Business Context and Reporting Period
This Form 6-K filing by Teekay LNG Partners L.P. (NYSE: TGP) reports financial results for the quarter and fiscal year ended December 31, 2012. The Partnership is a master limited partnership and the world's third-largest independent owner and operator of LNG carriers. The report covers operations across three segments: Liquefied Gas, Conventional Tankers, and equity-accounted joint ventures.
Key Financial Metrics
- Distributable Cash Flow (DCF): $53.6 million for Q4 2012, up 22% from $44.1 million in Q4 2011.
- Net Income (GAAP): $28.2 million attributable to partners for Q4 2012, compared to $40.3 million in Q4 2011. Full-year 2012 net income was $123.7 million versus $89.8 million in 2011.
- Adjusted Net Income: $38.5 million for Q4 2012 (non-GAAP), compared to $29.8 million in Q4 2011. Full-year 2012 adjusted net income was $156.3 million.
- Cash Flow from Vessel Operations (CFVO): Total CFVO was $105.9 million for Q4 2012, down from $90.9 million in Q4 2011, driven by growth in equity-accounted vessels.
- Liquidity: Total liquidity was approximately $495.0 million as of December 31, 2012, comprised of $113.6 million in cash and $381.4 million in undrawn credit facilities.
- Distributions: Declared a cash distribution of $0.675 per unit for Q4 2012, paid on February 14, 2013.
Material Changes vs. Prior Period
- Revenue and Income: GAAP net income decreased in Q4 2012 primarily due to a $29.4 million non-cash write-down of three conventional Suezmax tankers and unrealized foreign exchange losses. Adjusted net income increased significantly due to the inclusion of new assets.
- Segment Performance:
- Liquefied Gas: CFVO from consolidated vessels decreased slightly ($54.3M vs $55.5M) due to higher administrative costs, while CFVO from equity-accounted vessels more than doubled ($38.5M vs $20.0M) following the acquisition of six LNG carriers in the MALT LNG joint venture.
- Conventional Tankers: CFVO decreased to $13.1 million from $15.4 million due to amended time-charter contracts for two Suezmax tankers, reducing daily hire rates temporarily.
- Derivatives: The Partnership recognized a net unrealized gain of $14.4 million on derivative instruments in Q4 2012, compared to a loss of $8.8 million in the prior year.
Guidance, Outlook, and Material Transactions
- New LPG Joint Venture: Completed a 50/50 joint venture with Exmar NV (Exmar LPG BVBA) effective November 1, 2012. The fleet includes 25 vessels (16 owned, 5 chartered-in, 4 newbuildings on order). Teekay LNG invested approximately $134 million in equity and assumed $108 million in debt. Management expects this to provide immediate access to the LPG market and offset cash flow reductions in the conventional tanker segment.
- LNG Newbuildings: Ordered two 173,400-cubic meter LNG carriers from DSME for approximately $400 million, with options for three more. Deliveries are scheduled for the first half of 2016. Management intends to secure long-term fixed-rate contracts prior to delivery.
- Liquidity Outlook: Pro forma liquidity following the Exmar transaction is approximately $360 million. Management believes the Partnership is well-positioned for further growth and is actively bidding on new projects.
- Risks: Forward-looking statements highlight risks regarding the ability to secure contracts for newbuildings, refinancing the Exmar fleet, and potential early termination of existing long-term contracts.
Investor Verification Checklist
- Verify the reconciliation of Distributable Cash Flow to Net Income in Appendix B to understand the impact of non-cash items and maintenance capital expenditures.
- Review the details of the $29.4 million vessel write-down in Appendix A to assess the impact on the Conventional Tanker segment's future profitability.
- Confirm the status of the $355 million debt facility documentation for the Exmar LPG joint venture refinancing.
- Monitor the progress of securing long-term employment contracts for the two DSME LNG newbuildings scheduled for 2016 delivery.
- Assess the impact of the amended Suezmax charter contracts on cash flows through September 2014.