Teekay GP L.L.C., the general partner (the General Partner) of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), yesterday reported the Partnership’s results for the quarter ended March 31, 2020.
First Quarter of 2020 Compared to First Quarter of 2019
GAAP net (loss) income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were positively impacted for the three months ended March 31, 2020, compared to the same quarter of the prior year, by: earnings from the six liquefied natural gas (LNG) carrier newbuildings which delivered into the Partnership’s consolidated fleet and equity-accounted joint ventures between January and December 2019; 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 Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the MALT Joint Venture) as a result of the charter contracts that were secured at higher rates for the Arwa Spirit and Marib Spirit in June and July 2019, respectively; and higher earnings from the Partnership’s 50 percent-owned joint venture with Exmar NV (the Exmar LPG Joint Venture) as a result of securing higher LPG charter rates. These increases were partially offset by: a reduction in earnings upon the sales of the WilForce and WilPride LNG carriers in January 2020, the Toledo Spirit in January 2019 and the Alexander Spirit in October 2019; and lower earnings from the Magellan Spirit upon its redeployment in May 2019, which is currently chartered-in from the MALT Joint Venture.
In addition, GAAP net (loss) income attributable to the partners and preferred unitholders was negatively impacted for the three months ended March 31, 2020, compared to the same quarter of the prior year, by write-downs of $45 million recorded on six multi-gas carriers in the first quarter of 2020; unrealized credit loss provisions upon the adoption of the new accounting standard ASC 326 on January 1, 2020; and higher unrealized losses on non-designated derivative instruments.
“Teekay LNG continues to record strong operating results with the completion of our growth program and our assets operating as expected, earning reliable cash flows for the Partnership,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “While the unprecedented recent global events are clearly a major area of focus for us, our long-term contract cover has ensured that they have had a minimal impact on Teekay LNG’s operations and cash flows so far in 2020, and we expect this to continue. We are very proud of how our dedicated seafarers and on-shore colleagues have responded to COVID-19, implementing new standards which focus on the health and well-being of everyone involved in our organization, especially our colleagues at sea, while maintaining consistently safe and efficient vessel operation for our customers.”
Mr. Kremin continued, “I’m pleased that we took proactive steps this quarter to strengthen our commercial position with three new fixed-term LNG charters and to increase our financial flexibility with the refinancing of our unsecured revolver at the same size and pricing despite the volatility in our markets. Our LNG fleet is now 100 percent fixed on ‘take-or-pay’ charters with high-quality customers and with over $370 million in total liquidity as of March 31, 2020, we believe we are well-positioned to meet our upcoming debt maturities without the need to access the public capital markets until later next year, while maintaining a strong financial foundation. Given the long-term stability of our business model, we are today reaffirming our fiscal 2020 financial guidance which projects an increase in adjusted net income of approximately 48 percent(1) over 2019.”
Summary of Recent Events
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, the MALT Joint Venture chartered the Marib Spirit to an international trading company for a period of six months, which is expected to commence 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 are expected to commence upon completion and in direct continuation of their existing charters in May and July 2020, respectively.
In March 2020, the Partnership successfully refinanced its existing $225 million unsecured revolving credit facility, which was scheduled to mature in November 2020, with a new two-year facility of the same amount and pricing consistent with the previous facility of LIBOR + 140 bps.
In December 2018, the board of directors of Teekay LNG’s general partner approved a $100 million common unit repurchase program. Since that time, the Partnership has repurchased a total of 3.63 million common units, or approximately 4.6 percent of the outstanding common units immediately prior to commencement of the program, for a total cost of $44.2 million, representing an average repurchase price of $12.16 per unit.
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).
Liquefied Natural Gas Segment
Income from vessel operations and consolidated adjusted EBITDA(1) for the liquefied natural gas segment for the three months ended March 31, 2020, compared to the same quarter of the prior year, were negatively impacted primarily by: a reduction in earnings upon the sales of the WilForce and WilPride LNG carriers in January 2020; and lower earnings from the Magellan Spirit upon its redeployment in May 2019 at a lower charter rate. These decreases were partially offset by the delivery of the Yamal Spirit in January 2019.
Equity income and adjusted EBITDA from equity-accounted vessels(1) for the liquefied natural gas segment for the three months ended March 31, 2020, compared to the same quarter of the prior year, were positively impacted primarily by: 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 Bahrain LNG Joint Venture; and higher earnings from the Partnership’s 52 percent-owned 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. In addition, GAAP equity income was negatively impacted by higher unrealized losses on non-designated derivative instruments in the first quarter of 2020 compared to the first quarter of 2019, and unrealized credit loss provisions recorded in the Partnership’s equity-accounted joint ventures upon adoption of the new accounting standard (ASC 326) on January 1, 2020.
Liquefied Petroleum Gas Segment
Loss from vessel operations for the liquefied petroleum gas segment for the three months ended March 31, 2020, compared to the same quarter of the prior year, was negatively impacted by the write-downs of six multi-gas carriers primarily due to the lower near-term outlook for these types of vessels as a result of the current economic environment as well as receiving notification that the Partnership’s commercial management arrangement with a third-party commercial manager will dissolve in September 2020. This decrease was partially offset by the improved results from the Partnership’s seven multi-gas carriers as a result of fewer off-hire days for scheduled dry dockings and repairs during the first quarter of 2020.
Equity income (loss) and adjusted EBITDA from equity-accounted vessels(1) for the liquefied petroleum gas segment for the three months ended March 31, 2020, compared to the same quarter of the prior year, were positively impacted by higher LPG charter rates earned and fewer off-hire days in the Partnership’s 50 percent-owned Exmar LPG Joint Venture.
Conventional Tanker Segment
There were no results from vessel operations for the conventional tanker segment for the three months ended March 31, 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.
Teekay LNG’s Fleet
The following table summarizes the Partnership’s fleet as of May 1, 2020. The Partnership also owns a 30 percent interest in a regasification terminal in Bahrain.
As of March 31, 2020, the Partnership had total liquidity of $372.7 million (comprised of $312.7 million in cash and cash equivalents and $60.0 million in undrawn credit facilities), up from $326.4 million of total liquidity as of December 31, 2019.
Source: Teekay LNG Partners L.P.