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: Fourth Quarter and Full Year ended December 31, 2005
Date of Report: February 22, 2006
Teekay LNG Partners L.P. is a Marshall Islands partnership providing LNG and crude oil marine transportation services under long-term, fixed-rate time charters. The filing reports Q4 2005 results, full-year 2005 performance, and provides guidance for 2006 and 2007.
Key Financial Metrics
Income Statement Highlights (Q4 2005 vs. Q4 2004)
- Net Income: $12.7 million (Q4 2005) vs. Net Loss of $60.1 million (Q4 2004).
- Voyage Revenues: $40.2 million (Q4 2005) vs. $32.3 million (Q4 2004).
- Income from Vessel Operations: $17.5 million (Q4 2005) vs. $16.6 million (Q4 2004).
- Foreign Exchange Impact: Q4 2005 included a $5.2 million unrealized gain; Q4 2004 included a $58.8 million unrealized loss, primarily due to Euro-denominated debt.
Full Year 2005 vs. 2004
- Net Income: $79.5 million (2005) vs. Net Loss of $68.2 million (2004).
- Voyage Revenues: $145.5 million (2005) vs. $123.8 million (2004).
- Foreign Exchange Impact: 2005 included an $81.8 million gain; 2004 included a $60.8 million loss.
- One-time 2005 Items: $15.3 million loss related to write-down of capitalized loan costs and termination of interest rate swaps.
Cash Flow and Liquidity
- Distributable Cash Flow (Q4 2005): $15.7 million.
- Cash Distribution Declared (Q4 2005): $0.4125 per unit ($14.7 million total), paid February 14, 2006.
- Cash and Cash Equivalents (Dec 31, 2005): $34.5 million (down from $156.4 million in 2004).
- Long-Term Debt (Dec 31, 2005): $780.6 million (down from $1.28 billion in 2004).
- Net Operating Cash Flow (2005): $65.7 million.
Material Changes and Acquisitions
- Acquisition of Suezmax Tankers: On November 23, 2005, the Partnership acquired three double-hulled Suezmax crude oil tankers and related long-term charters from Teekay for $180 million. These vessels are expected to contribute approximately $20 million in annual cash flow.
- Capital Raise: In November 2005, the Partnership raised $126 million via a follow-on public offering of 4.6 million common units to partially finance the Suezmax acquisition.
- Debt Restructuring: Entered into a new $137.5 million revolving credit facility in December 2005. Significant prepayments of long-term debt ($399.3 million) occurred in 2005.
- Fleet Expansion: Agreed to acquire a 70% interest in three newbuilding LNG carriers (RasGas II project) scheduled for delivery in late 2006 and early 2007. Lease arrangements are expected to reduce the required equity investment by approximately $40 million.
Guidance, Outlook, and Risks
2006 and 2007 Guidance
- 2006 Estimated Annual Distribution: $1.85 per unit (12% increase from 2005).
- 2007 Estimated Annual Distribution: $2.10 per unit (14% increase from 2006), commencing in the third quarter of 2007 upon delivery of RasGas II vessels.
- Projected Distributable Cash Flow (2006): $43.9 million.
- Projected Distributable Cash Flow (2007): $83.6 million.
Risks and Contingencies
- Foreign Currency Exposure: Significant exposure to Euro fluctuations due to long-term debt denominated in Euros. Gains and losses are largely unrealized.
- Forward-Looking Statements: Estimates depend on actual operating results, capital requirements, and approval by the General Partner.
- Project Delays: Risks include shipyard production delays and potential changes in LNG demand or production.
- Financing: Ability to raise financing for future vessel purchases and reliance on lease arrangements for RasGas II.
Investor Verification Checklist
- Verify the reconciliation of the non-GAAP measure "Distributable Cash Flow" to Net Income in the Appendix.
- Confirm the status of the $180 million Suezmax acquisition and the integration of the three new vessels into operations.
- Monitor the progress of the RasGas II newbuilding deliveries scheduled for late 2006/early 2007 and the associated lease financing arrangements.
- Review the impact of Euro exchange rate fluctuations on future interest expense and unrealized gains/losses.
- Validate the $137.5 million revolving credit facility terms and availability.
- Check for any updates on the RasGas 3 and Tangguh LNG projects regarding the offer of Teekay's interests to the Partnership.