Business Context and Reporting Period
Company: Teekay LNG Partners L.P. (NYSE: TGP)
Filing Type: Form 6-K (Earnings Release)
Reporting Period: Quarter and Year Ended December 31, 2009
Date of Report: March 5, 2010
Teekay LNG Partners L.P. is a master limited partnership providing LNG, LPG, and crude oil marine transportation services under long-term, fixed-rate time-charter contracts. The fleet consists of LNG carriers, LPG/Multigas carriers, and Suezmax class crude oil tankers.
Key Financial Metrics
Income and Cash Flow
- Distributable Cash Flow (Q4 2009): $33.5 million (up from $29.6 million in Q4 2008).
- Adjusted Net Income Attributable to Partners (Q4 2009): $16.8 million (up from $14.8 million in Q4 2008).
- GAAP Net Income Attributable to Partners (Q4 2009): $39.6 million (compared to a net loss of $15.9 million in Q4 2008).
- Annual Adjusted Net Income (2009): $66.9 million (up from $48.6 million in 2008).
- Annual GAAP Net Income (2009): $35.9 million (up from $18.6 million in 2008).
- Cash Distribution: $0.57 per unit declared for Q4 2009, paid February 12, 2010.
Liquidity and Debt
- Total Liquidity (as of Dec 31, 2009): $479.8 million.
- Composition: $102.6 million in cash and cash equivalents; $377.2 million in undrawn medium-term revolving credit facilities.
- Recent Financing: Entered into a new $122.0 million credit facility in late October 2009 secured by five newbuilding LPG/Multigas carriers.
Segment Performance (Q4 2009)
| Segment | Net Voyage Revenues ($000s) | Cash Flow from Vessel Operations ($000s) |
|---|---|---|
| Liquefied Gas | $66,250 | $52,852 |
| Suezmax Tanker | $18,880 | $7,540 |
| Total | $85,130 | $60,392 |
Material Changes vs. Prior Period
- Liquefied Gas Segment Growth: Cash flow from vessel operations increased to $52.9 million in Q4 2009 from $39.1 million in Q4 2008. Drivers included the delivery of two Skaugen LPG carriers (April and November 2009), acquisition of Tangguh LNG carriers (August 2009), and favorable Euro exchange rates.
- Suezmax Tanker Segment Decline: Cash flow decreased to $7.5 million in Q4 2009 from $15.2 million in Q4 2008. This was primarily due to a $6.2 million decrease in the Teide Spirit profit share, increased drydock days, and lower LIBOR rates affecting daily charter rates.
- GAAP Volatility: GAAP net income was significantly impacted by unrealized gains/losses on derivative instruments and foreign exchange revaluations, which do not affect cash flow.
Guidance, Outlook, and Management Commentary
Strategic Acquisitions
On March 2, 2010, the Partnership agreed to acquire three conventional tankers (two Suezmax and one Handymax) from Teekay Corporation for $160 million. The vessels operate under long-term fixed-rate contracts with 10–11 years remaining.
- Financing: $126 million via debt assumption; $34 million from available liquidity.
- Impact: Expected to generate approximately $8 million in incremental annual distributable cash flow.
Distribution Outlook
Management plans to recommend a distribution increase of $0.03 per unit (approximately 5%) commencing in the first quarter of 2010, citing the accretive nature of the new tanker acquisition.
Future Projects
- Skaugen LPG/Multigas: Three vessels under construction, scheduled for delivery in 2010 and 2011, with 15-year fixed-rate charters.
- Angola LNG: Partnership has a 33% interest in a consortium chartering four newbuilding LNG carriers for 20 years. Deliveries scheduled to commence in 2011.
Risks and Contingencies
Forward-looking statements are subject to risks including project delays, shipyard production delays, changes in trading patterns, potential early termination of contracts, and the ability to raise financing. The filing notes that unrealized gains/losses on derivatives and foreign exchange revaluations impact GAAP income but not cash flow.
Investor Verification Checklist
- Verify the closing date and final terms of the $160 million acquisition of three conventional tankers from Teekay Corporation.
- Confirm the timing of the recommended $0.03 per unit distribution increase and its formal approval by the Board.
- Monitor the delivery schedule for the three Skaugen LPG/Multigas carriers and the four Angola LNG carriers.
- Review the reconciliation of Distributable Cash Flow to GAAP Net Income to understand the impact of non-cash derivative adjustments.
- Assess the impact of the Suezmax segment's profit share mechanism on future earnings volatility.