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: First Quarter ended March 31, 2019

Date of Report: May 23, 2019

Teekay LNG Partners is a master limited partnership and one of the world's largest independent owners and operators of LNG carriers. The fleet consists of 49 LNG carriers (including four newbuildings), 29 LPG/multi-gas carriers, and one conventional tanker, with ownership interests ranging from 20% to 100%. The Partnership also holds a 30% interest in a regasification terminal under construction in Bahrain.

Key Financial Metrics

Note: Q1 2019 non-GAAP measures reflect a change in terminology from "Cash Flow from Vessel Operations" to "Adjusted EBITDA" to align with internal reporting and SEC Form 20-F.

Material Changes vs. Prior Period

• Revenue Growth: Voyage revenues increased 30% year-over-year (Q1 2019 vs. Q1 2018), driven by the delivery of 10 LNG carrier newbuildings and higher charter rates on existing vessels.
• Profitability: GAAP net income swung from a loss of $6.9 million in Q1 2018 to a profit of $21.6 million in Q1 2019. This was primarily due to new vessel deliveries and the absence of significant vessel write-downs that impacted the prior year.
• Segment Performance:
  • LNG Segment: Strong growth in income from vessel operations ($72.8M vs. $50.2M) due to newbuildings and higher rates.
  • LPG Segment: Improved results due to higher spot revenues from multi-gas carriers.
  • Conventional Tanker Segment: Losses narrowed compared to Q1 2018, which included $18.7 million in vessel write-downs.
• Equity Income: GAAP equity income decreased to $5.6 million from $26.7 million in Q1 2018, largely due to unrealized losses on derivative instruments and the absence of a $5.6 million gain on the sale of an equity investment recorded in the prior year.

Guidance, Outlook, and Management Commentary

• Guidance: Management expects 2019 results to remain within previously issued earnings and Adjusted EBITDA guidance ranges.
• Capital Allocation: The Partnership increased quarterly cash distributions on common units by 36%, from $0.14 to $0.19 per unit, effective May 2019. Management remains committed to a balanced strategy of returning capital to unitholders while delevering the balance sheet.
• Outlook: CEO Mark Kremin highlighted significant cash flow growth driven by newbuild deliveries. The Partnership expects four additional LNG carrier newbuildings and the Bahrain LNG terminal to commence operations in the second half of 2019, driving further Adjusted EBITDA growth.
• Commercial Strategy: Despite near-term spot market weakness, the Partnership secured one-to-three-year charters on three LNG carriers at attractive rates. The LNG fleet is now 100% fixed for the remainder of 2019, 97% for 2020, and 92% for 2021.
• Risks: Forward-looking statements are subject to risks including shipyard delays, cost overruns, changes in LNG production, charterer default, and regulatory changes.

Investor Verification Checklist

• Charter Rates and Utilization: Verify the specific rates and commencement dates of the new charters secured for the Magellan Spirit, Polar Spirit, Arwa Spirit, and Marib Spirit.
• Newbuilding Deliveries: Confirm the delivery schedule and contract start-up dates for the four LNG carrier newbuildings expected in H2 2019.
• Bahrain Terminal Progress: Monitor construction updates and the expected Q3 2019 operational commencement of the 30% owned regasification terminal.
• Debt and Leverage: Review the impact of recent refinancing and the Partnership's ability to delever faster as projected by management.
• Derivative Exposure: Assess the impact of unrealized losses on non-designated derivative instruments on GAAP net income versus Adjusted Net Income.