Teekay Offshore Announces Plan to Reduce Quarterly Cash Distributions on Common Units

HAMILTON, BERMUDA--(Marketwired - Dec. 16, 2015) - Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO), has approved a plan to reduce its quarterly cash distributions to $0.11 per common unit, down from $0.56 per common unit in the third quarter of 2015, commencing with the fourth quarter of 2015 distribution payable in February 2016. The Partnership expects to use a significant portion of its internally generated cash flow to fund equity capital requirements on its future profitable growth projects and reduce debt levels, eliminating the need to access the equity capital markets for the foreseeable future.

"Despite significant weakness in the global energy and capital markets, Teekay Offshore's businesses remain strong," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "The Partnership's cash flows remain stable and growing, supported by a large and well-diversified portfolio of fee-based contracts with high quality counterparties," Mr. Evensen continued. "However, as a growing MLP, Teekay Offshore does require capital and there is currently a dislocation in the capital markets relative to the stability of our businesses such that the Partnership's cost of equity has increased to the point where it is currently not an economically attractive source of capital. Based on the upcoming capital requirements for our committed growth projects and bond maturities, coupled with the uncertainty regarding how long it will take for the energy and capital markets to normalize, management and the Partnership's Board of Directors believe that it is in the best interest of the Partnership's unitholders to conserve our internally generated cash flows to fund future growth projects and reduce our debt levels."

Mr. Evensen added "This decision by management and the Partnership's Board of Directors was not taken lightly. Numerous options were considered, including selling existing assets and future growth projects, and evaluating potential alternative sources of capital, which could have resulted in permanent dilution to existing unitholders. Rather than take this course, we determined that temporarily reducing our cash distributions is the most reliable way to fund our future profitable growth projects with the lowest cost of capital. We believe this prudent approach will strengthen the Partnership's financial position, preserve our long-term growth potential, and will result in higher distributable cash flow per unit."

The Partnership's Series A, B and C preferred unitholders are not directly affected by this change and we expect to continue paying regular quarterly cash distributions to the preferred unitholders.

Teekay Corporation and the Partnership plan to host a joint conference call on Thursday, December 17, 2015 at 8:45 a.m. (ET) to discuss this announcement. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

• By dialing 1-800-524-8950 or 1-416-260-0113, if outside North America, and quoting conference ID code 4020024.
• By accessing the webcast, which will be available on Teekay Offshore's website www.teekayoffshore.com (the archive will remain on the website for a period of 30 days).

About Teekay Offshore

Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production, storage, long-distance towing and offshore installation and maintenance and safety services to the offshore oil industry, primarily focusing on the growing deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) with consolidated assets of approximately $5.9 billion, comprised of 68 offshore assets, including shuttle tankers, floating production, storage and offloading (FPSO) units, floating storage and offtake (FSO) units, units for maintenance and safety (UMS), long-distance towing and offshore installation vessels and conventional tankers. The majority of Teekay Offshore's fleet is employed on medium-term, stable contracts.

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

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 fourth quarter 2015 cash distribution to be paid in February 2016; the strength of the Partnership's businesses; the stability and growth of the Partnership's future cash flows and distributable cash flow per unit; use of internally generated cash flow to fund equity capital requirements and reduce debt levels, including eliminating the need to issue new equity capital for the foreseeable future; the impact of cash distribution reductions on the Partnership's financial position, long-term growth potential and cost of capital; the potential for future cash distribution increases; and the impact on preferred unitholders, including future cash distribution payments. 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: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea, Brazil and East Coast of Canada offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion and upgrade delays and cost overruns; changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; delays in the commencement of time-charters; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore's general partner to approve the acquisition of vessels offered from Teekay Corporation, or third parties; the Partnership's ability to raise adequate financing and generate internally generated cash flow to purchase additional assets and complete organic growth projects; 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, 2014 and on Form 6-K for the quarter ended September 30, 2015. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.