Teekay LNG Partners Cash Flow Drops, Bermuda

Teekay GP L.L.C., the general partner of Teekay LNG Partners reported the Partnership’s results for the quarter ended June 30, 2013.

During the second quarter of 2013, the Partnership generated distributable cash flow of $55.4 million, compared to $56.8 million in the same quarter of the previous year. The decrease in distributable cash flow was primarily the result of a higher number of off – hire days in the second quarter of 2013, compared to the same period in 2012, due to scheduled dry dockings, and lower charter rates on two of the Partnership’s conventional tankers as a result of renegotiated rates effective October 2012 for a period of two years.

The decreases were partially offset by increased distributable cash flow as a result of the Partner ship’s acquisition of a 50 percent interest in Exmar LPG BVBA, a liquefied petroleum gas (LPG) carrier joint venture with Exmar, in February 2013 and higher rates on charter contracts entered into during 2012 for certain of the MALT LNG Carriers.

“Since reporting first quarter results in May, the Partnership’s business development activities have resulted in several positive outcomes,” commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. “This includes securing new time-charter contracts and newbuilding vessel orders, and acquiring on-the-water vessels with existing contracts, all of which are expected to result in near and long-term distributable cash flow growth. To begin with, in June, we were awarded five-year time-charters with Cheniere for the two LNG carrier newbuildings we ordered in December 2012. These vessels’ attractive 173,400 cubic meter cargo size and fuel-efficient MEGI engines were key factors in being awarded these important new contracts. These vessels will be among the first to export LNG from the Sabine Pass facility in the U.S. Gulf Coast.”

Mr. Evensen continued, “Based on our successful chartering efforts for the first two MEGI newbuildings, in late -July, the Partnership exercised a portion of its options with DSME to order an additional two 173,400 cubic meter MEGI LNG carrier newbuildings. As with the two carriers we ordered in December, we believe the 2016 delivery dates for these vessels will be well-timed for the next major wave of LNG carrier demand which is expected to follow the large number of LNG export projects that are scheduled to come on-stream starting in late-2015. While we expect to secure long-term financing for these vessels upon securing time-charter employment, we will fund the initial shipyard installments with a portion of the proceeds from the Partnership’s recent $40 million common unit private placement transaction. As part of this vessel order, the Partnership also secured five additional options from DSME for future LNG carrier orders.”

“Our position in the attractive liquefied petroleum gas sector also continues to grow,” Mr. Evensen added. “Last week, our LPG joint venture with Exmar exercised in-the-money options with Hanjin to construct two additional medium-size gas carrier, or MGC, newbuildings, bringing the joint venture’s MGC newbuilding program to a total of 10 vessels.”

“Looking more near-term,” Mr. Evensen continued, “last week, the Partnership announced an agreement to acquire up to two 155,900 cubic meter LNG carrier newbuildings from Awilco LNG, with a five-year fixed-rate bareboat charter back to Awilco at a net price of $155 million per vessel. Assuming the option for the second vessel is exercised, these two vessels, which are scheduled to deliver from DSME in September and November 2013, are expected to provide the Partnership with near-term cash flow accretion and bridge the gap between now and when our other newbuilding vessels begin delivering in 2016.”

Mr. Evensen added, “In addition to our recent announcements, the Partnership is currently involved in several LNG shipping and floating regasification project tenders with start-up dates in the late-2015 through 2017 that would generate further accretive distributable cash flows for the Partnership.”

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LNG World News Staff, August 9, 2013