Teekay Offshore Partners LP (TOO)
Q1 2013 Earnings Call
May 10, 2013 12:00 pm ET
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Vincent Lok - Chief Financial officer, Principal Accounting Officer and Executive Vice President
TJ Schultz - RBC Capital Markets, LLC, Research Division
Nishant Mani - JP Morgan Chase & Co, Research Division
Good day, ladies and gentlemen, and welcome to Teekay Offshore Partners' First Quarter 2013 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to Mr. Peter Evensen, Teekay Offshore Partners' Chief Executive Officer. Please go ahead, Mr. Evensen.
Before Mr. Evensen begins, I'd like to direct all participants to our website at www.teekayoffshore.com, where you will find a copy of the first quarter 2013 earnings presentation. Mr. Evensen will review this presentation during today's conference call.
Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the first quarter of 2013 earnings release and earnings presentation available on our website.
I'll now turn the call over to Mr. Evensen to begin.
Thank you, Ryan [ph]. Good afternoon, everyone, and thank you for joining us on our first quarter of 2013 investor conference call. I'm joined today by Teekay Corporation's CFO, Vince Lok; its Chief Strategy Officer, Kenneth Hvid; and its MLP Controller, David Wong. During our call today, I'll be walking through our first quarter 2013 earnings presentation, which can be found on our website.
Starting on Slide #3 of the presentation, I will briefly review some of Teekay Offshore's recent financial highlights. We generated distributable cash flow of $41.8 million in the first quarter, down slightly from the same quarter of the prior year, partially due to the effect of the partnership's fleet renewal activities, as I'll talk about later on this call. For the first quarter of 2013, we declared a cash distribution of $0.5253 per unit, which is an increase of 2.5% from the previous quarter. In addition, we announced our intention to increase Teekay Offshore's distribution by a minimum of 2.5% later this year, as a result of the expected deliveries of the 4 BG shuttle tankers and the potential acquisition of the Itajai FPSO.
And I'm pleased to report that the partnership remains in a strong financial position due primarily to the completion of 2 capital raises in April for a total of $210 million. I'll review these transactions in more detail later in this presentation. But what I'd like to point out now is that with the completion of these offerings, the equity requirements for the acquisition of the Cidade de Itajai FPSO and the 4 BG shuttle tanker newbuildings are now covered.
On Slide #4, I want to highlight the various ways we're currently growing each of our offshore businesses. And on the subsequent slides, I'll go into more detail on a few of these projects. With the recent completion of the Voyageur Spirit FPSO acquisition, Teekay Offshore now owns and operates 4 FPSOs. And this total will increase again if we acquire Teekay Corporation's 50% interest in the FPSO. Our shuttle fleet grew today with the delivery of the Samba Spirit, and we expect to take delivery of its 3 sister ships over the next 6 months. And following on from the letter of intent that we announced last quarter, we've now finalized and signed a 10-year plus up to 5 additional years time charter contract with Salamander Energy to convert the Navion Clipper shuttle tanker into an FSO for an estimated fully built-up cost of approximately $50 million. We expect the FSO will generate cash flow from vessel operations or CFVO of approximately $6.5 million per year upon delivery of the FSO to the oilfield in the third quarter of 2014. This new FSO project will enable us to successfully extend the life of one of our remaining older shuttle tankers under a long-term fixed-rate contract, which will continue to support the cash flow stability of the partnership. In addition, Teekay Offshore is currently directly bidding on FPSO newbuilding and FSO conversion projects, which we hope to update you on later in coming quarters.
Turning to Slide #5. On May 2, we completed the acquisition of the Voyageur Spirit's cylindrical FPSO for a price of $540 million. The FPSO has commenced its firm 5-year charter with German utility company E.ON and is currently producing oil from the Huntington field in the North Sea. We expect the FPSO will generate average annual CFVO of approximately $70 million during the 5-year firm period, which could be extended if any of the 10 1-year options are exercised.
Moving on to Slide #6. I'd like to take a moment to walk through a few of the details of the recent offer received from Teekay Corporation to acquire its 50% interest in the Cidade de Itajai FPSO. In February this year, the FPSO commenced a 9-year contract plus extension options with Petrobras, producing oil from the Bauna and Piracaba fields in the Santos Basin offshore Brazil. The FPSO is expected to generate annual CFVO of approximately $25 million on a 50% basis. Because the unit is owned in a 50-50 joint venture with Odebrecht Oil & Gas, if accepted, we will account for this FPSO as an equity investment. The FPSO offer is currently being reviewed by the Conflicts Committee of the partnership's Board of Directors. And if accepted, we expect the unit to be acquired during the second quarter of 2013. Importantly, the FPSO is currently financed with a 10-year debt facility, and the equity component of the acquisition can be funded from existing liquidity.