Form
20-F
|
X
|
Form
40- F
|
Yes
|
No
|
X
|
Yes
|
No
|
X
|
Yes
|
No
|
X
|
PART
I: FINANCIAL INFORMATION
|
PAGE | ||
Item 1. Financial Statements (Unaudited) | |||
Report
of Independent Registered Public Accounting
Firm
|
3
|
||
Unaudited
Consolidated Statements of Income for
the three and nine months ended September, 2007 and
2006
|
4
|
||
Unaudited
Consolidated Balance Sheets as at September 30, 2007 and December
31,
2006
|
5
|
||
Unaudited
Consolidated Statements of Cash Flows for
the nine months ended September 30, 2007 and 2006
|
6
|
||
Unaudited
Consolidated Statements of Changes In Partners’ Equity for the nine months
ended September 30, 2007
|
7
|
||
Notes
to the Unaudited Consolidated Financial Statements
|
8
|
||
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
16
|
||
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
27
|
||
PART
II: OTHER INFORMATION
|
29
|
||
SIGNATURES
|
30
|
Vancouver, Canada | /s/ ERNST & YOUNG LLP |
October 31, 2007 | Chartered Accountants |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
$
|
$
|
$
|
$
|
|||||||||||||
VOYAGE
REVENUES (including $37,173 and $116,019 from related parties for
the three and nine months ended September 30, 2007, respectively
and
$10,421 and $122,357 for the three and nine months ended September
30,
2006, respectively - notes 10a, 10b, 10d, 10e, and
10h)
|
192,050
|
152,646
|
571,991
|
539,370
|
||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Voyage
expenses
|
36,458
|
24,126
|
107,798
|
72,470
|
||||||||||||
Vessel
operating expenses
|
35,247
|
24,520
|
99,025
|
77,474
|
||||||||||||
Time-charter
hire expense
|
37,161
|
38,988
|
111,749
|
204,618
|
||||||||||||
Depreciation
and amortization
|
31,318
|
24,958
|
88,942
|
76,289
|
||||||||||||
General
and administrative (including $15,156 and $43,011 from related parties
for
the three and nine months ended September 30, 2007, respectively
and
$1,363 and $4,057 for the three and nine months ended September 30,
2006,
respectively - notes 10c, 10g, and 10i)
|
15,731
|
13,983
|
47,153
|
57,452
|
||||||||||||
Vessel
and equipment writedowns and (gain) on sale of vessels (note
14)
|
-
|
(6,404 | ) |
-
|
(4,254 | ) | ||||||||||
Restructuring
charge
|
-
|
353
|
-
|
806
|
||||||||||||
Total
operating expenses
|
155,915
|
120,524
|
454,667
|
484,855
|
||||||||||||
Income
from vessel operations
|
36,135
|
32,122
|
117,324
|
54,515
|
||||||||||||
OTHER
ITEMS
|
||||||||||||||||
Interest
expense (note 7)
|
(21,578 | ) | (13,845 | ) | (57,640 | ) | (38,349 | ) | ||||||||
Interest
income
|
1,784
|
1,041
|
4,268
|
4,332
|
||||||||||||
Equity
income from joint ventures
|
-
|
1,365
|
-
|
4,556
|
||||||||||||
Foreign
currency exchange (loss) gain
|
(4,372 | ) |
7,492
|
(14,329 | ) | (11,196 | ) | |||||||||
Income
tax (expense) recovery (note 12)
|
(6,057 | ) |
4,518
|
(2,683 | ) | (3,244 | ) | |||||||||
Other
income - net (note 9)
|
2,965
|
2,770
|
8,266
|
8,464
|
||||||||||||
Total
other items
|
(27,258 | ) |
3,341
|
(62,118 | ) | (35,437 | ) | |||||||||
Income
before non-controlling interest
|
8,877
|
35,463
|
55,206
|
19,078
|
||||||||||||
Non-controlling
interest (note 1)
|
(6,763 | ) | (3,162 | ) | (42,546 | ) | (3,576 | ) | ||||||||
Net
income
|
2,114
|
32,301
|
12,660
|
15,502
|
||||||||||||
General
partner’s interest in net income
|
42
|
-
|
253
|
-
|
||||||||||||
Limited
partners’ interest: (note 15)
|
||||||||||||||||
Net
income
|
2,072
|
32,301
|
12,407
|
15,502
|
||||||||||||
Net
income per:
-
Common unit (basic and diluted)
|
0.21
|
2.56
|
0.91
|
1.23
|
||||||||||||
-
Subordinated unit (basic and diluted)
|
0.00
|
2.56
|
0.35
|
1.23
|
||||||||||||
-
Total unit (basic and diluted)
|
0.11
|
2.56
|
0.64
|
1.23
|
||||||||||||
Weighted
average number of units outstanding:
-
Common units (basic and diluted)
|
9,800,000
|
2,800,000
|
9,800,000
|
2,800,000
|
||||||||||||
-
Subordinated units (basic and diluted)
|
9,800,000
|
9,800,000
|
9,800,000
|
9,800,000
|
||||||||||||
-
Total units (basic and diluted)
|
19,600,000
|
12,600,000
|
19,600,000
|
12,600,000
|
||||||||||||
Cash
distributions declared per unit
|
0.35
|
-
|
0.75
|
-
|
As
at
September
30,
2007
$
|
As
at
December
31,
2006
$
|
|||||||
ASSETS
|
||||||||
Current
Cash
and cash equivalents (note 7)
|
96,589
|
113,986
|
||||||
Accounts
receivable, net
|
44,424
|
24,635
|
||||||
Net
investment in direct financing leases - current
|
22,690
|
21,764
|
||||||
Prepaid
expenses
|
31,750
|
24,608
|
||||||
Other
assets
|
8,297
|
7,732
|
||||||
Total
current assets
|
203,750
|
192,725
|
||||||
Vessels
and equipment(note 7)
At
cost, less accumulated depreciation of $662,633 (December
31, 2006 - $581,994)
|
1,659,079
|
1,524,842
|
||||||
Net
investment in direct financing leases
|
83,526
|
92,018
|
||||||
Other
assets
|
30,240
|
38,198
|
||||||
Intangible
assets - net (note 5)
|
58,122
|
66,425
|
||||||
Goodwill
– shuttle tanker segment
|
127,113
|
127,113
|
||||||
Total
assets
|
2,161,830
|
2,041,321
|
||||||
LIABILITIES
AND PARTNERS’ EQUITY
|
||||||||
Current
Accounts
payable
|
14,447
|
7,366
|
||||||
Accrued
liabilities
|
34,167
|
42,987
|
||||||
Current
portion of long-term debt (note 7)
|
18,980
|
17,656
|
||||||
Due
to affiliate (note 10k)
|
10,378
|
16,951
|
||||||
Total
current liabilities
|
77,972
|
84,960
|
||||||
Long-term
debt (note 7)
|
1,430,421
|
1,285,696
|
||||||
Deferred
income taxes
|
88,283
|
71,583
|
||||||
Other
long-term liabilities
|
29,774
|
32,163
|
||||||
Total
liabilities
|
1,626,450
|
1,474,402
|
||||||
Commitments
and contingencies (notes 7, 10, 11, 13 and 16)
|
||||||||
Non-controlling
interest
|
429,041
|
427,977
|
||||||
Partners’
equity
Partners’
equity
|
102,321
|
133,642
|
||||||
Accumulated
other comprehensive income (note 8)
|
4,018
|
5,300
|
||||||
Total
partners’ equity
|
106,339
|
138,942
|
||||||
Total
liabilities and partners’ equity
|
2,161,830
|
2,041,321
|
Nine
Months Ended September 30,
|
||||||||
2007
|
2006
|
|||||||
$
|
$
|
|||||||
Cash
and cash equivalents provided by (used for)
|
||||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income
|
12,660
|
15,502
|
||||||
Non-cash
items:
|
||||||||
Depreciation
and amortization
|
88,942
|
76,289
|
||||||
Non-controlling
interest
|
42,546
|
3,576
|
||||||
Gain
on sale of vessels
|
-
|
(6,404 | ) | |||||
Loss
on writedown of vessels and equipment
|
-
|
2,150
|
||||||
Deferred
income tax expense
|
2,683
|
3,244
|
||||||
Equity
income (net of dividends received: September 30, 2006 -
$5,000)
|
-
|
540
|
||||||
Unrealized
foreign currency exchange loss and other - net
|
13,222
|
8,397
|
||||||
Change
in non-cash working capital items related to operating
activities
|
(25,686 | ) |
16,422
|
|||||
Distribution
from subsidiaries to non-controlling interest owners
|
(44,192 | ) | (4,224 | ) | ||||
Expenditures
for drydocking
|
(31,673 | ) | (22,415 | ) | ||||
Net
operating cash flow
|
58,502
|
93,077
|
||||||
FINANCING
ACTIVITIES
|
||||||||
Proceeds
from long-term debt
|
137,000
|
545,750
|
||||||
Scheduled
repayments of long-term debt
|
(12,151 | ) |
-
|
|||||
Prepayments
of long-term debt
|
(115,000 | ) | (93,527 | ) | ||||
Prepayments
of capital lease obligation
|
-
|
(34,245 | ) | |||||
Expenses
from initial public offering of common units
|
(2,793 | ) |
-
|
|||||
Net
advances to affiliate
|
-
|
(463,533 | ) | |||||
Equity
distribution to Teekay Corporation
|
-
|
(53,731 | ) | |||||
Cash
distributions paid
|
(15,000 | ) |
-
|
|||||
Net
financing cash flow
|
(7,944 | ) | (99,286 | ) | ||||
INVESTING
ACTIVITIES
|
||||||||
Expenditures
for vessels and equipment
|
(13,341 | ) | (21,370 | ) | ||||
Purchase
of Navion Bergen LLC and Navion Gothenburg LLC (note
10j)
|
(65,389 | ) |
-
|
|||||
Proceeds
from sale of vessels and equipment
|
3,225
|
8,904
|
||||||
Investment
in direct financing leases
|
(8,332 | ) | (6,797 | ) | ||||
Repayment
of direct financing leases
|
15,882
|
13,897
|
||||||
Other
|
-
|
(12,646 | ) | |||||
Net
investing cash flow
|
(67,955 | ) | (18,012 | ) | ||||
Decrease
in cash and cash equivalents
|
(17,397 | ) | (24,221 | ) | ||||
Cash
and cash equivalents, beginning of the period
|
113,986
|
128,986
|
||||||
Cash
and cash equivalents, end of the period
|
96,589
|
104,765
|
PARTNERS’
EQUITY
|
||||||||||||||||||||||||||||
Limited
Partners
|
||||||||||||||||||||||||||||
Common
|
Subordinated
|
General
Partner
|
Accumulated
Other Comprehensive Income
|
Total
|
||||||||||||||||||||||||
Units
|
$
|
Units
|
$
|
$
|
$
|
$
|
||||||||||||||||||||||
Balance
as at December 31, 2006
|
9,800
|
134,714
|
9,800
|
(1,052 | ) | (20 | ) |
5,300
|
138,942
|
|||||||||||||||||||
Net
income (January 1 – September 30, 2007)
|
8,932
|
3,475
|
253
|
12,660
|
||||||||||||||||||||||||
Other
comprehensive income:
|
||||||||||||||||||||||||||||
Unrealized
gain on derivative instruments (notes 8 and 11)
|
84
|
84
|
||||||||||||||||||||||||||
Reclassification
adjustment for gain on derivative instruments included in net income
(notes 8 and 11)
|
(1,366 | ) | (1,366 | ) | ||||||||||||||||||||||||
Offering
costs from public offering of limited partnership
interests
|
(93 | ) | (93 | ) | ||||||||||||||||||||||||
Purchase
of Navion Bergen LLC and Navion Gothenburg LLC from Teekay Corporation
(note 10j)
|
(14,155 | ) | (14,155 | ) | (578 | ) | (28,888 | ) | ||||||||||||||||||||
Cash
distributions
|
(7,350 | ) | (7,350 | ) | (300 | ) | (15,000 | ) | ||||||||||||||||||||
Balance
as at September 30, 2007
|
9,800
|
122,048
|
9,800
|
(19,082 | ) | (645 | ) |
4,018
|
106,339
|
Proceeds
received:
|
||||
Sale
of 8,050,000 common units at $21.00 per unit
|
$ |
169,050
|
||
Use
of proceeds from sale of common units:
|
||||
Underwriting
and structuring fees
|
$ |
11,088
|
||
Professional
fees and other offering expenses to third parties
|
2,793
|
|||
Repayment
of promissory note and redemption of 1.05 million common units from
Teekay
Corporation
|
155,169
|
|||
$ |
169,050
|
Three
Months Ended September 30,
|
||||||||||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||||||||||
Shuttle
Tanker Segment
$
|
Conventional
Tanker
Segment
$
|
FSO
Segment
$
|
Total
$
|
Shuttle
Tanker Segment
$
|
Conventional
Tanker
Segment
$
|
FSO
Segment
$
|
Total
$
|
|||||||||||||||||||||||||
Voyage
revenues
|
145,166
|
30,100
|
16,784
|
192,050
|
132,753
|
14,576
|
5,317
|
152,646
|
||||||||||||||||||||||||
Voyage
expenses
|
29,404
|
6,816
|
238
|
36,458
|
22,559
|
1,399
|
168
|
24,126
|
||||||||||||||||||||||||
Vessel
operating expenses
|
25,532
|
6,125
|
3,590
|
35,247
|
19,099
|
3,928
|
1,493
|
24,520
|
||||||||||||||||||||||||
Time-charter
hire expense
|
37,161
|
-
|
-
|
37,161
|
38,988
|
-
|
-
|
38,988
|
||||||||||||||||||||||||
Depreciation
and amortization
|
22,453
|
5,053
|
3,812
|
31,318
|
17,283
|
5,432
|
2,243
|
24,958
|
||||||||||||||||||||||||
General
and administrative(1)
|
12,908
|
2,070
|
753
|
15,731
|
11,552
|
2,033
|
398
|
13,983
|
||||||||||||||||||||||||
Vessels
and equipment writedowns/ (gain) on sale of vessels
|
-
|
-
|
-
|
-
|
(6,404 | ) |
-
|
-
|
(6,404 | ) | ||||||||||||||||||||||
Restructuring
charge
|
-
|
-
|
-
|
-
|
-
|
353
|
-
|
353
|
||||||||||||||||||||||||
Income
from vessel operations
|
17,708
|
10,036
|
8,391
|
36,135
|
29,676
|
1,431
|
1,015
|
32,122
|
||||||||||||||||||||||||
Nine
Months Ended September 30,
|
||||||||||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||||||||||
Shuttle
Tanker Segment
$
|
Conventional
Tanker
Segment
$
|
FSO
Segment
$
|
Total
$
|
Shuttle
Tanker Segment
$
|
Conventional
Tanker
Segment
$
|
FSO
Segment
$
|
Total
$
|
|||||||||||||||||||||||||
Voyage
revenues
|
435,730
|
102,748
|
33,513
|
571,991
|
395,956
|
126,131
|
17,283
|
539,370
|
||||||||||||||||||||||||
Voyage
expenses
|
81,245
|
25,969
|
584
|
107,798
|
67,249
|
4,530
|
691
|
72,470
|
||||||||||||||||||||||||
Vessel
operating expenses
|
73,160
|
17,187
|
8,678
|
99,025
|
57,506
|
14,959
|
5,009
|
77,474
|
||||||||||||||||||||||||
Time-charter
hire expense
|
111,749
|
-
|
-
|
111,749
|
125,280
|
79,338
|
-
|
204,618
|
||||||||||||||||||||||||
Depreciation
and amortization
|
62,973
|
15,748
|
10,221
|
88,942
|
53,094
|
16,219
|
6,976
|
76,289
|
||||||||||||||||||||||||
General
and administrative(1)
|
39,352
|
5,928
|
1,873
|
47,153
|
38,739
|
17,346
|
1,367
|
57,452
|
||||||||||||||||||||||||
Vessels
and equipment writedowns/ (gain) on sale of vessels
|
-
|
-
|
-
|
-
|
(4,254 | ) |
-
|
-
|
(4,254 | ) | ||||||||||||||||||||||
Restructuring
charge
|
-
|
-
|
-
|
-
|
-
|
806
|
-
|
806
|
||||||||||||||||||||||||
Income
(loss) from vessel operations
|
67,251
|
37,916
|
12,157
|
117,324
|
58,342
|
(7,067 | ) |
3,240
|
54,515
|
|||||||||||||||||||||||
(1)
|
Includes
direct general and administrative expenses and indirect general and
administrative expenses (allocated to each segment based on estimated
use
of corporate resources).
|
|
A
reconciliation of total segment assets to total assets presented
in the
consolidated balance sheets is as
follows:
|
September
30,
2007
$
|
December
31, 2006
$
|
|||||||
Shuttle
tanker segment
|
1,580,542
|
1,445,830
|
||||||
Conventional
tanker segment
|
255,312
|
310,699
|
||||||
FSO
segment
|
114,676
|
75,633
|
||||||
Unallocated:
|
||||||||
Cash
and cash equivalents
|
96,589
|
113,986
|
||||||
Accounts
receivable, prepaid expenses and other assets
|
114,711
|
95,173
|
||||||
Consolidated
total assets
|
2,161,830
|
2,041,321
|
September
30,
2007
$
|
December
31, 2006
$
|
|||||||
Gross
carrying amount
|
124,250
|
124,250
|
||||||
Accumulated
amortization
|
(66,128 | ) | (57,825 | ) | ||||
Net
carrying amount
|
58,122
|
66,425
|
6.
|
Supplemental
Cash Flow Information
|
7.
|
Long-Term
Debt
|
September
30,
2007
$
|
December
31, 2006
$
|
|||||||
U.S.
Dollar-denominated Revolving Credit Facilities due through
2017
|
1,153,200
|
1,080,000
|
||||||
U.S.
Dollar-denominated Term Loans due through
2017
|
296,201
|
223,352
|
||||||
1,449,401
|
1,303,352
|
|||||||
Less
current
portion
|
18,980
|
17,656
|
||||||
Total
|
1,430,421
|
1,285,696
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
$
|
2006
$
|
2007
$
|
2006
$
|
|||||||||||||
Net
income
|
2,114
|
32,301
|
12,660
|
15,502
|
||||||||||||
Other
comprehensive income:
|
||||||||||||||||
Unrealized
(loss) gain on derivative instruments
|
(8,160 | ) | (734 | ) |
84
|
434
|
||||||||||
Reclassification
adjustment for gain on derivative instruments included in net
income
|
(398 | ) | (68 | ) | (1,366 | ) | (66 | ) | ||||||||
Comprehensive
(loss) income
|
(6,444 | ) |
31,499
|
11,378
|
15,870
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
$
|
2006
$
|
2007
$
|
|
2006
$
|
|
|||||||||||
Volatile
organic compound emissions plant lease income
|
2,792
|
2,767
|
8,280
|
8,424
|
||||||||||||
Miscellaneous
|
173
|
3
|
(14 | ) |
40
|
|||||||||||
Other
income - net
|
2,965
|
2,770
|
8,266
|
8,464
|
10.
|
Related
Party Transactions
|
a.
|
Navion
Shipping Ltd., a subsidiary of the Predecessor, time-chartered vessels
to
a subsidiary of Teekay Corporation at charter rates that provided
for a
1.25% fixed profit margin. Pursuant to this arrangement, the Predecessor
earned voyage revenues of $84.8 million during the first half of
2006.
|
b.
|
On
October 1, 2006, OPCO entered into new time-charter contracts for
its nine
Aframax-class conventional tankers with a subsidiary of Teekay Corporation
at market-based daily rates for terms of five to twelve years. Under
the
terms of eight of these nine time-charter contracts, OPCO is responsible
for the bunker fuel expenses; however, OPCO adds the approximate
amounts
of these expenses to the daily hire rate. Pursuant to these time-charter
contracts, OPCO earned voyage revenues of $30.1 million and $95.2
million
for the three and nine months ended September 30, 2007,
respectively.
|
c.
|
Eight
of OPCO’S Aframax conventional oil tankers and two FSO units are managed
by subsidiaries of Teekay Corporation. Pursuant to the related management
services agreements, the Partnership incurred general and administrative
expenses of $1.1 million and $3.3 million during the three and nine
months
ended September 30, 2007, respectively. During the three and nine
months
ended September 30, 2006, the Partnership incurred $1.4 million and
$4.1
million, respectively, of these
costs.
|
d.
|
Two
of OPCO’s FSO units have been employed on long-term bareboat charters with
subsidiaries of Teekay Corporation. Pursuant to these charter contracts,
the Partnership earned voyage revenues of $2.8 million and $8.4 million
during the three and nine months ended September 30, 2007,
respectively. The Partnership earned $2.5 million and $7.9
million during the three and nine months ended September 30, 2006,
respectively, pursuant to these
contracts.
|
e.
|
Effective
October 1, 2006, two of OPCO’s shuttle tankers have been employed on
long-term bareboat charters with a subsidiary of Teekay Corporation.
Pursuant to these charter contracts, the Partnership earned voyage
revenues of $3.6 million and $10.6 million during the three and nine
months ended September 30, 2007,
respectively.
|
f.
|
The
Partnership has entered into an omnibus agreement with Teekay Corporation,
Teekay LNG Partners L.P., the General Partner and others governing,
among
other things, when the Partnership, Teekay Corporation and Teekay
LNG
Partners L.P. may compete with each other and certain rights of first
offer on liquefied natural gas carriers, oil tankers, shuttle tankers,
FSO
units and floating production, storage and offloading
units.
|
g.
|
The
Partnership, OPCO and certain of OPCO’s operating subsidiaries have
entered into services agreements with certain subsidiaries of Teekay
Corporation in connection with the initial public offering, pursuant
to
which Teekay Corporation subsidiaries provide the Partnership, OPCO
and
its operating subsidiaries with administrative, advisory, technical
and
strategic consulting services and ship management
services. During the three and nine months ended September 30,
2007, the Partnership incurred $14.0 million and $39.4 million of
these
costs, respectively. Prior to the Offering, the shore-based staff
who
provided these services to the Predecessor were transferred to a
subsidiary of Teekay Corporation.
|
h.
|
On
October 1, 2006, a subsidiary of Teekay Corporation entered into
a
services agreement with a subsidiary of OPCO, pursuant to which the
subsidiary of OPCO provides the Teekay Corporation subsidiary with
ship
management services. During the three and nine months ended
September 30, 2007, the Partnership earned management fees of $0.7
million
and $1.9 million, respectively, under the
agreement.
|
i.
|
The
Partnership reimburses the General Partner for all expenses incurred
by
the Partnership that are necessary or appropriate for the conduct
of the
Partnership’s business. During the three and nine months ended September
30, 2007, the Partnership incurred $0.1 million and $0.3 million
of these
costs, respectively.
|
j.
|
In
July 2007, the Partnership acquired interests in two double-hull
shuttle
tankers from Teekay Corporation for a total cost of $159.1 million,
including assumption of debt. The Partnership acquired Teekay
Corporation's 100% interest in the 2000-built
NavionBergen and Teekay Corporation’s 50% interest in
the 2006-built Navion Gothenburg, together with their respective
13-year, fixed-rate bareboat charters to Petroleo Brasileiro S.A.
The
purchases were financed with one of the Partnership’s existing Revolvers
and the assumption of debt. The excess of the proceeds paid by the
Partnership over Teekay Corporation’s historical cost was accounted for as
an equity distribution to Teekay Corporation of $28.9
million.
|
k.
|
At
September 30, 2007 and December 31, 2006, amounts due to affiliates
totaled $10.4 million and $17.0 million, respectively. Amounts due
to
affiliates are non-interest bearing and
unsecured.
|
Interest
Rate
Index
|
Principal
Amount
$
|
Fair
Value/ Carrying Amount of Asset (Liability)
$
|
Weighted-Average
Remaining Term
(years)
|
Fixed
Interest
Rate
(%)(1)
|
|
U.S.
Dollar-denominated interest rate swaps
|
LIBOR
|
890,000
|
15,384
|
6.3
|
4.8
|
U.S.
Dollar-denominated interest rate swaps(2)
|
LIBOR
|
353,922
|
3,991
|
14.3
|
5.0
|
U.S.
Dollar-denominated interest rate swaps(3)
|
LIBOR
|
335,000
|
(3,232)
|
2.0
|
4.9
|
(1)
|
Excludes
the margin the Partnership pays on its variable-rate debt, which
as at
September 30, 2007, ranged from 0.60% to 0.80%.
|
(2) |
Principal
amount reduces quarterly or semiannually.
|
(3) | Commencement date of the interest rate swap is December 28, 2007. |
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
2007
$
|
2006
$
|
2007
$
|
2006
$
|
|
||||||||||||
Current
|
(157 | ) | (254 | ) | (522 | ) | (331 | ) | ||||||||
Deferred
|
(5,900 | ) |
4,772
|
(2,161 | ) | (2,913 | ) | |||||||||
Income
tax (expense) recovery
|
(6,057 | ) |
4,518
|
(2,683 | ) | (3,244 | ) |
ITEM
2 -
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
§
|
Our
cash flow is reduced by distributions on Teekay Corporation’s 74% interest
in OPCO. Since our initial public offering in
December 2006, Teekay Corporation has a 74% limited partner interest
in OPCO. OPCO’s partnership agreement requires it to distribute all of its
available cash each quarter. In determining the amount of cash available
for distribution, the Board of Directors of our general partner must
approve the amount of cash reserves to be set aside at OPCO, including
reserves for future maintenance capital expenditures, working capital
and
other matters. Distributions by OPCO to Teekay Corporation as one
of its
limited partners reduces our cash flow compared to historical
results.
|
§
|
On
July 1, 2006, OPCO transferred certain assets to Teekay Corporation
that are included in historical results of operations. On
July 1, 2006, OPCO transferred to Teekay Corporation a subsidiary of
Norsk Teekay Holdings Ltd. (Navion Shipping Ltd.) that chartered-in
approximately 25 conventional tankers since 2004 and subsequently
time-chartered the vessels back to Teekay Corporation at charter
rates
that provided for a 1.25% fixed profit margin. In addition, OPCO
transferred to Teekay Corporation a 1987-built shuttle tanker (the
Nordic Trym), OPCO’s single-anchor loading equipment, a
1992-built in-chartered shuttle tanker (the Borga) and a 50%
interest in Alta Shipping S.A., which had no material assets (collectively
with Navion Shipping Ltd., the Non-OPCOAssets). During
the nine months ended September 30, 2006, the Non-OPCO Assets accounted
for approximately 19% of OPCO’s net voyage revenues,
respectively.
|
§
|
Amendments
to OPCO’s joint venture agreements resulted in
five50%-owned joint venture companies being
consolidated with us under GAAP. Our historical results of
operations prior to December 1, 2006 reflect OPCO’s investment in five
50%-owned joint venture companies, accounted for using the equity
method,
whereby the investment was carried at the original cost plus OPCO’s
proportionate share of undistributed earnings. On December 1, 2006,
the
operating agreements for these joint ventures were amended such that
OPCO
obtained control of these joint ventures, resulting in the consolidation
of these five joint venture companies in accordance with GAAP. Although
our net income did not change due to this change in accounting, the
results of the joint ventures are reflected in our income from operations,
commencing December 1, 2006. This change also resulted in the five
shuttle
tankers owned by these joint ventures being included in the number
of
vessels in OPCO’s owned fleet for periods subsequent to December 1,
2006.
|
§
|
The
size of our fleet continues to change. Our historical
results of operations reflect changes in the size and composition
of our
fleet due to certain vessel deliveries and vessel dispositions. For
instance, in addition to the decrease in chartered-in vessels associated
with the transfer of Navion Shipping Ltd. described above, the average
number of owned vessels in our shuttle tanker fleet increased from
21 in
2006 to 26 in 2007. Please read “— Shuttle Tanker Segment,"
"Conventional Tanker Segment" and “FSO Segment" below for further details
about vessel dispositions and deliveries. Due to the nature of our
business, we expect our fleet to continue to fluctuate in size and
composition.
|
§
|
Our
financial results of operations reflect different time charter terms
for
OPCO’s nine conventional tankers. On October 1, 2006, OPCO
entered into new fixed-rate time charters with a subsidiary of Teekay
Corporation for OPCO’s nine conventional tankers at rates we believe were
market-based charter rates. Under the terms of eight of these nine
time-charter contracts, OPCO is responsible for the bunker fuel expenses;
however, OPCO adds the approximate amounts of these expenses to the
daily
hire rate. Please read Item 1 - Financial Statements: Note 10 (b)
-
Related Party Transactions. At various times during the previous
three
years, eight of these nine conventional tankers were employed on
time
charters with the same subsidiary of Teekay Corporation. However,
the
charter rates were generally lower than market-based charter rates,
as
they were based on the cash flow requirements of each vessel, which
included operating expenses, loan principal and interest payments
and
drydock expenditures. The ninth conventional tanker was employed
on voyage
and bareboat charters. The new fixed-rate time charters have increased
our
voyage revenues as well as provided more stable voyage revenues for
these
vessels.
|
§
|
Our
financial results of operations are affected by fluctuations in
currencyexchange rates. Prior to
the closing of our initial public offering, OPCO settled its foreign
currency denominated advances. In October 2006, Teekay Corporation
loaned
5.6 billion Norwegian Kroner ($863.0 million) to a subsidiary of
OPCO
primarily for the purchase of eight Aframax-class conventional
crude oil
tankers from Teekay Corporation. Immediately preceding the initial
public
offering, this interest-bearing loan was sold to OPCO. Under GAAP,
all
foreign currency-denominated monetary assets and liabilities, such
as cash
and cash equivalents, accounts receivable, accounts payable, advances
from
affiliates and deferred income taxes are revalued and reported
based on
the prevailing exchange rate at the end of the period. Most of
our
historical foreign currency gains and losses prior to our initial
public
offering are attributable to this revaluation in respect of our
foreign
currency denominated advances from affiliates. In addition, a substantial
majority of OPCO’s crewing expenses historically have been denominated in
Norwegian Kroner, which is primarily a function of the nationality
of the
crew. Fluctuations in the Norwegian Kroner relative to the
U.S. Dollar have caused fluctuations in operating results. Prior to
our initial public offering, OPCO entered into new services agreements
with subsidiaries of Teekay Corporation whereby the subsidiaries
operate
and crew the vessels. Under these services agreements, OPCO pays
all
vessel operating expenses in U.S. Dollars, and will not be subject to
currency exchange fluctuations until 2009. Beginning in 2009, payments
under the services agreements will adjust to reflect any change
in Teekay
Corporation’s cost of providing services based on fluctuations in the
value of the Kroner relative to the U.S. Dollar. We may seek to hedge
this currency fluctuation risk in the
future.
|
§
|
We
have entered into services agreements with subsidiaries of Teekay
Corporation. Prior to the closing of our initial public
offering, we, OPCO and certain of its subsidiaries entered into services
agreements with subsidiaries of Teekay Corporation, pursuant to which
those subsidiaries provide certain services, including strategic
consulting, advisory, ship management, technical and administrative
services. Our cost for these services depends on the amount and types
of
services provided during each period. The services are valued at
an
arm’s-length rate that will include reimbursement of reasonable direct
or
indirect expenses incurred to provide the services. We also reimburse
our
general partner for all expenses it incurs on our behalf, including
CEO/CFO compensation and expenses relating to its Board of Directors,
including compensation, travel and liability insurance costs. We may
also grant equity compensation that would result in an expense to
us.
|
§
|
We
are incurring additional general and administrative expenses.
As a result of becoming a publicly-traded limited
partnership on December 19, 2006, we have begun to incur costs associated
with annual reports to unitholders and SEC filings, investor relations,
NYSE annual listing fees and tax compliance
expenses.
|
§
|
Our
operations are seasonal. Historically, the utilization of
shuttle tankers in the North Sea is higher in the winter months,
as
favorable weather conditions in the summer months provide opportunities
for repairs and maintenance to our vessels and to the offshore
oil
platforms. Downtime for repairs and maintenance generally reduces
oil
production and, thus, transportation requirements. OPCO generally
has not
experienced seasonality in its FSO and conventional tanker
segments.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||||||||||
(in
thousands of U.S. dollars, except calendar-ship-days and
percentages)
|
2007
|
2006
|
%
Change
|
2007
|
2006
|
%
Change
|
||||||||||||||||||
Voyage
revenues
|
145,166
|
132,753
|
9.4
|
435,730
|
395,956
|
10.0
|
||||||||||||||||||
Voyage
expenses
|
29,404
|
22,559
|
30.3
|
81,245
|
67,249
|
20.8
|
||||||||||||||||||
Net
voyage revenues
|
115,762
|
110,194
|
5.1
|
354,485
|
328,707
|
7.8
|
||||||||||||||||||
Vessel
operating expenses
|
25,532
|
19,099
|
33.7
|
73,160
|
57,506
|
27.2
|
||||||||||||||||||
Time-charter
hire expense
|
37,161
|
38,988
|
(4.7 | ) |
111,749
|
125,280
|
(10.8 | ) | ||||||||||||||||
Depreciation
and amortization
|
22,453
|
17,283
|
29.9
|
62,973
|
53,094
|
18.6
|
||||||||||||||||||
General
and administrative (1)
|
12,908
|
11,552
|
11.7
|
39,352
|
38,739
|
1.6
|
||||||||||||||||||
Vessels
and equipment writedowns/ (gain) on sale of vessels
|
-
|
(6,404 | ) |
100.0
|
-
|
(4,254 | ) |
100.0
|
||||||||||||||||
Income
from vessel operations
|
17,708
|
29,676
|
(40.3 | ) |
67,251
|
58,342
|
15.3
|
|||||||||||||||||
Calendar-Ship-Days
|
||||||||||||||||||||||||
Owned
Vessels
|
2,369
|
1,853
|
27.8
|
6,713
|
5,654
|
18.7
|
||||||||||||||||||
Chartered-in
Vessels
|
1,074
|
1,140
|
(5.8 | ) |
3,204
|
3,687
|
(13.1 | ) | ||||||||||||||||
Total
|
3,443
|
2,993
|
15.0
|
9,917
|
9,341
|
6.2
|
(1)
|
Includes
direct general and administrative expenses and indirect general and
administrative expenses (allocated to the shuttle tanker segment
based on
estimated use of corporate
resources).
|
§
|
the
consolidation into our results of the five vessels owned by OPCO’s
50%-owned joint ventures, effective December 1, 2006 upon amendments
to
the applicable operating agreements, which granted OPCO control of
the
joint ventures (the Consolidation of Joint Ventures);
and
|
§
|
the
acquisition of the 2000-built shuttle tanker (the Navion Bergen)
and a 50% interest in the 2006-built shuttle-tanker (the Navion
Gothenburg) in July 2007 (collectively, the 2007 Shuttle Tanker
Acquisitions);
|
§
|
the
sale of a 1981-built shuttle tanker (the Nordic Laurita) in July
2006 to a third party and the sale of a 1987-built shuttle tanker
(the
Nordic Trym) to Teekay Corporation in November 2006
(collectively, the 2006 Shuttle Tanker
Dispositions).
|
§
|
the
redelivery of one chartered-in vessel back to its owner in April
2006;
and
|
§
|
the
sale in July 2006 of a time charter-in contract for a 1992-built
shuttle
tanker (the Borga) to Teekay
Corporation.
|
§
|
increases
of $10.6 million and $34.5 million, respectively, for the three and
nine
months ended September 30, 2007, due to the Consolidation of Joint
Ventures;
|
§
|
an
increase of $4.7 million for the three and nine months ended September
30,
2007, due to the 2007 Shuttle Tanker
Acquisitions;
|
§
|
increases
of $1.1 million and $3.9 million, respectively, for the three and
nine
months ended September 30, 2007, due to the renewal of certain vessels
on
time charter contracts at higher daily rates during 2006 and a higher
number of revenue days for these vessels;
and
|
§
|
increases
of $0.4 million and $6.6 million, respectively, for the three and
nine
months ended September 30, 2007, due to the redeployment of
excess capacity of one shuttle tanker from servicing contracts of
affreightment to a bareboat
charter;
|
§
|
decreases
of $9.3 million and $7.2 million, respectively, for the three and
nine
months ended September 30, 2007, in revenues due to (a) fewer revenue
days
for shuttle tankers servicing contracts of affreightment during the
three
and nine months ended September 30, 2007 due to a decline in oil
production from mature oil fields in the North Sea, partially offset
by
(b) the redeployment of idle shuttle tankers servicing contracts
of
affreightment in the conventional spot market at a higher average
charter
rate than the same periods last year due to a strong spot tanker
market in
2007;
|
§
|
decreases
of $1.1 million and $7.5 million, respectively, for the three and
nine
months ended September 30, 2007, due to the 2006 Shuttle Tanker
Dispositions;
|
§
|
decreases
of $0.6 million and $4.4 million, respectively, for the three and
nine
months ended September 30, 2007, due to the sale of the time charter-in
contract for the Borga;
and
|
§
|
a
decrease of $2.9 million for the nine months ended September 30,
2007,
from the redelivery of one chartered-in vessel to its owner in April
2006.
|
§
|
increases
of $5.0 million and $13.1 million, respectively, for the three and
nine
months ended September 30, 2007, due to the Consolidation of Joint
Ventures;
|
§
|
increases
of $0.6 million and $3.6 million, respectively, for the three and
nine
months ended September 30, 2007, in salaries for crew and officers
primarily due to general wage escalations and a change in the crew
rotation system; and
|
§
|
increases
of $1.5 and $0.8 million, respectively, for the three and nine months
ended September 30, 2007, relating to the timing of planned maintenance
activities;
|
§
|
decreases
of $0.6 million and $2.5 million, respectively, for the three and
nine
months ended September 30, 2007, due to the 2006 Shuttle Tanker
Dispositions.
|
§
|
increases
of $3.7 million and $11.1 million, respectively, for the three and
nine
months ended September 30, 2007, due to the Consolidation of Joint
Ventures;
|
§
|
an
increase of $1.6 million for the three and nine months ended September
30,
2007, due to the 2007 Shuttle Tanker Acquisitions;
and
|
§
|
increases
of $1.3 million and $3.3 million, respectively, for the three and
nine
months ended September 30, 2007, from the amortization of vessel
upgrades
and drydock costs incurred during 2006 and the nine months ended
September
30, 2007;
|
§
|
decreases
of $1.3 million and $5.3 million, respectively, for the three and
nine
months ended September 30, 2007, relating to the 2006 Shuttle Tanker
Dispositions.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||||||||||
(in
thousands of U.S. dollars, except calendar-ship-days and
percentages)
|
2007
|
2006
|
%
Change
|
2007
|
2006
|
% Change
|
||||||||||||||||||
Voyage
revenues
|
30,100
|
14,576
|
106.5
|
102,748
|
126,131
|
(18.5 | ) | |||||||||||||||||
Voyage
expenses
|
6,816
|
1,399
|
387.2
|
25,969
|
4,530
|
473.3
|
||||||||||||||||||
Net
voyage revenues
|
23,284
|
13,177
|
76.7
|
76,779
|
121,601
|
(36.9 | ) | |||||||||||||||||
Vessel
operating expenses
|
6,125
|
3,928
|
55.9
|
17,187
|
14,959
|
14.9
|
||||||||||||||||||
Time-charter
hire expense
|
-
|
-
|
-
|
-
|
79,338
|
(100.0 | ) | |||||||||||||||||
Depreciation
and amortization
|
5,053
|
5,432
|
(7.0 | ) |
15,748
|
16,219
|
(2.9 | ) | ||||||||||||||||
General
and administrative (1)
|
2,070
|
2,033
|
1.8
|
5,928
|
17,346
|
(65.8 | ) | |||||||||||||||||
Restructuring
charge
|
-
|
353
|
(100.0 | ) |
-
|
806
|
(100.0 | ) | ||||||||||||||||
Income
(loss) from vessel operations
|
10,036
|
1,431
|
601.3
|
37,916
|
(7,067 | ) |
636.5
|
|||||||||||||||||
Calendar-Ship-Days
|
||||||||||||||||||||||||
Owned
Vessels
|
828
|
920
|
(10.0 | ) |
2,577
|
2,730
|
(5.6 | ) | ||||||||||||||||
Chartered-in
Vessels
|
-
|
-
|
-
|
-
|
4,395
|
(100.0 | ) | |||||||||||||||||
Total
|
828
|
920
|
(10.0 | ) |
2,577
|
7,125
|
(63.8 | ) |
(1)
|
Includes
direct general and administrative expenses and indirect general and
administrative expenses (allocated to the conventional tanker segment
based on estimated use of corporate
resources).
|
§
|
the
sale of Navion Shipping Ltd. to Teekay Corporation during July 2006
(Navion Shipping Ltd. chartered-in approximately 25 conventional
tankers
since 2004 and subsequently time-chartered the vessels back to Teekay
Corporation at charter rates that provided for a 1.25% fixed profit
margin
(please read "-- Items You Should Consider When Evaluating Our Results
– On July 1, 2006, OPCO transferred certain assets to Teekay Corporation
that are included in historical results of operations"));
and
|
§
|
the
transfer of the Navion Saga to the FSO segment, as a result of
the completion of its conversion to an FSO unit and commencing a
three-year FSO time charter contract in early May 2007 (prior to
the
completion of the vessel’s conversion to an FSO unit, it was included as a
conventional crude oil tanker within the conventional tanker
segment).
|
§
|
a
decrease of $80.0 million for the nine months ended September 30,
2007,
from the sale of Navion Shipping
Ltd.;
|
§
|
increases
of $10.8 million and $33.5 million, respectively, for the three
and nine months ended September 30, 2007, from higher hire rates
earned by
the nine owned Aframax-class conventional tankers on time charters
with a
subsidiary of Teekay Corporation (please read “-- Items You Should
Consider When Evaluating Our Results – Our financial results of operations
reflect different time charter terms for OPCO’s nine conventional
tankers”); and
|
§
|
an
increase of $1.7 million for the nine months ended September 30,
2007,
relating to the Navion Saga temporarily trading in the spot
market as a conventional crude oil tanker until it was transferred
to the
FSO segment in early May 2007, compared to the same period last year
when
the vessel was employed on a time charter with a subsidiary of Teekay
Corporation at a lower daily hire
rate.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||||||||||
(in
thousands of U.S. dollars, except calendar-ship-days and
percentages)
|
2007
|
2006
|
%
Change
|
2007
|
2006
|
% Change
|
||||||||||||||||||
Voyage
revenues
|
16,784
|
5,317
|
215.7
|
33,513
|
17,283
|
93.9
|
||||||||||||||||||
Voyage
expenses
|
238
|
168
|
41.7
|
584
|
691
|
(15.5 | ) | |||||||||||||||||
Net
voyage revenues
|
16,546
|
5,149
|
221.3
|
32,929
|
16,592
|
98.5
|
||||||||||||||||||
Vessel
operating expenses
|
3,590
|
1,493
|
140.5
|
8,678
|
5,009
|
73.2
|
||||||||||||||||||
Depreciation
and amortization
|
3,812
|
2,243
|
70.0
|
10,221
|
6,976
|
46.5
|
||||||||||||||||||
General
and administrative (1)
|
753
|
398
|
89.2
|
1,873
|
1,367
|
37.0
|
||||||||||||||||||
Income
from vessel operations
|
8,391
|
1,015
|
726.7
|
12,157
|
3,240
|
275.2
|
||||||||||||||||||
Calendar-Ship-Days
Owned Vessels
|
368
|
276
|
33.3
|
972
|
819
|
18.7
|
(1)
|
Includes
direct general and administrative expenses and indirect general and
administrative expenses (allocated to the FSO segment based on estimated
use of corporate resources).
|
§
|
increases
of $0.9 million and $2.1 million, respectively, for the three and
nine
months ended September 30, 2007 relating to an increase in shore-based
compensation, travel and consulting fees;
and
|
§
|
increases
of $0.6 million and $1.6 million, respectively, for the three and
nine
months ended September 30, 2007 relating to additional expenses as
a
result of our being a publicly-traded limited partnership since our
initial public offering in December
2006;
|
§
|
a
decrease of $13.9 million for the nine months ended September 30,
2007 in
general and administrative expenses as a result of the sale of Navion
Shipping Ltd. to Teekay Corporation in July 2006. Prior to our initial
public offering, general and administrative expenses were allocated
based
on OPCO’s proportionate share of Teekay Corporation’s total ship-operating
(calendar) days for each of the periods presented; since the initial
public offering, we have incurred general and administrative expenses
primarily through services agreements between we, OPCO and certain
of its
subsidiaries and subsidiaries of Teekay
Corporation.
|
§
|
increases
of $11.1 million and $31.7 million, respectively, for the three and
nine months ended September 30, 2007 relating to additional debt
of $773
million under a new revolving credit facility OPCO entered into during
the
fourth quarter of 2006; and
|
§
|
increases
of $3.2 million and $9.6 million, respectively, for the three and
nine months ended September 30, 2007 due to the Consolidation of
Joint
Ventures; and
|
§
|
an
increase of $1.5 million for the three and nine months ended September
30,
2007 due to the assumption of debt relating to the 2007 Shuttle Tanker
Acquisitions;
|
§
|
decreases
of $3.3 million and $10.1 million, respectively, for the three and
nine months ended September 30, 2007, relating to the settlement
of
interest-bearing advances from affiliates during the fourth quarter
of
2006;
|
§
|
decreases
of $4.7 million and $8.9 million, respectively, for the three and
nine
months ended September 30, 2007, relating to interest incurred under
one
of the revolving credit facilities, which was prepaid and cancelled
prior
to our initial public offering; and
|
§
|
decreases
of $1.7 million and $6.3 million, respectively, for the three and
nine months ended September 30, 2007, relating to interest incurred
by
Teekay Offshore Partners Predecessor on one of its revolving credit
facilities, which was not transferred to OPCO prior to our initial
public
offering.
|
|
As
at September 30, 2007, our total cash and cash equivalents were $96.6
million, compared to $114.0 million at December 31, 2006. Our total
liquidity, including cash, cash equivalents and undrawn long-term
borrowings, was $361.1 million as at September 30, 2007, compared
to
$429.0 million as at December 31, 2006. The decrease in liquidity
was
primarily the result of our purchase of the Navion Bergen LLC and
Navion Gothenburg LLC in July 2007, the payment of cash
distributions by us and OPCO and expenditures for vessels and equipment,
partially offset by cash generated by our operating activities during
the
nine months ended September 30,
2007.
|
|
In
addition to distributions on our equity interests, our primary short-term
liquidity needs are to fund general working capital requirements
and
drydocking expenditures, while our long-term liquidity needs primarily
relate to expansion and investment capital expenditures and other
maintenance capital expenditures and debt repayment. Expansion capital
expenditures are primarily for the purchase or construction of vessels
to
the extent the expenditures increase the operating capacity of or
revenue
generated by our fleet, while maintenance capital expenditures primarily
consist of drydocking expenditures and expenditures to replace vessels
in
order to maintain the operating capacity of or revenue generated
by our
fleet. Investment capital expenditures are those capital expenditures
that
are neither maintenance capital expenditures nor expansion capital
expenditures.
|
|
We
anticipate that our primary sources of funds for our short-term liquidity
needs will be cash flows from operations. We believe that cash flows
from
operations will be sufficient to meet our existing liquidity needs
for at
least the next 12 months. Generally, our long-term sources of funds
will be from cash from operations, long-term bank borrowings and
other
debt or equity financings, or a combination thereof. Because we and
OPCO
distribute all of our and its available cash, we expect that we and
OPCO
will rely upon external financing sources, including bank borrowings
and
the issuance of debt and equity securities, to fund acquisitions
and
expansion and investment capital expenditures, including opportunities
we
may pursue under the omnibus agreement with Teekay Corporation and
other
of its affiliates.
|
Nine
Months Ended September 30,
|
||||||||
2007
($000’s)
|
2006
($000’s)
|
|||||||
Net
cash flow from operating activities
|
58,502
|
93,077
|
||||||
Net
cash flow from financing activities
|
(7,944 | ) | (99,286 | ) | ||||
Net
cash flow from investing activities
|
(67,955 | ) | (18,012 | ) |
§
|
Amended
2006 Revolving Credit Facility. This 8-year amended reducing
revolving credit facility allows OPCO and it subsidiaries to borrow
up to
$455 million (subject to scheduled reductions through 2014) and may
be used for acquisitions and for general partnership purposes. Obligations
under this credit facility are collateralized by first-priority mortgages
on eight of OPCO’s vessels. Borrowings under the facility may be prepaid
at any time in amounts of not less than
$5.0 million.
|
§
|
New
2006 Revolving Credit Facility. This 8-year reducing revolving credit
facility allows for borrowing of up to $940 million (subject to
scheduled reductions through 2014) and may be used for acquisitions
and
for general partnership purposes. Obligations under this credit facility
are collateralized by first-priority mortgages on 19 of OPCO’s vessels.
Borrowings under the facility may be prepaid at any time in amounts
of not
less than $5.0 million. This credit facility allows OPCO to make
working capital borrowings and loan the proceeds to us (which we
could use
to make distributions, provided that such amounts are paid down
annually).
|
§
|
New
2007 Revolving Credit Facility. This 10-year reducing revolving
credit facility allows for borrowing of up to $70 million and may
be used
for general partnership purposes. Obligations under this credit facility
are collateralized by a first-priority mortgage on one of our vessels.
Borrowings under the facility may be prepaid at any time in amounts
of not
less than $5.0 million.
|
•
|
incurring
or guaranteeing indebtedness;
|
•
|
changing
ownership or structure, including by mergers, consolidations, liquidations
and dissolutions;
|
•
|
making
dividends or distributions when in default of the relevant
loans;
|
•
|
making
capital expenditures in excess of specified
levels;
|
•
|
making
certain negative pledges or granting certain
liens;
|
•
|
selling,
transferring, assigning or conveying
assets; or
|
•
|
entering
into a new line of business.
|
Total
|
Fourth
Quarter
of
2007
|
2008
and
2009
|
2010
and
2011
|
Beyond
2011
|
||||||||||||||||
(in
millions of U.S. dollars)
|
||||||||||||||||||||
Long-term
debt (1)
|
1,449.4
|
3.7
|
126.4
|
255.0
|
1,064.3
|
|||||||||||||||
Chartered-in
vessels (operating leases)
|
497.5
|
38.1
|
188.8
|
138.1
|
132.5
|
|||||||||||||||
Purchase
obligation
|
41.7
|
-
|
41.7
|
-
|
-
|
|||||||||||||||
Total
contractual obligations
|
1,988.6
|
41.8
|
356.9
|
393.1
|
1,196.8
|
(1)
|
Excludes
expected interest payments of $21.4 million (fourth quarter of 2007),
$163.9 million (2008 and 2009), $142.7 million (2010 and 2011)
and $148.5 million (beyond 2011). Expected interest payments are
based on LIBOR, plus margins which ranged between 0.45% and 0.80%
as at
September 30, 2007. The expected interest payments do not reflect
the
effect of related interest rate swaps that hedge certain of the
floating-rate debt.
|
·
|
our
future growth prospects;
|
·
|
results
of operations and revenues and
expenses;
|
·
|
offshore
and tanker market fundamentals, including the balance of supply
and demand
in the offshore and tanker
market;
|
·
|
future
capital expenditures and availability of capital resources to fund
capital
expenditures;
|
·
|
offers
of shuttle tankers, FSOs and FPSOs and related contracts from Teekay
Corporation;
|
·
|
obtaining
offshore projects that we or Teekay Corporation bid on or have
been
awarded;
|
·
|
delivery
dates of and financing for newbuildings or existing
vessels;
|
·
|
the
commencement of service of newbuildings or existing
vessels;
|
·
|
our
liquidity needs; and
|
·
|
our
exposure to foreign currency fluctuations, particularly in Norwegian
Kroner.
|
ITEM
3 -
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Expected
Maturity Date
|
||||||||||||||||||||||||||||||||||||
Fourth
Quarter of
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
Total
|
Fair
Value
Asset/
(Liability)
|
Rate
(1)
|
||||||||||||||||||||||||||||
(in
millions of U.S. dollars, except percentages)
|
||||||||||||||||||||||||||||||||||||
Long-Term
Debt:
|
||||||||||||||||||||||||||||||||||||
U.S.
Dollar-denominated (2)
|
3.7
|
55.6
|
70.8
|
97.6
|
157.4
|
1,064.3
|
1,449.4
|
(1,449.4 | ) | 5.9 | % | |||||||||||||||||||||||||
Interest
Rate Swaps:
|
||||||||||||||||||||||||||||||||||||
Contract
Amount (3)
|
295.1
|
12.4
|
547.6
|
12.8
|
13.1
|
697.9
|
1,578.9
|
16.1
|
4.9 | % | ||||||||||||||||||||||||||
Average
Fixed Pay Rate (2)
|
5.4 | % | 4.9 | % | 4.7 | % | 4.9 | % | 4.9 | % | 4.8 | % | 4.9 | % |
(1)
|
Rate
refers to the weighted-average effective interest rate for our debt,
including the margin paid on our floating-rate debt and the average
fixed
pay rate for interest rate swaps. The average fixed pay rate for
interest
rate swaps excludes the margin paid on the floating-rate debt, which
as of
September 30, 2007 ranged from 0.45% to
0.80%.
|
(2)
|
Interest
payments on floating-rate debt and interest rate swaps are based
on
LIBOR.
|
(3)
|
The
average variable receive rate for interest rate swaps is set quarterly
at
the 3-month LIBOR or semi-annually at the 6-month
LIBOR.
|
3.1
|
Certificate
of Limited Partnership of Teekay Offshore Partners L.P.
(1)
|
3.2
|
First
Amended and Restated Agreement of Limited Partnership of Teekay Offshore
Partners L.P. (2)
|
3.3
|
Certificate
of Formation of Teekay Offshore GP L.L.C. (1)
|
3.4
|
Amended
and Restated Limited Liability Company Agreement of Teekay Offshore
GP
L.L.C. (1)
|
3.5
|
Certificate
of Limited Partnership of Teekay Offshore Operating L.P.
(1)
|
3.6
|
Amended
and Restated Agreement of Limited Partnership of Teekay Offshore
Operating
Partners L.P. (1)
|
3.7
|
Certificate
of Formation of Teekay Offshore Operating GP L.L.C. (1)
|
3.8
|
Amended
and Restated Limited Liability Company Agreement of Teekay Offshore
Operating GP L.L.C. (1)
|
15.1
|
Acknowledgement
of Independent Registered Public Accounting
Firm
|
(1)
|
Previously
filed as an exhibit to the Partnership’s Registration Statement on Form
F-1 (File No. 333-139116), filed with the SEC on December 4, 2006,
and
hereby incorporated by reference to such Registration
Statement.
|
(2)
|
Previously
filed as Appendix A to the Partnership’s Rule 424(b)(4) Prospectus filed
with the SEC on December 14, 2006, and hereby incorporated by reference
to
such Prospectus.
|
Date: December
21, 2007
|
TEEKAY
OFFSHORE PARTNERS L.P.
By:
Teekay Offshore GP L.L.C., its general partner
By:
/s/ Peter Evensen
Peter
Evensen
Chief
Executive Officer and Chief Financial Officer
(Principal
Executive, Financial and Accounting
Officer)
|