Filing summary
Important filing mismatch: The supplied filing is Teekay LNG Partners L.P.’s Form 20-F for the fiscal year ended December 31, 2013. It does not identify Seapeak LLC and is an annual report, not a standalone 2013 Q4 filing. The summary below reflects the filing text provided.
Business context and reporting period
Teekay LNG Partners was an international marine transporter of LNG, LPG and crude oil. Its growth strategy centered on expanding LNG and LPG shipping, chiefly under long-term, fixed-rate charters. The financial statements cover the year ended December 31, 2013, with comparisons to 2012 and 2011; amounts below are U.S. dollars unless stated otherwise.
Key financial metrics
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| Voyage revenues | $399.3 million | $392.9 million | +1.6% |
| Net voyage revenues | $396.4 million | $391.1 million | +1.4% |
| Income from vessel operations | $176.4 million | $147.8 million | +19.3% |
| Equity income from joint ventures | $123.3 million | $78.9 million | +56.3% |
| Net income | $213.3 million | $139.1 million | +53.3% |
| Limited partners’ net income per unit, diluted | $2.48 | $1.54 | +$0.94 |
| Net cash from operating activities | $183.5 million | $192.0 million | −4.4% |
| Cash distributions declared per unit | $2.700 | $2.655 | +1.7% |
Income from vessel operations was about 44.2% of voyage revenues, versus about 37.6% in 2012; net income was about 53.4% of revenues, versus about 35.4%. These are simple ratios derived from reported figures, and net income includes substantial equity income from joint ventures.
At year-end, cash and cash equivalents were $139.5 million and restricted cash was $497.3 million. Total liquidity, defined by the Partnership as cash, cash equivalents and undrawn medium-term credit facilities, was $332.2 million, including $192.7 million of undrawn facilities. Working capital was in deficit by $67.1 million. Long-term debt was $1.778 billion and capital lease obligations were $598.3 million, totaling approximately $2.376 billion. Total assets were $4.220 billion and total equity was $1.444 billion.
Financing cash flow was $334.7 million and investing cash flow was negative $492.3 million. Investing outflows included vessel and equipment expenditures of $368.2 million and $135.8 million for equity-accounted investments. The Partnership reported Adjusted EBITDA of $461.0 million, a non-GAAP measure; it should not be treated as a substitute for operating cash flow.
Material changes versus the prior comparable period
- Voyage revenue growth was modest, while vessel operating income improved; consolidated vessel operations included 135 dry-docking off-hire days versus 23 in 2012.
- Joint-venture equity income rose by $44.4 million, driven in part by the Exmar LPG venture, a full year of MALT LNG operations, and higher reported results from other LNG joint ventures. Derivative valuation movements contributed to some joint-venture results.
- Net income increased by $74.2 million. The comparison also reflects the absence of 2012’s $29.4 million vessel impairment, partly offset by higher 2013 income-tax expense ($5.2 million versus $0.6 million) and a $1.8 million restructuring charge.
- Operating cash flow declined by $8.5 million, which management attributed mainly to more scheduled dry-docking off-hire, higher dry-docking expenditures and lower dividends received from equity-accounted ventures.
- Debt and capital lease obligations increased from $2.051 billion to $2.376 billion. Fleet expansion and joint-venture investments were funded through borrowing and equity issuance, including a $150 million Norwegian-krone bond offering and common-unit offerings.
Outlook, management commentary, risks and unusual items
- Growth and investment: The Partnership had five LNG newbuildings under construction, with two contracted to Cheniere for five years and scheduled for delivery in 2016. Three additional LNG carriers, costing approximately $637 million in total, were ordered for 2017 delivery without charters yet secured. Its 50% share of remaining costs for 12 LPG newbuildings in the Exmar venture was estimated at $260 million.
- Distributions and funding: The Partnership’s policy was to distribute available cash, subject to reserves, debt covenants and other restrictions; it cautioned that distributions were not guaranteed. The fourth-quarter 2013 distribution of $0.675 per unit was paid in February 2014. The distribution was increased to $0.6918 per unit for the first quarter of 2014.
- Liquidity and leverage: Management expected to meet short-term needs primarily from operating cash flow and manage the working-capital deficit mainly with 2014 operating cash flow and, to a lesser extent, undrawn revolving facilities. Debt covenants, vessel collateral and restrictions on distributions could constrain financial flexibility. The Partnership and affiliates reported compliance with covenants at year-end.
- Lease and tax contingencies: A UK tax-authority challenge to the tax benefits of the RasGas II LNG leases could result in significant termination costs or higher lease payments. The Partnership estimated its 70% share of potential exposure at about $34 million, excluding possible financing and swap-termination costs. Separately, a letter-of-credit bank downgrade was expected to increase lease payments by $12.3 million in present value; the Partnership’s share was about $8.6 million.
- Other material risks: Risks include dependence on a limited number of charter customers, major capital needs, refinancing and interest-rate exposure, currency movements, charter termination or newbuild delays, volatile LPG spot-market exposure, environmental regulation, and dependence on Teekay Corporation and joint-venture partners. Major customers Ras Laffan, Repsol, CEPSA and the Tangguh contractors each accounted for 12%–17% of 2013 consolidated revenue.
- Unusual accounting items: Much of the $15.8 million foreign-exchange loss was unrealized. The $14.0 million derivative loss was lower than 2012’s $29.6 million loss; unrealized derivative gains do not necessarily represent cash generation. Management recorded a $1.8 million restructuring charge for seafarer severance related to vessel sales. The 2012 impairment charge was $29.4 million.
- Audit and controls: KPMG gave an unqualified opinion on the consolidated financial statements and reported effective internal control over financial reporting as of December 31, 2013.
Most important facts for investors to verify
- Confirm the issuer and period: the source is Teekay LNG Partners’ 2013 annual Form 20-F, not a Seapeak LLC filing or a quarterly report.
- Review the audited statements and notes for the composition, maturity schedule, interest terms, security and covenant headroom of the approximately $2.376 billion of debt and capital leases.
- Assess whether operating cash flow and available liquidity can fund distributions, debt service, dry-docking and remaining newbuilding commitments without further borrowing or unit issuance.
- Check charter coverage, customer credit quality and the status of unchartered newbuildings, including the LNG vessels planned for 2017 and the LPG fleet under construction.
- Track the HMRC lease-tax appeal and letter-of-credit downgrade impacts, as well as any later changes in estimated exposure or lease payments.
- Separate recurring operating performance and cash generation from joint-venture income, derivative and foreign-exchange marks, and other non-cash or non-recurring items.