Form 6-K Teekay Offshore Partners For: May 19

TEEKAY OFFSHORE PARTNERS L.P.

Teekay Offshore GP L.L.C., its general partner

/s/ Peter Evensen

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.

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).

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.

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.

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.

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.

FPSO

Segment

FSO

Segment

UMS

Segment

Net revenues⁽¹⁾

Vessel operating expenses

Time-charter hire expense

Depreciation and amortization

CFVO from consolidated vessels⁽²⁾

CFVO from equity accounted vessels⁽³⁾

Total CFVO⁽²⁾⁽³⁾

FPSO

Segment

FSO

Segment

Net revenues⁽¹⁾

Vessel operating expenses

Time-charter hire expense

Depreciation and amortization

CFVO from consolidated vessels⁽²⁾

CFVO from equity accounted vessel⁽³⁾

Total CFVO⁽²⁾⁽³⁾

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.

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.

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.

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.

Shuttle Tanker Segment

FPSO Segment

FSO Segment

Towage Segment

Conventional Segment

UMS Segment

Total

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.

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.

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

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

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.

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.

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

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).

March 31,

2016

December 31,

2015

March 31,

2015

Revenues

Voyage expenses

Vessel operating expenses

Time-charter hire expense

Depreciation and amortization⁽²⁾

General and administrative

(Write-down) and gain on sale of vessels⁽³⁾

Restructuring charge

Income from vessel operations

Interest expense

Interest income

Realized and unrealized (losses) gains on derivative instruments⁽⁴⁾

Equity income

Foreign currency exchange loss⁽⁵⁾

Other income – net

(Loss) income before income tax recovery

Income tax recovery

Net (loss) income

Non-controlling interests in net (loss) income

Dropdown Predecessor’s interest in net loss⁽¹⁾

Preferred unitholders’ interest in net (loss) income

General Partner’s interest in net (loss) income

Limited partners’ interest in net (loss) income

Weighted-average number of common units:

- basic

- diluted

Total number of common units outstanding at end of period

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.

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.

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.

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:

Realized losses relating to:

Interest rate swaps

Foreign currency forward contracts

Unrealized (losses) gains relating to:

Interest rate swaps

Foreign currency forward contracts

Total realized and unrealized (losses) gains on derivative instruments

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:

Realized losses on cross currency swaps

Unrealized gains (losses) on cross currency swaps

Unrealized (losses) gains on revaluation of NOK bonds

ASSETS

Current

Cash and cash equivalents

Restricted cash - current

Accounts receivable

Vessels held for sale

Net investments in direct financing leases - current

Prepaid expenses

Due from affiliates

Other current assets

Total current assets

Restricted cash - long-term

Vessels and equipment

At cost, less accumulated depreciation

Advances on newbuilding contracts and conversion costs

Net investments in direct financing leases

Investment in equity accounted joint ventures

Deferred tax asset

Other assets

Goodwill

Total assets

LIABILITIES AND EQUITY

Current

Accounts payable

Accrued liabilities

Deferred revenues

Due to affiliates

Current portion of derivative instruments

Current portion of long-term debt

Current portion of in-process revenue contracts

Total current liabilities

Long-term debt

Derivative instruments

Due to affiliates

In-process revenue contracts

Other long-term liabilities

Total liabilities

Redeemable non-controlling interest

Convertible Preferred Units (10.4 million units issued and outstanding at March 31, 2016 and December 31, 2015)

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)

Limited partners - preferred units (11.0 million units issued and outstanding at March 31, 2016 and December 31, 2015)

General Partner

Non-controlling interests

Accumulated other comprehensive (loss) income

Total equity

Total liabilities and total equity

Cash and cash equivalents provided by (used for)

OPERATING ACTIVITIES

Net loss

Non-cash items:

Unrealized (gain) loss on derivative instruments

Equity income

Depreciation and amortization

Write-down and (gain) on sale of vessels

Deferred income tax recovery

Amortization of in-process revenue contracts

Unrealized foreign currency exchange gain and other

Change in non-cash working capital items related to operating activities

Expenditures for dry docking

Net operating cash flow

FINANCING ACTIVITIES

Proceeds from long-term debt

Scheduled repayments of long-term debt

Prepayments of long-term debt

Debt issuance costs

Purchase of Teekay Knarr AS and Knarr L.L.C from Teekay Corporation (net of cash acquired of $14.2 million)

Decrease in restricted cash

Cash distributions paid by the Partnership

Cash distributions paid by subsidiaries to non-controlling interests

Other

Net financing cash flow

INVESTING ACTIVITIES

Net expenditures for vessels and equipment, including advances on newbuilding contracts and conversion costs

Proceeds from sale of vessels and equipment

Repayment from joint ventures

Direct financing lease payments received

Return of capital from (investment in) equity accounted joint ventures

Increase in restricted cash

Net investing cash flow

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

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.

Net loss – GAAP basis

Adjustments:

Net income attributable to non-controlling interests

Net loss attributable to Dropdown Predecessor

Net loss attributable to the partners

Add (subtract) specific items affecting net loss:

Foreign currency exchange losses⁽¹⁾

Unrealized losses on derivative instruments⁽²⁾

Write-down and (gain) on sale of vessels⁽³⁾

Pre-operational costs⁽⁴⁾

Early termination fee and other⁽⁵⁾

Non-controlling interests’ share of items above⁽⁶⁾

Total adjustments

Adjusted net income attributable to the partners

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.

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.

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.

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.

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.

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.

Net loss

Net loss attributable to Dropdown Predecessor

Net loss attributable to the partners and non-controlling interests’

Depreciation and amortization

Equity income from joint ventures

Distributions relating to equity financing of newbuildings and conversion costs

Partnership’s share of equity accounted joint venture’s distributable cash flow net of estimated maintenance capital expenditures⁽¹⁾

Write-down and (gain on sale) of vessels

Distributions relating to preferred units

Estimated maintenance capital expenditures⁽²⁾

Unrealized losses on derivative instruments⁽³⁾

Foreign currency exchange and other, net

Distributable cash flow before non-controlling interests

Non-controlling interests’ share of DCF

Distributable Cash Flow

Amount attributable to the General Partner

Limited partners’ Distributable Cash Flow

Weighted-average number of common units outstanding

Distributable Cash Flow per limited partner unit

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.

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.

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

FPSO

Segment

FSO

Segment

Revenues

Voyage expenses

Net revenues

Three Months Ended March 31, 2015

FPSO

Segment

FSO

Segment

Revenues

Voyage expenses

Net revenues

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.

Net revenues (See Appendix C)

Vessel operating expenses

Time-charter hire expense

Depreciation and amortization

General and administrative

Income (loss) from vessel operations

Net revenues (See Appendix C)

Vessel operating expenses

Time-charter hire expense

Depreciation and amortization

General and administrative

(Write-down) and gain on sale of

vessels

Income (loss) from vessel operations

FPSO

Segment

FSO

Segment

Income (loss) from vessel operations

(See Appendix D)

Depreciation and amortization

Realized (losses) gains from the settlements of non-designated foreign exchange forward contracts

Amortization of non-cash portion of revenue contracts

Falcon Spirit revenue accounted for as direct financing lease

Falcon Spirit cash flow from time-charter contracts

Cash flow from vessel operations from consolidated vessels

FSO

Segment

Income (loss) from vessel operations

(See Appendix D)

Cash flow from vessel operations from consolidated vessels attributable to Dropdown Predecessor

Depreciation and amortization

Realized losses from the settlements of non-designated foreign exchange forward contracts

Amortization of non-cash portion of revenue contracts

Write-down and (gain) on sale of vessels

Falcon Spirit revenue accounted for as direct financing lease

Falcon Spirit cash flow from time-charter contracts

Cash flow from (used for) vessel operations from consolidated vessels

Voyage revenues

Vessel and other operating expenses

Depreciation and amortization

General and administrative