Bermuda: Teekay Offshore Reports Strong Operation Results

Teekay Offshore GP L.L.C., the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership), yesterday reported the Partnership’s results for the quarter ended September 30, 2011. During the third quarter of 2011, the Partnership generated distributable cash flow of $52.1 million, compared to $20.8 million in the same period of the prior year.

The increase is mainly related to the Partnership’s acquisition of the remaining 49 percent interest in Teekay Offshore Operating L.P. (OPCO) in March 2011, the acquisition of the Cidade de Rio Das Ostras floating production storage and offloading (FPSO) unit in October 2010, and the acquisition of three newbuilding shuttle tankers during the past three quarters.

On October 18, 2011, the Partnership declared a cash distribution of $0.50 per unit for the quarter ended September 30, 2011. The cash distribution is payable on November 14, 2011 to all unitholders of record on November 2, 2011.

“The Partnership reported very strong operating results for the third quarter, primarily due to lower operating costs and higher shuttle tanker revenues resulting from a number of short-term transportation and storage contracts at higher rates,” commented Peter Evensen, Teekay Offshore GP LLC’s Chief Executive Officer. “While we do not expect the results for the fourth quarter to be as strong, we are pleased with the continued growth of the Partnership through the recent acquisitions of two newbuilding shuttle tankers and the announcement earlier today to acquire the Piranema FPSO from Sevan Marine.”

Summary of Recent Transactions

In connection with Teekay Corporation’s (Teekay) previously announced transaction to acquire three FPSO units from Sevan Marine ASA (Sevan), the Partnership today announced today that Teekay and Teekay Offshore intend for Teekay Offshore to acquire the Piranema FPSO unit directly from Sevan Marine ASA (Sevan) for approximately $165 million, subject to certain working capital adjustments. The 2007-built Piranema FPSO is currently operating under a long-term charter to Petrobras S.A. on the Piranema field located offshore Brazil. The charter includes a firm contract period through March 2018, with up to 11 one-year extension options and includes cost escalation clauses.

The remaining two Sevan FPSOs, the Sevan Hummingbird (which is currently operating under a short-term charter contract), and the Sevan Voyageur (which is currently undergoing an upgrade) initially would be acquired by Teekay. If acquired by Teekay, both FPSO units would be eligible to be acquired by Teekay Offshore upon commencement of charter contracts with a firm period of greater than three years in duration.

In addition, the Partnership announced yesterday that it has agreed to sell approximately 7.1 million common units in a private placement to a group of institutional investors for proceeds of approximately $170 million (excluding its general partner’s proportionate capital contribution). The Partnership intends to use the proceeds from the sale of common units to partially finance the acquisition of the Piranema FPSO and to partially fund the Partnership’s previously announced acquisition of four newbuilding shuttle tankers that are scheduled to deliver in mid-2013.

On August 2, 2011 the Partnership completed the acquisition of a newbuilding shuttle tanker, the Peary Spirit, for a cost of $134.5 million. The purchase price was financed through the assumption of debt of $96.8 million and $37.7 million in cash.

On October 1, 2011, the Partnership completed the acquisition of another newbuilding shuttle tanker, the Scott Spirit, for a cost of $116 million, including $93.3 million of debt which was assumed by Teekay Offshore. The purchase price is subject to adjustment for up to an additional $12 million based upon incremental shuttle tanker revenues generated during the two years following acquisition.

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Source: Teekay Offshore, November 11, 2011