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Teekay LNG Partners Reports Second Quarter 2019 Results

Friday, 02 August 2019 | 00:00

Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), yesterday reported the Partnership's results for the quarter ended June 30, 2019.

Consolidated Financial Summary

(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).

(2) The Partnership's Total (Proportionate Consolidated) Adjusted EBITDA guidance range for 2019 has increased by approximately $30 million, to $665-690 million, to include the non-controlling interest portion of Adjusted EBITDA relating to the Tangguh and RasGas2 joint ventures, which is consistent with the calculation method as described in this Earnings Release under Definitions of Non-GAAP Financial Measures. The 2019 Consolidated Adjusted EBITDA and Total Adjusted EBITDA guidance metrics provided by the Partnership have been normalized to exclude any Awilco deferred revenue.

Second Quarter of 2019 Compared to Second Quarter of 2018

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended June 30, 2019, compared to the same quarter in the prior year, were positively impacted by: earnings from the nine liquefied natural gas (LNG) carrier newbuildings delivered into the Partnership's consolidated fleet and equity-accounted joint ventures between May 2018 and June 2019; higher earnings from the Torben Spirit upon redeployment at a higher charter rate that commenced in December 2018; lower vessel operating expenses due to timing of expenditures; lower general and administrative expenses due primarily to lower corporate costs; and higher earnings from the Partnership’s seven multi-gas carriers. These increases in earnings were partially offset by lower earnings from the Partnership’s conventional tanker fleet for the three months ended June 30, 2019 due to the sales of three conventional tankers between October 2018 and January 2019.

In addition, GAAP net income attributable to the partners and preferred unitholders was positively impacted in the three months ended June 30, 2019, compared to the same quarter of the prior year, by various items, including a decrease in the write-down of vessels, partially offset by increases in unrealized losses on non-designated derivative instruments.

CEO Commentary

“Our financial results improved again this quarter compared to both the previous quarter and the same quarter last year due to recent newbuilding deliveries and higher charter rates on certain LNG carriers, partially offset by an increase in drydocks and waiting time prior to the commencement of recently secured LNG charters at higher rates,” commented Mark Kremin, Teekay Gas Group Ltd.'s President and Chief Executive Officer. “Looking ahead, we expect our financial results for the second half of this year to continue to improve now that each of these new charters have commenced, leading to higher utilization and higher revenues, coupled with fewer drydocks and the expected delivery of another three 50 percent-owned Yamal ARC7 LNG newbuildings and the start-up of the Bahrain LNG regasification terminal.”

Mr. Kremin continued, “I am also pleased to report that our smaller LPG segment generated stronger Adjusted EBITDA this quarter compared to both last quarter and the same quarter of the prior year, now that all of our wholly-owned multi-gas carriers have transitioned into the Lauritzen-Kosan Pool. We are encouraged to see that charter rates for larger LPG carriers have been strengthening recently, which may translate into higher charter rates for our mid-size LPG carriers.”

“As our fixed-rate cash flows increase as newbuild vessels deliver, the Partnership's delevering trend, which began over a year ago, continued again this quarter and at the same time, we have been returning capital to unitholders with the recent 36 percent increase in distributions and opportunistic common unit repurchases,” commented Mr. Kremin. “We remain committed to our balanced capital allocation plan, which we believe will create value to our long-term unitholders.”

Summary of Recent Events

In June 2019, the Partnership took delivery of the third, 50 percent-owned ARC7 LNG carrier newbuilding, the Nikolay Yevgenov, which immediately commenced its 27-year charter contract servicing the Yamal LNG project.

The three-year charter contract for the Magellan Spirit, the three-year charter contract extension for the Polar Spirit and the one-year charter contracts for the Arwa Spirit and Marib Spirit, both of which are owned by the Partnership’s 52 percent-owned Teekay LNG-Marubeni Joint Venture, commenced at higher charter rates between May 2019 and July 2019.

In December 2018, the Board of Teekay LNG’s general partner approved a $100 million unit repurchase program. Since that time, the Partnership has repurchased a total of 1.43 million common units, or approximately 2 percent of the outstanding common units immediately prior to commencement of the program, for a total cost of $16.9 million, representing an average repurchase price of $11.86 per unit.

Operating Results

The following table highlights certain financial information for Teekay LNG's three segments: the Liquefied Natural Gas Segment, the Liquefied Petroleum Gas Segment and the Conventional Tanker Segment (please refer to the “Teekay LNG's Fleet” section of this release below and Appendices D and E for further details).

I. These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.

Liquefied Natural Gas Segment

Income from vessel operations and Consolidated Adjusted EBITDA for the liquefied natural gas segment for the three months ended June 30, 2019, compared to the same quarter of the prior year, were positively impacted primarily by: the deliveries of five wholly-owned LNG carrier newbuildings (the Myrina, Megara, Bahrain Spirit, Sean Spirit and Yamal Spirit) between May 2018 and January 2019; and higher earnings from the Torben Spirit upon redeployment in December 2018 at a higher charter rate. These increases were partially offset by an increase in off-hire days in the second quarter of 2019 for certain of the Partnership's LNG carriers due to repairs and a scheduled dry docking.

Equity income and Adjusted EBITDA from equity-accounted vessels for the liquefied natural gas segment for the three months ended June 30, 2019, compared to the same quarter of the prior year, were positively impacted primarily by: the deliveries of two LNG carrier newbuildings between July 2018 and January 2019 to the Partnership’s 20 percent-owned joint venture with China LNG Shipping (Holdings) Limited, CETS Investment Management (HK) Co. Limited and BW LNG Investments Pte. Ltd. (the Pan Union Joint Venture), and the deliveries of two ARC7 LNG carrier newbuildings between September 2018 and June 2019 to the Partnership's 50 percent-owned Joint Venture with China LNG Shipping (Holdings) Limited (the Yamal LNG Joint Venture); partially offset by the commencement of the Partnership’s 21-year time-charter contract for the Bahrain Spirit in September 2018 in the Partnership’s 30 percent-owned joint venture with the Natural Oil and Gas Authority, Gulf Investment Corporation G.S.C. and Samsung C&T (the Bahrain LNG Joint Venture) ahead of the commencement of operations of the LNG regasification terminal in Bahrain; and scheduled dry dockings and planned maintenance on certain vessels in the Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the Teekay LNG-Marubeni Joint Venture). In addition, GAAP equity income was negatively impacted by unrealized losses on non-designated derivative instruments in the Partnership’s equity-accounted joint ventures in the second quarter of 2019 compared to gains on designated and non-designated derivative instruments in the second quarter of 2018.

Liquefied Petroleum Gas Segment

Income (loss) from vessel operations and Consolidated Adjusted EBITDA for the liquefied petroleum gas segment for the three months ended June 30, 2019, compared to the same quarter of the prior year, were positively impacted by: higher earnings from the Partnership’s seven multi-gas carriers, which earned higher spot revenues during the second quarter of 2019; and lower vessel operating expenses due to timing of expenditures. In addition, income (loss) from vessel operations for the three months ended June 30, 2018, included a $33 million impairment charge relating to four multi-gas carriers.

Equity income and Adjusted EBITDA from equity-accounted vessels for the liquefied petroleum gas segment for the three months ended June 30, 2019, compared to the same quarter of the prior year, were positively impacted by fewer off-hire days for scheduled dry dockings and repairs in the Partnership's 50/50 joint venture with Exmar NV (the Exmar LPG Joint Venture). In addition, GAAP equity income was negatively impacted by unrealized losses on non-designated derivative instruments in the Exmar LPG Joint Venture for the three months ended June 30, 2019, compared to unrealized gains in the same quarter of the prior year.

Conventional Tanker Segment

Income from vessel operations and Consolidated Adjusted EBITDA for the conventional tanker segment for the three months ended June 30, 2019, compared to the same quarter of the prior year, were negatively impacted by the sales of the European Spirit, African Spirit and Toledo Spirit between October 2018 and January 2019.

Teekay LNG’s Fleet

The following table summarizes the Partnership's fleet as of July 31, 2019. The Partnership also owns a 30 percent interest in a regasification terminal in Bahrain which is under construction and is expected to commence operations in the second half of 2019.

I. Includes vessels leased by the Partnership from third parties and accounted for as finance leases.
II. The Partnership's ownership interests in these vessels range from 20 percent to 100 percent.
III. The Partnership's ownership interest in these newbuildings is 50 percent.
IV. The Partnership's ownership interests in these vessels range from 50 percent to 99 percent.
V. The Partnership is currently marketing its Handymax product tanker for sale and it has been recorded as “Vessel Held For Sale” in the Partnership’s Consolidated Balance Sheets.
Liquidity

As of June 30, 2019, the Partnership had total liquidity of $337.4 million (comprised of $124.9 million in cash and cash equivalents and $212.5 million in undrawn credit facilities).

Full Report

Source: Teekay LNG Partners L.P.

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