FPSO problems hits Teekay

Nov 07 2014


Teekay Corp has reported an adjusted net loss of $12.6 mill for the third quarter of this year, compared to adjusted net loss of $36 mill, for the same period in 2013.

The adjusted net loss excluded a number of specific items that had the net effect of increasing GAAP net income by $15 mill for the quarter and increasing GAAP net loss by $13.1 mill for the 3Q13.

Including these items, the company reported, on a GAAP basis, a net income of $2.4 mill for 3Q14, compared to net loss of $49.1 mill for 3Q13. Net revenues for 3Q14 increased to $456 mill, compared to $426.8 mill for 3Q13.  

For the nine months ended September 30, 2014, Teekay Corp reported an adjusted net loss $29.2 mill, compared to an adjusted net loss of $81 mill for the same period of 2013.

Again this adjusted net loss excluded a number of specific items that had the net effect of increasing GAAP net loss by $11.9 mill and decreasing GAAP net loss by $37.1 mill for the same period last year.

Including these items, the company reported, on a GAAP basis, a net loss of $41.1 mill, compared to a net loss of $43.9 mill for the same period in 2013. Net revenues for the nine months ended 30th September, 2014 increased to $1,346.3 mill, compared to $1,256 mill for the 2013 period.

"While the third quarter 2014 results improved from the previous quarter, our results were lower than anticipated due to lower than expected production on the ‘Foinaven’ FPSO relating to subsea issues and the delayed start-up of the ‘Banff ‘FPSO and the Hi-Load DP unit charter contract," commented Peter Evensen, Teekay's president and CEO.

"We recently announced our new dividend policy, which represents the next step in Teekay's transformation into a pure-play owner of two general partnerships," Evensen continued. "Based on the increase in cash flows, we expect to receive from our general partner and limited partner ownership interests in Teekay Offshore following the proposed dropdown of the ‘Knarr’ FPSO, we intend to raise Teekay's annualised cash dividend to between $2.20 and $2.30 per share, representing an increase of approximately 75-80%.

“In addition, with a project backlog of approximately $5 bill of known growth capital expenditures at Teekay Offshore and Teekay LNG, we expect that Teekay's dividend will continue to grow by approximately 20% per annum for at least the three years, following the initial dividend increase.

"The proposed dropdown of the ‘Knarr’ FPSO is an important milestone in Teekay's transformation because it will provide for significant de-leveraging of Teekay Parent's balance sheet. The ‘Knarr’FPSO, which has now been offered to Teekay Offshore and is currently being reviewed by Teekay Offshore's conflicts committee, is anticipated to achieve first oil in December of this year," he said.

As for Teekay’s publicly listed entities, Teekay Offshore’s  cash flow from vessel operations increased to $120.1 mill in 3Q14, from $92.3 mill in 3Q13.

This increase was primarily due to the contributions from the ‘Voyageur Spirit’FPSO following the commencement of its timecharter in August 2013, the three BG shuttle tanker newbuildings following commencement of their respective timecharters in August and November 2013 and January 2014, respectively and the ‘Suksan Salamander’FSO following commencement of its timecharter in August 2014.

These increases were partially offset by the layup and sale of older shuttle and conventional tankers during 2013 and 2014, as their charter contracts expired, or terminated and the scheduled drydocking of the ‘Navion Saga’ FSO during 3Q14.

The results for the third quarter of 2014 were also negatively impacted by the delayed start-up of the Hi-Load DP unit charter contract.This unit continues to undergo operational testing and related delays in commencement of operations may affect its previously anticipated cash flow. Upon successful completion of the testing, the unit is expected to commence its timecharter contract with Petrobras.

In October 2014, Teekay Offshore, through its 50/50 joint venture with Odebrecht Oil & Gas, signed a letter of intent with Petrobras to provide an FPSO for the Libra field located in the Santos Basin offshore Brazil.

The contract, which is expected to be finalised in the fourth quarter of this year, will be serviced by a new FPSO converted from Teekay Offshore's 1995-built shuttle tanker, ‘Navion Norvegia’.

The conversion project will be completed at Sembcorp Marine's Jurong Shipyard in Singapore and the FPSO is scheduled to commence operations in early 2017 under a 12-year firm period fixed-rate contract with Petrobras. The FPSO conversion is expected to be completed for a total fully built-up cost of about $1 bill.

In late October 2014, Teekay Offshore, through its wholly-owned subsidiary ALP Maritime Services (ALP), agreed to acquire six modern long-distance towing and anchor handling (AHTS) vessels for around $220 mill.

Including these vessels, along with ALP's four long-distance AHTS newbuildings, scheduled to deliver in 2016, ALP will become the world's largest owner and operator of DP AHTS. All 10 vessels will be capable of long-distance towing and offshore unit installation and decommissioning of large floating exploration, production and storage units, including FPSOs, FLNGs and floating drill rigs.

Teekay LNG's total cash flow from vessel operations, including cash flows from equity-accounted vessels, was $123.3 mill in 3Q14, compared to $125.2 mill in 3Q13.

The decrease was primarily due to the sale of three 2000 and 2001-built conventional tankers and four older LPG carriers in Exmar LPG BVBA in 2013 and 2014 and the scheduled drydocking of one LNGC and two LPG carriers in Exmar LPG BVBA during 3Q14, partially offset by the acquisitions of, and contributions from, the two Awilco LNGCs in late 2013 and higher revenues from Exmar LPG BVBA, as a result of three newbuilding deliveries in 2014.

In late October 2014, Teekay LNG agreed to acquire a 2003-built 10,200 cu m LPG carrier, ‘Norgas Napa’, from IM Skaugen (IMSK) for about $27 mill. Teekay LNG expects to take delivery of the vessel in mid November, 2014. Upon its delivery, IMSK will bareboat charter the vessel back for a period of five-years at a fixed rate, plus a profit share component based on actual earnings of the vessel, which is trading in IMSK's Norgas pool.

Meanwhile, cash flow from vessel operations from Teekay Tankers increased to $21.2 mill in 3Q14, from $14 mill in 3Q13. This increase was primarily due to stronger average spot tanker rates in the third quarter of this year, compared to 3Q13, an increase in fleet size due to the addition of six  chartered-in vessels during 2014 and higher equity income, as a result of commercial and technical management fees earned through Teekay Tankers' 50% interest in the conventional tanker commercial management and technical management operations acquired from Teekay on 1st August, 2014.

In October 2014, Teekay Tankers secured timecharter-in contracts for two additional Aframaxes, which increased the company’s' total timechartered fleet to 10 vessels. The new timecharter contracts have an average daily rate of $18,000 and firm contract periods of six months to 33 months, with extension options.

Finally, for 3Q14, Teekay Parent generated negative cash flow from vessel operations of $13.1 mill, compared to a negative cash flow from vessel operations of $36.3 mill in 3Q13.

The reduction in negative cash flow is primarily due to the ‘Banff’FPSO recommencing operations under its timecharter contract in July 2014 following a storm event in late-2011, the re-delivery of several chartered-in tankers over the past year and higher spot tanker rates.

In July 2014, repairs to the gas compressors on the ‘Foinaven’ FPSO were completed and the unit was available to produce at its maximum capacity. However, due to issues with the subsea flow lines, which are the responsibility of the charterer, the field was unable to produce at maximum capacity. As a result, the FPSO is expected to generate lower revenues until these issues are resolved by the charterer.

In late-June 2014, Teekay Parent took delivery of the newbuilding ‘Petrojarl Knarr’ FPSO and the unit arrived in Norway in mid-September 2014. Following installation and offshore testing on the Knarr field, the unit is anticipated to commence its 10-year charter contract with BG Group in December 2014.

In September 2014, Teekay Parent offered to sell the FPSO to Teekay Offshore for its fully built-up cost of about $1.16 bill. The offer is currently being reviewed by Teekay Offshore's board. Once approved by the conflicts committee and the board, the sale will remain subject to the ‘Petrojarl Knarr’ achieving first oil.



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