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: First Quarter ended March 31, 2011
Date of Report: May 13, 2011
Teekay LNG Partners L.P. is a master limited partnership providing LNG, LPG, and crude oil marine transportation services under long-term, fixed-rate charter contracts. The fleet consists of 30 delivered vessels and 7 committed newbuildings as of May 1, 2011.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Distributable Cash Flow (DCF) | $39.1 million | $33.9 million |
| Net Income (GAAP) | $29.7 million | $31.0 million |
| Net Income Attributable to Partners (GAAP) | $25.0 million | $28.5 million |
| Adjusted Net Income Attributable to Partners | $25.9 million | $21.4 million |
| Voyage Revenues | $93.2 million | $92.5 million |
| Cash Flow from Vessel Operations | $67.1 million | $62.8 million |
| Liquidity (as of March 31, 2011) | $437.6 million | N/A |
| Liquidity (as of May 1, 2011) | ~$600 million | N/A |
| Cash Distribution Declared | $0.63 per unit | N/A |
Material Changes vs. Prior Period
- Distributable Cash Flow: Increased 15% to $39.1 million, driven by a full quarter of revenue from three vessels acquired in March 2010, a 50% interest in two LNG carriers acquired in November 2010, and reduced off-hire days.
- Net Income (GAAP): Decreased to $29.7 million from $31.0 million, primarily due to a $21.0 million unrealized foreign exchange loss and a decrease in unrealized gains on derivative instruments compared to the prior year.
- Adjusted Net Income: Increased to $25.9 million from $21.4 million, excluding non-cash items such as foreign exchange fluctuations and derivative mark-to-market adjustments.
- Segment Performance:
- Liquefied Gas Segment: Cash flow from vessel operations decreased slightly to $52.7 million due to the sale of the Dania Spirit, offset by fewer off-hire days.
- Conventional Tanker Segment: Cash flow increased to $14.3 million from $9.9 million, reflecting a full quarter of operations from three tankers acquired in late Q1 2010.
Guidance, Outlook, and Management Commentary
- Acquisitions: The Partnership agreed to acquire Teekay Corporation's 33% interest in four Angola LNG carrier newbuildings scheduled for delivery in 2011 and 2012. These vessels are chartered at fixed rates with inflation adjustments for 20 years.
- Newbuildings: Three Skaugen LPG/Multigas carriers are under construction and expected to be delivered in 2011, commencing service under 15-year fixed-rate charters.
- Liquidity: Total liquidity increased to approximately $600 million as of May 1, 2011, following an equity offering that raised approximately $161.6 million. Management intends to evaluate opportunities to acquire high-quality third-party assets.
- Outlook: Management anticipates further DCF growth as new gas carriers supported by long-term fixed-rate contracts come online. The LNG sector is showing increased activity for both traditional transportation and floating storage and regasification units (FSRUs).
- Risks: Forward-looking statements are subject to risks including project delays, shipyard production delays, changes in trading patterns, foreign currency fluctuations, and the ability to secure financing.
Investor Verification Checklist
- Verify the reconciliation of Distributable Cash Flow (non-GAAP) to Net Income in Appendix B.
- Confirm the delivery schedules for the four Angola LNG carriers and three Skaugen LPG/Multigas carriers.
- Review the impact of unrealized foreign exchange losses ($21.0 million) and derivative instrument gains/losses on GAAP net income.
- Assess the terms of the 20-year fixed-rate charters for the Angola LNG project and 15-year charters for Skaugen vessels.
- Monitor the utilization of the ~$600 million liquidity for future acquisitions or debt repayment.