Teekay LNG Partners L.P.
NYSE : TGP

Teekay LNG Partners L.P.

November 25, 2008 09:09 ET

Teekay LNG Partners Reports Restated Historical Results

HAMILTON, BERMUDA--(Marketwire - Nov. 25, 2008) -

Highlights

- Teekay LNG has completed its previously announced financial restatement.

- As anticipated, there is no impact on the Partnership's previously reported distributable cash flow, liquidity or cash distributions in any period.

- All restatement adjustments are non-cash in nature and do not affect the economics of the Partnership.

- The Partnership will host a conference call on Tuesday, November 25, 2008 to discuss its restated results and key elements of its financial position and outlook.

Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE:TGP) today reported that it has restated its previously reported financial results, including results for fiscal years 2003 through 2007 and the first and second quarters of 2008, to adjust for:

- its accounting treatment for its derivative transactions under the Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging (SFAS 133), as more fully discussed below under "Restatement for Accounting under SFAS 133";

- its accounting treatment for certain vessels it acquired from Teekay Corporation (Teekay) subsequent to the Partnership's May 2005 initial public offering, whereby the Partnership's financial statements have been retroactively adjusted to include the historical results of the vessels from the date they were originally acquired by Teekay and began operating, as more fully discussed below under "Restatement for Changes to Accounting for Dropdown Transactions"; and

- its financial statement presentation for the Partnership's interests in the RasGas joint ventures, whereby certain assets and liabilities have been grossed-up for accounting presentation purposes, as more fully discussed below under "Restatement for Gross-up Presentation of RasGas Joint Ventures and Other."

"It is important to emphasize that all of the restatement adjustments have no impact on the Partnership's distributable cash flow(1), liquidity or cash distributions in any period," stated Peter Evensen, Chief Executive Officer of Teekay GP LLC, the Partnership's general partner. "Any adjustments to the Partnership's financial statements are due to changes in accounting treatment only and have no impact on the economics of the Partnership or its actual cash flows."

Mr. Evensen continued, "Any adjustments to net income resulting from the change in the Partnership's accounting treatment for hedge transactions are exclusively due to unrealized gains or losses as a result of the change in the mark-to-market value of our hedging instruments at the end of each reporting period, which have no cash impact. Additional adjustments, which came into scope as a result of the Partnership's detailed and thorough restatement audit, also have no cash impact. The change to our accounting treatment for vessel dropdowns simply means that vessels acquired from Teekay are now reflected in the Partnership's comparative historical financial statements for periods prior to the Partnership's actual acquisition of the vessels as if they had been acquired by the Partnership at the time of their original purchase by Teekay. This adjustment has no impact on the Partnership's financial results subsequent to the date the vessels were acquired by the Partnership. Finally, any gross-up of assets and liabilities related to the Partnership's RasGas joint venture interests does not impact partners' equity or net income and does not result in any change to the Partnership's net exposure in these joint ventures."

(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 to this release for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

A summary of financial information reflecting the restatement adjustments for the three and six months ended June 30, 2008 and 2007 and the three months ended March 31, 2008 is presented below. Appendix B to this release provides a summary of the impact of the restatements on reported net income for the fiscal years ended December 31, 2003 through 2007. Please see "Information on SEC Filings" below for information about the Partnership's upcoming filings with the U.S. Securities and Exchange Commission (SEC) relating to the restatements.

Summary of Restated Second Quarter 2008 Results

Since the restatement adjustments are all non-cash in nature, they have not impacted the Partnership's distributable cash flow(1) or cash distributions. During the three months ended June 30, 2008, the Partnership generated $24.4 million of distributable cash flow, an increase from $22.2 million for the same quarter last year. For the quarter ended June 30, 2008, the Partnership raised its quarterly cash distribution by approximately four percent to $0.55 per unit from $0.53 per unit in the previous quarter. This increase reflects the acquisition of the two Kenai LNG carriers on April 1, 2008. This cash distribution was paid on August 14, 2008 to all unitholders of record on August 7, 2008.

On November 3, 2008, the Partnership declared a cash distribution of $0.57 per unit for the quarter ended September 30, 2008, an increase of $0.02 per unit, or four percent, from the previous quarter. This distribution increase reflects the contribution from the Partnership's joint venture interest in four RasGas 3 LNG carriers delivered between May and July of 2008. This cash distribution was paid on November 14, 2008 to all unitholders of record on November 7, 2008.

The effect of the accounting adjustments noted above on previously reported net income for the three and six months ended June 30, 2008 and 2007 and for the three months ended March 31, 2008 is summarized in the table below. The results of vessels acquired from Teekay relating to the periods prior to their acquisition by the Partnership are referred to herein as the Dropdown Predecessor.



--------------------------------------------------------------------------
Net Income (Loss)
--------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands June 30, March 31, June 30, June 30, June 30,
of US dollars) 2008 2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------ -----------------------
As
Previously
Reported $ 7,634 $ (25,000) $ 2,461 $ (17,366) $ 3,863
Adjustments:
Derivative
Instruments (2) 22,784 (17,785) 39,241 4,999 45,216
Dropdown
Predecessor (3) - 895 - 895 -
Gross-up
Presentation
and Other (4) 1,298 (333) (277) 965 (1,189)
------------------------------------------------ -----------------------
As Restated $ 31,716 $ (42,223) $ 41,425 $ (10,507) $ 47,890
------------------------------------------------ -----------------------


For the three months ended June 30, 2008, the Partnership now reports net income of $31.7 million, compared to net income of $41.4 million for the same period last year. Net income for the three months ended June 30, 2008 and 2007 includes unrealized foreign currency translation losses of $29,000 and $5.7 million, respectively, which primarily relate to long-term debt denominated in Euros. Net income for the three months ended June 30, 2008 and 2007 also includes non-cash net gains of $19.8 million and $34.9 million, respectively, relating primarily to changes in fair value of derivative instruments not qualifying for hedge accounting and the accounting consolidation of interests in the two Tangguh LNG newbuilding carriers (which the Partnership has not yet acquired) and in the four RasGas 3 LNG carriers (which the Partnership acquired on May 6, 2008).

For the six months ended June 30, 2008, the Partnership now reports a net loss of $10.5 million, compared to net income of $47.9 million for the same period last year. Net income for the six months ended June 30, 2008 and 2007 includes unrealized foreign currency translation losses of $33.9 million and $10.5 million, respectively, which primarily relate to long-term debt denominated in Euros. Net income for the six months ended June 30, 2008 and 2007 also includes a non-cash net loss of $1.3 million and a non-cash net gain of $37.7 million, respectively, relating primarily to changes in fair value of derivative instruments not qualifying for hedge accounting and the accounting consolidation of interests in the Tangguh and RasGas 3 LNG carriers.

(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 to this release for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

(2) Please refer to "Restatement for Accounting under SFAS 133" included in this release.

(3) Please refer to "Restatement for Changes to Accounting for Dropdown Transactions" included in this release.

(4) Please refer to "Restatement for Gross-up Presentation of RasGas Joint Ventures and Other" included in this release.

Further Information Regarding Restatement Items

Restatement for Accounting under SFAS 133

On August 7, 2008, the Partnership announced that it would restate its historical financial statements to adjust its accounting treatment for its derivative transactions under SFAS 133. This restatement adjusts for the Partnership's interest rate swap agreements and profit sharing swap agreement that did not qualify for hedge accounting treatment under SFAS 133 as aspects of the Partnership's hedge documentation did not meet the strict technical requirements of the standard.

Accordingly, the Partnership has now recognized the changes in the fair value of these derivatives through the statement of income (loss) rather than directly to partners' equity on the balance sheet. This restatement, which is non-cash in nature, has resulted in adjustments to Teekay LNG's previously reported net income, but does not affect the economics of any hedging transactions or have any impact on the Partnership's previously reported distributable cash flow, liquidity or cash distributions. The Partnership believes that the applicable derivative transactions were consistent with its risk management policies and that its overall hedging strategy continues to be sound.

The Partnership has discontinued the use of hedge accounting for its interest rate swap agreements and the profit sharing swap agreement. As a result, the unrealized gains and losses due to the change in the fair values of these derivative instruments will be reflected as increases or decreases to the Partnership's voyage revenues, interest expense and interest income going forward. This change will not impact the economics of hedging transactions nor the Partnership's distributable cash flow, liquidity or cash distributions in any future period.

Restatement for Changes to Accounting for Dropdown Transactions

Subsequent to the release of its preliminary second quarter financial results, the Partnership reviewed and revised its accounting treatment for certain vessels acquired through dropdown transactions from Teekay. The Partnership has historically accounted for the acquisition of vessel interests from Teekay as asset acquisitions (rather than business acquisitions) and recorded the financial results of these vessels commencing from the date the vessels were acquired by Teekay LNG.

Although substantially all of the value relating to these transactions is attributable to the vessels and associated contracts, the Partnership has now determined that these related-party vessel acquisitions should have been accounted for as business acquisitions (rather than asset acquisitions) under the provision of the Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141). Under SFAS 141, business acquisitions for entities under common control which 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.

Accordingly, the Partnership has recast its historical financial results, including results for the quarters ended March 31 and June 30, 2008 and the fiscal years ended December 31, 2003 through 2007. The table below lists the seven vessels acquired by Teekay LNG subsequent to the Partnerships' May 2005 initial public offering that formerly operated under Teekay.



----------------------------------------------------------------------
Vessel Dropdown Predecessor Period
----------------------------------------------------------------------
African Spirit November 10, 2003 to November 22, 2005
European Spirit September 26, 2003 to November 22, 2005
Asian Spirit January 5, 2004 to November 22, 2005
Granada Spirit December 6, 2004 to May 9, 2005
Dania Spirit April 1, 2003 to December 31, 2006
Polar Spirit December 13, 2007 to March 31, 2008
Arctic Spirit December 14, 2007 to March 31, 2008
----------------------------------------------------------------------


The retroactive adjustments to reflect the results of the Dropdown Predecessor have resulted in changes to Teekay LNG's previously reported net income and total partners' equity. As they are non-cash in nature, these adjustments have not resulted in changes to the Partnership's previously reported distributable cash flow, liquidity or cash distributions. The Dropdown Predecessor adjustments have no effect on the previously reported net income for the three months ended June 30, 2008, or partners' equity as at June 30, 2008.

Restatement for Gross-up Presentation of RasGas Joint Ventures and Other

Subsequent to the release of its preliminary second quarter financial results, the Partnership reviewed and revised its financial statement presentation for debt and interest rate swap agreements related to its joint venture interests in the three RasGas II and four RasGas 3 LNG carriers. As a result, certain of the Partnership's assets and liabilities have been grossed up for accounting presentation purposes. These adjustments, which do not affect the Partnership's net income, distributable cash flow, liquidity, cash distributions or partners' equity in any period, are described below. All RasGas II and RasGas 3 carriers have now been delivered and are currently operating under long-term, fixed-rate contracts.

In January 2006, the Partnership entered into a sale and 30-year leaseback arrangement pertaining to shipbuilding contracts for its 70 percent interest in the three RasGas II LNG carriers. In accordance with Emerging Issues Task Force Issue 97-10, the Effect of Lessee Involvement in Asset Construction, the Partnership has now recorded on its December 31, 2006 balance sheet the accumulated construction cost of these vessels and related capital lease obligations for the period subsequent to the RasGas II sale-leaseback transaction as the Partnership retained certain construction period risks. This adjustment does not impact the accounting treatment for these vessels in any period following their delivery in the first quarter of 2007. The Partnership has restated its consolidated balance sheet as at December 31, 2006 to record the accumulated cost of approximately $295 million for these vessels under construction, and related capital lease obligations.

Through a wholly-owned subsidiary, the Partnership owns a 40 percent interest in the four RasGas 3 LNG carriers. The joint venture partner, a wholly-owned subsidiary of Qatar Gas Transport Company, owns the remaining 60 percent interest. Both wholly-owned subsidiaries are joint and several co-borrowers with respect to the RasGas 3 term loan and related interest rate swap agreements. Previously, the Partnership recorded 40 percent of the RasGas 3 term loan and interest rate swap obligations in its financial statements. The Partnership has now made adjustments to its balance sheet to reflect 100 percent of the RasGas 3 term loan and interest rate swap obligations, as well as offsetting increases in assets, for the fourth quarter of 2006 through the second quarter of 2008. As the Partnership is a joint and several borrower, it has also made adjustments to its statements of income (loss) to reflect 100 percent of the interest expense on the RasGas 3 term loan with an offsetting amount to interest income from its advances to the joint venture. These RasGas 3 adjustments do not result in any increase to the Partnership's net exposure in the joint ventures.

The Partnership has also restated certain other items primarily relating to amounts attributable to non-controlling interests.

Information on SEC Filings

More detailed financial information relating to the restatements will be included in the amended Form 20-F/A for the fiscal year ended December 31, 2007 (certain financial information will be included for annual fiscal periods from 2003 through 2007), in the amended Form 6-K/A for the quarter ended March 31, 2008 and in the Form 6-K for the quarter ended June 30, 2008, which the Partnership expects to file with or furnish to, as applicable, the SEC and make available on its website at www.teekaylng.com no later than December 5, 2008. For a summary of the impact of the restatement on reported net income for the fiscal years ended December 31, 2003 through 2007, please refer to Appendix B of this release.

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 15 LNG carriers, six LPG carriers and eight Suezmax class crude oil tankers. Two of the 15 LNG carriers are newbuildings scheduled for delivery between late-2008 and early-2009. Five of the six LPG carriers are newbuildings scheduled for delivery in 2009 and 2010.

Teekay LNG Partners' common units trade on the New York Stock Exchange under the symbol "TGP".

Conference Call

Teekay LNG plans to host a conference call at 2:00 p.m. ET on Tuesday, November 25, 2008, to discuss the Partnership's restated results. In addition, the Partnership will take the opportunity to discuss key elements of its financial position and outlook. All unitholders and interested parties are invited to listen to the live conference call at www.teekaylng.com or by dialing (866) 322-8032, or (416) 640-3406 if outside North America, and quoting confirmation code 3198467. The Partnership plans to make available a recording of the conference call until midnight December 2, 2008 by dialing (888) 203-1112 or (647) 436-0148, and entering access code 3198467, or via the Partnership's web site until December 24, 2008.

An investor presentation to accompany this conference call will be made available on the Partnership's web site at www.teekaylng.com prior to the start of the call.



----------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
----------------------------------------------------------------------------
Three Months Ended June 30, 2008
---------------------------------

Adjustments
---------------------------------

Dropdown Gross-up
As Derivative Predec- Present-
Previously Instruments essor ation and As
Reported (1) (2) (un- Other (3) Restated
(unaudited) (unaudited) audited) (unaudited) (unaudited)
---------- ----------- -------- ---------- ----------

VOYAGE
REVENUES (4) $ 71,592 $ (9,276) - - $ 62,316
--------------------------------------------------------------------------

OPERATING
EXPENSES
Voyage
expenses 649 - - - 649
Vessel
operating
expenses 20,792 - - - 20,792
Depreciation
and
amortization 18,872 - - - 18,872
General and
administrative 5,745 - - - 5,745
--------------------------------------------------------------------------
46,058 - - - 46,058
--------------------------------------------------------------------------
Income from
vessel
operations 25,534 (9,276) - - 16,258
--------------------------------------------------------------------------
OTHER ITEMS
Interest
(expense)
gain (5) (29,602) 74,328 - (4,330) 40,396
Interest
income
(loss) (6) 12,828 (23,183) - 4,330 (6,025)
Foreign
exchange loss (29) - - - (29)
Other income
(loss) - net 17 (559) - - (542)
--------------------------------------------------------------------------
Income before
non-controlling
interest 8,748 41,310 - - 50,058
Non-controlling
interest (1,114) (18,526) - 1,298 (18,342)
--------------------------------------------------------------------------
Net income $ 7,634 $ 22,784 - $ 1,298 $31,716
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited
partners'
units
outstanding:
Weighted-aver-
age number of
common units
outstanding
- Basic and
diluted 29,899,726 29,494,930
Weighted-aver-
age number of
subordinated
units
outstanding
- Basic and
diluted 12,629,633 13,034,429
Weighted-aver-
age number of
total units
outstanding
- Basic and
diluted 42,529,359 42,529,359
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included
in this release.
(2) Please refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.
(4) Restated voyage revenues includes $9.3 million of unrealized losses for
the three months ended June 30, 2008 relating to the change in fair
value of a profit sharing swap agreement between the Partnership and
Teekay for the Toledo Spirit time charter contract.
(5) Restated interest (expense) gain includes $76.2 million of unrealized
gains for the three months ended June 30, 2008 relating to the change
in fair value of interest rate swap agreements that do not qualify for
hedge accounting.
(6) Restated interest income (loss) includes $23.2 million of unrealized
losses for the three months ended June 30, 2008 relating to the change
in fair value of the Partnership's non-designated RasGas II defeasance
deposit interest rate swap agreements that do not qualify for hedge
accounting.


---------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF LOSS
(in thousands of U.S. dollars, except unit data)

---------------------------------------------------------------------------
Three Months Ended March 31, 2008
---------------------------------

Adjustments
---------------------------------

Dropdown Gross-up
Derivative Predec- Present-
As Instruments essor ation and As
Reported (1) (2) (un- Other (3) Restated
(unaudited) (unaudited) audited) (unaudited) (unaudited)
---------- ----------- -------- ---------- ---------

VOYAGE
REVENUES (4) $ 66,022 $ (2,694) 10,283 - $ 73,611
--------------------------------------------------------------------------
OPERATING
EXPENSES
Voyage
expenses 295 - 113 - 408
Vessel
operating
expenses 15,400 - 3,007 - 18,407
Depreciation
and
amortization 16,072 - 2,718 - 18,790
General and
administrative 3,960 - 495 - 4,455
--------------------------------------------------------------------------
35,727 - 6,333 - 42,060
--------------------------------------------------------------------------
Income from
vessel
operations 30,295 (2,694) 3,950 - 31,551
--------------------------------------------------------------------------
OTHER ITEMS
Interest
expense (5) (33,058) (64,791) (3,055) (4,631) (105,535)
Interest
income (6) 11,947 26,213 - 4,631 42,791
Foreign
exchange
loss (33,891) - - - (33,891)
Other (loss)
income - net (388) 243 - - (145)
--------------------------------------------------------------------------
Loss (income)
before
non-controll-
ing interest (25,095) (41,029) 895 - (65,229)
Non-controll-
ing interest 95 23,244 - (333) 23,006
--------------------------------------------------------------------------
Net loss
(income) $ (25,000) $ (17,785) $895 $ (333) $ (42,223)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited
partners'
units
outstanding:
Weighted-aver-
age number
of common
units
outstanding
- Basic and
diluted 22,540,547 22,540,547

Weighted-aver
age number of
subordinated
units
outstanding
- Basic and
diluted 14,734,572 14,734,572

Weighted-aver
age number
of total
units
outstanding
- Basic and
diluted 37,275,119 37,275,119
--------------------------------------------------------------------------


(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Relates to the results of the Dropdown Predecessor (as at June 30,
2008) for the Polar Spirit and Arctic Spirit from January 1 to March
31, 2008, when the vessels were under the common control of Teekay
prior to their acquisition by Teekay LNG. Please refer to "Restatement
for Changes to Accounting for Dropdown Transactions" included in this
release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.
(4) Restated voyage revenues includes $2.7 million of unrealized losses for
the three months ended March 31, 2008 relating to the change in fair
value of a profit sharing swap agreement between the Partnership and
Teekay for the Toledo Spirit time charter contract.
(5) Restated interest expense includes $67.3 million of unrealized losses
for the three months ended March 31, 2008 relating to the change in
fair value of interest rate swap agreements that do not qualify for
hedge accounting.
(6) Restated interest income includes $26.2 million of unrealized gains for
the three months ended March 31, 2008 relating to the change in fair
value of the Partnership's non-designated RasGas II defeasance deposit
interest rate swap agreements that do not qualify for hedge accounting.


--------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)

--------------------------------------------------------------------------
Three Months Ended June 30, 2007
---------------------------------

Adjustments
---------------------------------

Dropdown Gross-up
Derivative Predec- Present-
As Instruments essor ation and As
Reported (1) (2) (un- Other (3) Restated
(unaudited) (unaudited) audited) (unaudited) (unaudited)
---------- ----------- -------- ---------- ---------

VOYAGE
REVENUES (4) $ 65,282 $ 13,035 - - $ 78,317
--------------------------------------------------------------------------
OPERATING
EXPENSES
Voyage
expenses 274 - - - 274
Vessel
operating
expenses 13,930 - - - 13,930
Depreciation
and
amortization 16,555 - - - 16,555
General and
administrative 3,759 - - - 3,759
--------------------------------------------------------------------------
34,518 - - - 34,518
--------------------------------------------------------------------------
Income from
vessel
operations 30,764 13,035 - - 43,799
--------------------------------------------------------------------------
OTHER ITEMS
Interest
(expense)
gain (5) (35,819) 67,551 - (4,079) 27,653
Interest
income
(loss) (6) 13,020 (27,047) - 4,079 (9,948)
Foreign
exchange
loss (5,682) - - - (5,682)
Other loss -
net (271) (558) - - (829)
--------------------------------------------------------------------------
Income
before
non-controlling
interest 2,012 52,981 - - 54,993
Non-controlling
interest 449 (13,740) - (277) (13,568)
--------------------------------------------------------------------------
Net income $ 2,461 $ 39,241 - $ (277) $ 41,425
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited
partners'
units
outstanding:
Weighted-aver-
age number
of common
units
outstanding
- Basic and
diluted 21,327,360 21,327,360
Weighted-aver-
age number
of
subordinated
units
outstanding
- Basic and
diluted 14,734,572 14,734,572
Weighted-aver-
age number
of total
units
outstanding
- Basic and
diluted 36,061,932 36,061,932
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Please refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.
(4) Restated voyage revenues includes $13.0 million of unrealized gains for
the three months ended June 30, 2007 relating to the change in fair
value of a profit sharing swap agreement between the Partnership and
Teekay for the Toledo Spirit time charter contract.
(5) Restated interest (expense) gain includes $63.6 million of unrealized
gains for the three months ended June 30, 2007 relating to the change
in fair value of interest rate swap agreements that do not qualify for
hedge accounting.
(6) Restated interest income (loss) includes $27.0 million of unrealized
losses for the three months ended June 30, 2007 relating to the change
in fair value of the Partnership's non-designated RasGas II defeasance
deposit interest rate swap agreements that do not qualify for hedge
accounting.


---------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF LOSS
(in thousands of U.S. dollars, except unit data)
---------------------------------------------------------------------------

Six Months Ended June 30, 2008
------------------------------

Adjustments
-----------------------------------

Gross-up
As Derivative Dropdown Presen-
Previously Instruments Predecessor tation and As
Reported (1) (2) Other(3) Restated
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ----------- -------- ---------- ---------

VOYAGE
REVENUES (4) $ 137,614 $ (11,970) $ 10,283 - $ 135,927
--------------------------------------------------------------------------

OPERATING
EXPENSES
Voyage expenses 944 - 113 - 1,057
Vessel operating
expenses 36,192 - 3,007 - 39,199
Depreciation and
amortization 34,944 - 2,718 - 37,662
General and
administrative 9,705 - 495 - 10,200
--------------------------------------------------------------------------
81,785 - 6,333 - 88,118
--------------------------------------------------------------------------
Income from
vessel
operations 55,829 (11,970) 3,950 - 47,809
--------------------------------------------------------------------------
OTHER ITEMS
Interest
(expense)
gain (5) (62,660) 9,537 (3,055) (8,961) (65,139)
Interest
income (6) 24,775 3,030 - 8,961 36,766
Foreign exchange
loss (33,920) - - - (33,920)
Other loss - net (371) (316) - - (687)
--------------------------------------------------------------------------
(Loss) income
before
non-controlling
interest (16,347) 281 895 - (15,171)
Non-controlling
interest (1,019) 4,718 - 965 4,664
--------------------------------------------------------------------------
Net (loss)
income $ (17,366) $ 4,999 $ 895 $ 965 $ (10,507)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited
partners' units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 26,220,136 26,017,738
Weighted-average
number of
subordinated
units
outstanding
- Basic and
diluted 13,682,103 13,884,501
Weighted-average
number of total
units
outstanding
- Basic and
diluted 39,902,239 39,902,239
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Relates to the results of the Dropdown Predecessor for two vessels, the
Polar Spirit and Arctic Spirit, from January 1, 2008 to March 31, 2008
when the vessels were under the common control of Teekay prior to their
acquisition by Teekay LNG. Please refer to "Restatement for Changes to
Accounting for Dropdown Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.
(4) Restated voyage revenues includes $12.0 million of unrealized losses
for the six months ended June 30, 2008 relating to the change in fair
value of a profit sharing swap agreement between the Partnership and
Teekay for the Toledo Spirit time charter contract.
(5) Restated interest (expense) gain includes $8.9 million of unrealized
gains for the six months ended June 30, 2008 relating to the change in
fair value of interest rate swap agreements that do not qualify for
hedge accounting.
(6) Restated interest income includes $3.0 million of unrealized gains for
the six months ended June 30, 2008 relating to the change in fair value
of the Partnership's non-designated RasGas II defeasance deposit
interest rate swap agreements that do not qualify for hedge accounting.


---------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except unit data)
---------------------------------------------------------------------------

Six Months Ended June 30, 2007
------------------------------

Adjustments
-----------------------------------

Gross-up
Derivative Dropdown Presen-
As Instruments Predecessor tation and As
Reported (1) (2) Other(3) Restated
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ----------- ---------- ---------- ---------

VOYAGE
REVENUES (4) $ 123,611 $14,408 - - $138,019
--------------------------------------------------------------------------

OPERATING
EXPENSES
Voyage expenses 540 - - - 540
Vessel operating
expenses 27,751 - - - 27,751
Depreciation and
amortization 32,374 - - - 32,374
General and
administrative 7,277 - - - 7,277
--------------------------------------------------------------------------
67,942 - - - 67,942
--------------------------------------------------------------------------
Income from
vessel
operations 55,669 14,408 - - 70,077
--------------------------------------------------------------------------
OTHER ITEMS
Interest
(expense)
gain(5) (66,166) 75,905 - (6,926) 2,813
Interest
income (loss)
(6) 24,117 (31,108) - 6,926 (65)
Foreign exchange
loss (10,482) - - - (10,482)
Other loss - net (791) (754) - - (1,545)
--------------------------------------------------------------------------
Income before
non-controlling
interest 2,347 58,451 - - 60,798
Non-controlling
Interest 1,516 (13,235) - (1,189) (12,908)
--------------------------------------------------------------------------
Net income (loss) $ 3,863 $ 45,216 - $ (1,189) $ 47,890
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Limited partners'
units
outstanding:
Weighted-average
number of
common units
outstanding
- Basic and
diluted 20,786,956 20,786,956
Weighted-
average number
of subordinated
units
outstanding
- Basic and
diluted 14,734,572 14,734,572
Weighted-
average number
of total units
outstanding
- Basic and
diluted 35,521,528 35,521,528
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Please refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.
(4) Restated voyage revenues includes $14.4 million of unrealized gains for
the six months ended June 30, 2007 relating to the change in fair value
of a profit sharing swap agreement between the Partnership and Teekay
for the Toledo Spirit time charter contract.
(5) Restated interest (expense) gain includes $70.9 million of unrealized
gains for the six months ended June 30, 2007 relating to the change in
fair value of interest rate swap agreements that do not qualify for
hedge accounting.
(6) Restated interest income (loss) includes $31.1 million of unrealized
losses for the six months ended June 30, 2007 relating to the change in
fair value of the Partnership's non-designated RasGas II defeasance
deposit interest rate swap agreements that do not qualify for hedge
accounting.


---------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
---------------------------------------------------------------------------

As at June 30, 2008
-------------------

Adjustments
-----------------------------------

Gross-up
As Derivative Dropdown Presen-
Previously Instruments Predecessor tation and As
Reported (1) (2) Other (3) Restated
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ----------- ---------- ---------- ---------

ASSETS
Cash and cash
equivalents 78,811 - - - 78,811
Restricted
cash - current 33,520 - - - 33,520
Other current
assets 17,385 - - 22,674 40,059
Restricted cash -
long-term 661,608 - - - 661,608
Vessels and
equipment 1,810,796 - - - 1,810,796
Advances on
newbuilding
contracts 322,897 - - - 322,897
Other assets 506,380 - - 465,209 971,589
Intangible
assets 146,370 - - - 146,370
Goodwill 39,279 - - - 39,279
--------------------------------------------------------------------------
Total Assets 3,617,046 - - 487,883 4,104,929
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND
PARTNERS'
EQUITY
Accounts
payable and
accrued
liabilities 62,929 - - 3,402 66,331
Current portion
of long-term
debt and
capital leases 206,609 - - (99,203) 107,406
Current portion
of long-term
debt related to
newbuilding
vessels to be
delivered 47,226 - - 4,656 51,882
Advances from
affiliates and
joint venture
partners 105,364 - - - 105,364
Long-term debt
and capital
leases 2,012,323 - - 435,080 2,447,403
Long-term debt
related to
newbuilding
vessels to be
delivered 234,708 - - 144,354 379,062
Other long-term
liabilities 66,915 (1,800) - 5,903 71,018
Non-controlling
interest 58,287 - - (10,991) 47,296
Partners' equity 822,685 1,800 - 4,682 829,167
--------------------------------------------------------------------------
Total
Liabilities
and Partners'
Equity 3,617,046 - - 487,883 4,104,929
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Please refer to "Restatement for Changes to Accounting for Dropdown
Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.


---------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
---------------------------------------------------------------------------

As at December 31, 2007
-----------------------

Adjustments
--------------------------------------
Gross-up
Presen-
As Derivative Dropdown tation and As
Reported Instruments(1) Predecessor(2) Other(3) Restated
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ------------- ------------- ---------- ----------

ASSETS
Cash
and
cash
equivalents 91,891 - - - 91,891
Restricted
cash -
current 26,662 - - - 26,662
Other
current
assets 21,709 - 400 7,512 29,621
Restricted
cash -
long-term 652,567 - - - 652,567
Vessels
and
equip-
ment 1,595,731 - 229,068 - 1,824,799
Advances
on
new-
building
contracts 240,773 - - - 240,773
Other
assets 407,264 - - 354,825 762,089
Intangible
assets 150,935 - - - 150,935
Goodwill 39,279 - - - 39,279
--------------------------------------------------------------------------
Total
Assets 3,226,811 - 229,468 362,337 3,818,616
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES
AND
PARTNERS'
EQUITY
Accounts
payable
and
accrued
liabilities 42,587 - 208 - 42,795
Current
portion
of
long-
term
debt
and
capital
leases 187,635 - - 187,635
Current
portion
of
long-
term
debt
related
to
newbuilding
vessels
to be
delivered 27,153 - - 7,512 34,665
Advances
from
affiliates
and joint
venture
partners 40,950 - 228,142 - 269,092
Long-term
debt and
capital
leases 1,586,073 - - - 1,586,073
Long-term
debt
related
to
newbuilding
vessels to
be
delivered 421,536 - - 353,082 774,618
Other
long-term
liabilities 63,437 - - 9,631 73,068
Non-
contr-
olling
interest 158,077 - - (16,699) 141,378
Partners'
equity 699,363 - 1,118 8,811 709,292
--------------------------------------------------------------------------
Total
Liabilities
and
Partners'
Equity 3,226,811 - 229,468 362,337 3,818,616
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Relates to the results of the Dropdown Predecessor (based on Form 6-K
for the quarter ended June 30, 2008, to be furnished with the SEC no
later than December 5, 2008) for the Polar Spirit and Arctic Spirit as
at December 31, 2007, when the vessels were under the common control of
Teekay prior to their acquisition by Teekay LNG. Please refer to
"Restatement for Changes to Accounting for Dropdown Transactions"
included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.


----------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands of U.S. dollars)
----------------------------------------------------------------------------
For the Six Months Ended June 30, 2008
--------------------------------------

Adjustments
--------------------------------

Dropdown Gross-up
As Derivative Predec- Present-
Previously Instruments essor ation and As
Reported (1) (2) (un- Other (3) Restated
(unaudited) (unaudited) audited) (unaudited) (unaudited)
---------- ----------- -------- ---------- ----------
Cash and
cash
equivalents
provided by
(used for)
OPERATING
ACTIVITIES
--------------------------------------------------------------------------
Net operating
cash flow 66,195 - 4,497 (5,431) 65,261
--------------------------------------------------------------------------
FINANCING
ACTIVITIES
Excess of
purchase
price over
the
contributed
basis
of Teekay
Nakilat (III)
Holdings
Corporation - - - (12,192) (12,192)
Distribution
to Teekay
Corporation
for the
purchase
of Kenai
LNG carriers - - (230,000) - (230,000)
Proceeds
from
long-term
debt 491,503 - - 124,293 615,796
Capitalized
loan costs (1,329) - - - (1,329)
Scheduled
repayments
of long-term
debt and
capital
leases (22,928) - - - (22,928)
Prepayments
of long-term
debt (245,000) - - - (245,000)
Decrease in
restricted
cash 1,228 - - - 1,228
Net advances
from
affiliates 8,140 - (7,778) - 362
Net advances
from joint
venture
partners 593 - - - 593
Cash
distributions
paid (45,026) - - - (45,026)
Proceeds
from
issuance of
units 202,519 - - - 202,519
Equity
distribution
from Teekay
Corporation - - 3,281 - 3,281
--------------------------------------------------------------------------
Net
financing
cash flow 389,700 - (234,497) 112,101 267,304
--------------------------------------------------------------------------

INVESTING
ACTIVITIES
Advances to
joint
venture (87,198) - - (124,293) (211,491)
Receipt of
Spanish
re-investment
tax credit - - - 5,431 5,431
Return of
capital of
Teekay BLT
Corporation
to
Teekay
Corporation (19,600) - - - (19,600)
Purchase of
Teekay
Nakilat (III)
Holdings
Corporation (49,095) - - 12,192 (36,903)
Purchase of
Kenai LNG
carriers (230,000) - 230,000 - -
Expenditures
for vessels
and
equipment (83,082) - - - (83,082)
--------------------------------------------------------------------------
Net
investing
cash flow (468,975) - 230,000 (106,670) (345,645)
--------------------------------------------------------------------------

Decrease in
cash and
cash
equivalents (13,080) - - - (13,080)
Cash and
cash
equivalents,
beginning of
the period 91,891 - - - 91,891
--------------------------------------------------------------------------
Cash and
cash
equivalents,
end of the
period 78,811 - - - 78,811
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Please refer to "Restatement for Accounting under SFAS 133" included in
this release.
(2) Relates to classification adjustments for the Dropdown Predecessor for
two vessels, the Polar Spirit and Arctic Spirit, from January 1 to
March 31, 2008, when the vessels were under the common control of
Teekay prior to their acquisition by Teekay LNG. Please refer to
"Restatement for Changes to Accounting for Dropdown Transactions"
included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.


--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX A - RESTATED 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-controlling interest, non-cash items, estimated maintenance capital expenditures, gains and losses on vessel sales, income taxes and foreign exchange related items. Unrealized gains and losses on derivative instruments that do not qualify for hedge accounting are non-cash items to the Partnership and thus, have no impact on the Partnership's distributable cash flow. 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 United States generally accepted accounting principles and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by United States generally accepted accounting principles. the table below reconciles distributable cash flow to net income.



-------------------------------------------------------------------------
Three Months Ended June 30, 2008

Adjustments
--------------------------------
Gross-up
As Previously Derivative Presentation As
Reported Instruments (1) and Other (2) Restated
------------- -------------- ------------ ----------
(unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------------------------------------------
Net Income 7,634 22,784 1,298 31,716
Add:
Depreciation
and
amortization 18,872 - - 18,872
Non-control-
ling
interest 1,114 18,526 (1,298) 18,342
Foreign
exchange
loss 29 - - 29
Non-cash
interest
expense and
other 5,438 (41,869) - (36,431)
Equity loss
of RasGas 3
joint
venture 1,627 - - 1,627
Income tax
expense - 559 - 559
Less:
Estimated
maintenance
capital
expenditures 7,151 - - 7,151
Income tax
recovery 551 - - 551
Partnership's
share of
RasGas 3 DCF
before
estimated
maintenance
capital
expenditures 934 - - 934
-------------------------------------------------------------------------
Distributable
Cash Flow
before Non
Controlling
Interest 26,078 - - 26,078
-------------------------------------------------------------------------
Non-controlling
interests'
share of DCF
before
estimated
maintenance
capital
expenditures (1,678) - - (1,678)
-------------------------------------------------------------------------
Distributable
Cash Flow 24,400 - - 24,400
-------------------------------------------------------------------------

(1) Results are net of non-controlling interest. Please refer to
"Restatement for Accounting under SFAS 133" included in this release.
(2) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.


--------------------------------------------------------------------------
TEEKAY OFFSHORE PARTNERS L.P.
APPENDIX B - SUMMARY OF RESTATED AND RETROACTIVELY
ADJUSTED FINANCIAL RESULTS

(in thousands of U.S. dollars)
--------------------------------------------------------------------------


The table below summarizes the impact on the Partnership's previously reported net income for fiscal years ended December 31, 2003 through 2007, as a result of the restatements described in this release under "Restatement for Accounting under SFAS 133", "Restatement for Changes to Accounting for Dropdown Transactions" and "Restatement for Gross-up Presentation of RasGas Joint Ventures and Other". Retroactive adjustments to reflect the results of the Dropdown Predecessor based on the acquisitions completed by the Partnership as of December 31, 2007.



--------------------------------------------------------------------------
Net Income (Loss)
--------------------------------------------------------------------------
Year Ended December 31,
(in thousands 2007 2006 2005 2004 2003
of US dollars) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
As
Previously
Reported $ (9,438) $ (9,591) $ 79,547 $ (68,231) $ (59,432)
Adjustments:
Derivative
Instruments (1) 35,210 22,654 (22,676) (43,678) -
Dropdown
Predecessor (2) - (123) 4,971 9,824 3,096
Gross-up
Presentation
and Other (3) (630) (1,811) - - -
--------------------------------------------------------------------------
As Restated $ 25,142 $ 11,129 $ 61,842 $ (102,085) $ (56,336)
--------------------------------------------------------------------------

(1) Relates to unrealized gains (losses) as a result of the change in fair
value of certain derivative instruments. Results are net of
non-controlling interest. Please refer to "Restatement for Accounting
under SFAS 133" included in this release.
(2) Relates to the results of the Dropdown Predecessor for the following
vessels and periods, when the vessels were under the common control of
Teekay but prior to their acquisition by Teekay LNG: African Spirit
from November 10, 2003 to November 22, 2005; European Spirit from
September 26, 2003 to November 22, 2005; Asian Spirit from
January 5, 2004 to November 22, 2005; Granada Spirit from
December 6, 2004 to May 9, 2005; and Dania Spirit from April 1, 2003 to
December 31, 2006. Please refer to "Restatement for Changes to
Accounting for Dropdown Transactions" included in this release.
(3) Please refer to "Restatement for Gross-up Presentation of RasGas Joint
Ventures and Other" included in this release.

Contact Information

  • Teekay LNG Partners L.P.
    Kent Alekson
    Investor Relations Enquiries
    (604) 609-6442
    or
    Teekay LNG Partners L.P.
    Alana Duffy
    Media Enquiries
    (604) 844-6605
    Website: www.teekaylng.com