Teekay Offshore Partners Investor Day Presentation June 18, 2012
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 Partnership s future growth prospects, cash flows and distributions to unitholders; the timing of delivery of vessels under construction or conversion; the industry fundamentals for deepwater offshore oil production, storage and transportation; the potential for Teekay to offer additional vessels to the Partnership and the Partnership s acquisition of any such vessels, including the Petrojarl Foinaven, the Petrojarl Cidade de Itajai, the Voyageur Spirit, the Hummingbird Spirit and the newbuilding FPSO unit that will service the Knarr field under contract with BG Norge Limited; and the potential for the Partnership to acquire other vessels or offshore projects from Teekay or third parties. 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; variability in shuttle tanker tonnage requirements under the Statoil master agreement; different-than-expected levels of oil production in the North Sea and Brazil offshore fields; potential early termination of contracts; failure of Teekay to offer to the Partnership additional vessels; the inability of the joint venture between Teekay and Odebrecht to secure new Brazil FPSO projects that may be offered for sale to the Partnership; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore s general partner to acquire other vessels or offshore projects from Teekay or third parties; the Partnership s ability to raise financing to purchase additional assets; 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, 2011. 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 www.teekayoffshore.com
Investment Highlights Leading market positions Market leader in harsh weather FPSOs and shuttle tankers Stable operating model Diversified portfolio of fixed-rate contracts with major oil companies Visible growth through accretive acquisitions and projects Seven FPSO units will be available for purchase from Sponsor, Teekay Corporation Four advanced shuttle tankers scheduled for delivery in 2013 Strong fundamentals driving industry growth High E&P spending driving record number of planned FPSO projects Advantageous tax structure Teekay Offshore is a 1099 filer no K-1 reporting requirements 3 www.teekayoffshore.com
Teekay Offshore Overview Teekay Offshore completed IPO in Dec. 2006 by Teekay Corp. $1.9bn* Market Cap Strong Sponsor Teekay Corp. ownership: 33% (incl. 2% GP interest) Core focus: Deepwater offshore production, floating storage and transport projects 56 vessels in global fleet (Shuttle tankers, FSOs, FPSOs, oil tankers) 3-10 years fixed-rate contracts *As at June 8, 2012 4 www.teekayoffshore.com
Strong Industry Fundamentals Support Our Business Strategy Increase distributions per unit by executing on the following strategies: Expand presence in high-growth regions Focus on leadership positions in Brazil and North Sea Continue to pursue new high-return projects in the FPSO, FSO and shuttle tanker segments Opportunistically acquire existing assets on long-term fixed-rate contracts Preference for assets with contracts provides immediate accretion Several FPSOs at Sponsor received offer to acquire Voyageur Spirit FPSO from Teekay Corp Provide superior customer service by maintaining high reliability, safety, environmental and quality standards Operational expertise is a competitive advantage 5 www.teekayoffshore.com
Number of FPSO Units Number of Shuttle Tankers Market Leader in Core Segments 40 4 36 22 4 18 Existing Newbuildings on Order 9 5 3 7 2 3 Control More Than 50% of the World s Fleet Teekay Offshore Knutsen NYK Transpetro Viken / PJMR Lauritzen Leading Operator of Leased FPSOs in the North Sea 2 5 7 Teekay Offshore / Teekay Corp. 3 Bluewater Maersk BW Offshore 2 1 Source: Clarkson Research Services, Platou, Company Websites, Industry Sources. 6 www.teekayoffshore.com
Expertise in Deepwater and Harsh Environments North Sea 20 shuttle tankers owned, 4 in-chartered 1 FPSO + 6 owned by Sponsor Brazil 16 shuttle tankers owned 2 FPSOs + 1 owned by Sponsor 7 www.teekayoffshore.com
Attractive Contract Portfolio Substantial portfolio of long-term, fixed-rate contracts with high quality oil and gas companies Total forward fixed-rate revenues of $3.8 billion Weighted average remaining contract life of over 5.0 years Shuttle Tankers FPSO Units FSO Units Conventional Tankers # of units 40 3 5 8 Average Contract Life 5.4 years 4.1 years 3.2 years 2.8 years Forward Revenues $2.6 bn $0.7 bn $0.2 bn $0.3 bn High Quality Customers 8 www.teekayoffshore.com
Conventional Tanker Portfolio Rolling-off Expect reduction in conventional tanker fleet Do not anticipate renewing conventional tanker charters Will keep some conventional hulls for future redeployment as FSOs - Two hulls currently tendered for FSO project in Asia Acquisition of FPSOs will replace lost cash flow Example: cash flow from Piranema FPSO = approximately 4 conventional tankers 2012 2013 2014 2015 2016 2017 2018 Vessel Built 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Fuji Spirit 2003 Kilimanjaro Spirit 2004 SPT Navigator 2008 SPT Explorer 2008 Poul Spirit 1995 Gotland Spirit 1986 Hamane Spirit 1997 Sold Torben Spirit 1994 For sale Leyte Spirit 1992 In lay-up, FSO candidate Luzon Spirit 1992 In lay-up, FSO candidate 9 www.teekayoffshore.com
TOO s Business Mix is Evolving Since IPO, greater proportion of TOO s cash flow has come from highgrowth FPSO sector Higher risk-adjusted returns With roll-off of conventional tanker contracts, TOO is becoming a true pure-play in the build-out of offshore crude oil TOO Q1-07 CFVO * By Segment 27% TOO Q1-12 CFVO * By Segment 5% 29% 66% 10% 7% 56% Conventional Tankers FPSOs Shuttle Tankers FSOs *Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense, write-down of vessels and amortization of deferred gains and in-process revenue contract, includes the realized gains (losses) on the settlement of foreign exchange forward contracts and adjusting for direct financing leases to a cash basis. Cash flow from vessel operations is a non-gaap financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Partnership s web site at www.teekayoffshore.com for a reconciliation of this non-gaap measure as used in this release to the most directly comparable GAAP financial measure. 10 www.teekayoffshore.com
Significant Visible Growth Opportunities Assets and Contracts Suitable for Acquisition Acquisition Candidates Following Contract Renewal / Amendment Cidade de Itajai (50%)(Petrobras) Knarr FPSO (BG) Petrojarl Foinaven (BP) Hummingbird Spirit (Centrica) Voyageur Spirit (E.ON) Received offer from Teekay Corp 4 Shuttle Tankers (BG) Directly ordered by TOO Petrojarl I (Statoil) Petrojarl Banff (CNR) Omnibus agreements with Teekay & Sevan provide additional opportunities 11 www.teekayoffshore.com
Voyageur Spirit FPSO (ex. Sevan Voyageur) Charterer: E-ON Ruhrgas Year Built: 2009 Upgrade in progress at Nymo Shipyard in Arendal, Norway Expected First-Oil: Oct. 2012 Cylindrical hull design by Sevan Marine Firm Contract Length:5 years Contract Options: evergreen with 12-month cancellation Expected CFVO ~$75m p.a. Operating Water Depth +120m Processing Capacity: 30,000 bbls/d Storage Capacity: 270,000 bbls Field Application: Oil production, Gas export and water injection Huntington Field North Sea, U.K. 12 www.teekayoffshore.com
Four BG Shuttle Tankers Charterer: BG Group Delivery Dates: Hull 2037, Q2-2013 Hull 2038, Q2-2013 Hull 2039, Q3-2013 Hull 2040, Q4-2013 Suezmax-sized DP2 shuttle tankers Delivered Cost: ~$120m / vessel Being constructed at Samsung Shipyard, South Korea Contract Length: 10 years plus 2 x 5-year options Will service BG s pre-salt requirements BG is one of the largest international oil companies operating in Brazil 13 www.teekayoffshore.com
Petrojarl Cidade de Itajai FPSO (ex. Tiro & Sidon) Charterer: Petrobras Expected First-Oil: December 2012 Aframax conversion at Jurong Shipyard, Singapore 50/50 Joint Venture with Brazilbased Odebrecht Firm Contract Length: 9 years Extension Options: 6 x 1 years Expected CFVO: $25m (50% basis) 80% Project Financing arranged with syndicate of International Banks Designed Water Depth: up to 1,000m Operating Depth: ~250m Processing Capacity: 80,000 bbls/d Storage Capacity: 650,000 bbls Tiro & Sidon fields on Block BM-S- 40, Santos Basin, offshore Brazil +150 million barrels of recoverable oil 14 www.teekayoffshore.com
Knarr FPSO Charterer: BG Group Expected First-Oil: 1H 2014 Purpose built in South Korea by Samsung Heavy Industries Firm Contract Length: 6 or 10 years Extension Options: up to 20 years (total) Processing Capacity: 63,000 bbls/d Designed to handle a wide-range of LPGs Operating Water Depth: ~400m Est. Recoverable Reserves: 70-150 mmbbls Knarr Field, North Sea 15 www.teekayoffshore.com
Linking Rig to Refinery Leading indicators for offshore production, storage and transportation demand Teekay s role in the offshore value chain 16 www.teekayoffshore.com
MODU Orders $ / BBL Oil Price Drilling Activity a Key Leading Indicator 81 mobile drilling unit (MODU) orders placed in 2011 Highest since 1980 Growth strongest in the deepwater / ultra-deepwater drilling fleet Deepwater wells yielding the biggest results Average discovery size in 2010 for wells >1,500m depth was 1,000+ mboe MODU Orders Versus Oil Price 100 80 60 40 20 0 Jack Ups Semi-subs and Drillships Oil Price (USD) 120 100 80 60 40 20 0 Source: Clarksons, Douglas Westwood, BP 17 www.teekayoffshore.com
North Sea Market Resurgent Activity Resurgence in North Sea drilling activity yielding results 1.7-3.3 billion barrel Johan Sverdrup find was biggest of 2011 New finds tend to suit an FPSO and shuttle tanker solution Enhanced Oil Recovery leading to renewed production in mature areas Move into Barents Sea requires high-specification shuttle tankers and FPSOs Norwegian Exploration Wells Drilled* Record high level of exploration *Source: Norwegian Petroleum Directorate Barents Sea (emerging shuttle region) Norwegian Sea (existing shuttle region) North Sea (existing shuttle area) 18 www.teekayoffshore.com
Brazil Market More Growth to Come 140 Brazil Offshore Production Fleet Development 120 100 80 Installed On Order Planned 60 40 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: IMA Brazilian offshore production fleet set to double in 2011-18 Growth in offshore production drives demand for shuttle tankers and FPSOs Petrobras is aggressively increasing its production capability Other oil companies also have shuttle requirements in offshore Brazil 19 www.teekayoffshore.com
Strong Future Demand for FPSOs FPSOs in the Planning Stage FPSO Forecast (Next 5 Years) End-06 End-08 Apr-12 68 96 Source: IMA 141 0 50 100 150 The number of projects which could require an FPSO has doubled in the past five years Estimate of 20-28 FPSO orders per year over the next five years depending on the global economy, oil demand and energy prices Operational and engineering expertise required to be successful in the leased FPSO business creates a high barrier to entry 30 25 20 15 10 5 0 Source: IMA 15 Avg. Orders per year Avg. Orders per year (2007 2011) 10 Orders Jan-Apr 2012 Orders Jan-Apr 2012 20 Low Case Low Case 24 Base Case Base Case 28 High Case High Case Next 5 Years 20 www.teekayoffshore.com
Increased Demand for FSO Solutions Resurgence in offshore activity creating new FSO opportunities Re-emergence of FSO demand in the North Sea New development in S.E. Asia 22 projects currently considering the use of an FSO 11 in Asia; 4 in North Sea Planned FSO Projects Top Leased FSO Operators 12 10 8 6 4 2 11 4 3 2 1 1 10 8 6 4 2 7 5 4 Owners with 2 units 19 Owners with 1 unit 4 4 3 0 S.E. Asia North Sea MED GoM Brazil Africa 0 Tanker Pacific Teekay Modec Trada Maritime MISC 21 www.teekayoffshore.com
Investment Highlights Leading market positions Stable operating model Visible growth through accretive acquisitions and projects Strong fundamentals driving industry growth Advantageous tax structure no K-1 reporting requirements 22 www.teekayoffshore.com