SEAL-PA

Seapeak LLC Form 6-K Summary: Quarter Ended March 31, 2022

Business Context and Reporting Period

This Form 6-K covers the quarterly period ended March 31, 2022, for Seapeak LLC (formerly Teekay LNG Partners L.P.). The company is an international provider of marine transportation services for liquefied natural gas (LNG) and liquefied petroleum gas (LPG). During the quarter, the company completed a merger with an entity managed by Stonepeak Partners L.P. (the "Stonepeak Transaction") on January 13, 2022, resulting in the delisting of common units from the NYSE. Concurrently, the entity converted from a limited partnership to a limited liability company and changed its name to Seapeak LLC.

Key Financial Metrics

Material Changes vs. Prior Period

• Income from Vessel Operations: Decreased significantly to $18.1 million from $70.6 million. This decline was primarily driven by a $44.0 million write-down of two LNG carriers (Seapeak Arctic and Seapeak Polar) due to changes in future commercial expectations, and $2.7 million in restructuring charges related to the Stonepeak Transaction.
• Equity Income: Increased substantially to $92.9 million from $37.5 million. The increase was largely due to $55.1 million in unrealized gains on non-designated derivative instruments within joint ventures, resulting from the removal of hedge accounting designations and rising long-term forward LIBOR rates.
• Other Expense: Increased to $22.8 million from $3.8 million, primarily due to $18.0 million in professional fees associated with the Stonepeak Transaction and higher credit loss provisions.
• Derivative Gains: Realized and unrealized gains on non-designated derivatives rose to $29.4 million from $6.6 million, driven by interest rate swap valuations.

Outlook, Risks, and Management Commentary

• Transaction Impact: Management notes that the Stonepeak Transaction resulted in the cessation of common unit distributions and the acquisition of Teekay subsidiaries, which added management fee revenue but also incurred significant one-time costs.
• Liquidity: Total liquidity stands at $314.2 million. Management expects this, combined with operating cash flows, to be sufficient to meet obligations for the next 12 months, pending the refinancing of a revolving credit facility maturing in 2022.
• Geopolitical Risks: The filing highlights the potential adverse impact of the Russian invasion of Ukraine and related sanctions on global energy markets and the company's operations.
• Joint Venture Covenants: The Angola Joint Venture experienced debt service coverage ratio breaches but obtained a waiver from lenders in May 2022, valid until June 30, 2022, subject to dividend withholding.
• Charter Contracts: The company secured a ten-year fixed-rate charter for the Oak Spirit and extended the charter for the Creole Spirit. However, two vessels in the MALT Joint Venture remain under suspension agreements with YLNG due to the political situation in Yemen.

Investor Verification Checklist

• Asset Valuation: Verify the methodology and assumptions used for the $44.0 million impairment charge on the Seapeak Arctic and Seapeak Polar vessels.
• Derivative Accounting: Review the impact of removing hedge accounting designations on the volatility of reported equity income and net income.
• Debt Maturities: Assess the refinancing risk for the revolving credit facility maturing in 2022 and the $1.6 billion in finance lease obligations.
• Joint Venture Exposure: Monitor the status of the Angola Joint Venture covenant waiver and the potential for dividend withholding.
• Geopolitical Exposure: Evaluate the specific exposure to Russian energy markets and the potential impact of sanctions on charterers or counterparties.