Teekay Offshore Partners Reports Second Quarter 2016 Results
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HAMILTON, BERMUDA -- (Marketwired) -- 08/04/16 -- Highlights
-- Reported GAAP net loss attributable to the partners and preferred
unitholders of $102.6 million and adjusted net income attributable to
the partners and preferred unitholders of $23.6 million (excluding items
listed in Appendix A to this release) in the second quarter of 2016.
-- Generated distributable cash flow of $45.9 million, or $0.42 per common
unit, in the second quarter of 2016.
-- In June 2016, Teekay Offshore completed all of its previously announced
financing initiatives. Total liquidity of $421 million as of June 30,
2016.
-- In early July 2016, the Arendal Spirit UMS returned to operations
following replacement of the gangway that was damaged in April 2016.
-- Cancelled the shipyard contracts for the two remaining UMS newbuildings.
-- Declared second quarter 2016 cash distribution of $0.11 per common unit.
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 June 30, 2016.
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Three Months Ended
June 30, 2016 March 31, 2016 June 30, 2015
(unaudited) (unaudited) (unaudited)
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GAAP FINANCIAL COMPARISON
Revenues 284,464 306,708 311,234
Income from vessel operations 24,271 88,299 96,412
Equity income 3,626 5,283 9,720
Net (loss) income attributable
to the partners and preferred
unitholders (102,625) (4,411) 104,226
NON-GAAP FINANCIAL COMPARISON
Total cash flow from vessel
operations (CFVO) (1) 144,208 166,089 134,100
Distributable cash flow (DCF)
(1) 45,885 62,037 58,271
Adjusted net income
attributable to the partners
and preferred unitholders (1) 23,566 43,950 39,450
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(1) These are non-GAAP financial measures. Please refer to "Definitions and
Non-GAAP Financial Measures" and the Appendices to this release for
definitions of these terms and reconciliations of these non-GAAP
financial measures as used in this release to the most directly
comparable financial measures under United States generally accepted
accounting principles (GAAP).
CEO Commentary
"During the second quarter of 2016, the Partnership generated lower distributable cash flows compared to the same period of the prior year; however, our results were ahead of our expectations mostly due to higher vessel utilization in the shuttle tanker segment," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "The decrease in cash flows was partially due to off-hire related to gangway damage on the Arendal Spirit UMS which, I'm pleased to report, has recently recommenced its charter with Petrobras following repairs and extensive testing."
Mr. Evensen continued, "With strong support from our financial stakeholders, Teekay Offshore successfully completed all of its previously announced financing initiatives in June 2016, including $400 million of new or extended bank facilities, $200 million of equity capital, the deferral of certain bond maturities, and the cancellation of approximately $400 million of UMS-related capital expenditures. These initiatives, together with expected operating cash flow and previously arranged debt facilities, are expected to cover all of our medium-term liquidity requirements and fully-finance all of Teekay Offshore's $1.6 billion of committed growth projects. Once delivered, these growth projects are expected to add over $200 million to Teekay Offshore's annual cash flow from vessel operations."
Summary of Recent Events
Financing Initiatives
Between April and June 2016, the Partnership completed a series of initiatives to finance its unfunded capital expenditures and upcoming debt maturities, including:
-- 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 previously 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 Petrojarl Varg FPSO unit;
-- extending the majority of the principal maturity payments to late-2018
for two of the Partnership's existing Norwegian Kroner senior unsecured
bonds, previously due in January 2017 and January 2018;
-- agreeing with Teekay Corporation that, until the Partnership's Norwegian
Kroner bonds maturing in 2018 have been repaid, all cash distributions
to be paid on the Partnership's common units to Teekay Corporation,
including the Partnership's general partner, will instead be paid in
common units;
-- extending to January 2019 the maturity date of $200 million of existing
intercompany loans made by Teekay Corporation to the Partnership which
the Partnership will pay Teekay Corporation interest in the amount of
10.0% per annum;
-- issuing $200 million of equity consisting of (i) $100 million of its
10.5% Series D Cumulative Exchangeable Perpetual Preferred Units with a
two-year payment-in-kind option to be settled in common units plus 4.5
million warrants with an exercise price of $4.55 per common unit and
2.25 million warrants with an exercise price of $6.05 per common unit,
and (ii) $100 million of common units at a price of $4.55 per unit;
-- cancelling the shipyard contracts for the two remaining UMS
newbuildings; and
-- amending the terms of certain interest rate swaps to defer the
counterparties' early termination options and extend existing cross
currency swaps related to two of Teekay Offshore's Norwegian Kroner
bonds that have been extended.
As part of completing the financing initiatives, Teekay Offshore secured a payment-in-kind option by agreeing to convert $46 million of face value of the $250 million of the outstanding 8.60% Series C Cumulative Convertible Preferred Units (Series C Preferred Units) for approximately 8.3 million common units, and the remaining $204 million of outstanding Series C Preferred Units for approximately 8.5 million of the Partnership's newly issued 8.60% Series C-1 Cumulative Convertible Preferred Units that also include a two-year payment-in-kind option.
Arendal Spirit UMS Update
In April 2016, during the process of lifting the gangway connecting the Arendal Spirit UMS to an FPSO unit, the gangway of the Arendal Spirit UMS suffered extensive damage, resulting in the UMS being declared off-hire under its charter contract. The gangway has now been replaced and undergone extensive testing, and the unit returned to operations in early-July 2016.
Operating Results
The following table highlights certain financial information for Teekay Offshore's six segments: the floating production, storage and off-loading (FPSO) segment, the shuttle tanker segment, the floating storage and off-take (FSO) segment, the units for maintenance and safety (UMS) segment, the towage segment and the conventional tanker segment (please refer to the "Teekay Offshore's Fleet" section of this release below and Appendices C through E for further details).
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(in thousands Three Months Ended
of U.S. June 30, 2016
dollars) (unaudited)
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Shuttle Conventional
FPSO Tanker FSO UMS Towage Tanker
Segment Segment Segment Segment Segment Segment Total
GAAP FINANCIAL
COMPARISON
Revenues 124,715 125,840 13,789 3,736 11,730 4,654 284,464
Income (loss)
from vessel
operations 36,412 34,751 5,117 (51,760) (62) (187) 24,271
Equity income 3,626 - - - - - 3,626
NON-GAAP FINANCIAL
COMPARISON
CFVO from
(used for)
consolidated
vessels (i) 68,682 63,878 8,802 (6,415) 2,893 (187) 137,653
CFVO from
equity
accounted
vessels (i) 6,555 - - - - - 6,555
Total CFVO(i) 75,237 63,878 8,802 (6,415) 2,893 (187) 144,208
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(in thousands Three Months Ended
of U.S. June 30, 2015
dollars) (unaudited)
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Shuttle Conventional
FPSO Tanker FSO UMS Towage Tanker
Segment Segment Segment Segment Segment Segment Total
GAAP FINANCIAL
COMPARISON
Revenues 141,722 132,899 14,165 3,686 10,517 8,245 311,234
Income from
vessel
operations 46,602 38,323 3,760 1,020 2,805 3,902 96,412
Equity income 9,720 - - - - - 9,720
NON-GAAP FINANCIAL
COMPARISON
CFVO from
consolidated
vessels (i) 43,192 63,856 7,946 1,921 4,979 5,577 127,471
CFVO from
equity
accounted
vessels (i) 6,629 - - - - - 6,629
Total CFVO(i) 49,821 63,856 7,946 1,921 4,979 5,577 134,100
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(i) These are non-GAAP financial measures. Please refer to "Definitions and
Non-GAAP Financial Measures" and the Appendices to this release for
definitions of these terms and reconciliations of these non-GAAP
financial measures as used in this release to the most directly
comparable financial measures under GAAP.
FPSO Segment
Income from vessel operations and cash flow from vessel operations from consolidated vessels were negatively impacted by the redelivery of the Varg FPSO, which left the field at the end of July 2016. From February 1, 2016 to the redelivery date, the Partnership did not receive the capital portion of the charter hire but continued to receive the operating portion of the charter hire. Income from vessel operations and cash flow from vessel operations were also negatively impacted in the second quarter of 2016 as a result of a provision made with respect to retroactive claims from the charterer of the Piranema Spirit FPSO. The provision relates to the charterer's claim that the Partnership's November 2011 cessation of paying certain agency fees with respect to the unit should have resulted in a corresponding 2 percent charter rate reduction.
Cash flow from vessel operations increased in the second quarter of 2016 compared to the same period of the prior year primarily as a result of the acquisition of the Knarr FPSO in mid-2015. In accordance with GAAP, income from vessel operations includes the Knarr FPSO results from March 9, 2015 to June 30, 2015 when the vessel was owned by Teekay Corporation whereas cash flow from vessel operations excludes these results since the unit was not acquired by the Partnership until July 1, 2015. Refer to footnote (1) of the summary consolidated statements of (loss) income included in this release.
Shuttle Tanker Segment
Income from vessel operations and cash flows from vessel operations were negatively impacted by 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 under certain contracts. Income from vessel operations in the second quarter of 2016 was also impacted by higher vessel depreciation and amortization expense as a result of the change in the useful life estimate of the shuttle component of the Partnership's shuttle tankers effective January 1, 2016.
FSO Segment
Income from vessel operations and cash flow from vessel operations increased primarily due to lower crew costs resulting from the strengthening of the U.S. Dollar.
UMS Segment
Income from vessel operations and cash flow from vessel operations decreased mainly due to the off-hire of the Arendal Spirit UMS for 71 days in the second quarter of 2016 as a result of the damage suffered to the gangway of the unit, which was subsequently repaired. After undergoing extensive testing, the unit returned to operations in early-July 2016. Income from vessel operations was also negatively impacted by a $43.7 million write-down of two UMS newbuildings as a result of the cancellation of the related construction contracts in the second quarter of 2016.
Towage Segment
Income from vessel operations and cash flow from vessel operations decreased primarily due to lower charter rates and utilization, partially offset by an increase in fleet size during 2015.
Conventional Tanker Segment
Income from vessel operations and cash flow from vessel operations decreased primarily due to the sale of the SPT Explorer and Navigator Spirit in the fourth quarter of 2015 and the sale-leaseback of the Fuji Spirit and Kilimanjaro Spirit during the first quarter of 2016.
Teekay Offshore's Fleet
The following table summarizes Teekay Offshore's fleet as of August 1, 2016.
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Number of Vessels
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Committed
Newbuildings /
Chartered-in Conversions /
Owned Vessels Vessels Upgrade Total
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FPSO Segment 6(i) - 2(ii) 8
Shuttle Tanker Segment 29(iii) 4(iv) 3(v) 36
FSO Segment 6 - 1(vi) 7
UMS Segment 1 - - 1
Towage Segment 6 - 4(vii) 10
Conventional Segment - 2 - 2
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Total 48 6 10 64
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(i) Includes one FPSO unit, the Cidade de Itajai, in which Teekay
Offshore's ownership interest is 50 percent.
(ii) Consists of the Petrojarl I FPSO upgrade project and Teekay Offshore's
50 percent ownership interest in the Libra FPSO conversion project.
(iii) 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.
(iv) At the time of this release, the Partnership had entered into an
agreement to in-charter a fourth shuttle tanker scheduled to join the
fleet in September 2016 for a period of three years.
(v) Includes three Suezmax-size, DP2 shuttle tanker newbuildings scheduled
to be delivered in the third quarter of 2017 through the first half of
2018 for employment under the East Coast of Canada contracts.
(vi) 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.
(vii) Consists of four long-distance towing and offshore installation vessel
newbuildings scheduled to deliver between mid-2016 to early-2017.
Liquidity Update
As of June 30, 2016, the Partnership had total liquidity of $421 million (comprised of $380.7 million in cash and cash equivalents and $40.0 million in an undrawn credit facility).
Conference Call
The Partnership plans to host a conference call on Thursday, August 4, 2016 at 12:00 p.m. (ET) to discuss the results for the second 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 6876004.
-- 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 Second 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, August 18, 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 6876004.
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 oil industry, primarily focusing on oil production-related activities of its customers and operating in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) with consolidated assets of approximately $5.8 billion, comprised of 64 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".
Definitions and Non-GAAP Financial Measures
This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the U.S. Securities and Exchange Commission. These non-GAAP financial measures, which include Cash Flow From Vessel Operations, Adjusted Net Income, and Distributable Cash Flow, are intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings, and may not be comparable to similar measures presented by other companies. The Partnership believes that certain investors use this information to evaluate the Partnership's financial performance.
Cash Flow from Vessel Operations
Cash flow from vessel operations (CFVO) represents income (loss) from vessel operations before depreciation and amortization expense, amortization of in-process revenue contracts, vessel write-downs, gains or losses on the sale of vessels, adjustments for direct financing leases to a cash basis, but includes realized gains or losses on the settlement of foreign currency forward contracts. CFVO from Consolidated Vessels represents CFVO from vessels that are consolidated on the Partnership's financial statements. CFVO from Equity Accounted Vessels represents the Partnership's proportionate share of CFVO from its equity-accounted vessels. CFVO is a non-GAAP financial measure used by certain investors to measure the financial performance of companies. Please refer to Appendices D and E of this release for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures reflected in the Partnership's consolidated financial statements.
Adjusted Net Income
Adjusted net income excludes from GAAP net (loss) income items of income or loss that are typically excluded by securities analysts in their published estimates of the Partnership's financial results. The Partnership believes that certain investors use this information to evaluate the Partnership's financial performance. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Distributable Cash Flow
Distributable cash flow (DCF) represents net (loss) income adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, vessel write-downs and gains or losses on the sale of vessels, distributions relating to equity financing of newbuilding installments and conversion costs, distributions on our preferred units, gains on extinguishment of contingent liabilities, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, ineffectiveness for derivative instruments designated as hedges for accounting purposes, adjustments to direct financing leases to a cash basis and unrealized foreign exchange related items, including the Partnership's proportionate share of such items in equity accounted investments. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating financial performance. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure reflected in the Partnership's consolidated financial statements.
Teekay Offshore Partners L.P.
Summary Consolidated Statements of (Loss) Income
(in thousands of U.S. Dollars, except unit data)
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Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015(1) 2016 2015(1)
(unaudited) (unaudited)(unaudited) (unaudited)(unaudited)
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Revenues 284,464 306,708 311,234 591,172 576,217
Voyage expenses (17,588) (18,344) (20,716) (35,932) (43,233)
Vessel operating
expenses (90,761) (95,352) (94,823) (186,113) (174,390)
Time-charter hire
expense (18,829) (15,322) (10,762) (34,151) (17,745)
Depreciation and
amortization (74,057) (74,922) (71,803) (148,979) (129,797)
General and
administrative (13,821) (14,469) (16,083) (28,290) (31,102)
(Write-down) and
gain on sale of
vessels (2) (43,650) - (500) (43,650) (14,353)
Restructuring
charge (1,487) - (135) (1,487) (135)
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Income from vessel
operations 24,271 88,299 96,412 112,570 165,462
Interest expense (33,347) (36,026) (31,380) (69,373) (56,179)
Interest income 293 404 141 697 276
Realized and
unrealized
(losses) gains on
derivative
instruments (3) (62,037) (60,490) 49,729 (122,527) (13,079)
Equity income 3,626 5,283 9,720 8,909 13,811
Foreign currency
exchange loss (4) (13,087) (2,838) (1,739) (15,925) (6,383)
Other (loss)
income - net (2) (21,286) 9 385 (21,277) 639
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(Loss) income
before income tax
recovery (101,567) (5,359) 123,268 (106,926) 104,547
Income tax
recovery 1,438 2,836 111 4,274 190
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Net (loss) income (100,129) (2,523) 123,379 (102,652) 104,737
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Non-controlling
interests in net
(loss) income 2,496 1,888 3,638 4,384 7,636
Dropdown
Predecessor's
interest in net
income (1) - - 15,515 - 10,101
Preferred
unitholders'
interest in net
(loss) income 10,314 10,750 4,791 21,063 7,510
General Partner's
interest in net
(loss) income (2,260) (304) 6,153 (2,563) 9,917
Limited partners'
interest in net
(loss) income (110,679) (14,857) 93,282 (125,536) 69,573
Weighted-average
number of common
units:
- basic 107,794,323 107,055,382 92,413,598 107,424,853 92,402,772
- diluted 107,794,323 107,055,382 92,457,480 107,424,853 92,470,600
Total number of
common units
outstanding at
end of period 137,430,180 107,128,349 92,413,598 137,430,180 92,413,598
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(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) In June 2016, as part of the Partnership's financing initiatives, the
Partnership canceled the UMS construction contracts for its two UMS
newbuildings. As a result, the Partnership incurred a $43.7 million
write-down related to these two UMS newbuildings, included in (Write-
down) and gain on sale of vessels for the three and six months ended
June 30, 2016. In addition, the Partnership, in accordance with GAAP,
accrued for potential damages resulting from the cancellations and
reversed the contingent liabilities previously recorded that were
subject to the delivery of the UMS newbuildings. This net loss provision
of $23.4 million is reported in Other (loss) income - net for the three
and six months ended June 30, 2016. The newbuilding contracts are held
in separate subsidiaries of the Partnership and obligations of these
subsidiaries are non-recourse to Teekay Offshore.
(3) 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:
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Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
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Realized losses relating
to:
Interest rate swaps (13,515) (13,967) (16,101) (27,482) (29,520)
Foreign currency forward
contracts (1,687) (2,933) (2,571) (4,620) (5,824)
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(15,202) (16,900) (18,672) (32,102) (35,344)
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Unrealized (losses) gains
relating to:
Interest rate swaps (47,818) (51,921) 62,188 (99,739) 21,148
Foreign currency forward
contracts 983 8,331 6,213 9,314 1,117
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(46,835) (43,590) 68,401 (90,425) 22,265
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Total realized and
unrealized (losses)
gains on derivative
instruments (62,037) (60,490) 49,729 (122,527) (13,079)
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(4) The Partnership entered into cross currency swaps to economically hedge
the foreign currency exposure on the payment of interest and repayment
of principal amounts of the Partnership's Norweigan Kroner (NOK) bonds
with maturity dates through to 2019. In addition, the cross currency
swaps economically hedge the interest rate exposure on the NOK bonds.
The Partnership has not designated, for accounting purposes, these cross
currency swaps as cash flow hedges of its NOK bonds and thus foreign
currency exchange loss includes realized losses relating to the amounts
the Partnership paid to settle its non-designated cross currency swaps,
unrealized (losses) gains relating to the change in fair value of such
swaps, partially offset by unrealized gains (losses) on the revaluation
of the NOK bonds, as detailed in the table below. In addition, during
the three months ended March 31, 2016 and the six months ended June 30,
2016, realized losses on cross-currency swaps includes a $32.6 million
loss on the maturity of the swap associated with the NOK 500 million
bond settled in January 2016, which was offset by a $32.6 million gain
on the settlement of the bond which is not included in the table below.
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Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
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Realized losses on cross
currency swaps (2,671) (35,276) (1,953) (37,947) (4,333)
Unrealized (losses) gains
on cross currency swaps (14,422) 52,895 12,525 38,473 (19,676)
Unrealized gains (losses)
on revaluation of NOK
bonds 3,293 (51,487) (9,512) (48,194) 19,880
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Teekay Offshore Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
As at As at As at
June 30, March 31, December 31,
2016 2016 2015
(unaudited) (unaudited) (unaudited)
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ASSETS
Current
Cash and cash equivalents 380,718 335,751 258,473
Restricted cash - current 7,403 6,836 51,431
Accounts receivable 145,902 131,775 153,662
Vessels held for sale - - 55,450
Net investments in direct financing
leases - current 6,766 6,328 5,936
Prepaid expenses 37,619 38,279 34,027
Due from affiliates 74,806 57,936 81,271
Other current assets 21,309 21,221 20,490
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Total current assets 674,523 598,126 660,740
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Restricted cash - long-term 21,127 15,864 9,089
Vessels and equipment
At cost, less accumulated depreciation 4,178,593 4,250,285 4,348,535
Advances on newbuilding contracts and
conversion costs 516,754 470,005 395,084
Net investments in direct financing
leases 12,302 9,747 11,535
Investment in equity accounted joint
ventures 120,415 70,656 77,647
Deferred tax asset 33,511 31,600 30,050
Other assets 95,917 76,160 82,341
Goodwill 129,145 129,145 129,145
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Total assets 5,782,287 5,651,588 5,744,166
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LIABILITIES AND EQUITY
Current
Accounts payable 28,301 20,858 15,899
Accrued liabilities 138,896 124,955 91,065
Deferred revenues 54,431 49,122 54,378
Due to affiliates 97,438 105,326 304,583
Current portion of long-term debt 574,575 615,803 485,069
Current portion of derivative
instruments 63,924 209,795 201,456
Current portion of in-process revenue
contracts 12,744 12,744 12,779
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Total current liabilities 970,309 1,138,603 1,165,229
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Long-term debt 2,666,656 2,675,444 2,878,805
Derivative instruments 413,063 205,997 221,329
Due to affiliates 200,000 200,000 -
In-process revenue contracts 56,706 59,883 63,026
Other long-term liabilities 221,055 186,331 192,258
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Total liabilities 4,527,789 4,466,258 4,520,647
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Redeemable non-controlling interest 2,367 2,297 3,173
Convertible Preferred Units (12.5
million, 10.4 million and 10.4 million
units issued and outstanding at June
30, 2016, March 31, 2016 and December
31, 2015 respectively) 268,277 252,334 252,498
Equity
Limited partners - common units (137.4
million, 107.1 million and 107.0
million units issued and outstanding at
June 30, 2016, March 31, 2016 and
December 31, 2015, respectively) 645,259 603,518 629,264
Limited partners - preferred units (11.0
million units issued and outstanding at
June 30, 2016, March 31, 2016 and
December 31, 2015, respectively) 266,925 266,925 266,925
General Partner 17,879 17,082 17,608
Warrants 13,797 - -
Accumulated other comprehensive (loss)
income (19,191) (12,835) 696
Non-controlling interests 59,185 56,009 53,355
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Total equity 983,854 930,699 967,848
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Total liabilities and total equity 5,782,287 5,651,588 5,744,166
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Teekay Offshore Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Six Months Ended
June 30, 2016 June 30, 2015
(unaudited) (unaudited) (1)
----------------------------------------------------------------------------
Cash and cash equivalents provided by (used
for)
OPERATING ACTIVITIES
Net (loss) income (102,652) 104,737
Non-cash items:
Unrealized loss (gain) on derivative
instruments 51,094 (2,589)
Equity income (5,437) (13,811)
Depreciation and amortization 148,979 129,797
Write-down and (gain) on sale of vessel 43,650 14,353
Deferred income tax recovery (5,436) (817)
Amortization of in-process revenue contracts (6,355) (6,320)
Unrealized foreign currency exchange loss
and other 26,645 (52,439)
Change in non-cash working capital items
related to operating activities 32,055 49,301
Expenditures for dry docking (10,801) (5,145)
----------------------------------------------------------------------------
Net operating cash flow 171,742 217,067
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 163,112 410,374
Scheduled repayments of long-term debt (263,850) (185,907)
Prepayments of long-term debt (21,607) (13,606)
Debt issuance costs (6,102) (4,554)
Decrease in restricted cash 31,990 15,140
Purchase of Teekay Knarr AS and Knarr L.L.C
from Teekay Corporation (net of cash acquired
of $14.2 million) - 14,247
Proceeds from issuance of common units 102,930 -
Proceeds from issuance of preferred units and
warrants 100,000 125,000
Expenses relating to equity offerings (5,601) (4,187)
Cash distributions paid by the Partnership (45,538) (115,460)
Cash distributions paid by subsidiaries to
non-controlling interests (110) (5,720)
Equity contribution from joint venture
partners 750 5,500
Settlement of contingent consideration
liability - (3,303)
Other - 579
----------------------------------------------------------------------------
Net financing cash flow 55,974 238,103
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Net expenditures for vessels and equipment,
including advances on newbuilding contracts
and conversion costs (106,432) (418,153)
Increase in restricted cash - (42,080)
Proceeds from sale of vessel and equipment 55,450 8,918
Repayment from joint ventures - 5,225
Direct financing lease (investments) payments
received (1,616) 2,358
Investment in equity accounted joint ventures (52,873) (5,396)
----------------------------------------------------------------------------
Net investing cash flow (105,471) (449,128)
----------------------------------------------------------------------------
Increase in cash and cash equivalents 122,245 6,042
Cash and cash equivalents, beginning of the
period 258,473 252,138
----------------------------------------------------------------------------
Cash and cash equivalents, end of the period 380,718 258,180
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) In accordance with GAAP, the Consolidated Statement of Cash Flows for
the six months ended June 30, 2015 includes the cash flows relating to
the Knarr FPSO unit Dropdown Predecessor for the period from March 9,
2015 to June 30, 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 - Reconciliation of Non-GAAP Financial Measures
Specific Items Affecting Net (Loss) Income
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended
June 30, 2016 June 30, 2015
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net (loss) income - GAAP basis (100,129) 123,379
Adjustments:
Net (loss) income attributable to non-
controlling interests (2,496) (3,638)
Net income attributable to Dropdown
Predecessor - (15,515)
----------------------------------------------------------------------------
Net (loss) income attributable to the partners
and preferred unitholders (102,625) 104,226
----------------------------------------------------------------------------
Add (subtract) specific items affecting net
(loss) income:
Foreign currency exchange losses (gains) (1) 10,416 (4,742)
Unrealized losses (gains) on derivative
instruments (2) 44,978 (63,365)
Write-down and (gain) on sale of vessels (3) 43,650 500
Net loss provision relating to cancellation
of UMS newbuildings (3) 21,282 -
Pre-operational costs (4) 3,393 2,354
Restructuring charge and other (5) 2,162 135
Non-controlling interests' share of items
above (6) 310 342
----------------------------------------------------------------------------
Total adjustments 126,191 (64,776)
----------------------------------------------------------------------------
Adjusted net income attributable to the
partners and preferred unitholders 23,566 39,450
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Foreign currency exchange (losses) gains primarily relate to the
Partnership's revaluation of all foreign currency-denominated monetary
assets and liabilities based on the prevailing exchange rate at the end
of each reporting period and unrealized gains or losses related to the
Partnership's cross currency swaps related to the Partnership's NOK
bonds and excludes the realized gains and losses relating to the cross
currency swaps.
(2) Reflects the unrealized losses (gains) 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) See footnote (2) of the summary consolidated statements of (loss) income
included in this release for further details.
(4) Reflects the costs associated with the delivery deferral of one of the
Partnership's two UMS newbuildings up to its cancellation date,
depreciation and amortization expense and vessel operating expenses
relating to the Petrojarl I FPSO unit while undergoing conversion and
realized losses (gains) 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.
(5) Other items for the three months ended June 30, 2016 include $1.5
million relating to the reorganization within the Partnership's FPSO
segment and $0.7 million relating to the write-down of equipment in one
of its joint ventures. Other items for the three months ended June 30,
2015 relate to seafarer redundancy costs.
(6) Items affecting net (loss) income include amounts attributable to the
Partnership's consolidated non-wholly-owned subsidiaries. Each item
affecting net (loss) income 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 Measures
Distributable Cash Flow
(in thousands of U.S. Dollars, except per unit and per unit data)
----------------------------------------------------------------------------
Three Months Ended
June 30,
2016 2015
(unaudited) (unaudited)
----------------------------------------------------------------------------
Net (loss) income (100,129) 123,379
Net income attributable to Dropdown
Predecessor - (15,515)
Net (loss) income attributable to the partners
and non-controlling interests (100,129) 107,864
Add (subtract):
Depreciation and amortization 74,057 53,864
Write-down and (gain) on sale of vessels (1) 43,650 500
Net loss provision relating to cancellation
of UMS newbuildings (1) 21,282 -
Partnership's share of equity accounted
joint venture's distributable
cash flow net of estimated maintenance
capital expenditures (2) 4,140 4,143
Distributions relating to equity financing
of newbuildings
and conversion costs 4,041 5,433
Equity income from joint ventures (3,626) (9,720)
Distributions relating to preferred units (10,314) (4,791)
Estimated maintenance capital expenditures
(3) (40,118) (29,483)
Unrealized losses (gains) on derivative
instruments (4) 46,835 (56,628)
Foreign currency exchange and other, net 11,128 (6,819)
----------------------------------------------------------------------------
Distributable cash flow before non-controlling
interests 50,946 64,363
Non-controlling interests' share of DCF (5,061) (6,092)
----------------------------------------------------------------------------
Distributable Cash Flow 45,885 58,271
Amount attributable to the General Partner (309) (5,264)
----------------------------------------------------------------------------
Limited partners' Distributable Cash Flow 45,576 53,007
Weighted-average number of common units
outstanding 107,794,323 92,413,598
----------------------------------------------------------------------------
Distributable Cash Flow per limited partner
unit 0.42 0.57
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See footnote (2) of the summary consolidated statements of (loss) income
included in this release for further details.
(2) Estimated maintenance capital expenditures relating to the Partnership's
equity accounted joint venture for the three months ended June 30, 2016
and 2015 were $1.0 million.
(3) 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 June 30, 2016.
(4) Derivative instruments include interest rate swaps and foreign exchange
forward contracts.
Teekay Offshore Partners L.P.
Appendix C - Supplemental Segment Information
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
----------------------------------------------------------------------------
Shuttle Tanker
FPSO Segment Segment FSO Segment
Revenues 124,715 125,840 13,789
Voyage expenses - (12,573) (124)
Vessel operating
expenses (41,365) (29,792) (6,195)
Time-charter
hire expense - (14,764) -
Depreciation and
amortization (37,234) (30,089) (2,209)
General and
administrative (8,217) (3,871) (144)
Write-down of
vessels - - -
Restructuring
charge (1,487) - -
----------------------------------------------------------------------------
Income (loss)
from vessel
operations 36,412 34,751 5,117
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay Offshore Partners L.P.
Appendix C - Supplemental Segment Information
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
----------------------------------------------------------------------------
Conventional
UMS Segment Towage Segment Tanker Segment Total
Revenues 3,736 11,730 4,654 284,464
Voyage expenses - (4,281) (610) (17,588)
Vessel operating
expenses (9,319) (3,924) (166) (90,761)
Time-charter
hire expense - - (4,065) (18,829)
Depreciation and
amortization (1,695) (2,830) - (74,057)
General and
administrative (832) (757) - (13,821)
Write-down of
vessels (43,650) - - (43,650)
Restructuring
charge - - - (1,487)
----------------------------------------------------------------------------
Income (loss)
from vessel
operations (51,760) (62) (187) 24,271
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2015
(unaudited)
----------------------------------------------------------------------------
Shuttle Tanker
FPSO Segment Segment FSO Segment
Revenues 141,722 132,899 14,165
Voyage expenses - (18,976) (89)
Vessel operating
expenses (50,445) (31,120) (6,921)
Time-charter
hire expense - (10,762) -
Depreciation and
amortization (37,783) (26,795) (2,975)
General and
administrative (6,892) (6,788) (420)
Write-down of
vessel - - -
Restructuring
charge - (135) -
----------------------------------------------------------------------------
Income from
vessel
operations 46,602 38,323 3,760
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2015
(unaudited)
----------------------------------------------------------------------------
Conventional
UMS Segment Towage Segment Tanker Segment Total
Revenues 3,686 10,517 8,245 311,234
Voyage expenses - (1,004) (647) (20,716)
Vessel operating
expenses (1,126) (3,697) (1,514) (94,823)
Time-charter
hire expense - - - (10,762)
Depreciation and
amortization (401) (2,174) (1,675) (71,803)
General and
administrative (639) (837) (507) (16,083)
Write-down of
vessel (500) - - (500)
Restructuring
charge - - - (135)
----------------------------------------------------------------------------
Income from
vessel
operations 1,020 2,805 3,902 96,412
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay Offshore Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Cash Flow From (Used For) Vessel Operations From Consolidated Vessels
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
----------------------------------------------------------------------------
Shuttle
FPSO Tanker FSO
Segment Segment Segment
Income (loss)
from vessel
operations
(See Appendix C) 36,412 34,751 5,117
Depreciation and
amortization 37,234 30,089 2,209
Realized
(losses) gains
from the
settlements of
non-designated
foreign
exchange
forward
contracts (967) (962) -
Amortization of
non-cash
portion of
revenue
contracts (3,997) - -
Write-down of
vessels - - -
Falcon Spirit
revenue
accounted for
as direct
financing lease - - (702)
Falcon Spirit
cash flow from
time-charter
contracts - - 2,178
----------------------------------------------------------------------------
Cash flow from
(used for)
vessel
operations from
consolidated
vessels 68,682 63,878 8,802
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay Offshore Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Cash Flow From (Used For) Vessel Operations From Consolidated Vessels
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended June 30, 2016
(unaudited)
----------------------------------------------------------------------------
Conventional
UMS Towage Tanker
Segment Segment Segment Total
Income (loss)
from vessel
operations
(See Appendix C) (51,760) (62) (187) 24,271
Depreciation and
amortization 1,695 2,830 - 74,057
Realized
(losses) gains
from the
settlements of
non-designated
foreign
exchange
forward
contracts - 125 - (1,804)
Amortization of
non-cash
portion of
revenue
contracts - - - (3,997)
Write-down of
vessels 43,650 - - 43,650
Falcon Spirit
revenue
accounted for
as direct
financing lease - - - (702)
Falcon Spirit
cash flow from
time-charter
contracts - - - 2,178
----------------------------------------------------------------------------
Cash flow from
(used for)
vessel
operations from
consolidated
vessels (6,415) 2,893 (187) 137,653
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2015
(unaudited)
Shuttle
FPSO Tanker FSO
Segment Segment Segment
----------------------------------------------------------------------------
Income from
vessel
operations
(See Appendix C) 46,602 38,323 3,760
Cash flow from
vessel
operations from
consolidated
vessels
attributable to
Dropdown
Predecessor (36,707) - -
Depreciation and
amortization 37,783 26,795 2,975
Realized losses
from the
settlements of
non-designated
foreign
exchange
forward
contracts (1,309) (1,262) -
Amortization of
non-cash
portion of
revenue
contracts (3,177) - -
Write-down of
vessel - - -
Falcon Spirit
revenue
accounted for
as direct
financing lease - - (942)
Falcon Spirit
cash flow from
time-charter
contracts - - 2,153
----------------------------------------------------------------------------
Cash flow from
vessel
operations from
consolidated
vessels 43,192 63,856 7,946
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30, 2015
(unaudited)
Conventional
UMS Towage Tanker
Segment Segment Segment Total
----------------------------------------------------------------------------
Income from
vessel
operations
(See Appendix C) 1,020 2,805 3,902 96,412
Cash flow from
vessel
operations from
consolidated
vessels
attributable to
Dropdown
Predecessor - - - (36,707)
Depreciation and
amortization 401 2,174 1,675 71,803
Realized losses
from the
settlements of
non-designated
foreign
exchange
forward
contracts - - - (2,571)
Amortization of
non-cash
portion of
revenue
contracts - - - (3,177)
Write-down of
vessel 500 - - 500
Falcon Spirit
revenue
accounted for
as direct
financing lease - - - (942)
Falcon Spirit
cash flow from
time-charter
contracts - - - 2,153
----------------------------------------------------------------------------
Cash flow from
vessel
operations from
consolidated
vessels 1,921 4,979 5,577 127,471
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Teekay Offshore Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures
Cash Flow From Vessel Operations From Equity Accounted Vessels
(in thousands of U.S. Dollars)
----------------------------------------------------------------------------
Three Months Ended Three Months Ended
June 30, 2016 June 30, 2015
(unaudited) (unaudited)
----------------------------------------------------------------------------
Partnership's Partnership's
At 100% 50% At 100% 50%
Revenues 19,077 9,539 20,174 10,087
Vessel and other operating
expenses (5,968) (2,984) (6,915) (3,458)
Depreciation and
amortization (4,402) (2,201) (4,422) (2,211)
Write-down of equipment (1,351) (676) - -
----------------------------------------------------------------------------
Income from vessel
operations of equity
accounted vessels 7,356 3,678 8,837 4,418
Net interest expense (1,892) (946) (1,650) (825)
Realized and unrealized
gains on derivative
instruments (1) 1,254 627 12,269 6,135
Foreign currency exchange
gain 611 306 - -
----------------------------------------------------------------------------
Total other items (27) (13) 10,619 5,310
Net income / equity income
of equity accounted vessels
before income tax expense 7,329 3,665 19,456 9,728
Income tax expense (78) (39) (16) (8)
----------------------------------------------------------------------------
Net income / equity income
of equity accounted vessels 7,251 3,626 19,440 9,720
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations of equity
accounted vessels 7,356 3,678 8,837 4,418
Depreciation and
amortization 4,402 2,201 4,422 2,211
Write-down of equipment 1,351 676
----------------------------------------------------------------------------
Cash flow from vessel
operations from equity
accounted vessels 13,109 6,555 13,259 6,629
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Realized and unrealized gains on derivative instruments for the three
months ended June 30, 2016 and 2015 include total unrealized gains of
$2.1 million ($1.0 million at the Partnership's 50% share) and
unrealized gains of $13.5 million ($6.7 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 results and benefits of the Partnership's financing initiatives, including the Partnership's ability to meet medium-term liquidity requirements and finance its committed growth projects; and the expected impact of the delivery of the Partnership's existing growth projects on its cash flows, including cash flow from vessel operations. 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: 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; 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: Ryan Hamilton Tel: +1 (604) 609-6442 Website: www.teekay.com
Source: Teekay Offshore Partners L.P.
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