Teekay LNG Partners Reports Third Quarter Results
Teekay LNG Partners L.P. (NYSE: TGP) –
Highlights
– Declared a cash distribution of $20.6 million, or $0.53 per unit, for the third quarter
– Generated $20.4 million in distributable cash flow, up from $18.6 million in the same quarter of the prior year
– Net loss of $12.8 million includes a $21.6 million unrealized foreign exchange loss, which has no impact on cash flow
Teekay LNG Partners L.P. (Teekay LNG or the Partnership) today reported a net loss of $12.8 million for the quarter ended September 30, 2007, compared to net income of $12.6 million for the same period last year. The results for the third quarters of 2007 and 2006 included a $21.6 million foreign currency translation loss and a $3.8 million foreign currency translation gain, respectively, primarily relating to long-term debt denominated in Euros.
Net loss for the nine months ended September 30, 2007 was $8.9 million, compared to a net loss of $2.2 million for the same period last year. The results for the nine months ended September 30, 2007 and 2006 included foreign currency translation losses of $32.0 million and $24.4 million, respectively, primarily relating to long-term debt denominated in Euros.
The Partnership’s Euro-denominated revenues currently approximate its Euro-denominated expenses and debt service costs. As a result, the Partnership currently is not exposed materially to foreign currency fluctuations. However, 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 exchange gains or losses in the income statement, as reflected in the foreign currency exchange losses discussed above for the three and nine months ended September 30, 2007 and 2006, respectively.
Declaration of Cash Distribution
During the three months ended September 30, 2007, the Partnership generated $20.4 million in distributable cash flow(1), up from $18.6 million during the third quarter 2006. For the quarter ended September 30, 2007, the Partnership declared a cash distribution of $0.53 per unit, representing a total cash distribution of $20.6 million. The cash distribution is payable on November 14, 2007 to all unitholders of record on November 7, 2007.
(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 A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.
Operating Results
The following table highlights certain financial information for Teekay LNG’s segments; the Liquefied Gas Segment and the Suezmax Segment (please read the “Teekay LNG Partners’ Fleet” section of this release below and Appendix B for further details):
———————————————————————– —- Three Months Ended Three Months Ended September 30, 2007 September 30, 2006 —————————- —————————- (unaudited) (unaudited) —————————- —————————- Liquefied Liquefied (in thousands Gas Suezmax Gas Suezmax of U.S. dollars) Segment Segment Total Segment Segment Total ————————————————————————— Net voyage revenues 43,166 20,233 63,399 24,831 21,202 46,033 Vessel operating expenses 7,977 5,958 13,935 4,297 5,235 9,532 Depreciation & amortization 11,490 5,011 16,501 7,959 5,013 12,972 Cash flow from vessel operations(i) 33,526 12,407 45,933 19,319 14,318 33,637 ————————————————————————— (i) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Partnership’s web site at www.teekaylng.com for a reconciliation of this 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 increased to $33.5 million for the third quarter of 2007, compared to $19.3 million for the third quarter of 2006, primarily due to the delivery of the three RasGas II LNG carriers, which commenced their 20-year fixed-rate charters in the fourth quarter of 2006 and the first quarter of 2007, and the acquisition of the Dania Spirit LPG carrier from Teekay in January 2007, partially offset by 31 days of off-hire for a scheduled drydock of one of the LNG carriers in the third quarter of 2007.
Suezmax Segment
Cash flow from vessel operations from the Partnership’s Suezmax tankers decreased to $12.4 million for the third quarter of 2007, compared to $14.3 million for the third quarter of 2006, primarily due to a decrease in revenues earned by the Teide Spirit (the time charter for the Teide Spirit contains a profit share component, which provides for additional revenues to the Partnership beyond the fixed-hire rate when spot freight rates exceed a certain threshold level). Spot tanker rates were lower in the third quarter of 2007, compared to the same period last year.
Future LNG/LPG Projects
Below is a summary of LNG and LPG newbuildings which the Partnership has agreed to, or has the right to, acquire:
RasGas 3
The Partnership has agreed to acquire Teekay’s 40% interest in four 217,000 cubic meter LNG newbuilding carriers scheduled to deliver during the second quarter of 2008. Upon their deliveries, the vessels will provide transportation services to Ras Laffan Liquefied Natural Gas Co. Limited (3) (RasGas 3), a joint venture company between a subsidiary of ExxonMobil Corporation and Qatar Petroleum, at fixed rates, with inflation adjustments, for a period of 25 years, with options exercisable by RasGas 3 to extend up to a total of 35 years. Teekay’s joint venture partner, Qatar Gas Transport Company, owns the remaining 60% interest in these vessels.
Skaugen LPG Carriers
The Partnership has agreed to acquire three LPG carriers from IM Skaugen ASA Group (Skaugen) that are currently under construction and will be purchased upon their delivery from the shipyard in mid-2008 and mid-2009. Upon their delivery, the vessels will commence service under 15-year fixed-rate charters to Skaugen.
Tangguh
The Partnership has agreed to acquire Teekay’s 70% interest in two 155,000 cubic meter LNG newbuilding carriers scheduled to deliver during late 2008 and early 2009. Upon their deliveries, the vessels will provide transportation services to The Tangguh Production Sharing Contractors, a consortium led by a subsidiary of BP plc, to service the Tangguh LNG project in Indonesia at fixed rates, with inflation adjustments, for a period of 20 years. An Indonesian joint venture partner owns the remaining 30% interest in these vessels.
Angola LNG
As previously announced, a consortium in which Teekay has a 33% interest, signed a letter of intent to charter four newbuilding LNG carriers for a period of 20 years to the Angola LNG Project, which is being developed by subsidiaries of Chevron, Sonangol, BP, and Total. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in 2011. Final award of this charter is expected in December 2007. Teekay is obligated to offer Teekay LNG its interest in these vessels and related charter contracts.
Teekay LNG’s Fleet
The following table summarizes the Partnership’s fleet as of September 30, 2007:
———————————————————— Number of Vessels ——————————— Delivered Committed Vessels Vessels Total ——————————— LNG Carrier Fleet 7 6(1) 13 LPG Carrier Fleet 1 3(2) 4 Suezmax Tanker Fleet 8 – 8 ———————————————————— Total 16 9 25 ———————————————————— (1) Represents the 40% interest in four LNG newbuilding carriers relating to the RasGas 3 LNG project and the 70% interest in two LNG newbuilding carriers relating to the Tangguh LNG project, as described above. (2) Represents the three Skaugen LPG carriers currently under construction, as described above.
Liquidity
As of September 30, 2007, the Partnership had total liquidity of $486.3 million, comprising $40.9 million in cash and cash equivalents and $445.4 million in undrawn medium-term revolving credit facilities, up from total liquidity of $451.8 million in the previous quarter.
About Teekay LNG Partners L.P.
Teekay LNG Partners L.P. is a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors. Teekay LNG Partners L.P. provides LNG, LPG and crude oil marine transportation services under long-term, fixed-rate time charter contracts with major energy and utility companies through its fleet of thirteen LNG carriers, four LPG carriers and eight Suezmax class crude oil tankers. Six of the thirteen LNG carriers are newbuildings scheduled for delivery between mid-2008 and early 2009. Three of the four LPG carriers are newbuildings scheduled for delivery between early 2008 and mid-2009.
Teekay LNG Partners’ common units trade on the New York Stock Exchange under the symbol “TGP”.
Earnings Conference Call
The Partnership plans to host a conference call at 11:00 a.m. ET on Friday, November 2, 2007, to discuss the Partnership’s results and the outlook for its business activities. All unitholders and interested parties are invited to listen to the live conference call and view the Partnership’s earnings presentation through the Partnership’s web site at www.teekaylng.com. The Partnership plans to make available a recording of the conference call until midnight November 9, 2007 by dialing (866) 203-1112 or (647) 436-0148, access code 1408463, or via the Partnership’s web site until December 2, 2007.
TEEKAY LNG PARTNERS L.P. SUMMARY CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands of U.S. dollars, except unit data) ————————————————————————– Three Months Ended Nine Months Ended ————————————– ————————– September 30, June 30, September 30, September 30, September 30, 2007 2007 2006 2007 2006 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) ———— ———- ———— ———— ———— VOYAGE REVENUES 63,716 65,282 46,696 187,327 133,371 ————————————————————————– OPERATING EXPENSES Voyage expenses 317 274 663 857 1,590 Vessel operating expenses 13,935 13,930 9,532 41,686 28,260 Depreciation and amortization 16,501 16,555 12,972 48,875 38,374 General and administ- rative 3,531 3,759 2,864 10,808 8,957 ————————————————————————– 34,284 34,518 26,031 102,226 77,181 ————————————————————————– Income from vessel operations 29,432 30,764 20,665 85,101 56,190 ————————————————————————– OTHER ITEMS Interest expense (32,651) (35,819) (22,282) (98,817) (62,287) Interest income 12,219 13,020 9,881 36,336 26,761 Income tax recovery (expense) 91 (209) 180 (571) 558 Foreign exchange (loss) gain (21,555) (5,682) 3,752 (32,037) (24,401) Other (loss) income – net (315) 387 389 1,072 1,006 ————————————————————————– (42,211) (28,303) (8,080) (94,017) (58,363) ————————————————————————– Net (loss) income (12,779) 2,461 12,585 (8,916) (2,173) ————————————————————————– ————————————————————————– Limited partners’ units outstanding: Weighted- average number of common units outstanding – Basic and dilu- ted 22,540,547 21,327,360 20,238,072 21,377,910 20,238,072 Weighted- average number of subordinated units outstanding – Basic and dilu- ted 14,734,572 14,734,572 14,734,572 14,734,572 14,734,572 Weighted- average number of total units outstanding – Basic and dilu- ted 37,275,119 36,061,932 34,972,644 36,112,482 34,972,644 ————————————————————————– ————————————————————————– TEEKAY LNG PARTNERS L.P. SUMMARY CONSOLIDATED BALANCE SHEETS(1) (in thousands of U.S. dollars) As at As at September 30, December 31, 2007 2006 (unaudited) (unaudited) ————– ————– ASSETS Cash and cash equivalents 40,893 28,871 Restricted cash – current 30,777 55,009 Other current assets 22,551 15,937 Restricted cash – long-term 675,810 615,749 Vessels and equipment 1,608,851 1,316,836 Advances on newbuilding contracts 235,606 84,184 Other assets 424,487 215,484 Intangible assets 153,217 160,064 Goodwill 39,279 39,279 ————————————————————————– Total Assets 3,231,471 2,531,413 ————————————————————————– ————————————————————————– LIABILITIES AND PARTNERS’ EQUITY Accounts payable and accrued liabilities 45,626 25,376 Current portion of long-term debt and capital leases 193,325 181,197 Current portion of long-term debt related to newbuilding vessels to be delivered 2,504 – Advances from affiliates 40,541 38,939 Long-term debt and capital leases 1,597,694 1,021,182 Long-term debt related to newbuilding vessels to be delivered 385,769 266,340 Other long-term liabilities 63,192 114,153 Minority interest(2) 162,211 165,729 Partners’ equity 740,609 718,497 ————————————————————————– Total Liabilities and Partners’ Equity 3,231,471 2,531,413 ————————————————————————– ————————————————————————– (1) With the Partnership’s agreement on November 1, 2006 to acquire Teekay Corporation’s 70% and 40% interests in the Tangguh and RasGas 3 projects, respectively, the Partnership is required to consolidate Tangguh and equity account for its investment in RasGas 3 under U.S. generally accepted accounting principles. (2) As the Partnership is consolidating the Tangguh and RasGas 3 projects and it has not yet acquired those interests as described in note (1) above, minority interest includes 100% of the equity interest in the Tangguh project and the Partnership’s 40% equity interest in the RasGas 3 project. TEEKAY LNG PARTNERS L.P. SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) Nine Months Ended September 30, 2007 2006 (unaudited) (unaudited) Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES ————————————————————————– Net operating cash flow 81,406 59,416 ————————————————————————– FINANCING ACTIVITIES Proceeds from long-term debt 534,561 138,176 Scheduled repayments of long-term debt (28,500) (12,804) Prepayments of long-term debt (188,000) (41,000) Increase in restricted cash (12,817) (436,808) Advances from affiliate – 20,040 Advances from joint venture partners 44,214 – Repayment of joint venture partner advances (21,627) – Cash distributions paid (53,564) (47,731) Proceeds from issuance of units 86,044 (141) Other (1,952) (4,584) ————————————————————————– Net financing cash flow 358,359 (384,852) ————————————————————————– INVESTING ACTIVITIES Advances to joint ventures (187,618) – Purchase of Teekay Nakilat Holdings Corporation (66,096) – Purchase of Dania Spirit L.L.C. (18,546) – Expenditures for vessels and equipment (155,483) (1,413) Proceeds from sale of vessels and equipment – 312,972 ————————————————————————– Net investing cash flow (427,743) 311,559 ————————————————————————– Increase (decrease) in cash and cash equivalents 12,022 (13,877) Cash and cash equivalents, beginning of the period 28,871 34,469 ————————————————————————– Cash and cash equivalents, end of the period 40,893 20,592 ————————————————————————– ————————————————————————– TEEKAY LNG PARTNERS L.P. APPENDIX A – RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (in thousands of U.S. dollars) ————————————————————————– Description of Non-GAAP Financial Measure – Distributable Cash Flow (DCF) Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-cash interest expense, minority interest, estimated maintenance capital expenditures, gains and losses on vessel sales, income taxes 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 accounting principles generally accepted in the United States and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance required by accounting principles generally accepted in the United States. The table below reconciles distributable cash flow to net income. ——————————————————— Three Months Ended September 30, 2007 (unaudited) ——————————————————— Net loss (12,779) Add: Depreciation and amortization 16,501 Foreign exchange loss 21,555 Non-cash interest expense 3,692 Minority interest expense 254 Less: Estimated maintenance capital expenditures 6,647 Income tax recovery 91 Minority owners’ share of DCF before estimated maintenance capital expenditures 2,044 ——————————————————— Distributable cash flow 20,441 ——————————————————— ————————————————————————— TEEKAY LNG PARTNERS L.P. APPENDIX B – SUPPLEMENTAL SEGMENT INFORMATION (in thousands of U.S. dollars) ————————————————————————— Three Months Ended September 30, 2007 —————————————– (unaudited) Liquefied Suezmax Gas Segment Segment Total ————————————————————————— Net voyage revenues(1) 43,166 20,233 63,399 Vessel operating expenses 7,977 5,958 13,935 Depreciation and amortization 11,490 5,011 16,501 General and administrative 1,663 1,868 3,531 ————————————————————————— Income from vessel operations 22,036 7,396 29,432 ————————————————————————— ————————————————————————— Three Months Ended September 30, 2006 —————————————– (unaudited) Liquefied Suezmax Gas Segment Segment Total ————————————————————————— Net voyage revenues(1) 24,831 21,202 46,033 Vessel operating expenses 4,297 5,235 9,532 Depreciation and amortization 7,959 5,013 12,972 General and administrative 1,215 1,649 2,864 ————————————————————————— Income from vessel operations 11,360 9,305 20,665 ————————————————————————— ————————————————————————— (1) Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net voyage revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Partnership’s web site at www.teekaylng.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.
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 Partnership’s future growth prospects; Teekay being awarded LNG vessels and associated long-term contracts to service the Angola LNG Project and offering its interest in these vessels to the Partnership; the timing of the commencement of the RasGas 3 and Tangguh LNG projects; the timing of LNG and LPG newbuilding deliveries; and the Partnership’s exposure to foreign currency fluctuations, particularly in Euros. 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 unit price of equity offerings to finance acquisitions, changes in production of LNG or LPG, either generally or in particular regions; less than anticipated revenues or higher than anticipated costs or capital requirements; changes in trading patterns 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 that the conditions relating to the final award of the charter contracts for the Angola LNG Project are not met; the potential for early termination of long-term contracts and inability of the Partnership to renew or replace long-term contracts; LNG and LPG project delays, shipyard production delays; the Partnership’s ability to raise financing to purchase additional vessels or to pursue LNG or LPG projects; changes to the amount or proportion of revenues, expenses, or debt service costs denominated in foreign currencies; and other factors discussed in Teekay LNG’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2006. 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: Teekay LNG Partners L.P. Dave Drummond Investor Relations Enquiries Contact (604) 609-6442 Teekay LNG Partners L.P. Alana Duffy Media Enquiries Contact (604) 844-6605 Website: www.teekaylng.com
SOURCE: Teekay LNG Partners L.P.