Teekay LNG Partners Reports First Quarter Results

HAMILTON, BERMUDA--(Marketwired - May 9, 2013) - Teekay LNG Partners L.P. (NYSE: TGP) -

Highlights

• Generated distributable cash flow of $53.7 million in the first quarter of 2013, an increase of 6 percent from the first quarter of 2012.  

• Declared first quarter 2013 cash distribution of $0.675 per unit.  

• On February 12, 2013, completed the previously-announced 50/50 joint venture with Exmar NV which owns and charters-in 25 vessels in the LPG carrier segment.  

• Total liquidity of $301.2 million as at March 31, 2013.  

Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), today reported the Partnership's results for the quarter ended March 31, 2013. During the first quarter of 2013, the Partnership generated distributable cash flow(1) of $53.7 million, compared to $50.8 million in the same quarter of the previous year. The increase primarily reflects the incremental distributable cash flow resulting from the following acquisitions: a 50 percent interest in Exmar LPG BVBA, a joint venture with Exmar NV that owns and charters-in 25 liquefied petroleum gas (LPG) carriers, including eight newbuilding carriers, in February 2013; and a 52 percent interest in six liquefied natural gas (LNG) carriers in February 2012.

On April 18, 2013, the Partnership declared a cash distribution of $0.675 per unit for the quarter ended March 31, 2013. The cash distribution is payable on May 14, 2013 to all unitholders of record on April 30, 2013.

Exmar LPG Joint Venture

On February 12, 2013, Teekay LNG entered into a joint venture with Belgium-based Exmar NV to own and charter-in LPG carriers with a primary focus on the mid-size gas carrier segment. The joint venture entity, called Exmar LPG BVBA includes 20 owned LPG carriers (including eight newbuildings scheduled for delivery between 2014 and 2016) and five chartered-in LPG carriers. In exchange for its 50 percent ownership in Exmar LPG BVBA, including newbuilding payments made prior to the establishment of the joint venture, Teekay LNG invested approximately $134 million of equity and assumed approximately $108 million of pro rata debt and lease obligations secured by certain vessels in the Exmar LPG BVBA fleet.

"With 100 percent of the Partnership's LNG fleet operating under fixed-rate contracts, Teekay LNG is insulated from the recent decline in short-term LNG shipping rates," commented Peter Evensen, Chief Executive Officer of Teekay GP L.L.C. "While demand for new LNG carrier capacity is expected to be volatile in the short-term, following the scheduled start-up of several new liquefaction projects beginning in late-2015, demand for new LNG carriers is expected to increase." Mr. Evensen continued. "As a result, the Partnership is currently bidding on several LNG and floating regasification projects with start-up dates in late-2015 through 2017, including potential employment opportunities that we believe are well-suited to the Partnership's two fuel-efficient LNG carrier newbuildings scheduled for delivery during the first-half of 2016."

(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 for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP).

Financial Summary

The Partnership reported adjusted net income attributable to the partners(2) (as detailed in Appendix A to this release) of $39.1 million for the quarter ended March 31, 2013, compared to $35.6 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of increasing net income by $15.4 million and decreasing net income by $10.9 million for the three months ended March 31, 2013 and 2012, respectively, as detailed in Appendix A. Including these items, the Partnership reported net income attributable to the partners, on a GAAP basis, of $54.4 million and $24.7 million for the three months ended March 31, 2013 and 2012, respectively.

For accounting purposes, the Partnership is required to recognize the changes in the fair value of its derivative instruments on its consolidated statements of income. This method of accounting does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized gains or losses on the consolidated statements of income as detailed in footnotes 3, 4 and 5 to the Summary Consolidated Statements of Income included in this release.

(2) Adjusted net income attributable to the partners is a non-GAAP financial measure. Please refer to Appendix A to this release for a reconciliation of this non-GAAP measure to the most directly comparable financial measure under GAAP and information about specific items affecting net income which are typically excluded by securities analysts in their published estimates of the Partnership's financial results.

Operating Results

The following table highlights certain financial information for Teekay LNG's two segments: the Liquefied Gas segment and the Conventional Tanker segment (please refer to the "Teekay LNG's Fleet" section of this release above and Appendices C to F for further details).

Liquefied Gas Segment

Cash flow from vessel operations from the Partnership's Liquefied Gas segment, excluding equity-accounted vessels, decreased to $51.9 million in the first quarter of 2013 from $56.8 million in the same quarter of the prior year. The decrease is primarily due to the scheduled drydocking of the Arctic Spirit during the first quarter of 2013, which resulted in 41 days of off-hire, and higher vessel operating expenditures due to preparations for the scheduled drydocking of the two Tangguh project LNG carriers during the second and fourth quarters in 2013.

Cash flow from vessel operations from the Partnership's equity-accounted vessels in the Liquefied Gas segment increased to $42.0 million in the first quarter of 2013 from $26.2 million in the same quarter of the prior year. This increase was primarily due to the Teekay LNG-Marubeni joint venture's acquisition of six LNG carriers from A.P. Moller Maersk A/P (the MALT LNG Carriers) in February 2012 and the acquisition of a 50 percent interest in the Exmar LPG BVBA joint venture in February 2013.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $13.6 million in the first quarter of 2013 from $15.8 million in the same quarter of the prior year, primarily as a result of amendments to two of the Partnership's Suezmax tanker charter contracts that temporarily reduces the daily hire rate for each vessel by $12,000 from October 2012 until September 2014. During this period, however, if Suezmax spot tanker rates exceed the amended rates, the charterer will pay the Partnership the excess amount up to a maximum of the original daily charter rate.

Teekay LNG's Fleet

The following table summarizes the Partnership's fleet as of May 1, 2013:

Liquidity

As of March 31, 2013, the Partnership had total liquidity of $301.2 million (comprised of $91.0 million in cash and cash equivalents and $210.2 million in undrawn credit facilities), compared to total liquidity of $495.0 million as of December 31, 2012. The decrease in liquidity during the first quarter of 2013 is primarily due to the acquisition of the Partnership's 50 percent interest in Exmar LPG BVBA, advances to Exmar LPG BVBA of $13.8 million to fund newbuilding installments and drydocking expenditures incurred during the quarter.

Availability of 2012 Annual Report

The Partnership filed its 2012 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 16, 2013. Copies of this report are available on Teekay LNG's website, under "SEC Filings", at www.teekaylng.com. Unitholders may request a printed copy of this Annual Report, including the complete audited financial statements, free of charge by contacting Teekay LNG Partners Investor Relations.

Conference Call

The Partnership plans to host a conference call on Friday, May 10, 2013 at 11:00 a.m. (ET) to discuss the results for the first quarter of 2013. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

• By dialing (866) 322-2356 or (416) 640-3405, if outside North America, and quoting conference ID code 2188375.  

• By accessing the webcast, which will be available on Teekay LNG's website at www.teekaylng.com (the archive will remain on the web site for a period of 30 days).  

A supporting First Quarter 2013 Earnings Presentation will also be available at www.teekaylng.com in advance of the conference call start time.

The conference call will be recorded and made available until Friday, May 17, 2013. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 2188375.

About Teekay LNG Partners L.P.

Teekay LNG Partners is the world's third largest independent owner and operator of LNG carriers, providing LNG, LPG and crude oil marine transportation services generally under long-term, fixed-rate charter contracts through its interests in 29 LNG carriers (including one LNG regasification unit and two newbuildings), 29 LPG/Multigas carriers (including five chartered-in LPG carriers and eight newbuildings) and 11 conventional tankers. The Partnership's interests in these vessels range from 33 to 100 percent. Teekay LNG Partners L.P. is a publicly-traded master limited partnership (MLP) 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' common units trade on the New York Stock Exchange under the symbol "TGP".

TEEKAY LNG PARTNERS L.P.

APPENDIX A - SPECIFIC ITEMS AFFECTING NET INCOME

(in thousands of U.S. Dollars)

Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.

TEEKAY LNG PARTNERS L.P.

APPENDIX B - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

DISTRIBUTABLE CASH FLOW (DCF)

(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 items, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, deferred 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 GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net income.

TEEKAY LNG PARTNERS L.P.

APPENDIX C - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

NET VOYAGE REVENUES

(in thousands of U.S. Dollars)

Description of Non-GAAP Financial Measure - Net Voyage Revenues

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 included because certain investors use this data to measure the financial performance of shipping companies. Net voyage revenues is not required by accounting principles generally accepted in the United States and should not be considered as an alternative to voyage revenues or any other indicator of the Partnership's performance required by accounting principles generally accepted in the United States.

TEEKAY LNG PARTNERS L.P.

APPENDIX D - SUPPLEMENTAL SEGMENT INFORMATION

(in thousands of U.S. Dollars)

TEEKAY LNG PARTNERS L.P.

APPENDIX E - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

CASH FLOW FROM VESSEL OPERATIONS

FROM CONSOLIDATED VESSELS

(in thousands of U.S. Dollars)

Description of Non-GAAP Financial Measure - Cash Flow from Vessel Operations from Consolidated Vessels

Cash flow from vessel operations from consolidated vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts included in voyage revenues, and includes (c) adjustments for direct financing leases and two Suezmax tankers to a cash basis. The Partnership's only direct financing leases for the periods indicated relate to the Partnership's 69% interest in two LNG carriers, the Tangguh Sago and Tangguh Hiri. The Partnership's cash flow from vessel operations from consolidated vessels does not include the Partnership's cash flow from vessel operations from its equity-accounted joint ventures. Cash flow from vessel operations is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's consolidated vessels. Cash flow from vessel operations from consolidated vessels 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.

TEEKAY LNG PARTNERS L.P.

APPENDIX F - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

CASH FLOW FROM VESSEL OPERATIONS FROM EQUITY ACCOUNTED VESSELS

(in thousands of U.S. Dollars)

Description of Non-GAAP Financial Measure - Cash Flow from Vessel Operations from Equity Accounted Vessels

Cash flow from vessel operations from equity accounted vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts and includes (c) adjustments for direct financing leases to a cash basis. Cash flow from vessel operations from equity accounted vessels is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity-accounted joint ventures. Cash flow from vessel operations from equity accounted vessels is not required by accounting principles generally accepted in the United States and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by accounting principles generally accepted in the United States.

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: future growth opportunities, including the Partnership's ability to successfully bid for new LNG shipping and regasification projects; the Partnership's ability to secure long-term contract employment for the two LNG carrier newbuilding vessels; expected delivery dates for the Partnership's newbuildings; and LNG and LPG shipping market fundamentals, including the short-term demand for LNG carrier capacity, future growth in global LNG supply, and the balance of supply and demand of shipping capacity and shipping charter rates in these sectors. 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: availability of LNG shipping LPG shipping, floating storage, regasification and other growth project opportunities; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; the Partnership's ability to secure new contracts through bidding on project tenders; 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 of existing vessels in the Teekay LNG fleet; the financial ability of our charterers to pay their charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels or attain fixed-rate long-term contracts for newbuilding vessels; the Partnership's ability to raise financing to purchase additional vessels or to pursue other projects; changes to the amount or proportion of revenues, expenses, or debt service costs denominated in foreign currencies; competitive dynamics in bidding for potential LNG or LPG projects; and other factors discussed in Teekay LNG Partners' filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2012. The Partnership expressly disclaims any obligation 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

Contacts:
Teekay LNG Partners L.P.
Kent Alekson
Investor Relations Enquiries
+1 (604) 609-6442
www.teekaylng.com