Teekay LNG Partners Cash Flow Climbs in Q3 (Bermuda)

Teekay GP LLC, the general partner of Teekay LNG Partners L.P. today 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 $43.7 million, compared to $36.7 million in the same quarter of the previous year. The increase primarily reflects the incremental distributable cash flow resulting from the November 2010 acquisition of a 50 percent interest in two LNG carriers, the June 2011 acquisition of one Multigas carrier, the August 2011 acquisition of a 33 percent interest in one LNG carrier, the September 2011 acquisition of one LPG carrier, and fewer off-hire days relating to scheduled drydockings, partially offset by the sale of the Dania Spirit LPG carrier in November 2010.

On October 18, 2011, the Partnership declared a cash distribution of $0.63 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 Maersk LNG Transaction

In October 2011, the Partnership announced that its joint venture with Marubeni Corporation (Marubeni) (the Teekay LNG Marubeni Joint Venture) agreed to acquire ownership interests in eight LNG carriers from Denmark-based global conglomerate, A.P. Moller-Maersk A/S, for an aggregate purchase price of approximately $1.402 billion. The Teekay LNG Marubeni Joint Venture, in which Teekay LNG and Marubeni have 52 and 48 percent economic interest, respectively, but share control, will acquire 100 percent interests in six LNG carriers and 26 percent interests in two LNG carriers. Five of the eight Maersk LNG Carriers to be acquired are currently operating under long-term, fixed-rate time-charter contracts, with an average remaining firm contract period of approximately 17 years, plus extension options. The other three vessels are currently operating under short-term, fixed-rate time-charters, one of which includes an extension option which if exercised would extend its charter by 18 years. In addition, the owner of the remaining interests in the two LNG carriers in which the Teekay LNG Marubeni Joint Venture will acquire 26 percent interests will have the right to require the Joint Venture to acquire up to all of such remaining interests. Since control of the Teekay LNG Marubeni Joint Venture will be shared jointly between Teekay LNG and Marubeni, the Partnership expects to account for the Teekay LNG Marubeni Joint Venture using the equity method. The transaction is expected to close by early 2012.

In early November 2011, the Partnership completed a public offering of 5.5 million common units (excluding the underwriters’ overallotment option), for net proceeds of approximately $179.5 million, a portion of which is intended to be used to finance the Partnership’s $146 million pro rata equity contribution for the Maersk LNG carriers.

“We believe the acquisition of the Maersk LNG fleet, through our joint venture with Marubeni, combined with the recent delivery of several newbuilding vessels, will result in significant distributable cash flow growth for the Partnership,” commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. “Since the end of August, we have taken delivery of the first three of the four Angola LNG carriers, in which the Partnership owns a 33 percent interest, as well as the final two Skaugen LPG carriers. All of these vessels are now operating under long-term fixed-rate charters. In addition, given the strength of the current LNG shipping market, the Maersk LNG Carriers that are currently employed on short-term charters should provide potential upside to the Partnership to the extent these contracts are renewed at higher rates. As a result of these accretive fleet additions, management intends to recommend to the Teekay GP LLC Board of Directors an increase to the quarterly distribution of $0.045 per common unit, or 7 percent, subject to the completion of the Maersk LNG fleet acquisition. This increase would commence with the first quarter 2012 distribution to be paid in May 2012, which would be timed to match the expected completion of the Maersk LNG transaction.”

Mr. Evensen added, “Our $180 million follow-on equity offering, which closed earlier this week, will more than cover the Partnership’s pro rata equity contribution of approximately $146 million for the Maersk LNG transaction. With the additional proceeds adding to our existing liquidity, the Partnership remains financially well positioned with approximately $460 million of total liquidity on a pro forma basis, after giving effect to the Maersk LNG transaction and the acquisition of the third Angola LNG carrier and second Skaugen Multigas carrier in October 2011.”

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Source: Teekay LNG, November 10, 2011