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Teekay LNG Partners Reports Record Quarterly Results

Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P., reported the Partnership’s results for the quarter ended September 30, 2019.

Third Quarter of 2019 Compared to Third Quarter of 2018

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended September 30, 2019, compared to the same quarter in the prior year, were positively impacted by: earnings from the nine liquefied natural gas (LNG) carrier newbuildings which delivered into the Partnership’s consolidated fleet and equity-accounted joint ventures between July 2018 and August 2019; higher earnings from the Torben Spirit upon redeployment at a higher charter rate that commenced in December 2018; higher earnings from the Magellan Spirit, which was chartered-in from the Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the MALT Joint Venture) commencing in September 2018; higher earnings in the MALT Joint Venture from the commencements of the Arwa Spirit and Marib Spirit one-year charter contracts at higher rates in June and July 2019, respectively, and recognition of drydock hire revenue for the Meridian Spirit; and higher earnings from the Partnership’s seven multi-gas carriers. These increases were partially offset by lower earnings due to more off-hire days for scheduled dry dockings and repairs during the third quarter of 2019 for certain of the Partnership’s LNG carriers compared to the same quarter of the prior year.

In addition, GAAP net income attributable to the partners and preferred unitholders was negatively impacted in the three months ended September 30, 2019, compared to the same quarter of the prior year, by various items, including unrealized losses on non-designated derivative instruments in the third quarter of 2019 compared to gains on non-designated derivative instruments in the third quarter of 2018, partially offset by a decrease in the write-down of vessels.

CEO Commentary

“During the third quarter of 2019, Teekay LNG recorded its highest ever quarterly results with adjusted earnings per common unit up almost 3.5x from the same period of the previous year,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “We expect Teekay LNG’s results will continue to increase, as reflected in our increased and tightened 2019 guidance range and a new, higher 2020 guidance range issued today. Based on this foundation of earnings growth expected in 2020, we intend to increase our distributions by 32 percent to $1.00 per common unit per annum, starting with our first quarter of 2020 distribution payable in May 2020.” Mr. Kremin continued, “I am also pleased to report that with the recent sale of our last conventional tanker, Teekay LNG is now 100 percent focused on our core business of transporting LNG and LPG.”

“We are currently in the process of completing the last of our recent phase of growth projects,” commented Mr. Kremin. “We have made good progress and anticipate the start-up of the Bahrain regasification terminal before the end of the year. In August and early-November 2019, we delivered our fourth and fifth ARC7 ice-breaking LNG carriers for the Yamal LNG project, which immediately commenced their respective long-term charter contracts. We expect the sixth ARC7 to deliver and commence its long-term charter contract with Yamal in late-November 2019, which will mark the successful completion of the $3.5 billion growth program we commenced in 2013. With nearly all of our current growth projects delivered and generating cash flows under long-term contracts, we are moving from a phase of project execution to a period of significant cash flow generation, which we believe will enable the Partnership to allocate capital towards balance sheet delevering and returning capital to unitholders.”

Summary of Recent Events

In December 2018, the Board of Teekay LNG’s general partner approved a $100 million unit repurchase program. Since that time, the Partnership has repurchased a total of 2.26 million common units, or approximately 2.8 percent of the outstanding common units immediately prior to commencement of the program, for a total cost of $28.9 million, representing an average repurchase price of $12.78 per unit. Since early-August 2019, Teekay LNG repurchased 816,672 units at an average price of $14.33 per unit, for a total cost of $11.7 million.

In August and November 2019, the Partnership took delivery of the fourth and fifth 50 percent-owned ARC7 LNG carrier newbuildings, respectively, the Vladimir Voronin and Georgiy Ushakov, which immediately commenced their 26-year charter contracts servicing the Yamal LNG project.

On September 25, 2019, the United States Government, by an Executive Order of the Department of the Treasury’s Office of Foreign Assets Control (OFAC), imposed sanctions on COSCO Shipping Tanker (Dalian) Co., Ltd. (COSCO Dalian). At the time, COSCO Dalian owned 50 percent of China LNG Shipping (Holdings) Limited (CLNG). CLNG was not listed on the OFAC Order as Specially Designated National or involved in any sanctioned activity, but by virtue of being 50 percent-owned by COSCO Dalian at the time, CLNG was designated as a “Blocked Person” under OFAC’s deeming rules. CLNG, in turn, owns a 50 percent interest in Teekay LNG’s Yamal LNG joint venture (the Yamal LNG Joint Venture), which owns five on-the-water ARC7 LNG carriers and one ARC7 LNG carrier newbuilding. As a result of CLNG’s 50 percent interest, the Yamal LNG Joint Venture at the time also qualified as a “Blocked Person” under OFAC’s deeming rules.

On October 21, 2019, the COSCO group completed an ownership restructuring on arms-length terms pursuant to which its 50 percent interest in CLNG was transferred from COSCO Dalian to a non-sanctioned COSCO entity, which automatically resulted in CLNG and the Yamal LNG Joint Venture no longer being classified as a “Blocked Person” under OFAC’s deeming rules. Teekay LNG does not expect any material impact to the Partnership from these resolved issues.

On October 16, 2019, the Partnership sold its last remaining conventional tanker, the Alexander Spirit, for net proceeds of $11.5 million.

Liquefied Natural Gas Segment

Income from vessel operations and Consolidated Adjusted EBITDA for the liquefied natural gas segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, were positively impacted primarily by: the deliveries of four wholly-owned LNG carrier newbuildings (the Megara, Bahrain Spirit, Sean Spirit and Yamal Spirit) between July 2018 and January 2019; higher earnings from the Magellan Spirit, which was chartered-in from the Partnership’s 52 percent-owned MALT Joint Venture commencing in September 2018; and higher earnings from the Torben Spirit upon redeployment in December 2018 at a higher charter rate. These increases were partially offset by an increase in off-hire days in the third quarter of 2019 for the Madrid Spirit due to a scheduled dry docking and repairs.

Equity income and Adjusted EBITDA from equity-accounted vessels for the liquefied natural gas segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, were positively impacted primarily by: the deliveries of three ARC7 LNG carrier newbuildings between September 2018 and August 2019 to the Partnership’s 50 percent-owned Yamal LNG Joint Venture; the deliveries of two LNG carrier newbuildings between July 2018 and January 2019 to the Partnership’s 20 percent-owned joint venture with CLNG, CETS Investment Management (HK) Co. Limited and BW LNG Investments Pte. Ltd. (the Pan Union Joint Venture); and higher earnings in the MALT Joint Venture from the commencements of the Arwa Spirit and Marib Spirit one-year charter contracts at higher rates in June and July 2019, respectively, and recognition of drydock hire revenue for the Meridian Spirit. These increases were partially offset by the commencement of the time-charter in contract for the Bahrain Spirit floating storage unit (FSU) in September 2018 in the Bahrain LNG Joint Venture ahead of the commencement of operations of the LNG receiving and regasification terminal in Bahrain. In addition, GAAP equity income was negatively impacted by unrealized losses on non-designated derivative instruments in the Partnership’s equity-accounted joint ventures in the third quarter of 2019 compared to gains on designated and non-designated derivative instruments in the third quarter of 2018.

Liquefied Petroleum Gas Segment

Loss from vessel operations and Consolidated Adjusted EBITDA for the liquefied petroleum gas segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, were positively impacted by higher earnings from the Partnership’s seven multi-gas carriers, which earned higher spot revenues during the third quarter of 2019.

Equity income (loss) and Adjusted EBITDA from equity-accounted vessels for the liquefied petroleum gas segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, were positively impacted by higher charter rates earned and fewer off-hire days; partially offset by more scheduled dry dockings in the Partnership’s 50/50 joint venture with Exmar NV (the Exmar LPG Joint Venture).

Conventional Tanker Segment

Consolidated Adjusted EBITDA for the conventional tanker segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, remained comparable. Loss from vessel operations for the conventional tanker segment for the three months ended September 30, 2019, compared to the same quarter of the prior year, was positively impacted by lower write-downs related to the Alexander Spirit, European Spirit and African Spirit.

Full Report

Source: Teekay LNG Partners L.P.

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