Teekay LNG Partners Reports Record Second Quarter 2020 Results

Highlights

  • GAAP net income attributable to the partners and preferred unitholders of $44.9 million and GAAP net income per common unit of $0.46 in the second quarter of 2020.
  • Adjusted net income(1) attributable to the partners and preferred unitholders of $62.6 million and adjusted net income per common unit of $0.67 in the second quarter of 2020 (excluding other items listed in Appendix A to this release).
  • Total adjusted EBITDA(1) of $192.3 million in the second quarter of 2020, representing another quarterly record and up nearly 19 percent from the same quarter of the prior year.
  • Eighth consecutive quarterly increase in total adjusted EBITDA(1).
  • Fixed-rate charters performing as expected; reaffirming 2020 financial guidance(2).

HAMILTON, Bermuda, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Teekay GP L.L.C., the general partner (the General Partner) of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), today reported the Partnership’s results for the quarter ended June 30, 2020.

Consolidated Financial Summary

 Three Months Ended
 June 30, 2020March 31, 2020June 30, 2019
(in thousands of U.S. Dollars, except per unit data)(unaudited)(unaudited)(unaudited)
GAAP FINANCIAL COMPARISON   
Voyage revenues148,205 139,887 153,060 
Income from vessel operations69,589 21,738 74,677 
Equity income32,155 373 1,738 
Net income (loss) attributable to the partners and preferred unitholders44,934 (32,994)16,435 
Limited partners’ interest in net income per common unit0.46 (0.50)0.12 
NON-GAAP FINANCIAL COMPARISON   
Total adjusted revenues(1)254,001 244,268 221,926 
Total adjusted EBITDA(1)192,340 188,388 162,069 
Distributable cash flow (DCF)(1)83,170 74,877 56,330 
Adjusted net income attributable to the partners and preferred unitholders(1)62,643 52,236 34,435 
Limited partners’ interest in adjusted net income per common unit0.67 0.58 0.35 

(1)   These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).
(2)   The previously provided 2020 Guidance Range for Earnings per unit has been recalibrated to account for the timing of the issuance of new units to Teekay Corporation in exchange for eliminating its Incentive Distribution Rights.

Second Quarter of 2020 Compared to Second Quarter of 2019

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were positively impacted for the three months ended June 30, 2020, compared to the same quarter of the prior year, by: earnings from six liquefied natural gas (LNG) carrier newbuildings which delivered into the Partnership’s consolidated fleet and equity-accounted joint ventures last year; fewer dry docking and repair off-hire days; and higher earnings by certain of the Partnership's joint ventures as their individual projects commenced or certain of their vessels commenced charters at, or earned, higher rates. These increases were partially offset by a reduction in earnings upon the sales of two LNG carriers in January 2020, and an oil tanker in October 2019.

Second Quarter of 2020 Compared to First Quarter of 2020

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were positively impacted for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, by a reduction in operational performance claims; higher earnings in one of the Partnership's joint ventures due to higher LPG rates; and a decrease in income tax expense. These decreases were partially offset by an increase in vessel operating expenses due to the timing of repairs and maintenance and an increase in general and administrative expenses due to additional professional fees incurred in the second quarter of 2020. In addition, GAAP net income was higher in the second quarter of 2020 as a result of a write-down recorded in the first quarter of 2020 and decreases in unrealized losses on non-designated derivative instruments and credit loss provision adjustments in the second quarter of 2020, including within the Partnership's equity-accounted joint ventures. These increases were partially offset by unrealized foreign currency exchange losses incurred in the second quarter of 2020 as compared to gains in the first quarter of 2020.

CEO Commentary

“We are pleased to report that this was another record quarter for Teekay LNG,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “While COVID-19 continues to have an unprecedented impact on the world and is a major focus for us, we have been able to fully service our charter contracts and have continued to receive contracted cash flows from our high quality customers. As a result of the pandemic, the overall maritime industry has experienced significant challenges related to crew changes, but I am pleased to report that we have safely changed-out a number of crew members on all of our vessels. We continue to work hard with both the industry and inter-governmental organizations to tackle this challenge and bring our remaining overdue colleagues home safely as soon as possible. I am truly proud of how our seafarers and onshore colleagues have responded to ensure safe and successful transitions with no reported COVID-19 cases, while providing uninterrupted service to our customers.”

Mr. Kremin continued, “Following the completion of our growth program late last year, our focus has been primarily on delevering our balance sheet, which also reduces interest costs, and maximizing our fleet utilization, which provides us with stable, predictable cash flows. This focus, in combination with consistent operational performance and competitive costs, driven by our economies of scale, has resulted in record Adjusted Net Income(1) and Total Adjusted EBITDA(1) for Teekay LNG this quarter.”

Mr. Kremin continued, “Our LNG fleet is fully-fixed for the remainder of 2020 and 94 percent fixed for 2021, largely insulating Teekay LNG from the current weak short-term LNG shipping market.  Furthermore, all of our charter contracts are currently operating in-line with our expectations, which allows us to reaffirm our previously provided financial guidance for 2020.”

(1)   These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).

Summary of Recent Events

In July 2020, the Partnership entered into a new commercial management agreement with the current manager of its seven wholly-owned multi-gas vessels. The new agreement has a two-year term effective September 2020 and is in direct continuation of the expiry of the current commercial management agreement.

In May 2020, Teekay Corporation and the Partnership eliminated all of the Partnership's incentive distribution rights held by the General Partner in exchange for 10.75 million newly-issued common units. Following the completion of this transaction on May 11, 2020, Teekay Corporation now beneficially owns approximately 36 million of the Partnership's common units and remains the sole owner of the General Partner, which together represents an economic interest of approximately 42 percent in the Partnership.

In May 2020, on maturity, the Partnership repaid its 1 billion Norwegian Krone (NOK) -denominated bonds and the associated cross currency swap arrangement. This repayment amounted to $111 million, net of $23 million of cash collateral released on the associated cross currency swap.

In May 2020, the Partnership's 52 percent-owned joint venture with Marubeni Corporation (the MALT Joint Venture) chartered the Marib Spirit to an international trading company for a period of six months, which commenced in mid-June 2020.

In April 2020, the MALT Joint Venture secured new charters for the Arwa Spirit and the Methane Spirit for periods of 12 and eight months, respectively. The new charters commenced upon completion and in direct continuation of their existing charters in May and July 2020, respectively.

Operating Results

The following table highlights certain financial information for Teekay LNG’s segments: the Liquefied Natural Gas Segment, the Liquefied Petroleum Gas Segment and until the sale of our last conventional tanker in October 2019,  the Conventional Tanker Segment (please refer to the “Teekay LNG’s Fleet” section of this release below and Appendices D and E for further details).

 Three Months Ended
 June 30, 2020June 30, 2019
(in thousands of U.S. Dollars)(unaudited)(unaudited)
 Liquefied Natural Gas SegmentLiquefied Petroleum Gas SegmentConventional Tanker SegmentTotalLiquefied Natural Gas SegmentLiquefied Petroleum Gas SegmentConventional Tanker SegmentTotal
GAAP FINANCIAL COMPARISON        
Voyage revenues137,822 10,383  148,205 141,833 8,858 2,369 153,060 
Income from vessel operations69,232 357  69,589 73,933 311 433 74,677 
Equity income (loss)27,795 4,360  32,155 3,377 (1,639) 1,738 
NON-GAAP FINANCIAL COMPARISON        
Consolidated adjusted EBITDA(i)103,190 1,420  104,610 111,109 2,341 602 114,052 
Adjusted EBITDA from equity-accounted vessels(i)75,824 11,906  87,730 40,095 7,922  48,017 
Total adjusted EBITDA(i)179,014 13,326  192,340 151,204 10,263 602 162,069 

(i) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.

Liquefied Natural Gas Segment

Income from vessel operations and consolidated adjusted EBITDA(1) for the liquefied natural gas segment for the three months ended June 30, 2020, compared to the same quarter of the prior year, decreased primarily by  a reduction in earnings upon the sales of the WilForce and WilPride LNG carriers in January 2020. This decrease was partially offset by fewer off-hire days in the second quarter of 2020 due to scheduled dry dockings for certain of the Partnership's LNG carriers.

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the liquefied natural gas segment for the three months ended June 30, 2020, compared to the same quarter of the prior year, increased primarily due to: the deliveries of four ARC7 LNG carrier newbuildings between June and December 2019 to the Partnership’s 50 percent-owned joint venture with China LNG Shipping (Holdings) Limited (Yamal LNG Joint Venture); commencement of terminal use payments in January 2020 to the Partnership's 30 percent-owned joint venture with National Oil & Gas Authority, Gulf Investment Corporation and Samsung C&T (the Bahrain LNG Joint Venture); higher earnings from the MALT Joint Venture as a result of the one-year charter contracts that were secured at higher rates for the Arwa Spirit and Marib Spirit in June and July 2019, respectively; and fewer off-hire days due to scheduled dry dockings and main engine overhauls for certain vessels in the second quarter of 2019.

Liquefied Petroleum Gas Segment

Income from vessel operations and consolidated adjusted EBITDA(1) for the liquefied petroleum gas segment for the three months ended June 30, 2020, compared to the same quarter of the prior year, was relatively stable.

Equity income (loss) and adjusted EBITDA from equity-accounted vessels(1) for the liquefied petroleum gas segment for the three months ended June 30, 2020, compared to the same quarter of the prior year, were positively impacted by higher LPG rates earned and fewer off-hire days in the Partnership’s 50 percent-owned LPG joint venture with Exmar NV (the Exmar LPG Joint Venture).

Conventional Tanker Segment

There were no results from vessel operations for the conventional tanker segment for the three months ended June 30, 2020, as the last of the Partnership's conventional tankers, the Toledo Spirit and Alexander Spirit, were sold in January and October of 2019, respectively.

(1)    These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.

Teekay LNG's Fleet

The following table summarizes the Partnership’s fleet as of August 1, 2020. In addition, the Partnership owns a 30 percent interest in a regasification terminal in Bahrain.

 Number of Vessels
 Owned and In-Chartered Vessels(i)
LNG Carrier Fleet47(ii) 
LPG/Multi-gas Carrier Fleet30(iii) 
Total77 
  1. Includes vessels leased by the Partnership from third parties and accounted for as finance leases.
  2. The Partnership’s ownership interests in these vessels range from 20 percent to 100 percent.
  3. The Partnership’s ownership interests in these vessels range from 50 percent to 100 percent.

Liquidity

As of June 30, 2020, the Partnership had total liquidity of $306.3 million (comprised of $226.3 million in cash and cash equivalents and $80.0 million in undrawn credit facilities).

Conference Call

The Partnership plans to host a conference call on Thursday, August 13, 2020 at 1:00 p.m. (ET) to discuss the results for the second quarter of 2020. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:

  • By dialing 1 (800) 367-2403 or 1 (647) 490-5367, if outside North America, and quoting conference ID code 9339565.
  • By accessing the webcast, which will be available on Teekay LNG’s website at www.teekay.com (the archive will remain on the website for a period of one year).

An accompanying Second Quarter of 2020 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.

About Teekay LNG Partners L.P.

Teekay LNG Partners is one of the world's largest independent owners and operators of LNG carriers, providing LNG and LPG services primarily under long-term, fee-based charter contracts through its interests in 47 LNG carriers, 23 mid-size LPG carriers, and seven multi-gas carriers. The Partnership's ownership interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in an LNG regasification terminal. Teekay LNG Partners is a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.

Teekay LNG Partners’ common units and preferred units trade on the New York Stock Exchange under the symbols “TGP”, “TGP PR A” and “TGP PR B”, respectively.

For Investor Relations
enquiries contact:

Ryan Hamilton
Tel: +1 (604) 609-2963
Website: www.teekay.com


Definitions and Non-GAAP Financial Measures

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the SEC. These non-GAAP financial measures which include Adjusted Net Income Attributable to the Partners and Preferred Unitholders, Distributable Cash Flow, Total Adjusted Revenues and Adjusted EBITDA, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings across companies, and may not be comparable to similar measures presented by other companies. These non-GAAP measures are used by management, and the Partnership believes that these supplementary metrics assist investors and other users of its financial reports in comparing financial and operating performance of the Partnership across reporting periods and with other companies.

Non-GAAP Financial Measures

Total Adjusted Revenues represents the Partnership's voyage revenues from its consolidated vessels, as shown in the Partnership's Consolidated Statements of Income (Loss), and its proportionate ownership percentage of the voyage revenues from its equity-accounted joint ventures, as shown in Appendix E of this release, less the Partnership's proportionate share of voyage revenues earned directly from its equity-accounted joint ventures. Please refer to Appendix C and E of this release for a reconciliation of this non-GAAP financial measure to voyage revenues and equity income, the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements. The Partnership's equity-accounted joint ventures are generally required to distribute all available cash to their owners. However, the timing and amount of dividends from each of the Partnership's equity-accounted joint ventures may not necessarily coincide with the operating cash flow generated from each respective equity-accounted joint venture. The timing and amount of dividends distributed by the Partnership's equity-accounted joint ventures are affected by the timing and amounts of debt repayments in the joint ventures, capital requirements of the joint ventures, as well as any cash reserves maintained in the joint ventures for operations, capital expenditures and/or as required under financing agreements.

Adjusted EBITDA represents net income (loss) before interest, taxes, and depreciation and amortization and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include unrealized credit loss adjustments, unrealized gains or losses on derivative instruments, foreign exchange gains or losses, adjustments for direct financing and sales-type leases to a cash basis, and certain other income or expenses. Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Partnership's performance, views these gains or losses as an element of interest expense and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments. Consolidated Adjusted EBITDA represents Adjusted EBITDA from vessels that are consolidated on the Partnership's financial statements. Adjusted EBITDA from Equity-Accounted Vessels represents the Partnership's proportionate share of Adjusted EBITDA from its equity-accounted vessels. The Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entity in which the Partnership holds the equity-accounted investments or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of any such distributions to the Partnership and other owners. Adjusted EBITDA is a non-GAAP financial measure used by certain investors and management to measure the operational performance of companies. Please refer to Appendices C and E of this release for reconciliations of Adjusted EBITDA to net income and equity income, respectively, which are the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.

Adjusted Net Income Attributable to the Partners and Preferred Unitholders excludes items of income or loss from GAAP net income (loss) that are typically excluded by securities analysts in their published estimates of the Partnership’s financial results. The Partnership believes that certain investors use this information to evaluate the Partnership’s financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net income, and refer to footnote (3) of the Consolidated Statements of Income (Loss) for a reconciliation of adjusted equity income to equity income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.

Distributable Cash Flow (DCF) represents GAAP net income (loss) adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, unrealized credit loss adjustments, distributions relating to equity financing of newbuilding installments, distributions relating to preferred units, adjustments for direct financing and sales-type leases to a cash basis, unrealized foreign currency exchange gains or losses, and the Partnership’s proportionate share of such items in its equity-accounted for investments. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership’s capital assets. DCF is a quantitative standard used in the publicly-traded partnership investment community and by management to assist in evaluating financial performance. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.



Teekay LNG Partners L.P.
Consolidated Statements of Income (Loss)
(in thousands of U.S. Dollars, except unit and per unit data)

 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
 20202020201920202019
 (unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Voyage revenues148,205 139,887 153,060 288,092 302,804 
      
Voyage expenses(5,329)(2,317)(6,023)(7,646)(11,798)
Vessel operating expenses(28,407)(26,104)(27,457)(54,511)(53,558)
Time-charter hire expense(5,368)(5,922)(3,080)(11,290)(8,671)
Depreciation and amortization(31,629)(32,639)(35,338)(64,268)(69,464)
General and administrative expenses(7,883)(6,167)(5,667)(14,050)(12,299)
Write-down of vessels(1) (45,000) (45,000) 
Restructuring charges(2)  (818) (2,976)
Income from vessel operations69,589 21,738 74,677 91,327 144,038 
      
Equity income(3)32,155 373 1,738 32,528 7,316 
Interest expense(35,143)(36,704)(41,018)(71,847)(83,235)
Interest income1,697 2,370 960 4,067 2,038 
Realized and unrealized loss on non-designated derivative instruments(4)(8,516)(20,471)(7,826)(28,987)(14,443)
Foreign currency exchange (loss) gain(5)(11,624)4,739 (7,243)(6,885)(7,974)
Other expense(679)(361)(487)(1,040)(236)
Net income (loss) before income tax recovery (expense)47,479 (28,316)20,801 19,163 47,504 
Income tax recovery (expense)1,804 (2,512)(1,749)(708)(4,327)
Net income (loss)49,283 (30,828)19,052 18,455 43,177 
      
Non-controlling interest in net income4,349 2,166 2,617 6,515 5,125 
Preferred unitholders' interest in net income6,425 6,425 6,425 12,850 12,850 
General partner's interest in net income (loss)713 (789)200 (76)504 
Limited partners’ interest in net income (loss)37,796 (38,630)9,810 (834)24,698 
Limited partners' interest in net income (loss)  per common unit:     
• Basic0.46 (0.50)0.12(0.01)0.31 
• Diluted0.46 (0.50)0.12(0.01)0.31 
Weighted-average number of common units outstanding:     
• Basic82,197,665 77,071,647 78,603,636 79,629,623 78,600,342 
• Diluted82,262,235 77,071,647 78,685,537 79,629,623 78,682,263 
Total number of common units outstanding at end of period86,927,558 76,171,639 78,441,316 86,927,558 78,441,316 

(1)    In the first quarter of  2020, the Partnership wrote-down six wholly-owned multi-gas carriers (the Pan Spirit, Unikum Spirit, Vision Spirit, Camilla Spirit, Sonoma Spirit and Cathinka Spirit) to their estimated fair values. The total impairment charge of $45.0 million related to these six multi-gas carriers is included in write-down of vessels for the three months ended March 31, 2020, and six months ended June 30, 2020.

(2)    In January 2019, the Toledo Spirit conventional tanker was sold and as a result of this sale, the Partnership recorded restructuring charges of $0.8 million and $3.0 million for the three and six months ended June 30, 2019, respectively.

(3)    The Partnership’s proportionate share of items within equity income as identified in Appendix A of this release is detailed in the table below. By excluding these items from equity income, the Partnership believes the resulting adjusted equity income is a normalized amount that can be used to better evaluate the financial performance of the Partnership’s equity-accounted investments. Adjusted equity income is a non-GAAP financial measure.

 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
 20202020201920202019
Equity income32,155 373 1,738 32,528 7,316 
Proportionate share of unrealized loss on non-designated interest rate swaps3,806 22,204 5,102 26,010 9,462 
Proportionate share of unrealized credit loss provision(a)(423)8,980  8,557  
Proportionate share of other items362 (539)1,124 (177)1,469 
Equity income adjusted for items in Appendix A35,900 31,018 7,964 66,918 18,247 

(a) Related to adoption of new accounting standard ASC 326 on January 1, 2020.

(4)   The realized losses on non-designated derivative instruments relate to the amounts the Partnership actually paid to settle non-designated derivative instruments and the unrealized (losses) gains on non-designated derivative instruments relate to the change in fair value of such non-designated derivative instruments, as detailed in the table below:

 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
 20202020201920202019
Realized losses relating to:     
Interest rate swap agreements(3,662)(2,911)(2,392)(6,573)(4,777)
Foreign currency forward contracts (241) (241) 
 (3,662)(3,152)(2,392)(6,814)(4,777)
Unrealized (losses) gains relating to:     
Interest rate swap agreements(4,854)(17,521)(5,333)(22,375)(9,525)
Foreign currency forward contracts 202 (101)202 (101)
Toledo Spirit time-charter derivative contract    (40)
 (4,854)(17,319)(5,434)(22,173)(9,666)
Total realized and unrealized losses on non-designated derivative instruments(8,516)(20,471)(7,826)(28,987)(14,443)

(5)    For accounting purposes, the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rates at the end of each reporting period. This revaluation does not affect the Partnership’s cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency translation gains or losses in the Consolidated Statements of Income (Loss).

Foreign currency exchange (loss) gain includes realized (losses) gains relating to the amounts the Partnership paid to settle the Partnership’s non-designated cross currency swaps that were entered into as economic hedges in relation to the Partnership’s Norwegian Krone (NOK) denominated unsecured bonds. Foreign currency exchange gain (loss) also includes unrealized gains (losses) relating to the change in fair value of such derivative instruments and unrealized (losses) gain on the revaluation of the NOK bonds as detailed in the table below:

 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
 20202020201920202019
Realized losses on cross-currency swaps(1,430)(1,817)(1,087)(3,247)(2,521)
Realized losses on cross-currency swaps maturity(33,844)  (33,844) 
Realized gains on repayment of NOK bonds33,844   33,844  
Unrealized gains (losses) on cross currency swaps45,881 (49,540)(139)(3,659)(2,059)
Unrealized (losses) gains on revaluation of NOK bonds(53,794)53,973 (3,901)179 (4,480)



Teekay LNG Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)

 As at June 30,As at March 31,As at December 31,
 202020202019
 (unaudited)(unaudited)(unaudited)
ASSETS   
Current   
Cash and cash equivalents226,328 312,710 160,221 
Restricted cash – current11,544 37,032 53,689 
Accounts receivable9,694 10,592 13,460 
Prepaid expenses10,891 7,780 6,796 
Current portion of derivative assets  355 
Current portion of net investments in direct financing and sale-type leases14,014 13,740 273,986 
Advances to affiliates3,025 5,474 5,143 
Other current assets237 237 238 
Total current assets275,733 387,565 513,888 
    
Restricted cash – long-term54,603 76,496 39,381 
    
Vessels and equipment   
At cost, less accumulated depreciation1,256,434 1,272,433 1,335,397 
Vessels related to finance leases, at cost, less accumulated depreciation1,675,168 1,686,634 1,691,945 
Operating lease right-of-use asset27,568 30,882 34,157 
Total vessels and equipment2,959,170 2,989,949 3,061,499 
Investments in and advances to equity-accounted joint ventures1,082,346 1,065,389 1,155,316 
Net investments in direct financing and sales-type leases525,812 529,943 544,823 
Other assets17,633 16,169 14,738 
Derivative assets  1,834 
Intangible assets – net38,938 41,152 43,366 
Goodwill34,841 34,841 34,841 
Total assets4,989,076 5,141,504 5,409,686 
    
LIABILITIES AND EQUITY   
Current   
Accounts payable4,270 1,633 5,094 
Accrued liabilities79,832 76,796 76,752 
Unearned revenue30,185 25,832 28,759 
Current portion of long-term debt295,282 328,384 393,065 
Current obligations related to finance leases70,955 70,455 69,982 
Current portion of operating lease liabilities13,681 13,524 13,407 
Current portion of derivative liabilities34,997 66,852 38,458 
Advances from affiliates18,271 8,372 7,003 
Total current liabilities547,473 591,848 632,520 
Long-term debt1,263,202 1,356,766 1,438,331 
Long-term obligations related to finance leases1,305,056 1,323,069 1,340,922 
Long-term operating lease liabilities13,887 17,357 20,750 
Derivative liabilities88,336 96,453 51,006 
Other long-term liabilities52,635 53,460 49,182 
Total liabilities3,270,589 3,438,953 3,532,711 
Equity   
Limited partners – common units1,447,690 1,425,960 1,543,598 
Limited partners – preferred units285,159 285,159 285,159 
General partner45,868 47,839 50,241 
Accumulated other comprehensive loss(116,313)(108,457)(57,312)
Partners' equity1,662,404 1,650,501 1,821,686 
Non-controlling interest56,083 52,050 55,289 
Total equity1,718,487 1,702,551 1,876,975 
Total liabilities and total equity4,989,076 5,141,504 5,409,686 



Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)

 Six Months Ended
 June 30,June 30,
 20202019
 (unaudited)(unaudited)
Cash and cash equivalents provided by (used for)  
   
OPERATING ACTIVITIES  
Net income18,455 43,177 
Non-cash and non-operating items:  
Unrealized loss on non-designated derivative instruments22,173 9,666 
Depreciation and amortization64,268 69,464 
Write-down of vessels45,000  
Unrealized foreign currency exchange loss including the effect of the settlement of cross currency swaps3,660 4,727 
Equity income, net of dividends received $14,852 (2019 – $17,274)(17,676)9,958 
Amortization of deferred financing issuance costs included in interest expense3,001 5,170 
Other non-cash items1,823 3,828 
Change in non-cash operating assets and liabilities:  
Receipts from direct financing and sales-type leases267,463 6,050 
Expenditures for dry docking(1,927)(6,335)
Other non-cash operating assets and liabilities17,621 (28,827)
Net operating cash flow423,861 116,878 
FINANCING ACTIVITIES  
   
Proceeds from issuance of long-term debt446,650 126,263 
Scheduled repayments of long-term debt and settlement of related swaps(194,831)(66,310)
Prepayments of long-term debt(525,021)(168,787)
Financing issuance costs(2,601)(989)
Proceeds from financing related to sales and leaseback of vessels 158,680 
Scheduled repayments of obligations related to finance leases(34,893)(33,855)
Repurchase of common units(15,635)(12,056)
Cash distributions paid(47,295)(39,315)
Acquisition of non-controlling interest in certain of the Partnership's subsidiaries(2,219) 
Dividends paid to non-controlling interest (55)
Net financing cash flow(375,845)(36,424)
INVESTING ACTIVITIES  
   
Expenditures for vessels and equipment(8,832)(82,575)
Capital contributions and advances to equity-accounted joint ventures (15,555)
Net investing cash flow(8,832)(98,130)
Increase (decrease) in cash, cash equivalents and restricted cash39,184 (17,676)
Cash, cash equivalents and restricted cash, beginning of the period253,291 222,864 
Cash, cash equivalents and restricted cash, end of the period292,475 205,188 




Teekay LNG Partners L.P.
Appendix A - Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income
(in thousands of U.S. Dollars)

 Three Months Ended
June 30,
20202019
(unaudited)(unaudited)
Net income – GAAP basis49,283 19,052 
Less: Net income attributable to non-controlling interests(4,349)(2,617)
Net income attributable to the partners and preferred unitholders44,934 16,435 
Add (subtract) specific items affecting net income:  
Restructuring charges(1) 818 
Foreign currency exchange loss(2)10,194 6,068 
Unrealized losses on non-designated derivative instruments and other items from equity-accounted investees(3)3,745 6,226 
Unrealized losses on non-designated derivative instruments(4)4,854 5,434 
Other items(1,619) 
Non-controlling interests’ share of items above(5)535 (546)
Total adjustments17,709 18,000 
Adjusted net income attributable to the partners and preferred unitholders62,643 34,435 
   
Preferred unitholders' interest in adjusted net income6,425 6,425 
General partner's interest in adjusted net income1,044 560 
Limited partners’ interest in adjusted net income55,174 27,450 
Limited partners’ interest in adjusted net income per common unit, basic0.67 0.35 
Weighted-average number of common units outstanding, basic82,197,665 78,603,636 
  1. See Note 2 to the Consolidated Statements of Income (Loss) included in this release for further details.
  2. Foreign currency exchange loss primarily relate to the Partnership’s revaluation of all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized losses on the cross currency swaps economically hedging the Partnership’s NOK bonds. This amount excludes the realized losses relating to the cross currency swaps for the NOK bonds. See Note 5 to the Consolidated Statements of Income (Loss) included in this release for further details.
  3. Reflects the proportionate share of unrealized losses due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes and unrealized credit loss provision in the Partnership's equity-accounted investees. See Note 3 to the Consolidated Statements of Income (Loss) included in this release for further details.
  4. Reflects the unrealized losses due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes. See Note 4 to the Consolidated Statements of Income (Loss) included in this release for further details.
  5. Items affecting net income (loss) include items from the Partnership’s consolidated non-wholly-owned subsidiaries. The specific items affecting net income (loss) are analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests’ percentage share in this subsidiary to arrive at the non-controlling interests’ share of the amount. The amount identified as “non-controlling interests’ share of items above” in the table above is the cumulative amount of the non-controlling interests’ proportionate share of the other specific items affecting net income listed in the table.


Teekay LNG Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures
Distributable Cash Flow (DCF)
(in thousands of U.S. Dollars, except units outstanding and per unit data)

 Three Months Ended
June 30,
20202019
(unaudited)(unaudited)
    
Net income49,283 19,052 
Add:  
Partnership’s share of equity-accounted joint ventures' DCF net of estimated maintenance capital expenditures(1)42,725 16,056 
Depreciation and amortization31,629 35,338 
Foreign currency exchange loss10,194 6,068 
Unrealized loss on non-designated derivative instruments4,854 5,434 
Direct finance and sale-type lease payments received in excess of revenue recognized and other adjustments3,392 4,037 
Deferred income tax and other non-cash items531 116 
Distributions relating to equity financing of newbuildings 1,099 
Less:  
Distributions relating to preferred units(6,425)(6,425)
Estimated maintenance capital expenditures(14,513)(17,397)
Equity income(32,155)(1,738)
Distributable Cash Flow before non-controlling interest89,515 61,640 
Non-controlling interests’ share of DCF before estimated maintenance capital expenditures(6,345)(5,310)
Distributable Cash Flow83,170 56,330 
Amount of cash distributions attributable to the General Partner(411)(304)
Limited partners' Distributable Cash Flow82,759 56,026 
Weighted-average number of common units outstanding, basic82,197,665 78,603,636 
Distributable Cash Flow per limited partner common unit1.03 0.71 
  1. The estimated maintenance capital expenditures relating to the Partnership’s share of equity-accounted joint ventures were $15.2 million and $10.8 million for the three months ended June 30, 2020 and 2019, respectively.


Teekay LNG Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Total Adjusted Revenues and Total Adjusted EBITDA
(in thousands of U.S. Dollars)

 Three Months Ended
June 30,
20202019
(unaudited)(unaudited)
Voyage revenues148,205 153,060 
Partnership's proportionate share of voyage revenues from its equity-accounted joint ventures (See Appendix E)111,365 73,391 
Less the Partnership’s proportionate share of voyage revenues earned directly from its equity-accounted joint ventures(5,569)(4,525)
Total adjusted revenues254,001 221,926 


 Three Months Ended
June 30,
20202019
(unaudited)(unaudited)
Net income49,283 19,052 
Depreciation and amortization31,629 35,338 
Interest expense, net of interest income33,446 40,058 
Income tax (recovery) expense(1,804)1,749 
EBITDA112,554 96,197 
   
Add (subtract) specific income statement items affecting EBITDA:  
Foreign currency exchange loss11,624 7,243 
Other expense679 487 
Equity income(32,155)(1,738)
Realized and unrealized loss on derivative instruments8,516 7,826 
Direct finance and sale-type lease payments received in excess of revenue recognized and other adjustments3,392 4,037 
Consolidated adjusted EBITDA104,610 114,052 
Adjusted EBITDA from equity-accounted vessels (See Appendix E)87,730 48,017 
Total adjusted EBITDA192,340 162,069 


Teekay LNG Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Consolidated Adjusted EBITDA by Segment
(in thousands of U.S. Dollars)

 Three Months Ended June 30, 2020
 (unaudited)
 Liquefied Natural Gas SegmentLiquefied Petroleum Gas SegmentConventional Tanker SegmentTotal
Voyage revenues137,822 10,383  148,205 
Voyage expenses(806)(4,523) (5,329)
Vessel operating expenses(24,599)(3,808) (28,407)
Time-charter hire expense(5,368)  (5,368)
Depreciation and amortization(30,566)(1,063) (31,629)
General and administrative expenses(7,251)(632) (7,883)
Income from vessel operations69,232 357  69,589 
Depreciation and amortization30,566 1,063  31,629 
Direct finance and sales-type lease payments received in excess of revenue recognized and other adjustments3,392   3,392 
Consolidated adjusted EBITDA103,190 1,420  104,610 
     
 Three Months Ended June 30, 2019
 (unaudited)
 Liquefied Natural Gas SegmentLiquefied Petroleum Gas SegmentConventional Tanker SegmentTotal
Voyage revenues141,833 8,858 2,369 153,060 
Voyage (expenses) recoveries(3,484)(2,542)3 (6,023)
Vessel operating expenses(23,146)(3,630)(681)(27,457)
Time-charter hire expense(3,080)  (3,080)
Depreciation and amortization(33,139)(2,030)(169)(35,338)
General and administrative expenses(5,051)(345)(271)(5,667)
Restructuring charges  (818)(818)
Income from vessel operations73,933 311 433 74,677 
Depreciation and amortization33,139 2,030 169 35,338 
Direct finance and sales-type lease payments received in excess of revenue recognized and other adjustments4,037   4,037 
Consolidated adjusted EBITDA111,109 2,341 602 114,052 


Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA from Equity-Accounted Vessels
(in thousands of U.S. Dollars)

 Three Months Ended
 June 30, 2020June 30, 2019
 (unaudited)(unaudited)
 AtPartnership'sAtPartnership's
100%Portion(1)100%Portion(1)
Voyage revenues258,426 111,365 172,632 73,391 
Voyage expenses(1,360)(638)(4,502)(2,196)
Vessel operating expenses, time-charter hire expenses and general and administrative expenses(72,316)(31,551)(63,879)(27,992)
Depreciation and amortization(25,123)(12,530)(28,551)(13,741)
Income from vessel operations of equity-accounted vessels159,627 66,646 75,700 29,462 
Net interest expense(73,082)(29,351)(52,929)(21,254)
Income tax recovery (expense)225 110 (670)(246)
Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provision(2)(17,786)(5,250)(18,764)(6,224)
Net income / equity income of equity-accounted vessels68,984 32,155 3,337 1,738 
Net income / equity income of equity-accounted LNG vessels60,105 27,795 6,455 3,377 
Net income (loss) / equity income (loss) of equity-accounted LPG vessels8,879 4,360 (3,118)(1,639)
     
Net income / equity income of equity-accounted vessels68,984 32,155 3,337 1,738 
Depreciation and amortization25,123 12,530 28,551 13,741 
Net interest expense73,082 29,351 52,929 21,254 
Income tax recovery (expense)(225)(110)670 246 
EBITDA from equity-accounted vessels166,964 73,926 85,487 36,979 
     
Add (subtract) specific income statement items affecting EBITDA:    
Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provision17,786 5,250 18,764 6,224 
Direct finance and sale-type lease payments received in excess of revenue recognized26,381 9,499 16,131 5,759 
Amortization of in-process contracts(1,738)(945)(1,736)(945)
Adjusted EBITDA from equity-accounted vessels209,393 87,730 118,646 48,017 
Adjusted EBITDA from equity-accounted LNG vessels185,577 75,824 102,799 40,095 
Adjusted EBITDA from equity-accounted LPG vessels23,816 11,906 15,847 7,922 
  1. The Partnership's equity-accounted vessels for the three months ended June 30, 2020 and 2019 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 50 percent ownership interest in the Partnership’s joint venture with Exmar NV (the Excalibur Joint Venture), which owns one LNG carrier; the Partnership’s 33 percent ownership interest in four LNG carriers servicing the Angola LNG project; the Partnership’s 52 percent ownership interest in the MALT Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in Exmar LPG BVBA, which owns and in-charters 23 LPG carriers as at June 30, 2020, compared to 22 owned and in-chartered LPG carriers as at June 30, 2019; the Partnership’s ownership interest ranging from 20 to 30 percent in four LNG carriers as at June 30, 2020 chartered to Shell (the Pan Union Joint Venture); the Partnership’s 50 percent ownership interest in six ARC7 LNG carriers in the Yamal LNG Joint Venture as at June 30, 2020, compared to three ARC7 LNG carriers and three ARC7 LNG carrier newbuildings as at June 30, 2019; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal in Bahrain.
     
  2. Unrealized credit losses relate to the Partnership's adoption of ASC 326 on January 1, 2020.


Teekay LNG Partners L.P.
Appendix F - Summarized Financial Information of Equity-Accounted Joint Ventures
(in thousands of U.S. Dollars)

 As at June 30, 2020As at December 31, 2019
 (unaudited)(unaudited)
 AtPartnership'sAtPartnership's
100%Portion(1)100%Portion(1)
Cash and restricted cash, current and non-current552,035 230,274 509,065 210,736 
Other current assets85,740 34,986 62,566 27,719 
Property, plant and equipment, including owned vessels, vessels related to finance leases and operating lease right-of-use assets2,020,188 1,031,717 3,112,349 1,375,570 
Net investments in sales-type and direct financing leases, current and non-current5,464,583 2,107,966 4,589,139 1,856,709 
Other non-current assets68,602 45,075 50,967 41,015 
Total assets8,191,148 3,450,018 8,324,086 3,511,749 
     
Current portion of long-term debt and obligations related to finance leases and operating leases548,893 250,659 315,247 136,573 
Current portion of derivative liabilities65,839 26,967 34,618 13,658 
Other current liabilities143,828 57,774 153,816 66,224 
Long-term debt and obligations related to finance leases and operating leases4,661,614 1,865,877 5,026,123 2,041,595 
Shareholders' loans, current and non-current346,969 128,422 346,969 126,546 
Derivative liabilities327,015 131,459 162,640 66,060 
Other long-term liabilities62,864 31,139 64,196 32,323 
Equity2,034,126 957,721 2,220,477 1,028,770 
Total liabilities and equity8,191,148 3,450,018 8,324,086 3,511,749 
     
Investments in equity-accounted joint ventures 957,721  1,028,770 
Advances to equity-accounted joint ventures 128,422  126,546 
Credit loss provision(2) (3,797)  
Investments in and advances to equity-accounted joint ventures 1,082,346  1,155,316 
  1. The Partnership's equity-accounted vessels as at June 30, 2020 and December 31, 2019 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 50 percent ownership interests in the Excalibur Joint Venture, which owns one LNG carrier; the Partnership’s 33 percent ownership interest in four LNG carriers servicing the Angola LNG project; the Partnership’s 52 percent ownership interest in the MALT Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in Exmar LPG BVBA, which owns and in-charters 23 LPG carriers; the Partnership’s ownership interest ranging from 20 percent to 30 percent in four LNG carriers as at June 30, 2020 chartered to Shell in the Pan Union Joint Venture; the Partnership’s 50 percent ownership interest in six ARC7 LNG carriers in the Yamal LNG Joint Venture; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal in Bahrain.
     
  2. Unrealized credit losses relate to the Partnership's adoption of ASC 326 on January 1, 2020.


Forward-Looking Statements

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements, among other things, regarding: the impact of COVID-19 and related global events on the Partnership's operations and cash flows; the Partnership’s ability to achieve previously disclosed financial guidance for 2020;  fixed charter coverage for the Partnership's LNG fleet for the remainder of 2020 and 2021; the Partnership's ability to complete remaining crew changes and anticipated timing thereof; the timing of the new commercial management agreement for the Partnership's seven wholly-owned multi-gas vessels; the Partnership's operational performance and cost competitiveness, including the Partnership’s ability to derive benefits from its economies of scale; expected reductions in the Partnership’s interest costs as it continues to reduce its debt levels; and the continued performance of the Partnership's and its joint ventures' charter contracts. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start-up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Partnership's fleet; higher than expected costs and expenses, including as a result of off-hire days or dry-docking requirements; general market conditions and trends, including spot, multi-month and multi-year charter rates; inability of customers of the Partnership or any of its joint ventures to make future payments under contracts; potential further delays to the formal commencement of commercial operations of the Bahrain Regasification Terminal; the inability of the Partnership to renew or replace long-term contracts on existing vessels; potential lack of cash flow to reduce balance sheet leverage or of excess capital available to allocate towards returning capital to unitholders; and other factors discussed in Teekay LNG Partners’ filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2019. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

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