Teekay Offshore Partners L.P.
NYSE : TOO

Teekay Offshore Partners L.P.

September 08, 2009 08:45 ET

Teekay Offshore Partners to Acquire Petrojarl Varg FPSO for $320 Million

HAMILTON, BERMUDA--(Marketwire - Sept. 8, 2009) - Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO) announced today that it has agreed to acquire the Petrojarl Varg Floating Production Storage and Offloading unit (Petrojarl Varg FPSO) from Teekay Corporation (Teekay) (NYSE:TK) for a purchase price of $320 million. The Partnership also announced today that Teekay has agreed to provide vendor financing in the amount of $220 million which, together with the $104 million of equity raised by the Partnership in August 2009, will enable Teekay Offshore to complete the acquisition by mid-September 2009.

The Petrojarl Varg FPSO recently commenced a new a four-year fixed-rate contract extension with Talisman Energy (Talisman) on the Varg oil field in the North Sea, where the FPSO has been operating for over ten years. Talisman also has options to extend the new contract for up to an additional nine years. The contract is comprised of a daily base rate plus an incentive component based on the operational performance of the FPSO, a tariff component based on the volume of oil produced and an annual adjustment for cost escalations. There is potential for additional upside from the tariff component if, as expected, nearby oil fields become operational and are tied into the Petrojarl Varg FPSO.

During the four-year firm contract period, the Petrojarl Varg FPSO is expected to generate average annual cash flow from vessel operations of approximately $55 million and distributable cash flow (DCF) of approximately $30 million, which represents a significant increase to Teekay Offshore's DCF generated over the last twelve months of $48.2 million(1).

The $220 million vendor financing is comprised of two tranches. The first tranche is a $160 million short-term debt facility, which will be repaid upon the completion of a new $260 million revolving credit facility that is currently in syndication. The $260 million revolving credit facility, which will be secured by the Petrojarl Varg FPSO and its contract with Talisman, is expected to be completed by the end of October 2009. The second tranche of the vendor financing is a $60 million unsecured subordinated debt facility with a maximum term of five years and bears an interest rate of 10 percent per annum. Upon the completion of the acquisition and the $260 million revolving credit facility, together with the equity proceeds raised in August 2009, the Partnership's liquidity will increase by approximately $100 million.

The Board of Directors of the Partnership's General Partner and its Conflicts Committee have both approved the transaction. The Conflicts Committee retained independent legal and financial advisors to assist it in evaluating the transaction. In approving the transaction, the Committee obtained the views of its financial advisor as to the fairness of the purchase price.

"We are excited about this strategic acquisition which moves us further upstream in our customers' oil production chain, making us a complete 'wellhead to refinery' provider," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC, the Partnership's General Partner. "This accretive acquisition will further enhance our financial strength and flexibility by adding significant stable cash flow, with upside potential, from a strong counterparty and upon completion of the external financing, increase the Partnership's liquidity by $100 million. We are also pleased to complete the first FPSO acquisition from our sponsor, Teekay Corporation, from whom we have the right to acquire up to four additional FPSO units in the future."

(1) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B included in the Partnership's earnings releases for each of the four quarters ended June 30, 2009 on its website www.teekayoffshore.com for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Corporation (NYSE:TK), is an international provider of marine transportation and storage services to the offshore oil industry. Teekay Offshore currently owns a 51 percent interest in and controls Teekay Offshore Operating L.P., a Marshall Islands limited partnership with a fleet of 33 shuttle tankers (including eight chartered-in vessels), four floating storage and offloading (FSO) units, nine double-hull conventional oil tankers and two lightering vessels. In addition, Teekay Offshore has direct ownership interests in two shuttle tankers and one FSO unit. Teekay Offshore also has rights to participate in certain FPSO opportunities.

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

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of U.S. federal securities laws, which reflect management's current views with respect to certain future events and performance, including statements regarding: the expected timing of completing the acquisition of the Petrojarl Varg FPSO; the expected annual cash flow from vessel operations and distributable cash flow from the Petrojarl Varg FPSO; the expected timing of completing the $260 million revolving credit facility; the expected increase in the Partnership's liquidity upon the completion of the acquisition and the $260 million revolving credit facility; the potential upside from the tariff component of the charter if nearby oil fields become operational; and the potential for Teekay Offshore to acquire up to four additional FPSOs from Teekay in the future. 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: any unforeseen delays or failure to complete the steps required for Teekay to transfer the Petrojarl Varg FPSO to the Partnership; any failure to generate the expected cash flow from operations or distributable cash flow; a failure to syndicate and complete the $260 million revolving credit facility; any unforeseen operational difficulties, such as unanticipated repairs or accidents; higher than anticipated level of operating costs; lower than anticipated level of oil production on the Varg field; the failure of nearby oil fields to become operational and/or to be tied into the Petrojarl Varg FPSO; any changes in applicable industry laws and regulations; early termination of the long-term contract with Talisman; the failure of Teekay to offer additional FPSOs to Teekay Offshore; the required approvals by the Board of Directors of Teekay Offshore's general partner, as well as its Conflicts Committee to acquire additional FPSOs from Teekay; the Partnership's ability to finance, and the cost of financing the purchase of additional FPSOs; 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, 2008. 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.

Contact Information

  • Teekay Offshore Partners L.P.
    Kent Alekson
    Investor Relations enquiries
    + 1 (604) 609-6442
    or
    Teekay Offshore Partners L.P.
    Nicole Breuls
    Media enquiries
    + 1 (604) 844-6631
    www.teekayoffshore.com