SEAL-PA

Business Context and Reporting Period

Company: Teekay LNG Partners L.P. (NYSE: TGP)

Filing Type: Form 6-K (Report of Foreign Private Issuer)

Reporting Period: Third Quarter ended September 30, 2019

Date of Report: November 13, 2019

Teekay LNG Partners is a master limited partnership and one of the world's largest independent owners and operators of LNG carriers. The company reported its highest-ever quarterly results for Q3 2019, driven by the delivery of newbuildings and higher charter rates. The Partnership has completed the sale of its last conventional tanker, focusing 100% on LNG and LPG transportation.

Key Financial Metrics

Liquidity: As of September 30, 2019, total liquidity was $329.1 million, comprised of $142.9 million in cash and cash equivalents and $186.2 million in undrawn credit facilities.

Debt: Total long-term debt was $1,437.3 million, with a current portion of $390.6 million.

Material Changes vs. Prior Period

• Revenue Growth: Voyage revenues increased 21% year-over-year to $149.7 million, primarily due to earnings from nine LNG carrier newbuildings delivered between July 2018 and August 2019.
• Profitability Surge: GAAP net income attributable to partners more than doubled to $47.4 million. Adjusted net income per common unit increased nearly 3.5x to $0.55.
• Equity Income: Equity income rose significantly to $21.3 million (from $14.7 million in Q3 2018) due to new deliveries in the Yamal LNG Joint Venture and higher rates in the MALT Joint Venture.
• Offsetting Factors: Results were partially offset by increased off-hire days for scheduled dry dockings and unrealized losses on non-designated derivative instruments compared to gains in the prior year.

Guidance, Outlook, and Management Commentary

Guidance Revisions

• Fiscal 2019: Guidance revised upwards by 10%. Adjusted net income per common unit range is now $1.75 to $1.85.
• Fiscal 2020: New guidance introduced with projected earnings per unit increasing over 55% from 2019 guidance. Range is $2.60 to $3.10.

Distribution Increase

Management announced a 32% increase in distributions to $1.00 per common unit per annum, commencing with the first quarter of 2020 distribution.

Operational Highlights

• Newbuildings: Took delivery of the fourth and fifth 50% owned ARC7 LNG carriers in August and early November 2019. The final ARC7 newbuilding is expected in late November 2019, completing a $3.5 billion growth program.
• Bahrain Terminal: The Bahrain LNG Regasification terminal is expected to commence operations before year-end.
• Strategic Shift: Sold the last conventional tanker (Alexander Spirit) for $11.5 million net proceeds, marking a full transition to core LNG/LPG business.

Risks and Contingencies

OFAC Sanctions Resolution: In September 2019, sanctions on COSCO Dalian impacted the Yamal LNG Joint Venture. On October 21, 2019, COSCO completed an ownership restructuring transferring the interest to a non-sanctioned entity, resolving the "Blocked Person" status. Management does not expect a material impact.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of unrealized losses on non-designated derivative instruments ($3.3 million loss in Q3 2019) on future earnings volatility.
• Newbuilding Deliveries: Confirm the timely delivery of the final ARC7 vessel in late November 2019 to meet 2020 guidance assumptions.
• Bahrain Terminal Timeline: Monitor the start-up date of the Bahrain regasification terminal to ensure it occurs before year-end as projected.
• Unit Repurchases: Track the remaining capacity of the $100 million unit repurchase program (2.26 million units repurchased to date).
• Debt Maturity: Review the schedule for the $390.6 million current portion of long-term debt due within the next 12 months.