Canada: Teekay Offshore Completes Acquisition of FPSO and Newbuilding Shuttle Tanker

Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership)  today announced that is has completed the acquisition of the Cidade de Rio das Ostras (Rio das Ostras) floating production storage and offloading (FPSO) unit from Teekay Corporation (Teekay) for a purchase price of approximately $158 million.

The Partnership also announced that its 51 percent-owned subsidiary, Teekay Offshore Operating L.P. (OPCO), has acquired the newbuilding shuttle tanker, the Amundsen Spirit, from Teekay for approximately $128 million and has agreed to acquire two additional newbuilding shuttle tankers, the Nansen Spirit and the Peary Spirit, from Teekay for a total purchase price of $260 million.

The Partnership has financed the acquisition of the Rio das Ostras FPSO and Amundsen Spirit newbuilding shuttle tanker through the assumption of $187 million of debt secured by these assets, with the remainder of the purchase price financed from available capacity under the Partnership’s revolving credit facilities.

The transactions are expected to increase the Partnership’s Cash Flow from Vessel Operations(1) by approximately $60 million in 2011, and Distributable Cash Flow(2), which includes only 51 percent of OPCO, of approximately $20 million.

The Rio das Ostras FPSO operates under a fixed-rate contract with Petroleo Brasileiro SA (Petrobras) servicing the Aruana field, located in Brazil’s Campos Basin, through 2017. The Amundsen Spirit operates as part of a Master Agreement with Statoil ASA (Statoil), under a fixed-rate, life-of-field time-charter contract to service the Tampen and Haltenbanken fields on the Norwegian Continental Shelf.

The acquisitions of the Nansen Spirit and Peary Spirit are expected to be completed upon the commencement of their life-of-field, time-charter contracts, under the same Statoil Master Agreement, which is expected to occur in January 2011 and July 2011, respectively.

The Board of Directors of the Partnership’s General Partner and its Conflicts Committee have approved the transactions. The Conflicts Committee retained independent legal and financial advisors to assist it in evaluating the transactions.

(1) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense, vessel/goodwill write-downs, gains and losses on the sale of vessels and unrealized gains and losses relating to derivatives, but includes realized gains and losses on the settlement of foreign currency forward contracts. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies.

(2) Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interest, non-cash items, estimated maintenance capital expenditures, gains and losses on vessel sales, unrealized gains and losses from derivatives, non-cash income taxes and unrealized 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 defined by U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance required by GAAP.

“We are excited to complete these strategically significant acquisitions, which includes our second FPSO unit,” commented Peter Evensen, Teekay Offshore’s Chief Executive Officer. “The Rio das Ostras FPSO allows us to build on our existing franchise in Brazil, where we currently operate 13 shuttle tankers, and the three newbuilding shuttle tankers help to renew our shuttle tanker fleet operating in the North Sea.” Mr. Evensen continued, “These accretive transactions further enhance the Partnership’s profitability and portfolio of fixed-rate cash flows which will support future distribution increases. The long-term, fixed-rate nature of these time-charters will also reduce the seasonal variability of our cash flows going forward.”

About Teekay Offshore

Teekay Offshore Partners L.P., a publicly-traded master limited partnership formed by Teekay Corporation , is an international provider of marine transportation, production and storage services to the offshore oil industry. Teekay Offshore 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 six chartered-in vessels), four FSO units, eleven conventional oil tankers. Teekay Offshore Operating L.P has also agreed to acquire two newbuilding shuttle tankers from Teekay Corporation upon the commencement of their respective time-charter contracts in 2011. In addition, Teekay Offshore has direct ownership interests in two shuttle tankers, two FSO units, and two FPSO units. Teekay Offshore also has rights to participate in certain other FPSO and FSO opportunities of Teekay Corporation.

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Source:TeekayOffshore, October  19, 2010;