Teekay Offshore Partners Reports Fourth Quarter and Annual 2019 Results

February 6, 2020

HAMILTON, Bermuda, Feb. 06, 2020 (GLOBE NEWSWIRE) — Teekay Offshore GP L.L.C. (TOO GP), the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership), today reported the Partnership’s results for the quarter and year ended December 31, 2019.

Consolidated Financial Summary

    
  Three Months EndedYear Ended
  December 31,September 30,December 31,December 31,December 31,
(in thousands of U.S. Dollars, except per unit data)20192019 (2)201820192018
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
GAAP FINANCIAL RESULTS     
Revenues312,142  299,447  445,213 1,268,000  1,416,424 
Net (loss) income(285,549) (34,769) 67,842 (350,895) (123,945)
Limited partners’ interest in net (loss) income per     
common unit – basic(0.71) (0.10) 0.14  (0.92) (0.36)
NON-GAAP FINANCIAL RESULTS     
Adjusted EBITDA (1)167,147  157,660  289,548 671,898  782,521 
Adjusted net income attributable to the partners     
preferred unitholders (1)19,796  4,659  130,463 58,696  149,587 
Limited partners’ interest in adjusted net income     
per common unit (1)0.03  (0.01) 0.30 0.06  0.29 
  1. These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).
  2. Please refer to Appendices to the release announcing the results for the third quarter of 2019 attached as Exhibit 1 to the Form 6-K filed with the Securities and Exchange Commission on November 7, 2019 for a reconciliation of these non-GAAP measures to the most directly comparable financial measures under GAAP.

Fourth Quarter of 2019 Compared to Fourth Quarter of 2018

Revenues were $312 million in the fourth quarter of 2019, a decrease of $133 million, compared to $445 million in the same quarter of the prior year, primarily due to $91 million of revenue related to the positive settlement with Petróleo Brasileiro S.A. and certain of its subsidiaries (together Petrobras) recorded during the fourth quarter of 2018, a decrease of $21 million due to the amortization of non-cash deferred revenue relating to the Piranema Spirit FPSO unit during the fourth quarter of 2018, a $12 million decrease due to fewer vessels in our CoA shuttle tanker fleet during the fourth quarter of 2019 and the redelivery of an older shuttle tanker in August 2019 and an $8 million decrease due to the completion of the Ostras FPSO charter contract in March 2019.

Net loss increased to $286 million in the fourth quarter of 2019 compared to net income of $68 million in the same quarter of the prior year. A $326 million increase in the net write-down of vessels and the decrease in revenues described above was partially offset by a $61 million increase in unrealized fair value gains mainly related to interest rate swap derivative instruments, reflecting increased interest rate levels in the fourth quarter of 2019 compared to decreased interest rate levels in the fourth quarter of 2018, a $21 million increase in equity income, a $10 million increase in foreign currency exchange gains, a $6 million decrease in depreciation and amortization expense due to the sale of certain shuttle tankers and a $5 million decrease in interest expense.

Non-GAAP Adjusted EBITDA was $167 million in the fourth quarter of 2019, representing a decrease of $123 million, compared to $290 million in the fourth quarter of 2018. This decrease was primarily due to the decrease in revenues, as explained above, partially offset by a $9 million increase in earnings from equity-accounted joint ventures.

Non-GAAP Adjusted Net Income was $20 million in the fourth quarter of 2019, a decrease of $110 million compared to $130 million in the fourth quarter of 2018, primarily due to the $123 million decrease in Non-GAAP Adjusted EBITDA, partially offset by a $6 million decrease in depreciation and amortization expense and a $5 million decrease in interest expense.

Fourth Quarter of 2019 Compared to Third Quarter of 2019

Revenues increased by $13 million to $312 million for the fourth quarter of 2019, compared to $299 million for the third quarter of 2019, mainly due to increased utilization and rates in the shuttle tanker and towage fleets, and net loss increased by $251 million in the fourth quarter of 2019, compared to the prior quarter. The net loss during the fourth quarter of 2019 was impacted by a $342 million write-down of vessels. This was partially offset by the increase in revenues, as explained above, a $39 million increase in the consolidated unrealized fair value gains mainly related to interest rate swap derivative instruments, a $23 million increase in equity income due to the recognition of a maintenance bonus during the fourth quarter of 2019 and unrealized fair value gains on derivative instruments within the equity-accounted joint ventures, and an $11 million increase in foreign currency exchange gains.

Non-GAAP Adjusted EBITDA was $167 million in the fourth quarter of 2019, representing an increase of $9 million compared to $158 million in the third quarter of 2019. The increase was primarily due to an $8 million increase in earnings in the FPSO segment mainly from the recognition of the maintenance bonus during the fourth quarter of 2019 in the Pioneiro de Libra FPSO equity-accounted joint venture.

Non-GAAP Adjusted Net Income was $20 million in the fourth quarter of 2019, an increase of $15 million compared to $5 million in the third quarter of 2019 due to the increase in Non-GAAP Adjusted EBITDA and a $6 million decrease in interest expense.

Fiscal Year 2019 Compared to Fiscal Year 2018

Revenues were $1,268 million for the year ended December 31, 2019, compared to $1,416 million for the prior fiscal year. The decrease in revenues was primarily due to $91 million of revenue related to the positive settlement with Petrobras recorded during the fourth quarter of 2018, a $33 million decrease due to reduced charter rates under the Piranema Spirit FPSO contract extension and the amortization of non-cash deferred revenue in 2018, and a $30 million decrease due to the expiration of the Ostras FPSO charter contract in March 2019.

Net loss increased by $227 million for the year ended December 31, 2019 compared to the prior fiscal year mainly due to the $148 million decrease in revenues explained above, a $109 million increase in the net write-down of vessels and a $98 million increase in realized and unrealized losses on derivative instruments, partially offset by the absence in 2019 of $55 million of losses on debt repurchases, a $30 million decrease in operating expenses, a $23 million decrease in depreciation and amortization expense, a $15 million decrease in income tax expense and a $12 million increase in foreign currency exchange gains.

Non-GAAP Adjusted EBITDA was $672 million for the year ended December 31, 2019, compared to $783 million in the prior fiscal year, representing a decrease of $111 million. This decrease was due to the decrease in revenues, as explained above, in particular the absence of the $91 million Petrobras settlement, partially offset by a $30 million decrease in operating expenses.

Non-GAAP Adjusted Net Income was $59 million for the year ended December 31, 2019, a decrease of $91 million compared to $150 million for 2018, primarily due to the decrease in Non-GAAP Adjusted EBITDA, partially offset by a $23 million decrease in depreciation and amortization expense.

Please refer to “Operating Results” for additional information on variances by segment and Appendices A and B for reconciliations between GAAP net (loss) income and Non-GAAP Adjusted EBITDA and Adjusted Net Income, respectively.

Summary of Recent Events

Delivery of Shuttle Tanker Newbuilding

In January 2020, the Partnership took delivery of one LNG-fueled Aframax shuttle tanker newbuilding, the Aurora Spirit. The vessel was constructed based on the Partnership’s E-shuttle design, which incorporates technologies intended to increase fuel efficiency and reduce emissions, including LNG fuel and recovered volatile organic compounds (VOCs) as secondary fuel, as well as battery packs for flexible power distribution and blackout prevention. The vessel will commence operations under an existing master agreement with Equinor in the North Sea.

Completion of Brookfield Acquisition by Merger

On January 22, 2020, Brookfield Business Partners L.P., together with certain of its affiliates and institutional partners (collectively, Brookfield), completed its acquisition by merger (the Merger) of all of the outstanding publicly held and listed common units representing limited partner interests of the Partnership (common units) held by parties other than Brookfield (unaffiliated unitholders) pursuant to the agreement and plan of merger (the Merger Agreement) among the Partnership, TOO GP and certain members of Brookfield.

Under the terms of the Merger Agreement, common units held by unaffiliated unitholders were converted into the right to receive $1.55 in cash per common unit (the cash consideration), other than common units held by unaffiliated unitholders who elected to receive the equity consideration (as defined below). As an alternative to receiving the cash consideration, each unaffiliated unitholder had the option to elect to forego the cash consideration and instead receive one newly designated unlisted Class A Common Unit of the Partnership per common unit (the equity consideration). The Class A Common Units are economically equivalent to the common units held by Brookfield following the Merger, but have limited voting rights and limited transferability.

As a result of the Merger, Brookfield owns 100% of the Class B Common Units, representing approximately 98.7% of the outstanding common units of the Partnership. All of the Class A Common Units, representing approximately 1.3% of the outstanding common units of the Partnership as of the closing of the Merger, are held by the unaffiliated unitholders who elected to receive the equity consideration in respect of their common units.

As a result of the Merger, and that the exercise price of each of the outstanding warrants exceeded the cash consideration, the warrants were automatically canceled and ceased to exist. No consideration was delivered in respect thereof. Pursuant to the terms of the Merger Agreement, the Partnership’s outstanding preferred units were unchanged and remain outstanding following the Merger.

Trading of the Partnership’s common units was suspended on the New York Stock Exchange (the NYSE) before the beginning of trading on January 23, 2020. The Partnership requested that the NYSE file a Form 25 with the United States Securities and Exchange Commission (the SEC) notifying the SEC of the delisting of its common units on the NYSE and the deregistration of the common units. The deregistration of the common units will become effective 90 days after the filing of the Form 25 or such shorter period as may be determined by the SEC.

Plan to Rebrand as Altera Infrastructure

In January 2020, following the closing of the Merger, the Partnership announced that it intends to change its name in due course to Altera Infrastructure L.P. and, effective from March 24, 2020, to rebrand the consolidated group of companies under the new umbrella of Altera Infrastructure.

Changes to Board of Directors

In January 2020, the Partnership announced the following changes to the Board of Directors of TOO GP:

Financing

In October 2019, a subsidiary of the Partnership, Teekay Shuttle Tankers L.L.C., successfully placed $125 million of senior unsecured green floating-rate bonds due in October 2024. The bonds carry a coupon of three-month LIBOR plus 6.50%. The proceeds from the bonds will be to partially fund four LNG-fueled shuttle tankers, one of which delivered to the Partnership in January 2020, and the remaining of which vessels are currently under construction with expected deliveries through 2021.

In October 2019, the Partnership secured a $100 million bridge term loan to provide pre- and post-delivery financing for a shuttle tanker newbuilding to operate on the East Coast of Canada, which matures in August 2022. The debt facility bears interest at a rate of LIBOR plus 250 basis points until March 2020 and increases by 25 basis points per quarter thereafter. The Partnership intends to refinance the bridge loan into the existing East Coast Canada shuttle financing secured by the three vessels in operation. The facility remains undrawn.

Økokrim Investigation

In January 2020, Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) and the local Stavanger police raided Teekay Shipping Norway AS’ (a subsidiary of the Partnership) premises, based on a search warrant issued pursuant to suspected violations of Norwegian pollution and export laws in connection with the export of the Navion Britannia shuttle tanker from the Norwegian Continental Shelf in March 2018. The Partnership has not identified such violations but continues to evaluate any potential liabilities together with advisors.

Liquidity Update

As of December 31, 2019, the Partnership had total liquidity of $304 million, including $105 million undrawn on a revolving credit facility, an increase of $33 million compared to September 30, 2019. The increase in liquidity was primarily due to the Partnership’s issuance of $125 million of senior unsecured green bonds during the fourth quarter of 2019.

Operating Results

The commentary below compares certain results of our operating segments (including the non-GAAP measure of Adjusted EBITDA) for the three months ended December 31, 2019 to the same period of the prior year, unless otherwise noted.

FPSO Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 201920192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues115,258 113,362 143,651 
Adjusted EBITDA81,739 73,550 108,543 
       

Adjusted EBITDA (including Adjusted EBITDA from equity-accounted vessels) decreased by $27 million primarily due to the absence of $21 million in the amortization of non-cash deferred revenue relating to the Piranema Spirit FPSO unit and a decrease of $8 million due to the expiration of the charter contract of the Ostras FPSO unit in March 2019.

Adjusted EBITDA for the fourth quarter of 2019 increased by $8 million, compared to the third quarter of 2019, primarily due the recognition of a maintenance bonus during the fourth quarter of 2019 relating to the Libra FPSO unit in an equity-accounted joint venture.

Shuttle Tanker Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 20192019 (2)2018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues141,541 133,659 206,212 
Adjusted EBITDA65,339 64,421 124,038 
       

Adjusted EBITDA decreased by $59 million mainly due to $55 million of revenues related to the positive settlement with Petrobras received in the fourth quarter of the prior year and a $5 million decrease due to the redelivery of the Stena Sirita from its charter contract in August 2019, which had reached the end of its estimated useful life.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

FSO Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 201920192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues35,690 35,168 36,734 
Adjusted EBITDA22,415 23,703 25,508 
       

Adjusted EBITDA decreased by $3 million mainly due to higher repair and maintenance expenses.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

UMS Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 201920192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues446  441  36,536 
Adjusted EBITDA(2,310) (1,574) 35,011 
         

Adjusted EBITDA decreased by $37 million due to the absence of $37 million of revenues related to the positive settlement with Petrobras received in the same quarter of the prior year.

Adjusted EBITDA for the fourth quarter of 2019 was generally in line with the third quarter of 2019.

Towage Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 201920192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues19,207 16,817  15,252  
Adjusted EBITDA1,467 (1,198) (1,202) 
         

Adjusted EBITDA increased by $3 million compared to both prior periods presented due to higher utilization.

Conventional Tanker Segment

  
 Three Months Ended
 December 31,September 30,December 31,
 201920192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues  6,828  
Adjusted EBITDA  (880) 
        

The Partnership redelivered the two in-chartered vessels to their owners in March and April 2019, respectively, and no longer has activity in the conventional tanker segment.

Teekay Offshore’s Fleet

The following table summarizes Teekay Offshore’s fleet as of February 6, 2020. In comparison to the previously-reported fleet table in the release for the third quarter of 2019, Teekay Offshore’s fleet decreased by two vessels due to the sale of the Navion Hispania and Stena Sirita shuttle tankers in January 2020, both of which vessels had reached the end of their estimated useful lives.

  
 Number of Vessels
 Owned
Vessels
Chartered-in VesselsCommitted
Newbuildings
Total
FPSO Segment8 (i)    8  
Shuttle Tanker Segment24 (ii)2  6 (iii)32  
FSO Segment5      5  
UMS Segment1      1  
Towage Segment10      10  
Total48  2  6  56  
             
  1. Includes two FPSO units, the Cidade de Itajai and Libra, in which Teekay Offshore’s ownership interest is 50 percent.
  2. Includes four shuttle tankers in which Teekay Offshore’s ownership interest is 50 percent and one HiLoad DP unit.
  3. Includes six DP2 shuttle tanker newbuildings scheduled for delivery through early-2022, one of which will operate under Teekay Offshore’s master agreement with Equinor in the North Sea, four of which will join Teekay Offshore’s CoA portfolio in the North Sea and one which will operate under Teekay Offshore’s existing contracts on the East Coast of Canada.

Conference Call

The Partnership plans to host a conference call on Thursday, February 6, 2020 at 12:00 p.m. (ET) to discuss the results for the fourth quarter of 2019. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

An accompanying Fourth Quarter 2019 Earnings Presentation will also be available at www.teekayoffshore.com in advance of the conference call start time.

Forward Looking Statements

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including, among others: the timing and certainty of the delisting and deregistration of the Partnership’s common units; the timing of the retirement of Kenneth Hvid from TOO GP’s Board of Directors; the expected use of proceeds from the Partnership’s issuance of green bonds; the intended refinancing of the Partnership’s bridge loan; and the timing of shuttle tanker newbuilding deliveries and the commencement of related contracts. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth, particularly in or related to North Sea, Brazil and East Coast of Canada offshore fields; shipyard delivery delays and cost overruns; delays in the commencement of charter contracts; and other factors discussed in Teekay Offshore’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2018. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P. is a leading international midstream services provider to the offshore oil production industry, primarily focused on the ownership and operation of critical infrastructure assets in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay Offshore has consolidated assets of approximately $4.9 billion, comprised of 56 offshore assets, including floating production, storage and offloading (FPSO) units, shuttle tankers (including six newbuildings), floating storage and offtake (FSO) units, long-distance towing and offshore installation vessels and a unit for maintenance and safety (UMS). The majority of Teekay Offshore’s fleet is employed on medium-term, stable contracts. Brookfield owns 100 percent of Teekay Offshore’s general partner.

Teekay Offshore’s preferred units trade on the New York Stock Exchange under the symbols “TOO PR A”, “TOO PR B” and “TOO PR E”, respectively.

For Investor Relations enquiries contact:

Jan Rune Steinsland, Chief Financial Officer
Tel:  +47 51 44 27 00
Website: www.teekayoffshore.com


Teekay Offshore Partners L.P.
Summary Consolidated Statements of (Loss) Income

    
  Three Months EndedYear Ended
  December 31,September 30,December 31,December 31,December 31,
(in thousands of U.S. Dollars, except per unit data)20192019201820192018
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
       
Revenues312,142  299,447  445,213  1,268,000  1,416,424  
Voyage expenses(32,314) (30,906) (39,402) (129,910) (151,808) 
Vessel operating expenses(107,614) (99,400) (108,592) (426,951) (437,671) 
Time-charter hire expenses(10,236) (11,119) (13,281) (44,427) (52,616) 
Depreciation and amortization(84,911) (86,336) (91,023) (349,379) (372,290) 
General and administrative(25,094) (16,947) (14,335) (76,245) (65,427) 
(Write-down) and gain on sale of vessels(342,383) (1,498) (16,414) (332,125) (223,355) 
Restructuring recovery (charge)    379    (1,520) 
Operating (loss) income(290,410) 53,241  162,545  (91,037) 111,737  
      
Interest expense(48,085) (53,767) (53,424) (205,709) (199,395) 
Interest income1,012  1,776  1,215  5,111  3,598  
Realized and unrealized gain (loss)     
 on derivative instruments14,634  (27,600) (40,465) (85,195) 12,808  
Equity income26,135  3,385  5,237  32,794  39,458  
Foreign currency exchange gain (loss)6,359  (5,387) (3,344) 2,193  (9,413) 
Losses on debt repurchases        (55,479) 
Other income (expense) – net870  (101) (40) (1,225) (4,602) 
(Loss) income before income tax expense(289,485) (28,453) 71,724  (343,068) (101,288) 
Income tax recovery (expense)3,936  (6,316) (3,882) (7,827) (22,657) 
Net (loss) income(285,549) (34,769) 67,842  (350,895) (123,945) 
      
Non-controlling interests in net (loss) income147  (1,817) 1,476  (1,384) (7,161) 
Preferred unitholders’ interest in net (loss) income8,038  8,038  8,038  32,150  31,485  
General partner’s interest in net (loss) income(2,223) (311) 443  (2,891) (1,128) 
Limited partners’ interest in net (loss) income(291,511) (40,679) 57,885  (378,770) (147,141) 
Limited partner’s interest in net (loss) income per     
 common unit     
  – basic(0.71) (0.10) 0.14  (0.92) (0.36) 
  – diluted(0.71) (0.10) 0.12  (0.92) (0.36) 
Weighted-average number of common units     
  – basic411,158,400  410,801,717  410,314,977  410,727,035  410,261,239  
  – diluted411,158,400  410,801,717  475,565,613  410,727,035  410,261,239  
Total number of common units outstanding     
 at end of period411,148,991  411,188,338  410,314,977  411,148,991  410,314,977  
                 

Teekay Offshore Partners L.P.
Consolidated Balance Sheets

     
  As atAs atAs at
  December 31, 2019September 30, 2019December 31, 2018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
ASSETS   
Current   
Cash and cash equivalents199,388 270,827 225,040 
Restricted cash17,798 17,961 8,540 
Accounts receivable204,020 168,593 141,903 
Vessels held for sale15,374 19,756 12,528 
Prepaid expenses29,887 28,136 32,199 
Due from related parties  58,885 
Other current assets7,467 5,830 11,879 
Total current assets473,934 511,103 490,974 
     
Restricted cash – long-term89,070   
Vessels and equipment   
At cost, less accumulated depreciation3,511,758 3,929,521 4,196,909 
Advances on newbuilding contracts257,017 220,186 73,713 
Investment in equity-accounted joint ventures234,627 212,589 212,202 
Deferred tax asset7,000 2,146 9,168 
Due from related parties  949 
Other assets220,716 205,775 198,992 
Goodwill129,145 129,145 129,145 
Total assets4,923,267 5,210,465 5,312,052 
     
LIABILITIES AND EQUITY   
Current   
Accounts payable56,699 105,377 16,423 
Accrued liabilities140,976 111,861 129,896 
Deferred revenues53,728 57,735 55,750 
Due to related parties20,000  183,795 
Current portion of derivative instruments18,956 18,061 23,290 
Current portion of long-term debt353,238 358,781 554,336 
Other current liabilities14,793 4,198 15,062 
Total current liabilities658,390 656,013 978,552 
     
Long-term debt2,825,712 2,704,685 2,543,406 
Derivative instruments143,222 168,965 94,354 
Due to related parties 125,000  
Other long-term liabilities223,877 188,147 236,616 
Total liabilities3,851,201 3,842,810 3,852,928 
     
Equity   
Limited partners – common units505,394 796,815 883,090 
Limited partners – preferred units 384,274 384,274 384,274 
General Partner 12,164 14,385 15,055 
Warrants132,225 132,225 132,225 
Accumulated other comprehensive income4,410 6,504 7,361 
Non-controlling interests 33,599 33,452 37,119 
Total equity1,072,066 1,367,655 1,459,124 
Total liabilities and total equity4,923,267 5,210,465 5,312,052 
       

Teekay Offshore Partners L.P.
Consolidated Statements of Cash Flows

  
 Year Ended
 December 31, 2019December 31, 2018
(in thousands of U.S. Dollars)(unaudited)(unaudited)
Cash, cash equivalents and restricted cash provided by (used for)  
OPERATING ACTIVITIES  
Net loss(350,895) (123,945) 
Adjustments to reconcile net loss to net operating cash flow:  
Unrealized loss (gain) on derivative instruments50,956  (53,419) 
Equity income, net of dividends received of $17,655 (2018 – $6,200)(15,139) (33,258) 
Depreciation and amortization349,379  372,290  
Write-down and (gain) on sale of vessels332,125  223,355  
Deferred income tax expense3,161  18,606  
Amortization of in-process revenue contracts(15,062) (35,219) 
Expenditures for dry docking(15,890) (21,411) 
Other(31,142) 16,871  
Change in non-cash working capital items related to operating activities12,416  (83,227) 
Net operating cash flow 319,909  280,643  
FINANCING ACTIVITIES  
Proceeds from long-term debt492,517  734,698  
Scheduled repayments of long-term debt and settlement of related swaps(410,429) (567,298) 
Prepayments of long-term debt and settlement of related swaps  (457,426) 
Financing issuance costs(23,755) (14,128) 
Proceeds from financing related to sales and leaseback of vessels23,800  —   
Proceeds from issuance of preferred units—   120,000  
Expenses relating to equity offerings—   (3,997) 
Proceeds from credit facility due to related parties95,000  125,000  
Prepayments of credit facility due to related parties(200,000)   
Cash distributions paid by the Partnership(32,150) (46,675) 
Cash distributions paid by subsidiaries to non-controlling interests(3,636) (12,048) 
Cash contributions paid from non-controlling interests to subsidiaries1,500  1,500  
Other(865) (964) 
Net financing cash flow(58,018) (121,338) 
INVESTING ACTIVITIES  
Net payments for vessels and equipment, including advances on newbuilding  
contracts and conversion costs(214,670) (233,736) 
Proceeds from sale of vessels and equipment33,341  30,049  
Investment in equity-accounted joint ventures(7,886) (3,000) 
Direct financing lease payments received  5,414  
Acquisition of companies from Teekay Corporation (net of cash acquired of $26.6  25,254  
million)
Net investing cash flow (189,215) (176,019) 
Increase (decrease) in cash, cash equivalents and restricted cash72,676  (16,714) 
Cash, cash equivalents and restricted cash, beginning of the year233,580  250,294  
Cash, cash equivalents and restricted cash, end of the year306,256  233,580  
       

Definitions and Non-GAAP Financial Measures

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the U.S. Securities and Exchange Commission (SEC). These non-GAAP financial measures, including Consolidated Adjusted EBITDA, Adjusted EBITDA and Adjusted Net Income, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings, and may not be comparable to similar measures presented by other companies. These non-GAAP measures are used by management, and the Partnership believes that these supplementary metrics assist investors and other users of its financial reports in comparing financial and operating performance of the Partnership across reporting periods and with other companies.

Non-GAAP Financial Measures

Consolidated Adjusted EBITDA represents net (loss) income before interest, taxes, and depreciation and amortization and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include vessel write-downs, gains or losses on the sale of vessels, unrealized gains or losses on derivative instruments, foreign exchange gains or losses, losses on debt repurchases, and certain other income or expenses. Consolidated Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Partnership’s performance, views these gains or losses as an element of interest expense, and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments.  Consolidated Adjusted EBITDA also excludes equity income as the Partnership does not control its equity-accounted investments, and as a result, the Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted investments is retained within the entity in which the Partnership holds the equity-accounted investment or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of any such distributions to the Partnership and other owners.

Adjusted EBITDA represents Consolidated Adjusted EBITDA further adjusted to include the Partnership’s proportionate share of consolidated adjusted EBITDA from its equity-accounted joint ventures and to exclude the non-controlling interests’ proportionate share of the consolidated adjusted EBITDA from the Partnership’s consolidated joint ventures. Readers are cautioned when using Adjusted EBITDA as a liquidity measure as the amount contributed from Adjusted EBITDA from the equity-accounted investments may not be available or distributed to the Partnership in the periods such Adjusted EBITDA is generated by the equity-accounted investments. Please refer to Appendices A and C of this release for reconciliations of Adjusted EBITDA to net (loss) income and equity income, respectively, the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.

Adjusted Net Income represents net (loss) income adjusted to exclude the impact of certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance consistent with the calculation of Adjusted EBITDA. Adjusted Net Income includes realized gains or losses on interest rate swaps as an element of interest expense and excludes income tax expenses or recoveries from changes in valuation allowance or uncertain tax provisions. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net (loss) income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.

Teekay Offshore Partners L.P.
Appendix A – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA

     
   Three Months EndedYear Ended
  December 31,December 31,
   2019201820192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)(unaudited)
       
Net (loss) income(285,549) 67,84   (350,895) (123,945) 
 Depreciation and amortization84,911  91,023  349,379  372,290  
 Interest expense, net of interest income47,073  52,209  200,598  195,797  
 Income tax (recovery) expense(3,936) 3,882  7,827  22,657  
EBITDA(157,501) 214,956  206,909  466,799  
Add (subtract) specific income statement items affecting EBITDA:    
 Write-down and (gain) on sale of vessels342,383  16,414  332,125  223,355  
 Realized and unrealized (gain) loss on derivative instruments(14,634) 40,465  85,195  (12,808) 
 Equity income(26,135) (5,237) (32,794) (39,458) 
 Foreign currency exchange (gain) loss(6,359) 3,344  (2,193) 9,413  
 Losses on debt repurchases—   —   —   55,479  
 Other (income) expense – net(870) 40  1,225  4,602  
 Realized loss on foreign currency forward contracts(1,495) (1,470) (5,054) (1,228) 
Total adjustments292,890  53,556  378,504  239,355  
Consolidated Adjusted EBITDA135,389  268,512  585,413  706,154  
 Add: Adjusted EBITDA from equity-accounted vessels (See Appendix C)34,198  25,270  97,849  92,637  
 Less: Adjusted EBITDA attributable to non-controlling interests (1)(2,440) (4,234) (11,364) (16,270) 
Adjusted EBITDA167,147  289,548  671,898  782,521  
             

(1)    Adjusted EBITDA attributable to non-controlling interests is summarized in the table below.  

     
   Three Months EndedYear Ended
  December 31,December 31,
   2019201820192018
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)(unaudited)
Net (loss) income attributable to non-controlling interests147  1,476  (1,384) (7,161) 
 Depreciation and amortization2,006  2,809  10,525  14,617  
 Interest expense, net of interest income308  439  1,470  2,064  
EBITDA attributable to non-controlling interests2,461  4,724  10,611  9,520  
Add (subtract) specific income statement items affecting EBITDA:    
 (Gain) on sale and write-down of vessels—   (500) 746  6,711  
 Foreign currency exchange (gain) loss(21) 10  7  39  
Total adjustments(21) (490) 753  6,750  
Adjusted EBITDA attributable to non-controlling interests2,440  4,234  11,364  16,270  
             

Teekay Offshore Partners L.P.
Appendix B – Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income

     
   Three Months EndedYear Ended
   December 31,December 31,
   2019201820192018
(in thousands of U.S. Dollars, except per unit data)(unaudited)(unaudited)(unaudited)(unaudited)
Net (loss) income(285,549) 67,842  (350,895) (123,945) 
Adjustments:    
 Net (loss) income attributable to non-controlling interests147  1,476 (1,384) (7,161) 
Net (loss) income attributable to the partners and preferred unitholders(285,696) 66,366 (349,511) (116,784) 
Add (subtract) specific items affecting net (loss) income:    
 Write-down and (gain) on sale of vessels342,383  16,414 332,125  223,355  
 Unrealized (gain) loss on derivative instruments(25,970) 34,719 50,956  (52,047) 
 Realized loss on interest rate swap amendments5,000  —  14,000  16,250  
 Foreign currency exchange (gain) loss (1)(6,359) 3,201 (2,629) 6,532  
 Losses on debt repurchases—   —  —   55,479  
 Other (income) expense – net(870) 40 1,225  4,602  
 Deferred income tax (recovery) expense relating to Norwegian tax structure(4,900) 2,719 2,126  18,822  
 Other adjustments (2)—   —  —   2,164  
 Adjustments related to equity-accounted vessels (3)(3,813) 6,514 11,157  (2,036) 
 Adjustments related to non-controlling interests (4)21  490 (753) (6,750) 
Total adjustments305,492  64,097 408,207  266,371  
Adjusted net income attributable to the partners and preferred19,796  130,463 58,696  149,587  
 unitholders 
     
Preferred unitholders’ interest in adjusted net income8,038  8,038 32,150  31,485  
General Partner’s interest in adjusted net income89  931 202  898  
Limited partners’ interest in adjusted net income11,669  121,494 26,344  117,204  
Limited partners’ interest in adjusted net income per common unit, basic0.03  0.30 0.06  0.29  
Weighted-average number of common units outstanding, basic411,158,400  410,314,977 410,727,035  410,261,239  
  1. Foreign currency exchange (gain) loss primarily relates to the Partnership’s revaluation of all foreign currency-denominated assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized gain or loss related to the Partnership’s cross-currency swaps related to the Partnership’s Norwegian Krone (NOK) bonds, and excludes the realized gain or loss relating to the Partnership’s cross-currency swaps and NOK bonds.
  2. Other adjustments primarily reflects voyage expenses, vessel operating expense, depreciation and amortization expense and general and administrative expenses relating to vessels undergoing upgrades or newbuilding vessels prior to the commencement of their respective charter contracts.
  3. Reflects the Partnership’s proportionate share of specific items affecting the net income of the Cidade de Itajai FPSO unit and Libra FPSO unit equity-accounted joint ventures, including the unrealized gain or loss on derivative instruments and the foreign exchange gain or loss.
  4. Items affecting net (loss) income include amounts attributable to the Partnership’s consolidated non-wholly-owned subsidiaries. Each item affecting net (loss) income is analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests’ percentage share in this subsidiary to arrive at the non-controlling interests’ share of the amount. The adjustments relate to the gain on sale or write-down of vessels and foreign currency exchange gain or loss within the Partnership’s consolidated non-wholly-owned subsidiaries.

Teekay Offshore Partners L.P.
Appendix C – Reconciliation of Non-GAAP Financial Measures 
Adjusted EBITDA From Equity-Accounted Vessels

    
  Three Months EndedThree Months Ended
  December 31, 2019December 31, 2018
(in thousands of U.S. Dollars)(unaudited)(unaudited)
  At 100%Partnership’s 50%At 100%Partnership’s 50%
Revenues84,543  42,272  77,566  38,783  
Vessel and other operating expenses(16,148) (8,074) (27,026) (13,513) 
Depreciation and amortization(15,670) (7,835) (15,905) (7,952) 
Operating income of equity-accounted vessels52,725  26,363  34,635  17,318  
Net interest expense(6,870) (3,435) (11,441) (5,721) 
Realized and unrealized gain (loss) on derivative instruments (1)6,307  3,154  (13,325) (6,663) 
Foreign currency exchange gain406  203  314  157  
Total other items(157) (78) (24,452) (12,227) 
Net income / equity income of equity-accounted vessels52,568  26,285  10,183  5,09   
 before income tax (expense) recovery
Income tax (expense) recovery(300) (150) 291  146  
Net income / equity income of equity-accounted vessels52,268  26,135  10,474  5,237  
 Depreciation and amortization15,670  7,835  15,905  7,952  
 Net interest expense6,870  3,435  11,441  5,721  
 Income tax expense (recovery)300  150  (291) (146) 
EBITDA75,108  37,555  37,529  18,764  
Add (subtract) specific items affecting EBITDA:    
 Realized and unrealized (gain) loss on derivative instruments (1)(6,307) (3,154) 13,325  6,663  
 Foreign currency exchange gain(406) (203) (314) (157) 
Adjusted EBITDA from equity-accounted vessels68,395  34,198  50,540  25,270  
  1. Realized and unrealized (loss) gain on derivative instruments includes an unrealized gain of $7.2 million ($3.6 million at the Partnership’s 50% share) for the three months ended December 31, 2019 and an unrealized loss of $13.3 million ($6.7 million at the Partnership’s 50% share) for the three months ended December 31, 2018 related to interest rate swaps for the Cidade de Itajai and Libra FPSO units.
    
  Year EndedYear Ended
  December 31, 2019December 31, 2018
(in thousands of U.S. Dollars)(unaudited)(unaudited)
  At 100%Partnership’s 50%At 100%Partnership’s 50%
Revenues261,574  130,787  262,205  131,103 
Vessel and other operating expenses(65,877) (32,938) (76,931) (38,466)
Depreciation and amortization(65,067) (32,534) (61,893) (30,947)
Operating income of equity-accounted vessels130,630  65,315  123,381  61,690 
Net interest expense (1)(39,499) (19,749) (37,166) (18,585)
Realized and unrealized loss on derivative instruments(2)(25,053) (12,527) (7,047) (3,523)
Foreign currency exchange gain10  5  636  318 
Total other items(64,542) (32,271) (43,577) (21,790)
Net income / equity income of equity-accounted vessels66,088  33,044  79,804  39,900 
 before income tax expense
Income tax expense(501) (250) (883) (442)
Net income / equity income of equity-accounted vessels65,587  32,794  78,921  39,458 
 Depreciation and amortization65,067  32,534  61,893  30,947 
 Net interest expense(1)39,499  19,749  37,166  18,585 
 Income tax expense501  250  883  442 
EBITDA170,654  85,327  178,863  89,432 
Add (subtract) specific items affecting EBITDA:    
 Realized and unrealized loss on derivative instruments(2)25,053  12,527  7,047  3,523 
 Foreign currency exchange gain(10) (5) (636) (318)
Adjusted EBITDA from equity-accounted vessels195,697  97,849  185,274  92,637 
  1. Net interest expense for the year ended December 30, 2018 includes an unrealized gain of $9.7 million ($4.9 million at the Partnership’s 50% share) related to interest rate swaps designated and qualifying as cash flow hedges for the Libra FPSO unit.
  2. Realized and unrealized loss on derivative instruments includes an unrealized loss of $22.4 million ($11.2 million at the Partnership’s 50% share) for the year ended December 31, 2019 and an unrealized loss of $6.3 million ($3.1 million at the Partnership’s 50% share) for the year ended December 31, 2018 related to interest rate swaps for the Cidade de Itajai FPSO unit.