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Hamilton, Bermuda - 17 December 2014
Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO) today announced that it has entered into an agreement with a consortium led by Queiroz Galvão Exploração e Produção SA (QGEP) to provide a floating production, storage and offloading (FPSO) unit for the Atlanta field located in the Santos Basin offshore Brazil.
In connection with the contract with QGEP, the Partnership has agreed to acquire the Petrojarl I FPSO from Teekay Corporation (NYSE:TK) (Teekay) for $57 million. Subsequent to the acquisition, the FPSO will undergo upgrades at the Damen Shipyard Group's DSR Schiedam Shipyard in the Netherlands for a fully built-up cost of approximately $240 million, which includes the cost of acquiring the Petrojarl I. The FPSO is scheduled to commence operations in the first half of 2016 under a five-year charter contract with QGEP. The charter contract is expected to generate annual cash flow from vessel operations(1) of approximately $55 to $60 million.
Petrojarl I FPSO
Petrojarl Knarr FPSO
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The acquisition of the Petrojarl I has been approved by the Partnership's Conflicts Committee and Board of Directors and the transaction is expected to close by the end of January 2015.
"We continue to secure new, accretive growth in our Offshore Production business with our second contract award in just three months," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "The QGEP contract award further strengthens the Partnership's position in the fast-growing Brazilian offshore market and highlights the Partnership's ability to provide cost-effective solutions to its customers by redeploying our Sponsor's existing FPSO units."
"In addition to our acquisition of the Petrojarl 1 FPSO, the Partnership's Board of Directors also recently approved the acquisition of the Petrojarl Knarr FPSO from Teekay, subject to the unit achieving first oil and commencing its charter contract", Mr. Evensen continued. "The purchase price for the FPSO, which is based on a fully built-up cost of approximately $1.2 billion, is expected to be financed through the assumption of an existing $815 million long-term debt facility and up to $400 million of short-term credit financing from Teekay. The installation and offshore testing of the Petrojarl Knarr FPSO on its North Sea field is progressing; however, recent unfavorable weather conditions have delayed certain of these activities. Depending on weather conditions, the Partnership currently expects to complete the acquisition of the Petrojarl Knarr and commence its charter with BG Group during the first quarter of 2015."
Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense and deferred gains, and includes the realized gains (losses) on the settlement of foreign exchange forward contracts and adjustments for direct financing leases to a cash basis. CFVO is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Cash flow from vessel operations is not defined by U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income of any other indicator of the Partnership's performance required by GAAP.
About Teekay Offshore Partners L.P.
Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production, storage services and floating accommodation to the offshore oil industry focusing on the fast-growing, deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) and owns interests in 33 shuttle tankers (including two chartered-in vessels), eight floating production storage and offloading (FPSO) units (including three committed FPSO units), six floating storage and offtake (FSO) units (excluding one committed FSO conversion unit), one HiLoad Dynamic Positioning (DP) unit, ten long-haul towing and anchor handling vessels (including six vessels Teekay Offshore has agreed to acquire and four newbuildings), three floating accommodation unit newbuildings and four conventional oil tankers. The majority of Teekay Offshore's fleet is employed on medium-term, stable contracts. In addition, Teekay Offshore also has rights to participate in certain other FPSO, shuttle tanker and HiLoad DP opportunities provided by Teekay Corporation (NYSE:TK), Sevan Marine ASA (Oslo Bors: SEVAN) and Remora AS.
Teekay Offshore's common units trade on the New York Stock Exchange under the symbol "TOO".
Teekay Offshore Partners L.P. press release