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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Translation of Registrant’s Name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
4th floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
Telephone: (441) 298-2530
Fax: (441) 292-3931
(Contact Information for Company Contact Person)
Title of each class | Name of each exchange on which registered | |
Common Units | New York Stock Exchange |
9,800,000 Subordinated Units
Large Accelerated Filero | Accelerated Filerþ | Non-Accelerated Filero |
U.S. GAAPþ | International Financial Reporting Standards as issued by the International Accounting Standards Boardo | Othero |
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(a) | Derivative Instruments and Hedging Activities and Other |
(b) | Vessels Acquired from Teekay Corporation |
(d) | Vision Incentive Plan |
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Total | ||||||||||||||||||||||||||||
Owner’s | ||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||
(Predecessor | ||||||||||||||||||||||||||||
and Dropdown | ||||||||||||||||||||||||||||
Net Income (Loss) | Predecessor) | |||||||||||||||||||||||||||
December 19 | January 1 to | At | ||||||||||||||||||||||||||
to December | December 18, | December 31, | ||||||||||||||||||||||||||
2007 | 31, 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
As previously reported | 19,672 | 848 | (33,563 | ) | 84,747 | 213,772 | 63,513 | 262,835 | ||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Derivative instruments, net of non-controlling interest and other(1) | (17,014 | ) | 500 | 2,806 | 756 | (648 | ) | (1,178 | ) | — | ||||||||||||||||||
Dropdown Predecessor(2) | 1,300 | 114 | 3,097 | 2,910 | 4,076 | 6,768 | 32,558 | |||||||||||||||||||||
Vision Incentive Plan | — | — | (2,632 | ) | 7,500 | — | — | — | ||||||||||||||||||||
As restated | 3,958 | 1,462 | (30,292 | ) | 95,913 | 217,200 | 69,103 | 295,393 | ||||||||||||||||||||
(1) | Includes an adjustment totaling ($3.6) million for the year ended December 31, 2007 relating to the accounting for the non-controlling interest in one of our 50% owned subsidiaries and adjusting amounts relating to deferred income taxes and the fair value of derivative instruments at December 31, 2007. | |
(2) | Relates to the results for the pre-acquisition periods in which we and the acquired interests in vessels, as listed below, were both in operation and under the common control of Teekay Corporation, as follows: |
• | Dampier Spirit(FSO unit) for March 15, 1998 to September 30, 2007; |
• | Navion Bergen(shuttle tanker) for April 16, 2007 to June 30, 2007; and |
• | Navion Gothenburg(shuttle tanker) began operations concurrently with our acquisition of it on July 24, 2007. |
3
INDEX TO REPORT ON FORM 20-F/A
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67 | ||||
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68 | ||||
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71 | ||||
71 | ||||
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74 | ||||
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• | our ability to make cash distributions on our units or any increases in quarterly distributions; |
• | our future financial condition or results of operations and future revenues and expenses; |
• | growth prospects of the offshore and tanker markets; |
• | offshore and tanker market fundamentals, including the balance of supply and demand in the offshore and tanker markets; |
• | the expected lifespan of a new shuttle tanker, floating storage and off-take (or FSO) unit and conventional tanker; |
• | estimated capital expenditures and the availability of capital resources to fund capital expenditures; |
• | our ability to maintain long-term relationships with major crude oil companies; |
• | our ability to leverage to our advantage Teekay Corporation’s relationships and reputation in the shipping industry; |
• | our continued ability to enter into fixed-rate time charters with customers; |
• | obtaining offshore projects that we or Teekay Corporation bid on or that Teekay Corporation is awarded; |
• | our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter; |
• | the ability of the counterparties to our derivative contracts to fulfill their contractual obligations; |
• | our pursuit of strategic opportunities, including the acquisition of vessels and expansion into new markets vessels; |
• | our expected financial flexibility to pursue acquisitions and other expansion opportunities; |
• | anticipated funds for liquidity needs and the sufficiency of cash flows; |
• | the expected cost of, and our ability to comply with, governmental regulations and maritime self regulatory organization standards applicable to our business; |
• | the expected impact of heightened environmental and quality concerns of insurance underwriters, regulators and charterers; |
• | anticipated taxation of our partnership and its subsidiaries; |
• | Teekay Corporation increasing its ownership interest in Teekay Petrojarl ASA (formally Petrojarl ASA) or offering to us additional interest in Teekay Offshore Operating L.P; |
• | our general and administrative expenses as a public company and expenses under service agreements with other affiliates of Teekay Corporation and for reimbursements of fees and costs of our general partner; and |
• | our business strategy and other plans and objectives for future operations. |
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• | historical financial and operating data of Teekay Offshore Partners Predecessor (as defined below); and |
• | financial and operating data of Teekay Offshore Partners L.P. and its subsidiaries since its initial public offering on December 19, 2006. |
• | the historical financial and operating data of Teekay Offshore Partners Predecessor as at and for the years ended December 31, 2003, 2004 and 2005 is derived from the combined consolidated financial statements of Teekay Offshore Partners Predecessor; |
• | the historical financial and operating data of Teekay Offshore Partners Predecessor for the period from January 1, 2006 to December 18, 2006 are derived from the audited combined consolidated financial statements of Teekay Offshore Partners Predecessor; and |
• | the historical financial and operating data of Teekay Offshore Partners L.P. as at December 31, 2006 and 2007, for the period from December 19, 2006 to December 31, 2006, and for the year ended December 31, 2007, reflect our initial public offering and are derived from our audited consolidated financial statements. |
• | January 1 to December 31, 2007 |
• | January 1 to December 18, 2006 |
• | December 19 to December 31, 2006 |
• | January 1 to December 31, 2005 |
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Year Ended December 31, | ||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||
January 1 to | December 19 to | Year Ended | ||||||||||||||||||||||
Year Ended December 31, | December 18, | December 31, | December 31, | |||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2006 | 2007 | |||||||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||||||
(in thousands, except unit, per unit and fleet data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Voyage revenues | $ | 507,236 | $ | 723,217 | $ | 613,246 | $ | 617,514 | $ | 24,397 | $ | 785,203 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Voyage expenses(1) | 69,652 | 90,414 | 74,543 | 91,321 | 3,102 | 151,637 | ||||||||||||||||||
Vessel operating expenses(2) | 89,415 | 109,278 | 109,480 | 107,991 | 4,297 | 149,660 | ||||||||||||||||||
Time-charter hire expense | 107,792 | 177,050 | 169,687 | 159,973 | 5,641 | 150,463 | ||||||||||||||||||
Depreciation and amortization | 93,946 | 120,197 | 109,824 | 100,823 | 3,726 | 124,370 | ||||||||||||||||||
General and administrative | 18,049 | 45,941 | 56,726 | 63,014 | 2,177 | 62,404 | ||||||||||||||||||
Loss (gain) on sale of vessels and equipment — net of writedowns | 63 | (3,725 | ) | 2,820 | (4,778 | ) | — | — | ||||||||||||||||
Restructuring charge | — | — | 955 | 832 | — | �� | — | |||||||||||||||||
Total operating expenses | 378,917 | 539,155 | 524,035 | 519,176 | 18,943 | 638,534 | ||||||||||||||||||
Income from vessel operations | 128,319 | 184,062 | 89,211 | 98,338 | 5,454 | 146,669 | ||||||||||||||||||
Interest expense | (47,223 | ) | (44,268 | ) | (39,983 | ) | (64,462 | ) | (1,617 | ) | (126,304 | ) | ||||||||||||
Interest income | 1,278 | 2,459 | 4,612 | 5,167 | 191 | 5,871 | ||||||||||||||||||
Equity income from joint ventures | 5,047 | 5,514 | 5,955 | 6,321 | — | — | ||||||||||||||||||
Gain on sales of marketable securities | 517 | 94,222 | — | — | — | — | ||||||||||||||||||
Foreign currency exchange (loss) gain(3) | (18,691 | ) | (37,840 | ) | 34,228 | (66,214 | ) | (118 | ) | (11,678 | ) | |||||||||||||
Income tax (expense) recovery | (22,064 | ) | (29,465 | ) | 12,375 | (3,260 | ) | (121 | ) | 10,516 | ||||||||||||||
Other — net | 4,455 | 14,064 | 9,091 | 8,367 | 309 | 10,403 | ||||||||||||||||||
Income (loss) from continuing operations before non-controlling interest | 51,638 | 188,748 | 115,489 | (15,743 | ) | 4,098 | 35,477 | |||||||||||||||||
Non-controlling interest | (2,763 | ) | (2,167 | ) | (229 | ) | (3,893 | ) | (2,636 | ) | (31,519 | ) | ||||||||||||
Income (loss) from continuing operations | 48,875 | 186,581 | 115,260 | (19,636 | ) | 1,462 | 3,958 | |||||||||||||||||
Net income (loss) from discontinuedoperations(11) | 20,228 | 30,619 | (19,347 | ) | (10,656 | ) | — | — | ||||||||||||||||
Net income (loss) | $ | 69,103 | $ | 217,200 | $ | 95,913 | $ | (30,292 | ) | $ | 1,462 | $ | 3,958 | |||||||||||
Dropdown Predecessor’s interest in net income | $ | 6,768 | $ | 4,076 | $ | 2,910 | $ | 3,097 | $ | 114 | $ | 1,300 | ||||||||||||
General partner’s interest in net income | — | — | — | — | 64 | 733 | ||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income (loss) from continuing operations | 42,107 | 182,505 | 112,350 | (22,733 | ) | 1,284 | 1,925 | |||||||||||||||||
Net income (loss) from continuing operations per: | ||||||||||||||||||||||||
Common unit (basic and diluted) (4) | 3.34 | 14.48 | 8.92 | (1.80 | ) | 0.07 | 0.12 | |||||||||||||||||
Subordinated unit (basic and diluted) (4) | 3.34 | 14.48 | 8.92 | (1.80 | ) | 0.06 | 0.07 | |||||||||||||||||
Total unit (basic and diluted) (4) | 3.34 | 14.48 | 8.92 | (1.80 | ) | 0.07 | 0.10 | |||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income (loss) | 62,335 | 213,124 | 93,003 | (33,389 | ) | 1,284 | 1,925 | |||||||||||||||||
Net income (loss) per: | ||||||||||||||||||||||||
Common unit (basic and diluted) (4) | 4.95 | 16.91 | 7.38 | (2.65 | ) | 0.07 | 0.12 | |||||||||||||||||
Subordinated unit (basic and diluted) (4) | 4.95 | 16.91 | 7.38 | (2.65 | ) | 0.06 | 0.07 | |||||||||||||||||
Total unit (basic and diluted) (4) | 4.95 | 16.91 | 7.38 | (2.65 | ) | 0.07 | 0.10 | |||||||||||||||||
Cash distributions declared per unit | — | — | — | — | — | 1.14 | ||||||||||||||||||
Balance Sheet Data(at end of year): | ||||||||||||||||||||||||
Cash and marketable securities(12) | $ | 160,957 | $ | 143,729 | $ | 128,986 | $ | 113,986 | $ | 121,224 | ||||||||||||||
Vessels and equipment(5) (13) | 1,446,978 | 1,440,167 | 1,310,135 | 1,532,743 | 1,662,865 | |||||||||||||||||||
Total assets | 2,054,448 | 2,054,760 | 1,895,601 | 2,081,224 | 2,166,351 | |||||||||||||||||||
Total debt(6) | 1,328,985 | 1,178,132 | 943,319 | 1,303,352 | 1,517,467 | |||||||||||||||||||
Non-controlling interest | 15,525 | 14,276 | 11,859 | 427,977 | 392,613 | |||||||||||||||||||
Dropdown Predecessor’s equity | 39,420 | 44,016 | 47,784 | 51,792 | — | |||||||||||||||||||
Total partners’/owner’s equity | 529,794 | 659,212 | 747,879 | 138,942 | 77,401 | |||||||||||||||||||
Common units outstanding(4) | 2,800,000 | 2,800,000 | 2,800,000 | 2,800,000 | 9,800,000 | 9,800,000 | ||||||||||||||||||
Subordinated units outstanding(4) | 9,800,000 | 9,800,000 | 9,800,000 | 9,800,000 | 9,800,000 | 9,800,000 | ||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities(7) | $ | 231,757 | $ | 247,184 | $ | 157,881 | $ | 45,847 | ||||||||||||||||
Financing activities(7) | 728,594 | (74,302 | ) | (206,748 | ) | (23,905 | ) | |||||||||||||||||
Investing activities(7) | (839,148 | ) | (190,110 | ) | 34,124 | (14,704 | ) | |||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Net voyage revenues(8) | $ | 437,584 | $ | 632,803 | $ | 538,703 | $ | 526,193 | $ | 21,295 | $ | 633,566 | ||||||||||||
EBITDA(9) | 239,738 | 409,638 | 229,199 | 133,086 | 6,735 | 238,245 | ||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
Expenditures for vessels and equipment | 148,004 | 170,630 | 24,760 | 31,079 | — | 31,228 | ||||||||||||||||||
Expenditures for drydocking | 11,980 | 9,174 | 8,906 | 31,255 | — | 49,053 | ||||||||||||||||||
Fleet data: | ||||||||||||||||||||||||
Average number of shuttle tankers(10) | 30.5 | 37.9 | 35.8 | 33.9 | 36.0 | 36.9 | ||||||||||||||||||
Average number of conventionaltankers(10) | 27.4 | 40.7 | 41.2 | 22.0 | 10.0 | 9.3 | ||||||||||||||||||
Average number of FSO units(10) | 3.2 | 4.0 | 4.0 | 4.0 | 4.0 | 4.6 |
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(1) | Voyage expenses are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. | |
(2) | Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. | |
(3) | Substantially all of these foreign currency exchange gains and losses were unrealized and not settled in cash. Under U.S. accounting guidelines, 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. For the periods prior to our initial public offering, our primary source of foreign currency gains and losses were our Norwegian Kroner-denominated advances from affiliates, which were settled by the Predecessor prior to December 19, 2006. | |
(4) | Net income (loss) per unit is determined by dividing net income (loss), after deducting the amount of net income (loss) attributable to the Dropdown Predecessor and the amount of net income (loss) allocated to our general partner’s interest for periods subsequent to our initial public offering on December 19, 2006, by the weighted-average number of units outstanding during the period. For periods prior to December 19, 2006, such units are deemed equal to the common and subordinated units received by Teekay Corporation in exchange for a 26.0% interest in OPCO in connection with our initial public offering. | |
(5) | Vessels and equipment consists of (a) vessels, at cost less accumulated depreciation, (b) vessels under capital leases, at cost less accumulated depreciation, and (c) advances on newbuildings. | |
(6) | Total debt includes long-term debt, capital lease obligations and advances from affiliates. | |
(7) | For the year ended December 31, 2006, cash flow data provided by (used in) operating activities, financing activities and investing activities was $162,228, ($230,238) and $53,010, respectively. | |
(8) | Consistent with general practice in the shipping industry, we use net voyage revenues (defined as voyage revenues less voyage expenses) as a measure of equating revenues generated from voyage charters to revenues generated from time charters, which assists us in making operating decisions about the deployment of vessels and their performance. Under time charters and bareboat charters, the charterer typically pays the voyage expenses, which are all expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, whereas under voyage charter contracts and contracts of affreightment the shipowner typically pays the voyage expenses. Some voyage expenses are fixed, and the remainder can be estimated. If we or OPCO, as the shipowner, pay the voyage expenses, we or OPCO typically pass the approximate amount of these expenses on to the customers by charging higher rates under the contract or billing the expenses to them. As a result, although voyage revenues from different types of contracts may vary, the net revenues after subtracting voyage expenses, which we call net voyage revenues, are comparable across the different types of contracts. We principally use net voyage revenues, a non-GAAP financial measure, because it provides more meaningful information to us than voyage revenues, the most directly comparable GAAP financial measure. Net voyage revenues are also widely used by investors and analysts in the shipping industry for comparing financial performance between companies in the shipping industry to industry averages. The following table reconciles net voyage revenues with voyage revenues. |
Year Ended December 31, 2006 | ||||||||||||||||||||||||
January 1 | December 19 | |||||||||||||||||||||||
to | to | Year Ended | ||||||||||||||||||||||
Year Ended December 31, | December 18, | December 31, | December 31, | |||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2006 | 2007 | |||||||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||||||
Voyage revenues | $ | 507,236 | $ | 723,217 | $ | 613,246 | $ | 617,514 | $ | 24,397 | $ | 785,203 | ||||||||||||
Voyage expenses | 69,652 | 90,414 | 74,543 | 91,321 | 3,102 | 151,637 | ||||||||||||||||||
Net voyage revenues | $ | 437,584 | $ | 632,803 | $ | 538,703 | $ | 526,193 | $ | 21,295 | $ | 633,566 | ||||||||||||
(9) | EBITDA. Earnings before interest, taxes, depreciation and amortization is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, as discussed below: |
• | Financial and operating performance.EBITDA assists our management and investors by increasing the comparability of the fundamental performance of us from period to period and against the fundamental performance of other companies in our industry that provide EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest expense, taxes, depreciation or amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring the ongoing financial and operational strength and health of us in assessing whether to continue to hold our common units. |
• | Liquidity.EBITDA allows us to assess the ability of assets to generate cash sufficient to service debt, make distributions and undertake capital expenditures. By eliminating the cash flow effect resulting from the existing capitalization of us and OPCO and other items such as drydocking expenditures, working capital changes and foreign currency exchange gains and losses (which may vary significantly from period to period), EBITDA provides a consistent measure of our ability to generate cash over the long term. Management uses this information as a significant factor in determining (a) our and OPCO’s proper capitalization (including assessing how much debt to incur and whether changes to the capitalization should be made) and (b) whether to undertake material capital expenditures and how to finance them, all in light of existing cash distribution commitments to unitholders. Use of EBITDA as a liquidity measure also permits investors to assess the fundamental ability of OPCO and us to generate cash sufficient to meet cash needs, including distributions on our common units. |
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Year Ended December 31, 2006 | ||||||||||||||||||||||||
January 1 | December 19 | |||||||||||||||||||||||
to | to | Year Ended | ||||||||||||||||||||||
Year Ended December 31, | December 18, | December 31, | December 31, | |||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2006 | 2007 | |||||||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||||||
Reconciliation of “EBITDA” to “Net income (loss)”: | ||||||||||||||||||||||||
Net income (loss) | $ | 69,103 | $ | 217,200 | $ | 95,913 | $ | (30,292 | ) | $ | 1,462 | $ | 3,958 | |||||||||||
Depreciation and amortization | 93,946 | 120,197 | 109,824 | 100,823 | 3,726 | 124,370 | ||||||||||||||||||
Interest expense, net | 45,945 | 41,809 | 35,371 | 59,295 | 1,426 | 120,433 | ||||||||||||||||||
Income taxes expense (recovery) | 22,064 | 29,465 | (12,375 | ) | 3,260 | 121 | (10,516 | ) | ||||||||||||||||
Depreciation and amortization and income tax expense related to discontinued operations | 8,680 | 967 | 466 | — | — | — | ||||||||||||||||||
EBITDA(1) | $ | 239,738 | $ | 409,638 | $ | 229,199 | $ | 133,086 | $ | 6,735 | $ | 238,245 | ||||||||||||
Reconciliation of “EBITDA” to “Net operating cash flow”: | ||||||||||||||||||||||||
Net operating cash flow | $ | 231,757 | $ | 247,184 | $ | 157,881 | $ | 162,112 | $ | 116 | $ | 45,847 | ||||||||||||
Non-controlling interest | (2,763 | ) | (2,167 | ) | (229 | ) | (3,893 | ) | (2,636 | ) | (31,519 | ) | ||||||||||||
Expenditures for drydocking | 11,980 | 9,174 | 8,906 | 31,255 | — | 49,053 | ||||||||||||||||||
Interest expense, net | 45,945 | 41,809 | 35,371 | 59,295 | 1,426 | 120,433 | ||||||||||||||||||
(Loss) gain on sale of vessels | (63 | ) | 3,725 | 9,423 | 6,928 | — | — | |||||||||||||||||
Gain on sale of marketable securities, net of writedowns | (4,393 | ) | 94,222 | — | — | — | — | |||||||||||||||||
Loss on writedown of vessels and equipment | — | — | (12,243 | ) | (2,150 | ) | — | — | ||||||||||||||||
Write-off of debt issuance costs | — | — | — | (2,790 | ) | — | — | |||||||||||||||||
Equity income (net of dividends received) | (1,234 | ) | (1,986 | ) | 3,205 | 319 | — | — | ||||||||||||||||
Change in working capital | (10,586 | ) | 36,757 | (26,539 | ) | (50,673 | ) | 7,134 | 33,706 | |||||||||||||||
Distribution from subsidiaries to minority owners | 3,060 | 2,347 | 9,618 | 4,224 | — | 78,107 | ||||||||||||||||||
Change in fair value of interest rate swaps | — | — | — | 2,647 | 699 | (45,491 | ) | |||||||||||||||||
Foreign currency exchange (loss) gain and other, net | (33,965 | ) | (21,427 | ) | 43,806 | (74,188 | ) | (4 | ) | (11,891 | ) | |||||||||||||
EBITDA(1) | $ | 239,738 | $ | 409,638 | $ | 229,199 | $ | 133,086 | $ | 6,735 | $ | 238,245 | ||||||||||||
(1) | EBITDA is net of non-controlling interest expense of $2.8 million, $2.2 million, $0.2 million, $3.9 million, $2.6 million and $31.5 million for the years ended December 31, 2003, 2004 and 2005, and for the periods January 1 to December 18, 2006 and December 19 to December 31, 2006, and for the year ended December 31, 2007, respectively. |
Year Ended December 31, 2006 | ||||||||||||||||||||||||
January 1 | December 19 | |||||||||||||||||||||||
to | to | Year Ended | ||||||||||||||||||||||
Year Ended December 31, | December 18, | December 31, | December 31, | |||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2006 | 2007 | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||||||
(Loss) gain on sale of vessels and equipment, net of writedowns | $ | (63 | ) | $ | 3,725 | $ | (2,820 | ) | $ | 4,778 | $ | — | $ | — | ||||||||||
Gain on sale of marketable securities, net of writedowns | (4,393 | ) | 94,222 | — | — | — | — | |||||||||||||||||
Unrealized gains (losses) on foreign exchange forward contracts | — | — | — | — | — | (466 | ) | |||||||||||||||||
Foreign currency exchange (loss) gain | (18,691 | ) | (37,840 | ) | 34,228 | (66,214 | ) | (118 | ) | (11,678 | ) | |||||||||||||
$ | (23,147 | ) | $ | 60,107 | $ | 31,408 | $ | (61,436 | ) | $ | (118 | ) | $ | (12,144 | ) | |||||||||
(10) | Average number of ships consists of the average number of owned and chartered-in vessels (including those in discontinued operations) that were in our possession during the period (excluding the five vessels owned by OPCO’s 50% joint ventures for periods prior to December 1, 2006, but including two vessels deemed to be in our possession for accounting purposes as a result of the inclusion of the Dropdown Predecessor prior to our actual acquisition of such vessels). On December 1, 2006, the operating agreements for these five joint ventures were amended, resulting OPCO controlling these entities and in their consolidation with OPCO in accordance with GAAP. | |
(11) | On July 1, 2006, the Predecessor sold Navion Shipping Ltd. to a subsidiary of Teekay Corporation for $53.7 million. At the time of the sale, all of the Predecessor’s chartered-in conventional tankers were chartered-in by Navion Shipping Ltd. and subsequently time chartered to a subsidiary of Teekay Corporation at charter rates that provided a fixed 1.25% profit margin. These chartered-in conventional tankers were operated in the spot market by the subsidiary of Teekay Corporation. |
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(12) | Cash and marketable securities includes cash from discontinued operations of $15.2 million, $13.4 million and $2.5 million as at December 31, 2003, 2004, and 2005, respectively. | |
(13) | Vessels and equipment includes a vessel held for sale of $20.6 million and $19.6 million as at December 31, 2003 and 2004, respectively. | |
(14) | Expenditures for vessels and equipment excludes non-cash investing activities. Please read Item 18 — Financial Statements: Note 14 — Supplemental Cash Flow Information. | |
(15) | A reconciliation of our previously reported consolidated financial information to our restated consolidated financial information as at December 31, 2005, 2004 and 2003 and for the years ended December 31, 2004 and 2003 is contained in the following table. Only those line items in the selected financial data table that are both from our consolidated financial information and were affected by the restatement are contained below. |
Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
(in thousands, except unit and per unit data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Year ended December 31, 2004 | ||||||||||||||||||||||||
Voyage revenues | $ | 986,504 | — | 14,790 | (278,077 | ) | — | $ | 723,217 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Voyage expenses | 118,819 | — | — | (28,405 | ) | — | 90,414 | |||||||||||||||||
Vessel operating expenses | 105,595 | — | 5,749 | (2,066 | ) | — | 109,278 | |||||||||||||||||
Time-charter hire expense | 372,449 | — | — | (195,399 | ) | — | 177,050 | |||||||||||||||||
Depreciation and amortization | 118,460 | — | 2,704 | (967 | ) | — | 120,197 | |||||||||||||||||
General and administrative | 65,819 | — | 743 | (20,621 | ) | — | 45,941 | |||||||||||||||||
Loss (gain) on sale of vessels and equipment — net of writedowns | (3,725 | ) | — | — | — | — | (3,725 | ) | ||||||||||||||||
Total operating expenses | 777,417 | — | 9,196 | (247,458 | ) | — | 539,155 | |||||||||||||||||
Income from vessel operations | 209,087 | — | 5,594 | (30,619 | ) | — | 184,062 | |||||||||||||||||
Interest expense | (43,957 | ) | — | (311 | ) | — | (44,268 | ) | ||||||||||||||||
Interest income | 2,459 | — | — | — | — | 2,459 | ||||||||||||||||||
Equity income from joint ventures | 6,162 | (648 | ) | — | — | — | 5,514 | |||||||||||||||||
Gain on sales of marketable securities | 94,222 | — | — | — | — | 94,222 | ||||||||||||||||||
Foreign currency exchange (loss) gain | (37,910 | ) | — | 70 | — | — | (37,840 | ) | ||||||||||||||||
Income tax expense | (28,188 | ) | — | (1,277 | ) | — | — | (29,465 | ) | |||||||||||||||
Other — net | 14,064 | — | — | — | — | 14,064 | ||||||||||||||||||
Income (loss) from continuing operations before non-controlling interest | 215,939 | (648 | ) | 4,076 | (30,619 | ) | — | 188,748 | ||||||||||||||||
Non-controlling interest | (2,167 | ) | — | — | — | — | (2,167 | ) | ||||||||||||||||
Income (loss) from continuing operations | 213,772 | (648 | ) | 4,076 | (30,619 | ) | — | 186,581 | ||||||||||||||||
Net income from discontinued operations | — | — | — | 30,619 | — | 30,619 | ||||||||||||||||||
Net income (loss) | $ | 213,772 | $ | (648 | ) | $ | 4,076 | $ | — | — | $ | 217,200 | ||||||||||||
Dropdown Predecessor’s interest in net income | $ | — | $ | 4,076 | ||||||||||||||||||||
General partner’s interest in net income | — | — | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income from continuing operations | 213,772 | 182,505 | ||||||||||||||||||||||
Net income from continuing operations per: | ||||||||||||||||||||||||
Common unit (basic and diluted) | 16,97 | 14.48 | ||||||||||||||||||||||
Subordinated unit (basic and diluted) | 16.97 | 14.48 | ||||||||||||||||||||||
Total unit (basic and diluted) | 16.97 | 14.48 | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income | 213,772 | 213,124 | ||||||||||||||||||||||
Net income per: | ||||||||||||||||||||||||
Common unit (basic and diluted) | 16,97 | 16.91 | ||||||||||||||||||||||
Subordinated unit (basic and diluted) | 16.97 | 16.91 | ||||||||||||||||||||||
Total unit (basic and diluted) | 16.97 | 16.91 | ||||||||||||||||||||||
Cash distributions declared per unit | — | — |
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Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
(in thousands, except unit and per unit data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Year ended December 31, 2003 | ||||||||||||||||||||||||
Voyage revenues | $ | 747,383 | (1,178 | ) | 14,580 | (253,549 | ) | — | $ | 507,236 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Voyage expenses | 146,893 | — | — | (77,241 | ) | — | 69,652 | |||||||||||||||||
Vessel operating expenses | 87,507 | — | 4,914 | (3,006 | ) | — | 89,415 | |||||||||||||||||
Time-charter hire expense | 235,976 | — | — | (128,184 | ) | — | 107,792 | |||||||||||||||||
Depreciation and amortization | 93,269 | — | 2,568 | (1,891 | ) | — | 93,946 | |||||||||||||||||
General and administrative | 33,968 | — | 291 | (16,210 | ) | — | 18,049 | |||||||||||||||||
Loss (gain) on sale of vessels and equipment — net of writedowns | 63 | — | — | — | — | 63 | ||||||||||||||||||
Total operating expenses | 597,676 | — | 7,773 | (226,532 | ) | — | 378,917 | |||||||||||||||||
Income from vessel operations | 149,707 | (1,178 | ) | 6,807 | (27,017 | ) | — | 128,319 | ||||||||||||||||
Interest expense | (46,872 | ) | — | (351 | ) | — | (47,223 | ) | ||||||||||||||||
Interest income | 1,278 | — | — | — | — | 1,278 | ||||||||||||||||||
Equity income from joint ventures | 5,047 | — | — | — | — | 5,047 | ||||||||||||||||||
Gain on sales of marketable securities | 517 | — | — | — | — | 517 | ||||||||||||||||||
Foreign currency exchange loss | (17,821 | ) | — | (870 | ) | — | — | (18,691 | ) | |||||||||||||||
Income tax (expense) recovery | (30,035 | ) | — | 1,182 | 6,789 | — | (22,064 | ) | ||||||||||||||||
Other — net | 4,455 | — | — | — | 4,455 | |||||||||||||||||||
Income (loss) from continuing operations before non-controlling interest | 66,276 | (1,178 | ) | 6,768 | (20,228 | ) | — | 51,638 | ||||||||||||||||
Non-controlling interest | (2,763 | ) | — | — | — | — | (2,763 | ) | ||||||||||||||||
Income (loss) from continuing operations | 63,513 | (1,178 | ) | 6,768 | (20,228 | ) | — | 48,875 | ||||||||||||||||
Net income from discontinued operations | — | — | — | 20,228 | — | 20,228 | ||||||||||||||||||
Net income (loss) | $ | 63,513 | $ | (1,178 | ) | $ | 6,768 | $ | — | — | $ | 69,103 | ||||||||||||
Dropdown Predecessor’s interest in net income | $ | — | $ | 6,768 | ||||||||||||||||||||
General partner’s interest in net income | — | — | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income from continuing operations | 63,513 | 42,107 | ||||||||||||||||||||||
Net income from continuing operations per: | ||||||||||||||||||||||||
Common unit (basic and diluted) | 5.04 | 3.34 | ||||||||||||||||||||||
Subordinated unit (basic and diluted) | 5.04 | 3.34 | ||||||||||||||||||||||
Total unit (basic and diluted) | 5.04 | 3.34 | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income | 63,513 | 62,335 | ||||||||||||||||||||||
Net income per: | ||||||||||||||||||||||||
Common unit (basic and diluted) | 5.04 | 4.95 | ||||||||||||||||||||||
Subordinated unit (basic and diluted) | 5.04 | 4.95 | ||||||||||||||||||||||
Total unit (basic and diluted) | 5.04 | 4.95 | ||||||||||||||||||||||
Cash distributions declared per unit | — | — | ||||||||||||||||||||||
Balance Sheet Data (at end of year): | ||||||||||||||||||||||||
As at December 31, 2005 | ||||||||||||||||||||||||
Cash and marketable securities | $ | 128,986 | $ | — | $ | — | $ | — | $ | — | $ | 128,986 | ||||||||||||
Vessels and equipment | 1,300,064 | — | 10,071 | — | — | 1,310,135 | ||||||||||||||||||
Total assets | 1,884,017 | — | 11,584 | — | — | 1,895,601 | ||||||||||||||||||
Total debt | 991,855 | — | (41,036 | ) | — | (7,500 | ) | 943,319 | ||||||||||||||||
Non-controlling interest | 11,859 | — | — | — | — | 11,859 | ||||||||||||||||||
Dropdown Predecessor’s equity | — | — | 47,784 | — | — | 47,784 | ||||||||||||||||||
Total partners’/owner’s equity | 740,379 | — | — | — | 7,500 | 747,879 | ||||||||||||||||||
As at December 31, 2004 | ||||||||||||||||||||||||
Cash and marketable securities | $ | 143,729 | $ | — | $ | — | $ | — | $ | — | $ | 143,729 | ||||||||||||
Vessels and equipment | 1,427,481 | — | 12,686 | — | — | 1,440,167 | ||||||||||||||||||
Total assets | 2,040,642 | — | 14,118 | — | — | 2,054,760 | ||||||||||||||||||
Total debt | 1,210,998 | — | (32,866 | ) | — | — | 1,178,132 | |||||||||||||||||
Non-controlling interest | 14,276 | — | — | — | — | 14,276 | ||||||||||||||||||
Dropdown Predecessor’s equity | — | — | 44,016 | — | — | 44,016 | ||||||||||||||||||
Total partners’/owner’s equity | 659,212 | — | — | — | — | 659,212 |
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Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
(in thousands, except unit and per unit data) | ||||||||||||||||||||||||
Balance Sheet Data (at end of year): | ||||||||||||||||||||||||
As at December 31, 2003 | ||||||||||||||||||||||||
Cash and marketable securities | $ | 160,957 | $ | — | $ | — | $ | — | $ | — | $ | 160,957 | ||||||||||||
Vessels and equipment | 1,431,947 | — | 15,031 | — | — | 1,446,978 | ||||||||||||||||||
Total assets | 2,037,855 | — | 16,593 | — | — | 2,054,448 | ||||||||||||||||||
Total debt | 1,354,392 | — | (25,407 | ) | — | — | 1,328,985 | |||||||||||||||||
Non-controlling interest | 15,525 | — | — | — | — | 15,525 | ||||||||||||||||||
Dropdown Predecessor’s equity | — | — | 39,420 | — | — | 39,420 | ||||||||||||||||||
Total partners’/owner’s equity | 529,794 | — | — | — | — | 529,794 | ||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||
As at December 31, 2004 | ||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities | $ | 240,245 | $ | — | $ | 6,939 | $ | — | $ | — | $ | 247,184 | ||||||||||||
Financing activities | (67,363 | ) | — | (6,939 | ) | — | — | (74,302 | ) | |||||||||||||||
Investing activities | (190,110 | ) | — | — | — | — | (190,110 | ) | ||||||||||||||||
As at December 31, 2003 | ||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities | $ | 224,237 | $ | — | $ | 7,520 | $ | — | $ | — | $ | 231,757 | ||||||||||||
Financing activities | 734,389 | — | (5,795 | ) | — | — | 728,594 | |||||||||||||||||
Investing activities | (837,423 | ) | — | (1,725 | ) | — | — | (839,148 | ) | |||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
As at December 31, 2004 | ||||||||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
Expenditures for vessels and equipment | $ | 170,630 | $ | — | $ | — | $ | — | $ | — | $ | 170,630 | ||||||||||||
Expenditures for drydocking | 9,174 | — | — | — | — | 9,174 | ||||||||||||||||||
As at December 31, 2003 | ||||||||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
Expenditures for vessels and equipment | $ | 146,279 | $ | — | $ | 1,725 | $ | — | $ | — | $ | 148,004 | ||||||||||||
Expenditures for drydocking | 11,980 | — | — | — | — | 11,980 |
• | the rates it obtains from its charters and contracts of affreightment (whereby OPCO carries an agreed quantity of cargo for a customer over a specified trade route within a given period of time); | ||
• | the price and level of production of, and demand for, crude oil, particularly the level of production at the offshore oil fields OPCO services under contracts of affreightment; | ||
• | the level of its operating costs, such as the cost of crews and insurance; | ||
• | the number of off-hire days for its fleet and the timing of, and number of days required for, drydocking of its vessels; | ||
• | the rates, if any, at which OPCO may be able to redeploy shuttle tankers in the spot market as conventional oil tankers during any periods of reduced or terminated oil production at fields serviced by contracts of affreightment; | ||
• | delays in the delivery of any newbuildings or vessels undergoing conversion and the beginning of payments under charters relating to those vessels; |
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• | prevailing global and regional economic and political conditions; | ||
• | currency exchange rate fluctuations; and | ||
• | the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of its business. |
• | the level of capital expenditures it makes, including for maintaining vessels or converting existing vessels for other uses and complying with regulations; | ||
• | its debt service requirements and restrictions on distributions contained in its debt instruments; | ||
• | fluctuations in its working capital needs; | ||
• | its ability to make working capital borrowings; and | ||
• | the amount of any cash reserves, including reserves for future maintenance capital expenditures, working capital and other matters, established by the Board of Directors of our general partner. |
• | interest expense and principal payments on any indebtedness we incur; | ||
• | restrictions on distributions contained in any of our current or future debt agreements; | ||
• | fees and expenses of us, our general partner, its affiliates or third parties we are required to reimburse or pay, including expenses we incur as a result of being a public company; and | ||
• | reserves our general partner believes are prudent for us to maintain for the proper conduct of our business or to provide for future distributions. |
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• | the cost of labor and materials; | ||
• | customer requirements; | ||
• | increases in fleet size or the cost of replacement vessels; | ||
• | governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and | ||
• | competitive standards. |
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• | our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; | ||
• | we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders; | ||
• | our debt level may make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our industry or the economy generally; and | ||
• | our debt level may limit our flexibility in responding to changing business and economic conditions. |
• | incur or guarantee indebtedness; | ||
• | change ownership or structure, including mergers, consolidations, liquidations and dissolutions; | ||
• | make dividends or distributions; | ||
• | make certain negative pledges and grant certain liens; | ||
• | sell, transfer, assign or convey assets; | ||
• | make certain investments; and | ||
• | enter into a new line of business. |
• | failure to pay any principal, interest, fees, expenses or other amounts when due; | |
• | failure to notify the lenders of any material oil spill or discharge of hazardous material, or of any action or claim related thereto; | |
• | breach or lapse of any insurance with respect to vessels securing the facilities; | |
• | breach of certain financial covenants; | |
• | failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases; | |
• | default under other indebtedness; | |
• | bankruptcy or insolvency events; | |
• | failure of any representation or warranty to be materially correct; | |
• | a change of control, as defined in the applicable agreement; and | |
• | a material adverse effect, as defined in the applicable agreement. |
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• | renew existing charters and contracts of affreightment upon their expiration; | ||
• | obtain new charters and contracts of affreightment; | ||
• | successfully interact with shipyards during periods of shipyard construction constraints; | ||
• | obtain financing on commercially acceptable terms; or | ||
• | maintain satisfactory relationships with suppliers and other third parties. |
• | decreases in the actual or projected price of oil, which could lead to a reduction in or termination of production of oil at certain fields we service or a reduction in exploration for or development of new offshore oil fields; |
• | increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those markets; |
• | decreases in the consumption of oil due to increases in its price relative to other energy sources, other factors making consumption of oil less attractive or energy conservation measures; |
• | availability of new, alternative energy sources; and |
• | negative global or regional economic or political conditions, particularly in oil consuming regions, which could reduce energy consumption or its growth. |
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• | industry relationships and reputation for customer service and safety; | ||
• | experience and quality of ship operations; | ||
• | quality, experience and technical capability of the crew; | ||
• | relationships with shipyards and the ability to get suitable berths; | ||
• | construction management experience, including the ability to obtain on-time delivery of new vessels according to customer specifications; | ||
• | willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and | ||
• | competitiveness of the bid in terms of overall price. |
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• | quality or engineering problems, the risk of which may be increased with FPSO units due to their technical complexity; | ||
• | changes in governmental regulations or maritime self-regulatory organization standards; | ||
• | work stoppages or other labor disturbances at the shipyard; | ||
• | bankruptcy or other financial crisis of the shipbuilder; | ||
• | a backlog of orders at the shipyard; | ||
• | political or economic disturbances; | ||
• | weather interference or catastrophic event, such as a major earthquake or fire; | ||
• | requests for changes to the original vessel specifications; | ||
• | shortages of or delays in the receipt of necessary construction materials, such as steel; | ||
• | inability to finance the construction or conversion of the vessels; or | ||
• | inability to obtain requisite permits or approvals. |
• | prevailing economic conditions in oil and energy markets; |
• | a substantial or extended decline in demand for oil; |
• | increases in the supply of vessel capacity; and |
• | the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, or otherwise. |
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• | fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements; |
• | be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet; |
• | decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions; |
• | significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions; |
• | incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or |
• | incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. |
• | marine disasters; |
• | bad weather; |
• | mechanical failures; |
• | grounding, capsizing, fire, explosions and collisions; |
• | piracy; |
• | human error; and |
• | war and terrorism. |
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• | death or injury to persons, loss of property or damage to the environment and natural resources; |
• | delays in the delivery of cargo; |
• | loss of revenues from charters or contracts of affreightment; |
• | liabilities or costs to recover any spilled oil or other petroleum products and to restore the eco-system where the spill occurred; |
• | governmental fines, penalties or restrictions on conducting business; |
• | higher insurance rates; and |
• | damage to our reputation and customer relationships generally. |
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• | own, operate and charter offshore vessels if the remaining duration of the time charter or contract of affreightment for the vessel, excluding any extension options, is less than three years; |
• | own, operate and charter offshore vessels and related time charters or contracts of affreightment acquired as part of a business or package of assets and operating or chartering those vessels if a majority of the value of the total assets or business acquired is not attributable to the offshore vessels and related contracts, as determined in good faith by Teekay Corporation’s Board of Directors or the conflicts committee of the Board of Directors of Teekay LNG Partners L.P.’s general partner, as applicable; however, if at any time Teekay Corporation or Teekay LNG Partners L.P. completes such an acquisition, it must, within 365 days of the closing of the transaction, offer to sell the offshore vessels and related contracts to us for their fair market value plus any additional tax or other similar costs to Teekay Corporation or Teekay LNG Partners L.P. that would be required to transfer the vessels and contracts to us separately from the acquired business or package of assets; or |
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• | own, operate and charter offshore vessels and related time charters and contracts of affreightment that relate to tender, bid or award for a proposed offshore project that Teekay Corporation or any of its subsidiaries has submitted or received hereafter submits or receives; however, at least 365 days after the delivery date of any such offshore vessel, Teekay Corporation must offer to sell the vessel and related time charter or contract of affreightment to us, with the vessel valued (a) for newbuildings originally contracted by Teekay Corporation, at its “fully-built-up cost” (which represents the aggregate expenditures incurred (or to be incurred prior to delivery to us) by Teekay Corporation to acquire, construct and/or convert and bring such offshore vessel to the condition and location necessary for our intended use, plus project development costs for completed projects and projects that were not completed but, if completed, would have been subject to an offer to us) and (b) for any other vessels, Teekay Corporation’s cost to acquire a newbuilding from a third party or the fair market value of an existing vessel, as applicable, plus in each case any subsequent expenditures that would be included in the “fully-built-up cost” of converting the vessel prior to delivery to us. |
• | acquire, operate and charter offshore vessels and related time charters and contracts of affreightment if our general partner has previously advised Teekay Corporation or Teekay LNG Partners L.P. that our general partner’s Board of Directors has elected, with the approval of its conflicts committee, not to cause us or our controlled affiliates to acquire or operate the vessels and related time charters and contracts of affreightment; |
• | acquire up to a 9.9% equity ownership, voting or profit participation interest in any publicly-traded company that engages in, acquires or invests in any business that owns or operates or charters offshore vessels and related time charters and contracts of affreightment; |
• | provide ship management services relating to owning, operating or chartering offshore vessels and related time charters and contracts of affreightment; or |
• | own a limited partner interest in OPCO or own shares of Teekay Petrojarl ASA (formally Petrojarl ASA. And referred to herein asPetrojarl). |
• | neither our partnership agreement nor any other agreement requires Teekay Corporation or its affiliates (other than our general partner) to pursue a business strategy that favors us or utilizes our assets, and Teekay Corporation’s officers and directors have a fiduciary duty to make decisions in the best interests of the stockholders of Teekay Corporation, which may be contrary to our interests; |
• | the Chief Executive Officer and Chief Financial Officer and three of the directors of our general partner also serve as executive officers or directors of Teekay Corporation and the general partner of Teekay LNG Partners L.P.; |
• | our general partner is allowed to take into account the interests of parties other than us, such as Teekay Corporation, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders; |
• | our general partner has limited its liability and reduced its fiduciary duties under the laws of the Marshall Islands, while also restricting the remedies available to our unitholders and unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner, all as set forth in our partnership agreement; |
• | our general partner determines the amount and timing of our asset purchases and sales, capital expenditures, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders; |
• | in some instances, our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units or to make incentive distributions (in each case to affiliates of Teekay Corporation) or to accelerate the expiration of the subordination period relating to our subordinated units held by Teekay Corporation; |
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• | our general partner determines which costs incurred by it and its affiliates are reimbursable by us; |
• | our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf; |
• | our general partner intends to limit its liability regarding our contractual and other obligations; |
• | our general partner may exercise its right to call and purchase common units if it and its affiliates own more than 80.0% of our common units; |
• | our general partner controls the enforcement of obligations owed to us by it and its affiliates; and |
• | our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
• | the allocation of shared overhead expenses to OPCO and us; |
• | the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and OPCO or its subsidiaries, on the other hand; |
• | the determination and timing of the amount of cash to be distributed to OPCO’s partners and the amount of cash to be reserved for the future conduct of OPCO’s business; |
• | the decision as to whether OPCO should make asset or business acquisitions or dispositions, and on what terms; |
• | the determination or the amount and timing of OPCO’s capital expenditures; |
• | the determination of whether OPCO should use cash on hand, borrow funds or issue equity to raise cash to finance maintenance or expansion capital projects, repay indebtedness, meet working capital needs or otherwise; and |
• | any decision we make to engage in business activities independent of, or in competition with, OPCO. |
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• | Shuttle Tankers.Our shuttle tanker fleet consists of 38 vessels that operate under fixed-rate contracts of affreightment, time charters and bareboat charters. Of the 38 shuttle tankers, 24 are owned by OPCO (including 5 through 50% owned subsidiaries), 12 are chartered-in by OPCO and 2 are owned by us (including one through a 50% owned subsidiary). All of the shuttle tankers operate under contracts of affreightment for various offshore oil fields or under fixed-rate time charter or bareboat charter contracts for specific oil field installations. The majority of the contracts of affreightment volumes are life-of-field, which have an estimated weighted-average remaining life of approximately 16 years. The time charters and bareboat charters have an average remaining contract term of approximately 5 years. As of December 31, 2007, our shuttle tankers, which had a total cargo capacity of approximately 4.6 million deadweight tonnes (ordwt), represented approximately 65% of the total tonnage of the world shuttle tanker fleet. |
• | Conventional Tankers.OPCO has a fleet of nine Aframax conventional crude oil tankers. The conventional tankers all have fixed-rate time charters with Teekay Corporation, with an average remaining term of approximately 7 years. As of December 31, 2007, our conventional tankers had a total cargo capacity of approximately 0.9 million dwt. |
• | FSO Units.We have a fleet of five FSO units. All of the FSO units operate under fixed-rate contracts, with an average remaining term of approximately 4 years. As of December 31, 2007, our FSO units had a total cargo capacity of approximately 0.6 million dwt. |
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Capacity | Position- | Operating | Remaining | |||||||||||||||||||||||||
Vessel | (dwt) | Built | Ownership | ing system | Region | Contract Type (1) | Charterer | Term | ||||||||||||||||||||
Navion Hispania | 126,700 | 1999 | 100% | DP2 | North Sea | CoA | ||||||||||||||||||||||
Navion Oceania | 126,300 | 1999 | 100% | DP2 | North Sea | CoA | ||||||||||||||||||||||
Navion Anglia | 126,300 | 1999 | 100% | DP2 | North Sea | CoA | ||||||||||||||||||||||
Navion Scandia | 126,700 | 1998 | 100% | DP2 | North Sea | CoA | ||||||||||||||||||||||
Navion Britannia (2) | 124,200 | 1998 | 100% | DP2 | North Sea | CoA | StatoilHydro | |||||||||||||||||||||
Chevron | ||||||||||||||||||||||||||||
Navion Norvegia (2) | 130,600 | 1995 | 100% | DP | North Sea | CoA | Marathon Oil | |||||||||||||||||||||
Hess | ||||||||||||||||||||||||||||
Navion Europa (2) | 130,300 | 1995 | 100% | DP | North Sea | CoA | ExxonMobil | |||||||||||||||||||||
Eni Mongstad | Majority of volumes are | |||||||||||||||||||||||||||
Navion Fennia (2) | 95,200 | 1992 | 100% | DP | North Sea | CoA | Terminal Draugen | life-of-field | ||||||||||||||||||||
Grena | 148,000 | 2003 | In-chartered (until 2013) (3) | DP2 | North Sea | CoA | Transport BP | |||||||||||||||||||||
Bertora | 100,300 | 2001 | In-chartered (until 2008) (10) | DP2 | North Sea | CoA | ConocoPhillips Shell | |||||||||||||||||||||
Sallie Knutsen | 153,600 | 1999 | In-chartered (until 2015) | DP2 | North Sea | CoA | Total Talisman | |||||||||||||||||||||
Karen Knutsen | 153,600 | 1999 | In-chartered (until 2013) | DP2 | North Sea | CoA | Nexen DONG | |||||||||||||||||||||
Elisabeth Knutsen | 124,700 | 1997 | In-chartered (until 2008) | DP2 | North Sea | CoA | Danoil Denerco | |||||||||||||||||||||
Gerd Knutsen | 146,200 | 1996 | In-chartered (until 2008) | DP | North Sea | CoA | Idemitsu Lundin | |||||||||||||||||||||
Aberdeen | 87,000 | 1996 | In-chartered (until 2009) | DP | North Sea | CoA | DNO (6) | |||||||||||||||||||||
Randgrid (2) | 124,500 | 1995 | In-chartered (until 2014) (4) | DP | North Sea | CoA | ||||||||||||||||||||||
Tordis Knutsen | 123,800 | 1993 | In-chartered (unit 2010) | DP | North Sea | CoA | ||||||||||||||||||||||
Vigdis Knutsen | 123,400 | 1993 | In-chartered (until 2008) | DP | North Sea | CoA | ||||||||||||||||||||||
Navion Akarita | 107,200 | 1991 | Lease (until 2012) (5) | DP | North Sea | CoA | ||||||||||||||||||||||
Tove Knutsen (2) | 106,300 | 1989 | In-chartered (until 2009) | DP2 | North Sea | CoA | ||||||||||||||||||||||
Stena Sirita | 127,400 | 1999 | 50%(7) | DP2 | North Sea | Time charter | ExxonMobil (8) | 2 years | ||||||||||||||||||||
Navion Clipper | 78,200 | 1993 | 100% | DP | Brazil | Time charter | Petrobras | 2 years | ||||||||||||||||||||
Nordic Marita | 103,900 | 1999 | 100% | DP | Brazil | Time charter | Petrobras | 1.5 years | ||||||||||||||||||||
Stena Natalita | 108,000 | 2001 | 50%(7) | DP2 | North Sea | Time charter | ExxonMobil (8) | 1.5 years | ||||||||||||||||||||
Stena Alexita | 127,400 | 1998 | 50%(7) | DP2 | North Sea | Time charter | ExxonMobil (8) | 1 year | ||||||||||||||||||||
Nordic Svenita | 106,500 | 1997 | 100% | DP | Brazil | Time charter | Petrobas | 1 year | ||||||||||||||||||||
Nordic Savonita | 108,100 | 1992 | 100% | DP | Brazil | Time charter | Petrobras | 2 years | ||||||||||||||||||||
Nordic Torinita | 106,800 | 1992 | 100% | DP2 | North Sea | Time charter | Knutsen (8) | 1 year | ||||||||||||||||||||
Basker Spirit | 97,000 | 1992 | 100% | DP | Australia | Time charter | Anzon (8) | 1 year | ||||||||||||||||||||
Navion Stavanger | 147,500 | 2003 | 100% | DP2 | Brazil | Bareboat | Petrobras (9) | 12 years | ||||||||||||||||||||
Nordic Spirit | 151,300 | 2001 | 100% | DP | Brazil | Bareboat | Petrobras (9) | 11 years | ||||||||||||||||||||
Stena Spirit | 151,300 | 2001 | 50%(7) | DP | Brazil | Bareboat | Petrobras (9) | 10 years | ||||||||||||||||||||
Nordic Brasilia | 151,300 | 2004 | 100% | DP | Brazil | Bareboat | Petrobras (9) | 10 years | ||||||||||||||||||||
Nordic Rio | 151,300 | 2004 | 50%(7) | DP | Brazil | Bareboat | Petrobras (9) | 10 years | ||||||||||||||||||||
Navion Bergen | 105,600 | 2000 | 100% | DP2 | Brazil | Bareboat | Petrobras (9) | 13 years | ||||||||||||||||||||
Navion Gothenburg | 152,200 | 2006 | 50%(7) | DP2 | Brazil | Bareboat | Petrobras (9) | 13 years | ||||||||||||||||||||
Petroatlantic | 92,900 | 2003 | 100% | DP2 | North Sea | Bareboat | Petrojarl (9) | 2 years | ||||||||||||||||||||
Petronordic | 92,900 | 2002 | 100% | DP2 | North Sea | Bareboat | Petrojarl (9) | 2 years | ||||||||||||||||||||
Total capacity | 4,644,500 | |||||||||||||||||||||||||||
(1) | “CoA” refers to contracts of affreightment. | |
(2) | The vessel is capable of loading from a submerged turret loading buoy. | |
(3) | OPCO has options to extend the time charter or purchase the vessel. | |
(4) | The time charter period is linked to the term of the transportation service agreement for the Heidrun field on the Norwegian continental shelf, which term is in turn linked to the production level at the field. |
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(5) | OPCO has options to extend the bareboat lease. | |
(6) | Not all of the contracts of affreightment customers utilize every ship in the contract of affreightment fleet. | |
(7) | Owned through a 50% owned subsidiary. The parties share in the profits and losses of the subsidiary in proportion to each party’s relative capital contributions. Teekay Corporation subsidiaries provide operational services for these vessels. | |
(8) | Charterer has an option to extend the time charter. | |
(9) | Charterer has the right to purchase the vessel at end of the bareboat charter. | |
(10) | In June 2007, OPCO exercised its option to purchase this vessel. The vessel delivered in March 2008. |
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Contract | ||||||||||||||||||||||||
Vessel | Capacity (dwt) | Built | Ownership | Type | Charterer | Remaining Term (1) | ||||||||||||||||||
Kilimanjaro Spirit | 115,000 | 2004 | 100 | % | Time charter | Teekay | 11 years | |||||||||||||||||
Fuji Spirit | 106,300 | 2003 | 100 | % | Time charter | Teekay | 11 years | |||||||||||||||||
Hamane Spirit | 105,200 | 1997 | 100 | % | Time charter | Teekay | 8 years | |||||||||||||||||
Poul Spirit | 105,300 | 1995 | 100 | % | Time charter | Teekay | 7 years | |||||||||||||||||
Gotland Spirit | 95,300 | 1995 | 100 | % | Time charter | Teekay | 7 years | |||||||||||||||||
Torben Spirit | 98,600 | 1994 | 100 | % | Time charter | Teekay | 5 years | |||||||||||||||||
Scotia Spirit (2) | 95,000 | 1992 | 100 | % | Time charter | Teekay | 4 years | |||||||||||||||||
Leyte Spirit | 98,700 | 1992 | 100 | % | Time charter | Teekay | 4 years | |||||||||||||||||
Luzon Spirit | 98,600 | 1992 | 100 | % | Time charter | Teekay | 4 years | |||||||||||||||||
Total capacity | 918,000 | |||||||||||||||||||||||
(1) | Charterer has options to extend each time charter on an annual basis for a total of five years after the initial term. Charterer also has the right to purchase the vessel beginning on the third anniversary of the contract at a specified price. | |
(2) | This vessel has been equipped with FSO equipment and OPCO can terminate the charter upon 30-days notice if it has arranged an FSO project for the vessel. |
Capacity | Field name and | Remaining | ||||||||||||||||||||||||||
Vessel | (dwt) | Built | Ownership | location | Contract Type | Charterer | Term | |||||||||||||||||||||
Pattani Spirit | 113,800 | 1988 | 100 | % | Platong, Thailand | Bareboat | Teekay | 6 years (1) | ||||||||||||||||||||
Nordic Apollo | 126,900 | 1978 | 89 | % | Banff, U.K. | Bareboat | Teekay | 7 years (2) | ||||||||||||||||||||
Navion Saga | 149,000 | 1991 | 100 | % | Volve, Norway | Time charter | StatoilHydro | 2 years (3) | ||||||||||||||||||||
Karratha Spirit | 106,600 | 1988 | 100 | % | Legendre, Australia | Time charter | Woodside | 1 year (3) | ||||||||||||||||||||
Dampier Spirit | 106,700 | 1987 | 100 | % | Stag, Australia | Time charter | Apache | 6 year (3) | ||||||||||||||||||||
Total capacity | 603,0000 | |||||||||||||||||||||||||||
(1) | This vessel is on a back-to-back charter between Teekay and Unocol for a remaining term of six years. | |
(2) | Charterer is required to charter the vessel for as long as a specified FPSO unit, thePetrojarl Banff, produces the Banff field in the North Sea, which could extend to 2014 depending on the field operator. | |
(3) | Charterer has option to extend the time charter after the initial fixed period. |
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• | Expand global operations in high growth regions.We seek to expand our shuttle tanker and FSO unit operations into growing offshore markets such as Brazil and Australia. In addition, we intend to pursue opportunities in new markets such as Arctic Russia, Eastern Canada, the Gulf of Mexico, Asia and Africa. |
• | Pursue opportunities in the FPSO sector.We believe that Teekay Corporation’s control of Petrojarl will enable us to competitively pursue FPSO projects anywhere in the world by combining Petrojarl’s engineering and operational expertise with Teekay Corporation’s global marketing organization and extensive customer and shipyard relationships. |
• | Acquire additional vessels on long-term, fixed-rate contracts.We intend to continue acquiring shuttle tankers and FSO units with long-term contracts, rather than ordering vessels on a speculative basis, and we intend to follow this same practice in acquiring FPSO units. We believe this approach facilitates the financing of new vessels based on their anticipated future revenues and ensures that new vessels will be employed upon acquisition, which should stabilize cash flows. Additionally, we anticipate growing by acquiring additional limited partner interests in OPCO that Teekay Corporation may offer us in the future. |
• | Provide superior customer service by maintaining high reliability, safety, environmental and quality standards.Energy companies seek transportation partners that have a reputation for high reliability, safety, environmental and quality standards. We intend to leverage OPCO’s and Teekay Corporation’s operational expertise and customer relationships to further expand a sustainable competitive advantage with consistent delivery of superior customer service. |
• | Manage our conventional tanker fleet to provide stable cash flows.We believe the fixed-rate time charters for these tankers will provide stable cash flows during their terms and a source of funding for expanding offshore operations. Depending on prevailing market conditions during and at the end of each existing charter, we may seek to extend the charter, enter into a new charter, operate the vessel on the spot market or sell the vessel, in an effort to maximize returns on the conventional fleet while managing residual risk. |
• | Leading position in the shuttle tanker sector.We are the world’s largest owner and operator of shuttle tankers, as we owned or operated 38 of the 74 vessels in the world shuttle tanker fleet as at December 31, 2007. Our large fleet size enables us to provide comprehensive coverage of charterers’ requirements and provides opportunities to enhance the efficiency of operations and increase fleet utilization. |
• | Offshore operational expertise and enhanced growth opportunities through our relationship with Teekay Corporation.Teekay Corporation has achieved a global brand name in the shipping industry and the offshore market, developed an extensive network of long-standing relationships with major energy companies and earned a reputation for reliability, safety and excellence. Some benefits we believe we receive due to our relationship with Teekay Corporation include: |
• | access through services agreements to its comprehensive market intelligence and operational and technical sophistication gained from over 25 years of providing shuttle tanker services and FSO services to offshore energy customers. We believe this expertise will also assist us in successfully expanding into the FPSO sector through Teekay Corporation’s control of Petrojarl and our rights to participate in certain FPSO projects under the omnibus agreement; |
• | access to Teekay Corporation’s general commercial and financial core competencies, practices and systems, which we believe enhances the efficiency and quality of operations; |
• | enhanced growth opportunities and added competitiveness in bidding for transportation requirements for offshore projects and in attracting and retaining long-term contracts throughout the world; and |
• | improved leverage with leading shipyards during periods of vessel production constraints, which are anticipated over the next few years, due to Teekay Corporation’s established relationships with these shipyards and the high number of newbuilding orders it places. |
• | Cash flow stability from contracts with leading energy companies.We benefit from stability in cash flows due to the long-term, fixed-rate contracts underlying most of our business. We have been able to secure long-term contracts because our services are an integrated part of offshore oil field projects and a critical part of the logistics chain of the fields. Due to the integrated nature of our services, the high cost of field development and the need for uninterrupted oil production, contractual relationships with customers with respect to any given field typically last until the field is no longer producing. |
• | Disciplined vessel acquisition strategy and successful project execution.Our fleet has been built through successful new project tenders and acquisitions, and this strategy has contributed significantly to our leading position in the shuttle tanker market. A significant portion of OPCO’s shuttle tanker fleet was established through the acquisition of Ugland Nordic Shipping AS in 2001 and Navion AS, StatoilHydro ASA’s shipping subsidiary, in 2003. In addition, we have increased the size of our fleet through customized shuttle tanker and FSO projects for major energy companies around the world. |
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• | We have financial flexibility to pursue acquisitions and other expansion opportunities through additional debt borrowings and the issuance of additional partnership units.As of March 31, 2008, our existing revolving credit facilities provided us access to $115.5 million of undrawn financing for working capital and acquisition purposes. We believe that borrowings available under our revolving credit facilities, access to other bank financing facilities and the debt capital markets, and our ability to issue additional partnership units will provide us with financial flexibility to pursue acquisition and expansion opportunities. |
• | vessel maintenance; |
• | crewing; |
• | purchasing; |
• | shipyard supervision; |
• | insurance; and |
• | financial management services. |
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• | the vessel’s flag state, or the vessel’s classification society if nominated by the flag state, inspect the vessels to ensure they comply with applicable rules and regulations of the country of registry of the vessel and the international conventions of which that country is a signatory; |
• | port state control authorities, such as the U.S. Coast Guard and Australian Maritime Safety Authority, inspect vessels at regular intervals; and |
• | customers regularly inspect our vessels as a condition to chartering, and regular inspections are standard practice under long-term charters. |
• | ensure adherence to our operating standards; |
• | maintain the structural integrity of the vessel is being maintained; |
• | maintain machinery and equipment to give full reliability in service; |
• | optimize performance in terms of speed and fuel consumption; and |
• | ensure the vessel’s appearance will support our brand and meet customer expectations. |
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• | is the subject of a contract for a major conversion or original construction on or after July 6, 1993; |
• | commences a major conversion or has its keel laid on or after January 6, 1994; or |
• | completes a major conversion or is a newbuilding delivered on or after July 6, 1996. |
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• | natural resources damages and the related assessment costs; |
• | real and personal property damages; |
• | net loss of taxes, royalties, rents, fees and other lost revenues; |
• | lost profits or impairment of earning capacity due to property or natural resources damage; |
• | net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and |
• | loss of subsistence use of natural resources. |
• | address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a “worst case discharge”; |
• | describe crew training and drills; and |
• | identify a qualified individual with full authority to implement removal actions. |
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• | TEHS is a capital company resident in Luxembourg and fully subject to tax in this country; |
• | TEHS owns more than 10% of Teekay Netherlands, or alternatively, TEHS’ acquisition price for the shares of Teekay Netherlands equals or exceeds Euro 1.2 million for purposes of the dividend exemption or Euro 6.0 million for purposes of the capital gains exemption; |
• | At the time of the dividend or disposal of shares, TEHS has owned the shares for at least 12 months (or, alternatively in the case of dividends, TEHS commits to hold the shares for at least 12 months and in the case of capital gains, TEHS commits to continue to hold at least 10% of the shares of Teekay Netherlands for at least 12 months); and |
• | Teekay Netherlands is a resident of the Netherlands for Dutch tax purposes and is covered by the European Union Parent-Subsidiary Directive. |
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• | Teekay Netherlands is a shareholder of at least 5.0% of the par value of the paid up share capital of Norsk Teekay AS; |
• | Norsk Teekay AS is subject to Norwegian profits tax; |
• | the shares are not held as stock in trade; and |
• | the shares of Norsk Teekay AS are not held as a portfolio investment. |
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• | Teekay Netherlands must be a shareholder of at least 5.0% of the par value of the paid up share capital of Norsk Teekay AS; and |
• | the shares in Norsk Teekay AS must not be considered a portfolio investment in a company that is not subject to an adequate profit tax. |
• | charter hire/freight income from the operation of non-Singapore-registered vessels outside the limits of the port of Singapore; |
• | dividends from approved shipping subsidiaries; |
• | gains from the disposition of non-Singapore-registered ships for a period of 5 years from January 1, 2004 to December 13, 2008; and |
• | foreign exchange, interest rate swaps and other derivative gains would be automatically regarded as tax exempt hedging gains for a period of 5 years from January 1 2004 to December 31, 2008. |
• | be a tax resident in Singapore; |
• | own and operate a significant fleet of ships; |
• | implement the business plan agreed with the MPA at the time of application of the incentive or such other modified plans as approved by the MPA; |
• | the company’s shipping operations should be controlled and managed in Singapore; |
• | incur directly attributable business spending in Singapore an average of S$4 million a year or S$20 million over a 5 year period; |
• | support and make significant use of Singapore’s trade infrastructure, such as banking, financial, business training, arbitration, and other ancillary services; |
• | all ships chartered-in must be conducted on an arm’s-length basis; |
• | inform the MPA of any changes to its Group shareholdings and operations; |
• | keep proper books and records and submit annual audited accounts to the MPA, together with an annual audited statement comparing the actual total business spending in Singapore against the projected amount within 3 months of their completion; and |
• | disclose such information to and permit such inspection of its premises by the Singapore Government, as required. |
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Net Income (Loss) | ||||||||||||||||
January 1 to | December 19 to | |||||||||||||||
December 18, | December 31, | |||||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
As previously reported | 19,672 | (33,563 | ) | 848 | 84,747 | |||||||||||
Adjustments: | ||||||||||||||||
Derivative instruments, net of non-controlling interest and other(1) | (17,014 | ) | 2,806 | 500 | 756 | |||||||||||
Dropdown Predecessor(2) | 1,300 | 3,097 | 114 | 2,910 | ||||||||||||
Vision Incentive Plan | — | (2,632 | ) | — | 7,500 | |||||||||||
As restated | 3,958 | (30,292 | ) | 1,462 | 95,913 | |||||||||||
(1) | Includes an adjustment totaling ($3.6) million for the year ended December 31, 2007 relating to the accounting for the non-controlling interest in one of our 50% owned subsidiaries and adjusting amounts related to deferred income taxes and the fair value of derivative instruments at December 31, 2007. | |
(2) | Relates to the results for the pre-acquisition periods in which we and the acquired interests in vessels, as listed below, were both in operation and under the common control of Teekay Corporation, as follows: |
• | Dampier Spirit(FSO unit) for March 15, 1998 to September 30, 2007; | ||
• | Navion Bergen(shuttle tanker) for April 16, 2007 to June 30, 2007; and | ||
• | Navion Gothenburg(shuttle tanker) began operations concurrently with the Partnership’s acquisition of it on July 24, 2007. |
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• | Contracts of affreightment, whereby we carry an agreed quantity of cargo for a customer over a specified trade route within a given period of time; |
• | Time charters, whereby vessels we operate and are responsible for crewing are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates or current market rates; |
• | Bareboat charters, whereby customers charter vessels for a fixed period of time at rates that are generally fixed, but the customers operate the vessels with their own crews; and |
• | Voyage charters, which are charters for shorter intervals that are priced on a current, or “spot,” market rate. |
Contract of Affreightment | Time Charter | Bareboat Charter | Voyage Charter(1) | |||||
Typical contract length | One year or more | One year or more | One year or more | Single voyage | ||||
Hire rate basis(2) | Typically daily | Daily | Daily | Varies | ||||
Voyage expenses(3) | We pay | Customer pays | Customer pays | We pay | ||||
Vessel operating expenses(3) | We pay | We pay | Customer pays | We pay | ||||
Off-hire (4) | Customer typically does not pay | Varies | Customer typically pays | Customer does not pay |
(1) | Under a consecutive voyage charter, the customer pays for idle time. | |
(2) | “Hire”rate refers to the basic payment from the charterer for the use of the vessel. | |
(3) | Defined below under “Important Financial and Operational Terms and Concepts.” | |
(4) | “Off-hire”refers to the time a vessel is not available for service. |
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• | charges related to the depreciation of the historical cost of our fleet (less an estimated residual value) over the estimated useful lives of the vessels; |
• | charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking; and |
• | charges related to the amortization of the fair value of contracts of affreightment where amounts have been attributed to those items in acquisitions; these amounts are amortized over the period in which the asset is expected to contribute to future cash flows. |
• | Our financial results reflect the results of the interests in vessels acquired from Teekay Corporation for all periods the vessels were under common control.In July 2007, we acquired from Teekay Corporation ownership of its 100% interest in the 2000-built shuttle tankerNavion Bergenand its 50% interest in the 2006-built shuttle tankerNavion Gothenburg, respectively. The acquisitions included the assumption of debt, related interest rate swap agreements and Teekay Corporation’s rights and obligations under 13-year, fixed-rate bareboat charters. In October 2007, we acquired from Teekay Corporation its interest in the FSO unitDampier Spirit, along with its 7-year fixed-rate time-charter. | ||
These transactions were deemed to be business acquisitions between entities under common control. Accordingly, we have accounted for these transactions in a manner similar to the pooling of interest method. Under this method of accounting, our financial statements prior to the date the interests in these vessels were actually acquired by us are retroactively adjusted to include the results of these acquired vessels. The periods retroactively adjusted include all periods that we and the acquired vessels were both under common control of Teekay Corporation and had begun operations. As a result, our statements of income (loss) for the years ended December 31, 2007, 2006 and 2005 reflect these vessels, referred to herein as theDropdown Predecessor, as if we had acquired them when each respective vessel began operations under the ownership of Teekay Corporation. These vessels began operations on April 16, 2007 (Navion Bergen), July 24, 2007 (Navion Gothenburg) and March 15, 1998 (Dampier Spirit). |
• | Our cash flow will be reduced by distributions on Teekay Corporation’s interest in OPCO. Following the closing of our initial public offering, Teekay Corporation has held 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, including reserves for future maintenance capital expenditures, working capital and other matters. Distributions to Teekay Corporation for periods following our initial public offering reduce our cash flow compared to historical results. |
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• | On July 1, 2006, OPCO transferred certain assets to Teekay Corporation that are included in results of operation prior to that date.On July 1, 2006, and in anticipation of our December 2006 initial public offering, 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 a subsidiary of Teekay Corporation at charter rates that provided for a 1.25% fixed profit margin. We have disclosed the results of Navion Shipping Ltd. for periods prior to its sale on July 1, 2006 as discontinued operations. In addition, OPCO transferred to Teekay Corporation a 1987-built shuttle tanker (theNordic Trym), a 1992-built in-chartered shuttle tanker (theBorga) and certain other assets (collectively with Navion Shipping Ltd., theNon-OPCO Assets). |
• | Amendments to certain operating agreements in December 2006 have resulted in five 50% owned subsidiaries being consolidated with us under GAAP.Our results of operations prior to December 1, 2006 reflect OPCO’s investment in five 50% joint venture companies, accounted for using the equity method, whereby the investment is carried at the original cost plus OPCO’s proportionate share of undistributed earnings. On December 1, 2006, the operating agreements for these subsidiaries were amended such that OPCO obtained control of these subsidiaries, resulting in the consolidation of these five subsidiaries in accordance with GAAP. Although our net income did not change due to this change in accounting, the results of the subsidiaries have been reflected in our income from operations since December 1, 2006. As noted above, this change also resulted in the five shuttle tankers owned by these subsidiaries being included in the vessels used to calculate calendar-ship-days. |
• | The size of our fleet continues to change.Our 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 25 in 2007, and our FSO segment increased from 4 in 2006 to 5 in 2007. Please read “— Results of Operations” 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 believed reflected then-prevailing market rates. Please read item 18 — Financial Statements: Note 10 “Related Party Transactions.” At various times prior to October 2006, 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. Under the terms of eight of the nine new time-charter contracts, OPCO is responsible for the bunker fuel expenses and the approximate amounts of these expenses are added to the daily hire rate. |
• | Our vessel operating costs are facing industry-wide cost pressures.The shipping industry is experiencing a global manpower shortage due to significant growth in the world fleet. This shortage has resulted in crewing wage increases during 2007, the effect of which is explained in our comparison of vessel operating expenses incurred in the year ended December 31, 2007 versus the year ended December 31, 2006. We expect a trend of increasing crew compensation to continue into 2008. |
• | Our financial results of operations are affected by fluctuations in currency exchange rates. Under US 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 settled its then-outstanding foreign currency denominated advances from affiliates and also entered into services agreements with subsidiaries of Teekay Corporation whereby the subsidiaries operate and crew the vessels. Under these service 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 service agreements will adjust to reflect any change in Teekay Corporation’s cost of providing services based on fluctuations in the value of the Norwegian Kroner relative to the U.S. Dollar, which may result in increased payments under the services agreements if the strength of the U.S. Dollar declines relative to the Norwegian Kroner. At December 31, 2007, we were committed to foreign exchange contracts for the forward purchase of approximately Norwegian Kroner 255.7 million for U.S. Dollars at an average rate of Norwegian Kroner 5.64 per U.S. Dollar, maturing in 2009. |
• | We are incurring additional general and administrative expenses.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 applicable periods presented. In connection with 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 administrative, advisory and technical services and ship management. 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 include reimbursement of reasonable direct and indirect expenses incurred to provide the services. We also reimburse our general partner for all expenses it incurs on our behalf, including compensation and expenses of its executive officers and directors and we may grant equity compensation that would result in an expense to us. Since becoming a publicly traded limited partnership, we have also incurred costs associated with annual reports to unitholders and SEC filings, investor relations, NYSE annual listing fees and additional 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. |
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Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2007 | 2006 | % Change | |||||||||
(restated) | (restated) | (restated) | ||||||||||
Voyage revenues | 590,611 | 535,972 | 10.2 | |||||||||
Voyage expenses | 114,157 | 88,446 | 29.1 | |||||||||
Net voyage revenues | 476,454 | 447,526 | 6.5 | |||||||||
Vessel operating expenses | 103,809 | 80,307 | 29.3 | |||||||||
Time-charter hire expense | 150,463 | 165,614 | (9.1 | ) | ||||||||
Depreciation and amortization | 86,502 | 71,367 | 21.2 | |||||||||
General and administrative(1) | 50,776 | 50,353 | 0.8 | |||||||||
Gain on sale of vessels and equipment — net of writedowns | — | (4,778 | ) | (100.0 | ) | |||||||
Income from vessel operations | 84,904 | 84,663 | 0.3 | |||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 9,180 | 7,559 | 21.4 | |||||||||
Chartered-in Vessels | 4,297 | 4,824 | (10.9 | ) | ||||||||
Total | 13,477 | 12,383 | 8.8 | |||||||||
(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 subsidiaries, effective December 1, 2006 upon amendments to the applicable operating agreements that granted OPCO control of the subsidiaries (theConsolidation of 50%-Owned Subsidiaries). Prior to December 1, 2006, these entities were equity accounted for as joint ventures. Please read “—Items You Should Consider When Evaluating Our Results of Operations— Amendments to certain operating agreements in December 2006 have resulted in five 50% owned subsidiaries being consolidated with us under GAAP” above; and |
• | the acquisition in July 2007 of the 2000-built shuttle tanker (theNavion Bergen) and a 50% interest in the 2006-built shuttle-tanker (theNavion Gothenburg) (the2007 Shuttle Tanker Acquisitions). However, as a result of the inclusion of the Dropdown Predecessor, theNavion Bergenhad been included for accounting purposes in our results as if it had been acquired on April 16, 2007, when it completed its conversion and began operations as a shuttle tanker for Teekay Corporation. TheNavion Gothenburgcompleted its conversion and began operations as a shuttle tanker concurrently with its acquisition in July 2007. Please read “—Items You Should Consider When Evaluating Our Results of Operations— Our financial results reflect the results of the interests in vessels acquired from Teekay Corporation for all periods the vessels were under common control” above; |
• | the sale of a 1981-built shuttle tanker (theNordic Laurita) in July 2006 to a third party and the sale of a 1987-built shuttle tanker (theNordic Trym) to Teekay Corporation in November 2006 (collectively, the2006 Shuttle Tanker Dispositions). |
• | the redelivery of one chartered-in vessel back to its owner in April 2006; and |
• | the sale in July 2006 to Teekay Corporation of a time charter-in contract for a 1992-built shuttle tanker (theBorga). |
• | an increase of $40.8 million due to the Consolidation of 50%-Owned Subsidiaries; |
• | an increase of $12.2 million due to the 2007 Shuttle Tanker Acquisitions (including the impact of the Dropdown Predecessor); and |
• | an increase of $3.6 million due to the renewal of certain vessels on time charter contracts at higher daily rates during 2006; |
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• | a decrease of $13.6 million in revenues due to (a) fewer revenue days for shuttle tankers servicing contracts of affreightment during 2007 due to a decline in oil production from mature oil fields in the North Sea and (b) the redeployment of idle shuttle tankers servicing contracts of affreightment in the conventional spot market at a lower average charter rate during the fourth quarter of 2007 due to a weaker spot tanker market; |
• | a decrease of $7.6 million due to the 2006 Shuttle Tanker Dispositions; |
• | a decrease of $4.4 million due to the sale of the time charter-in contract for theBorga;and |
• | a decrease of $2.9 million from the redelivery of one chartered-in vessel to its owner in April 2006. |
• | an increase of $17.3 million due to the Consolidation of 50%-Owned Subsidiaries; |
• | an increase of $7.0 million in salaries for crew and officers primarily due to general wage escalations from the renegotiation of seafarer contracts, changes in crew composition and a change in the crew rotation system; and |
• | an increase of $1.9 million relating to an increase in services due to the rising cost of consumables, lubes, and freight during 2007; |
• | a decrease of $3.2 million due to the 2006 Shuttle Tanker Dispositions. |
• | an increase of $13.7 million due to the Consolidation of 50%-Owned Subsidiaries; |
• | an increase of $4.1 million due to the 2007 Shuttle Tanker Acquisitions (including the impact of the Dropdown Predecessor); and |
• | an increase of $3.9 million from the amortization of vessel upgrades and drydock costs incurred during 2006 and 2007; |
• | a decrease of $5.7 million relating to the 2006 Shuttle Tanker Dispositions. |
• | a $6.4 million gain relating to the sale of a 1981-built shuttle tanker (theNordic Laurita) in July 2006; |
• | a $2.2 million writedown in 2006 of certain offshore equipment servicing a marginal oil field that was prematurely shut down in June 2005 due to lower than expected oil production. This writedown occurred due to a reassessment of the estimated net realizable value of the equipment and follows a $12.2 million writedown in 2005 arising from the early termination of a contract for the equipment (some of this equipment was re-deployed on another field in October 2005). |
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Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2007 | 2006 | % Change | |||||||||
(restated) | (restated) | |||||||||||
Voyage revenues | 135,922 | 70,056 | 94.0 | |||||||||
Voyage expenses | 36,594 | 4,892 | 648.0 | |||||||||
Net voyage revenues | 99,328 | 65,164 | 52.4 | |||||||||
Vessel operating expenses | 24,175 | 19,378 | 24.8 | |||||||||
Depreciation and amortization | 21,324 | 21,212 | 0.5 | |||||||||
General and administrative(1) | 7,828 | 11,789 | (33.6 | ) | ||||||||
Restructuring charge | — | 832 | (100.0 | ) | ||||||||
Income from vessel operations | 46,001 | 11,953 | 284.8 | |||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 3,405 | 3,650 | (6.7 | ) | ||||||||
(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). |
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Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2007 | 2006 | % Change | |||||||||
(restated) | (restated) | (restated) | ||||||||||
Voyage revenues | 58,670 | 35,883 | 63.5 | |||||||||
Voyage expenses | 886 | 1,085 | (18.3 | ) | ||||||||
Net voyage revenues | 57,784 | 34,798 | 66.1 | |||||||||
Vessel operating expenses | 21,676 | 12,603 | 72.0 | |||||||||
Depreciation and amortization | 16,544 | 11,970 | 38.2 | |||||||||
General and administrative(1) | 3,800 | 3,049 | 24.6 | |||||||||
Income from vessel operations | 15,764 | 7,176 | 119.7 | |||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 1,705 | 1,460 | 16.8 | |||||||||
(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). |
• | a decrease in management fees owing to subsidiaries of Teekay Corporation (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 us, OPCO and certain of its subsidiaries and subsidiaries of Teekay Corporation); |
• | an increase of $2.4 million relating to additional expenses as a result of our being a publicly-traded limited partnership since our initial public offering in December 2006. |
• | an increase of $48.9 million relating to the unrealized change in fair value of our interest rate swaps; |
• | an increase of $35.9 million relating to a full year of interest incurred on debt under a revolving credit facility OPCO entered into during the fourth quarter of 2006; |
• | an increase of $11.3 million due to the Consolidation of 50%-Owned Subsidiaries; and |
• | increase of $4.7 million due to the assumption of debt relating to the 2007 Shuttle Tanker Acquisitions (including theNavion Bergen‘s interest expense from April 16, 2007 until we acquired it on July 1, 2007); |
• | a decrease of $14.2 million in interest incurred on a Norwegian Kroner-denominated loan owing by a subsidiary of OPCO to Teekay Corporation from October 2006 until our initial public offering in December 2006 (Teekay Corporation sold this loan receivable to OPCO immediately before our initial public offering); |
• | a decrease of $12.9 million relating to the settlement of interest-bearing advances from affiliates during the fourth quarter of 2006; |
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• | a decrease of $7.5 million relating to interest incurred under a revolving credit facility that was prepaid and cancelled prior to our initial public offering; and |
• | a decrease of $6.3 million 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. |
Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2006 | 2005 | % Change | |||||||||
(restated) | (restated) | (restated) | ||||||||||
Voyage revenues | 535,972 | 516,758 | 3.7 | |||||||||
Voyage expenses | 88,446 | 68,308 | 29.5 | |||||||||
Net voyage revenues | 447,526 | 448,450 | (0.2 | ) | ||||||||
Vessel operating expenses | 80,307 | 75,196 | 6.8 | |||||||||
Time-charter hire expense | 165,614 | 169,687 | (2.4 | ) | ||||||||
Depreciation and amortization | 71,367 | 77,083 | (7.4 | ) | ||||||||
General and administrative(1) | 50,353 | 44,063 | 14.3 | |||||||||
Gain on sale of vessels and equipment — net of writedowns | (4,778 | ) | 2,820 | 269.4 | ||||||||
Restructuring charge | — | 955 | (100.0 | ) | ||||||||
Income from vessel operations | 84,663 | 78,646 | 7.7 | |||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 7,559 | 8,120 | (6.9 | ) | ||||||||
Chartered-in Vessels | 4,824 | 4,963 | (2.8 | ) | ||||||||
Total | 12,383 | 13,083 | (5.4 | ) | ||||||||
(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 sale of two older shuttle tankers in March and October 2005, respectively (or the2005 Shuttle Tanker Dispositions); and |
• | the 2006 Shuttle Tanker Dispositions. |
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• | the redelivery of one chartered-in vessel back to its owner in April 2006; and |
• | the sale in July 2006 of theBorgato Teekay Corporation; |
• | the inclusion of two additional chartered-in vessels commencing May and June 2005. |
• | a decrease of $5.9 million from the 2005 Shuttle Tanker Dispositions; |
• | a decrease of $4.5 million due to an extended drydocking of theNordic Trymduring the second half of 2006; |
• | a decrease of $2.9 million from the redelivery of one chartered-in vessel to its owner in April 2006; and |
• | a decrease of $2.2 million from the 2006 Shuttle Tanker Dispositions; |
• | an increase of $5.4 million from the 2006 transfer of certain of our shuttle tankers servicing contracts of affreightment to short-term time-charter contracts, which had higher average rates; |
• | an increase of $4.9 million due to the renewal of three vessels on time charter at higher daily rates during 2006; and |
• | an increase of $3.8 million due to the change in accounting treatment resulting from the Consolidation of 50%-Owned Subsidiaries. |
• | an increase of $5.8 million in salaries for crew and officers primarily due to a change in crew composition on one vessel upon the commencement of a new short-term time charter contract in 2005, a one-time bonus payment and general wage escalations; |
• | a total increase of $1.5 million relating to repairs and maintenance for certain vessels during 2006 and an increase in the cost of lubricants as a result of higher crude oil costs; and |
• | an increase of $1.2 million from the Consolidation of 50%-Owned Subsidiaries; |
• | a decrease of $2.8 million from the 2005 Shuttle Tanker Dispositions. |
• | a decrease of $4.3 million relating to the 2006 Shuttle Tanker Dispositions and the 2005 Shuttle Tanker Dispositions, the sale of theNordic Trymin November 2006 and the sale and leaseback of one shuttle tanker in March 2005; and |
• | a decrease of $2.8 million relating to a reduction in amortization from the expiration during 2005 of two contracts of affreightment and from the contracts of affreightment acquired as part of the purchase of Navion AS in 2003, which are being amortized over their respective lives, with the amount amortized each year being weighted based on the projected revenue to be earned under the contracts; |
• | an increase of $1.2 million due to the Consolidation of 50%-Owned Subsidiaries. |
• | a $6.4 million gain relating to the sale of theNordic Lauritain July 2006; |
• | a $2.2 million writedown of certain offshore equipment servicing a marginal oil field that was prematurely shut down in June 2005 due to lower than expected oil production. This writedown occurred due to a reassessment of the estimated net realizable value of the equipment and follows a $12.2 million writedown in 2005 arising from the early termination of a contract for the equipment (some of this equipment was re-deployed on another field in October 2005). |
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• | a $12.2 million write-down from the previously mentioned offshore equipment; |
• | a $9.1 million gain on the 2005 Shuttle Tanker Dispositions. |
Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2006 | 2005 | % Change | |||||||||
(restated) | (restated) | (restated) | ||||||||||
Voyage revenues | 70,056 | 57,454 | 21.9 | |||||||||
Voyage expenses | 4,892 | 5,419 | (9.7 | ) | ||||||||
Net voyage revenues | 65,164 | 52,035 | 25.2 | |||||||||
Vessel operating expenses | 19,378 | 21,574 | (10.2 | ) | ||||||||
Depreciation and amortization | 21,212 | 20,646 | 2.7 | |||||||||
General and administrative(1) | 11,789 | 9,634 | 22.4 | |||||||||
Restructuring charge | 832 | — | 100.0 | |||||||||
Income from vessel operations | 11,953 | 181 | 6,503.9 | |||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 3,650 | 3,650 | — | |||||||||
(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). |
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Year Ended December 31, | ||||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | 2006 | 2005 | % Change | |||||||||
(restated) | (restated) | (restated) | ||||||||||
Voyage revenues | 35,883 | 39,034 | (8.1 | ) | ||||||||
Voyage expenses | 1,085 | 816 | 33.0 | |||||||||
Net voyage revenues | 34,798 | 38,218 | (8.9 | ) | ||||||||
Vessel operating expenses | 12,603 | 12,710 | (0.8 | ) | ||||||||
Depreciation and amortization | 11,970 | 12,095 | (1.0 | ) | ||||||||
General and administrative(1) | 3,049 | 3,029 | 0.7 | |||||||||
Income from vessel operations | 7,176 | 10,384 | (30.9 | ) | ||||||||
Calendar-Ship-Days | ||||||||||||
Owned Vessels | 1,460 | 1,460 | — | |||||||||
(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). |
• | an increase of $14.2 million in interest incurred on a Norwegian Kroner-denominated loan owing by a subsidiary of OPCO to Teekay Corporation from October 2006 until our initial public offering in December 2006 (Teekay Corporation sold this loan receivable to OPCO immediately before our initial public offering); |
• | an increase of $7.1 million relating to additional debt of $745 million from a revolving credit facility entered into during the fourth quarter of 2006; |
• | an increase of $4.6 million due to a higher average balance for one of OPCO’s existing revolving credit facilities in 2006 compared to 2005; |
• | an increase of $4.0 million relating to an increase in the weighted-average interest rate on OPCO’s floating-rate debt in 2006 compared to 2005; and |
• | an increase of $1.4 million due to the Consolidation of 50%-Owned Subsidiaries; |
• | a decrease of $3.3 million relating to the unrealized change in fair value of our interest rate swaps; and |
• | a decrease of $1.9 million relating to the settlement of interest-bearing advances from affiliates during 2005. |
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Years Ended December 31, | ||||||||
2007 | 2006 | |||||||
($000’s) | ($000’s) | |||||||
(restated) | (restated) | |||||||
Net cash flow from operating activities | 45,847 | 162,228 | ||||||
Net cash flow from financing activities | (23,905 | ) | (230,238 | ) | ||||
Net cash flow from investing activities | (14,704 | ) | 53,010 |
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Years Ended December 31, | ||||||||
2007 | 2006 | |||||||
($000's) | ($000's) | |||||||
(restated) | (restated) | |||||||
Net cash flow from operating activities | 45,847 | 162,228 | ||||||
Net cash flow from financing activities | (23,905 | ) | (230,238 | ) | ||||
Net cash flow from investing activities | (14,704 | ) | 53,010 |
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• | $455 Million Revolving Credit Facility. This 8-year 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. |
• | $940 Million 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 incur working capital borrowings and loan the proceeds to us (which we could use to make distributions, provided that such amounts are paid down annually). |
• | $70 Million Revolving Credit Facility. This 10-year reducing revolving credit facility allows for borrowing of up to $70 million (subject to scheduled reductions through 2017) 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 (applicable to our term loans and the $70 million revolving credit facility only); |
• | 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; |
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• | making certain negative pledges or granting certain liens; |
• | selling, transferring, assigning or conveying assets; or |
• | entering into a new line of business. |
2009 | 2011 | |||||||||||||||||||
and | and | |||||||||||||||||||
Total | 2008 | 2010 | 2012 | Beyond 2012 | ||||||||||||||||
(in millions of U.S. dollars) | ||||||||||||||||||||
Long-term debt(1) | 1,517.5 | 64.1 | 222.6 | 305.8 | 925.0 | |||||||||||||||
Chartered-in vessels (operating leases) | 480.4 | 117.8 | 168.3 | 118.6 | 75.7 | |||||||||||||||
Purchase obligation(2) | 41.7 | 41.7 | — | — | — | |||||||||||||||
Total contractual obligations | 2,039.6 | 223.6 | 390.9 | 424.4 | 1,000.7 | |||||||||||||||
(1) | Excludes expected interest payments of $84.9 million (2008), $153.1 million (2009 and 2010), $122.6 million (2011 and 2012) and $87.2 million (beyond 2012). Expected interest payments are based on LIBOR, plus margins which ranged between 0.45% and 0.80% as at December 31, 2007. | |
(2) | In June 2007, we exercised our option to purchase a 2001-built shuttle tanker, which is currently part of our in-chartered shuttle tanker fleet. The vessel will be delivered to us in March 2008. |
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Name | Age | Position | ||||||
C. Sean Day | 58 | Chairman(1) | ||||||
Bjorn Moller | 50 | Vice Chairman(1) | ||||||
Peter Evensen | 49 | Chief Executive Officer, Chief Financial Officer and Director | ||||||
David L. Lemmon | 65 | Director(2) | ||||||
Carl Mikael L.L. von Mentzer | 63 | Director(2) | ||||||
John J. Peacock | 64 | Director(2) |
(1) | Member of Corporate Governance Committee | |
(2) | Member of Audit Committee and Conflicts Committee |
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Name | Age | Position | ||||||
C. Sean Day | 58 | Chairman | ||||||
Bjorn Moller | 50 | Vice Chairman | ||||||
Peter Evensen | 49 | Chief Executive Officer, Chief Financial Officer and Director |
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• | the integrity of our financial statements; |
• | our compliance with legal and regulatory requirements; |
• | the qualifications and independence of our independent auditor; and |
• | the performance of our internal audit function and our independent auditor. |
• | reviews specific matters that the Board believes may involve conflicts of interest; and |
• | determines if the resolution of the conflict of interest is fair and reasonable to us. |
• | oversees the operation and effectiveness of the Board and its corporate governance. |
• | develops, updates and recommends to the Board corporate governance principles and policies applicable to us and our general partner and monitors compliance with these principles and policies; and |
• | oversees director compensation and the long-term incentive plan described above. |
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Percentage of | ||||||||||||||||||||
Percentage of | Percentage of | Total Common | ||||||||||||||||||
Common Units | Common Units | Subordinated | Subordinated | and Subordinated | ||||||||||||||||
Identity of Person or Group | Owned | Owned | Units Owned | Units Owned | Units Owned(3) | |||||||||||||||
All directors and officers as a group (6 persons) (1) (2) | 292,725 | 2.99 | % | — | — | 1.49 | % |
(1) | Excludes units owned by Teekay Corporation, which controls us and on the board of which serve the directors of our general partner, C. Sean Day and Bjorn Moller. In addition, Mr. Moller is Teekay Corporation’s President and Chief Executive Officer, and Peter Evensen, our general partner’s Chief Executive Officer and Chief Financial Officer and a Director, is Teekay Corporation’s Executive Vice President and Chief Strategy Officer. Please read Item 7: Major Shareholders and Related Party Transactions for more detail. | |
(2) | Each director, executive officer and key employee beneficially owns less than one percent of the outstanding common and subordinated units. | |
(3) | Excludes the 2% general partner interest held by our general partner, a wholly owned subsidiary of Teekay Corporation. |
Percentage of Total | ||||||||||||||||||||
Percentage of | Percentage of | Common and | ||||||||||||||||||
Common Units | Common Units | Subordinated | Subordinated | Subordinated Units | ||||||||||||||||
Identity of Person or Group | Owned | Owned | Units Owned | Units Owned | Owned | |||||||||||||||
Teekay Corporation (1) | 1,750,000 | 17.9 | % | 9,800,000 | 100.0 | % | 58.9 | % | ||||||||||||
Luxor Capital Group, LP, Luxor Management, LLC, and Mr. Christian Leone, as a group(2) | 1,269,799 | 13.0 | % | — | — | 6.5 | % | |||||||||||||
Neuberger Berman, Inc. and Neuberger Berman, LLC, as a group(3) | 820,974 | 8.4 | % | — | — | 4.2 | % |
(1) | Excludes the 2% general partner interest held by our general partner, a wholly owned subsidiary of Teekay Corporation. | |
(2) | Includes shared voting power and shared dispositive power as to 1,269,799 units. Luxor Capital Group, LP, Luxor Management, LLC, and Mr. Christian Leone all have shared voting and dispositive power. Luxor Capital Group, LP serves as an investment manager of Luxor Capital Group, LP’s mutual funds. This information is based on the Schedule 13G/A filed by this group with the SEC on February 14, 2008. | |
(3) | Includes sole voting power as to 745,924 units and shared dispositive power as to 820,974 units. Both Neuberger Berman, LLC and Neuberger Berman Inc. have shared dispositive power. Neuberger Berman, LLC and Neuberger Berman Management Inc. serve as sub-advisor and investment manager, respectively, of Neuberger Berman Inc.’s mutual funds. This information is based on the Schedule 13G filed by this group with the SEC on February 12, 2008. |
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a) | On October 1, 2006, OPCO entered into time-charter contracts for its nine Aframax conventional tankers with a subsidiary of Teekay Corporation at then-prevailing 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 $128.4 million during 2007. |
b) | Effective October 1, 2006, two of OPCO’s shuttle tankers commenced employment on long-term bareboat charters with a subsidiary of Teekay Corporation. Pursuant to these charter contracts, OPCO earned voyage revenues of $14.2 million during 2007. |
c) | Two of OPCO’s FSO units were employed on long-term bareboat charters with a subsidiary of Teekay Corporation. Pursuant to these charter contracts, OPCO earned voyage revenues of $12.0 million during 2007. |
d) | 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 2007, OPCO earned management fees of $3.3 million under the agreement. |
e) | Eight of OPCO’S Aframax conventional oil tankers and two FSO units (including theDampier Spirit) are managed by subsidiaries of Teekay Corporation. Pursuant to the associated management services agreements, OPCO incurred general and administrative expenses of $4.5 million during 2007. During the year ended December 31, 2007, $0.1 million of general and administrative expenses attributable to the operations of theDampier Spirit were incurred by Teekay Corporation and have been allocated to us as part of the results of the Dropdown Predecessor. Please read Note 18, “Restatement of Previously Issued Financial Statements”, to the consolidated financial statements included in this Report. |
f) | In December 2006, we, OPCO, and certain of our and its subsidiaries have entered into services agreements with certain subsidiaries of Teekay Corporation, pursuant to which the Teekay Corporation subsidiaries provide to us, OPCO, and our and its subsidiaries administrative, advisory and technical services and ship management. These services are provided in a commercially reasonably manner and upon the reasonable request of our general partner or our or OPCO’s operating subsidiaries, as applicable. The Teekay Corporation subsidiaries that are parties to the services agreements provide these services directly or subcontract for certain of these services with other entities, including other Teekay Corporation subsidiaries. We pay arm’s-length fees for the services that include reimbursement of the reasonable cost of any direct and indirect expenses the Teekay Corporation subsidiaries incur in providing these services. During 2007, we incurred $52.7 million of costs under these agreements. |
g) | Pursuant to our partnership agreement, we reimburse our general partner for all expenses necessary or appropriate for the conduct of our business. During 2007, we incurred $0.8 million of these costs. |
h) | In July 2007, we acquired interests in two double-hull shuttle tankers from Teekay Corporation for a total cost of $159.1 million, including assumption of debt of $93.7 million and the related interest rate swap agreement. We acquired Teekay Corporation’s 100% interest in the 2000-builtNavion Bergenand its 50% interest in the 2006-builtNavion Gothenburg, together with their respective 13-year, fixed-rate bareboat charters to Petroleo Brasileiro S.A. We financed the purchases with one of our existing revolving credit facilities and the assumption of debt. The excess of the proceeds we paid over Teekay Corporation’s historical cost were accounted for as an equity distribution to Teekay Corporation of $25.4 million. |
i) | In October 2007, we acquired from Teekay Corporation an FSO unit, theDampier Spirit, along with its 7-year fixed-rate time-charter to Apache Corporation for a total cost of $30.3 million. We financed the purchase with one of our existing revolving credit facilities. The excess of the proceeds we paid over Teekay Corporation’s historical cost was accounted for as an equity distribution to Teekay Corporation of $13.9 million. |
j) | In December 2007, Teekay Corporation contributed a $65.6 million, nine-year, 4.98% interest rate swap agreement (used to hedge the debt assumed in the purchase of theNavion Bergen) having a fair value liability of $2.6 million, to us for no consideration and was accounted for as an equity distribution to Teekay Corporation. |
k) | In December 2007, Teekay Corporation agreed to reimburse OPCO for certain costs relating to events which occurred prior to our initial public offering, totaling $4.8 million, including the settlement of a customer dispute in respect of vessels delivered prior to our initial public offering and other costs. |
l) | C. Sean Day is the Chairman of our general partner, Teekay Offshore GP L.L.C., and of Teekay Offshore Operating GP L.L.C., the general partner of OPCO. He also is the Chairman of Teekay Corporation, Teekay Tankers and Teekay GP L.L.C., the general partner of Teekay LNG. |
m) | We have entered into an amended and restated omnibus agreement with our general partner, Teekay Corporation, Teekay LNG and related parties. The following discussion describes certain provisions of the omnibus agreement. |
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• | owning, operating or chartering offshore vessels if the remaining duration of the time charter or contract of affreightment for the vessel, excluding any extension options, is less than three years; |
• | acquiring offshore vessels and related time charters or contracts of affreightment as part of a business or package of assets and operating or chartering those vessels if a majority of the value of the total assets or business acquired is not attributable to the offshore vessels and related contracts, as determined in good faith by the board of directors of Teekay Corporation or the conflicts committee of the board of directors of Teekay LNG’s general partner; however, if Teekay Corporation or Teekay LNG completes such an acquisition, it must, within one year after completing the acquisition, offer to sell the offshore vessels and related contracts to us for their fair market value plus any additional tax or other similar costs to Teekay Corporation or Teekay LNG that would be required to transfer the offshore vessels and contracts to us separately from the acquired business or package of assets; |
• | owning, operating or chartering offshore vessels and related time charters and contracts of affreightment that relate to a tender, bid or award for a proposed offshore project that Teekay Corporation or any of its subsidiaries has submitted or hereafter submits or receives; however, at least one year after the delivery date of any such offshore vessel, Teekay Corporation must offer to sell the offshore vessel and related contract to us, with the vessel valued (i) for newbuildings originally contracted by Teekay Corporation, at its “fully-built-up cost’’ (which represents the aggregate expenditures incurred (or to be incurred prior to delivery to us) by Teekay Corporation to acquire, construct, and/or convert and bring such offshore vessel to the condition and location necessary for our intended use, plus project development costs for completed projects and projects that were not completed but, if completed, would have been subject to an offer to us pursuant to the omnibus agreement) and (ii) for any other vessels, Teekay Corporation’s cost to acquire a newbuilding from a third party or the fair market value of any existing vessel, as applicable, plus in each case any subsequent expenditures that would be included in the “fully-built-up cost” of converting the vessel prior to delivery to us; |
• | acquiring, operating or chartering offshore vessels if our general partner has previously advised Teekay Corporation or Teekay LNG that the board of directors of our general partner has elected, with the approval of its conflicts committee, not to cause us or our subsidiaries to acquire or operate the vessels; or |
• | owing a limited partner interest in OPCO or owning shares of Teekay Petrojarl ASA (Petrojarl). |
• | acquiring oil tankers or LNG carriers and any related time charters as part of a business or package of assets and operating or chartering those vessels, if a majority of the value of the total assets or business acquired is not attributable to the oil tankers and LNG carriers and any related charters, as determined by the conflicts committee of our general partner’s board of directors; however, if at any time we complete such an acquisition, we are required to promptly offer to sell to Teekay Corporation the oil tankers and time charters or to Teekay LNG the LNG carriers and time charters for fair market value plus any additional tax or other similar costs to us that would be required to transfer the vessels and contracts to Teekay Corporation or Teekay LNG separately from the acquired business or package of assets; or |
• | acquiring, operating or chartering oil tankers or LNG carriers if Teekay Corporation or Teekay LNG, respectively, has previously advised our general partner that it has elected not to acquire or operate those vessels. |
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n) | In January 2007, Teekay Corporation contributed foreign exchange contracts for the forward purchase of a total of Australian Dollars 4.5 million having a fair value asset of $0.1 million, net of non-controlling interest, to OPCO for no consideration and was accounted for as an equity contribution from Teekay Corporation. The foreign exchange forward contracts matured by December 2007. |
o) | During the year ended December 31, 2007, $1.2 million of interest expense attributable to the operations of theNavion Bergenwas incurred by Teekay Corporation and has been allocated to us as part of the results of the Dropdown Predecessor. |
• | Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our partnership agreement to distribute available cash on a quarterly basis, which is subject to our general partner’s broad discretion to establish reserves and other limitations. |
• | The Board of Directors of OPCO’s general partner, Teekay Offshore Operating GP L.L.C. (subject to approval by the Board of Directors of our general partner), has authority to establish reserves for the prudent conduct of OPCO’s business. The establishment of these reserves could result in a reduction in cash distributions. |
• | While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions requiring us to make cash distributions contained therein, may be amended. Although during the subordination period (defined in our partnership agreement), with certain exceptions, our partnership agreement may not be amended without the approval of non-affiliated common unitholders, our partnership agreement can be amended with the approval of a majority of the outstanding common units after the subordination period has ended. |
• | Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by the Board of Directors of our general partner, taking into consideration the terms of our partnership agreement. |
• | Under Section 51 of the Marshall Islands Limited Partnership Act, we may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. |
• | We may lack sufficient cash to pay distributions to our unitholders due to decreases in net voyage revenues or increases in operating expenses, principal and interest payments on outstanding debt, tax expenses, working capital requirements, maintenance capital expenditures or anticipated cash needs. |
• | Our distribution policy may be affected by restrictions on distributions under our and OPCO’s credit facility agreements, which contain material financial tests and covenants that must be satisfied. Should we or OPCO be unable to satisfy these restrictions included in the credit agreements or if we or OPCO is otherwise in default under the credit agreements, we or it would be prohibited from making cash distributions, which would materially hinder our ability to make cash distributions to unitholders, notwithstanding our stated cash distribution policy. |
• | If we make distributions out of capital surplus, as opposed to operating surplus (as such terms are defined in our partnership agreement), such distributions will constitute a return of capital and will result in a reduction in the minimum quarterly distribution and the target distribution levels under our partnership agreement. We do not anticipate that we will make any distributions from capital surplus. |
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Marginal Percentage Interest | ||||||||||
Total Quarterly | in Distributions | |||||||||
Distribution Target Amount | Unitholders | General Partner | ||||||||
Minimum Quarterly Distribution | $0.35 | 98.0 | % | 2.0 | % | |||||
First Target Distribution | Up to $0.4025 | 98.0 | % | 2.0 | % | |||||
Second Target Distribution | Above $0.4025 up to $0.4375 | 85.0 | % | 15.0 | % | |||||
Third Target Distribution | Above $0.4375 up to $0.525 | 75.0 | % | 25.0 | % | |||||
Thereafter | Above $0.525 | 50.0 | % | 50.0 | % |
Dec. 31, | Dec. 31, | |||||||
Year Ended | 2007 | 2006(1) | ||||||
High | $ | 37.45 | $ | 26.77 | ||||
Low | 24.04 | 21.00 |
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Dec. 31, | Sept. 30, | June 30, | Mar. 31, | Dec. 31, | ||||||||||||||||
Quarter Ended | 2007 | 2007 | 2007 | 2007 | 2006(1) | |||||||||||||||
High | $ | 29.38 | $ | 37.45 | $ | 35.40 | $ | 31.66 | $ | 26.77 | ||||||||||
Low | 24.04 | 28.00 | 29.79 | 26.00 | 21.00 |
Mar. 31, | Feb. 29, | Jan. 31, | Dec. 31, | Nov. 30, | Oct. 31, | |||||||||||||||||||
Months Ended | 2008 | 2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||
High | $ | 25.32 | $ | 26.46 | $ | 25.86 | $ | 26.37 | $ | 29.20 | $ | 29.38 | ||||||||||||
Low | 20.71 | 22.07 | 22.75 | 24.41 | 24.04 | 27.25 |
a) | Agreement, dated June 26, 2003, for a U.S. $455,000,000 Revolving Credit Facility between Norsk Teekay Holdings Ltd., Den Norske Bank ASA and various other banks. This facility bears interest at LIBOR plus a margin of 0.625%. The amount available under the facility reduces semi-annually, with a bullet reduction of $131.0 million on maturity in October 2014. The credit facility may be used for acquisitions and for general partnership purposes. Our obligations under the facility are secured by first-priority mortgages on seven shuttle tankers and one FSO unit. |
b) | Agreement, dated October 2, 2006, for a U.S. $940,000,000 Revolving Credit Facility between Teekay Offshore Operating L.P., Den Norske Bank ASA and various other banks. This facility bears interest at LIBOR plus a margin of 0.625%. The amount available under the facility reduces semi-annually, with a bullet reduction of $350.0 million on maturity in October 2014. The credit facility may be used for acquisitions and for general partnership purposes. In addition, this 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. Our obligations under the facility are secured by first-priority mortgages on 11 shuttle tankers and eight conventional tankers. |
c) | Amended and Restated Omnibus Agreement, dated December 19, 2006, among us, our general partner, Teekay Corporation, Teekay LNG and related parties. Please read Item 7 — Major Unitholders and Related Party Transactions for a summary of certain contract terms. |
d) | We, OPCO and certain of our and its operating subsidiaries have entered into services agreements with certain subsidiaries of Teekay Corporation pursuant to which the Teekay Corporation subsidiaries provide us, OPCO, and our and its operating subsidiaries with administrative, advisory, technical, strategic consulting services and ship management services for a reasonable fee that includes reimbursement of their direct and indirect expenses incurred in providing these services. Please read Item 7 — Major Unitholders and Related Party Transactions for a summary of certain contract terms. |
e) | Contribution, Conveyance and Assumption Agreement. Pursuant to this agreement, prior to the closing of our initial public offering on December 19, 2006, Teekay Corporation sold to us a 25.99% limited partner interest in OPCO and its subsidiaries and a 100% interest in Teekay Offshore Operating GP L.L.C., which owns the 0.01% general partner interest in OPCO, in exchange for (a) the issuance to Teekay Corporation of 2,800,000 common units and 9,800,000 subordinated units in us and a $134.6 million non-interest bearing promissory note and (b) the issuance of the 2.0% general partner interest in us and all of our incentive distribution rights to Teekay Offshore GP L.L.C., a wholly owned subsidiary of Teekay Corporation. |
f) | Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan. Please read Item 6 — Directors, Senior Management and Employees for a summary of certain plan terms. |
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• | the excess distribution or gain will be allocated ratably over the unitholder’s holding period; | ||
• | the amount allocated to the current taxable year and any year prior to the first year in which we were a PFIC will be taxed as ordinary income in the current year; | ||
• | the amount allocated to each of the other taxable years in the unitholder’s holding period will be subject to U.S. federal income tax at the highest rate in effect for the applicable class of taxpayer for that year; and | ||
• | an interest charge for the deemed deferral benefit will be imposed with respect to the resulting tax attributable to each such other taxable year. |
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Fair Value | ||||||||||||||||||||||||||||||||||||
Expected Maturity Date | Asset/(Liability) | |||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | (restated) | Rate(1) | ||||||||||||||||||||||||||||
(in millions of U.S. dollars, except percentages) | ||||||||||||||||||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||||||||||
U.S Dollar- denominated(2) | 64.1 | 115.6 | 107.0 | 164.0 | 141.8 | 925.0 | 1,517.5 | (1,517.5 | ) | 5.7 | % | |||||||||||||||||||||||||
Interest Rate Swaps: | ||||||||||||||||||||||||||||||||||||
Contract Amount(3) | 17.1 | 552.6 | 18.1 | 18.7 | 19.2 | 723.7 | 1,349.4 | (21.0 | ) | 4.8 | % | |||||||||||||||||||||||||
Average Fixed Pay Rate(2) | 4.9 | % | 4.7 | % | 4.9 | % | 4.9 | % | 4.9 | % | 4.8 | % | 4.8 | % |
(1) | Rate refers to the weighted-average effective interest rate for OPCO’s 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 December 31, 2007 ranged from 0.50% 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 6-month LIBOR. |
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• | One of the requirements of SFAS No. 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, entities must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Based on our review, we concluded that the prospective hedge effectiveness assessment that was conducted for certain of our interest rate swap agreements on the date of designation was not sufficient to conclude that the interest rate swaps would be highly effective, in accordance with the technical requirements of SFAS No. 133, in achieving offsetting changes in cash flows attributable to the risk being hedged. |
• | To conclude that hedge accounting is appropriate, another requirement of SFAS No. 133 is that the applicable hedge documentation specifies the method that will be used to assess, retrospectively and prospectively, the hedging instrument’s effectiveness, and the method that will be used to measure hedge ineffectiveness. Documentation for certain of our interest rate swap agreements did not clearly specify the method to be used to measure hedge ineffectiveness. |
• | Certain of our derivative instruments were designated as hedges when the derivative instruments had a non-zero fair value. However, this designation was not appropriate as we used certain methods of measuring ineffectiveness that are not allowed in the case of non-zero fair value derivatives. |
• | Restated our results for the affected periods to reflect the changes in fair value of certain derivative transactions as unrealized gains and losses through earnings |
• | Discontinued hedge accounting for all derivative transactions to which the restatement applied; and |
• | Restated our accounting for the Vision Incentive Plan as described above. |
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• | Not applying hedge accounting to our derivative instruments, other than certain foreign currency forward contracts; and |
• | Implementing a more rigorous process to determine the appropriate accounting treatment for complex accounting issues such as hedge accounting and non-routine, complex financial arrangements, including the engagement of appropriately qualified external expertise. |
1. | Management of our general partner is responsible for establishing and maintaining for us adequate internal controls over financial reporting. |
2. | Our internal controls were designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal controls over financial reporting includes those policies and procedures that 1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and the directors of our general partnership; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
3. | We conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. |
4. | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements even when determined to be effective and can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. |
5. | Based on the evaluation, management of our general partner believes that the documentation of controls and the design effectiveness of controls were appropriate. However, management of our general partner believes that, as of December 31, 2007, the controls were not operating effectively to ensure that the accounting was appropriate for non-routine, complex financial arrangements such as the Vision Incentive Plan, and that hedge documentation requirements were met for certain derivative instruments, in accordance with generally accepted accounting principles. These control deficiencies resulted in an amendment of our Annual Report on Form 20-F for the year ended December 31, 2007, in order to restate the consolidated financial statements for 2005 and 2006. The financial statements for 2007 were also restated as it relates to hedge documentation requirements for certain derivative instruments. Accordingly, management of our general partner has concluded that these control deficiencies constitute material weaknesses. |
6. | In Management’s Report on Internal Control Over Financial Reporting included in our original Annual Report on Form 20-F for the year ended December 31, 2007, management of our general partner concluded that we maintained effective internal control over financial reporting as of December 31, 2007. Solely as a result of the material weaknesses described above, management of our general partner has revised its earlier assessment and has now concluded that our internal control over financial reporting relating to accounting for non-routine, complex financial arrangements, and the preparation of hedge documentation was not effective as of December 31, 2007, based on the criteria inInternal Control - Integrated Framework,issued by the Committee of Sponsoring Organizations of the Treadway Commission. Accordingly, management of our general partner has restated its report on internal control over financial reporting. |
7. | Our independent auditors, Ernst & Young LLP, a registered public accounting firm has audited the accompanying consolidated financial statements and our internal control over financial reporting. Their attestation report on the effectiveness of our internal control over financial reporting can be found on page F-2 of this Form 20-F/A. |
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Fees | 2007 | 2006 | ||||||
Audit Fees(1) | $ | 429,300 | $ | 575,400 | ||||
Audit-Related Fees(2) | 8,500 | 40,000 | ||||||
Tax Fees(3) | 15,800 | 144,300 | ||||||
Total | $ | 453,600 | $ | 759,700 | ||||
(1) | Audit fees represent fees for professional services provided in connection with the audit of our consolidated financial statements, review of our quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings, including professional services in connection with the review of our regulatory filings for our initial public offering of common units in December 2006. | |
(2) | Audit-related fees consisted primarily of accounting consultations. | |
(3) | For 2007 and 2006, respectively, tax fees principally included corporate tax compliance fees of $15,800 and $39,500. Tax fees in 2006 also included personal and expatriate tax services fees of $94,800 and international tax planning fees of $10,000. |
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Page | ||||
F-1, F-2 | ||||
Consolidated Financial Statements | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 |
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1.1 | Certificate of Limited Partnership of Teekay Offshore Partners L.P. (1) | |||
1.2 | First Amended and Restated Agreement of Limited Partnership of Teekay Offshore Partners L.P. (2) | |||
1.3 | Certificate of Formation of Teekay Offshore GP L.L.C. (1) | |||
1.4 | Amended and Restated Limited Liability Company Agreement of Teekay Offshore GP L.L.C. (1) | |||
1.5 | Certificate of Limited Partnership of Teekay Offshore Operating L.P. (1) | |||
1.6 | Amended and Restated Agreement of Limited Partnership of Teekay Offshore Operating PartnersL.P. (1) | |||
1.7 | Certificate of Formation of Teekay Offshore Operating GP L.L.C. (1) | |||
1.8 | Amended and Restated Limited Liability Company Agreement of Teekay Offshore Operating GPL.L.C. (1) | |||
4.1 | Agreement, dated June 26, 2003, for a U.S $455,000,000 Revolving Credit Facility between Norsk Teekay Holdings Ltd., Den Norske Bank ASA and various other banks (1) | |||
4.2 | Agreement, dated October 2, 2006, for a U.S $940,000,000 Revolving Credit Facility between Teekay Offshore Operating L.P., Den Norske Bank ASA and various other banks (1) | |||
4.3 | Contribution, Conveyance and Assumption Agreement (1) | |||
4.4 | Teekay Offshore Partners L.P. 2006 Long-Term Incentive Plan (1) | |||
4.5 | Amended and Restated Omnibus Agreement (1) | |||
4.6 | Administrative Services Agreement between Teekay Offshore Operating Partners L.P. and TeekayLimited (3) | |||
4.7 | Advisory, Technical and Administrative Services Agreement (3) | |||
4.8 | Administrative Services Agreement between Teekay Offshore Partners L.P. and Teekay Limited (3) | |||
8.1 | List of Subsidiaries of Teekay Offshore Partners L.P. | |||
12.1 | Rule 13a-14(a)/15d-14(a) Certification of Teekay Offshore Partners L.P.’s Chief Executive Officer | |||
12.2 | Rule 13a-14(a)/15d-14(a) Certification of Teekay Offshore Partners L.P.’s Chief Financial Officer | |||
13.1 | Teekay Offshore Partners L.P. Certification of Peter Evensen, Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
15.1 | Consent of Ernst & Young LLP, as independent registered public accounting firm. | |||
15.2 | Consolidated Balance Sheet of Teekay Offshore GP L.L.C. (restated) |
(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. | |
(3) | Previously filed as an exhibit to the Partnership’s Amendment No. 1 to Registration Statement on Form F-1 (File No. 333-139116), filed with the SEC on December 8, 2006, and hereby incorporated by reference to such Registration Statement. |
74
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TEEKAY OFFSHORE PARTNERS L.P. | ||||
By: | Teekay Offshore GP L.L.C., its general partner | |||
Dated: April 2, 2009 | By: | /s/ Peter Evensen | ||
Peter Evensen | ||||
Chief Executive Officer and Chief Financial Officer (Principal Financial and Accounting Officer) |
75
Table of Contents
General Partner of Teekay Offshore Partners L.P.,
and the Limited Partners of Teekay Offshore Partners L.P.
o January 1 to December 31, 2007 |
o January 1 to December 18, 2006 | |||
o December 19 to December 31, 2006 |
o January 1 to December 31, 2005 |
Vancouver, Canada | /s/ Ernst & Young LLP | |
March 12, 2008, | ||
except for Notes 18 and 19, as to which the | ||
date is April 2, 2009. |
F - 1
Table of Contents
General Partner of Teekay Offshore Partner L.P.,
and the Limited Partners of Teekay Offshore Partners L.P.
Vancouver, Canada | /s/ Ernst & Young LLP | |
March 12, 2008, | ||
except for paragraphs 5 through 7 of Management’s Annual Report on Internal Control over Financial Reporting (as restated), as to which the date is April 2, 2009. |
F - 2
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
Restated — Note 18 | ||||||||||||||||
January 1 | December 19 | |||||||||||||||
Year Ended | to | to | Year Ended | |||||||||||||
December 31, | December 18, | December 31, | December 31, | |||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
VOYAGE REVENUES($154,605, $74,651 and $60,109 for 2007, 2006 and 2005, respectively, from related parties — notes10c, 10h, 10i, 10j, 10k, and 10l) | 785,203 | 617,514 | 24,397 | 613,246 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 151,637 | 91,321 | 3,102 | 74,543 | ||||||||||||
Vessel operating expenses(note 11) | 149,660 | 107,991 | 4,297 | 109,480 | ||||||||||||
Time-charter hire expense | 150,463 | 159,973 | 5,641 | 169,687 | ||||||||||||
Depreciation and amortization | 124,370 | 100,823 | 3,726 | 109,824 | ||||||||||||
General and administrative (note 11, and $55,543, $28,102 and $21,720 for 2007, 2006 and 2005, respectively, from related parties — notes10m, 10n, 10o, and 10p) | 62,404 | 63,014 | 2,177 | 56,726 | ||||||||||||
Gain on sale of vessels and equipment — net of writedowns(note 15) | — | (4,778 | ) | — | 2,820 | |||||||||||
Restructuring charge(note 9) | — | 832 | — | 955 | ||||||||||||
Total operating expenses | 638,534 | 519,176 | 18,943 | 524,035 | ||||||||||||
Income from vessel operations | 146,669 | 98,338 | 5,454 | 89,211 | ||||||||||||
OTHER ITEMS | ||||||||||||||||
Interest expense(note 6,note 11, and $1,236, $27,056 and $14,772 for 2007, 2006 and 2005, respectively, from related parties —notes 10f, 10g and 10x) | (126,304 | ) | (64,462 | ) | (1,617 | ) | (39,983 | ) | ||||||||
Interest income | 5,871 | 5,167 | 191 | 4,612 | ||||||||||||
Equity income from joint ventures(note 11) | — | 6,321 | — | 5,955 | ||||||||||||
Foreign currency exchange (loss) gain(note 11) | (11,678 | ) | (66,214 | ) | (118 | ) | 34,228 | |||||||||
Income tax recovery (expense)(note 12) | 10,516 | (3,260 | ) | (121 | ) | 12,375 | ||||||||||
Other income — net(note 9) | 10,403 | 8,367 | 309 | 9,091 | ||||||||||||
Total other items | (111,192 | ) | (114,081 | ) | (1,356 | ) | 26,278 | |||||||||
Income (loss) from continuing operations before non-controlling interest | 35,477 | (15,743 | ) | 4,098 | 115,489 | |||||||||||
Non-controlling interest | (31,519 | ) | (3,893 | ) | (2,636 | ) | (229 | ) | ||||||||
Net income (loss) from continuing operations | 3,958 | (19,636 | ) | 1,462 | 115,260 | |||||||||||
Net loss from discontinued operations(note 19) | — | (10,656 | ) | — | (19,347 | ) | ||||||||||
Net Income (loss) | 3,958 | (30,292 | ) | 1,462 | 95,913 | |||||||||||
Dropdown predecessor’s interest in net income(note 1) | 1,300 | 3,097 | 114 | 2,910 | ||||||||||||
General partner’s interest in net income | 733 | — | 64 | — | ||||||||||||
Limited partners’ interest:(note 16) | ||||||||||||||||
Net income (loss) from continuing operations | 1,925 | (22,733 | ) | 1,284 | 112,350 | |||||||||||
Net income (loss) from continuing operations per: | ||||||||||||||||
- Common unit (basic and diluted) | 0.12 | (1.80 | ) | 0.07 | 8.92 | |||||||||||
- Subordinated unit (basic and diluted) | 0.07 | (1.80 | ) | 0.06 | 8.92 | |||||||||||
- Total unit (basic and diluted) | 0.10 | (1.80 | ) | 0.07 | 8.92 | |||||||||||
Net loss from discontinued operations | — | (10,656 | ) | — | (19,347 | ) | ||||||||||
Net income (loss) from discontinued operations per: | ||||||||||||||||
- Common unit (basic and diluted) | — | (0.85 | ) | — | (1.54 | ) | ||||||||||
- Subordinated unit (basic and diluted) | — | (0.85 | ) | — | (1.54 | ) | ||||||||||
- Total unit (basic and diluted) | — | (0.85 | ) | — | (1.54 | ) | ||||||||||
Net income (loss) | 1,925 | (33,389 | ) | 1,284 | 93,003 | |||||||||||
Net income (loss) per: | ||||||||||||||||
- Common unit (basic and diluted) | 0.12 | (2.65 | ) | 0.07 | 7.38 | |||||||||||
- Subordinated unit (basic and diluted) | 0.07 | (2.65 | ) | 0.06 | 7.38 | |||||||||||
- Total unit (basic and diluted) | 0.10 | (2.65 | ) | 0.07 | 7.38 | |||||||||||
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 | 1.14 | — | — | — | ||||||||||||
F - 3
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
Restated — Note 18 | ||||||||
As at | As at | |||||||
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
$ | $ | |||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents(note 6) | 121,224 | 113,986 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $nil (December 31, 2006 — $401) | 42,245 | 25,826 | ||||||
Due from affiliate(notes 10u and 10v) | 796 | 30,757 | ||||||
Net investment in direct financing leases — current | 22,268 | 21,764 | ||||||
Prepaid expenses | 34,219 | 24,608 | ||||||
Other current assets | 7,644 | 7,786 | ||||||
Total current assets | 228,396 | 224,727 | ||||||
Vessels and equipment(note 6) | ||||||||
At cost, less accumulated depreciation of $694,258 (December 31, 2006 — $585,146) | 1,662,865 | 1,532,743 | ||||||
Net investment in direct financing leases | 78,199 | 92,018 | ||||||
Other assets | 14,423 | 38,198 | ||||||
Intangible assets — net(note 4) | 55,355 | 66,425 | ||||||
Goodwill — shuttle tanker segment | 127,113 | 127,113 | ||||||
Total assets | 2,166,351 | 2,081,224 | ||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||
Current | ||||||||
Accounts payable | 12,076 | 7,459 | ||||||
Accrued liabilities(note 5) | 38,464 | 45,633 | ||||||
Current portion of long-term debt(note 6) | 64,060 | 17,656 | ||||||
Total current liabilities | 114,600 | 70,748 | ||||||
Long-term debt(note 6) | 1,453,407 | 1,285,696 | ||||||
Deferred income taxes(note 12) | 77,306 | 73,906 | ||||||
Other long-term liabilities(note 11) | 51,024 | 32,163 | ||||||
Total liabilities | 1,696,337 | 1,462,513 | ||||||
Commitments and contingencies(notes 7, 10 and 13) | ||||||||
Non-controlling interest | 392,613 | 427,977 | ||||||
Dropdown Predecessor’s equity(note 1) | — | 51,792 | ||||||
Partners’ equity | ||||||||
Partners’ equity | 77,108 | 138,942 | ||||||
Accumulated other comprehensive income | 293 | — | ||||||
Total partners’ equity | 77,401 | 190,734 | ||||||
Total liabilities and partners’ equity | 2,166,351 | 2,081,224 | ||||||
F - 4
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
Restated — Note 18 | ||||||||||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income (loss) | 3,958 | (28,830 | ) | 95,913 | ||||||||
Non-cash items: | ||||||||||||
Unrealized loss (gain) on derivative instruments(note 11) | 45,957 | (3,346 | ) | — | ||||||||
Depreciation and amortization | 124,370 | 104,549 | 110,290 | |||||||||
Non-controlling interest | 31,519 | 6,529 | 229 | |||||||||
Gain on sale of vessels | — | (6,928 | ) | (9,423 | ) | |||||||
Loss on writedown of vessels and equipment | — | 2,150 | 12,243 | |||||||||
Equity income (net of dividends received: December 31, 2006 — $6,002; December 31, 2005 — $2,750) | — | (319 | ) | (3,205 | ) | |||||||
Deferred income tax (recovery) expense | (10,516 | ) | 425 | (16,214 | ) | |||||||
Foreign currency exchange loss (gain) and other | 11,425 | 72,438 | (39,967 | ) | ||||||||
Change in non-cash working capital items related to operating activities(note 14) | (33,706 | ) | 51,039 | 19,039 | ||||||||
Distribution from subsidiaries to minority owners | (78,107 | ) | (4,224 | ) | (9,618 | ) | ||||||
Expenditures for drydocking | (49,053 | ) | (31,255 | ) | (8,906 | ) | ||||||
Net operating cash flow | 45,847 | 162,228 | 150,381 | |||||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of long-term debt | 298,443 | 1,290,750 | 1,226,804 | |||||||||
Capitalized loan costs | — | (6,178 | ) | (639 | ) | |||||||
Scheduled repayments of long-term debt | (17,328 | ) | (119,900 | ) | (39,884 | ) | ||||||
Prepayments of long-term debt | (152,000 | ) | (493,527 | ) | (1,382,140 | ) | ||||||
Repayments of capital lease obligations | — | (34,245 | ) | (1,248 | ) | |||||||
Proceeds from issuance of common units | — | 157,963 | — | |||||||||
Expenses from issuance of common units | (2,793 | ) | — | — | ||||||||
Net advances to affiliates | (42,935 | ) | (793,488 | ) | (10,999 | ) | ||||||
Equity distribution from (to) Teekay Corporation | 1,819 | (230,886 | ) | 858 | ||||||||
Investment in subsidiaries from non-controlling interest owners | — | — | 8,000 | |||||||||
Excess of purchase price over the contributed basis of a 50% interest in Navion Gothenburg LLC (note 10r) | (6,358 | ) | ||||||||||
Distribution to Teekay Corporation relating to purchase of Navion Bergen LLC (note 10r) | (48,800 | ) | — | — | ||||||||
Distribution to Teekay Corporation relating to purchase of Dampier LLC(note 10s) | (30,253 | ) | — | — | ||||||||
Cash distributions paid | (22,700 | ) | — | — | ||||||||
Other | (1,000 | ) | (727 | ) | — | |||||||
Net financing cash flow | (23,905 | ) | (230,238 | ) | (199,248 | ) | ||||||
INVESTING ACTIVITIES | ||||||||||||
Expenditures for vessels and equipment | (20,997 | ) | (31,079 | ) | (24,760 | ) | ||||||
Proceeds from sale of vessels and equipment | 3,225 | 61,713 | 73,220 | |||||||||
Purchase of a 50% interest in Navion Gothenburg LLC(note 10r) | (10,231 | ) | — | — | ||||||||
Investment in direct financing lease assets | (8,378 | ) | (13,256 | ) | (23,708 | ) | ||||||
Direct financing lease payments received | 21,677 | 19,323 | 12,440 | |||||||||
Cash assumed upon consolidation of 50%-owned subsidiaries | — | 17,055 | — | |||||||||
Other | — | (746 | ) | (3,068 | ) | |||||||
Net investing cash flow | (14,704 | ) | 53,010 | 34,124 | ||||||||
Increase (decrease) in cash and cash equivalents | 7,238 | (15,000 | ) | (14,743 | ) | |||||||
Adjustment for net change in cash and cash equivalents in discontinued operations | — | 2,456 | 10,970 | |||||||||
Cash and cash equivalents, beginning of the year | 113,986 | 126,530 | 130,303 | |||||||||
Cash and cash equivalents, end of the year | 121,224 | 113,986 | 126,530 | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
Restated — Note 18 | ||||||||||||
OWNER’S EQUITY (PREDECESSOR | ||||||||||||
AND DROPDOWN PREDECESSOR) | ||||||||||||
Accumulated | ||||||||||||
Other | ||||||||||||
Comprehensive | Total Owner’s | |||||||||||
Owner’s Equity | Income (Loss) | Equity | ||||||||||
$ | $ | $ | ||||||||||
Balance as at December 31, 2004 | 703,170 | 58 | 703,228 | |||||||||
Net income | 95,913 | 95,913 | ||||||||||
Other comprehensive income: | ||||||||||||
Realized gain on marketable securities | (58 | ) | (58 | ) | ||||||||
Comprehensive income | 95,855 | |||||||||||
Net change in parent’s equity in Dropdown Predecessor | 858 | 858 | ||||||||||
Norwegian group tax contributions (note 10a) | (1,185 | ) | (1,185 | ) | ||||||||
Loss on sale ofDania Spirit(note 10b) | (3,093 | ) | (3,093 | ) | ||||||||
Balance as at December 31, 2005 | 795,663 | — | 795,663 | |||||||||
Net loss and comprehensive loss (January 1 to December 18, 2006) | (30,292 | ) | (30,292 | ) | ||||||||
Net change in parent’s equity in Dropdown Predecessor | 798 | 798 | ||||||||||
Gain on sale of Navion Shipping Ltd. to Teekay Corporation (notes 10c and 19) | 18,468 | 18,468 | ||||||||||
Gain on sale of Norwegian subsidiaries to Teekay Corporation (note 10e) | 23,260 | 23,260 | ||||||||||
Loss on sale of theBorgato Teekay Corporation (note 10d) | (11,900 | ) | (11,900 | ) | ||||||||
Stock compensation expense (note 1) | 1,048 | 1,048 | ||||||||||
Excess purchase price over the contributed basis of Teekay Offshore Partners Predecessor (note 1) | (231,684 | ) | (231,684 | ) | ||||||||
Purchase of a 26% interest in Teekay Offshore Operating L.P. from Teekay Corporation (note 1) | (134,629 | ) | (134,629 | ) | ||||||||
Reclassification adjustment for Teekay Corporation’s 74% non-controlling interest in Teekay Offshore Operating L.P.(note 1) | (376,089 | ) | (376,089 | ) | ||||||||
Balance as at December 18, 2006 | 54,643 | — | 54,643 | |||||||||
F - 6
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ EQUITY/OWNER’S EQUITY
(in thousands of U.S. dollars and units)
Restated — Note 18 | ||||||||||||||||||||||||||||||||
Owner’s | ||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||
(Predecessor | Accumulated | |||||||||||||||||||||||||||||||
and | PARTNERS’ EQUITY | Other | ||||||||||||||||||||||||||||||
Dropdown | Limited Partners | General | Comprehensive | |||||||||||||||||||||||||||||
Predecessor) | Common | Subordinated | Partner | Income | Total | |||||||||||||||||||||||||||
$ | Units | $ | Units | $ | $ | $ | $ | |||||||||||||||||||||||||
Balance as at December 18, 2006 | 54,643 | — | 54,643 | |||||||||||||||||||||||||||||
Allocation of Predecessor and Dropdown Predecessor’s equity to unitholders (note 1) | (2,965 | ) | 2,800 | 634 | 9,800 | 2,220 | 111 | — | ||||||||||||||||||||||||
Proceeds from initial public offering of limited partnership interests, net of offering costs of $13,788 (note 2) | 8,050 | 155,262 | 155,262 | |||||||||||||||||||||||||||||
Redemption of common units from Teekay Corporation (note 2) | (1,050 | ) | (20,633 | ) | (20,633 | ) | ||||||||||||||||||||||||||
Net income (December 19 — 31, 2006) | 114 | 678 | 606 | 64 | 1,462 | |||||||||||||||||||||||||||
Balance as at December 31, 2006 | 51,792 | 9,800 | 135,941 | 9,800 | 2,826 | 175 | — | 190,734 | ||||||||||||||||||||||||
Net income (January 1 — December 31, 2007) | 1,300 | 1,225 | 700 | 733 | 3,958 | |||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||
Unrealized net gain on qualifying cash flow hedging instruments (note 11) | 281 | 281 | ||||||||||||||||||||||||||||||
Realized net loss on qualifying cash flow hedging instruments (note 11) | 12 | 12 | ||||||||||||||||||||||||||||||
Comprehensive income | 4,251 | |||||||||||||||||||||||||||||||
Contribution of foreign exchange forward contracts from Teekay Corporation(note 10w) | 16 | 89 | 4 | 109 | ||||||||||||||||||||||||||||
Offering costs from public offering of limited partnership interests | (93 | ) | (93 | ) | ||||||||||||||||||||||||||||
Net change in parent’s equity in Dropdown Predecessor (note 14e) | (6,939 | ) | (6,939 | ) | ||||||||||||||||||||||||||||
Purchase of Navion Bergen LLC and Navion Gothenburg LLC from Teekay Corporation (note 10r) | (29,756 | ) | (3,720 | ) | (20,832 | ) | (850 | ) | (55,158 | ) | ||||||||||||||||||||||
Purchase of Dampier Spirit LLC from Teekay Corporation (note 10s) | (16,397 | ) | (2,029 | ) | (11,363 | ) | (464 | ) | (30,253 | ) | ||||||||||||||||||||||
Contribution of interest rate swap agreement from Teekay Corporation (note 10t) | (373 | ) | (2,092 | ) | (85 | ) | (2,550 | ) | ||||||||||||||||||||||||
Cash distributions | (11,123 | ) | (11,123 | ) | (454 | ) | (22,700 | ) | ||||||||||||||||||||||||
Balance as at December 31, 2007 | — | 9,800 | 119,844 | 9,800 | (41,795 | ) | (941 | ) | 293 | 77,401 | ||||||||||||||||||||||
F - 7
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
1. | Summary of Significant Accounting Policies |
F - 8
Table of Contents
(Successor to Teekay Offshore Partners Predecessor) — (Cont’d)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
F - 9
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
F - 10
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
F - 11
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
2. | Initial Public Offering |
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 notes and redemption of 1.05 million common units from Teekay Corporation | 155,169 | |||
$ | 169,050 | |||
F - 12
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
3. | Segment Reporting |
Year Ended December 31, 2006 | ||||||||||||||||
January 1 | December 19 | |||||||||||||||
Year Ended | to | to | Year Ended | |||||||||||||
December 31, | December 18, | December 31, | December 31, | |||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
(U.S. dollars in millions) | (restated) | (restated) | (restated) | (restated) | ||||||||||||
StatoilHydro ASA(1) (2) | $309.6 or 39 | % | $187.6 or 30 | % | $6.9 or 28 | % | $184.7 or 30 | % | ||||||||
Teekay Corporation(3) | $154.6 or 20 | % | $68.9 or 11 | % | $5.3 or 22 | % | — | |||||||||
Petrobras Transporte S.A(1) (2) | $100.8 or 13 | % | — | — | — |
(1) | Shuttle tanker segment. | |
(2) | Statoil ASA and Petrobras Transporte S.A. are international oil companies. | |
(3) | Shuttle tanker, conventional tanker and FSO segments. |
Year Ended December 31, 2007 | ||||||||||||||||
Shuttle | Conventional | |||||||||||||||
Tanker | Tanker | FSO | ||||||||||||||
Segment | Segment | Segment | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | (restated) | ||||||||||||||
Voyage revenues | 590,611 | 135,922 | 58,670 | 785,203 | ||||||||||||
Voyage expenses | 114,157 | 36,594 | 886 | 151,637 | ||||||||||||
Vessel operating expenses | 103,809 | 24,175 | 21,676 | 149,660 | ||||||||||||
Time charter hire expense | 150,463 | — | — | 150,463 | ||||||||||||
Depreciation and amortization | 86,502 | 21,324 | 16,544 | 124,370 | ||||||||||||
General and administrative(1) | 50,776 | 7,828 | 3,800 | 62,404 | ||||||||||||
Income from vessel operations | 84,904 | 46,001 | 15,764 | 146,669 | ||||||||||||
Expenditures for vessels and equipment(2) | 18,189 | 1,998 | 11,041 | 31,228 |
F - 13
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Year Ended December 31, 2006 | ||||||||||||||||||||||||||||||||
January 1 to December 18, 2006 | December 19 to December 31, 2006 | |||||||||||||||||||||||||||||||
Shuttle | Conventional | Shuttle | Conventional | |||||||||||||||||||||||||||||
Tanker | Tanker | FSO | Tanker | Tanker | FSO | |||||||||||||||||||||||||||
Segment | Segment | Segment | Total | Segment | Segment | Segment | Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
(restated) | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||||||||||||||
Voyage revenues | 516,187 | 66,673 | 34,654 | 617,514 | 19,785 | 3,383 | 1,229 | 24,397 | ||||||||||||||||||||||||
Voyage expenses | 85,451 | 4,841 | 1,029 | 91,321 | 2,995 | 51 | 56 | 3,102 | ||||||||||||||||||||||||
Vessel operating expenses | 77,085 | 18,754 | 12,152 | 107,991 | 3,222 | 624 | 451 | 4,297 | ||||||||||||||||||||||||
Time charter hire expense | 159,973 | — | — | 159,973 | 5,641 | — | — | 5,641 | ||||||||||||||||||||||||
Depreciation and amortization | 68,784 | 20,507 | 11,532 | 100,823 | 2,583 | 705 | 438 | 3,726 | ||||||||||||||||||||||||
General and administrative(1) | 48,490 | 11,571 | 2,953 | 63,014 | 1,863 | 218 | 96 | 2,177 | ||||||||||||||||||||||||
Gain on sale of vessels and equipment — net of writedowns | (4,778 | ) | — | — | (4,778 | ) | — | — | — | — | ||||||||||||||||||||||
Restructuring charge | — | 832 | — | 832 | — | — | — | — | ||||||||||||||||||||||||
Income from vessel operations | 81,182 | 10,168 | 6,988 | 98,338 | 3,481 | 1,785 | 188 | 5,454 | ||||||||||||||||||||||||
Equity income from joint ventures | 6,321 | — | — | 6,321 | — | — | — | — | ||||||||||||||||||||||||
Expenditures for vessels and equipment(2) | 25,055 | 6,024 | — | 31,079 | — | — | — | — |
Year Ended December 31, 2005 | ||||||||||||||||
Conventional | ||||||||||||||||
Shuttle Tanker | Tanker | FSO | ||||||||||||||
Segment | Segment | Segment | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | (restated) | (restated) | |||||||||||||
Voyage revenues | 516,758 | 57,454 | 39,034 | 613,246 | ||||||||||||
Voyage expenses | 68,308 | 5,419 | 816 | 74,543 | ||||||||||||
Vessel operating expenses | 75,196 | 21,574 | 12,710 | 109,480 | ||||||||||||
Time charter hire expense | 169,687 | — | — | 169,687 | ||||||||||||
Depreciation and amortization | 77,083 | 20,646 | 12,095 | 109,824 | ||||||||||||
General and administrative(1) | 44,063 | 9,634 | 3,029 | 56,726 | ||||||||||||
Gain on sale of vessels and equipment — net of writedowns | 2,820 | — | — | 2,820 | ||||||||||||
Restructuring charge | 955 | — | — | 955 | ||||||||||||
Income (loss) from vessel operations | 78,646 | 181 | 10,384 | 89,211 | ||||||||||||
Equity income (loss) from joint ventures | 5,991 | (36 | ) | — | 5,955 | |||||||||||
Investments in joint ventures | 34,663 | 495 | — | 35,158 | ||||||||||||
Expenditures for vessels and equipment(2) | 22,760 | 2,000 | — | 24,760 |
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources). | |
(2) | Excludes non-cash investing activities (see Note 14). |
F - 14
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
2007 | 2006 | |||||||
$ | $ | |||||||
(restated) | ||||||||
Shuttle tanker segment | 1,559,261 | 1,445,830 | ||||||
Conventional tanker segment | 255,460 | 310,699 | ||||||
FSO segment | 131,080 | 83,534 | ||||||
Cash and cash equivalents | 121,224 | 113,986 | ||||||
Accounts receivable and other assets | 99,326 | 127,175 | ||||||
Consolidated total assets | 2,166,351 | 2,081,224 | ||||||
4. | Intangible Assets |
Weighted- | December 31, 2007 | December 31, 2006 | ||||||||||||||||||||||||||
Average | Gross | Net | Gross | |||||||||||||||||||||||||
Amortization | Carrying | Accumulated | Carrying | Carrying | Accumulated | Net Carrying | ||||||||||||||||||||||
Period | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
(years) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Contracts of affreightment | 10.2 | 124,250 | (68,895 | ) | 55,355 | 124,250 | (57,825 | ) | 66,425 |
5. | Accrued Liabilities |
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
$ | $ | |||||||
(restated) | ||||||||
Voyage and vessel | 26,015 | 32,471 | ||||||
Interest | 10,932 | 6,717 | ||||||
Payroll and benefits | 1,517 | 6,445 | ||||||
38,464 | 45,633 | |||||||
6. | Long-Term Debt |
December 31, 2007 | December 31, 2006 | |||||||
$ | $ | |||||||
U.S. Dollar-denominated Revolving Credit Facilities due through 2017 | 1,205,808 | 1,080,000 | ||||||
U.S. Dollar-denominated Term Loans due through 2017 | 311,659 | 223,352 | ||||||
1,517,467 | 1,303,352 | |||||||
Less current portion | 64,060 | 17,656 | ||||||
Total | 1,453,407 | 1,285,696 | ||||||
F - 15
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
7. | Leases |
8. | Fair Value of Financial Instruments |
December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | (restated) | (restated) | |||||||||||||
Cash and cash equivalents | 121,224 | 121,224 | 113,986 | 113,986 | ||||||||||||
Advances to affiliate (note 10v) | 796 | 796 | 30,757 | 30,757 | ||||||||||||
Long-term debt | (1,517,467 | ) | (1,517,467 | ) | (1,303,352 | ) | (1,303,352 | ) | ||||||||
Derivative instruments(1)(note 11) | ||||||||||||||||
Interest rate swap agreements | (21,050 | ) | (21,050 | ) | 22,440 | 22,440 | ||||||||||
Foreign currency forward contracts | 1,122 | 1,122 | — | — |
(1) | The Partnership transacts all of its derivative instruments through investment-grade rated financial institutions at the time of the transaction and requires no collateral from these institutions. |
F - 16
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
9. | Restructuring Charge and Other Income — Net |
Year Ended December 31, 2006 | ||||||||||||||||
January 1 | December 19 | |||||||||||||||
Year Ended | to | to | Year Ended | |||||||||||||
December 31, | December 18, | December 31, | December 31, | |||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | ||||||||||||||||
Volatile organic compound emissions plant lease income | 10,960 | 11,037 | 408 | 11,001 | ||||||||||||
Miscellaneous | (557 | ) | (2,670 | ) | (99 | ) | (1,910 | ) | ||||||||
Other income — net | 10,403 | 8,367 | 309 | 9,091 | ||||||||||||
10. | Related Party Transactions |
a. | During 2005, rate-effected income tax losses of $1.2 million that were generated by the Predecessor’s Norwegian subsidiaries were transferred to the Norwegian subsidiaries of Teekay Corporation. The transfer of these income tax losses was accounted for as an equity distribution. |
b. | During 2005, the Predecessor sold theDania Spirit,a 2000-built liquid petroleum gas carrier, to a subsidiary of Teekay Corporation for $18.0 million. The resulting $3.1 million loss on sale has been accounted for as an equity distribution to Teekay Corporation. |
c. | On July 1, 2006, the Predecessor sold Navion Shipping Ltd. to a subsidiary of Teekay Corporation for $53.7 million. The resulting gain on sale of $18.5 million was accounted for as an equity contribution by Teekay Corporation. Please read Note 19. |
d. | During 2006, the Predecessor paid $11.9 million to Teekay Corporation for it to assume the time-charter contract for one of the Predecessor’s in-chartered shuttle tankers, the Borga. The resulting $11.9 million loss on sale was accounted for as an equity distribution to Teekay Corporation. |
e. | In 2006, prior to the Offering, the Predecessor sold to Teekay Corporation certain subsidiaries and fixed assets for $64.7 million. The resulting $23.3 million gain on sale was accounted for as an equity contribution by Teekay Corporation. |
f. | Prior to the Offering, the Predecessor settled its Norwegian Kroner-denominated demand promissory note of 1.1 billion Norwegian Kroner ($166.3 million) and its Australian Dollar-denominated demand promissory note of 25.5 million Australian Dollars ($19.2 million) owing to Teekay Corporation. Interest expense incurred on these demand promissory notes for the period prior to the Offering (January 1 to December 18, 2006) and for the year ended December 31, 2005 were $12.9 million and $14.8 million, respectively. |
g. | 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 conventional crude oil tankers from Teekay Corporation. Immediately preceding the Offering, this interest-bearing loan was sold to OPCO. The interest expense incurred on this loan prior to its sale to OPCO was $14.2 million. |
h. | OPCO’s shuttle tankers, which are typically employed on long-term time-charters, previously were employed on short-term time charters with a subsidiary of Teekay Corporation when there were periods between the ending of one long-term time-charter and the beginning of another long-term time-charter. Pursuant to these short-term time-charters, OPCO earned voyage revenues of $1.2 million during the year ended December 31, 2005. |
F - 17
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
i. | On October 1, 2006, OPCO entered into time-charter contracts for its nine Aframax conventional tankers with a subsidiary of Teekay Corporation at then-prevailing 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 $128.4 million and $22.3 million for the year ended December 31, 2007 and the three months ended December 31, 2006, respectively. |
j. | One of OPCO’s FSO units and one of OPCO’s conventional tankers were employed on short-term bareboat charters with a subsidiary of Teekay Corporation during the last half of 2006. Pursuant to these charter contracts, OPCO earned voyage revenues of $3.4 million revenues during the last half of 2006. |
k. | 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, OPCO earned voyage revenues of $14.2 million and $3.6 million during the year ended December 31, 2007 and the three months ended December 31, 2006, respectively. |
l. | Two of OPCO’s FSO units were employed on long-term bareboat charters with a subsidiary of Teekay Corporation. Pursuant to these charter contracts, OPCO earned voyage revenues of $12.0 million, $10.2 million and $10.8 million during the years ended December 31, 2007, 2006 and 2005, respectively. |
m. | 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 year ended December 31, 2007 and the three months ended December 31, 2006, OPCO earned management fees of $3.3 million and $0.5 million, respectively, under the agreement. |
n. | Eight of OPCO’S Aframax conventional oil tankers and two FSO units (including theDampier Spirit) were managed by subsidiaries of Teekay Corporation. Pursuant to the associated management services agreements, OPCO incurred general and administrative expenses of $4.5 million, $6.1 million and $6.1 million during the years ended December 31, 2007, 2006, and 2005, respectively. During the years ended December 31, 2007, 2006, and 2005, $0.1 million, $0.8 million, and $0.9 million, respectively, of general and administrative expenses attributable to the operations of theDampier Spiritwere incurred by Teekay Corporation and have been allocated to the Partnership as part of the results of the Dropdown Predecessor. |
o. | 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 and technical services and ship management services. During the year ended December 31, 2007 and the period from December 19, 2006 to December 31, 2006, the Partnership incurred $52.7 million and $0.3 million, respectively, of these costs. Prior to the Offering, the shore-based staff who provided these services to the Predecessor were transferred to a subsidiary of Teekay Corporation. During the years ended December 31, 2006, and 2005, $21.6 million and $14.8 million, respectively, of general and administrative expenses attributable to the operations of the Predecessor prior to the Offering were incurred by Teekay Corporation and have been allocated to the Predecessor. |
p. | Pursuant to the Partnership’s partnership agreement, 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 year ended December 31, 2007, the Partnership incurred $0.8 million of these costs. |
q. | 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 offering on liquefied natural gas carriers, oil tankers, shuttle tankers, FSO units and floating production, storage and offloading units. |
r. | 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 of $93.7 million and the related interest rate swap agreement. The Partnership acquired Teekay Corporation’s 100% interest in the 2000-builtNavion Bergenand its 50% interest in the 2006-builtNavion 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 $25.4 million. |
F - 18
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
s. | In October 2007, the Partnership acquired from Teekay Corporation an FSO unit, theDampier Spirit, along with its 7-year fixed-rate time-charter to Apache Corporation for a total cost of $30.3 million. The purchase was financed with one of the Partnership’s existing Revolvers. 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 $13.9 million. |
t. | In December 2007, Teekay Corporation contributed a $65.6 million, nine-year, 4.98% interest rate swap agreement (used to hedge the debt assumed in the purchase of theNavion Bergen) having a fair value liability of $2.6 million (Note 11), to the Partnership for no consideration and was accounted for as an equity distribution to Teekay Corporation. |
u. | In December 2007, Teekay Corporation agreed to reimburse OPCO for certain costs relating to events which occurred prior to the Offering, totalling $4.8 million, including the settlement of a customer dispute in respect of vessels delivered prior to the Offering and other costs. |
v. | At December 31, 2007 and 2006, advances to affiliates totaled $0.8 million and $30.8 million, respectively. Advances to and from affiliates are non-interest bearing and unsecured. |
w. | In January 2007, Teekay Corporation contributed foreign exchange contracts for the forward purchase of a total of Australian Dollars 4.5 million having a fair value asset of $0.1 million, net of non-controlling interest, to OPCO for no consideration and was accounted for as an equity contribution from Teekay Corporation. The foreign exchange forward contracts matured by December 2007. |
x. | During the year ended December 31, 2007, $1.2 million of interest expense attributable to the operations of theNavion Bergenwas incurred by Teekay Corporation and has been allocated to the Partnership as part of the results of the Dropdown Predecessor. |
11. | Derivative Instruments and Hedging Activities |
Contract amount in | Average | Expected maturity | ||||||||||||||
foreign currency | forward rate | 2008 | 2009 | |||||||||||||
(millions) | (in millions of U.S. Dollars) | |||||||||||||||
Norwegian Kroner | 255.7 | 5.64 | — | $ | 45.4 | |||||||||||
Australian Dollar | 5.0 | 1.25 | $ | 4.0 | — | |||||||||||
Singapore Dollar | 4.1 | 1.44 | $ | 2.9 | — | |||||||||||
Euro | 4.0 | 0.68 | $ | 5.8 | — |
F - 19
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Fair Value / | Weighted- | |||||||||||||||||
Carrying | Average | |||||||||||||||||
Interest | Principal | Amount of | Remaining | Fixed | ||||||||||||||
Rate | Amount | Liability | Term | Interest Rate | ||||||||||||||
Index | $ | $ | (years) | (%)(1) | ||||||||||||||
U.S. Dollar-denominated interest rate swaps (restated) | LIBOR | 935,000 | (9,374 | ) | 6.5 | 4.7 | ||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 414,373 | (11,676 | ) | 13.3 | 5.0 |
(1) | Excludes the margin the Partnership pays on its variable-rate debt, which as at December 31, 2007, ranged from 0.50% and 0.80%. | |
(2) | Principal amount reduces quarterly or semiannually. |
12. | Income Taxes |
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
$ | $ | |||||||
(restated) | (restated) | |||||||
Deferred tax liabilities: | ||||||||
Vessels and equipment | 84,077 | 62,497 | ||||||
Goodwill and intangible assets | 266 | — | ||||||
Long-term debt | 94,071 | 34,504 | ||||||
Total deferred tax liabilities | 178,414 | 97,001 | ||||||
Deferred tax assets: | ||||||||
Goodwill and intangible assets | — | 368 | ||||||
Provisions | 1,012 | 1,012 | ||||||
Tax losses carried forward(1) | 100,096 | 21,715 | ||||||
Total deferred tax assets | 101,108 | 23,095 | ||||||
Net deferred tax liabilities | 77,306 | 73,906 | ||||||
Current portion | — | — | ||||||
Long-term portion of net deferred tax liabilities | 77,306 | 73,906 | ||||||
(1) | The net operating loss carryfowards are available to offset future taxable income in the respective jurisdictions, and can be carried forward indefinitely. |
Year Ended December 31, 2006 | ||||||||||||||||
January 1 | December 19 | |||||||||||||||
Year Ended | to | to | Year Ended | |||||||||||||
December 31, | December 18, | December 31, | December 31, | |||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | (restated) | (restated) | |||||||||||||
Current | — | (2,850 | ) | (106 | ) | (3,839 | ) | |||||||||
Deferred | 10,516 | (410 | ) | (15 | ) | 16,214 | ||||||||||
Income tax recovery (expense) | 10,516 | (3,260 | ) | (121 | ) | 12,375 | ||||||||||
F - 20
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Year Ended December 31, 2006 | ||||||||||||||||
January 1 | December 19 | |||||||||||||||
Year Ended | to | to | Year Ended | |||||||||||||
December 31, | December 18, | December 31, | December 31, | |||||||||||||
2007 | 2006 | 2006 | 2005 | |||||||||||||
% | % | % | % | |||||||||||||
(restated) | (restated) | (restated) | (restated) | |||||||||||||
Actual income tax provision (credit) rate | (49.5 | ) | (12.1 | ) | 3.0 | (14.8 | ) | |||||||||
Income not subject to income taxes | 77.5 | 40.1 | 25.0 | 42.8 | ||||||||||||
Applicable statutory income tax provision rate | 28.0 | 28.0 | 28.0 | 28.0 | ||||||||||||
13. | Commitments and Contingencies |
14. | Supplemental Cash Flow Information |
a) | The changes in non-cash working capital items related to operating activities for the years ended December 31, 2007, 2006 and 2005 are as follows: |
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
(restated) | (restated) | (restated) | ||||||||||
Accounts receivable | (16,206 | ) | 3,452 | 13,031 | ||||||||
Prepaid expenses and other assets | (1,957 | ) | 4,164 | (17,487 | ) | |||||||
Accounts payable and accrued liabilities | (6,126 | ) | 4,643 | 9,132 | ||||||||
Advances (to) from affiliate | (9,417 | ) | 38,780 | 14,363 | ||||||||
(33,706 | ) | 51,039 | 19,039 | |||||||||
b) | Cash interest paid (including interest paid by the Dropdown Predecessor) during the years ended December 31, 2007, 2006 and 2005 totaled $73.9 million, $44.0 million and $38.3 million, respectively. |
c) | Taxes paid (including taxes paid by the Dropdown Predecessor) during the years ended December 31, 2007, December 31, 2006 and December 31, 2005 totaled $1.8 million, $0.2 million and $6.5 million, respectively. |
d) | The Partnership’s consolidated statement of cash flows for the years ended December 31, 2007, 2006 and 2005 reflect the Dropdown Predecessor as if the Partnership had acquired the Dropdown Predecessor when each respective vessel began operations under the ownership of Teekay Corporation. If Teekay Corporation financed the construction or purchase of the vessel prior to the Dropdown Predecessor being included in the results of the Partnership, the expenditures for the vessel by Teekay Corporation have been treated as a non-cash transaction in the Partnership’s consolidated statement of cash flows. The non-cash investing activities related to the Dropdown Predecessor are as follows: |
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2007 | 2006 | 2005 | ||||||||||
$ | $ | $ | ||||||||||
(restated) | (restated) | (restated) | ||||||||||
Non-cash investing activities: | ||||||||||||
Expenditures for vessels and equipment | 71,646 | — | — |
e) | Net change in parent’s equity in the Dropdown Predecessor includes the equity of the Dropdown Predecessor when initially pooled for accounting purposes and any subsequent non-cash equity transactions of the Dropdown Predecessor. |
F - 21
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
15. | Vessel Sales and Write-downs on Vessels and Equipment |
16. | Partners’ Capital and Net Income (Loss) Per Unit |
• | Right to receive distribution of available cash within approximately 45 days after the end of each quarter. |
• | No limited partner shall have any management power over the Partnership’s business and affairs; the general partner shall conduct, direct and manage our activities. |
• | The General Partner may be removed if such removal is approved by unitholders holding at least 66 2/3% of the outstanding units voting as a single class, including units held by the General Partner and its affiliates. |
Quarterly Distribution Target Amount (per unit) | Unitholders | General Partner | ||||||
Minimum quarterly distribution of $0.35 | 98 | % | 2 | % | ||||
Up to $0.4025 | 98 | % | 2 | % | ||||
Above $0.4025 up to $0.4375 | 85 | % | 15 | % | ||||
Above $0.4375 up to $0.525 | 75 | % | 25 | % | ||||
Above $0.525 | 50 | % | 50 | % |
F - 22
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
17. | Valuation and Qualifying Accounts |
Balance at beginning | Balance at end | |||||||
of year | of year | |||||||
$ | $ | |||||||
Allowance for bad debts: | ||||||||
Year ended December 31, 2006 | 987 | 401 | ||||||
Year ended December 31, 2007 | 401 | — | ||||||
Restructuring cost accrual: | ||||||||
Year ended December 31, 2006 | 955 | 71 | ||||||
Year ended December 31, 2007 | 71 | — |
18. | Restatement of Previously Issued Financial Statements |
• | One of the requirements of SFAS No. 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, entities must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Based on the Partnership’s review, the Partnership concluded that the prospective hedge effectiveness assessment that was conducted for certain of the Partnership interest rate swap agreements on the date of designation was not sufficient to conclude that the interest rate swaps would be highly effective in accordance with the technical requirements of SFAS No. 133, in achieving offsetting changes in cash flows attributable to the risk being hedged. |
• | To conclude that hedge accounting is appropriate, another requirement of SFAS No. 133 is that the applicable hedge documentation specifies the method that will be used to assess, retrospectively and prospectively, the hedging instrument’s effectiveness, and the method that will be used to measure hedge ineffectiveness. Documentation for certain of the Partnership’s interest rate swap agreements did not clearly specify the method to be used to measure hedge ineffectiveness. |
• | Certain of the Partnership’s derivative instruments were designated as hedges when the derivative instruments had a non-zero fair value. However, this designation was not appropriate as the Partnership used certain methods of measuring ineffectiveness that are not allowed in the case of non-zero fair value derivatives. |
F - 23
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
F - 24
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Total | ||||||||||||||||||||
Owner’s Equity | ||||||||||||||||||||
Net Income (Loss) | (Predecessor | |||||||||||||||||||
Year Ended December 31, 2006 | and Dropdown | |||||||||||||||||||
January 1 | December 19 | Predecessor) | ||||||||||||||||||
Year Ended | to | to | Year Ended | At | ||||||||||||||||
December 31, | December 18, | December 31, | December 31, | December 31, | ||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
As previously reported | 19,672 | (33,563 | ) | 848 | 84,747 | 659,212 | ||||||||||||||
Adjustments: | ||||||||||||||||||||
Derivative instruments, net of non-controlling interest and other(1) | (17,014 | ) | 2,806 | 500 | 756 | — | ||||||||||||||
Dropdown Predecessor(2) | 1,300 | 3,097 | 114 | 2,910 | 44,016 | |||||||||||||||
Vision Incentive Plan | — | (2,632 | ) | — | 7,500 | — | ||||||||||||||
As restated | 3,958 | (30,292 | ) | 1,462 | 95,913 | 703,228 | ||||||||||||||
(1) | Includes an adjustment totaling ($3.6) million for the year ended December 31, 2007 relating to the accounting for the non-controlling interest in one of our 50% owned subsidiaries and adjusting amounts related to deferred income taxes and the fair value of derivative instruments at December 31, 2007. | |
(2) | Relates to the results for the pre-acquisition periods in which the Partnership and the acquired interests in vessels, as listed below, were both in operation and under the common control of Teekay Corporation, as follows: |
• | Dampier Spirit(FSO unit) for March 15, 1998 to September 30, 2007; | |
• | Navion Bergen(shuttle tanker) for April 16, 2007 to June 30, 2007; and | |
• | Navion Gothenburg(shuttle tanker) began operations concurrently with the Partnership’s acquisition of it on July 24, 2007. |
F - 25
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Year Ended December 31, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Derivative | ||||||||||||||||
As | Instruments | Dropdown | As | |||||||||||||
Reported | and Other | Predecessor | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
VOYAGE REVENUES | 775,969 | — | 9,234 | 785,203 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 151,583 | — | 54 | 151,637 | ||||||||||||
Vessel operating expenses | 143,247 | 365 | 6,048 | 149,660 | ||||||||||||
Time-charter hire expense | 150,463 | — | — | 150,463 | ||||||||||||
Depreciation and amortization | 122,415 | — | 1,955 | 124,370 | ||||||||||||
General and administrative | 61,530 | (40 | ) | 914 | 62,404 | |||||||||||
Total operating expenses | 629,238 | 325 | 8,971 | 638,534 | ||||||||||||
Income (loss) from vessel operations | 146,731 | (325 | ) | 263 | 146,669 | |||||||||||
OTHER ITEMS | ||||||||||||||||
Interest expense | (79,768 | ) | (45,192 | ) | (1,344 | ) | (126,304 | ) | ||||||||
Interest income | 5,774 | — | 97 | 5,871 | ||||||||||||
Foreign currency exchange (loss) gain | (12,144 | ) | (626 | ) | 1,092 | (11,678 | ) | |||||||||
Income tax recovery (expense) | 10,924 | (1,600 | ) | 1,192 | 10,516 | |||||||||||
Other income — net | 10,403 | — | — | 10,403 | ||||||||||||
Total other items | (64,811 | ) | (47,418 | ) | 1,037 | (111,192 | ) | |||||||||
Income (loss) before non-controlling interest | 81,920 | (47,743 | ) | 1,300 | 35,477 | |||||||||||
Non-controlling interest | (62,248 | ) | 30,729 | — | (31,519 | ) | ||||||||||
Net income (loss) | 19,672 | (17,014 | ) | 1,300 | 3,958 | |||||||||||
Dropdown Predecessor’s interest in net income | — | 1,300 | ||||||||||||||
General partner’s interest in net income | 393 | 733 | ||||||||||||||
Limited partners’ interest: | ||||||||||||||||
Net income | 19,279 | 1,925 | ||||||||||||||
Net income per: | ||||||||||||||||
- Common unit (basic and diluted) | 1.26 | 0.12 | ||||||||||||||
- Subordinated unit (basic and diluted) | 0.70 | 0.07 | ||||||||||||||
- Total unit (basic and diluted) | 0.99 | 0.10 | ||||||||||||||
Weighted average number of units outstanding: | ||||||||||||||||
- Common units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||
- Subordinated units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||
- Total units (basic and diluted) | 19,600,000 | 19,600,000 | ||||||||||||||
Cash distributions declared per unit | 1.14 | 1.14 | ||||||||||||||
F - 26
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
January 1 to December 18, 2006 | ||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
VOYAGE REVENUES | 684,766 | — | 12,762 | (80,014 | ) | — | 617,514 | |||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Voyage expenses | 91,321 | — | — | — | — | 91,321 | ||||||||||||||||||
Vessel operating expenses | 102,311 | — | 5,680 | — | — | 107,991 | ||||||||||||||||||
Time-charter hire expense | 239,311 | — | — | (79,338 | ) | — | 159,973 | |||||||||||||||||
Depreciation and amortization | 98,386 | — | 2,437 | — | — | 100,823 | ||||||||||||||||||
General and administrative | 70,387 | — | 1,327 | (11,332 | ) | 2,632 | 63,014 | |||||||||||||||||
Gain on sale of vessels and equipment, net of writedowns | (4,778 | ) | — | — | — | — | (4,778 | ) | ||||||||||||||||
Restructuring charge | 832 | — | — | — | — | 832 | ||||||||||||||||||
Total operating expenses | 597,770 | — | 9,444 | (90,670 | ) | 2,632 | 519,176 | |||||||||||||||||
Income from vessel operations | 86,996 | — | 3,318 | 10,656 | (2,632 | ) | 98,338 | |||||||||||||||||
OTHER ITEMS | ||||||||||||||||||||||||
Interest expense | (67,225 | ) | 2,763 | — | — | — | (64,462 | ) | ||||||||||||||||
Interest income | 5,167 | — | — | — | — | 5,167 | ||||||||||||||||||
Equity income from joint ventures | 6,162 | 159 | — | — | — | 6,321 | ||||||||||||||||||
Foreign currency exchange (loss) gain | (66,574 | ) | — | 360 | — | — | (66,214 | ) | ||||||||||||||||
Income tax expense | (2,672 | ) | — | (588 | ) | — | — | (3,260 | ) | |||||||||||||||
Other income — net | 8,360 | — | 7 | — | — | 8,367 | ||||||||||||||||||
Total other items | (116,782 | ) | 2,922 | (221 | ) | — | — | (114,081 | ) | |||||||||||||||
(Loss) income before non-controlling interest | (29,786 | ) | 2,922 | 3,097 | 10,656 | (2,632 | ) | (15,743 | ) | |||||||||||||||
Non-controlling interest | (3,777 | ) | (116 | ) | — | — | — | (3,893 | ) | |||||||||||||||
Net (loss) income from continuing operations | (33,563 | ) | 2,806 | 3,097 | 10,656 | (2,632 | ) | (19,636 | ) | |||||||||||||||
Net loss from discontinued operations | — | — | — | (10,656 | ) | — | (10,656 | ) | ||||||||||||||||
Net (loss) income | (33,563 | ) | 2,806 | 3,097 | — | (2,632 | ) | (30,292 | ) | |||||||||||||||
Dropdown predecessor’s interest in net income | — | 3,097 | ||||||||||||||||||||||
General partner’s interest in net loss | — | — | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net loss from continuing operations | (33,563 | ) | (22,733 | ) | ||||||||||||||||||||
Net loss from continuing operations per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | (2.66 | ) | (1.80 | ) | ||||||||||||||||||||
- Subordinated unit (basic and diluted) | (2.66 | ) | (1.80 | ) | ||||||||||||||||||||
- Total unit (basic and diluted) | (2.66 | ) | (1.80 | ) | ||||||||||||||||||||
Net loss from discontinued operations | — | (10,656 | ) | |||||||||||||||||||||
Net loss from discontinued operations per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | — | (0.85 | ) | |||||||||||||||||||||
- Subordinated unit (basic and diluted) | — | (0.85 | ) | |||||||||||||||||||||
- Total unit (basic and diluted) | — | (0.85 | ) | |||||||||||||||||||||
Net loss | (33,563 | ) | (33,389 | ) | ||||||||||||||||||||
Net loss per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | (2.66 | ) | (2.65 | ) | ||||||||||||||||||||
- Subordinated unit (basic and diluted) | (2.66 | ) | (2.65 | ) | ||||||||||||||||||||
- Total unit (basic and diluted) | (2.66 | ) | (2.65 | ) | ||||||||||||||||||||
Weighted average number of units outstanding: | ||||||||||||||||||||||||
- Common units (basic and diluted) | 2,800,000 | 2,800,000 | ||||||||||||||||||||||
- Subordinated units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||||||||||
- Total units (basic and diluted) | 12,600,000 | 12,600,000 | ||||||||||||||||||||||
Cash distributions declared per unit | — | — | ||||||||||||||||||||||
F - 27
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 19 to December 31, 2006 | ||||||||||||||||
Adjustments | ||||||||||||||||
As | Derivative | Dropdown | As | |||||||||||||
Reported | Instruments | Predecessor | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
VOYAGE REVENUES | 23,926 | — | 471 | 24,397 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 3,102 | — | — | 3,102 | ||||||||||||
Vessel operating expenses | 4,087 | — | 210 | 4,297 | ||||||||||||
Time-charter hire expense | 5,641 | — | — | 5,641 | ||||||||||||
Depreciation and amortization | 3,636 | — | 90 | 3,726 | ||||||||||||
General and administrative | 2,129 | — | 48 | 2,177 | ||||||||||||
Total operating expenses | 18,595 | 348 | 18,943 | |||||||||||||
Income from vessel operations | 5,331 | — | 123 | 5,454 | ||||||||||||
OTHER ITEMS | ||||||||||||||||
Interest expense | (2,200 | ) | 583 | — | (1,617 | ) | ||||||||||
Interest income | 191 | — | — | 191 | ||||||||||||
Foreign currency exchange (loss) gain | (131 | ) | — | 13 | (118 | ) | ||||||||||
Income tax expense | (99 | ) | — | (22 | ) | (121 | ) | |||||||||
Other income — net | 309 | — | — | 309 | ||||||||||||
Total other items | (1,930 | ) | 583 | (9 | ) | (1,356 | ) | |||||||||
Income before non-controlling interest | 3,401 | 583 | 114 | 4,098 | ||||||||||||
Non-controlling interest | (2,553 | ) | (83 | ) | — | (2,636 | ) | |||||||||
Net income | 848 | 500 | 114 | 1,462 | ||||||||||||
Dropdown Predecessor’s interest in net income | — | 114 | ||||||||||||||
General partner’s interest in net income | 17 | 64 | ||||||||||||||
Limited partners’ interest: | ||||||||||||||||
Net income | 831 | 1,284 | ||||||||||||||
Net income per: | ||||||||||||||||
- Common unit (basic and diluted) | 0.05 | 0.07 | ||||||||||||||
- Subordinated unit (basic and diluted) | 0.04 | 0.06 | ||||||||||||||
- Total unit (basic and diluted) | 0.04 | 0.07 | ||||||||||||||
Weighted average number of units outstanding: | ||||||||||||||||
- Common units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||
- Subordinated units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||
- Total units (basic and diluted) | 19,600,000 | 19,600,000 | ||||||||||||||
Cash distributions declared per unit | — | — | ||||||||||||||
F - 28
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
Year Ended December 31, 2005 | ||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
VOYAGE REVENUES | 807,548 | — | 14,837 | (209,139 | ) | — | 613,246 | |||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Voyage expenses | 74,543 | — | — | — | — | 74,543 | ||||||||||||||||||
Vessel operating expenses | 104,475 | — | 6,110 | (1,105 | ) | — | 109,480 | |||||||||||||||||
Time-charter hire expense | 373,536 | — | — | (203,849 | ) | — | 169,687 | |||||||||||||||||
Depreciation and amortization | 107,542 | — | 2,748 | (466 | ) | — | 109,824 | |||||||||||||||||
General and administrative | 85,856 | — | 1,436 | (23,066 | ) | (7,500 | ) | 56,726 | ||||||||||||||||
Gain on sale of vessels and equipment | 2,820 | — | — | — | — | 2,820 | ||||||||||||||||||
Restructuring charge | 955 | — | — | — | — | 955 | ||||||||||||||||||
Total operating expenses | 749,727 | — | 10,294 | (228,486 | ) | (7,500 | ) | 524,035 | ||||||||||||||||
Income from vessel operations | 57,821 | — | 4,543 | 19,347 | 7,500 | 89,211 | ||||||||||||||||||
OTHER ITEMS | ||||||||||||||||||||||||
Interest expense | (39,791 | ) | — | (192 | ) | — | — | (39,983 | ) | |||||||||||||||
Interest income | 4,605 | — | 7 | — | — | 4,612 | ||||||||||||||||||
Equity income from joint ventures | 5,199 | 756 | — | — | — | 5,955 | ||||||||||||||||||
Foreign currency exchange gain | 34,178 | — | 50 | — | — | 34,228 | ||||||||||||||||||
Income tax recovery (expense) | 13,873 | — | (1,498 | ) | — | — | 12,375 | |||||||||||||||||
Other income — net | 9,091 | — | — | — | — | 9,091 | ||||||||||||||||||
Total other items | 27,155 | 756 | (1,633 | ) | — | — | 26,278 | |||||||||||||||||
Income before non-controlling interest | 84,976 | 756 | 2,910 | 19,347 | 7,500 | 115,489 | ||||||||||||||||||
Non-controlling interest | (229 | ) | — | — | — | — | (229 | ) | ||||||||||||||||
Net income from continuing operations | 84,747 | 756 | 2,910 | 19,347 | 7,500 | 115,260 | ||||||||||||||||||
Net loss from discontinued operations | — | — | — | (19,347 | ) | — | (19,347 | ) | ||||||||||||||||
Net income | 84,747 | 756 | 2,910 | — | 7,500 | 95,913 | ||||||||||||||||||
Dropdown predecessor’s interest in net income | — | 2,910 | ||||||||||||||||||||||
General partner’s interest in net income | — | — | ||||||||||||||||||||||
Limited partners’ interest: | ||||||||||||||||||||||||
Net income from continuing operations | 84,747 | 112,350 | ||||||||||||||||||||||
Net income from continuing operations per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | 6.73 | 8.92 | ||||||||||||||||||||||
- Subordinated unit (basic and diluted) | 6.73 | 8.92 | ||||||||||||||||||||||
- Total unit (basic and diluted) | 6.73 | 8.92 | ||||||||||||||||||||||
Net loss from discontinued operations | — | (19,347 | ) | |||||||||||||||||||||
Net loss from discontinued operations per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | — | (1.54 | ) | |||||||||||||||||||||
- Subordinated unit (basic and diluted) | — | (1.54 | ) | |||||||||||||||||||||
- Total unit (basic and diluted) | — | (1.54 | ) | |||||||||||||||||||||
Net income | 84,747 | 93,003 | ||||||||||||||||||||||
Net income per: | ||||||||||||||||||||||||
- Common unit (basic and diluted) | 6.73 | 7.38 | ||||||||||||||||||||||
- Subordinated unit (basic and diluted) | 6.73 | 7.38 | ||||||||||||||||||||||
- Total unit (basic and diluted) | 6.73 | 7.38 | ||||||||||||||||||||||
Weighted average number of units outstanding: | ||||||||||||||||||||||||
- Common units (basic and diluted) | 2,800,000 | 2,800,000 | ||||||||||||||||||||||
- Subordinated units (basic and diluted) | 9,800,000 | 9,800,000 | ||||||||||||||||||||||
- Total units (basic and diluted) | 12,600,000 | 12,600,000 | ||||||||||||||||||||||
Cash distributions declared per unit | — | — | ||||||||||||||||||||||
F - 29
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 31, 2007 | ||||||||||||
Adjustment | ||||||||||||
Derivative | ||||||||||||
As | Instruments and | As | ||||||||||
Reported | Other | Restated | ||||||||||
$ | $ | $ | ||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | 121,224 | — | 121,224 | |||||||||
Accounts receivable, net | 42,245 | — | 42,245 | |||||||||
Due from affiliate | 796 | — | 796 | |||||||||
Net investment in direct financing leases — current | 22,268 | — | 22,268 | |||||||||
Prepaid expenses | 34,219 | — | 34,219 | |||||||||
Other current assets | 7,644 | — | 7,644 | |||||||||
Total current assets | 228,396 | — | 228,396 | |||||||||
Vessels and equipment | ||||||||||||
At cost, less accumulated depreciation | 1,662,865 | — | 1,662,865 | |||||||||
Net investment in direct financing leases | 78,199 | — | 78,199 | |||||||||
Other assets | 14,423 | — | 14,423 | |||||||||
Intangible assets — net | 55,355 | — | 55,355 | |||||||||
Goodwill — shuttle tanker segment | 127,113 | — | 127,113 | |||||||||
Total assets | 2,166,351 | — | 2,166,351 | |||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||
Current | ||||||||||||
Accounts payable | 12,076 | — | 12,076 | |||||||||
Accrued liabilities | 38,464 | — | 38,464 | |||||||||
Current portion of long-term debt | 64,060 | — | 64,060 | |||||||||
Total current liabilities | 114,600 | — | 114,600 | |||||||||
Long-term debt | 1,453,407 | — | 1,453,407 | |||||||||
Deferred income taxes | 75,706 | 1,600 | 77,306 | |||||||||
Other long-term liabilities | 50,024 | 1,000 | 51,024 | |||||||||
Total liabilities | 1,693,737 | 2,600 | 1,696,337 | |||||||||
Non-controlling interest | 391,645 | 968 | 392,613 | |||||||||
Partners’ equity | ||||||||||||
Partners’ equity | 86,282 | (9,174 | ) | 77,108 | ||||||||
Accumulated other comprehensive (loss) income | (5,313 | ) | 5,606 | 293 | ||||||||
Total partners’ equity | 80,969 | (3,568 | ) | 77,401 | ||||||||
Total liabilities and partners’ equity | 2,166,351 | — | 2,166,351 | |||||||||
F - 30
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 31, 2006 | ||||||||||||||||
Adjustments | ||||||||||||||||
As | Derivative | Dropdown | As | |||||||||||||
Reported | Instruments | Predecessor | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
ASSETS | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | 113,986 | — | — | 113,986 | ||||||||||||
Accounts receivable, net | 24,635 | — | 1,191 | 25,826 | ||||||||||||
Due from affiliate | — | — | 30,757 | 30,757 | ||||||||||||
Net investment in direct financing leases — current | 21,764 | — | — | 21,764 | ||||||||||||
Prepaid expenses | 24,608 | — | — | 24,608 | ||||||||||||
Other current assets | 7,732 | — | 54 | 7,786 | ||||||||||||
Total current assets | 192,725 | — | 32,002 | 224,727 | ||||||||||||
Vessels and equipment | ||||||||||||||||
At cost, less accumulated depreciation | 1,524,842 | — | 7,901 | 1,532,743 | ||||||||||||
Net investment in direct financing leases | 92,018 | — | — | 92,018 | ||||||||||||
Other assets | 38,198 | — | — | 38,198 | ||||||||||||
Intangible assets — net | 66,425 | — | — | 66,425 | ||||||||||||
Goodwill — shuttle tanker segment | 127,113 | — | — | 127,113 | ||||||||||||
Total assets | 2,041,321 | — | 39,903 | 2,081,224 | ||||||||||||
LIABILITIES AND PARTNERS’ EQUITY | ||||||||||||||||
Current | ||||||||||||||||
Accounts payable | 7,366 | — | 93 | 7,459 | ||||||||||||
Accrued liabilities | 42,987 | — | 2,646 | 45,633 | ||||||||||||
Current portion of long-term debt | 17,656 | — | — | 17,656 | ||||||||||||
Due to affiliate | 16,951 | — | (16,951 | ) | — | |||||||||||
Total current liabilities | 84,960 | — | (14,212 | ) | 70,748 | |||||||||||
Long-term debt | 1,285,696 | — | — | 1,285,696 | ||||||||||||
Deferred income taxes | 71,583 | — | 2,323 | 73,906 | ||||||||||||
Other long-term liabilities | 32,163 | — | — | 32,163 | ||||||||||||
Total liabilities | 1,474,402 | — | (11,889 | ) | 1,462,513 | |||||||||||
Non-controlling interest | 427,977 | — | — | 427,977 | ||||||||||||
Dropdown Predecessor’s equity | 51,792 | 51,792 | ||||||||||||||
Partners’ equity | ||||||||||||||||
Partners’ equity | 133,642 | 5,300 | — | 138,942 | ||||||||||||
Accumulated other comprehensive income (loss) | 5,300 | (5,300 | ) | — | — | |||||||||||
Total partners’ equity and dropdown predecessor’s equity | 138,942 | — | 51,792 | 190,734 | ||||||||||||
Total liabilities, partners’ equity and dropdown predecessor’s equity | 2,041,321 | — | 39,903 | 2,081,224 | ||||||||||||
F - 31
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 31, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Derivative | ||||||||||||||||
As | Instruments and | Dropdown | As | |||||||||||||
Reported | Other | Predecessor | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net income (loss) | 19,672 | (17,014 | ) | 1,300 | 3,958 | |||||||||||
Non-cash items: | ||||||||||||||||
Unrealized loss on derivative instruments | — | 45,957 | — | 45,957 | ||||||||||||
Depreciation and amortization | 122,415 | — | 1,955 | 124,370 | ||||||||||||
Non-controlling interest | 62,248 | (30,729 | ) | — | 31,519 | |||||||||||
Deferred income tax recovery | (10,924 | ) | 1,600 | (1,192 | ) | (10,516 | ) | |||||||||
Foreign currency exchange loss (gain) and other | 11,841 | 186 | (602 | ) | 11,425 | |||||||||||
Change in non-cash working capital items related to operating activities | (31,588 | ) | — | (2,118 | ) | (33,706 | ) | |||||||||
Distribution from subsidiaries to minority owners | (78,107 | ) | — | — | (78,107 | ) | ||||||||||
Expenditures for drydocking | (39,626 | ) | — | (9,427 | ) | (49,053 | ) | |||||||||
Net operating cash flow | 55,931 | — | (10,084 | ) | 45,847 | |||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issuance of long-term debt | 247,243 | — | 51,200 | 298,443 | ||||||||||||
Scheduled repayments of long-term debt | (17,328 | ) | — | — | (17,328 | ) | ||||||||||
Prepayments of long-term debt | (152,000 | ) | — | — | (152,000 | ) | ||||||||||
Expenses from issuance of common units | (2,793 | ) | — | — | (2,793 | ) | ||||||||||
Net advances from affiliates | — | — | (42,935 | ) | (42,935 | ) | ||||||||||
Equity distribution to Teekay Corporation | — | — | 1,819 | 1,819 | ||||||||||||
Distribution to Teekay Corporation relating to purchase of Navion Bergen LLC and purchase of a 50% interest in Navion Gothenburg LLC | — | — | (55,158 | ) | (55,158 | ) | ||||||||||
Distribution to Teekay Corporation relating to purchase of Dampier LLC | — | — | (30,253 | ) | (30,253 | ) | ||||||||||
Cash distributions paid | (22,700 | ) | — | — | (22,700 | ) | ||||||||||
Other | (1,000 | ) | — | — | (1,000 | ) | ||||||||||
Net financing cash flow | 51,422 | — | (75,327 | ) | (23,905 | ) | ||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Expenditures for vessels and equipment | (20,997 | ) | — | — | (20,997 | ) | ||||||||||
Proceeds from sale of vessels and equipment | 3,225 | — | — | 3,225 | ||||||||||||
Investment in direct financing lease assets | (8,378 | ) | — | — | (8,378 | ) | ||||||||||
Direct financing lease payments received | 21,677 | — | — | 21,677 | ||||||||||||
Purchase of Navion Bergen LLC and a 50% interest in Navion Gothenburg LLC | (65,389 | ) | — | 65,389 | — | |||||||||||
Purchase of a 50% interest in Navion Gothenburg LLC | — | — | (10,231 | ) | (10,231 | ) | ||||||||||
Purchase of Dampier LLC | (30,253 | ) | — | 30,253 | — | |||||||||||
Net investing cash flow | (100,115 | ) | — | 85,411 | (14,704 | ) | ||||||||||
Increase in cash and cash equivalents | 7,238 | — | — | 7,238 | ||||||||||||
Cash and cash equivalents, beginning of the year | 113,986 | — | — | 113,986 | ||||||||||||
Cash and cash equivalents, end of the year | 121,224 | — | — | 121,224 | ||||||||||||
F - 32
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 31, 2006 | ||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||
Net income (loss) | (32,715 | ) | 3,306 | 3,211 | — | (2,632 | ) | (28,830 | ) | |||||||||||||||
Non-cash items: | ||||||||||||||||||||||||
Unrealized gain on derivative instruments | — | (3,346 | ) | — | — | — | (3,346 | ) | ||||||||||||||||
Depreciation and amortization | 102,022 | — | 2,527 | — | — | 104,549 | ||||||||||||||||||
Non-controlling interest | 6,330 | 199 | — | — | — | 6,529 | ||||||||||||||||||
Gain on sale of vessels | (6,928 | ) | — | — | — | — | (6,928 | ) | ||||||||||||||||
Loss on writedown of vessels and equipment | 2,150 | — | — | — | — | 2,150 | ||||||||||||||||||
Equity income, net of dividends received | (160 | ) | (159 | ) | — | — | — | (319 | ) | |||||||||||||||
Deferred income tax expense (recovery) | 2,771 | — | (2,346 | ) | — | — | 425 | |||||||||||||||||
Foreign currency exchange loss (gain) and other | 72,768 | — | (330 | ) | — | — | 72,438 | |||||||||||||||||
Change in non-cash working capital items related to operating activities | 40,727 | — | 2,812 | — | 7,500 | 51,039 | ||||||||||||||||||
Distribution from subsidiaries to minority owners | (4,224 | ) | — | — | — | — | (4,224 | ) | ||||||||||||||||
Expenditures for drydocking | (31,255 | ) | — | — | — | — | (31,255 | ) | ||||||||||||||||
Net operating cash flow | 151,486 | — | 5,874 | — | 4,868 | 162,228 | ||||||||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||||
Proceeds from issuance of long-term debt | 1,290,750 | — | — | — | — | 1,290,750 | ||||||||||||||||||
Capitalized loan costs | (6,178 | ) | — | — | — | — | (6,178 | ) | ||||||||||||||||
Scheduled repayments of long-term debt | (119,900 | ) | — | — | — | — | (119,900 | ) | ||||||||||||||||
Prepayments of long-term debt | (493,527 | ) | — | — | — | — | (493,527 | ) | ||||||||||||||||
Repayments of capital lease obligations | (34,245 | ) | — | — | — | — | (34,245 | ) | ||||||||||||||||
Proceeds from issuance of common units | 157,963 | — | — | — | — | 157,963 | ||||||||||||||||||
Net advances to affiliates | (786,816 | ) | — | (6,672 | ) | — | — | (793,488 | ) | |||||||||||||||
Equity distribution (to) from Teekay Corporation | (226,816 | ) | — | 798 | — | (4,868 | ) | (230,886 | ) | |||||||||||||||
Other | (727 | ) | — | — | — | — | (727 | ) | ||||||||||||||||
Net financing cash flow | (219,496 | ) | — | (5,874 | ) | — | (4,868 | ) | (230,238 | ) | ||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||||
Expenditures for vessels and equipment | (31,079 | ) | — | — | — | — | (31,079 | ) | ||||||||||||||||
Proceeds from sale of vessels and equipment | 61,713 | — | — | — | — | 61,713 | ||||||||||||||||||
Investment in direct financing lease assets | (13,256 | ) | — | — | — | — | (13,256 | ) | ||||||||||||||||
Direct financing lease payments received | 19,323 | — | — | — | — | 19,323 | ||||||||||||||||||
Cash assumed upon consolidation of 50%-owned subsidiaries | 17,055 | — | — | — | — | 17,055 | ||||||||||||||||||
Other | (746 | ) | — | — | — | — | (746 | ) | ||||||||||||||||
Net investing cash flow | 53,010 | — | — | — | — | 53,010 | ||||||||||||||||||
Decrease in cash and cash equivalents | (15,000 | ) | — | — | — | — | (15,000 | ) | ||||||||||||||||
Adjustment for net change in cash and cash equivalents in discontinued operations | — | — | — | 2,456 | — | 2,456 | ||||||||||||||||||
Cash and cash equivalents, beginning of the year | 128,986 | — | — | (2,456 | ) | — | 126,530 | |||||||||||||||||
Cash and cash equivalents, end of the year | 113,986 | — | — | — | — | 113,986 | ||||||||||||||||||
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(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
December 31, 2005 | ||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||
Vision | ||||||||||||||||||||||||
As | Derivative | Dropdown | Discontinued | Incentive | As | |||||||||||||||||||
Reported | Instruments | Predecessor | Operations | Plan | Restated | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||
Net income | 84,747 | 756 | 2,910 | — | 7,500 | 95,913 | ||||||||||||||||||
Non-cash items: | ||||||||||||||||||||||||
Depreciation and amortization | 107,542 | — | 2,748 | — | — | 110,290 | ||||||||||||||||||
Non-controlling interest | 229 | — | — | — | — | 229 | ||||||||||||||||||
Gain on sale of vessels | (9,423 | ) | — | — | — | — | (9,423 | ) | ||||||||||||||||
Loss on writedown of vessels and equipment | 12,243 | — | — | — | — | 12,243 | ||||||||||||||||||
Equity income, net of dividends received | (2,449 | ) | (756 | ) | — | — | — | (3,205 | ) | |||||||||||||||
Deferred income tax (recovery) expense | (14,202 | ) | — | (2,012 | ) | — | — | (16,214 | ) | |||||||||||||||
Foreign currency exchange (gain) loss and other | (40,045 | ) | — | 78 | — | — | (39,967 | ) | ||||||||||||||||
Change in non-cash working capital items related to operating activities | 22,951 | — | 3,588 | — | (7,500 | ) | 19,039 | |||||||||||||||||
Distribution from subsidiaries to minority owners | (9,618 | ) | — | — | — | — | (9,618 | ) | ||||||||||||||||
Expenditures for drydocking | (8,906 | ) | — | — | — | — | (8,906 | ) | ||||||||||||||||
Net operating cash flow | 143,069 | — | 7,312 | — | — | 150,381 | ||||||||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||||
Proceeds from issuance of long-term debt | 1,226,804 | — | — | — | — | 1,226,804 | ||||||||||||||||||
Capitalized loan costs | (639 | ) | — | — | — | — | (639 | ) | ||||||||||||||||
Scheduled repayments of long-term debt | (29,884 | ) | — | (10,000 | ) | — | — | (39,884 | ) | |||||||||||||||
Prepayments of long-term debt | (1,382,140 | ) | — | — | — | — | (1,382,140 | ) | ||||||||||||||||
Repayments of capital lease obligations | (1,248 | ) | — | — | — | — | (1,248 | ) | ||||||||||||||||
Net advances to affiliates | (12,829 | ) | — | 1,830 | — | — | (10,999 | ) | ||||||||||||||||
Equity distribution from Teekay Corporation | — | — | 858 | — | — | 858 | ||||||||||||||||||
Investment in subsidiaries from non-controlling interest owners | 8,000 | — | — | — | — | 8,000 | ||||||||||||||||||
Net financing cash flow | (191,936 | ) | — | (7,312 | ) | — | — | (199,248 | ) | |||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||||
Expenditures for vessels and equipment | (24,760 | ) | — | — | — | — | (24,760 | ) | ||||||||||||||||
Proceeds from sale of vessels and equipment | 73,220 | — | — | — | — | 73,220 | ||||||||||||||||||
Investment in direct financing lease assets | (23,708 | ) | — | — | — | — | (23,708 | ) | ||||||||||||||||
Direct financing lease payments received | 12,440 | — | — | — | — | 12,440 | ||||||||||||||||||
Other | (3,068 | ) | — | — | — | — | (3,068 | ) | ||||||||||||||||
Net investing cash flow | 34,124 | — | — | — | — | 34,124 | ||||||||||||||||||
Decrease in cash and cash equivalents | (14,743 | ) | — | — | — | — | (14,743 | ) | ||||||||||||||||
Adjustment for change in cash and cash equivalents in discontinued operations | — | — | — | 10,970 | — | 10,970 | ||||||||||||||||||
Cash and cash equivalents, beginning of the year | 143,729 | — | — | (13,426 | ) | — | 130,303 | |||||||||||||||||
Cash and cash equivalents, end of the year | 128,986 | — | — | (2,456 | ) | — | 126,530 | |||||||||||||||||
F - 34
Table of Contents
(Successor to Teekay Offshore Partners Predecessor)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, except unit and per unit data or unless otherwise indicated)
19. | Discontinued Operations |
January 1 | January 1 | |||||||
to | to | |||||||
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Voyage revenues(1) | $ | 80,014 | $ | 209,139 | ||||
Loss from discontinued operations before income tax expense | $ | (10,656 | ) | $ | (19,347 | ) | ||
Income tax expense | — | — | ||||||
Loss from discontinued operations | $ | (10,656 | ) | $ | (19,347 | ) | ||
(1) | During the six months ended June 30, 2006 and the year ended December 31, 2005, the Predecessor earned $79.5 million and $194.0 million, respectively, of time charter revenue from a subsidiary of Teekay Corporation pursuant to the agreement with Navion Shipping Ltd. | |
During the six months ended June 30, 2006 and the year ended December 31, 2005, $10.7 million and $21.9 million, respectively, of general and administrative expenses attributable to the operations of Navion Shipping Ltd. were incurred by Teekay Corporation and have been allocated to Navion Shipping Ltd. |
F - 35
Table of Contents
The following is a list of Teekay Offshore Partners L.P.’s significant subsidiaries as at December 31, 2007: |
Proportion of | ||||||
State or | Ownership | |||||
Name of Significant Subsidiary | Jurisdiction of Incorporation | Interest | ||||
TEEKAY AUSTRALIA OFFSHORE HOLDINGS PTY LTD. | AUSTRALIA | 100 | % | |||
NAVION BERGEN L.L.C. | MARSHALL ISLANDS | 100 | % | |||
NAVION GOTHENBURG L.L.C. | MARSHALL ISLANDS | 50 | % | |||
NAVION OFFSHORE LOADING AS | NORWAY | 26 | % | |||
NORSK TEEKAY AS | NORWAY | 26 | % | |||
NORSK TEEKAY HOLDINGS LTD. | MARSHALL ISLANDS | 26 | % | |||
TEEKAY EUROPEAN HOLDINGS S.A.R.L. | LUXEMBOURG | 26 | % | |||
TEEKAY NAVION OFFSHORE LOADING PTE. LTD. | SINGAPORE | 26 | % | |||
TEEKAY NETHERLANDS EUROPEAN HOLDINGS BV. | NETHERLANDS | 26 | % | |||
TEEKAY NORDIC HOLDINGS INC. | MARSHALL ISLANDS | 26 | % | |||
TEEKAY NORWAY AS | NORWAY | 26 | % | |||
TEEKAY OFFSHORE OPERATING L.P. | MARSHALL ISLANDS | 26 | % | |||
UGLAND NORDIC SHIPPING AS | NORWAY | 26 | % |
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1. | I have reviewed this Annual Report on Form 20-F/A of Teekay Offshore Partners, L.P. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | I and the Registrant’s other certifying officer (which is also myself) are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | I and the Registrant’s other certifying officer (which is also myself) have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the board of directors of the Registrant’s general partner (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Dated: April 2, 2009 | By: | /s/ Peter Evensen | ||
Peter Evensen | ||||
Chief Executive Officer |
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Table of Contents
1. | I have reviewed this Annual Report on Form 20-F/A of Teekay Offshore Partners, L.P. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | I and the Registrant’s other certifying officer (which is also myself) are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | I and the Registrant’s other certifying officer (which is also myself) have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the board of directors of the Registrant’s general partner (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Dated: April 2, 2009 | By: | /s/ Peter Evensen | ||
Peter Evensen | ||||
Chief Financial Officer |
F - 38
Table of Contents
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
(1) | The Form 20-F/A fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | The information contained in the Form 20-F/A fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
By: | /s/ Peter Evensen | |||
Peter Evensen | ||||
Chief Executive Officer and Chief Financial Officer |
F - 39
Table of Contents
Vancouver, Canada | /s/ ERNST & YOUNG LLP | |||
April 2, 2009 |
F - 40
Table of Contents
OF
TEEKAY OFFSHORE GP L.L.C.
F - 42
Table of Contents
TEEKAY OFFSHORE GP L.L.C.
Vancouver, Canada | /s/ Ernst & Young LLP | |||
March 12, 2008, | ||||
except for Notes 15 and 16, as to | ||||
as to which the date is April 2, 2009 |
F - 36
Table of Contents
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
As at | ||||
December 31, | ||||
2007 | ||||
(restated) | ||||
$ | ||||
ASSETS | ||||
Current | ||||
Cash and cash equivalents(note 6) | 121,506 | |||
Accounts receivable, net of allowance for doubtful accounts of $nil | 42,245 | |||
Net investment in direct financing leases — current | 22,268 | |||
Prepaid expenses | 34,219 | |||
Other current assets(notes 9f) | 8,613 | |||
Total current assets | 228,851 | |||
Vessels and equipment(note 6) | ||||
At cost, less accumulated depreciation of $674,722 | 1,662,865 | |||
Net investment in direct financing leases | 78,199 | |||
Other assets | 14,423 | |||
Intangible assets — net(note 4) | 55,355 | |||
Goodwill — shuttle tanker segment | 127,113 | |||
Total assets | 2,166,806 | |||
LIABILITIES AND MEMBER’S EQUITY | ||||
Current | ||||
Accounts payable | 12,076 | |||
Accrued liabilities (note 5) | 38,464 | |||
Current portion of long-term debt(note 6) | 64,060 | |||
Total current liabilities | 114,600 | |||
Long-term debt(note 6) | 1,453,407 | |||
Deferred income taxes(note 11) | 77,306 | |||
Other long-term liabilities(note 10) | 51,024 | |||
Total liabilities | 1,696,337 | |||
Commitments and contingencies(notes 7, 9 and 12) | ||||
Non-controlling interest | 468,466 | |||
Member’s equity | ||||
Member’s equity | 1,997 | |||
Accumulated other comprehensive income | 6 | |||
Total member’s equity | 2,003 | |||
Total liabilities and member’s equity | 2,166,806 | |||
F - 43
Table of Contents
NOTES TO THE CONSOLIDATED BALANCE SHEET
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
1. | Summary of Significant Accounting Policies |
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Table of Contents
NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
2. | Initial Public Offering |
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 notes and redemption of 1.05 million common units from Teekay Corporation | 155,169 | |||
$ | 169,050 | |||
3. | Segment Reporting |
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
December 31, 2007 | ||||
$ | ||||
Shuttle tanker segment | 1,559,261 | |||
Conventional tanker segment | 255,460 | |||
FSO segment | 131,080 | |||
Cash and cash equivalents | 121,506 | |||
Accounts receivable and other assets | 99,499 | |||
Consolidated total assets | 2,166,806 | |||
4. | Intangible Assets |
December 31, 2007 | ||||||||||||||||
Weighted- | ||||||||||||||||
Average | Gross | |||||||||||||||
Amortization | Carrying | Accumulated | Net Carrying | |||||||||||||
Period | Amount | Amortization | Amount | |||||||||||||
(years) | $ | $ | $ | |||||||||||||
Contracts of affreightment | 10.2 | 124,250 | (68,895 | ) | 55,355 |
5. | Accrued Liabilities |
December 31, 2007 | ||||
$ | ||||
Voyage and vessel | 26,015 | |||
Interest | 10,932 | |||
Payroll and benefits | 1,517 | |||
38,464 | ||||
6. | Long-Term Debt |
December 31, 2007 | ||||
$ | ||||
U.S. Dollar-denominated Revolving Credit Facilities due through 2017 | 1,205,808 | |||
U.S. Dollar-denominated Term Loans due through 2017 | 311,659 | |||
1,517,467 | ||||
Less current portion | 64,060 | |||
Total | 1,453,407 | |||
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
7. | Leases |
8. | Fair Value of Financial Instruments |
December 31, 2007 | ||||||||
Carrying | Fair | |||||||
Amount | Value | |||||||
$ | $ | |||||||
(restated) | (restated) | |||||||
Cash and cash equivalents | 121,506 | 121,506 | ||||||
Advances to (from) affiliate (note 9f) | 969 | 969 | ||||||
Long-term debt | (1,517,467 | ) | (1,517,467 | ) | ||||
Derivative instruments(1) (note 10) | ||||||||
Interest rate swap agreements | (21,050 | ) | (21,050 | ) | ||||
Foreign currency forward contracts | 1,122 | 1,122 |
(1) | The Partnership transacts all of its derivative instruments through investment-grade rated financial institutions at the time of the transaction and requires no collateral from these institutions. |
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
9. | Related Party Transactions |
a. | The Partnership has entered into an omnibus agreement with Teekay Corporation, Teekay LNG Partners L.P. 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 offering on liquefied natural gas carriers, oil tankers, shuttle tankers, FSO units and floating production, storage and offloading units. |
b. | 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 of $93.7 million and the related interest rate swap agreement. The Partnership acquired Teekay Corporation’s 100% interest in the 2000-builtNavion Bergenand its 50% interest in the 2006-builtNavion 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. |
c. | In October 2007, the Partnership acquired from Teekay Corporation an FSO unit, theDampier Spirit, along with its 7-year fixed-rate time-charter to Apache Corporation for a total cost of $30.3 million. The purchase was financed with one of the Partnership’s existing Revolvers. |
d. | In December 2007, Teekay Corporation contributed a $65.6 million, nine-year, 4.98% interest rate swap agreement (used to hedge the debt assumed in the purchase of theNavion Bergen) having a fair value liability of $2.6 million (Note 10), to the Partnership for no consideration. |
e. | In December 2007, Teekay Corporation agreed to reimburse OPCO for certain costs relating to events which occurred prior to the Offering, totalling $4.8 million, including the settlement of a customer dispute in respect of vessels delivered prior to the Offering and other costs. This amount is included in other current assets. |
f. | At December 31, 2007, advances to affiliates totaled $1.0 million. Advances to affiliates are non-interest bearing and unsecured. This amount is included in other current assets. |
10. | Derivative Instruments and Hedging Activities |
Contract amount in | Average | Expected maturity | ||||||||||||||
foreign currency | forward rate | 2008 | 2009 | |||||||||||||
(millions) | (in millions of U.S. Dollars) | |||||||||||||||
Norwegian Kroner | 255.7 | 5.64 | — | $ | 45.4 | |||||||||||
Australian Dollar | 5.0 | 1.25 | $ | 4.0 | — | |||||||||||
Singapore Dollar | 4.1 | 1.44 | $ | 2.9 | — | |||||||||||
Euro | 4.0 | 0.68 | $ | 5.8 | — |
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
Fair Value / | Weighted- | |||||||||||||||||||
Carrying | Average | |||||||||||||||||||
Interest | Principal | Amount of | Remaining | Fixed Interest | ||||||||||||||||
Rate | Amount | Liability | Term | Rate | ||||||||||||||||
Index | $ | $ | (years) | (%)(1) | ||||||||||||||||
U.S. Dollar-denominated interest rate swaps (restated) | LIBOR | 935,000 | (9,374 | ) | 6.5 | 4.7 | ||||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 414,373 | (11,676 | ) | 13.3 | 5.0 |
(1) | Excludes the margin the Partnership pays on its variable-rate debt, which as at December 31, 2007, ranged from 0.50% and 0.80%. | |
(2) | Principal amount reduces quarterly or semiannually. |
11. | Income Taxes |
December 31, | ||||
2007 | ||||
$ | ||||
(restated) | ||||
Deferred tax liabilities: | ||||
Vessels and equipment | 84,077 | |||
Goodwill and intangible assets | 266 | |||
Long-term debt | 94,071 | |||
Total deferred tax liabilities | 178,414 | |||
Deferred tax assets: | ||||
Provisions | 1,012 | |||
Tax losses carried forward(1) | 100,096 | |||
Total deferred tax assets | 101,108 | |||
Net deferred tax liabilities | 77,306 | |||
Current portion | — | |||
Long-term portion of net deferred tax liabilities | 77,306 | |||
(1) | The net operating loss carryfowards are available to offset future taxable income in the respective jurisdictions, and can be carried forward indefinitely. |
12. | Commitments and Contingencies |
13. | Valuation and Qualifying Accounts |
Balance at beginning | Balance at end of | |||||||
of year | year | |||||||
$ | $ | |||||||
Allowance for bad debts: | ||||||||
Year ended December 31, 2007 | 401 | — | ||||||
Restructuring cost accrual: | ||||||||
Year ended December 31, 2007 | 71 | — |
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
14. | Supplemental information |
Teekay Offshore | Consolidation of | Teekay Offshore | ||||||||||
G.P. L.L.C. | Teekay Offshore | G.P. L.L.C. | ||||||||||
Stand-alone | Partners L.P. | Consolidated | ||||||||||
(restated) | (restated) | |||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | 282 | 121,224 | 121,506 | |||||||||
Accounts receivable, net of allowance for doubtful accounts of $nil | — | 42,245 | 42,245 | |||||||||
Net investment in direct financing leases — current | — | 22,268 | 22,268 | |||||||||
Prepaid expenses | — | 34,219 | 34,219 | |||||||||
Other current assets | 173 | 8,440 | 8,613 | |||||||||
Total current assets | 455 | 228,396 | 228,851 | |||||||||
Vessels and equipment | ||||||||||||
At cost, less accumulated depreciation of $693,338 | — | 1,662,865 | 1,662,865 | |||||||||
Net investment in direct financing leases | — | 78,199 | 78,199 | |||||||||
Other assets | 3,046 | 11,377 | 14,423 | |||||||||
Intangible assets — net | — | 55,355 | 55,355 | |||||||||
Goodwill — shuttle tanker segment | — | 127,113 | 127,113 | |||||||||
Total assets | 3,501 | 2,163,305 | 2,166,806 | |||||||||
LIABILITIES AND MEMBER’S/PARTNERS’ EQUITY | ||||||||||||
Current | ||||||||||||
Accounts payable | — | 12,076 | 12,076 | |||||||||
Accrued liabilities | — | 38,464 | 38,464 | |||||||||
Current portion of long-term debt | — | 64,060 | 64,060 | |||||||||
Total current liabilities | — | 114,600 | 114,600 | |||||||||
Long-term debt | — | 1,453,407 | 1,453,407 | |||||||||
Deferred income taxes | — | 77,306 | 77,306 | |||||||||
Other long-term liabilities | — | 51,024 | 51,024 | |||||||||
Total liabilities | — | 1,696,337 | 1,696,337 | |||||||||
Non-controlling interest | — | 468,466 | 468,466 | |||||||||
Member’s/Partners’ equity | ||||||||||||
Member’s/Partners’ equity | 3,501 | (1,504 | ) | 1,997 | ||||||||
Accumulated other comprehensive income | — | 6 | 6 | |||||||||
Total member’s/partners’ equity | 3,501 | (1,498 | ) | 2,003 | ||||||||
Total liabilities and member’s/partners’ equity | 3,501 | 2,163,305 | 2,166,806 | |||||||||
15. | Restatement of Previously Issued Financial Statements |
• | One of the requirements of SFAS No. 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, entities must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Based on the Partnership’s review, the Partnership concluded that the prospective hedge effectiveness assessment that was conducted for certain of the Partnership interest rate swaps on the date of designation was not sufficient to conclude that the interest rate swaps would be highly effective in accordance with the technical requirements of SFAS No. 133, in achieving offsetting changes in cash flows attributable to the risk being hedged. |
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
• | To conclude that hedge accounting is appropriate, another requirement of SFAS No. 133 is that the applicable hedge documentation specifies the method that will be used to assess, retrospectively and prospectively, the hedging instrument’s effectiveness, and the method that will be used to measure hedge ineffectiveness. Documentation for certain of the Partnership’s interest rate swap agreements did not clearly specify the method to be used to measure hedge ineffectiveness. |
• | Certain of the Partnership’s derivative instruments were designated as hedges when the derivative instruments had a non-zero fair value. However, this designation was not appropriate as the Partnership used certain methods of measuring ineffectiveness that are prohibited in the case of non-zero fair value derivatives. |
Derivative | ||||||||||||
As | Instruments | As | ||||||||||
Reported | and Other | Restated | ||||||||||
$ | $ | $ | ||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | 121,506 | — | 121,506 | |||||||||
Accounts receivable, net of allowance for doubtful accounts of $nil | 42,245 | — | 42,245 | |||||||||
Net investment in direct financing leases — current | 22,268 | — | 22,268 | |||||||||
Prepaid expenses | 34,219 | — | 34,219 | |||||||||
Other current assets | 8,613 | — | 8,613 | |||||||||
�� | ||||||||||||
Total current assets | 228,851 | — | 228,851 | |||||||||
Vessels and equipment | ||||||||||||
At cost, less accumulated depreciation | 1,662,865 | — | 1,662,865 | |||||||||
Net investment in direct financing leases | 78,199 | — | 78,199 | |||||||||
Other assets | 14,423 | — | 14,423 | |||||||||
Intangible assets — net | 55,355 | — | 55,355 | |||||||||
Goodwill — shuttle tanker segment | 127,113 | — | 127,113 | |||||||||
Total assets | 2,166,806 | — | 2,166,806 | |||||||||
LIABILITIES AND MEMBER’S/PARTNERS’ EQUITY | ||||||||||||
Current | ||||||||||||
Accounts payable | 12,076 | — | 12,076 | |||||||||
Accrued liabilities | 38,464 | — | 38,464 | |||||||||
Current portion of long-term debt | 64,060 | — | 64,060 | |||||||||
Total current liabilities | 114,600 | — | 114,600 | |||||||||
Long-term debt | 1,453,407 | — | 1,453,407 | |||||||||
Deferred income taxes | 75,706 | 1,600 | 77,306 | |||||||||
Other long-term liabilities | 50,024 | 1,000 | 51,024 | |||||||||
Total liabilities | 1,693,737 | 2,600 | 1,696,337 | |||||||||
Non-controlling interest | 470,995 | (2,529 | ) | 468,466 | ||||||||
Member’s/Partners’ equity | ||||||||||||
Member’s/Partners’ equity | 2,181 | (184 | ) | 1,997 | ||||||||
Accumulated other comprehensive (loss) income | (107 | ) | 113 | 6 | ||||||||
Total member’s/partners’ equity | 2,074 | (71 | ) | 2,003 | ||||||||
Total liabilities and member’s/partners’ equity | 2,166,806 | — | 2,166,806 | |||||||||
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NOTES TO THE CONSOLIDATED BALANCE SHEET — (Cont’d)
(all tabular amounts stated in thousands of U.S. dollars, unless otherwise indicated)
16. | Subsequent Events |
(a) | In March 2008, a subsidiary of OPCO sold certain vessel equipment to a subsidiary of Teekay Corporation for proceeds equal to its net book value of $1.4 million. |
(b) | On June 18, 2008, the Partnership completed a follow-on public offering of 7.0 million common units at a price of $20.00 per unit, for gross proceeds of $140.0 million. Concurrently with the public offering, Teekay Corporation acquired 3.25 million common units of the Partnership at the same public offering price for a total cost of $65.0 million. On July 16, 2008, the underwriters for the public offering partially exercised their over-allotment option and purchased an additional 375,000 common units for an additional $7.5 million in gross proceeds to the Partnership. |
(c) | On June 18, 2008, OPCO acquired from Teekay Corporation two ship owning subsidiaries (SPT Explorer L.L.C. and the SPT Navigator L.L.C.) for a total cost of approximately $106.0 million, including the assumption of debt of $90.0 million. The acquired subsidiaries own two 2008-built Aframax lightering tankers and their related 10-year, fixed-rate bareboat charters (with options exercisable by the charterer to extend up to an additional five years) entered into with Skaugen PetroTrans Inc., a company in which Teekay Corporation owns a 50% beneficial interest. These two lightering tankers are specially designed to be used in ship-to-ship oil transfer operations. This purchase was financed with the assumption of debt, together with cash balances. |
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