Teekay LNG Partners L.P.
NYSE : TGP

Teekay LNG Partners L.P.

February 27, 2008 23:58 ET

Teekay LNG Partners Reports Fourth Quarter and Annual Results

NAUSSAU, THE BAHAMAS--(Marketwire - Feb. 27, 2008) - Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE:TGP) -

Highlights

- Declared a cash distribution of $20.6 million, or $0.53 per unit, for the fourth quarter, up 14.6 percent from the same quarter of the prior year

- Generated $22.4 million in distributable cash flow, up from $17.6 million in the same quarter of the prior year

- Net loss of $0.5 million includes a $9.2 million unrealized foreign exchange loss and $5.7 million in non-cash expenses, which have no impact on cash flow

- Received offer from Teekay Corporation to acquire two specialized LNG carriers

Teekay LNG Partners L.P. (Teekay LNG or the Partnership) today reported a net loss of $0.5 million for the quarter ended December 31, 2007, compared to a net loss of $7.4 million for the same period last year. The results for the fourth quarters of 2007 and 2006 included foreign currency translation losses of $9.2 million and $15.1 million, respectively, primarily relating to long-term debt denominated in Euros, and non-cash expenses of $5.7 million and $1.8 million, respectively, primarily relating to the accounting consolidation of the Tangguh and RasGas 3 vessels (which the Partnership has not yet acquired) and non-cash interest expense. Net voyage revenues(1) for the fourth quarter of 2007 increased to $66.1 million from $49.0 million in the same quarter of the prior year.

During the three months ended December 31, 2007, the Partnership generated $22.4 million in distributable cash flow(2), compared to $20.4 million for the third quarter of 2007. For the quarter ended December 31, 2007, the Partnership declared a cash distribution of $0.53 per unit, representing a total cash distribution of $20.6 million. The cash distribution was paid on February 14, 2008 to all unitholders of record on February 8, 2008.

Net loss for the year ended December 31, 2007 was $9.4 million, compared to a net loss of $9.6 million for the same period last year. The results for the year ended December 31, 2007 and 2006 included foreign currency translation losses of $41.2 million and $39.5 million, respectively, primarily relating to long-term debt denominated in Euros, and non-cash expenses of $18.5 million and $9.0 million, respectively, primarily relating to the accounting consolidation of the Tangguh and RasGas 3 vessels (which the Partnership has not yet acquired) and non-cash interest expense. Net voyage revenues for the year ended December 31, 2007 increased to $252.6 million, compared to $180.7 million for the year ended December 31, 2006.

The Partnership's Euro-denominated revenues currently approximate its Euro-denominated expenses and debt service costs. As a result, the Partnership currently is not exposed materially to foreign currency fluctuations. However, for accounting purposes, the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period. This revaluation does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency translation gains or losses in the income statement, as reflected in the foreign exchange losses discussed above for the three months and years ended December 31, 2007 and 2006, respectively.

(1) Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net voyage revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see Appendix B for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

(2) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP financial measure.

Operating Results

The following table highlights certain financial information for Teekay LNG's segments; the Liquefied Gas Segment and the Suezmax Segment (please read the "Teekay LNG Partners' Fleet" section of this release below and Appendix B for further details):



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Three Months Ended Three Months Ended
December 31, 2007 December 31, 2006
------------------------ ------------------------
(unaudited) (unaudited)
------------------------ ------------------------
Liquefied Liquefied
(in thousands of U.S. Gas Suezmax Gas Suezmax
dollars) Segment Segment Total Segment Segment Total
--------------------------------------------------------------------------

Net voyage revenues 45,957 20,179 66,136 27,907 21,055 48,962

Vessel operating expenses 8,055 6,719 14,774 4,949 5,591 10,540
Depreciation &
amortization 11,615 5,011 16,626 8,720 4,875 13,595

Cash flow from vessel
operations(i) 35,875 11,205 47,080 20,887 13,281 34,168
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(i) Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense. Cash flow from
vessel operations is a non-GAAP financial measure used by certain
investors to measure the financial performance of shipping companies.
Please see the Partnership's web site at www.teekaylng.com for a
reconciliation of this non-GAAP measure as used in this release to the
most directly comparable GAAP financial measure.


Liquefied Gas Segment

Cash flow from vessel operations from the Partnership's Liquefied Gas Segment increased to $35.9 million for the fourth quarter of 2007, compared to $20.9 million for the fourth quarter of 2006, primarily due to the delivery of the two remaining RasGas II LNG carriers, which commenced their 20-year fixed-rate charters in the first quarter of 2007, and the acquisition of the Dania Spirit LPG carrier from Teekay in January 2007.

Suezmax Segment

Cash flow from vessel operations from the Partnership's Suezmax tankers decreased to $11.2 million for the fourth quarter of 2007, compared to $13.3 million for the fourth quarter of 2006, primarily due to an increase in vessel operating expenses related mainly to higher crewing costs and the depreciation of the U.S. dollar which increased Euro-denominated expenses (offset by higher Euro-denominated revenues). In addition, lower revenue was earned by the Teide Spirit during the fourth quarter of 2007 compared to the same period in 2006. The time charter for the Teide Spirit contains a profit share component, which provides for additional revenues to the Partnership beyond the fixed-hire rate when spot freight rates exceed a certain threshold level.

Future LNG/LPG Projects

Below is a summary of LNG and LPG newbuildings which the Partnership has agreed to, or has the right to, acquire:

Kenai LNG

In December 2007, Teekay Corporation (Teekay) acquired two 1993-built, 88,000 cubic meter specialized LNG vessels from a joint venture between ConocoPhillips and Marathon Oil Corporation for a total cost of $230.0 million. Teekay has offered these vessels to Teekay LNG in accordance with an omnibus agreement among Teekay, Teekay LNG, and Teekay Offshore Partners L.P. (the Omnibus Agreement).

RasGas 3 LNG

The Partnership has agreed to acquire Teekay's 40% interest in four 217,000 cubic meter newbuilding LNG carriers scheduled to deliver during the second quarter of 2008. Upon their deliveries, the vessels will provide transportation services to Ras Laffan Liquefied Natural Gas Co. Limited (3) (RasGas 3), a joint venture company between a subsidiary of ExxonMobil Corporation and Qatar Petroleum, at fixed rates, with inflation adjustments, for a period of 25 years, with options exercisable by RasGas 3 to extend up to a total of 35 years. Teekay's joint venture partner, Qatar Gas Transport Company, owns the remaining 60% interest in these vessels.

Skaugen LPG

The Partnership has agreed to acquire three LPG carriers from IM Skaugen ASA Group (Skaugen) that are currently under construction and will be purchased upon their delivery from the shipyard between mid-2008 and mid-2009. Upon their delivery, the vessels will commence service under 15-year fixed-rate charters to Skaugen.

Tangguh LNG

The Partnership has agreed to acquire Teekay's 70% interest in two 155,000 cubic meter newbuilding LNG carriers scheduled to deliver during late 2008 and early 2009. Upon their deliveries, the vessels will provide transportation services to The Tangguh Production Sharing Contractors, a consortium led by a subsidiary of BP plc, to service the Tangguh LNG project in Indonesia at fixed rates, with inflation adjustments, for a period of 20 years. An Indonesian joint venture partner owns the remaining 30% interest in these vessels.

Angola LNG

As previously announced, a consortium in which Teekay has a 33% interest, has agreed to charter four newbuilding LNG carriers for a period of 20 years to the Angola LNG Project, which is being developed by subsidiaries of Chevron, Sonangol, BP, and Total. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in 2011. In accordance with the Omnibus Agreement, Teekay is obligated to offer Teekay LNG its interest in these vessels and related charter contracts.

Teekay LNG's Fleet

The following table summarizes the Partnership's fleet as of February 27, 2008:



------------------------------------------------------------------
Number of Vessels
-------------------------------------------
Delivered Committed
Vessels Vessels Total
-------------------------------------------
LNG Carrier Fleet 7 6(1) 13
LPG Carrier Fleet 1 3(2) 4
Suezmax Tanker Fleet 8 - 8
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Total 16 9 25
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(1) Represents the 40% interest in four newbuilding LNG carriers relating
to the RasGas 3 LNG project and the 70% interest in two newbuilding LNG
carriers relating to the Tangguh LNG project, as described above.
Excludes Teekay's two Kenai LNG vessels and its 33% interest in the
four Angola LNG newbuildings, as described above.
(2) Represents the three Skaugen LPG carriers currently under construction,
as described above.


Liquidity

As of December 31, 2007, the Partnership had total liquidity of $522.9 million, comprising $91.9 million in cash and cash equivalents (of which, $54.4 million is only available for the Tangguh Joint Venture) and $431.0 million in undrawn medium-term revolving credit facilities, up from total liquidity of $486.3 million in the previous quarter.

About Teekay LNG Partners L.P.

Teekay LNG Partners L.P. is a publicly-traded master limited partnership formed by Teekay Corporation (NYSE:TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors. Teekay LNG Partners L.P. provides LNG, LPG and crude oil marine transportation services under long-term, fixed-rate time charter contracts with major energy and utility companies through its fleet of thirteen LNG carriers, four LPG carriers and eight Suezmax class crude oil tankers. Six of the thirteen LNG carriers are newbuildings scheduled for delivery between the second quarter of 2008 and early 2009. Three of the four LPG carriers are newbuildings scheduled for delivery between mid-2008 and mid-2009.

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

Earnings Conference Call

The Partnership plans to host a conference call at 11:00 a.m. ET on Friday, February 29, 2008, to discuss the Partnership's results and the outlook for its business activities. The Partnership's earning presentation will be available on the Partnership's web site at www.teekaylng.com prior to the call. All unitholders and interested parties are invited to listen to the live conference call by dialing (866) 322-2356 or (416) 640-3405, or listen to the live conference call through the Partnership's web site. The Partnership plans to make available a recording of the conference call until midnight March 7, 2008 by dialing (866) 203-1112 or (647) 436-0148, access code 7958534, or via the Partnership's web site until March 30, 2008.



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TEEKAY LNG PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. dollars, except unit data)
--------------------------------------------------------------------------
Three Months Ended Years Ended
------------------ -----------
December September December December December
31, 30, 31, 31, 31,
2007 2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
--------- --------- --------- --------- ---------
VOYAGE
REVENUES 66,476 63,716 49,402 253,803 182,773
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OPERATING
EXPENSES
Voyage
expenses 340 317 440 1,197 2,030
Vessel
operating
expenses 14,774 13,935 10,540 56,460 38,800
Depreciation
and
amortization 16,626 16,501 13,595 65,501 51,969
General and
administrative 4,282 3,531 4,254 15,090 13,211
--------------------------------------------------------------------------
36,022 34,284 28,829 138,248 106,010
--------------------------------------------------------------------------
Income from
vessel
operations 30,454 29,432 20,573 115,555 76,763
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OTHER ITEMS
Interest
expense (34,871) (32,651) (24,196) (133,688) (86,483)
Interest
income 12,951 12,219 10,664 49,287 37,425
Income tax
recovery
(expense) 133 91 9 (438) 567
Foreign
exchange loss (9,204) (21,555) (15,137) (41,241) (39,538)
Other income
(loss) - net 15 (315) 669 1,087 1,675
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(30,976) (42,211) (27,991) (124,993) (86,354)
--------------------------------------------------------------------------
Net loss (522) (12,779) (7,418) (9,438) (9,591)
--------------------------------------------------------------------------
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Limited
partners'
units
outstanding:
Weighted-
average
number of
common units
outstanding
- Basic and
diluted 22,540,547 22,540,547 20,240,036 21,670,958 20,238,567
Weighted-
average
number of
subordinated
units
outstanding
- Basic and
diluted 14,734,572 14,734,572 14,734,572 14,734,572 14,734,572
Weighted-
average
number of
total units
outstanding
- Basic and
diluted 37,275,119 37,275,119 34,974,608 36,405,530 34,973,139
--------------------------------------------------------------------------
--------------------------------------------------------------------------


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TEEKAY LNG PARTNERS L.P.
SUMMARY CONSOLIDATED BALANCE SHEETS(1)
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
As at As at
December 31, December 31,
2007 2006
--------- ---------
(unaudited) (unaudited)
--------- ---------
ASSETS
Cash and cash equivalents 91,891 28,871
Restricted cash - current 26,662 55,009
Other current assets 17,081 15,937
Restricted cash - long-term 652,567 615,749
Vessels and equipment 1,595,731 1,316,836
Advances on newbuilding contracts 240,773 84,184
Other assets 411,892 212,040
Intangible assets 150,935 160,064
Goodwill 39,279 39,279
--------------------------------------------------------------------------
Total Assets 3,226,811 2,527,969
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued liabilities 36,337 25,376
Current portion of long-term debt and capital leases 187,636 181,197
Current portion of long-term debt related to
newbuilding vessels to be delivered 27,152 -
Advances from affiliates 40,950 43,243
Long-term debt and capital leases 1,586,073 1,021,182
Long-term debt related to newbuilding vessels to
be delivered 421,536 266,340
Other long-term liabilities 69,687 109,849
Minority interest(2) 158,077 162,285
Partners' equity 699,363 718,497
--------------------------------------------------------------------------
Total Liabilities and Partners' Equity 3,226,811 2,527,969
--------------------------------------------------------------------------
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(1) With the Partnership's agreement on November 1, 2006 to acquire Teekay
Corporation's 70% and 40% interests in the Tangguh and RasGas 3
projects, respectively, the Partnership is required to consolidate
Tangguh and equity account for its investment in RasGas 3 under U.S.
generally accepted accounting principles.
(2) As the Partnership is consolidating the Tangguh and RasGas 3 projects
and it has not yet acquired those interests as described in note (1)
above, minority interest includes 100% of the equity interest in the
Tangguh project and the Partnership's 40% equity interest in the RasGas
3 project.


--------------------------------------------------------------------------
TEEKAY LNG PARTNERS L.P.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
--------------------------------------------------------------------------
Years Ended
December 31,
2007 2006
--------- ---------
(unaudited) (unaudited)
--------- ---------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
--------------------------------------------------------------------------
Net operating cash flow 114,461 83,049
--------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 751,708 234,996
Capitalized loan cost (5,345) (7,130)
Scheduled repayments of long-term debt (61,869) (161,003)
Prepayments of long-term debt (291,098) (46,000)
Net advances (to) from affiliates (931) 20,272
Net advances (to) from joint venture partners (21,630) 3,689
Decrease (increase) in restricted cash 11,590 (333,072)
Cash distributions paid (74,116) (64,237)
Proceeds from issuance of units 85,975 (142)
--------------------------------------------------------------------------
Net financing cash flow 394,284 (352,627)
--------------------------------------------------------------------------
INVESTING ACTIVITIES
Net advances to joint ventures (191,351) (21,092)
Purchase of Teekay Nakilat Holdings Corporation (75,071) (26,863)
Purchase of Dania Spirit L.L.C. (18,546) -
Expenditures for vessels and equipment (160,757) (1,037)
Proceeds from sale of vessels and equipment - 312,972
--------------------------------------------------------------------------
Net investing cash flow (445,725) 263,980
--------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 63,020 (5,598)
Cash and cash equivalents, beginning of the period 28,871 34,469
--------------------------------------------------------------------------
Cash and cash equivalents, end of the period 91,891 28,871
--------------------------------------------------------------------------
--------------------------------------------------------------------------


TEEKAY LNG PARTNERS L.P.
APPENDIX A - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in thousands of U.S. dollars)

Description of Non-GAAP Financial Measure - Distributable Cash Flow (DCF)

Distributable cash flow represents net income adjusted for depreciation and
amortization expense, non-cash interest expense, minority interest,
estimated maintenance capital expenditures, gains and losses on vessel
sales, income taxes and foreign exchange related items. Maintenance capital
expenditures represent those capital expenditures required to maintain over
the long-term the operating capacity of, or the revenue generated by the
Partnership's capital assets. Distributable cash flow is a quantitative
standard used in the publicly-traded partnership investment community to
assist in evaluating a partnership's ability to make quarterly cash
distributions. Distributable cash flow is not required by accounting
principles generally accepted in the United States and should not be
considered as an alternative to net income or any other indicator of the
Partnership's performance required by accounting principles generally
accepted in the United States. The table below reconciles distributable
cash flow to net income.

-------------------------------------------------------------------
Three Months Ended
December 31, 2007
------------------
(unaudited)
-------------------------------------------------------------------

Net loss (522)
Add:
Depreciation and amortization 16,626
Foreign exchange loss 9,204
Non-cash interest expense and other 5,740

Less:
Estimated maintenance capital expenditures 6,647
Income tax recovery 133
Minority interest recovery 84
Minority owners' share of DCF before estimated
maintenance capital expenditures 1,801

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Distributable cash flow 22,383
-------------------------------------------------------------------


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TEEKAY LNG PARTNERS L.P.
APPENDIX B - SUPPLEMENTAL SEGMENT INFORMATION
(in thousands of U.S. dollars)
--------------------------------------------------------------------------

Three Months Ended December 31, 2007
------------------------------------
(unaudited)

Liquefied Suezmax
Gas Segment Segment Total
--------------------------------------------------------------------------
Net voyage revenues(1) 45,957 20,179 66,136
Vessel operating expenses 8,055 6,719 14,774
Depreciation and amortization 11,615 5,011 16,626
General and administrative 2,027 2,255 4,282
--------------------------------------------------------------------------
Income from vessel operations 24,260 6,194 30,454
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Three Months Ended December 31, 2006
------------------------------------
(unaudited)

Liquefied Suezmax
Gas Segment Segment Total
--------------------------------------------------------------------------
Net voyage revenues(1) 27,907 21,055 48,962
Vessel operating expenses 4,949 5,591 10,540
Depreciation and amortization 8,720 4,875 13,595
General and administrative 2,071 2,183 4,254
--------------------------------------------------------------------------
Income from vessel operations 12,167 8,406 20,573
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Net voyage revenues represents voyage revenues less voyage expenses,
which comprise all expenses relating to certain voyages, including
bunker fuel expenses, port fees, canal tolls and brokerage commissions.
Net voyage revenues is a non-GAAP financial measure used by certain
investors to measure the financial performance of shipping companies.
Please see the Partnership's web site at www.teekaylng.com for a
reconciliation of this non-GAAP measure as used in this release to the
most directly comparable GAAP financial measure.


FORWARD LOOKING STATEMENTS

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the Partnership's future growth prospects; Teekay's offer of the Kenai LNG vessels to the Partnership; Teekay offering its interest in the Angola LNG Project vessels to the Partnership; the timing of the commencement of the RasGas 3 and Tangguh LNG projects; the timing of LNG and LPG newbuilding deliveries; and the Partnership's exposure to foreign currency fluctuations, particularly in Euros. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: the unit price of equity offerings to finance acquisitions, changes in production of LNG or LPG, either generally or in particular regions; required approvals by the conflicts committee of the board of directors of the Partnership's general partner to acquire any LNG projects offered to the Partnership by Teekay; less than anticipated revenues or higher than anticipated costs or capital requirements; changes in trading patterns significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts and inability of the Partnership to renew or replace long-term contracts; LNG and LPG project delays, shipyard production delays; the Partnership's ability to raise financing to purchase additional vessels or to pursue LNG or LPG projects; changes to the amount or proportion of revenues, expenses, or debt service costs denominated in foreign currencies; and other factors discussed in Teekay LNG's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2006. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

Contact Information

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