Business context and reporting period
Filing identity differs from the request: the supplied document is Teekay LNG Partners L.P.’s annual Form 20-F for the fiscal year ended December 31, 2019, filed April 9, 2020—not a Seapeak LLC filing or a standalone 2019 Q4 report. It reports annual results; separate Q4 figures are not provided in the filing text supplied.
Teekay LNG Partners operated LNG and LPG/multi-gas shipping businesses, primarily under medium- to long-term charters, and held a 30% interest in the Bahrain LNG terminal joint venture. At year-end, its fleet included 49 LNG carriers and 30 LPG/multi-gas carriers, including equity-accounted vessels.
Financial and operating performance
Amounts below are U.S. dollars; figures are rounded to millions unless noted.
| Metric | FY2019 | FY2018 |
|---|---|---|
| Voyage revenues | $601.3m | $510.8m |
| Net voyage revenues (non-GAAP) | $579.9m | $482.5m |
| Income from vessel operations | $299.3m | $147.8m |
| Equity income | $58.8m | $53.5m |
| Interest expense | $164.5m | $128.3m |
| Net income | $164.6m | $26.9m |
| Limited partners’ net income per common unit, diluted | $1.59 | $0.03 |
| EBITDA / Adjusted EBITDA (non-GAAP) | $469.4m / $684.7m | $279.0m / $515.3m |
| Net cash from operating activities | $298.9m | $131.2m |
| Net cash used for investing activities | $158.8m | $632.9m |
| Net cash from (used for) financing activities | $(109.7)m | $385.1m |
Income from vessel operations was approximately 49.8% of voyage revenues in 2019, versus 28.9% in 2018; these approximate ratios are affected by vessel sale gains and write-downs. LNG segment utilization was 97.8% versus 98.1%; LPG segment utilization improved to 96.7% from 88.0%.
At December 31, 2019, total assets were $5.410bn and total equity was $1.877bn. Cash and cash equivalents were $160.2m and restricted cash was $93.1m. Total liquidity, including undrawn revolving credit facilities, was $326.4m. The working capital deficit was $118.6m, mainly reflecting $393.1m of debt classified as current. Long-term debt was $1.831bn and finance lease obligations were $1.411bn; the filing’s selected-data measure of total debt, including finance leases, was $3.242bn.
Common-unit distributions declared were $0.71 per unit for 2019, versus $0.56 in 2018. Cash distributions paid totaled $82.4m. The filing does not provide a company-reported conventional profit margin.
Material changes versus FY2018
- Revenue increased 17.7%, and income from vessel operations roughly doubled. Management attributed the improvement primarily to LNG newbuild deliveries and higher charter rates, alongside substantially lower vessel write-downs than in 2018.
- Net income rose to $164.6m from $26.9m. FY2018 included a $53.0m tax indemnification expense in the RasGas II joint venture; FY2019 included a $14.3m gain when two Awilco LNG vessels were derecognized.
- Interest expense increased by $36.2m, primarily due to new finance lease obligations and borrowing to fund vessel deliveries. Operating cash flow increased by $167.7m; management cited new vessel employment, higher multi-gas charter rates, increased joint-venture dividends, and a change in cash-flow classification under new lease accounting.
- Investing cash outflow declined substantially as vessel and equipment spending fell following the 2018 delivery schedule. Financing cash flow shifted to an outflow, reflecting lower debt issuance, repayments, unit repurchases, and distributions.
- The company sold its last conventional tanker in October 2019, completing its exit from that segment. Common units outstanding declined to 77.5m from 79.4m, reflecting repurchases.
Outlook, management commentary, risks and unusual items
- Liquidity and refinancing: Management expected available liquidity, operating cash flows, and joint-venture dividends to cover needs for at least one year from the filing date. It expected to refinance or repay 2020–2021 maturities. Subsequent events included repayment of $157m of loans using proceeds from the January 2020 Awilco vessel purchases and a March 2020 refinancing of a $225m revolving facility to March 2022.
- Distributions and capital allocation: Management announced a 32% increase in quarterly common distributions to $0.25 per unit beginning with the first-quarter 2020 distribution, subject to board approval and financing restrictions. The board had also authorized up to $100m of unit repurchases; after year-end, 1.4m units were repurchased for $15.3m.
- COVID-19: The filing said the pandemic’s duration and financial effects could not be reasonably estimated. Management identified potential effects on energy demand, charter rates, vessel operations, dry-dock schedules, customers, vessel values, liquidity, financing access, and new LNG projects. It reported no material negative impact to the company as of the filing’s financial statement issuance date.
- Yemen charters: Two vessels in the 52%-owned MALT joint venture had suspended charters with Yemen LNG after the plant closed amid political unrest. Deferred hire repayment depended on a possible plant restart; the filing gave no assurance of timing or recovery. The vessels were re-chartered to third parties for limited terms.
- Other operating items: Fourteen LNG and LPG vessels were scheduled for dry-docking in 2020 and 11 in 2021; ballast-water system installations could raise costs and extend off-hire. A planned equipment upgrade for certain LNG vessels was estimated at approximately $61m, with installation in 2021–2022. The manager of the seven multi-gas vessels planned to dissolve its pool effective September 2020, and the company was evaluating alternatives.
- Principal risks: High leverage and refinancing needs; debt covenants and vessel-value tests; customer and joint-venture concentration; charter expirations and spot-market exposure; vessel impairment risk; foreign-exchange and interest-rate volatility, including LIBOR transition; regulatory and environmental compliance costs; and sanctions, geopolitical, operational, and counterparty risks. A critical audit matter concerned recoverability testing of LPG-segment vessels, particularly assumptions about future charter rates.
- Accounting and unusual items: The company adopted lease accounting and updated hedge accounting in 2019. Other comprehensive loss was $57.4m, chiefly reflecting changes in hedge valuations. No 2019 goodwill impairment was recorded; 2018 included LPG goodwill and vessel write-downs. The 2019 financial statements received an unqualified audit opinion, and the auditor also reported effective internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer and period: this is Teekay LNG Partners’ FY2019 annual filing, not Seapeak LLC or a quarterly report.
- Review the debt maturity and refinancing schedule, covenant headroom, and the effect of vessel values on secured borrowing tests.
- Assess whether operating cash flow and joint-venture distributions can support debt service, planned dry-docks, equipment spending, repurchases, and the higher announced common distribution.
- Track recovery prospects for deferred Yemen charter hire and the re-employment of vessels with expiring or suspended charters.
- Evaluate COVID-19 impacts, the multi-gas pool transition, and potential charter-rate and vessel-value changes; reported results do not quantify the pandemic’s future effect.
- Reconcile GAAP results with non-GAAP EBITDA and Adjusted EBITDA, including the effects of vessel gains, impairments, derivative valuations, and lease-accounting changes.