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 March 31, 2021.

(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).

First Quarter of 2021 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 March 31, 2021, compared to the same quarter of the prior year, primarily due to a decrease in operational claims under the Partnership’s charter contracts and higher rates earned for certain of the Partnership’s 50 percent-owned LPG carriers. These increases were partially offset by more scheduled dry dockings, redeployment of certain LNG carriers at lower rates, and the timing of certain vessel operating expenses during the first quarter of 2021.

GAAP net income attributable to the partners and preferred unitholders was also positively impacted by unrealized gains on non-designated derivative instruments in the first quarter of 2021, compared to unrealized losses in the first quarter of 2020, and by write-downs recorded on the Partnership’s multi-gas carriers in the first quarter of 2020. These increases were partially offset by the realized loss on the termination of one of the Partnership’s interest rate swap agreements associated with a debt refinancing completed in the first quarter of 2021.

First Quarter of 2021 Compared to Fourth 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 March 31, 2021, compared to the three months ended December 31, 2020, primarily due to a decrease in operational claims under the Partnership’s charter contracts, lower repairs and maintenance expenses, and lower net interest expense during the first quarter of 2021. These increases were partially offset by redeployment of certain LNG carriers at lower rates and unscheduled off-hire for repairs.

GAAP net income attributable to the partners and preferred unitholders for the three months ended March 31, 2021 was also positively impacted by unrealized gains on non-designated derivative instruments and unrealized foreign currency exchange gains in the first quarter of 2021, compared to unrealized losses on non-designated derivative instruments and unrealized foreign currency exchange losses in the fourth quarter of 2020, and by certain asset write-downs recorded in the fourth quarter of 2020 compared to no asset write-downs in the first quarter of 2021. These increases were partially offset by the realized loss on the termination of one of the Partnership’s interest rate swap agreements associated with a debt refinancing completed in the first quarter of 2021 and an increase in the unrealized credit loss provision recorded in the first quarter of 2021 compared to the first quarter of 2020.

CEO Commentary

“The strength of our fixed-rate LNG contract portfolio was evident again this quarter as Teekay LNG continued to generate strong earnings and cash flows even as the broader spot LNG shipping market declined from the high levels experienced during the recent winter period,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “This decline was short-lived, however, as LNG demand rebounded counter-seasonally in late-March and into the second quarter of 2021. We were able to take advantage of this strength by chartering out three LNG vessels, including one on a 12-month spot market-linked contract that allows us to achieve full utilization of the vessel while also retaining upside to strong markets. As a result of these recent charters, our LNG fleet is now 98 percent fixed for the remainder of 2021 and 89 percent fixed for 2022, providing us with a great deal of forward visibility on our business and cash flows.”

Mr. Kremin continued, “In mid-April, we announced an increase to our quarterly common unit distribution by 15 percent, to $1.15 per unit per annum, which was our third consecutive annual double-digit increase to our distribution. Importantly, this increase is consistent with our balanced capital allocation strategy and we believe that this level of distribution is very well covered by stable, long-term contracts, which also enables the Partnership to continue delevering its balance sheet and retain financial flexibility to optimally allocate capital in the future as global demand for LNG continues to grow.”

Summary of Recent Events

Chartering Activities

In April 2021, the Partnership secured a fixed-rate charter contract for the Oak Spirit MEGI LNG carrier, which is expected to commence in August or September 2021, for a period of one-year.

In March 2021, the Partnership secured a one-year, spot market-linked charter contract, with a one-year, fixed-rate option for the Creole Spirit MEGI LNG carrier. This new charter contract commenced in March 2021.

In March 2021, the charterer of the 52 percent-owned Arwa Spirit DFDE LNG carrier exercised its one-year option to extend the charter contract to May 2022 at a fixed-rate.

Financing Activities

In February 2021, the Partnership’s 70 percent-owned joint venture with PT Berlian Laju Tanker (the Tangguh Joint Venture), refinanced its term loan which was scheduled to mature in 2021, by entering into a new, $191.5 million term loan maturing in February 2026.

Operating Results

The following table highlights certain financial information for Teekay LNG’s segments: the Liquefied Natural Gas Segment and the Liquefied Petroleum Gas Segment (please refer to the “Teekay LNG’s Fleet” section of this release below and Appendices D and E for further details).

(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 LNG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, increased primarily due to a decrease in operational claims on certain of the Partnership’s LNG carriers. This increase was partially offset by more scheduled dry dockings, redeployment of one LNG carrier at a lower rate and the timing of vessel operating expenditures for certain of the Partnership’s LNG carriers during the first quarter of 2021.

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LNG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, were negatively impacted primarily due to lower earnings from the Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the MALT Joint Venture) as a result of lower charter rates earned upon redeployment of the Marib Spirit, Arwa Spirit and Methane Spirit between May 2020 and February 2021, more off-hire days for scheduled dry dockings and unscheduled repairs, and an increase in vessel operating expenses in the first quarter of 2021 compared to the first quarter of 2020 mainly due to the timing of certain expenditures.

In addition, GAAP equity income was positively impacted by unrealized gains on non-designated derivative instruments in the first quarter of 2021, compared to unrealized losses in the first quarter of 2020.

Liquefied Petroleum Gas Segment

Loss from vessel operations for the LPG segment for the three months ended March 31, 2021 was lower, compared to the same quarter of the prior year, mainly as a result of write-downs recorded in the first quarter of 2020 on six multi-gas carriers.

Consolidated adjusted EBITDA(1) for the LPG segment for the three months ended March 31, 2021 was comparable to the same quarter of the prior year.

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LPG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, were positively impacted from higher charter rates earned in the Partnership’s 50 percent-owned LPG joint venture with Exmar NV (the Exmar LPG Joint Venture). In addition, equity income for the LPG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, was positively impacted by lower net interest expense and unrealized gains on non-designated derivative instruments in the first quarter of 2021, compared to unrealized losses in the first quarter of 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 GAAP.

Teekay LNG’s Fleet

The following table summarizes the Partnership’s fleet as of May 1, 2021. In addition, the Partnership owns a 30 percent interest in an LNG regasification terminal in Bahrain.

(i) Includes vessels leased by the Partnership from third parties and accounted for as finance leases.

(ii) The Partnership’s ownership interests in these vessels range from 20 percent to 100 percent.

(iii) The Partnership’s ownership interests in these vessels range from 50 percent to 100 percent.

Liquidity

As of March 31, 2021, the Partnership had total liquidity of $406.2 million (comprised of $163.5 million in cash and cash equivalents and $242.7million in undrawn credit facilities) compared to $461.6 million as of December 31, 2020. The reduction in liquidity primarily relates to the swap termination payment and fees incurred in connection with the refinancing of the Tangguh Joint Venture’s debt facility as well as drydocking and other capital modification expenditures incurred by the Partnership during the first quarter of 2021.

Source: Teekay LNG Partners L.P.