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Teekay Offshore Partners Reports First Quarter 2014 Results

HAMILTON, BERMUDA -- (Marketwired) -- 05/15/14 --

Highlights


--  Generated distributable cash flow of $51.1 million in the first quarter
    of 2014, an increase of 22 percent from the first quarter of 2013. 
--  Declared first quarter 2014 cash distribution of $0.5384 per common
    unit. 
--  The Voyageur Spirit FPSO received its certificate of final acceptance
    from the charterer effective from February 22, 2014. 
--  In March 2014, acquired ALP Maritime Services and ordered four long-haul
    towing and anchor handling vessel newbuildings for an aggregate cost of
    approximately $261 million. 
--  In May 2014, entered into a letter of intent to acquire Logitel
    Offshore, a company focused on the high-end floating accommodation
    market utilizing the Sevan cylindrical hull design. 
--  Liquidity of approximately $349 million as at March 31, 2014. 

Teekay Offshore GP LLC, the general partner of Teekay Offshore Partners L.P. (Teekay Offshore or the Partnership) (NYSE:TOO), today reported the Partnership's results for the quarter ended March 31, 2014. During the first quarter of 2014, the Partnership generated distributable cash flow(1) of $51.1 million, compared to $41.8 million in the same period of the prior year.

On April 9, 2014, a cash distribution of $0.5384 per common unit was declared for the quarter ended March 31, 2014. The cash distribution was paid on May 9, 2014 to all unitholders of record on April 25, 2014.

"The Partnership's growing portfolio of long-term fixed-rate contracts continued to generate stable cash flows during the first quarter," commented Peter Evensen, Teekay Offshore GP LLC's Chief Executive Officer. "Further to the update last quarter, we are now pleased to report that in April 2014, the Partnership received the certificate of final acceptance for the Voyageur Spirit FPSO from the charterer effective February 22, 2014."

"We are excited about the letter of intent the Partnership recently signed to acquire Logitel Offshore, which we believe will provide the Partnership with an attractive and complementary new channel for growth," Mr. Evensen continued. "We continue to see strong growth fundamentals in the Brazil and North Sea offshore markets, which are our core markets. We believe that the combination of our strong operational platform and access to capital, with Logitel's innovative accommodation rig design using Sevan's cylindrical hull platform, will enable us to provide our customers with an attractive and reliable alternative in this growing segment."

Mr. Evensen added, "Looking ahead, we expect that the acquisitions of Logitel and ALP, which diversify the Partnership's investment portfolio and expand its presence in the offshore oil production value-chain, will further complement Teekay Offshore's existing pipeline of growth projects, including the Remora HiLoad DP unit and two FSO conversion projects delivering between 2014 and 2017. In addition, there are up to five FPSO units that may become available for purchase from our sponsor, Teekay Corporation, over the near to medium term. The largest of these, the Knarr FPSO newbuilding, remains on track for field installation and start-up in the fourth quarter of 2014."

(1) Distributable cash flow is a non-GAAP financial measure used by certain investors to measure the financial performance of the Partnership and other master limited partnerships. Please see Appendix B for a reconciliation of distributable cash flow to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP).

Summary of Recent Events

Proposed Acquisition of Logitel

In May 2014, Teekay Offshore entered into a letter of intent to acquire Logitel Offshore Holdings Ltd. (Logitel), a Norway-based company focused on the high-end floating accommodation market. Logitel owns two floating accommodation units (FAUs), which are based on the Sevan Marine ASA (Sevan) cylindrical hull design, currently under construction at the COSCO (Nantong) Shipyard (COSCO) in China, and has options with COSCO to order up to an additional six FAUs. The first committed FAU has secured a three-year fixed-rate charter contract, plus extension options, with Petroleo Brasileiro SA (Petrobras) in Brazil and is scheduled for delivery in early-2015. The Partnership expects to secure a charter contract for the second FAU prior to its scheduled delivery in late-2015. The agreement with COSCO for the committed FAUs includes a favorable payment schedule, with the majority of the purchase price due upon delivery. The Partnership intends to finance the Logitel acquisition and the initial newbuilding payments through its existing liquidity and expects to secure long-term debt financing for the units prior to their scheduled deliveries. The Partnership expects the proposed acquisition to be finalized in the third quarter of 2014.

Acquisition of ALP and Newbuilding Order

In March 2014, Teekay Offshore acquired ALP Maritime Services B.V. (ALP), a Netherlands-based provider of long-haul ocean towage and offshore installation services to the global offshore oil and gas industry. ALP currently provides these services through a fleet of third-party owned vessels. As part of the transaction, the Partnership and ALP entered into an agreement with Niigata Shipbuilding & Repair of Japan for the construction of four state-of-the-art SX-157 Ulstein Design ultra-long distance towing and anchor handling vessel newbuildings, which will be equipped with dynamic positioning capability, for a fully built-up cost of approximately $261 million, which includes the cost of acquiring ALP. These newbuildings will be capable of ultra-long distance towing and offshore unit installation and decommissioning of large floating exploration, production and storage units, including floating production, storage and offloading (FPSO) units, floating liquefied natural gas (FLNG) units and floating drill rigs. The Partnership intends to continue financing the newbuilding installments through its existing liquidity and expects to secure long-term debt financing for these vessels prior to their scheduled deliveries in 2016.

Voyageur Spirit FPSO Update

On August 27, 2013, repairs to the defective gas compressor on the Voyageur Spirit FPSO were completed and the unit achieved full production capacity. Since that time, the Partnership had been receiving full rate under the charter contract as though the unit was producing at full capacity either directly from the charterer or through the indemnification arrangement with Teekay Corporation. On April 4, 2014, the Partnership received the certificate of final acceptance from the charterer, which declared the unit on-hire retroactive to February 22, 2014.

Up to February 22, 2014, the Partnership has been indemnified by Teekay Corporation for certain lost revenues and certain unrecovered vessel operating expenses relating to the full operation of the Voyageur Spirit FPSO. Any indemnification amounts from Teekay Corporation to the Partnership have been effectively treated as a reduction in the purchase price paid to Teekay Corporation for the Voyageur Spirit FPSO by Teekay Offshore. During the first quarter of 2014, the Partnership's indemnification effectively resulted in a $3.5 million reduction in the purchase price. Any future compensation received by the Partnership from the charterer related to the indemnification period will reduce the amount of Teekay Corporation's indemnification to Teekay Offshore. Although the Partnership's reported revenue is lower as a result of any off-hire and reported vessel operating expenses are higher as a result of certain unrecovered operating costs relating to the Voyageur Spirit FPSO, there is no net impact on the Partnership's cash flow as a result of Teekay Corporation's indemnification. For the period from the date of acquisition to February 22, 2014, Teekay Corporation indemnified the Partnership for a total of $38.4 million relating to the Voyageur Spirit FPSO.

Dampier Spirit FSO Contract Extension

In May 2014, the Partnership secured a 10-year contract extension with Apache Energy for the 1987-built Dampier Spirit floating storage and offtake (FSO) unit, which operates on the Stag oil field offshore Western Australia. As part of the extension, the FSO unit is expected to enter into drydock during the second quarter of 2014 for capital upgrades with an expected total cost of approximately $11 million. Under the new contract, the unit is expected to earn approximately $5.7 million in annual cash flow from vessel operations(1).

(1) Cash flow from vessel operations (CFVO) from consolidated vessels represents income from vessel operations before depreciation and amortization expense, write-down of vessels and amortization of deferred gains, includes the realized gains (losses) on the settlement of foreign exchange forward contracts, and cash flow from vessel operations relating to its discontinued operations and adjusting for direct financing leases to a cash basis. CFVO is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies.

Teekay Offshore's Fleet

The following table summarizes Teekay Offshore's fleet as of May 1, 2014.


----------------------------------------------------------------------------
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                                         Number of Vessels                  
                       -----------------------------------------------------
                       -----------------------------------------------------
                                                 Committed                  
                           Owned Chartered- Newbuildings / Conversion       
                         Vessels in Vessels    Conversions Candidates  Total
                       -----------------------------------------------------
                       -----------------------------------------------------
Shuttle Tanker Segment     31(i)          2          1(ii)     1(iii)     35
FPSO Segment               5(iv)          -              -          -      5
Conventional Tanker                                                         
 Segment                       4          -              -          -      4
Towage Segment                 -          -           4(v)          -      4
FSO Segment                    5          -          1(vi)          -      6
----------------------------------------------------------------------------
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Total                         46          2              5          1     54
----------------------------------------------------------------------------
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i.  Includes six shuttle tankers in which Teekay Offshore's ownership
    interest is 50 percent and three shuttle tankers in which Teekay
    Offshore's ownership interest is 67 percent. One of the 67 percent owned
    shuttle tankers, the Randgrid, will commence its conversion to an FSO
    unit for the Gina Krog FSO project after its current shuttle tanker
    charter contract expires in 2015. 
ii. Includes one HiLoad DP unit expected to commence operations under a 10-
    year contract in the second quarter of 2014 once operational testing has
    been completed. 
iii.Includes one shuttle tanker which is currently in lay-up and is a
    candidate for conversion to an offshore asset. 
iv. Includes one FPSO unit in which Teekay Offshore's ownership interest is
    50 percent. 
v.  Includes four long-haul towing and anchor handling vessel newbuildings
    scheduled to deliver in 2016. 
vi. Includes the Navion Clipper shuttle tanker, which is currently being
    converted into an FSO unit and is expected to commence operations under
    a 10-year charter contract in the third quarter of 2014 with Salamander
    Energy plc. 

Other Future Growth Opportunities

Pursuant to an omnibus agreement that the Partnership entered into in connection with our initial public offering in December 2006, Teekay Corporation is obligated to offer to the Partnership its interest in certain shuttle tankers, FSO units and FPSO units Teekay Corporation owns or may acquire in the future, provided the vessels are servicing contracts with remaining durations of greater than three years. The Partnership may also acquire other vessels that Teekay Corporation may offer it from time to time and also intends to pursue direct acquisitions from third parties and new organic offshore projects.

Shuttle Tankers (including HiLoad DP Units)

In September 2013, the Partnership acquired a 2010-built HiLoad Dynamic Positioning (DP) unit from Remora AS (Remora), a Norway-based offshore marine technology company, for a total purchase price of approximately $55 million, including modification costs. The HiLoad DP unit is currently undergoing operational testing, which is expected to be completed during the second quarter of 2014. Upon completion of the testing, the unit is expected to commence operations under a ten-year time-charter contract with Petroleo Brasileiro SA (Petrobras) in Brazil. Under the terms of an agreement between Remora and Teekay Offshore, the Partnership has a right of first refusal to acquire any future HiLoad DP projects developed by Remora. In July 2013, Remora was awarded a contract by BG E&P Brasil Ltd. to perform a front end engineering and design (FEED) study to develop the next generation of HiLoad DP units. The design, which is based on the main parameters of the first generation design, is expected to include new features, such as increased engine power and the capability to maneuver vessels larger than Suezmax conventional tankers.

FPSO Units

In June 2011, Teekay Corporation entered into a contract with BG Norge Limited to provide a harsh weather FPSO unit to operate in the North Sea. The contract will be serviced by a newbuilding FPSO unit, the Petrojarl Knarr (Knarr), which is being constructed by Samsung Heavy Industries for a fully built-up cost of approximately $1 billion. Pursuant to the omnibus agreement, Teekay Corporation is obligated to offer to the Partnership its interest in the Knarr FPSO project at Teekay Corporation's fully built-up cost within a year after the commencement of the charter, which commencement is expected to occur in the fourth quarter of 2014.

Pursuant to the omnibus agreement and subsequent agreements, Teekay Corporation is obligated to offer to sell to the Partnership the Petrojarl Foinaven FPSO unit, an existing unit owned by Teekay Corporation and operating under a long-term contract in the North Sea, subject to approvals required from the charterer. The purchase price for the Petrojarl Foinaven would be based on fair market value.

Teekay Corporation owns three additional FPSO units, the Hummingbird Spirit FPSO, the Petrojarl Banff FPSO and the Petrojarl 1 FPSO, which may also be offered to the Partnership in the future pursuant to the omnibus agreement.

In May 2011, Teekay Corporation entered into a joint venture agreement with Odebrecht Oil & Gas S.A. (a member of the Odebrecht group) (Odebrecht) to jointly pursue FPSO projects in Brazil. Odebrecht is a well-established Brazil-based company that operates in the engineering and construction, petrochemical, bioenergy, energy, oil and gas, real estate and environmental engineering sectors, with over 120,000 employees and a presence in over 20 countries. Through the joint venture agreement, Odebrecht became a 50 percent partner in the Cidade de Itajai FPSO project and Teekay Corporation is currently working with Odebrecht on other FPSO project opportunities that, if awarded, may result in offers to the Partnership to acquire Teekay Corporation's interests in such projects, pursuant to the omnibus agreement.

FSO Units

In May 2013, the Partnership entered into an agreement with Statoil Petroleum AS (Statoil), on behalf of the field license partners, to provide an FSO unit for the Gina Krog oil and gas field located in the North Sea. The contract will be serviced by a new FSO unit that will be converted from the 1995-built shuttle tanker, Randgrid, which the Partnership currently owns through a 67 percent-owned subsidiary. The FSO conversion project is expected to be completed for a net capital cost of approximately $230 million, including the cost of acquiring the remaining 33 percent ownership interest in the Randgrid shuttle tanker. Following its scheduled completion in early-2017, the newly converted FSO unit will commence operations under a three-year time-charter contract to Statoil, which also includes 12 additional one-year extension options.

In May 2013, the Partnership entered into a ten-year charter contract, plus extension options, with Salamander Energy plc (Salamander) to supply an FSO unit in Asia. The Partnership is converting its 1993-built shuttle tanker, the Navion Clipper, into an FSO unit for an estimated fully built-up cost of approximately $70 million (including reimbursable installation costs). The unit is expected to commence its contract with Salamander in the third quarter of 2014.

Financial Summary

The Partnership reported adjusted net income attributable to the partners(1) of $31.2 million for the quarter ended March 31, 2014, compared to $18.9 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $23.8 million and increasing net income by $1.3 million for the quarters ended March 31, 2014 and 2013, respectively, as detailed in Appendix A to this release. Including these items, the Partnership reported, on a GAAP basis, net income attributable to the partners of $7.3 million for the first quarter of 2014, compared to $20.2 million in the same period of the prior year. Net revenues(2) increased to $225.8 million for the first quarter of 2014, compared to $189.2 million in the same period of the prior year.

Adjusted net income attributable to the partners for the three months ended March 31, 2014 increased from the same period in the prior year, mainly due to the acquisition of the Voyageur Spirit and a 50 percent interest in the Cidade de Itajai FPSO units in the second quarter of 2013 and the commencement of the time-charters with a subsidiary of BG Group plc for four newbuilding shuttle tankers (BG Shuttle Tankers) in June, August and November 2013 and January 2014. These increases were partially offset by the sale and lay-up of older shuttle and conventional tankers during 2013 as their related charter contracts expired or terminated.

As a result of the delay in receiving the certificate of final acceptance from the charterer for the Voyageur Spirit FPSO, the Partnership has not recorded all the revenues associated with operations of this FPSO unit from its acquisition on May 2, 2013 through to March 31, 2014. During this period, the unit also incurred certain operating expenses associated with ensuring the Voyageur Spirit FPSO was capable of operating at full capacity. For the three months ended March 31, 2014, the Partnership received $3.5 million in indemnification payments from Teekay Corporation, which are recorded in Partners' Equity as an adjustment to the Partnership's purchase price of the Voyageur Spirit FPSO unit. As a result of the indemnification from Teekay Corporation, there is no net impact on the Partnership's cash flows relating to the Voyageur Spirit FPSO.

For accounting purposes, the Partnership is required to recognize, through the consolidated statements of income, changes in the fair value of derivative instruments as unrealized gains or losses. This revaluation does not affect the economics of any hedging transactions nor does it have any impact on the Partnership's actual cash flows or the calculation of its distributable cash flow.


(1) Adjusted net income attributable to the partners is a non-GAAP financial
measure. Please refer to Appendix A included in this release for a          
reconciliation of this non-GAAP measure to the most directly comparable     
financial measure under GAAP and information about specific items affecting 
net income that are typically excluded by securities analysts in their      
published estimates of the Partnership's financial results.                 
(2) Net revenues is a non-GAAP financial measure used by certain investors  
to measure the financial performance of shipping companies. Please refer to 
Appendix C included in this release for a reconciliation of this non-GAAP   
measure to the most directly comparable financial measure under GAAP.       

Operating Results

The following table highlights certain financial information for Teekay Offshore's four segments: the Shuttle Tanker segment, the FPSO segment, the FSO segment, and the Conventional Tanker segment (please refer to the "Teekay Offshore's Fleet" section of this release above and Appendices C through F for further details).


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      Three Months Ended                    
                                        March 31, 2014                      
                                          (unaudited)                       
                  ----------------------------------------------------------
                  ----------------------------------------------------------
                      Shuttle                        Conventional           
(in thousands of       Tanker       FPSO                   Tanker           
 U.S. dollars)        Segment    Segment FSO Segment      Segment  Total (3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenues(1)       121,474     83,137      14,266        6,903    225,780
Vessel operating                                                            
 expenses              40,406     40,391       5,873        1,460     88,130
Time-charter hire                                                           
 expense               11,412          -           -            -     11,412
Depreciation and                                                            
 amortization          27,281     17,903       1,693        1,611     48,488
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CFVO from                                                                   
 consolidated                                                               
 vessels(2)            61,901     33,846       8,492        4,910    108,149
CFVO from equity                                                            
 accounted                                                                  
 vessel(4)                  -      7,947           -            -      7,947
Total CFVO(2)(4)       61,901     41,793       8,492        4,910    116,096
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      Three Months Ended                    
                                        March 31, 2013                      
                                          (unaudited)                       
                  ----------------------------------------------------------
                  ----------------------------------------------------------
                      Shuttle                        Conventional           
(in thousands of       Tanker       FPSO                   Tanker           
 U.S. dollars)        Segment    Segment FSO Segment      Segment      Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenues(1)       108,056     57,685      15,625        7,798    189,164
Vessel operating                                                            
 expenses              37,967     29,501       8,285        1,571     77,324
Time-charter hire                                                           
 expense               14,777          -           -            -     14,777
Depreciation and                                                            
 amortization          27,605     12,752       2,582        1,571     44,510
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CFVO from                                                                   
 consolidated                                                               
 vessels(2)            48,919     22,256       7,358       15,520     94,053
CFVO from equity                                                            
 accounted                                                                  
 vessel(4)                  -          -           -            -          -
Total CFVO(2)          48,919     22,256       7,358       15,520     94,053
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Net revenues is a non-GAAP financial measure used by certain investors
    to measure the financial performance of shipping companies. Please refer
    to Appendix C, included in this release for a reconciliation of this
    non-GAAP measure to the most directly comparable GAAP financial measure.
2.  Cash flow from vessel operations (CFVO) from consolidated vessels
    represents income from vessel operations before depreciation and
    amortization expense, write-down of vessels and amortization of deferred
    gains, and includes the realized gains (losses) on the settlement of
    foreign exchange forward contracts, and cash flow from vessel operations
    relating to its discontinued operations and adjustments for direct
    financing leases to a cash basis. CFVO is a non-GAAP financial measure
    used by certain investors to measure the financial performance of
    shipping companies. Please refer to Appendix E included in this release
    for a description and reconciliation of this non-GAAP measure to the
    most directly comparable GAAP financial measure.  
3.  The total column includes a $1.0 million fee associated with the
    acquisition of ALP in CFVO from consolidated vessels and Total CFVO.
    This fee was recognized in general and administrative expenses in the
    consolidated statement of income for the three months ended March 31,
    2014. The towage segment has not been disaggregated as its results are
    not material other than this fee. 
4.  CFVO from equity accounted vessel represents the Partnership's 50
    percent share of CFVO from the Cidade de Itajai FPSO unit. Please see
    Appendix F for a description and reconciliation of CFVO from equity
    accounted vessel (a non-GAAP measure) as used in this release to the
    most directly comparable GAAP financial measure. 

Shuttle Tanker Segment

Cash flow from vessel operations from the Partnership's Shuttle Tanker segment increased to $61.9 million in the first quarter of 2014 compared to $48.9 million for the same period of the prior year, primarily due to the delivery of the four BG Shuttle Tanker newbuildings in June, August and November 2013 and January 2014, partially offset by the expiration of time-charter out contracts relating to three existing shuttle tankers during the third quarter of 2013 and the first quarter of 2014.

FPSO Segment

Cash flow from vessel operations from the Partnership's FPSO segment, including one equity-accounted FPSO unit, increased to $41.8 million for the first quarter of 2014 compared to $22.3 million for the same period of the prior year, primarily due to additional cash flows related to the acquisition of the Voyageur Spirit and a 50 percent interest in the Cidade de Itajai FPSO units in the second quarter of 2013. Cash flow from vessel operations for the first quarter of 2014 excludes the $3.5 million Voyageur Spirit FPSO indemnification payment from Teekay Corporation.

FSO Segment

Cash flow from vessel operations from the Partnership's FSO segment increased to $8.5 million in the first quarter of 2014 compared to $7.4 million for the same period of the prior year, primarily due to costs associated with front-end engineering and design studies completed in 2013 in relation to certain FSO project tenders.

Conventional Tanker Segment

Cash flow from vessel operations from the Partnership's Conventional Tanker segment decreased to $4.9 million in the first quarter of 2014 compared to $15.5 million for the same period of the prior year primarily due to the sale of three conventional tankers since the first quarter of 2013.

Liquidity

In January 2014, the Partnership issued NOK 1,000 million in senior unsecured bonds in the Norwegian bond market that mature in January 2019. The aggregate principal amount of the bonds was equivalent to USD 162 million and all interest and principal payments have been swapped into U.S. dollars at a fixed rate of 6.28 percent. The net proceeds from the bond offering were used for general partnership purposes. The Partnership is applying to list the bonds on the Oslo Stock Exchange.

As of March 31, 2014, the Partnership had total liquidity of $348.5 million, which consisted of $223.0 million in cash and cash equivalents and $125.5 million in undrawn revolving credit facilities.

2013 Audited Financial Statements

Teekay Offshore Partners L.P. filed its 2013 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (SEC) on April 29, 2014. Copies are available on Teekay Offshore's website, under "Investors - Financials", at www.teekayoffshore.com. Unitholders may request a printed copy of this annual report, including the complete audited financial statements free of charge by contacting Teekay Offshore's Investor Relations.

Conference Call

The Partnership also plans to host a conference call on Friday, May 16, 2014 at noon (ET) to discuss the results for the first quarter of 2014. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:


--  By dialing 1-866-322-8032 or 416-640-3406, if outside North America, and
    quoting conference ID code 2061356. 
--  By accessing the webcast, which will be available on Teekay Offshore's
    website at www.teekayoffshore.com (the archive will remain on the
    website for a period of 30 days). 

A supporting First Quarter 2014 Earnings Presentation will also be available at www.teekayoffshore.com in advance of the conference call start time.

The conference call will be recorded and available until Friday, May 23, 2014. This recording can be accessed following the live call by dialing 1-888-203-1112 or 647-436-0148, if outside North America, and entering access code 2061356.

About Teekay Offshore Partners L.P.

Teekay Offshore Partners L.P. is an international provider of marine transportation, oil production and storage services to the offshore oil industry focusing on the fast-growing, deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore is structured as a publicly-traded master limited partnership (MLP) and owns interests in 35 shuttle tankers (including two chartered-in vessels and one HiLoad Dynamic Positioning (DP) unit), five floating production, storage and offloading (FPSO) units, six floating storage and offtake (FSO) units (including one committed FSO conversion unit), four long-haul towing and anchor handling vessel newbuildings and four conventional oil tankers. The majority of Teekay Offshore's fleet is employed on long-term, stable contracts. In addition, Teekay Offshore also has rights to participate in certain other FPSO, shuttle tanker and HiLoad DP opportunities provided by Teekay Corporation (NYSE:TK), Sevan Marine ASA (Oslo Bors: SEVAN) and Remora AS.

Teekay Offshore's common units trade on the New York Stock Exchange under the symbol "TOO".


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                       TEEKAY OFFSHORE PARTNERS L.P.                        
                 SUMMARY CONSOLIDATED STATEMENTS OF INCOME                  
              (in thousands of U.S. dollars, except unit data)              
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                 Three Months Ended         
                                                                            
                                          March 31,    December   March 31, 
                                               2014    31, 2013        2013 
                                        (unaudited) (unaudited) (unaudited) 
                                                                            
REVENUES                                    259,234     260,654     212,112 
----------------------------------------------------------------------------
                                                                            
OPERATING EXPENSES                                                          
Voyage expenses                              33,454      29,173      22,948 
Vessel operating expenses                    88,130      91,250      77,324 
Time-charter hire expense                    11,412      13,670      14,777 
Depreciation and amortization                48,488      52,311      44,510 
General and administrative                   14,849      11,066      10,390 
Write-down of vessels                             -      19,280           - 
Restructuring charge(1)                         559         104         659 
----------------------------------------------------------------------------
Total operating expenses                    196,892     216,854     170,608 
----------------------------------------------------------------------------
Income from vessel operations                62,342      43,800      41,504 
----------------------------------------------------------------------------
OTHER ITEMS                                                                 
Interest expense                            (18,920)    (18,403)    (11,628)
Interest income                                 177         434         195 
Realized and unrealized (losses) gains                                      
 on derivative instruments (2)              (36,632)      9,948      (1,077)
Equity income                                 3,703       3,934           - 
Foreign exchange losses(3)                     (775)     (2,465)     (3,638)
Loss on bond repurchase(4)                        -           -      (1,759)
Other income - net                              390         260         314 
----------------------------------------------------------------------------
Total other items                           (52,057)     (6,292)    (17,593)
----------------------------------------------------------------------------
Income from continuing operations before                                    
 income tax (expense) recovery               10,285      37,508      23,911 
Income tax (expense) recovery                (1,263)     (1,896)        234 
----------------------------------------------------------------------------
Net income from continuing operations         9,022      35,612      24,145 
Net loss from discontinued operations(5)          -           -      (2,175)
----------------------------------------------------------------------------
Net income                                    9,022      35,612      21,970 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-controlling interests in net income       1,679      (5,657)      1,777 
Preferred unitholders' interest in net                                      
 income                                       2,719       2,719           - 
General Partner's interest in net income      3,943       4,621       3,073 
Limited partners' interest in net income        681      33,929      17,120 
----------------------------------------------------------------------------
Weighted-average number of common units                                     
 - basic                                 85,455,292  83,949,362  80,105,408 
Weighted-average number of common units                                     
 - diluted                               85,480,352  83,981,522  80,106,741 
Total number of common units outstanding                                    
 at end of period                        85,468,145  83,452,079  80,105,408 
----------------------------------------------------------------------------

1.  Restructuring charges for the three months ended March 31, 2014 and
    December 31, 2013 each relate to the reflagging of a shuttle tanker. In
    addition, restructuring charges for the three months ended March 31,
    2013 relate to the reorganization of the Partnership's marine operations
    to create better alignment with its shuttle tanker business unit and a
    lower-cost organization.  
    
2.  Realized (losses) gains on derivative instruments relate to amounts the
    Partnership actually paid or received to settle derivative instruments,
    and the unrealized (losses) gains on derivative instruments relate to
    the change in fair value of such derivative instruments, as detailed in
    the table below: 
    

                                                                            
                                                                            
                                                  Three Months Ended        
                                            March 31,   December  March 31, 
                                                 2014   31, 2013       2013 
Realized (losses) gains relating to:                                        
  Interest rate swaps                         (14,063)   (15,018)   (14,623)
  Foreign currency forward contract              (497)      (253)       353 
                                           ---------------------------------
                                              (14,560)   (15,271)   (14,270)
                                           ---------------------------------
                                                                            
Unrealized (losses) gains relating to:                                      
  Interest rate swaps                         (24,108)    25,073     14,971 
  Foreign currency forward contracts            2,036        146     (1,778)
                                           ---------------------------------
                                              (22,072)    25,219     13,193 
                                           ---------------------------------
Total realized and unrealized (losses)                                      
 gains                                                                      
                                           ---------------------------------
on derivative instruments                     (36,632)     9,948     (1,077)
                                           ---------------------------------

3.  Foreign exchange losses include realized gains relating to the amounts
    the Partnership received to settle the Partnership's non-designated
    cross currency swaps that were entered into as an economic hedge
    relating to the Partnership's Norwegian Kroner (NOK)-denominated
    unsecured bonds as detailed in the table below. The Partnership issued
    NOK 600 million unsecured bonds in 2010 that matured in the fourth
    quarter of 2013, of which it repurchased NOK 388.5 million in the first
    quarter of 2013 and recognized a realized gain of $6.8 million on the
    partial early termination of a cross currency swap and a realized
    foreign exchange loss of $6.6 million on the repurchase of the bonds.
    The Partnership also issued NOK 600 million unsecured bonds in 2012
    maturing in 2017, NOK 1,300 million of unsecured bonds in 2013 maturing
    in 2016 and 2018, and NOK 1,000 million unsecured bonds in 2014 maturing
    in 2019. Foreign exchange losses also include unrealized gains (losses)
    relating to the change in fair value of such derivative instruments,
    partially offset by unrealized (losses) gains on the revaluation of the
    NOK bonds, as detailed in the table below: 

                                            Three Months Ended              
                                                                            
                                                December 31,                
                              March 31, 2014            2013 March 31, 2013 
Realized gain on partial                                                    
 termination of cross-currency                                              
 swap                                      -               -          6,800 
Realized foreign exchange loss                                              
 on partial repurchase of NOK                                               
 bonds                                     -               -         (6,573)
Realized gains on cross-                                                    
 currency swaps                           16             210            725 
Unrealized gains (losses) on                                                
 cross-currency swaps                  7,575          (4,534)       (25,502)
Unrealized (losses) gains on                                                
 revaluation of NOK bonds             (9,130)          2,983         23,996 

4.  Loss on bond repurchase for the quarter ended December 31, 2013 relates
    to the repurchase in the first quarter of 2013 of NOK 388.5 million of
    the Partnership's NOK 600 million bond issue at a premium. 
    
5.  Results for three conventional tankers (Leyte Spirit, Poul Spirit and
    Gotland Spirit), which the Partnership sold during 2013, have been
    included in Net loss from discontinued operations for the periods
    presented. 
    

                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
                         CONSOLIDATED BALANCE SHEETS                        
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                          As at        As at
                                                      March 31, December 31,
                                                           2014         2013
                                                    (unaudited)  (unaudited)
                                                                            
ASSETS                                                                      
Current                                                                     
Cash and cash equivalents                               222,990      219,126
Accounts receivable                                     169,021      176,265
Net investments in direct financing leases -                                
 current                                                  4,830        5,104
Prepaid expenses                                         36,525       31,675
Due from affiliates                                      19,675       15,202
Current portion of derivative instruments                 1,546          500
Other current assets                                      3,384        3,051
----------------------------------------------------------------------------
Total current assets                                    457,971      450,923
----------------------------------------------------------------------------
                                                                            
Vessels and equipment                                                       
At cost, less accumulated depreciation                3,067,880    3,089,582
Advances on newbuilding contracts                        46,369            -
Investment in equity accounted joint venture             55,824       52,120
Net investments in direct financing leases               21,305       22,463
Derivative instruments                                   12,168       10,323
Deferred income tax                                       7,981        7,854
Other assets                                             37,307       35,272
Intangible assets - net                                   9,429       10,436
Goodwill                                                129,145      127,113
----------------------------------------------------------------------------
Total assets                                          3,845,379    3,806,086
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND EQUITY                                                      
Current                                                                     
Accounts payable                                         18,518       15,753
Accrued liabilities                                     134,756      138,156
Deferred revenues                                        24,437       29,075
Due to affiliates                                        80,183      121,864
Current portion of long-term debt                       748,055      806,009
Current portion of derivative instruments                55,165       47,944
Current portion of in-process revenue contracts          12,744       12,744
----------------------------------------------------------------------------
Total current liabilities                             1,073,858    1,171,545
----------------------------------------------------------------------------
                                                                            
Long-term debt                                        1,730,873    1,562,967
Derivative instruments                                  131,302      121,135
In-process revenue contracts                             85,407       88,550
Other long-term liabilities                              23,480       23,984
----------------------------------------------------------------------------
Total liabilities                                     3,044,920    2,968,181
----------------------------------------------------------------------------
                                                                            
Redeemable non-controlling interest                      15,911       16,564
                                                                            
                                                                            
Limited partners - common units (85.5 million and                           
 85.5 million units issued and outstanding at                               
 March 31, 2014 and December 31, 2013,                                      
 respectively)                                          579,830      621,002
Limited partners - preferred units (6.0 million                             
 and 6.0 million units issued and outstanding at                            
 March 31, 2014 and December 31, 2013,                                      
 respectively)                                          144,800      144,800
General Partner                                          20,399       21,242
----------------------------------------------------------------------------
Partners' equity                                        745,029      787,044
----------------------------------------------------------------------------
Non-controlling interests                                39,519       34,297
----------------------------------------------------------------------------
Total equity                                            784,548      821,341
----------------------------------------------------------------------------
Total liabilities and total equity                    3,845,379    3,806,086
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                       TEEKAY OFFSHORE PARTNERS L.P.                        
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                       (in thousands of U.S. dollars)                       
--------------------------------------------------------------------------- 
--------------------------------------------------------------------------- 
                                                                            
                                                    Three Months Ended      
                                              March 31, 2014 March 31, 2013 
                                                 (unaudited)    (unaudited) 
Cash and cash equivalents provided by (used                                 
 for)                                                                       
OPERATING ACTIVITIES                                                        
Net income                                             9,022         21,970 
Non-cash items:                                                             
  Unrealized loss on derivative instruments           14,497         12,368 
  Equity income                                       (3,703)             - 
  Depreciation and amortization                       48,488         45,349 
  Write-down and loss on sale of vessels                   -         11,247 
  Deferred income tax expense (recovery)                  10           (108)
  Amortization of in-process revenue contracts        (3,142)        (3,142)
  Foreign currency exchange (gain) loss and                                 
   other                                               8,629        (23,004)
Change in non-cash working capital items                                    
 related to operating activities                     (49,017)       (17,361)
Expenditures for dry docking                          (5,212)          (972)
----------------------------------------------------------------------------
Net operating cash flow                               19,572         46,347 
----------------------------------------------------------------------------
                                                                            
FINANCING ACTIVITIES                                                        
Proceeds from long-term debt                         208,821        234,986 
Scheduled repayments of long-term debt               (37,999)       (23,019)
Prepayments of long-term debt                        (70,000)       (90,352)
Debt issuance costs                                   (2,250)        (5,091)
Indemnification on Voyageur Spirit FPSO from                                
 Teekay Corporation                                    3,474              - 
Realized gain on cross currency swap                       -          6,800 
Cash distributions paid by the Partnership           (57,204)       (44,209)
Other                                                  7,111           (158)
----------------------------------------------------------------------------
Net financing cash flow                               51,953         78,957 
----------------------------------------------------------------------------
                                                                            
INVESTING ACTIVITIES                                                        
Expenditures for vessels and equipment               (66,772)       (23,785)
Proceeds from sale of vessels and equipment                -         13,250 
Prepayment of purchase of Voyageur Spirit FPSO             -       (150,000)
Direct financing lease payments received               1,433          1,693 
Acquisition of ALP Maritime Services B.V. (net                              
 of cash acquired of $0.3 million)                    (2,322)             - 
----------------------------------------------------------------------------
Net investing cash flow                              (67,661)      (158,842)
----------------------------------------------------------------------------
                                                                            
Increase (decrease) in cash and cash                                        
 equivalents                                           3,864        (33,538)
Cash and cash equivalents, beginning of the                                 
 period                                              219,126        206,339 
----------------------------------------------------------------------------
Cash and cash equivalents, beginning of the                                 
 period                                              222,990        172,801 
----------------------------------------------------------------------------


                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
              APPENDIX A - SPECIFIC ITEMS AFFECTING NET INCOME              
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results. Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.


----------------------------------------------------------------------------
                                                    Three Months Ended      
                                              March 31, 2014 March 31, 2013 
                                                 (unaudited)    (unaudited) 
Net income - GAAP basis                                9,022         21,970 
Adjustments:                                                                
  Net income attributable to non-controlling                                
   interests                                          (1,679)        (1,777)
----------------------------------------------------------------------------
Net income attributable to the partners                7,343         20,193 
Add (subtract) specific items affecting net                                 
 income :                                                                   
  Foreign exchange losses (1)                            791          4,365 
  Unrealized losses (gains) on derivative                                   
   instruments (2)                                    21,921        (13,193)
  Components of discontinued operations (3)                -          4,447 
  Restructuring charges and other (4)                    922            821 
  Loss on bond repurchase (5)                              -          1,759 
  Non-controlling interests' share of items                                 
   above (6)                                             199            470 
----------------------------------------------------------------------------
Total adjustments                                     23,833         (1,331)
----------------------------------------------------------------------------
Adjusted net income attributable to the                                     
 partners                                             31,176         18,862 
----------------------------------------------------------------------------

1.  Foreign exchange losses 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 gains or losses related to the
    Partnership's cross currency swaps and repurchase of Norwegian Kroner
    bonds and exclude the realized gains and losses relating to the cross
    currency swaps for outstanding Norwegian bonds of the Partnership. 
2.  Reflects the unrealized losses (gains) due to changes in the mark-to-
    market value of interest rate swaps and foreign exchange forward
    contracts that are not designated as hedges for accounting purposes,
    including the unrealized mark-to-market value of the interest rate swap
    within the Cidade de Itajai FPSO equity accounted joint venture. 
3.  Related to components of net loss from discontinued operations. The
    results for the three months ended March 31, 2013 include a termination
    fee of $6.8 million received from Teekay Corporation upon the early
    termination of the Poul Spirit conventional tanker time-charter contract
    in March 2013, and the write-down of the Poul Spirit conventional tanker
    of $11.2 million to its estimated fair value. 
4.  The three months ended March 31, 2014 includes $0.6 million of
    restructuring charges relating to the reflagging of a vessel and a $1.0
    million fee associated with the acquisition of ALP, partially offset by
    a seafarer pension credit of $0.7 million. The three months ended March
    31, 2013 includes $0.7 million in restructuring charges relating to the
    reorganization of the Partnership's shuttle tanker marine operations
    resulting in a lower cost organization. 
5.  Loss on bond repurchase for the three months ended March 31, 2013
    relates to the repurchase of NOK 388.5 million of the Partnership's
    existing NOK 600 million bond issue at a premium in January 2013. 
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 listed above" in the table above is the cumulative amount of the
    non-controlling interests' proportionate share of items listed in the
    table. 

                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
          APPENDIX B - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE         
                           DISTRIBUTABLE CASH FLOW                          
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Description of Non-GAAP Financial Measure - Distributable Cash Flow (DCF)

Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interests, non-cash items, distributions relating to equity financing of newbuilding installments and on our preferred units, vessel and business acquisition costs, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, non-cash income taxes, foreign currency and unrealized foreign exchange related items. 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. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is not defined by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net income for the quarters ended March 31, 2014 and March 31, 2013, respectively.


----------------------------------------------------------------------------
                                                   Three Months Ended       
                                             March 31, 2014  March 31, 2013 
                                                (unaudited)     (unaudited) 
----------------------------------------------------------------------------
                                                                            
Net income                                            9,022          21,970 
Add (subtract):                                                             
  Depreciation and amortization                      48,488          44,510 
  Unrealized losses (gains) on derivative                                   
   instruments (1)                                   22,072         (13,193)
  Partnership's share of equity accounted                                   
   joint venture's distributable cash flow                                  
   before estimated maintenance capital                                     
   expenditures                                       5,907               - 
  Distributions relating to equity financing                                
   of newbuildings                                    1,707           2,459 
  Distributions relating to preferred units          (2,719)              - 
  Loss on bond repurchase                                 -           1,759 
  Equity income from joint venture                   (3,703)              - 
  Estimated maintenance capital expenditures                                
   (2)                                              (29,924)        (24,620)
  Indemnification from Teekay Corporation                                   
   relating to the Voyageur Spirit FPSO (2)           3,474               - 
  Non-cash items in discontinued operations                                 
   (3)                                                    -          12,086 
  Foreign exchange and other, net                     1,106           2,598 
----------------------------------------------------------------------------
Distributable Cash Flow before Non-                                         
 Controlling Interests                               55,430          47,569 
  Non-controlling interests' share of DCF            (4,370)         (5,813)
----------------------------------------------------------------------------
Distributable Cash Flow                              51,060          41,756 
----------------------------------------------------------------------------

1.  Derivative instruments include interest rate swaps and foreign exchange
    forward contracts. 
2.  Indemnification of the loss of revenues and certain unrecovered vessel
    operating expenses from the Voyageur Spirit FPSO is effectively treated
    as a reduction to estimated maintenance capital expenditures in the
    first quarter of 2014, since the indemnification amount received from
    Teekay Corporation is effectively treated as a reduction to the purchase
    price of the Voyageur Spirit FPSO. 
3.  Includes depreciation and loss on write-down of vessel included in
    discontinued operations. 

                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                       TEEKAY OFFSHORE PARTNERS L.P.                        
          APPENDIX C - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE         
                                NET REVENUES                                
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Description of Non-GAAP Financial Measure - Net Revenues

Net revenues represents revenues less voyage expenses (recoveries), which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies, however, it is not required by GAAP and should not be considered as an alternative to revenues or any other indicator of the Partnership's performance required by GAAP.


                                Three Months Ended March 31, 2014           
                                           (unaudited)                      
                        Shuttle                        Conventional         
                         Tanker       FPSO                   Tanker         
                        Segment    Segment FSO Segment      Segment    Total
----------------------------------------------------------------------------
Revenues                153,180     83,137      14,289        8,628  259,234
Voyage expenses          31,706          -          23        1,725   33,454
----------------------------------------------------------------------------
Net revenues            121,474     83,137      14,266        6,903  225,780
----------------------------------------------------------------------------
                                                                            
                                                                            
                                Three Months Ended March 31, 2013           
                                           (unaudited)                      
                        Shuttle                        Conventional         
                         Tanker       FPSO                   Tanker         
                        Segment    Segment FSO Segment      Segment    Total
----------------------------------------------------------------------------
Revenues                130,350     57,685      15,140        8,937  212,112
Voyage expenses                                                             
 (recoveries)            22,294          -        (485)       1,139   22,948
----------------------------------------------------------------------------
Net revenues            108,056     57,685      15,625        7,798  189,164
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
                APPENDIX D - SUPPLEMENTAL SEGMENT INFORMATION               
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                Three Months Ended March 31, 2014           
                                           (unaudited)                      
                        Shuttle                        Conventional         
                         Tanker       FPSO                   Tanker         
                        Segment    Segment  FSO Segment     Segment    Total
----------------------------------------------------------------------------
                                                                            
Net revenues (See                                                           
 Appendix C)            121,474     83,137       14,266       6,903  225,780
Vessel operating                                                            
 expenses                40,406     40,391        5,873       1,460   88,130
Time-charter hire                                                           
 expense                 11,412          -            -           -   11,412
Depreciation and                                                            
 amortization            27,281     17,903        1,693       1,611   48,488
General and                                                                 
 administrative           6,699      5,758          859         533   13,849
Acquisition fee (1)           -          -            -           -    1,000
Restructuring charge        559          -            -           -      559
----------------------------------------------------------------------------
Income from vessel                                                          
 operations              35,117     19,085        5,841       3,299   62,342
----------------------------------------------------------------------------
                                                                            
(1) The towage segment has not been disaggregated as its results are not    
 material other than a $1.0 million fee associated with the acquisition of  
 ALP. This fee was recognized in general and administrative expenses in the 
 consolidated statement of income for the three months ended March 31, 2014.
                                Three Months Ended March 31, 2013           
                                           (unaudited)                      
                        Shuttle                        Conventional         
                         Tanker       FPSO                   Tanker         
                        Segment    Segment  FSO Segment     Segment    Total
----------------------------------------------------------------------------
Net revenues (See                                                           
 Appendix C)            108,056     57,685       15,625       7,798  189,164
Vessel operating                                                            
 expenses                37,967     29,501        8,285       1,571   77,324
Time-charter hire                                                           
 expense                 14,777          -            -           -   14,777
Depreciation and                                                            
 amortization            27,605     12,752        2,582       1,571   44,510
General and                                                                 
 administrative           5,889      3,062          766         673   10,390
Restructuring charge        659          -            -           -      659
----------------------------------------------------------------------------
Income from vessel                                                          
 operations              21,159     12,370        3,992       3,983   41,504
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
          APPENDIX E - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE         
         CASH FLOW FROM VESSEL OPERATIONS FROM CONSOLIDATED VESSELS         
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Description of Non-GAAP Financial Measure - Cash Flow from Vessel Operations from Consolidated Vessels

Cash flow from vessel operations from consolidated vessels represents income from vessel operations before depreciation and amortization expense, write-down of vessels and amortization of deferred gains, and includes the realized (losses) gains on the settlement of foreign exchange forward contracts, and cash flow from vessel operations relating to its discontinued operations and adjustments for direct financing leases to a cash basis. Cash flow from vessel operations is included because certain investors use this data to measure a company's financial performance. Cash flow from vessel operations is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP.


                                Three Months Ended March 31, 2014           
                                           (unaudited)                      
                        Shuttle                        Conventional         
                         Tanker       FPSO                   Tanker         
                        Segment    Segment  FSO Segment     Segment    Total
----------------------------------------------------------------------------
Income from vessel                                                          
 operations (See                                                            
 Appendix D) (1)         35,117     19,085        5,841       3,299   62,342
Depreciation and                                                            
 amortization            27,281     17,903        1,693       1,611   48,488
Realized losses from                                                        
 the settlements of                                                         
 non-designated                                                             
 foreign exchange                                                           
 forward contracts        (497)          -            -           -    (497)
Amortization of non-                                                        
 cash portion of                                                            
 revenue contracts            -    (3,142)            -           -  (3,142)
Falcon Spirit                                                               
 revenue accounted                                                          
 for as direct                                                              
 financing lease              -          -      (1,184)           -  (1,184)
Falcon Spirit cash                                                          
 flow from time-                                                            
 charter contracts            -          -        2,142           -    2,142
----------------------------------------------------------------------------
Cash flow from                                                              
 vessel operations                                                          
 from                                                                       
consolidated vessels     61,901     33,846        8,492       4,910  108,149
----------------------------------------------------------------------------
                                                                            
(1) The total column includes a $1.0 million fee associated with the        
 acquisition of ALP in income from vessel operations. This fee was          
 recognized in general and administrative expenses in the consolidated      
 statement of income for the three months ended March 31, 2014. The towage  
 segment has not been disaggregated as its results are not material other   
 than this fee.                                                             
                                                                            
                                                                            
                                Three Months Ended March 31, 2013           
                                           (unaudited)                      
                          Shuttle                      Conventional         
                           Tanker    FPSO                    Tanker         
                          Segment Segment  FSO Segment      Segment   Total 
----------------------------------------------------------------------------
Income from vessel                                                          
 operations (See                                                            
 Appendix D)               21,159  12,370        3,992        3,983  41,504 
Depreciation and                                                            
 amortization              27,605  12,752        2,582        1,571  44,510 
Unrealized losses from                                                      
 the change in fair                                                         
 value of designated                                                        
 foreign exchange                                                           
 forward contracts             59       -            -            -      59 
Realized gains from                                                         
 the settlements of                                                         
 non-designated                                                             
 foreign exchange                                                           
 forward contracts             96     257            -            -     353 
Amortization of                                                             
 intangible and non-                                                        
 cash portion of                                                            
 revenue contracts              -  (3,123)           -            -  (3,123)
Falcon Spirit revenue                                                       
 accounted for as                                                           
 direct financing                                                           
 lease                          -       -       (1,339)           -  (1,339)
Falcon Spirit cash                                                          
 flow from time-                                                            
 charter contracts              -       -        2,123            -   2,123 
Cash flow from                                                              
 discontinued                                                               
 operations                     -       -            -        9,966   9,966 
----------------------------------------------------------------------------
Cash flow from vessel                                                       
 operations from                                                            
consolidated vessels       48,919  22,256        7,358       15,520  94,053 
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        TEEKAY OFFSHORE PARTNERS L.P.                       
          APPENDIX F - RECONCILIATION OF NON-GAAP FINANCIAL MEASURE         
        CASH FLOW FROM VESSEL OPERATIONS FROM EQUITY ACCOUNTED VESSEL       
                       (in thousands of U.S. dollars)                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Description of Non-GAAP Financial Measure - Cash Flow from Vessel Operations from Equity Accounted Vessel

Cash flow from vessel operations from equity accounted vessel represents income from vessel operations before depreciation and amortization expense. Cash flow from equity accounted vessel represents the Partnership's proportionate share of cash flow from vessel operations from its equity-accounted vessel, the Cidade de Itajai FPSO unit. Cash flow from vessel operations from equity accounted vessel is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity accounted joint venture. Cash flow from vessel operations from equity accounted vessel is not required by GAAP and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.


                                                    Three Months Ended      
                                                      March 31, 2014        
                                                       (unaudited)          
                                                          At  Partnership's 
                                                        100%            50% 
----------------------------------------------------------------------------
Voyage revenues                                       23,385         11,693 
Vessel and other operating expenses                    7,471          3,735 
Depreciation and amortization                          4,466          2,233 
General and administrative                                21             11 
----------------------------------------------------------------------------
Income from vessel operations of equity                                     
 accounted vessel                                     11,427          5,714 
----------------------------------------------------------------------------
Interest expense                                      (1,735)          (868)
Realized and unrealized losses on derivative                                
 instruments                                          (1,788)          (894)
Foreign currency exchange loss                          (475)          (238)
----------------------------------------------------------------------------
Total other items                                     (3,998)        (2,000)
----------------------------------------------------------------------------
Net income / equity income of equity accounted                              
 vessel before income tax expense                      7,429          3,714 
Income tax expense                                       (22)           (11)
----------------------------------------------------------------------------
Net income / equity income of equity accounted                              
 vessel                                                7,407          3,703 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Income from vessel operations                         11,427          5,714 
Depreciation and amortization                          4,466          2,233 
----------------------------------------------------------------------------
Cash flow from vessel operations from equity                                
 accounted vessel                                     15,893          7,947 
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                         FORWARD LOOKING STATEMENTS                         
----------------------------------------------------------------------------
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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 regarding: the fundamentals in the offshore industry; future growth opportunities, including the Partnership's ability to successfully bid for new offshore projects or to grow organically; future increases in the Partnership's distributable cash flows; the results of proposed projects; the timing of new and converted vessel deliveries and commencement of their time charter contracts; the potential for the Partnership to acquire future HiLoad projects and improved features of new HiLoad DP vessel designs; the timing and certainty of completion of the Partnership's acquisition of Logitel; the effect of the Logitel acquisition on the Partnership's future cash flows and growth opportunities; the timing and certainty of entering into long-term financing for the FAU newbuildings prior to their deliveries; the timing and certainty of securing a charter contract for the second FAU newbuilding prior to its delivery; the estimated cost of building or converting vessels or offshore units; the effect of the Dampier Spirit FSO contract extension on the Partnership's cash flow from vessel operations; and the potential for Teekay Corporation or third parties to offer additional vessels or projects to the Partnership and the Partnership agreeing to acquire such vessels or projects, including the timing and certainty of the acquisition of the Knarr FPSO.

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: vessel operations and oil production volumes; significant changes in oil prices; variations in expected levels of field maintenance; increased operating expenses; different-than-expected levels of oil production in the North Sea and Brazil offshore fields; potential early termination of contracts; shipyard delivery or vessel conversion delays and cost overruns; failure to complete the Partnership's acquisition of Logitel; failure by the Partnership to secure financing on the two FAU newbuildings and secure a charter contract for the second FAU newbuilding; change in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact the expected future growth in the floating accommodation and services rig market; delays in the commencement of time-charters; the inability to successfully complete the operational testing of the HiLoad DP unit; actual results of the new HiLoad DP unit designs; failure of Teekay Corporation to offer to the Partnership additional vessels or of Sevan, Remora or Odebrecht to develop new vessels or projects; potential delays in the construction of the Knarr FPSO and/or commencement of operations under its charter contract; failure to obtain required approvals by the Conflicts Committee of Teekay Offshore's general partner to approve the acquisition of vessels offered from Teekay Corporation, or third parties; the Partnership's ability to raise adequate financing to purchase additional assets; and other factors discussed in Teekay Offshore's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2013. The Partnership expressly disclaims any obligation or undertaking 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.

Contacts:
Teekay Offshore Partners L.P.
Investor Relations enquiries
Ryan Hamilton
+1 (604) 609-6442
www.teekayoffshore.com

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