May 18, 2016 - 10:00 PM EDT
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Teekay Offshore Partners Reports First Quarter 2016 Results

HAMILTON, BERMUDA -- (Marketwired) -- 05/19/16 -- Highlights

--  Generated distributable cash flow(1) of $62.0 million, or $0.58 per
    common unit, in the first quarter of 2016.

--  Generated cash flow from vessel operations(2) of $166.1 million in the
    first quarter of 2016, an increase of 22 percent from the same period of
    the prior year.

--  Declared first quarter 2016 cash distribution of $0.11 per common unit.

--  Executing on financing initiatives to address Teekay Offshore's 2016 and
    2017 funding requirements, which the Partnership expects to finalize in
    June 2016.

--  Completed the sale of two conventional tankers and one shuttle tanker
    for total gross proceeds of approximately $55 million.

--  Total liquidity of approximately $336 million as at March 31, 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 distributable cash flow to the most directly
     comparable financial measure under United States generally accepted
     accounting principles (GAAP).

(2)  Cash flow from vessel operations (CFVO) is a non-GAAP financial measure
     used by certain investors to measure the financial performance of
     shipping companies. CFVO 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 refer to Appendix E and F
     included in this release for a description and reconciliation of this
     non-GAAP financial measure to the most directly comparable GAAP
     financial measure.

Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE: TOO), today reported the Partnership's results for the quarter ended March 31, 2016. During the first quarter of 2016, the Partnership generated distributable cash flow(1) of $62.0 million, compared to $60.6 million in the same period of the prior year. The increase in distributable cash flow was primarily due to the acquisition of the Petrojarl Knarr (Knarr) floating production, storage and offloading (FPSO) unit in July 2015, the commencement of the Arendal Spirit unit for maintenance and safety (UMS) charter contract in June 2015, and the commencement of the East Coast Canada shuttle tanker contracts in June 2015. These increases were partially offset by the reduction in revenue earned on the Petrojarl Varg (Varg) FPSO unit as it prepares to come off field in August 2016, the expiration of two shuttle tanker contracts in the second quarter of 2015, and the sale of two conventional tankers and one shuttle tanker during 2015.

On April 1, 2016, the Partnership declared a cash distribution of $0.11 per common unit for the quarter ended March 31, 2016. The cash distribution was paid on May 13, 2016 to all unitholders of record on April 29, 2016.

CEO Commentary

"The Partnership generated higher cash flows in the first quarter of 2016 compared to the same period in the prior year as our fleet continues to operate at high uptime and utilization," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "The increase in cash flow was mainly driven by various growth projects that delivered during 2015, which more than offset the lower revenue from the Varg FPSO as the unit begins to wind down operations after almost 18 years on the Varg field. We continue to receive a strong level of customer interest in the Varg FPSO for various other offshore production opportunities in Norway."

Mr. Evensen continued, "Since reporting our earnings in February 2016, we have made significant progress toward addressing the Partnership's 2016 and 2017 funding needs and I am pleased to report that we have completed, or are nearing completion of, a number of financing initiatives which we believe will cover all of our liquidity requirements over the medium-term. This includes new committed facilities for our East Coast Canada shuttle tankers, refinancing $75 million of the existing Varg FPSO debt facility, an agreement to extend the majority of our 2017 and 2018 Norwegian bond maturities to late-2018, and discussions with the shipyard to defer the delivery of two UMS newbuildings. We are also in advanced discussions with investors on a new $200 million preferred equity issuance."

Mr. Evensen continued, "Upon our anticipated completion of these various initiatives, which we expect will occur prior to the end of June 2016, the Partnership's financial position will be significantly strengthened. Importantly, we will have secured all the necessary financing for our pipeline of growth projects delivering through early-2018 which, once delivered, are expected to add over $200 million to Teekay Offshore's annual cash flow from vessel operations, including our 50 percent share of cash flows from the Libra FPSO."

Summary of Recent Events

Financing Initiatives

Since early 2016, the Partnership has been negotiating a series of financing initiatives intended to fund its unfunded capital expenditures and upcoming debt maturities. The main financing initiatives include:


--  obtaining additional bank financing, including a $250 million debt
    facility for the three East Coast of Canada newbuilding shuttle tankers,
    a $40 million debt facility for six un-mortgaged vessels, and a new $35
    million tranche added to an existing debt facility secured by two
    shuttle tankers;
--  refinancing $75 million of an existing revolving credit facility
    relating to the Varg FPSO unit;
--  extending the majority of the principal maturity payments to late-2018
    for two of the Partnership's existing NOK senior unsecured bonds,
    previously due in January 2017 and January 2018;
--  extending beyond 2018 the maturity date of $200 million of existing
    intercompany loans made by Teekay Corporation to the Partnership;
--  issuing $200 million of preferred equity; and
--  deferring the delivery of the two remaining UMS newbuildings.

Completion of each of these initiatives is subject to, and conditioned upon, completion of each of the other initiatives described above, as well as the financing initiatives being undertaken by Teekay Corporation. Please refer to Teekay Corporation's first quarter 2016 earnings release for additional information regarding these initiatives.

In April 2016, the Partnership completed the new $35 million tranche on an existing debt facility secured by two shuttle tankers. As of May 18, 2016, the Partnership has received lender commitments for the other bank financing initiatives, received a majority of lender commitments for the Varg FPSO refinancing, received commitments from a majority of the NOK bondholders to extend the bond maturities (only 66.7% of the votes are required to approve the proposal), extended the $200 million Teekay Corporation intercompany loan maturity, is in discussions to defer the delivery of the two remaining UMS newbuildings, and is in advanced discussions relating to the preferred equity financing. The Partnership expects to complete all these initiatives before June 30, 2016.

Arendal Spirit UMS Update

On April 21, 2016, during the process of lifting the gangway connecting the Arendal Spirit UMS to an FPSO unit in a period of heavy waves, the gangway of the Arendal Spirit suffered extensive damage, resulting in the UMS being declared off-hire by its charterer, Petrobras. The Partnership is arranging to replace this gangway with the gangway from the second UMS newbuilding, which is currently in the process of being transported from the shipyard in China to Brazil. The Partnership anticipates having the new gangway installed on the Arendal Spirit by mid-June, at which point the unit is expected to recommence full operations.

Sale-leaseback of Two Conventional Tankers

In March 2016, the Partnership completed the sale of two conventional tankers, the Kilimanjaro Spirit and Fuji Spirit, to a third party for aggregate sales proceeds of approximately $50 million. After repaying existing debt secured by these vessels, this transaction added approximately $30 million to the Partnership's liquidity position. Related to the sale of these vessels, the Partnership has arranged to charter back both vessels for a period of three-years with an additional one-year extension option at $23,000 per day and $22,750 per day, respectively. One vessel has been fixed on a two-year time charter-out contract at $25,000 per day and the other vessel is currently trading in the spot conventional tanker market.

Sale of One Shuttle Tanker

In January 2016, the Partnership completed the sale of one shuttle tanker, the Navion Torinita, to a third party for aggregate sale proceeds of approximately $5 million.

Financial Summary

The Partnership reported adjusted net income attributable to the partners(1) of $44.0 million for the quarter ended March 31, 2016, compared to $40.5 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 decreasing net income by $48.4 million and $57.7 million for the quarters ended March 31, 2016 and 2015, respectively, as detailed in Appendix A to this release. Including these items, the Partnership reported, on a GAAP basis, net loss attributable to the partners of $4.4 million for the first quarter of 2016, compared to a net loss attributable to the partners of $17.2 million in the same period of the prior year. Net revenues(2) increased to $288.4 million for the first quarter of 2016, compared to $242.5 million in the same period of the prior year.

Adjusted net income attributable to the partners for the three months ended March 31, 2016 increased from the same period in the prior year mainly due to the acquisition of the Knarr FPSO unit on July 1, 2015, the Arendal Spirit UMS commencing its charter contract in June 2015, and the commencement of the East Coast of Canada shuttle tanker contracts in June 2015. These increases were partially offset by a reduction in revenue earned relating to the Varg FPSO unit as it prepares to come off field in August 2016, the expiration of two shuttle tanker contracts in the second quarter of 2015, and the sale of two conventional tankers and one shuttle tanker during 2015.

For accounting purposes, the Partnership is required to recognize, through the consolidated statements of (loss) income, changes in the fair value of derivative instruments as unrealized gains or losses. This revaluation does not affect the economics of any hedging transactions nor does it have any impact on the Partnership's actual cash flows or the calculation of its distributable cash flow.

(1)  Adjusted net income attributable to the partners is a non-GAAP
     financial measure. Please refer to Appendix A included in this release
     for a reconciliation of this non-GAAP financial measure to the most
     directly comparable financial measure under GAAP and information about
     specific items affecting net loss that are typically excluded by
     securities analysts in their published estimates of the Partnership's
     financial results.

(2)  Net revenues is a non-GAAP financial measure used by certain investors
     to measure the financial performance of shipping companies. Please
     refer to Appendix C included in this release for a reconciliation of
     this non-GAAP financial measure to the most directly comparable
     financial measure under GAAP.

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 F for further details).

----------------------------------------------------------------------------
                                           Three Months Ended
(in thousands of U.S.                        March 31, 2016
 Dollars)                                      (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                   FPSO      Tanker         FSO         UMS
                                Segment     Segment     Segment     Segment
----------------------------------------------------------------------------

Net revenues(1)                 132,784     112,246      14,151      13,482
Vessel operating expenses       (46,915)    (28,881)     (5,473)     (7,927)
Time-charter hire expense             -     (14,812)          -           -
Depreciation and
 amortization                   (37,583)    (30,648)     (2,172)     (1,696)
----------------------------------------------------------------------------
CFVO from consolidated
 vessels(2)                      72,131      62,878       9,836       4,862
CFVO from equity accounted
 vessels(3)                       8,233           -           -           -
----------------------------------------------------------------------------
Total CFVO(2)(3)                 80,364      62,878       9,836       4,862
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
                                           Three Months Ended
(in thousands of U.S.                        March 31, 2015
Dollars)                                       (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                   FPSO      Tanker         FSO         UMS
                                Segment     Segment     Segment  Segment(4)
----------------------------------------------------------------------------

Net revenues(1)                  98,275     118,561      14,354           -
Vessel operating expenses       (36,766)    (34,317)     (6,359)          -
Time-charter hire expense             -      (6,321)          -           -
Depreciation and
 amortization                   (24,485)    (28,367)     (2,920)          -
----------------------------------------------------------------------------
CFVO from consolidated
 vessels(2)                      44,118      67,738       8,531        (507)
CFVO from equity accounted
 vessel(3)                        8,854           -           -           -
----------------------------------------------------------------------------
Total CFVO(2)(3)                 52,972      67,738       8,531        (507)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
                                           Three Months Ended
(in thousands of U.S.                        March 31, 2016
 Dollars)                                     (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------

Net revenues(1)                       7,565           8,136         288,364
Vessel operating expenses            (4,885)         (1,271)        (95,352)
Time-charter hire expense                 -            (510)        (15,322)
Depreciation and
 amortization                        (2,823)              -         (74,922)
----------------------------------------------------------------------------
CFVO from consolidated
 vessels(2)                           1,967           6,182         157,856
CFVO from equity accounted
 vessels(3)                               -               -           8,233
----------------------------------------------------------------------------
Total CFVO(2)(3)                      1,967           6,182         166,089
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
                                           Three Months Ended
(in thousands of U.S.                        March 31, 2015
Dollars)                                      (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------

Net revenues(1)                       3,782           7,494         242,466
Vessel operating expenses              (751)         (1,374)        (79,567)
Time-charter hire expense              (662)              -          (6,983)
Depreciation and
 amortization                          (548)         (1,674)        (57,994)
----------------------------------------------------------------------------
CFVO from consolidated
 vessels(2)                           2,059           5,868         127,807
CFVO from equity accounted
 vessel(3)                                -               -           8,854
----------------------------------------------------------------------------
Total CFVO(2)(3)                      2,059           5,868         136,661
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1)  Net revenues is a non-GAAP financial measure used by certain investors
     to measure the financial performance of shipping companies. Please
     refer to Appendix C, included in this release for a reconciliation of
     this non-GAAP financial measure to the most directly comparable GAAP
     financial measure.

(2)  CFVO from consolidated vessels represents income (loss) from vessel
     operations before depreciation and amortization expense, write-down and
     gain on sale of vessels, and amortization of the non-cash portion of
     revenue contracts, and includes the realized losses on the settlement
     of foreign exchange forward contracts and adjusts for direct financing
     leases to a cash basis. CFVO is a non-GAAP financial measure used by
     certain investors to measure the financial performance of shipping
     companies. CFVO 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 refer to Appendix E included in
     this release for a description and reconciliation of this non-GAAP
     financial measure to the most directly comparable GAAP financial
     measure.

(3)  CFVO from equity accounted vessels represents the Partnership's
     proportionate share of CFVO from its equity-accounted vessels, the
     Cidade de Itajai FPSO unit and the Libra FPSO conversion project.
     Please see Appendix F for a description and reconciliation of CFVO from
     equity accounted vessels (a non-GAAP financial measure) as used in this
     release to the most directly comparable GAAP financial measure.

(4)  The Partnership acquired 100 percent of the outstanding shares of
     Logitel Offshore Holding AS (Logitel) during the third quarter of 2014
     and operations began in the second quarter of 2015.

FPSO Segment

Cash flow from vessel operations from the Partnership's FPSO segment (which also includes the results from two equity-accounted FPSO units), increased to $80.4 million for the first quarter of 2016, compared to $53.0 million for the same period of the prior year, primarily due to the acquisition of the Knarr FPSO unit from Teekay Corporation in July 2015, partially offset by a reduction in revenue earned relating to the Varg FPSO unit as it prepares to come off field in August 2016. In accordance with the Varg FPSO charter contract, from February 1, 2016 to August 1, 2016, the Partnership does not receive the capital portion of the charter hire but does continue to receive the operating portion of the charter hire.

Shuttle Tanker Segment

Cash flow from vessel operations from the Partnership's Shuttle Tanker segment decreased to $62.9 million for the first quarter of 2016 compared to $67.7 million for the same period of the prior year, primarily due to the sale of Navion Svenita in March 2015 and the expirations of a long-term contract of affreightment and a time-charter out contract over the past year, partially offset by the commencement of the East Coast of Canada shuttle tanker contracts in June 2015 and an increase in charter rates in certain contracts.

FSO Segment

Cash flow from vessel operations from the Partnership's FSO segment increased to $9.8 million for the first quarter of 2016, compared to $8.5 million for the same period of the prior year, primarily due to lower crew costs due to the strengthening of the U.S. Dollar compared to the same period of the prior year.

UMS Segment

Cash flow from vessel operations from the Partnership's UMS segment increased to $4.9 million for the first quarter of 2016, due to the Arendal Spirit UMS commencing its charter contract with Petrobras in June 2015.

Towage Segment

Cash flow from vessel operations from the Partnership's Towage segment decreased slightly to $2.0 million for the first quarter of 2016, compared to $2.1 million for the same period of the prior year as the increase in fleet size during 2015 was offset by lower charter rates and utilization.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership's Conventional Tanker segment increased to $6.2 million for the first quarter of 2016, compared to $5.9 million for the same period of the prior year, primarily due to a $4.0 million early termination fee received from Teekay Corporation relating to the charter contract termination for the Kilimanjaro Spirit during the first quarter of 2016, partially offset by the sale of two conventional tankers, the SPT Explorer and Navigator Spirit, in the fourth quarter of 2015.

Teekay Offshore's Fleet

The following table summarizes Teekay Offshore's fleet as of May 1, 2016.

----------------------------------------------------------------------------
                                        Number of Vessels
----------------------------------------------------------------------------
                                                       Committed
                                                  Newbuildings /
                             Owned  Chartered-in   Conversions /
                           Vessels       Vessels         Upgrade       Total
----------------------------------------------------------------------------
Shuttle Tanker
 Segment                     29(i)             3           3(ii)          35
FPSO Segment                6(iii)             -           2(iv)           8
FSO Segment                      6             -            1(v)           7
Towage Segment                   6             -           4(vi)          10
Conventional Segment             -             2               -           2
UMS Segment                      1             -          2(vii)           3
----------------------------------------------------------------------------
Total                           48             5              12          65
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i)    Includes six shuttle tankers in which Teekay Offshore's ownership
       interest is 50 percent, one shuttle tanker in which Teekay Offshore's
       ownership interest is 67 percent and one HiLoad DP unit.

(ii)   Includes three Suezmax-size, DP2 shuttle tanker newbuildings
       scheduled to be delivered in the third quarter of 2017 through the
       first quarter of 2018 for employment under the East Coast of Canada
       contracts.

(iii)  Includes one FPSO unit, the Cidade de Itajai, in which Teekay
       Offshore's ownership interest is 50 percent.

(iv)   Consists of the Petrojarl I FPSO upgrade project and Teekay
       Offshore's 50 percent ownership interest in the Libra FPSO conversion
       project.

(v)    Consists of the Randgrid shuttle tanker, which is being converted
       into an FSO unit for use with the Gina Krog FSO project scheduled to
       deliver early-2017.

(vi)   Consists of four long-distance towing and offshore installation
       vessel newbuildings scheduled to deliver in the third quarter of 2016
       through the first quarter of 2017.

(vii)  Consists of two UMS newbuildings scheduled to deliver in late-2019,
       subject to the finalization of a deferral agreement with the
       shipyard.


Liquidity Update

As of March 31, 2016, the Partnership had total liquidity of $336 million, comprised of cash and cash equivalents.

Availability of 2015 Annual Report

Teekay Offshore Partners L.P. filed its 2015 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 18, 2016. Copies are available on Teekay Offshore's website, under "Investors - Teekay Offshore 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 Offshore's Investor Relations.

Conference Call

The Partnership plans to host a conference call on Thursday, May 19, 2016 at 12:00 pm (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 1-800-524-8950 or 416-260-0113, if outside North America, and
    quoting conference ID code 4260566.
--  By accessing the webcast, which will be available on Teekay Offshore's
    website at www.teekay.com (the archive will remain on the website for a
    period of 30 days).


An accompanying First Quarter 2016 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.

The conference call will be recorded and available until Thursday, June 2, 2016. This recording can be accessed following the live call by dialing 1-888-203-1112 or 647-436-0148, if outside North America, and entering access code 4260566.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production, storage, long-distance towing and offshore installation and maintenance and safety services to the offshore oil industry, primarily focusing on the deepwater offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) with consolidated assets of approximately $5.7 billion, comprised of 65 offshore assets, including floating production, storage and offloading (FPSO) units, shuttle tankers, floating storage and offtake (FSO) units, units for maintenance and safety (UMS), long-distance towing and offshore installation vessels and conventional tankers. The majority of Teekay Offshore's fleet is employed on medium-term, stable contracts.

Teekay Offshore's common units trade on the New York Stock Exchange under the symbol "TOO".

This news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, or any other securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Teekay Offshore Partners L.P.
Summary Consolidated Statements of (Loss) Income
(in thousands of U.S. Dollars, except unit data)
----------------------------------------------------------------------------
                                            Three Months Ended
                                    March 31,   December 31,      March 31,
                                         2016           2015           2015
                                  (unaudited)    (unaudited) (unaudited)(1)
----------------------------------------------------------------------------
Revenues                              306,708        339,142        264,983

Voyage expenses                       (18,344)       (26,607)       (22,517)
Vessel operating expenses             (95,352)      (108,920)       (79,567)
Time-charter hire expense             (15,322)       (15,112)        (6,983)
Depreciation and
 amortization(2)                      (74,922)       (71,974)       (57,994)
General and administrative            (14,469)       (14,190)       (15,020)
(Write-down) and gain on sale
 of vessels(3)                              -        (55,645)       (13,853)
Restructuring charge                        -           (276)             -
----------------------------------------------------------------------------
Income from vessel operations          88,299         46,418         69,049

Interest expense                      (36,026)       (33,013)       (24,799)
Interest income                           404            203            135
Realized and unrealized
 (losses) gains on derivative
 instruments(4)                       (60,490)        16,478        (62,808)
Equity income                           5,283            913          4,091
Foreign currency exchange
 loss(5)                               (2,838)          (827)        (4,644)
Other income - net                          9            825            254
----------------------------------------------------------------------------
(Loss) income before income tax
 recovery                              (5,359)        30,997        (18,722)
Income tax recovery                     2,836         15,703             79
----------------------------------------------------------------------------
Net (loss) income                      (2,523)        46,700        (18,643)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Non-controlling interests in
 net (loss) income                      1,888          2,829          3,998
Dropdown Predecessor's interest
 in net loss(1)                             -              -         (5,415)
Preferred unitholders' interest
 in net (loss) income                  10,750         10,750          2,719
General Partner's interest in
 net (loss) income                       (304)           662          3,764
Limited partners' interest in
 net (loss) income                    (14,857)        32,459        (23,709)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted-average number of
 common units:
  - basic                         107,055,382    107,016,572     92,391,826
  - diluted                       107,055,382    107,047,391     92,391,826
Total number of common units
 outstanding at end of period     107,128,349    107,026,979     92,413,598
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  The Partnership has recast its financial results to include the
     financial results of the Knarr FPSO unit relating to the period prior
     to its acquisition by the Partnership from Teekay Corporation when it
     was under common control, which pre-acquisition results are referred to
     in this release as the Dropdown Predecessor. In accordance with GAAP,
     business acquisitions of entities under common control that have begun
     operations are required to be accounted for in a manner whereby the
     Partnership's financial statements are retroactively adjusted to
     include the historical results of the acquired vessels from the date
     the vessels were originally under the control of Teekay Corporation.
     For these purposes, the Knarr FPSO unit was under common control by
     Teekay Corporation from March 9, 2015 to July 1, 2015, when it was sold
     to the Partnership.

(2)  The Partnership considers its shuttle tankers to comprise of two
     components: i) a conventional tanker (the "tanker component") and ii)
     specialized shuttle equipment (the "shuttle component"). The
     Partnership differentiates these two components on the principle that a
     shuttle tanker can also operate as a conventional tanker without the
     use of the shuttle component. The economics of this alternate use
     depend on the supply and demand fundamentals in the two segments.
     Historically, the useful life of both components was assessed as 25
     years commencing from the date the vessel is delivered from the
     shipyard. During the three months ended March 31, 2016, the Partnership
     has considered factors related to the ongoing use of the shuttle
     component and has reassessed the useful life as being 20 years based on
     the challenges associated with adverse market conditions in the energy
     sector and other long term factors associated with the global oil
     industry. This change in estimate, commencing January 1, 2016, impacts
     the entire fleet of its shuttle tanker vessels. Separately, the
     Partnership has reviewed the depreciation of the tanker component for
     eight vessels in its fleet that are 17 years of age or older. Based on
     the Partnership's expected operating plan for these vessels, the
     Partnership has reassessed the estimated useful life of the tanker
     component for these vessels as 20 years commencing January 1, 2016. The
     effect of these changes in estimates was to increase depreciation
     expense and net loss by $7.3 million for the three months ended March
     31, 2016.

(3)  The write-down for the three months ended December 31, 2015 includes
     the impairment of two of the Partnership's 2000s-built conventional
     tankers and five of the Partnership's 1990s-built shuttle tankers to
     their estimated fair value, using appraised values. The write-down of
     the two conventional tankers was the result of the expected sale of the
     vessels and the vessels were classified as held for sale on the
     Partnership's consolidated balance sheet as at December 31, 2015. The
     write-down of the five shuttle tankers, which have an average age of
     17.5 years, was the result of changes in our expectations of their
     future opportunities, primarily due to their advanced age.

     The write-down and gain on sale of vessels for the three months ended
     March 31, 2015 includes the impairment of two of the Partnership's
     1990s-built shuttle tankers to their estimated fair values, using
     appraised values, and the gain on the sale of a 1997-built shuttle
     tanker, the Navion Svenita. The write-downs were the result of a change
     in the operating plans of one vessel and the expected sale of one
     vessel.

(4)  Realized losses on derivative instruments relate to amounts the
     Partnership actually paid to settle derivative instruments, and the
     unrealized (losses) gains on derivative instruments relate to the
     change in fair value of such derivative instruments, as detailed in the
     table below:



----------------------------------------------------------------------------
                                                 Three Months Ended
                                          March 31,    December   March 31,
                                               2016    31, 2015        2015
----------------------------------------------------------------------------
Realized losses relating to:
  Interest rate swaps                       (13,967)    (15,363)    (13,419)
  Foreign currency forward contracts         (2,933)     (3,909)     (3,253)
----------------------------------------------------------------------------
                                            (16,900)    (19,272)    (16,672)
----------------------------------------------------------------------------

Unrealized (losses) gains relating to:
  Interest rate swaps                       (51,921)     34,255     (41,040)
  Foreign currency forward contracts          8,331       1,495      (5,096)
----------------------------------------------------------------------------
                                            (43,590)     35,750     (46,136)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Total realized and unrealized (losses)
 gains on derivative instruments            (60,490)     16,478     (62,808)
----------------------------------------------------------------------------
----------------------------------------------------------------------------



(5)  Foreign currency exchange loss includes realized losses relating to the
     amounts the Partnership paid to settle its non-designated cross
     currency swaps that were entered into as an economic hedge relating to
     the Partnership's Norwegian Kroner (NOK)-denominated unsecured bonds as
     detailed in the table below. In addition, in the three months ended
     March 31, 2016, the realized loss on cross currency swaps includes a
     $32.6 million loss on the maturity of the cross currency swaps
     associated with the NOK 500 million bond settled during the quarter,
     which was offset by a $32.6 million gain on settlement of the bond, not
     included in the table below. The Partnership issued NOK 600 million of
     unsecured bonds in 2012 maturing in 2017, NOK 1,300 million of
     unsecured bonds in 2013, of which NOK 500 million matured in 2016 and
     NOK 800 million is maturing in 2018, and NOK 1,000 million of unsecured
     bonds in 2014 maturing in 2019. Foreign currency exchange loss 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                                  (35,276)       (2,967)       (2,380)
Unrealized gains (losses) on cross
 currency swaps                          52,895        (9,409)      (32,201)
Unrealized (losses) gains on
 revaluation of NOK bonds               (51,487)       12,615        29,392



Teekay Offshore Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
                                                    As at              As at
                                           March 31, 2016  December 31, 2015
                                              (unaudited)        (unaudited)
----------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents                         335,751            258,473
Restricted cash - current                           6,836             51,431
Accounts receivable                               131,775            153,662
Vessels held for sale                                   -             55,450
Net investments in direct financing
 leases - current                                   6,328              5,936
Prepaid expenses                                   38,279             34,027
Due from affiliates                                57,936             81,271
Other current assets                               21,221             20,490
----------------------------------------------------------------------------
Total current assets                              598,126            660,740
----------------------------------------------------------------------------

Restricted cash - long-term                        15,864              9,089

Vessels and equipment
At cost, less accumulated depreciation          4,250,285          4,348,535
Advances on newbuilding contracts and
 conversion costs                                 470,005            395,084
Net investments in direct financing
 leases                                             9,747             11,535
Investment in equity accounted joint
 ventures                                          70,656             77,647
Deferred tax asset                                 31,600             30,050
Other assets                                       76,160             82,341
Goodwill                                          129,145            129,145
----------------------------------------------------------------------------
Total assets                                    5,651,588          5,744,166
----------------------------------------------------------------------------

LIABILITIES AND EQUITY
Current
Accounts payable                                   20,858             15,899
Accrued liabilities                               124,955             91,065
Deferred revenues                                  49,122             54,378
Due to affiliates                                 105,326            304,583
Current portion of derivative
 instruments                                      209,795            201,456
Current portion of long-term debt                 615,803            485,069
Current portion of in-process revenue
 contracts                                         12,744             12,779
----------------------------------------------------------------------------
Total current liabilities                       1,138,603          1,165,229
----------------------------------------------------------------------------
Long-term debt                                  2,675,444          2,878,805
Derivative instruments                            205,997            221,329
Due to affiliates                                 200,000                  -
In-process revenue contracts                       59,883             63,026
Other long-term liabilities                       186,331            192,258
----------------------------------------------------------------------------
Total liabilities                               4,466,258          4,520,647
----------------------------------------------------------------------------

Redeemable non-controlling interest                 2,297              3,173
Convertible Preferred Units (10.4
 million units issued and outstanding at
 March 31, 2016 and December 31, 2015)            252,334            252,498

Equity
Limited partners - common units (107.1
 million and 107.0 million units issued
 and outstanding at March 31, 2016 and
 December 31, 2015, respectively)                 603,518            629,264
Limited partners - preferred units (11.0
 million units issued and outstanding at
 March 31, 2016 and December 31, 2015)            266,925            266,925
General Partner                                    17,082             17,608
Non-controlling interests                          56,009             53,355
Accumulated other comprehensive (loss)
 income                                           (12,835)               696
----------------------------------------------------------------------------
Total equity                                      930,699            967,848
----------------------------------------------------------------------------
Total liabilities and total equity              5,651,588          5,744,166
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Teekay Offshore Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
                                                   Three Months Ended
                                             March 31, 2016  March 31, 2015
                                                (unaudited)  (unaudited)(1)
----------------------------------------------------------------------------
Cash and cash equivalents provided by (used
 for)
OPERATING ACTIVITIES
Net loss                                             (2,523)        (18,643)
Non-cash items:
  Unrealized (gain) loss on derivative
   instruments                                       (9,356)         78,337
  Equity income                                      (5,283)         (4,091)
  Depreciation and amortization                      74,922          57,994
  Write-down and (gain) on sale of vessels                -          13,853
  Deferred income tax recovery                       (3,538)           (434)
  Amortization of in-process revenue
   contracts                                         (3,177)         (3,142)
  Unrealized foreign currency exchange gain
   and other                                         24,901         (22,532)
Change in non-cash working capital items
 related to operating activities                     52,860          23,262
Expenditures for dry docking                         (3,445)         (3,963)
----------------------------------------------------------------------------
Net operating cash flow                             125,361         120,641
----------------------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds from long-term debt                         50,410         379,717
Scheduled repayments of long-term debt             (125,030)        (65,812)
Prepayments of long-term debt                       (21,607)        (13,606)
Debt issuance costs                                     (99)         (4,658)
Purchase of Teekay Knarr AS and Knarr L.L.C
 from Teekay Corporation (net of cash
 acquired of $14.2 million)                               -          14,247
Decrease in restricted cash                          37,820          10,870
Cash distributions paid by the Partnership          (22,763)        (57,722)
Cash distributions paid by subsidiaries to
 non-controlling interests                             (110)         (2,610)
Other                                                  (204)            288
----------------------------------------------------------------------------
Net financing cash flow                             (81,583)        260,714
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Net expenditures for vessels and equipment,
 including advances on newbuilding contracts
 and conversion costs                               (25,277)       (320,989)
Proceeds from sale of vessels and equipment          55,450           8,918
Repayment from joint ventures                             -           5,225
Direct financing lease payments received              1,396           1,146
Return of capital from (investment in)
 equity accounted joint ventures                      1,931          (5,016)
Increase in restricted cash                               -         (34,082)
----------------------------------------------------------------------------
Net investing cash flow                              33,500        (344,798)
----------------------------------------------------------------------------

Increase in cash and cash equivalents                77,278          36,557
Cash and cash equivalents, beginning of the
 period                                             258,473         252,138
----------------------------------------------------------------------------
Cash and cash equivalents, end of the period        335,751         288,695
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  In accordance with GAAP, the Consolidated Statement of Cash Flows for
     the three months ended March 31, 2015 includes the cash flows relating
     to the Knarr FPSO unit Dropdown Predecessor for the period from March
     9, 2015 to March 31, 2015, when the vessel was under the common control
     of Teekay Corporation, but prior to its acquisition by the Partnership.



Teekay Offshore Partners L.P.
Appendix A - Specific Items Affecting Net Loss
(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 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  March 31, 2015
                                                (unaudited)     (unaudited)
----------------------------------------------------------------------------
Net loss - GAAP basis                                (2,523)        (18,643)
  Adjustments:
  Net income attributable to non-controlling
   interests                                         (1,888)         (3,998)
  Net loss attributable to Dropdown
   Predecessor                                            -           5,415
----------------------------------------------------------------------------
Net loss attributable to the partners                (4,411)        (17,226)
----------------------------------------------------------------------------
Add (subtract) specific items affecting net
 loss:
  Foreign currency exchange losses(1)                   191           4,696
  Unrealized losses on derivative
   instruments(2)                                    42,926          36,627
  Write-down and (gain) on sale of
   vessels(3)                                             -          13,853
  Pre-operational costs(4)                            5,150           2,307
  Early termination fee and other(5)                    296               -
  Non-controlling interests' share of items
   above(6)                                            (202)            251
----------------------------------------------------------------------------
Total adjustments                                    48,361          57,734
----------------------------------------------------------------------------
Adjusted net income attributable to the
 partners                                            43,950          40,508
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Foreign currency exchange losses primarily relate to the Partnership's
     revaluation of all foreign currency-denominated monetary assets and
     liabilities based on the prevailing exchange rate at the end of each
     reporting period and unrealized gains or losses related to the
     Partnership's cross currency swaps for outstanding Norwegian bonds of
     the Partnership and excludes the realized gains and losses relating to
     the cross currency swaps.

(2)  Reflects the unrealized losses due to changes in the mark-to-market
     value of interest rate swaps and foreign exchange forward contracts
     that are not designated as hedges for accounting purposes, hedge
     ineffectiveness from derivative instruments designated as hedges for
     accounting purposes, the unrealized mark-to-market value of the
     interest rate swaps within the Cidade de Itajai FPSO joint venture and
     hedge ineffectiveness within the Libra FPSO equity accounted joint
     venture.

(3)  Please refer to footnote (3) of the summary consolidated statements of
     loss for a description of the write-down of vessels for the three
     months ended March 31, 2015.

(4)  Reflects the realized losses on foreign currency forward contracts
     relating to upgrade costs on the Petrojarl I FPSO unit and the
     conversion costs on the Gina Krog FSO unit, depreciation and
     amortization expense relating to the Petrojarl I FPSO unit while
     undergoing conversion, and costs associated to the delivery deferral of
     the Stavanger Spirit UMS.

(5)  Other items for the three months ended March 31, 2016 includes $4.3
     million relating to an increase in depreciation expense as a result of
     the change in the useful life estimate of the shuttle component of the
     Partnership's shuttle tankers from 25 years to 20 years effective
     January 1, 2016, partially offset by an early termination fee received
     from Teekay Corporation of $4.0 million related to the sale of the
     Kilimanjaro Spirit conventional tanker.

(6)  Items affecting net loss include amounts attributable to the
     Partnership's consolidated non-wholly-owned subsidiaries. Each item
     affecting net loss is analyzed to determine whether any of the amounts
     originated from a consolidated non-wholly-owned subsidiary. Each amount
     that originates from a consolidated non-wholly-owned subsidiary is
     multiplied by the non-controlling interests' percentage share in this
     subsidiary to arrive at the non-controlling interests' share of the
     amount. The amount identified as "non-controlling interests' share of
     items above" in the table above is the cumulative amount of the non-
     controlling interests' proportionate share of items listed in the
     table.



Teekay Offshore Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measure
Distributable Cash Flow
(in thousands of U.S. Dollars, except unit and per unit amounts)

Distributable cash flow represents net loss adjusted for depreciation and amortization expense, non-controlling interests, non-cash items, distributions relating to equity financing of newbuilding installments, distributions on our preferred units, vessel and business acquisition costs, estimated maintenance capital expenditures, write-down and gains on sale of vessels, unrealized losses from derivatives, non-cash income taxes and unrealized 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 defined by GAAP and should not be considered as an alternative to net loss or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net loss for the three months ended March 31, 2016 and March 31, 2015.

----------------------------------------------------------------------------
                                                   Three Months Ended
                                                       March 31,
                                                       2016            2015
                                                (unaudited)     (unaudited)
----------------------------------------------------------------------------

Net loss                                             (2,523)        (18,643)
Net loss attributable to Dropdown
 Predecessor                                              -           5,415
----------------------------------------------------------------------------
Net loss attributable to the partners and
 non-controlling interests'                          (2,523)        (13,228)

Depreciation and amortization                        74,922          53,604
Equity income from joint ventures                    (5,283)         (4,091)
Distributions relating to equity financing
 of newbuildings and conversion costs                 3,262           3,749
Partnership's share of equity accounted
 joint venture's distributable cash flow net
 of estimated maintenance capital
 expenditures(1)                                      5,725           5,654
Write-down and (gain on sale) of vessels                  -          13,853
Distributions relating to preferred units           (10,750)         (2,719)
Estimated maintenance capital
 expenditures(2)                                    (40,671)        (29,254)
Unrealized losses on derivative
 instruments(3)                                      43,590          36,097
Foreign currency exchange and other, net             (1,373)          4,033
----------------------------------------------------------------------------
Distributable cash flow before non-
 controlling interests                               66,647          67,698
Non-controlling interests' share of DCF              (4,610)         (7,086)
----------------------------------------------------------------------------
Distributable Cash Flow                              62,037          60,612
Amount attributable to the General Partner             (240)         (5,264)
----------------------------------------------------------------------------
Limited partners' Distributable Cash Flow            61,797          55,348
Weighted-average number of common units
 outstanding                                    107,055,382      92,391,826
----------------------------------------------------------------------------
Distributable Cash Flow per limited partner
 unit                                                  0.58            0.60
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  Estimated maintenance capital expenditures relating to the
     Partnership's equity accounted joint venture for the three months ended
     March 31, 2016 and 2015 were $1.0 million.

(2)  Effective January 1, 2016, the Partnership changed the estimated useful
     life of its shuttle tankers that are 17 years of age or older and the
     shuttle component of its shuttle tankers from 25 years to 20 years.
     This resulted in an increase in estimated maintenance capital
     expenditure of $3.1 million for the three months ended March 31, 2016.

(3)  Derivative instruments include interest rate swaps and foreign exchange
     forward contracts.



Teekay Offshore Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measure
Net Revenues
(in thousands of U.S. Dollars)

Net revenues represents 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 revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies, however, it is not required by GAAP and should not be considered as an alternative to revenues or any other indicator of the Partnership's performance required by GAAP.

----------------------------------------------------------------------------
                                    Three Months Ended March 31, 2016
                                               (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                    FPSO     Tanker         FSO          UMS
                                 Segment    Segment     Segment      Segment
----------------------------------------------------------------------------
Revenues                         132,784    126,184      14,363       13,482
Voyage expenses                        -    (13,938)       (212)           -
----------------------------------------------------------------------------
Net revenues                     132,784    112,246      14,151       13,482
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                                    Three Months Ended March 31, 2015
                                               (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                             Tanker         FSO          UMS
                            FPSO Segment    Segment     Segment   Segment(1)
----------------------------------------------------------------------------
Revenues                          98,275    138,090      14,486            -
Voyage expenses                        -    (19,529)       (132)           -
----------------------------------------------------------------------------
Net revenues                      98,275    118,561      14,354            -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
                              Three Months Ended March 31,
                                          2016
                                      (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------
Revenues                             11,083           8,812         306,708
Voyage expenses                      (3,518)           (676)        (18,344)
----------------------------------------------------------------------------
Net revenues                          7,565           8,136         288,364
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                              Three Months Ended March 31,
                                          2015
                                      (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------
Revenues                              6,070           8,062         264,983
Voyage expenses                      (2,288)           (568)        (22,517)
----------------------------------------------------------------------------
Net revenues                          3,782           7,494         242,466
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)  The Partnership acquired 100% of the outstanding shares of Logitel
     during the third quarter of 2014 and operations began in the second
     quarter of 2015.



Teekay Offshore Partners L.P.
Appendix D - Supplemental Segment Information
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
                                    Three Months Ended March 31, 2016
                                               (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                   FPSO      Tanker         FSO         UMS
                                Segment     Segment     Segment     Segment
----------------------------------------------------------------------------
Net revenues (See Appendix
 C)                             132,784     112,246      14,151      13,482
Vessel operating expenses       (46,915)    (28,881)     (5,473)     (7,927)
Time-charter hire expense             -     (14,812)          -           -
Depreciation and
 amortization                   (37,583)    (30,648)     (2,172)     (1,696)
General and administrative       (8,674)     (3,957)       (238)       (693)
----------------------------------------------------------------------------
Income (loss) from vessel
 operations                      39,612      33,948       6,268       3,166
----------------------------------------------------------------------------
----------------------------------------------------------------------------




----------------------------------------------------------------------------
                                   Three Months Ended March 31, 2016
                                              (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------
Net revenues (See Appendix
 C)                                   7,565           8,136         288,364
Vessel operating expenses            (4,885)         (1,271)        (95,352)
Time-charter hire expense                 -            (510)        (15,322)
Depreciation and
 amortization                        (2,823)              -         (74,922)
General and administrative             (734)           (173)        (14,469)
----------------------------------------------------------------------------
Income (loss) from vessel
 operations                            (877)          6,182          88,299
----------------------------------------------------------------------------
----------------------------------------------------------------------------



----------------------------------------------------------------------------
                                    Three Months Ended March 31, 2015
                                               (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                   FPSO      Tanker         FSO         UMS
                                Segment     Segment     Segment     Segment
----------------------------------------------------------------------------
Net revenues (See Appendix
 C)                              98,275     118,561      14,354           -
Vessel operating expenses       (36,766)    (34,317)     (6,359)          -
Time-charter hire expense             -      (6,321)          -           -
Depreciation and
 amortization                   (24,485)    (28,367)     (2,920)          -
General and administrative       (4,942)     (8,399)       (610)       (507)
(Write-down) and gain on
 sale of vessels                      -     (13,853)          -           -
----------------------------------------------------------------------------
Income (loss) from vessel
 operations                      32,082      27,304       4,465        (507)
----------------------------------------------------------------------------
----------------------------------------------------------------------------




----------------------------------------------------------------------------
                                   Three Months Ended March 31, 2015
                                              (unaudited)
----------------------------------------------------------------------------
                                               Conventional
                                     Towage          Tanker
                                    Segment         Segment           Total
----------------------------------------------------------------------------
Net revenues (See Appendix
 C)                                   3,782           7,494         242,466
Vessel operating expenses              (751)         (1,374)        (79,567)
Time-charter hire expense              (662)              -          (6,983)
Depreciation and
 amortization                          (548)         (1,674)        (57,994)
General and administrative             (310)           (252)        (15,020)
(Write-down) and gain on
 sale of vessels                          -               -         (13,853)
----------------------------------------------------------------------------
Income (loss) from vessel
 operations                           1,511           4,194          69,049
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Teekay Offshore Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measure
Cash Flow From (Used For) Vessel Operations From Consolidated Vessels
(in thousands of U.S. Dollars)

Cash flow from (used for) vessel operations from consolidated vessels represents income (loss) from vessel operations before depreciation and amortization expense, write-down and gain on sale of vessels, and amortization of the non-cash portion of revenue contracts, and includes the realized gains and losses on the settlement of foreign exchange forward contracts and adjusts for direct financing leases to a cash basis. Cash flow from vessel operations is included because certain investors use this data to measure a company's financial performance. Cash flow from vessel operations is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP.

----------------------------------------------------------------------------
                                           Three Months Ended
                                             March 31, 2016
                                               (unaudited)
----------------------------------------------------------------------------
                                             Shuttle
                                    FPSO      Tanker         FSO         UMS
                                 Segment     Segment     Segment     Segment
----------------------------------------------------------------------------
Income (loss) from vessel
 operations (See Appendix D)      39,612      33,948       6,268       3,166
Depreciation and
 amortization                     37,583      30,648       2,172       1,696
Realized (losses) gains from
 the settlements of non-
 designated foreign exchange
 forward contracts               (1,067)     (1,718)           -           -
Amortization of non-cash
 portion of revenue
 contracts                       (3,997)           -           -           -
Falcon Spirit revenue
 accounted for as
 directfinancing lease                 -           -       (758)           -
Falcon Spirit cash flow from
 time-charter contracts                -           -       2,154           -
----------------------------------------------------------------------------
Cash flow from vessel
 operations from
 consolidated vessels             72,131      62,878       9,836       4,862
----------------------------------------------------------------------------
----------------------------------------------------------------------------




----------------------------------------------------------------------------
                                           Three Months Ended
                                             March 31, 2016
                                               (unaudited)
----------------------------------------------------------------------------
                                      Towage    Conventional
                                     Segment  Tanker Segment           Total
----------------------------------------------------------------------------
Income (loss) from vessel
 operations (See Appendix D)           (877)           6,182          88,299
Depreciation and
 amortization                          2,823               -          74,922
Realized (losses) gains from
 the settlements of non-
 designated foreign exchange
 forward contracts                        21               -         (2,764)
Amortization of non-cash
 portion of revenue
 contracts                                 -               -         (3,997)
Falcon Spirit revenue
 accounted for as
 directfinancing lease                     -               -           (758)
Falcon Spirit cash flow from
 time-charter contracts                    -               -           2,154
----------------------------------------------------------------------------
Cash flow from vessel
 operations from
 consolidated vessels                  1,967           6,182         157,856
----------------------------------------------------------------------------
----------------------------------------------------------------------------



----------------------------------------------------------------------------
                                           Three Months Ended
                                             March 31, 2015
                                               (unaudited)
----------------------------------------------------------------------------
                                            Shuttle
                                   FPSO      Tanker         FSO         UMS
                                Segment     Segment     Segment     Segment
----------------------------------------------------------------------------
Income (loss) from vessel
 operations (See Appendix D)     32,082      27,304       4,465        (507)
Cash flow from vessel
 operations from
 consolidated vessels
 attributable to Dropdown
 Predecessor                     (8,399)          -           -           -
Depreciation and
 amortization                    24,485      28,367       2,920           -
Realized losses from the
 settlements of non-
 designated foreign exchange
 forward contracts                 (908)     (1,786)          -           -
Amortization of non-cash
 portion of revenue
 contracts                       (3,142)          -           -           -
Write-down and (gain) on
 sale of vessels                      -      13,853           -           -
Falcon Spirit revenue
 accounted for as direct
 financing lease                      -           -        (984)          -
Falcon Spirit cash flow from
 time-charter contracts               -           -       2,130           -
----------------------------------------------------------------------------
Cash flow from (used for)
 vessel operations from
 consolidated vessels            44,118      67,738       8,531        (507)
----------------------------------------------------------------------------
----------------------------------------------------------------------------




----------------------------------------------------------------------------
                                           Three Months Ended
                                             March 31, 2015
                                              (unaudited)
----------------------------------------------------------------------------
                                                Conventional
                                      Towage          Tanker
                                     Segment         Segment          Total
----------------------------------------------------------------------------
Income (loss) from vessel
 operations (See Appendix D)           1,511           4,194         69,049
Cash flow from vessel
 operations from
 consolidated vessels
 attributable to Dropdown
 Predecessor                               -               -         (8,399)
Depreciation and
 amortization                            548           1,674         57,994
Realized losses from the
 settlements of non-
 designated foreign exchange
 forward contracts                         -               -         (2,694)
Amortization of non-cash
 portion of revenue
 contracts                                 -               -         (3,142)
Write-down and (gain) on
 sale of vessels                           -               -         13,853
Falcon Spirit revenue
 accounted for as direct
 financing lease                           -               -           (984)
Falcon Spirit cash flow from
 time-charter contracts                    -               -          2,130
----------------------------------------------------------------------------
Cash flow from (used for)
 vessel operations from
 consolidated vessels                  2,059           5,868        127,807
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Teekay Offshore Partners L.P.
Appendix F - Reconciliation of Non-GAAP Financial Measure
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 income from vessel operations before depreciation and amortization expense. Cash flow from equity accounted vessel represents the Partnership's proportionate share of cash flow from vessel operations from its equity-accounted vessels, the Cidade de Itajai FPSO unit and the Libra FPSO conversion project. 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       Three Months Ended
                               March 31, 2016           March 31, 2015
                                 (unaudited)              (unaudited)
----------------------------------------------------------------------------
                                 At  Partnership's        At  Partnership's
                               100%            50%      100%            50%
----------------------------------------------------------------------------
Voyage revenues              21,720         10,860    23,711         11,856
Vessel and other operating
 expenses                    (5,254)        (2,627)   (5,997)        (2,999)
Depreciation and
 amortization                (4,384)        (2,192)   (4,164)        (2,082)
General and administrative        -              -        (6)            (3)
----------------------------------------------------------------------------
Income from vessel
 operations of equity
 accounted vessels           12,082          6,041    13,544          6,772
----------------------------------------------------------------------------
Net interest expense         (1,398)          (699)   (2,630)        (1,315)
Realized and unrealized
 gains (losses) on
 derivative instruments(1)       35             18    (2,522)        (1,261)
----------------------------------------------------------------------------
Total other items            (1,363)          (681)   (5,152)        (2,576)
----------------------------------------------------------------------------
Net income / equity income
 of equity accounted
 vessel before income tax
 expense                     10,719          5,360     8,392          4,196
Income tax expense             (154)           (77)     (210)          (105)
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Net income / equity income
 of equity accounted
 vessels                     10,565          5,283     8,182          4,091
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Income from vessel
 operations of equity
 accounted vessels           12,082          6,041    13,544          6,772
Depreciation and
 amortization                 4,384          2,192     4,164          2,082
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Cash flow from vessel
 operations from equity
 accounted vessels           16,466          8,233    17,708          8,854
----------------------------------------------------------------------------
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(1)  Realized and unrealized gains (losses) on derivative instruments for
     the three months ended March 31, 2016 and 2015 include total unrealized
     gains of $1.2 million ($0.6 million at the Partnership's 50% share) and
     unrealized losses of $1.1 million ($0.5 million at the Partnership's
     50% share), respectively, related to interest rate swaps for the Cidade
     de Itajai FPSO unit and the Libra FPSO conversion project.

Forward Looking Statements

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the timing and completion of financing initiatives to address the Partnership's medium-term funding needs and their impact on the Partnership's financial position, including, among other things, plans to refinance and access additional debt, extend the maturities to late-2018 for two NOK senior unsecured bonds, issue equity securities and defer deliveries of two UMSs; the impact of growth projects on the Partnership's future cash flows; securing all the necessary financing for the Partnership's pipeline of growth projects; the replacement of the Arendal Spirit UMS gangway and timing of recommencing operations; the timing and completion of negotiating contract extensions; and the interest of current and potential customers in chartering the Varg FPSO. 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: the Partnership's ability to complete its financing initiatives, including delivery deferrals for the UMS newbuildings, to address the Partnership's medium-term funding needs, including financing for existing growth projects; failure of lenders, bondholders, investors or other third parties to approve or agree to the proposed terms of the financing initiatives of the Partnership; failure to achieve or the delay in achieving expected benefits of such financing initiatives; vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea, Brazil and East Coast of Canada offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion and upgrade delays and cost overruns; changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; delays in the commencement of charter contracts; potential delays related to the Arendal Spirit UMS recommencing operations; failure by the Partnership to secure a new charter contract for the Varg FPSO; and other factors discussed in Teekay Offshore's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2015. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

Contacts:
For Investor Relations enquiries contact:
Teekay Offshore Partners L.P.
Ryan Hamilton
+1 (604) 609-6442
www.teekay.com

Source: Teekay Offshore Partners L.P.

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Source: Equities.com News (May 18, 2016 - 10:00 PM EDT)

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