OFFSHORE PARTNERS FOURTH QUARTER 2014 EARNINGS PRESENTATION

Transcription

1 TEEKAY Photo Credit: John Mikal Torgersen TEEKAY OFFSHORE PARTNERS FOURTH QUARTER 2014 EARNINGS PRESENTATION February 20, 2015

2 Forward Looking Statements This presentation contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management s current views with respect to certain future events and performance, including statements regarding: the impact of low global oil prices on near-term offshore projects; the long-term offshore energy sector fundamentals, including the impact on the Partnership s future growth; the Partnership s growth projects, including new organic offshore projects and future acquisitions, and the impact of these projects on the Partnership s future distributable cash flows; the timing of newbuilding, conversion and upgrade vessel or offshore unit deliveries and commencement of their respective time-charter contracts; the Partnership s acquisition of future HiLoad projects and potential for improved features of new HiLoad DP vessel designs; the future application of the HiLoad technology, including securing a contract for the completed HiLoad DP unit; the estimated reserves on the Atlanta field; the timing and purchase price of the Partnership s acquisition of six towing and anchor handling vessels; the timing and certainty of entering into charter contracts for the FAU newbuildings prior to their deliveries; the estimated cost of building, converting or upgrading vessels or offshore units; the Partnership s acquisition of the Petrojarl Knarr FPSO, including the purchase price, the timing of completion of field installation and testing and contract start-up for this FPSO unit, the timing of the Partnership completing the acquisition, and the consideration for the acquisition; the timing and amount of the expected increase in the Partnership s cash distributions after the acquisition of the Petrojarl Knarr FPSO; and the potential for Teekay Corporation or third parties to offer additional vessels or projects to the Partnership and the Partnership agreeing to acquire such vessels or projects. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea and Brazil offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion and upgrade delays and cost overruns; failure by the Partnership to secure charter contracts for FAU newbuildings; changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; delays in the commencement of time-charters; the inability to successfully secure a contract for the HiLoad DP unit; inability of Remora to develop innovations for future HiLoad DP unit designs; failure of the Partnership to receive offers for additional vessels or offshore units from Teekay Corporation, Sevan, Remora or third parties; failure by the Partnership to complete the acquisition of the six towing and anchor handling vessels, including the transition of technical and commercial management of the vessels to ALP; potential delays in the commencement of operations of the Petrojarl Knarr FPSO unit; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore s general partner to approve the acquisition of vessels offered from Teekay Corporation, or third parties; the Partnership s ability to raise adequate financing to purchase additional assets and complete organic growth projects; and other factors discussed in Teekay Offshore s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based. 2

3 Recent Highlights Generated distributable cash flow* of $50.0 million in Q4-14 Declared Q4-14 cash distribution of $ per unit Agreed to acquire Petrojarl Knarr FPSO from Teekay Corp. Subject to commencement of charter; expected to occur in Q1-15 Expected to drive 4-5% TOO distribution growth Awarded new FPSO contract in Brazil and acquired Petrojarl I FPSO from Teekay Corp. Fixed-rate FPSO contract with QGEP consortium expected to commence in 1H-2016 Finalized contract to provide a converted FPSO for Libra field Capex of ~$1 billion (100% basis) 12-year fee-based contract with Petrobras; expected to commence in Q1-17 ALP subsidiary agreed to accretive ~$220 million acquisition of 6 on-the-water longdistance towing vessels * Distributable Cash Flow is a non-gaap measure used by certain investors to measure the financial performance of Teekay Offshore and other master limited partnerships 3

4 Knarr FPSO Status Update Knarr FPSO installation on North Sea field largely complete Completing final testing in preparation for first oil Agreed to acquire from Teekay Corp. for fully built-up cost of ~$1.2 billion Fully-financed with assumed debt and vendor financing On schedule to commence 10-year charter to BG in Q Expected to generate annual DCF* of approximately $80 million Acquisition expected to drive 4-5% distribution growth * Distributable Cash Flow is a non-gaap measure used by certain investors to measure the financial performance of Teekay Offshore and other master limited partnerships 44

5 Atlanta (Petrojarl 1) FPSO Project In December 2014, awarded new FPSO contract with consortium led by Queiroz Galvão Exploração e Produção Participacoes SA (QGEP) for an Early Production System (EPS) FPSO for the Atlanta field in the Santos Basin Field contains approximately 190 million recoverable barrels, with expected production to 2033 Majority of subsea-related capex already invested field estimated to have a low cash breakeven Acquired Petrojarl 1 FPSO from Teekay Corp. for $57 million; upgrades expected to cost additional ~$175 million Extends FPSO useful life by 15-years 5-year contract scheduled to commence in 1H-2016 Expected to generate CFVO* of ~$55-60 million per annum * Cash flow from vessel operations (CFVO) represents income from vessel operations before depreciation and amortization expense and amortization of in-process revenue contracts and deferred gains, and includes the realized gains (losses) on the settlement of foreign exchange forward contracts. CFVO is a non-gaap financial measure used by certain investors to measure the financial performance of shipping companies. Please refer to Appendix E included in the Q4-14 earnings release for a description and reconciliation of this non-gaap measure to the most directly comparable GAAP financial measure. 5

6 HiLoad DP Update In late-december, informed by Petrobras that HiLoad DP did not meet certain technical criteria required to commence the time-charter contract Teekay continues to believe in technical feasibility of HiLoad DP operations Discussions with Petrobras continue while also considering other alternatives Currently in discussions and conducting FEED study with another customer on potential use of HiLoad concept for oil export from Brazil $60 million investment in HiLoad DP #1 unit to-date 6

7 Executing on Growth Projects New lines of business commencing operations Long-haul Towage Three vessels delivering in Q1-15 Immediately employed at attractive rates Rig moves are leading to increased demand Three remaining vessels delivering in Q Floating Accommodation Unit Arendal Spirit Delivered from Cosco shipyard, expected to sail away for Brazil in early-march Expected to commence 3-year contract during Q2-15 7

8 Stable Portfolio of Fee-Based Contracts With Strong Customer Base Forward Fee-Based Revenues by Segment* Average Remaining Contract Length by Segment* FPSO 6 years 61% $7.8B Forward Fee-Based Revenues 1% 2% 8% 28% FSO Shuttle Tankers Conventional Tankers FAU 5 years 4 years 3.5 years 3 years * Excludes extension options and includes the Knarr FPSO which is expected to be acquired by Teekay Offshore during Q

9 Teekay Offshore Cash Flows Expected to Remain Stable All TOO revenues generated from fee-based fixed-rate contracts, not directly linked to oil prices TOO s assets are critical to customers production Production = cash flow TOO s diversified contract portfolio provides significant cash flow stability ~2% of 2015 contracted cash flow up for renewal in 2015 Oil Value Chain DP Ocean Towage FAUs FPSOs FSOs Offshore Loading Exploration / Seismic Subsea Production Storage Transportation Terminals Drilling Exploration more sensitive to oil prices Production - less sensitive to oil prices 9

10 Limited Near-term Rollover in FPSO Contracts Owner FPSO Unit TOO TOO Petrojarl Varg Talisman Options Voyageur Spirit E.ON Options 2028 TOO Cidade de Rio das Ostras Petrobras TOO Piranema Spirit Petrobras Options TOO Cidade de Itajai (50%) Petrobras Options 2028 TOO Petrojarl Knarr BG 2035 TOO Petrojarl I (Upgrade) QGEP Options TOO Libra (Conversion) (50%) Petrobras 2028 TK Hummingbird Spirit Centrica Options TK Petrojarl Banff CNR Petrojarl Foinaven TK BP Extension 10

11 Expected Near-Term Oil Price Impact on TOO s Offshore Logistics Businesses Offshore Segment Current Fleet Status Industry Dynamic Near-term TOO Outlook Shuttle Tanker 33 vessels operating under time-charter and CoA contracts Shuttle tankers critical to customer oil production chains Upward pressure on charter renewal rates due to high fleet utilization Ability to trade unutilized capacity in strong spot tanker market North Sea shuttle tanker fleet tightly balanced for next 3 years Few vessel charters up for nearterm renewal Floating Accommodation Unit#1 delivered in Feb 2015 Unit #2 and Unit #3 delivering in late-2015 and late-2016 Some 2015/16 contract tenders deferred Current weak oil price outlook expected to slow pace of newbuilding orders and could force older units to be scrapped Unit#1 scheduled to commence 3- year charter in Q2-15 Currently bidding on contracts for Units #2 and #3 project requirements favour new higher-end units with lower operating costs and enhanced safety features Flexible yard terms allow delivery delays of up to 1 year DP Ocean Towage 10-vessel fleet delivering 1H-15 through 2016 Niche market; stable rates based on small fleet size and high utilization Experienced management team Strong demand for DP units Partial indemnification of first year revenues 11

12 Distributable Cash Flow and Coverage Q4-14 vs. Q3-14 Three Months Ended Three Months Ended Decem ber 31, 2014 Septem ber 30, 2014 (Thousands of U.S. Dollars except coverage ratio information) (unaudited) (unaudited) Net revenues 236, ,820 Vessel operating expenses (84,294) (91,638) Time charter hire expense (7,618) (7,085) Estimated maintenance capital expenditures (28,240) (28,979) General and administrative expenses (20,575) (14,038) Partnership's share of equity accounted joint venture's DCF net of estimated maintenance capital expenditures 2,525 2,774 Interest expense (1) (40,183) (37,207) Interest income Income tax recovery (expense) 734 (1,468) Distributions relating to equity financing of new buildings and conversion costs 2,824 1,678 Distributions relating to preferred units (2,719) (2,719) Other - net (2,292) (1,727) Distributable Cash Flow before Non-Controlling Interests 56,622 49,556 Non-controlling interests' share of DCF (6,667) (4,393) Distributable Cash Flow (2) 49,955 45,163 A Distributions 55,003 51,011 B Coverage Ratio 0.91x 0.89x =A/B 1) See Adjusted Operating Results in the Appendix to this presentation for a reconciliation of this amount to the amount reported in the Summary Consolidated Statements of Income and Comprehensive Income in the Q4-14 and Q3-14 earnings release. 2) For a reconciliation of Distributable Cash Flow, a non-gaap measure, to the most directly comparable GAAP figures, see Appendix B in the Q4-14 and Q3-14 Earnings Releases. 12

13 Strong Visible Growth Pipeline Supports Future TOO Distribution Increases Known Growth Capex by Segment 50% $3.6B Known Growth Projects 14% 12% 7% 17% 2014 Dropdown FPSOs (Estimated) Conversion FPSO FSO FAUs Towage

14 Appendix 14

15 Teekay Offshore Capital Commitments Teekay Offshore s remaining capital commitments relating to its portion of newbuildings and conversions as at December 31, 2014: (in Millions) Offshore Production FPSO (1) $332 $298 - $630 Offshore Logistics FSO (2) $118 $46 - $164 Towage (3) $286 $109 - $395 FAU (4) $182 $374 $25 $581 $918 $827 $25 $1,770 1) Includes capital expenditures related to the Petrojarl I FPSO upgrades and Teekay Offshore s 50% interest in the Libra FPSO conversion project. 2) Includes capital expenditures related to the Gina Krog FSO conversion project. 3) Includes capital expenditures related to the acquisition of six on-the-water towing vessels and four long-haul towing newbuildings. 4) Includes capital expenditures related to three FAU newbuildings. 15

16 Adjusted Operating Results Q4-14 UNAUDITED (in thousands of US dollars) As Reported Three Months Ended December 31, 2014 Appendix A items (1) Reclass for Realized Gains/Losses on Derivatives (2) TOO Adjusted Income Statement NET REVENUES Revenues 260, ,461 Voyage expenses (24,208) - - (24,208) Net revenues 236, ,253 OPERATING EXPENSES Vessel operating expenses (84,294) 4,470 (999) (80,823) Time-charter hire expense (7,618) - - (7,618) Depreciation and amortization (51,832) - - (51,832) General and administrative (20,575) 4,362 (332) (16,545) Gain on sale of vessel 3,121 (3,121) - - operating expenses (161,198) 5,711 (1,331) (156,818) Income from vessel operations 75,055 5,711 (1,331) 79,435 OTHER ITEMS Interest expense (24,982) - (15,201) (40,183) Interest income Realized and unrealized losses on derivative instruments (59,495) 44,435 15,060 - Equity income 1, ,476 Foreign currency exchange loss (11,590) 10,118 1,472 - Other income net Income tax recovery other items (92,765) 55,265 1,331 (36,169) Net (loss) income from continuing operations (17,710) 60,976-43,266 Less: Net income attributable to non-controlling interests (5,547) 2,387 - (3,160) ADJUSTED NET INCOME ATTRIBUTABLE TO THE PARTNERSHIP (23,257) 63,363-40,106 1) See Appendix A to the Partnership's Q4-14 earnings release for description of Appendix A items. 2) Reallocating the realized gains/losses to their respective line as if hedge accounting had applied. Please refer to footnote (4) and (5) to the Summary Consolidated Statements of Income (loss) in the Q4-14 earnings release. 16

17 Adjusted Operating Results Q3-14 UNAUDITED (in thousands of US dollars) As Reported Three Months Ended September 30, 2014 Appendix A items (1) Reclass for Realized Gains/Losses on Derivatives (2) TOO Adjusted Income Statement NET REVENUES Revenues 258, ,442 Voyage expenses (28,622) - - (28,622) Net revenues 229, ,820 OPERATING EXPENSES Vessel operating expenses (91,638) - 54 (91,584) Time-charter hire expense (7,085) - - (7,085) Depreciation and amortization (49,759) - - (49,759) General and administrative (14,038) - (332) (14,370) Write-down of vessels (4,759) 4, operating expenses (167,279) 4,759 (278) (162,798) Income from vessel operations 62,541 4,759 (278) 67,022 OTHER ITEMS Interest expense (22,911) - (14,296) (37,207) Interest income Realized and unrealized losses on derivative instruments (9,432) (4,645) 14,077 - Equity income from joint venture 2,486 (1,045) - 1,441 Foreign exchange loss (939) Other (expense) income net (278) Income tax expense (1,468) - - (1,468) other items (32,397) (4,970) 278 (37,089) Net income (loss) from continuing operations 30,144 (211) - 29,933 Less: Net income attributable to non-controlling interests (1,623) (1,129) ADJUSTED NET INCOME ATTRIBUTABLE TO THE PARTNERSHIP 28, ,804 1) See Appendix A to the Partnership's Q3-14 earnings release for description of Appendix A items. 2) Reallocating the realized gains/losses to their respective line as if hedge accounting had applied. Please refer to footnote (4) and (5) to the Summary Consolidated Statements of Income (loss) in the Q3-14 earnings release. 17

18 2014 Actual & 2015 Est. Drydock Schedule Entity Segment March 31, 2015 (E) June 30, 2015 (E) September 30, 2015 (E) December 31, 2015 (E) 2015 Teekay Offshore Fixed-Rate Tanker FSO Shuttle Tanker Entity ` Segment March 31, 2014 (A) June 30, 2014 (A) September 30, 2014 (A) December 31, 2014 (A) 2014 Teekay Offshore Fixed-Rate Tanker FSO Shuttle Tanker Note: In the case that a vessel drydock straddles between quarters, the drydock has been allocated to the quarter in which the majority of drydock days occur. 18

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