Teekay LNG Partners Reports Third Quarter 2020 Results

Highlights

  • GAAP net income attributable to the partners and preferred unitholders of $40.3 million and GAAP net income per common unit of $0.38 in the third quarter of 2020.
  • Adjusted net income(1) attributable to the partners and preferred unitholders of $58.9 million and adjusted net income per common unit of $0.59 in the third quarter of 2020 (excluding other items listed in Appendix A to this release), down slightly from the previous quarter due to a higher than normal number of drydocks.
  • Total adjusted EBITDA(1) of $186.9 million in the third quarter of 2020.
  • In October 2020, extended charter contract to early-2022 for 52 percent-owned LNG carrier, the Marib Spirit.
  • The Partnership's LNG fleet now 100% fixed for 2020 and 96% fixed for 2021.
  • Fixed-rate charters continue to perform as expected; reaffirming 2020 financial guidance.

HAMILTON, Bermuda, Nov. 12, 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 September 30, 2020.

Consolidated Financial Summary

 Three Months Ended
 September 30, 2020June 30, 2020September 30, 2019
(in thousands of U.S. Dollars, except per unit data) (unaudited)(unaudited)(unaudited)
GAAP FINANCIAL COMPARISON   
Voyage revenues148,935148,205149,655
Income from vessel operations69,59769,58971,611
Equity income24,34632,15521,296
Net income attributable to the partners and preferred unitholders40,27544,93447,368
Limited partners’ interest in net income per common unit0.380.460.51
NON-GAAP FINANCIAL COMPARISON   
Total adjusted revenues(1)249,540254,001234,633
Total adjusted EBITDA(1)186,902192,340180,216
Distributable cash flow (DCF)(1)79,16883,17070,925
Adjusted net income attributable to the partners and preferred unitholders(1)58,93362,64350,514
Limited partners’ interest in adjusted net income per common unit0.590.670.55


(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).

Third Quarter of 2020 Compared to Second Quarter of 2020

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were lower for the three months ended September 30, 2020, compared to the three months ended June 30, 2020, primarily due to more scheduled drydockings and higher planned repairs and maintenance expenses during the third quarter of 2020, as well as lower earnings from the redeployment of three, 52 percent-owned liquefied natural gas (LNG) carriers at lower charter rates, one of which was rechartered at a higher rate in October 2020. These decreases were partially offset by lower net interest expense and a decrease in general and administrative expenses.

In addition, GAAP net income was negatively impacted by unrealized credit loss provisions related to the adoption of the new accounting standard (ASC 326) at the beginning of 2020 as a result of a decline in the estimated charter-free values of certain types of LNG carriers. This decrease to GAAP net income was partially offset by unrealized gains on non-designated derivative instruments in the third quarter of 2020, compared to unrealized losses in the second quarter of 2020, and a decrease in unrealized foreign currency exchange losses.

Third Quarter of 2020 Compared to Third 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 September 30, 2020, compared to the same quarter of the prior year, primarily due to: additional earnings from the delivery of three 50 percent-owned LNG carrier newbuildings in late-2019 and the commencement of terminal use payments to the Partnership’s 30 percent-owned Bahrain LNG Terminal; fewer off-hire days and lower net interest expense; partially offset by lower earnings as a result of the sale of non-core vessels and lower charter rates earned by three 52 percent-owned LNG carriers.

In addition, GAAP net income was negatively impacted by increases in unrealized credit loss provisions related to the adoption of the new accounting standard (ASC 326) at the beginning of 2020 as a result of a decline in the estimated charter-free values of certain types of LNG carriers; partially offset by unrealized gains on non-designated derivative instruments in the Partnership's equity-accounted joint ventures in the third quarter of 2020 compared to losses in the third quarter of 2019.

CEO Commentary

“We generated strong earnings and cash flow again this quarter, despite a higher than usual number of scheduled drydockings,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “We expect our earnings and cash flows to increase in the fourth quarter of 2020 and we continue to be on track to meeting the 2020 financial guidance we provided earlier this year.”

“I’m also pleased to report that we are delivering on a number of our strategic priorities,” continued Mr. Kremin. “During the third quarter of 2020, Teekay LNG reduced its total net debt(2) by nearly $95 million, or 8 percent on an annualized basis, and reduced total net interest expense(2) by over $6 million, or nearly 9 percent, compared with the second quarter of 2020. Importantly, we expect this trend of debt reduction and declining interest expense to continue while simultaneously paying an annual distribution of $1.00 per common unit, which is well-covered by our stable earnings and cash flows. In addition, during the recent market surge in demand for LNG carriers, we locked-in the 52 percent-owned Marib Spirit on a new fixed-rate contract to early-2022 at an improved rate. We approach the end of the year with the confidence that we have already secured fixed-rate contracts for our LNG fleet covering 96 percent of 2021, providing the Partnership with high fleet utilization and stable cash flows.”

Mr. Kremin concluded, “I want to thank our seafarers and onshore colleagues for their continued dedication to providing safe and uninterrupted service to our customers during this COVID-19 pandemic. I am pleased to report that, with the reopening of many jurisdictions during the summer months, we were able to successfully transition nearly all of our crew members across the fleet.”

(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)Includes Teekay LNG’s proportionate share of net debt and net interest expense in its equity-accounted joint ventures. Total net interest expense includes realized losses on non-designated derivative instruments at the joint venture level of $3.1 million and $2.3 million for the three months ended September 30, 2020 and June 30, 2020, respectively.

Summary of Recent Events

Chartering Activities

In October 2020, the charterer of the 52 percent-owned Marib Spirit exercised its options to extend the current charter by 14 months at a higher charter rate, extending the vessel's charter coverage to early-2022.

Financing Activities

In August 2020, Teekay LNG issued the equivalent of $112 million of unsecured, 5-year notes in the Norwegian Bond market at an all-in fixed coupon rate of 5.74 percent. The net proceeds from the bond issuance were used to repay drawings on the Partnership's revolving credit facilities and as a result, the new bond issuance did not increase the Partnership's financial leverage.

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
 September 30, 2020September 30, 2019
(in thousands of U.S. Dollars) (unaudited)(unaudited)
 Liquefied
Natural
Gas
Segment
Liquefied
Petroleum
Gas
Segment
Conventional
Tanker
Segment
TotalLiquefied
Natural
Gas
Segment
Liquefied
Petroleum
Gas
Segment
Conventional
Tanker
Segment
Total
GAAP FINANCIAL COMPARISON        
Voyage revenues138,953  9,982  — 148,935  137,212  10,846 1,597 149,655  
Income (loss) from vessel operations70,313  (716)— 69,597  73,236  (1,124)(501)71,611  
Equity income22,674  1,672  — 24,346  20,262  1,034  21,296  
NON-GAAP FINANCIAL COMPARISON        
Consolidated adjusted EBITDA(i)104,473  1,227  — 105,700  109,556  867 292 110,715  
Adjusted EBITDA from equity-accounted vessels(i)71,683  9,519  — 81,202  59,646  9,855  69,501  
Total adjusted EBITDA(i)176,156  10,746  — 186,902  169,202  10,722 292 180,216  


(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 September 30, 2020, compared to the same quarter of the prior year, decreased primarily due to a reduction in earnings upon the sales of the WilForce and WilPride LNG carriers in January 2020; and an increase in vessel operating expenses due to timing of repairs and maintenance for certain of the Partnership's LNG carriers during the third quarter of 2020. These decreases were partially offset by fewer off-hire days in the third quarter of 2020 relating 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 September 30, 2020, compared to the same quarter of the prior year, increased primarily due to the deliveries of three ARC7 LNG carrier newbuildings between August and December 2019 to the Yamal LNG Joint Venture and commencement of terminal use payments in January 2020 to the Bahrain LNG Joint Venture. These increases were partially offset by lower earnings from the MALT Joint Venture as a result of lower charter rates earned upon redeployment of the Arwa Spirit and Marib Spirit during the second quarter of 2020 and the Methane Spirit in July 2020, and the recognition of drydock hire revenue for the Meridian Spirit in the third quarter of 2019. In addition, GAAP equity income was negatively impacted by increases in unrealized credit loss provisions in the third quarter of 2020 related to the adoption of the new accounting standard (ASC 326) at the beginning of 2020 as a result of a decline in the estimated charter-free values of certain types of LNG carriers; partially offset by unrealized gains on non-designated derivative instruments in the Partnership's equity-accounted joint ventures in the third quarter of 2020 compared to losses in the third quarter of 2019.

Liquefied Petroleum Gas Segment

Loss from vessel operations, consolidated adjusted EBITDA(1) and equity income and adjusted EBITDA from equity-accounted vessels(1) for the liquefied petroleum gas (LPG) segment for the three months ended September 30, 2020 were comparable to the same quarter of the prior year.

Conventional Tanker Segment

There were no results from vessel operations for the conventional tanker segment for the three months ended September 30, 2020, as the last of the Partnership's conventional tanker, the Alexander Spirit, was sold in October of 2019.

(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 November 1, 2020. In addition, the Partnership owns a 30 percent interest in an LNG regasification terminal in Bahrain.

 Number of Vessels
 Owned and In-Chartered Vessels(i)
LNG Carrier Fleet47(ii)
LPG/Multi-gas Carrier Fleet30(iii)
Total77


(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 September 30, 2020, the Partnership had total liquidity of $430.8 million (comprised of $201.0 million in cash and cash equivalents and $229.8 million in undrawn credit facilities) compared to $306.3 million as of June 30, 2020.

Conference Call

The Partnership plans to host a conference call on Thursday, November 12, 2020 at 1:00 p.m. (ET) to discuss the results for the third 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 6710573.
  • 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 Third 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, 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 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 provisions, unrealized gains or losses on non-designated derivative instruments, foreign currency 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 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 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 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 provisions, 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
(in thousands of U.S. Dollars, except unit and per unit data)

 Three Months EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
20202020201920202019
 (unaudited)(unaudited)(unaudited) (unaudited) (unaudited)
Voyage revenues 148,935  148,205  149,655  437,027  452,459  
      
Voyage expenses(3,950) (5,329) (4,961) (11,596) (16,759) 
Vessel operating expenses(30,642) (28,407) (27,321) (85,153) (80,879) 
Time-charter hire expense(5,980) (5,368) (5,336) (17,270) (14,007) 
Depreciation and amortization(32,601) (31,629) (34,248) (96,869) (103,712) 
General and administrative expenses(6,165) (7,883) (5,393) (20,215) (17,692) 
Write-down of vessels(1)    (785) (45,000) (785) 
Restructuring charges(2)        (2,976) 
Income from vessel operations69,597  69,589  71,611  160,924  215,649  
      
Equity income(3)24,346  32,155  21,296  56,874  28,612  
Interest expense(30,528) (35,143) (40,574) (102,375) (123,809) 
Interest income  1,406  1,697  1,025  5,473  3,063  
Realized and unrealized loss on non-designated derivative instruments(4)(1,327) (8,516) (3,270) (30,314) (17,713) 
Foreign currency exchange (loss) gain(5)(7,853) (11,624) 2,879  (14,738) (5,095) 
Other expense(6)(14,149) (679) (1,828) (15,189) (2,064) 
Net income before income tax expense (recovery)41,492  47,479  51,139  60,655  98,643  
Income tax expense (recovery)(1,420) 1,804  (788) (2,128) (5,115) 
Net income40,072  49,283  50,351  58,527  93,528  
      
Non-controlling interest in net (loss) income(203) 4,349  2,983  6,312  8,108  
Preferred unitholders' interest in net income6,425  6,425  6,426  19,275  19,276  
General partner's interest in net income595  713  820  519  1,324  
Limited partners’ interest in net income33,255  37,796  40,122  32,421  64,820  
Limited partners' interest in net income per common unit:     
• Basic0.38  0.46  0.510.40  0.83  
• Diluted0.38  0.46  0.510.39  0.83  
Weighted-average number of common units outstanding:     
• Basic86,951,234  82,197,665  78,012,514  82,010,753  78,402,239  
• Diluted87,041,046  82,262,235  78,106,770  82,109,826  78,488,331  
Total number of common units outstanding at end of period86,951,234  86,927,558  77,509,411  86,951,234  77,509,411  


(1)In the first quarter of 2020, the Partnership wrote-down six wholly-owned multi-gas carriers to their estimated fair values. The total impairment charge of $45.0 million related to the six multi-gas carriers is included in write-down of vessels for the nine months ended September 30, 2020. In September 2019, the Partnership recorded a write-down of $0.8 million for the three and nine months ended September 30, 2019 on the Alexander Spirit, which was sold in October 2019.
  
(2)In January 2019, the Toledo Spirit conventional tanker was sold and as a result of this sale, the Partnership recorded restructuring charges of $3.0 million for the nine months ended September 30, 2019.
  
(3) The Partnership’s proportionate share of items within equity income as identified in Appendix A of this release are 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 EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
 20202020201920202019
Equity income24,34632,15521,29656,87428,612
Proportionate share of unrealized (gain) loss on non-designated interest rate swaps(2,680)3,8065,15023,33014,612
Proportionate share of unrealized credit loss provisions(a)7,099(423)15,656
Proportionate share of other items1,167362(77)9901,392
Equity income adjusted for items in Appendix A29,93235,90026,36996,85044,616

(a) Related to adoption of new accounting standard ASC 326 effective 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 gains (losses) 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 EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
 20202020201920202019
Realized losses relating to:     
Interest rate swap agreements(4,947)(3,662)(2,621)(11,520)(7,398)
Foreign currency forward contracts(241)
 (4,947)(3,662)(2,621)(11,761)(7,398)
Unrealized gains (losses) relating to:     
Interest rate swap agreements3,620(4,854)(215)(18,755)(9,740)
Foreign currency forward contracts(434)202(535)
Toledo Spirit time-charter derivative(40)
 3,620(4,854)(649)(18,553)(10,315)
Total realized and unrealized losses on non-designated derivative instruments(1,327)(8,516)(3,270)(30,314)(17,713)


(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.
  
 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 gain (losses) on the revaluation of the NOK bonds as detailed in the table below:


 Three Months EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
 20202020201920202019
Realized losses on cross-currency swaps(1,669)(1,430)(1,431)(4,916)(3,952)
Realized losses on cross-currency swaps maturity(33,844)(33,844)
Realized gains on repurchase of NOK bonds33,84433,844
Unrealized gains (losses) on cross currency swaps1,49045,881(23,759)(2,169)(25,818)
Unrealized (losses) gains on revaluation of NOK bonds(1,836)(53,794)22,167(1,657)17,687


(6)Includes unrealized credit loss provisions of $14.4 million and $14.6 million for the three and nine months ended September 30, 2020, respectively, related to the Partnership's adoption of ASC 326 effective January 1, 2020.


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

 As at September 30, As at June 30, As at December 31, 
 2020 2020 2019 
 (unaudited) (unaudited) (unaudited) 
ASSETS       
Current       
Cash and cash equivalents201,036 226,328 160,221 
Restricted cash – current11,224 11,544 53,689 
Accounts receivable6,753 9,694 13,460 
Prepaid expenses9,706 10,891 6,796 
Current portion of derivative assets  355 
Current portion of net investments in direct financing and sales-type leases, net13,762 14,014 273,986 
Advances to affiliates1,953 3,025 5,143 
Other current assets237 237 238 
Total current assets 244,671 275,733 513,888 
    
Restricted cash – long-term42,577 54,603 39,381 
    
Vessels and equipment     
At cost, less accumulated depreciation1,244,123 1,256,434 1,335,397 
Vessels related to finance leases, at cost, less accumulated depreciation 1,664,059 1,675,168 1,691,945 
Operating lease right-of-use asset24,179 27,568 34,157 
Total vessels and equipment 2,932,361 2,959,170 3,061,499 
Investments in and advances, net to equity-accounted joint ventures1,092,724 1,082,346 1,155,316 
Net investments in direct financing and sales-type leases, net508,561 525,812 544,823 
Other assets20,025 17,633 14,738 
Derivative assets  1,834 
Intangible assets – net36,724 38,938 43,366 
Goodwill34,841 34,841 34,841 
Total assets 4,912,484 4,989,076 5,409,686 
LIABILITIES AND EQUITY    
Current     
Accounts payable2,319 4,270 5,094 
Accrued liabilities84,975 79,832 76,752 
Unearned revenue32,685 30,185 28,759 
Current portion of long-term debt291,720 295,282 393,065 
Current obligations related to finance leases71,441 70,955 69,982 
Current portion of operating lease liabilities13,841 13,681 13,407 
Current portion of derivative liabilities35,616 34,997 38,458 
Advances from affiliates13,970 18,271 7,003 
Total current liabilities 546,567 547,473 632,520 
Long-term debt1,201,909 1,263,202 1,438,331 
Long-term obligations related to finance leases1,287,044 1,305,056 1,340,922 
Long-term operating lease liabilities10,338 13,887 20,750 
Derivative liabilities81,991 88,336 51,006 
Other long-term liabilities53,088 52,635 49,182 
Total liabilities 3,180,937 3,270,589 3,532,711 
 Equity     
Limited partners – common units1,459,599 1,447,690 1,543,598 
Limited partners – preferred units285,159 285,159 285,159 
General partner46,081 45,868 50,241 
Accumulated other comprehensive loss(111,967)(116,313)(57,312)
Partners' equity1,678,872 1,662,404 1,821,686 
Non-controlling interest52,675 56,083 55,289 
Total equity 1,731,547 1,718,487 1,876,975 
Total liabilities and total equity 4,912,484 4,989,076 5,409,686 


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

 Nine Months Ended
 September 30,September 30,
 2020 2019 
 (unaudited)(unaudited)
Cash and cash equivalents provided by (used for)  
OPERATING ACTIVITIES  
Net income58,527 93,528 
Non-cash and non-operating items:  
Unrealized loss on non-designated derivative instruments18,553 10,315 
Depreciation and amortization96,869 103,712 
Write-down of vessels45,000 785 
Unrealized foreign currency exchange loss (gain) including the effect of settlement of cross currency swaps upon maturity10,697 (1,213)
Equity income, net of distributions received  $32,297 (2019 – $25,374)(24,577)(3,238)
Amortization of deferred financing issuance costs included in interest expense4,401 6,722 
Change in unrealized credit loss provisions included in other expense14,557  
Other non-cash items3,595 6,173 
Change in non-cash operating assets and liabilities:  
Receipts from direct financing and sales-type leases270,973 9,242 
Expenditures for dry docking(1,984)(8,836)
Other non-cash operating assets and liabilities15,960 (15,227)
Net operating cash flow 512,571 201,963 
FINANCING ACTIVITIES   
Proceeds from issuance of long-term debt561,127 158,924 
Scheduled repayments of long-term debt and settlement of related swaps(220,875)(95,730)
Prepayments of long-term debt(687,061)(183,787)
Financing issuance costs(5,111)(989)
Proceeds from financing related to sales and leaseback of vessels 317,806 
Scheduled repayments of obligations related to finance leases(52,419)(54,484)
Extinguishment of obligations related to finance leases (111,617)
Repurchase of common units(15,635)(25,729)
Cash distributions paid(75,845)(60,926)
Dividends paid to non-controlling interests(3,390)(90)
Acquisition of non-controlling interest in certain of the Partnership's subsidiaries(2,219) 
Net financing cash flow (501,428)(56,622)
INVESTING ACTIVITIES  
Expenditures for vessels and equipment(9,597)(91,503)
Capital contributions and advances to equity-accounted joint ventures (42,171)
Net investing cash flow (9,597)(133,674)
Increase in cash, cash equivalents and restricted cash1,546 11,667 
Cash, cash equivalents and restricted cash, beginning of the period253,291 222,864 
Cash, cash equivalents and restricted cash, end of the period254,837 234,531 




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
September 30,June 30, September 30,
202020202019
(unaudited)(unaudited)(unaudited)
Net income – GAAP basis40,072   49,283   50,351   
Less: net loss (income) attributable to non-controlling interests203   (4,349) (2,983) 
Net income attributable to the partners and preferred unitholders40,275   44,934   47,368   
Add (subtract) specific items affecting net income:   
Write-down of vessels(1)—   —   785   
Foreign currency exchange losses (gains)(2)6,184   10,194   (4,607) 
Unrealized credit loss provisions, unrealized gains and losses on non-designated derivative instruments and other items from equity-accounted investees(3)5,586   3,745   5,073   
Unrealized (gains) losses on non-designated derivative instruments(4)(3,620) 4,854   649   
Unrealized credit loss provisions and other items(5)14,397   (1,619) 1,417   
 Non-controlling interests’ share of items above(6)(3,889) 535   (171) 
Total adjustments18,658   17,709   3,146   
Adjusted net income attributable to the partners and preferred unitholders58,933   62,643   50,514   
    
Preferred unitholders' interest in adjusted net income6,425   6,425   6,426   
General partner's interest in adjusted net income923   1,044   882   
Limited partners’ interest in adjusted net income51,585   55,174   43,206   
Limited partners’ interest in adjusted net income per common unit, basic0.59   0.67   0.55   
Weighted-average number of common units outstanding, basic86,951,234   82,197,665   78,012,514   


(1)See Note 1 to the Consolidated Statements of Income included in this release for further details.
(2)Foreign currency exchange losses (gains) 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 included in this release for further details.
(3)Reflects the proportionate share of unrealized credit loss provisions and unrealized gains or losses due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes in the Partnership's equity-accounted investees. See Note 3 to the Consolidated Statements of Income included in this release for further details.
(4)Reflects the unrealized losses due to changes in the mark-to-market value of the Partnership's derivative instruments that are not designated as hedges for accounting purposes. See Note 4 to the Consolidated Statements of Income included in this release for further details.
(5)For the three months ended September 30, 2020, includes unrealized credit loss provisions of $14.4 million related to the Partnership's adoption of ASC 326 effective January 1, 2020.
(6)Items affecting net income include items from the Partnership’s consolidated non-wholly-owned subsidiaries. The specific items affecting net income 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
September 30,June 30, September 30,
2020 2020 2019 
(unaudited)(unaudited)(unaudited)
     
Net income40,072 49,283 50,351 
Add:   
Partnership’s share of equity-accounted joint ventures' DCF net of estimated maintenance capital expenditures(1)38,065 42,725 34,319 
Depreciation and amortization32,601 31,629 34,248 
Unrealized credit loss provisions14,397 260  
Foreign currency exchange loss (gain)6,184 10,194 (4,607)
Direct finance and sale-type lease payments received in excess of revenue recognized and other adjustments3,502 3,392 4,071 
Write-down of vessels  785 
Distributions relating to equity financing of newbuildings  1,012 
Subtract:   
Deferred income tax and other non-cash items(709)271 801 
Unrealized (gain) loss on non-designated derivative instruments(3,620)4,854 649 
Distributions relating to preferred units(6,425)(6,425)(6,426)
Estimated maintenance capital expenditures(14,683)(14,513)(17,562)
Equity income(24,346)(32,155)(21,296)
Distributable Cash Flow before non-controlling interest85,038 89,515 76,345 
Non-controlling interests’ share of DCF before estimated maintenance capital expenditures(5,870)(6,345)(5,420)
Distributable Cash Flow79,168 83,170 70,925 
Amount of cash distributions attributable to the General Partner(389)(411)(301)
Limited partners' Distributable Cash Flow78,779 82,759 70,624 
Weighted-average number of common units outstanding, basic86,951,234 82,197,665 78,012,514 
Distributable Cash Flow per limited partner common unit0.91 1.01 0.91 


(1)The estimated maintenance capital expenditures relating to the Partnership’s share of equity-accounted joint ventures were $15.4 million, $15.2 million and $11.8 million for the three months ended  September 30, 2020, June 30, 2020 and September 30, 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
September 30,June 30, September 30,
2020 2020 2019 
(unaudited)(unaudited)(unaudited)
Voyage revenues148,935 148,205 149,655 
Partnership's proportionate share of voyage revenues from its equity-accounted joint ventures (See Appendix E)106,626 111,365 90,479 
Less the Partnership’s proportionate share of voyage revenues earned directly from its equity-accounted joint ventures(6,021)(5,569)(5,501)
Total adjusted revenues249,540 254,001 234,633 


 Three Months Ended
September 30,June 30, September 30,
2020 2020 2019 
(unaudited)(unaudited)(unaudited)
Net income 40,072 49,283 50,351 
Depreciation and amortization32,601 31,629 34,248 
Interest expense, net of interest income29,122 33,446 39,549 
Income tax expense (recovery)1,420 (1,804)788 
EBITDA103,215 112,554 124,936 
    
Add (subtract) specific income statement items affecting EBITDA:   
Foreign currency exchange loss (gain)7,853 11,624 (2,879)
Other expense14,149 679 1,828 
Equity income(24,346)(32,155)(21,296)
Realized and unrealized loss on non-designated derivative instruments1,327 8,516 3,270 
Write-down of vessels  785 
Direct finance and sale-type lease payments received in excess of revenue recognized and other adjustments3,502 3,392 4,071 
Consolidated adjusted EBITDA105,700 104,610 110,715 
Adjusted EBITDA from equity-accounted vessels (See Appendix E)81,202 87,730 69,501 
Total adjusted EBITDA186,902 192,340 180,216 
    


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 September 30, 2020
 (unaudited)
 Liquefied
Natural Gas
Segment
Liquefied
Petroleum Gas
Segment
Conventional
Tanker Segment
Total
Voyage revenues138,953 9,982  148,935 
Voyage expenses(427)(3,523) (3,950)
Vessel operating expenses(25,871)(4,771) (30,642)
Time-charter hire expenses(5,980)  (5,980)
Depreciation and amortization(30,658)(1,943) (32,601)
General and administrative expenses(5,704)(461) (6,165)
Income (loss) from vessel operations70,313 (716) 69,597 
Depreciation and amortization30,658 1,943  32,601 
Direct finance and sales-type lease payments received in excess of revenue recognized and other adjustments3,502   3,502 
Consolidated adjusted EBITDA104,473 1,227  105,700 
     
 Three Months Ended September 30, 2019
 (unaudited)
 Liquefied
Natural Gas
Segment
Liquefied
Petroleum Gas
Segment
Conventional
Tanker Segment
Total
Voyage revenues137,212 10,846 1,597 149,655 
Voyage recoveries (expenses)286 (4,778)(469)(4,961)
Vessel operating expenses(21,890)(4,804)(627)(27,321)
Time-charter hire expenses(5,336)  (5,336)
Depreciation and amortization(32,249)(1,991)(8)(34,248)
General and administrative expenses(4,787)(397)(209)(5,393)
Write-down of vessels  (785)(785)
Income (loss) from vessel operations73,236 (1,124)(501)71,611 
Depreciation and amortization32,249 1,991 8 34,248 
Write-down of vessels  785 785 
Direct finance and sales-type lease payments received in excess    of revenue recognized and other adjustments4,071   4,071 
Consolidated adjusted EBITDA109,556 867 292 110,715 


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
 September 30, 2020September 30, 2019
 (unaudited) (unaudited)
 AtPartnership's AtPartnership's
100%
Portion(1)100%
Portion(1)
Voyage revenues246,488 106,626 205,727 90,479 
Voyage expenses(2,815)(1,367)(1,858)(928)
Vessel operating expenses, time-charter hire expenses and general and administrative expenses(74,398)(32,778)(57,786)(25,564)
Depreciation and amortization(26,485)(13,328)(28,891)(13,962)
Income from vessel operations of equity-accounted vessels142,790 59,153 117,192 50,025 
Net interest expense(61,584)(25,133)(56,628)(23,221)
Income tax expense(449)(235)(32)(16)
Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provisions(2)(26,623)(9,439)(18,270)(5,492)
Net income / equity income of equity-accounted vessels54,134 24,346 42,262 21,296 
Net income / equity income of equity-accounted LNG vessels50,627 22,674 40,032 20,262 
Net income / equity income of equity-accounted LPG vessels3,507 1,672 2,230 1,034 
     
Net income / equity income of equity-accounted vessels54,134 24,346 42,262 21,296 
Depreciation and amortization26,485 13,328 28,891 13,962 
Net interest expense61,584 25,133 56,628 23,221 
  Income tax expense449 235 32 16 
EBITDA from equity-accounted vessels142,652 63,042 127,813 58,495 
     
Add (subtract) specific income statement items affecting EBITDA:    
Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provisions(2)26,623 9,439 18,270 5,492 
Direct finance and sale-type lease payments received in excess of revenue recognized26,752 9,677 17,701 6,470 
Amortization of in-process contracts(1,759)(956)(1,758)(956)
Adjusted EBITDA from equity-accounted vessels194,268 81,202 162,026 69,501 
Adjusted EBITDA from equity-accounted LNG vessels175,231 71,683 142,311 59,646 
Adjusted EBITDA from equity-accounted LPG vessels19,037 9,519 19,715 9,855 


(1)The Partnership's equity-accounted vessels for the three months ended September 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 September 30, 2020, compared to 22 owned and in-chartered LPG carriers as at September 30, 2019; the Partnership’s ownership interest ranging from 20 to 30 percent in four LNG carriers as at September 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 September 30, 2020, compared to four ARC7 LNG carriers and two ARC7 LNG carrier newbuildings as at September 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 loss provisions relate to the Partnership's adoption of ASC 326 effective 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 September 30, 2020As at December 31, 2019
 (unaudited)(unaudited)
 AtPartnership'sAtPartnership's
100%
Portion(1)100%
Portion(1)
Cash and restricted cash, current and non-current598,177 250,977 509,065 210,736
Other current assets68,446 26,702 62,566 27,719
Property, plant and equipment, including owned vessels, vessels related to finance leases and operating lease right-of-use assets2,004,583 1,023,826 3,112,349 1,375,570
Net investments in sales-type and direct financing leases, current and non-current5,420,362 2,091,072 4,589,139 1,856,709
Other non-current assets77,002 48,001 50,967 41,015
Total assets8,168,570 3,440,578 8,324,086 3,511,749
     
Current portion of long-term debt and obligations related to finance leases and operating leases540,300 244,754 315,247 136,573
Current portion of derivative liabilities65,440 25,622 34,618 13,658
Other current liabilities172,226 70,813 153,816 66,224
Long-term debt and obligations related to finance leases and operating leases4,606,936 1,844,580 5,026,123 2,041,595
Shareholders' loans, current and non-current346,969 129,550 346,969 126,546
Derivative liabilities311,665 126,461 162,640 66,060
Other long-term liabilities62,650 30,950 64,196 32,323
Equity2,062,384 967,848 2,220,477 1,028,770
Total liabilities and equity8,168,570 3,440,578 8,324,086 3,511,749
     
Investments in equity-accounted joint ventures 967,848  1,028,770
Advances to equity-accounted joint ventures 129,550  126,546
Unrealized credit loss provisions(2) (4,674) 
Investments in and advances, net to equity-accounted joint ventures 1,092,724  1,155,316


(1)The Partnership's equity-accounted vessels as at September 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 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)The unrealized credit loss provisions relate to the Partnership's adoption of ASC 326 effective 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; expected increase in the Partnership’s earnings and cash flows commencing in the fourth quarter of 2020; 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 operational performance and cost competitiveness; 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; delays in the Partnership’s ability to successfully and timely complete dry dockings; 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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