidiaries. The specific items affecting net
(loss) income are analyzed to determine whether any of the amounts
originated from a consolidated non-wholly-owned subsidiary. Each amount that
originates from a consolidated non-wholly-owned subsidiary is multiplied by
the non-controlling interests' percentage share in this subsidiary to arrive
at the non-controlling interests' share of the amount. The amount identified
as "non-controlling interests' share of items listed above" in the table
above is the cumulative amount of the non-controlling interests'
proportionate share of items listed in the table.
Teekay LNG Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures Distributable Cash Flow (DCF)
(in thousands of U.S. Dollars, except units outstanding)
Distributable cash flow represents net income adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, ineffectiveness for derivative instruments designated as hedges for accounting purposes, distributions relating to equity financing of newbuilding installments, equity income, adjustments for direct financing leases to a cash basis, loss on sale of vessels and foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is not required by GAAP and should not be considered as an alternative to net (loss) income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net (loss) income.
Three Months Ended
March 31,
2016 2015
(unaudited)
Net (loss) income: (34,963) 66,351
Add:
Depreciation and amortization 23,611 23,569
Loss on sale of vessels 27,439 -
Partnership's share of equity accounted
joint ventures' DCF net of estimated
maintenance capital expenditures(1) 20,573 25,209
Direct finance lease payments received in
excess of revenue recognized 4,866 4,401
Distributions relating to equity financing
of newbuildings - 3,916
Unrealized losses on non-designated
derivative instruments 32,076 6,157
Ineffective portion on qualifying cash flow
hedging instruments included in interest
expense 1,398 -
Unrealized foreign currency exchange loss
(gain) 7,740 (27,262)
Less:
Deferred income tax and other non-cash items (1,372) (1,068)
Equity income (9,498) (18,058)
Estimated maintenance capital expenditures (11,976) (11,662)
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Distributable Cash Flow before Non-controlling
interest 59,894 71,553
Non-controlling interests' share of DCF before
estimated maintenance capital expenditures (5,490) (5,352)
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Distributable Cash Flow 54,404 66,201
Amount of cash distributions attributable to
the General Partner (227) (8,653)
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Limited partners' Distributable Cash Flow 54,177 57,548
Weighted-average number of common units
outstanding 79,557,872 78,514,335
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Distributable Cash Flow per limited partner
unit 0.68 0.73
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(1) The estimated maintenance capital expenditures relating to the
Partnership's share of equity accounted joint ventures were $7.4 million and
$7.0 million for the three months ended March 31, 2016 and 2015,
respectively.
Teekay LNG Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Net Voyage Revenues
(in thousands of U.S. Dollars)
Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Net voyage revenues is a non-GAAP measure used by certain investors to measure the financial performance of shipping companies. Net voyage revenues is not required by GAAP and should not be considered as an alternative to voyage revenues or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended March 31, 2016
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Voyage revenues 78,585 17,186 95,771
Voyage expenses (117) (340) (457)
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Net voyage revenues 78,468 16,846 95,314
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Three Months Ended March 31, 2015
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Voyage revenues 75,934 21,392 97,326
Voyage expenses - (318) (318)
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Net voyage revenues 75,934 21,074 97,008
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Teekay LNG Partners L.P.
Appendix D - Supplemental Segment Information
(in thousands of U.S. Dollars)
Three Months Ended March 31, 2016
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Net voyage revenues (See
Appendix C) 78,468 16,846 95,314
Vessel operating expenses (15,232) (6,621) (21,853)
Depreciation and amortization (18,685) (4,926) (23,611)
General and administrative
expenses (4,362) (1,066) (5,428)
Loss on sale of vessels - (27,439) (27,439)
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Income (loss) from vessel
operations 40,189 (23,206) 16,983
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Three Months Ended March 31, 2015
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Net voyage revenues (See
Appendix C) 75,934 21,074 97,008
Vessel operating expenses (14,306) (7,328) (21,634)
Depreciation and amortization (18,306) (5,263) (23,569)
General and administrative
expenses (5,325) (1,383) (6,708)
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Income from vessel operations 37,997 7,100 45,097
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Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Consolidated Vessels
(in thousands of U.S. Dollars)
Cash flow from vessel operations from consolidated vessels represents income (loss) from vessel operations before (a) depreciation and amortization expense, (b) loss on sale of vessels, (c) amortization of in-process contracts included in voyage revenues, and includes (d) adjustments for direct financing leases to a cash basis, realized gains or losses on the Toledo Spirit derivative contract, and the revenue for two Suezmax tankers recognized a cash basis. The Partnership's direct financing leases for the periods indicated relate to the Partnership's 69 percent interest in two LNG carriers, the Tangguh Sago and Tangguh Hiri, and the two LNG carriers acquired from Awilco LNG ASA. The Partnership's cash flow from vessel operations from consolidated vessels does not include the Partnership's cash flow from vessel operations from its equity accounted joint ventures. Cash flow from vessel operations is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's consolidated vessels. Cash flow from vessel operations from consolidated vessels is not required by GAAP and should not be considered as an alternative to net (loss) income or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended March 31, 2016
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Income (loss) from vessel
operations (See Appendix D) 40,189 (23,206) 16,983
Depreciation and amortization 18,685 4,926 23,611
Loss on sale of vessels - 27,439 27,439
Amortization of in-process
contracts included in voyage
revenues (608) (278) (886)
Direct finance lease payments
received in excess of revenue
recognized 4,866 - 4,866
Realized gain on Toledo Spirit
derivative contract - 630 630
Cash flow adjustment for two
Suezmax tankers(1) - 1,037 1,037
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Cash flow from vessel
operations from consolidated
vessels 63,132 10,548 73,680
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Three Months Ended March 31, 2015
(unaudited)
Liquefied Conventional
Gas Tanker
Segment Segment Total
Income from vessel operations
(See Appendix D) 37,997 7,100 45,097
Depreciation and amortization 18,306 5,263 23,569
Amortization of in-process
contracts included in voyage
revenues - (278) (278)
Direct finance lease payments
received in excess of revenue
recognized 4,401 - 4,401
Realized loss on Toledo Spirit
derivative contract - (570) (570)
Cash flow adjustment for two
Suezmax tankers(1) - 486 486
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Cash flow from vessel
operations from consolidated
vessels 60,704 12,001 72,705
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(1) The Partnership's charter contracts for two of its Suezmax tankers, the
Bermuda Spirit and Hamilton Spirit, were amended in 2012, which had the
effect of reducing the daily charter rates by $12,000 per day for duration
of 24 months ending September 30, 2014. The cash impact of the change in
hire rates is not fully reflected in the Partnership's statements of (loss)
income and comprehensive (loss) income as the change in the lease payments
is being recognized on a straight-line basis over the term of the lease. In
addition, the charterer of these two Suezmax tankers exercised its purchase
options on these two vessels as permitted under the charter contract
agreements and as a result, the charter contracts have been reclassified as
sales-type leases.
Teekay LNG Partners L.P.
Appendix F - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Equity Accounted Vessels
(in thousands of U.S. Dollars)
Cash flow from vessel operations from equity accounted vessels represents the Partnership's proportionate share of income from vessel operations from equity accounted vessels before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts, and includes (c) adjustments for direct financing leases to a cash basis. Cash flow from vessel operations from equity accounted vessels is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity accounted joint ventures. Cash flow from vessel operations from equity accounted vessels is not required by GAAP and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended
March 31, 2016 March 31, 2015
(unaudited) (unaudited)
At Partnership's At Partnership's
100% Portion(1) 100% Portion(1)
Net voyage revenues 129,200 58,413 139,031 63,745
Vessel operating
expenses (41,581) (19,367) (39,686) (18,562)
Depreciation and
amortization (24,609) (12,311) (23,477) (11,904)
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Income from vessel
operations of equity
accounted vessels 63,010 26,735 75,868 33,279
Other items, including
interest expense and
realized and
unrealized gain
(loss) on derivative
instruments (42,242) (17,237) (36,791) (15,221)
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Net income / equity
income of equity
accounted vessels 20,768 9,498 39,077 18,058
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Income from vessel
operations 63,010 26,735 75,868 33,279
Depreciation and
amortization 24,609 12,311 23,477 11,904
Direct finance lease
payments received in
excess
of revenue recognized 8,786 3,186 8,584 3,134
Amortization of in-
process revenue
contracts (2,899) (1,483) (3,959) (2,013)
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Cash flow from vessel
operations from
equity accounted
vessels 93,506 40,749 103,970 46,304
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(1) The Partnership's equity accounted vessels for the three months ended
March 31, 2016 and 2015 include: the Partnership's 40 percent ownership
interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers;
the Partnership's ownership interest ranging from 49 percent to 50 percent
in the Excalibur and Excelsior joint ventures, which owns one LNG carrier
and one regasification unit, respectively; the Partnership's 33 percent
ownership interest in four LNG carriers servicing the Angola LNG project;
the Partnership's 52 percent ownership interest in Malt LNG Netherlands
Holding B.V., the joint venture between the Partnership and Marubeni
Corporation, which owns six LNG carriers; the Partnership's 50 percent
ownership interest in Exmar LPG BVBA, which owns and in-charters 23 vessels,
including six newbuildings, as at March 31, 2016, compared to 24 vessels
owned and in-chartered, including eight newbuildings, as at March 31, 2015;
the Partnership's 30 percent ownership interest in two LNG carrier
newbuildings and 20 percent ownership interest in two LNG carrier
newbuildings for BG Group acquired in June 2014; and the Partnership's 50
percent ownership interest in six LNG carrier newbuildings in the joint
venture between the Partnership and China LNG Shipping (Holdings) Limited
established in July 2014.
Forward-Looking Statements
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: expected profitability of existing growth projects; the timing of newbuilding vessel deliveries and project start-up and the commencement of related contracts; the stability and growth of the Partnership's business and future cash flows, including the cash flow impact relating to the two MEGI LNG carrier newbuildings commencing charters to Cheniere during 2016; the percentage of the Partnership's LNG fleet that is subject to fixed-rate charters in 2016; fundamentals in the liquefied gas industry; the impact of the long-term plant financing for the Yamal LNG Project on the financing of the Partnership's ARC7 Ice-Class LNG carrier newbuildings; the financing of the Partnership's remaining newbuildings; and the charter payment deferral on the Partnership's two 52 percent-owned LNG carriers on charter to the Yemen LNG project. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: potential shipyard and project construction delays, newbuilding specification changes or cost overruns; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels; factors affecting the outcome of the Partnership's dispute over the Magellan Spirit; the Partnership's and the Partnership's joint ventures' ability to raise financing for its existing newbuildings and projects; factors affecting the resumption of the LNG plant in Yemen; the inability of the Partnership to collect the deferred charter payments from the Yemen LNG project; and other factors discussed in Teekay LNG Partners' filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2015. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts:
Teekay LNG Partners L.P.
Investor Relations enquiries
Ryan Hamilton
+1 (604) 609-6442
www.teekay.com
Source: Teekay LNG Partners L.P.
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