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Teekay LNG Partners Reports First Quarter 2021 Results

Highlights

  • GAAP net income attributable to the partners and preferred unitholders of $87.6 million and GAAP net income per common unit of $0.92 in the first quarter of 2021.
  • Adjusted net income(1) attributable to the partners and preferred unitholders of $60.5 million and adjusted net income per common unit of $0.61 in the first quarter of 2021 (excluding other items listed in Appendix A to this release).
  • Total adjusted EBITDA(1) of $184.3 million in the first quarter of 2021.
  • Secured three LNG charters during March and April 2021, increasing the Partnership’s LNG fleet to 98 percent fixed for the remainder of 2021, and 89 percent fixed for 2022.
  • Teekay LNG increased its common unit distributions by 15 percent to $1.15 per common unit, on an annualized basis, commencing with the first quarter’s distribution to be paid in May 2021.

HAMILTON, Bermuda, May 13, 2021 (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 March 31, 2021.

Consolidated Financial Summary

  Three Months Ended
  March 31, 2021 December 31, 2020 March 31, 2020
(in thousands of U.S. Dollars, except per unit data) (unaudited) (unaudited) (unaudited)
GAAP FINANCIAL COMPARISON      
Voyage revenues 152,802 154,076 139,887  
Income from vessel operations 70,611 65,169 21,738  
Equity income 37,516 15,359 373  
Net income (loss) attributable to the partners and preferred unitholders 87,591 35,142 (32,994 )
Limited partners’ interest in net income (loss) per common unit 0.92 0.32 (0.50 )
NON-GAAP FINANCIAL COMPARISON      
Total adjusted EBITDA(1) 184,287 190,228 188,388  
Distributable cash flow (DCF)(1) 82,019 85,033 74,877  
Adjusted net income attributable to the partners and preferred unitholders(1) 60,466 59,978 52,236  
Limited partners’ interest in adjusted net income per common unit 0.61 0.61 0.58  
(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).

First Quarter of 2021 Compared to First Quarter of 2020

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were positively impacted for the three months ended March 31, 2021, compared to the same quarter of the prior year, primarily due to a decrease in operational claims under the Partnership’s charter contracts and higher rates earned for certain of the Partnership’s 50 percent-owned LPG carriers. These increases were partially offset by more scheduled dry dockings, redeployment of certain LNG carriers at lower rates, and the timing of certain vessel operating expenses during the first quarter of 2021.

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

First Quarter of 2021 Compared to Fourth Quarter of 2020

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were positively impacted for the three months ended March 31, 2021, compared to the three months ended December 31, 2020, primarily due to a decrease in operational claims under the Partnership’s charter contracts, lower repairs and maintenance expenses, and lower net interest expense during the first quarter of 2021. These increases were partially offset by redeployment of certain LNG carriers at lower rates and unscheduled off-hire for repairs.

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

CEO Commentary

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

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

Summary of Recent Events

Chartering Activities

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

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

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

Financing Activities

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

Operating Results

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

  Three Months Ended
  March 31, 2021 March 31, 2020
(in thousands of U.S. Dollars) (unaudited) (unaudited)
  Liquefied Natural Gas Segment
Liquefied Petroleum Gas Segment Total
Liquefied Natural Gas Segment
Liquefied Petroleum Gas Segment Total
GAAP FINANCIAL COMPARISON                    
Voyage revenues 141,416   11,386   152,802   132,570   7,317   139,887  
Income (loss) from vessel operations 71,019   (408 ) 70,611   67,182   (45,444 ) 21,738  
Equity income 32,939   4,577   37,516   182   191   373  
NON-GAAP FINANCIAL COMPARISON                    
Consolidated adjusted EBITDA(i) 104,827   1,262   106,089   101,543   1,603   103,146  
Adjusted EBITDA from equity-accounted vessels(i) 66,766   11,432   78,198   75,970   9,272   85,242  
Total adjusted EBITDA(i) 171,593   12,694   184,287   177,513   10,875   188,388  
  (i) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.

Liquefied Natural Gas Segment

Income from vessel operations and consolidated adjusted EBITDA(1) for the LNG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, increased primarily due to a decrease in operational claims on certain of the Partnership’s LNG carriers. This increase was partially offset by more scheduled dry dockings, redeployment of one LNG carrier at a lower rate and the timing of vessel operating expenditures for certain of the Partnership’s LNG carriers during the first quarter of 2021.

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

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

Liquefied Petroleum Gas Segment

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

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

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LPG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, were positively impacted from higher charter rates earned in the Partnership’s 50 percent-owned LPG joint venture with Exmar NV (the Exmar LPG Joint Venture). In addition, equity income for the LPG segment for the three months ended March 31, 2021, compared to the same quarter of the prior year, was positively impacted by lower net interest expense and unrealized gains on non-designated derivative instruments in the first quarter of 2021, compared to unrealized losses in the first quarter of 2020.

(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.

Teekay LNG’s Fleet

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

  Number of Vessels
  Owned and In-Chartered Vessels(i)
LNG Carrier Fleet 47(ii)
LPG/Multi-gas Carrier Fleet 30(iii)
Total 77
  (i) Includes vessels leased by the Partnership from third parties and accounted for as finance leases.
     
  (ii) The Partnership’s ownership interests in these vessels range from 20 percent to 100 percent.
     
  (iii) The Partnership’s ownership interests in these vessels range from 50 percent to 100 percent.

Liquidity

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

Conference Call

The Partnership plans to host a conference call on Thursday, May 13, 2021 at 1:00 p.m. (ET) to discuss the results for the first quarter of 2021. 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 7355560.
  • 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 First Quarter 2021 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 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

Adjusted EBITDA represents net income (loss) 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, write-downs of vessels, gains or losses on sales of vessels, 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 (loss) 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 (loss) 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 (loss), and refer to footnote (2) of the Consolidated Statements of Income (Loss) 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 (loss) 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, realized losses on interest rate swap termination, unrealized credit loss provisions, distributions relating to preferred units, adjustments for direct financing and sales-type leases to a cash basis, unrealized foreign currency exchange gains or losses, write-downs of vessels, gains or losses on sales of vessels, 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 (loss), the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.

Teekay LNG Partners L.P.
Consolidated Statements of Income (Loss)
(in thousands of U.S. Dollars, except unit and per unit data)

  Three Months Ended
  March 31, December 31, March 31,
2021 2020 2020
  (unaudited) (unaudited) (unaudited)
Voyage revenues 152,802   154,076   139,887  
       
Voyage expenses (7,183 ) (5,798 ) (2,317 )
Vessel operating expenses (30,089 ) (31,243 ) (26,104 )
Time-charter hire expenses (5,850 ) (6,294 ) (5,922 )
Depreciation and amortization (31,902 ) (32,883 ) (32,639 )
General and administrative expenses (7,167 ) (6,689 ) (6,167 )
Write-down of vessels(1)   (6,000 ) (45,000 )
Income from vessel operations 70,611   65,169   21,738  
       
Equity income(2) 37,516   15,359   373  
Interest expense (29,652 ) (30,431 ) (36,704 )
Interest income 2,006   1,411   2,370  
Realized and unrealized gain (loss) on non-designated derivative instruments(3) 6,618   (3,020 ) (20,471 )
Foreign currency exchange gain (loss)(4) 6,960   (6,618 ) 4,739  
Other expense(5) (3,769 ) (1,721 ) (361 )
Net income (loss) before income tax expense 90,290   40,149   (28,316 )
Income tax recovery (expense) 777   (1,364 ) (2,512 )
Net income (loss) 91,067   38,785   (30,828 )
       
Non-controlling interest in net income 3,476   3,643   2,166  
Preferred unitholders’ interest in net income 6,425   6,427   6,425  
General partner’s interest in net income (loss) 1,426   504   (789 )
Limited partners’ interest in net income (loss) 79,740   28,211   (38,630 )
Limited partners’ interest in net income (loss) per common unit:      
• Basic 0.92   0.32   (0.50 )
• Diluted 0.92   0.32   (0.50 )
Weighted-average number of common units outstanding:      
• Basic 86,955,664   86,951,234   77,071,647  
• Diluted 87,091,656   87,077,496   77,071,647  
Total number of common units outstanding at end of period 86,964,523   86,951,234   76,171,639  
(1) During the three months ended December 31, 2020 and March 31, 2020, the Partnership wrote-down four and six wholly-owned multi-gas carriers, respectively, to their estimated fair values. The total impairment charges of $6.0 million and $45.0 million were included in write-down of vessels for the three months ended December 31, 2020 and March 31, 2020, respectively.
   
(2) 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 Ended
  March 31, December 31, March 31,
  2021 2020 2020
Equity income 37,516   15,359   373  
Proportionate share of unrealized (gain) loss on non-designated interest rate swaps (15,410 ) (4,214 ) 22,204  
Proportionate share of write-down of vessels   17,000    
Proportionate share of unrealized credit loss provisions 6,677   2,989   8,980  
Proportionate share of other items (320 ) (669 ) (539 )
Equity income adjusted for items in Appendix A 28,463   30,465   31,018  
(3) 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 Ended
  March 31, December 31, March 31,
  2021 2020 2020
Realized losses relating to:      
Interest rate swap agreements (4,473 ) (5,106 ) (2,911 )
Interest rate swap agreement termination(i) (18,012 )    
Foreign currency forward contracts     (241 )
  (22,485 ) (5,106 ) (3,152 )
Unrealized gains (losses) relating to:      
Interest rate swap agreements 29,103   2,086   (17,521 )
Foreign currency forward contracts     202  
  29,103   2,086   (17,319 )
Total realized and unrealized gains (losses) on non-designated derivative instruments 6,618   (3,020 ) (20,471 )
  (i) The termination of an interest rate swap agreement during the three months ended March 31, 2021 was in connection with a debt refinancing completed in February 2021 at a lower all-in interest rate.
     
(4) 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 (Loss).
     
  Foreign currency exchange gain (loss) includes realized losses relating to the amounts the Partnership paid to settle the Partnership’s Norwegian Krone (NOK) denominated unsecured bonds and the associated non-designated cross currency swaps that were entered into as economic hedges in relation to the NOK denominated bonds. Foreign currency exchange gain (loss) also includes unrealized gains (losses) relating to the change in fair value of such derivative instruments and unrealized (losses) gain on the revaluation of the NOK bonds as detailed in the table below:
  Three Months Ended
  March 31, December 31, March 31,
  2021 2020 2020
Realized losses on cross-currency swaps (1,345 ) (1,672 ) (1,817 )
Unrealized gains (losses) on cross currency swaps 5,129   29,001   (49,540 )
Unrealized (losses) gains on revaluation of NOK bonds (1,189 ) (28,694 ) 53,973  
(5) Includes unrealized credit loss (provisions) reversals of $(3.7) million, $(1.5) million and $0.1 million for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

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

  As at March 31, As at December 31,
  2021 2020
  (unaudited) (unaudited)
ASSETS    
Current    
Cash and cash equivalents 163,480   206,762  
Restricted cash – current 5,702   8,358  
Accounts receivable 15,100   7,631  
Prepaid expenses 13,566   9,259  
Current portion of derivative assets 124    
Current portion of net investments in direct financing leases, net 14,022   13,969  
Current portion of advances to equity-accounted joint ventures, net 10,994   10,991  
Advances to affiliates 6,844   4,924  
Other current assets 237   237  
Total current assets 230,069   262,131  
     
Restricted cash – long-term 39,034   42,823  
Vessels and equipment    
At cost, less accumulated depreciation 1,209,622   1,220,355  
Vessels related to finance leases, at cost, less accumulated depreciation 1,650,959   1,654,814  
Operating lease right-of-use assets 17,357   20,750  
Total vessels and equipment 2,877,938   2,895,919  
Investments in and advances to equity-accounted joint ventures, net 1,118,104   1,056,792  
Net investments in direct financing leases, net 492,027   500,101  
Other assets 24,386   22,382  
Derivative assets 9,532   4,505  
Intangible assets, net 32,296   34,510  
Goodwill 34,841   34,841  
Total assets 4,858,227   4,854,004  
LIABILITIES AND EQUITY    
Current    
Accounts payable 4,104   4,883  
Accrued liabilities 71,512   81,706  
Unearned revenue 23,700   30,254  
Current portion of long-term debt 350,273   250,508  
Current obligations related to finance leases 72,422   71,932  
Current portion of operating lease liabilities 14,164   14,003  
Current portion of derivative liabilities 26,047   56,925  
Advances from affiliates 9,353   11,047  
Total current liabilities 571,575   521,258  
Long-term debt 1,094,044   1,221,705  
Long-term obligations related to finance leases 1,250,647   1,268,990  
Long-term operating lease liabilities 3,193   6,747  
Other long-term liabilities 55,544   56,063  
Derivative liabilities 30,293   32,971  
Total liabilities 3,005,296   3,107,734  
Equity    
Limited partners – common units 1,523,746   1,465,408  
Limited partners – preferred units 285,159   285,159  
General partner 47,225   46,182  
Accumulated other comprehensive loss (61,375 ) (103,836 )
Partners’ equity 1,794,755   1,692,913  
Non-controlling interest 58,176   53,357  
Total equity 1,852,931   1,746,270  
Total liabilities and total equity 4,858,227   4,854,004  

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

  Three Months Ended
  March 31, March 31,
  2021 2020
  (unaudited) (unaudited)
Cash and cash equivalents provided by (used for)    
OPERATING ACTIVITIES    
Net income (loss) 91,067   (30,828 )
Non-cash and non-operating items:    
Unrealized (gain) loss on non-designated derivative instruments (29,103 ) 17,319  
Depreciation and amortization 31,902   32,639  
Write-down of vessels   45,000  
Unrealized foreign currency exchange gain (9,982 ) (6,931 )
Equity income, net of distributions received $16,500 (2020 – $6,500) (21,016 ) 6,127  
Amortization of deferred financing issuance costs included in interest expense 1,447   1,534  
Change in unrealized credit loss provisions included in other expense 3,673   (100 )
Other non-cash items (734 ) 1,587  
Change in operating assets and liabilities:    
Receipts from direct financing and sales-type leases 3,585   264,072  
Expenditures for dry docking (3,508 ) (1,191 )
Other operating assets and liabilities (39,252 ) (495 )
Net operating cash flow 28,079   328,733  
FINANCING ACTIVITIES    
Proceeds from issuance of long-term debt 192,691   384,149  
Scheduled repayments of long-term debt (117,897 ) (27,785 )
Prepayments of long-term debt (96,543 ) (445,047 )
Financing issuance costs (2,461 ) (2,601 )
Scheduled repayments of obligations related to finance leases (17,853 ) (17,380 )
Repurchase of common units   (15,635 )
Cash distributions paid (28,552 ) (21,438 )
Acquisition of non-controlling interest in certain of the Partnership’s subsidiaries   (2,219 )
Net financing cash flow (70,615 ) (147,956 )
INVESTING ACTIVITIES    
Expenditures for vessels and equipment (7,191 ) (7,830 )
Net investing cash flow (7,191 ) (7,830 )
(Decrease) increase in cash, cash equivalents and restricted cash (49,727 ) 172,947  
Cash, cash equivalents and restricted cash, beginning of the period 257,943   253,291  
Cash, cash equivalents and restricted cash, end of the period 208,216   426,238  

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
March 31, December 31, March 31,
2021 2020 2020
(unaudited) (unaudited) (unaudited)
Net income (loss) – GAAP basis 91,067   38,785   (30,828 )
Less: net income attributable to non-controlling interests (3,476 ) (3,643 ) (2,166 )
Net income (loss) attributable to the partners and preferred unitholders 87,591   35,142   (32,994 )
Add (subtract) specific items affecting net income (loss):      
Write-down of vessels(1)   6,000   45,000  
Foreign currency exchange (gains) losses(2) (8,305 ) 4,944   (6,556 )
Unrealized credit loss provisions, unrealized (gains) and losses on non-designated derivative instruments and other items from equity-accounted investees(3) (9,053 ) 15,106   30,645  
Unrealized (gains) losses on non-designated derivative instruments and realized loss from interest rate swap termination(4) (11,091 ) (2,086 ) 17,319  
Unrealized credit loss provisions (reversals) and other items(5) 823   174   (100 )
Non-controlling interests’ share of items above(6) 501   698   (1,078 )
Total adjustments (27,125 ) 24,836   85,230  
Adjusted net income attributable to the partners and preferred unitholders 60,466   59,978   52,236  
       
Preferred unitholders’ interest in adjusted net income 6,425   6,427   6,425  
General partner’s interest in adjusted net income 950   941   916  
Limited partners’ interest in adjusted net income 53,091   52,610   44,895  
Limited partners’ interest in adjusted net income per common unit, basic 0.61   0.61   0.58  
Weighted-average number of common units outstanding, basic 86,955,664   86,951,234   77,071,647  
(1) See Note 1 to the Consolidated Statements of Income (Loss) included in this release for further details.
   
(2) Foreign currency exchange (gains) 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 losses (gains) 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 4 to the Consolidated Statements of Income (Loss) included in this release for further details.
   
(3) Reflects the proportionate share of write-down of vessels, 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 2 to the Consolidated Statements of Income (Loss) included in this release for further details.
   
(4) Reflects the unrealized (gains) 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 and realized losses related to interest rate swap agreement termination. See Note 3 to the Consolidated Statements of Income (Loss) included in this release for further details.
   
(5) Includes adjustments for unrealized credit loss provisions (reversals) (see Note 5 to the Consolidated Statements of Income (Loss) included in this release for further details) and adjustments relating to changes in deferred tax balances.
   
(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
March 31, December 31, March 31,
2021 2020 2020
(unaudited) (unaudited) (unaudited)
         
Net income (loss) 91,067   38,785   (30,828 )
Add:      
Partnership’s share of equity-accounted joint ventures’ DCF net of estimated maintenance capital expenditures(1) 36,356   38,511   39,542  
Depreciation and amortization 31,902   32,883   32,639  
Unrealized credit loss provisions 3,673   1,518   (100 )
Direct financing and sales-type lease payments received in excess of revenue recognized and other adjustments 3,576   3,578   3,769  
Write-down of vessels   6,000   45,000  
Subtract:      
Deferred income tax and other non-cash items (1,216 ) 3,723   1,098  
Distributions relating to preferred units (6,425 ) (6,427 ) (6,425 )
Foreign currency exchange (gain) loss (8,305 ) 4,944   (6,556 )
Unrealized (gains) losses on non-designated derivative instruments and realized loss from interest rate swap termination (11,091 ) (2,086 ) 17,319  
Estimated maintenance capital expenditures (14,365 ) (14,683 ) (14,657 )
Equity income (37,516 ) (15,359 ) (373 )
Distributable Cash Flow before non-controlling interest 87,656   91,387   80,428  
Non-controlling interests’ share of DCF before estimated maintenance capital expenditures (5,637 ) (6,354 ) (5,551 )
Distributable Cash Flow 82,019   85,033   74,877  
Amount of cash distributions attributable to the General Partner (447 ) (389 ) (389 )
Limited partners’ Distributable Cash Flow 81,572   84,644   74,488  
Weighted-average number of common units outstanding, basic 86,955,664   86,951,234   77,071,647  
Distributable Cash Flow per limited partner common unit 0.94   0.97   0.97  
(1) The Partnership’s share of estimated maintenance capital expenditures relating to its equity-accounted joint ventures were $15.1 million, $15.4 million and $15.2 million for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

Teekay LNG Partners L.P.
Appendix C – Reconciliation of Non-GAAP Financial Measures
Total Adjusted EBITDA
(in thousands of U.S. Dollars)

  Three Months Ended
March 31, December 31, March 31,
2021 2020 2020
(unaudited) (unaudited) (unaudited)
Net income (loss) 91,067   38,785   (30,828 )
Depreciation and amortization 31,902   32,883   32,639  
Interest expense, net of interest income 27,646   29,020   34,334  
Income tax (recovery) expense (777 ) 1,364   2,512  
EBITDA 149,838   102,052   38,657  
       
Add (subtract) specific income statement items affecting EBITDA:      
Foreign currency exchange (gain) loss (6,960 ) 6,618   (4,739 )
Other expense 3,769   1,721   361  
Equity income (37,516 ) (15,359 ) (373 )
Realized and unrealized (gain) loss on non-designated derivative instruments (6,618 ) 3,020   20,471  
Write-down of vessels   6,000   45,000  
Direct financing and sales-type lease payments received in excess of revenue recognized and other adjustments 3,576   3,578   3,769  
Consolidated adjusted EBITDA 106,089   107,630   103,146  
Adjusted EBITDA from equity-accounted vessels (See Appendix E) 78,198   82,598   85,242  
Total adjusted EBITDA 184,287   190,228   188,388  

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 March 31, 2021
  (unaudited)
  Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total
Voyage revenues 141,416   11,386   152,802  
Voyage expenses (2,129 ) (5,054 ) (7,183 )
Vessel operating expenses (25,583 ) (4,506 ) (30,089 )
Time-charter hire expenses (5,850 )   (5,850 )
Depreciation and amortization (30,232 ) (1,670 ) (31,902 )
General and administrative expenses (6,603 ) (564 ) (7,167 )
Income (loss) from vessel operations 71,019   (408 ) 70,611  
Depreciation and amortization 30,232   1,670   31,902  
Direct financing and sales-type lease payments received in excess of revenue recognized and other adjustments 3,576     3,576  
Consolidated adjusted EBITDA 104,827   1,262   106,089  
       
  Three Months Ended March 31, 2020
  (unaudited)
  Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total
Voyage revenues 132,570   7,317   139,887  
Voyage expenses (1,029 ) (1,288 ) (2,317 )
Vessel operating expenses (22,092 ) (4,012 ) (26,104 )
Time-charter hire expenses (5,922 )   (5,922 )
Depreciation and amortization (30,592 ) (2,047 ) (32,639 )
General and administrative expenses (5,753 ) (414 ) (6,167 )
Write-down of vessels   (45,000 ) (45,000 )
Income (loss) from vessel operations 67,182   (45,444 ) 21,738  
Depreciation and amortization 30,592   2,047   32,639  
Write-down of vessels   45,000   45,000  
Direct financing and sales-type lease payments received in excess of revenue recognized and other adjustments 3,769     3,769  
Consolidated adjusted EBITDA 101,543   1,603   103,146  

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
  March 31, 2021 March 31, 2020
  (unaudited) (unaudited)
  At Partnership’s At Partnership’s
100% Portion(1) 100% Portion(1)
Voyage revenues 243,714   105,389   254,652   110,136  
Voyage expenses (5,935 ) (2,948 ) (2,815 ) (1,354 )
Vessel operating expenses, time-charter hire expenses and general and administrative expenses (76,404 ) (33,346 ) (70,876 ) (31,629 )
Depreciation and amortization (24,710 ) (12,420 ) (25,613 ) (12,965 )
Income from vessel operations of equity-accounted vessels 136,665   56,675   155,348   64,188  
Net interest expense (60,557 ) (24,474 ) (76,058 ) (30,493 )
Income tax expense (780 ) (290 ) (598 ) (299 )
Other items including realized and unrealized gains (losses) on derivative instruments and unrealized credit loss provisions 17,932   5,605   (102,927 ) (33,023 )
Net income (loss) / equity income of equity-accounted vessels 93,260   37,516   (24,235 ) 373  
Net income (loss) / equity income of equity-accounted LNG vessels 83,939   32,939   (24,777 ) 182  
Net income / equity income of equity-accounted LPG vessels 9,321   4,577   542   191  
         
Net income (loss) / equity income of equity-accounted vessels 93,260   37,516   (24,235 ) 373  
Depreciation and amortization 24,710   12,420   25,613   12,965  
Net interest expense 60,557   24,474   76,058   30,493  
Income tax expense 780   290   598   299  
EBITDA from equity-accounted vessels 179,307   74,700   78,034   44,130  
         
Add (subtract) specific income statement items affecting EBITDA:        
Other items including realized and unrealized (gains) losses on derivative instruments and unrealized credit loss provisions (17,932 ) (5,605 ) 102,927   33,023  
Direct financing and sales-type lease payments received in excess of revenue recognized 27,758   10,038   24,976   9,024  
Amortization of in-process contracts (1,719 ) (935 ) (1,718 ) (935 )
Adjusted EBITDA from equity-accounted vessels 187,414   78,198   204,219   85,242  
Adjusted EBITDA from equity-accounted LNG vessels 164,550   66,766   185,672   75,970  
Adjusted EBITDA from equity-accounted LPG vessels 22,864   11,432   18,547   9,272  
(1) The Partnership’s equity-accounted vessels for the three months ended March 31, 2021 and 2020 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 the Exmar LPG Joint Venture, which owns and in-charters 23 LPG carriers; the Partnership’s ownership interest ranging from 20 to 30 percent in four LNG carriers 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; and the Partnership’s 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal in Bahrain.

Teekay LNG Partners L.P.
Appendix F – Summarized Financial Information of Equity-Accounted Joint Ventures
(in thousands of U.S. Dollars)

  As at March 31, 2021 As at December 31, 2020
  (unaudited) (unaudited)
  At Partnership’s At Partnership’s
100% Portion(1) 100% Portion(1)
Cash and restricted cash, current and non-current 603,225   251,130   549,454   225,049  
Other current assets 68,345   26,444   67,580   25,415  
Property, plant and equipment, including owned vessels, vessels related to finance leases and operating lease right-of-use assets 1,940,832   989,504   1,961,820   1,000,386  
Net investments in sales-type and direct financing leases, current and non-current 5,340,428   2,061,087   5,384,652   2,077,707  
Derivative assets 15,348   7,679      
Other non-current assets 90,826   53,168   87,248   51,812  
Total assets 8,059,004   3,389,012   8,050,754   3,380,369  
         
Current portion of long-term debt and obligations related to finance leases and operating leases 304,859   129,603   306,185   129,538  
Current portion of derivative liabilities 67,359   26,286   68,966   27,988  
Other current liabilities 187,783   79,304   164,266   65,311  
Long-term debt and obligations related to finance leases and operating leases 4,736,706   1,918,873   4,789,260   1,938,748  
Shareholders’ loans, current and non-current 348,977   123,027   341,113   121,778  
Derivative liabilities 167,496   68,208   280,480   112,922  
Other long-term liabilities 73,427   33,895   70,743   33,353  
Equity 2,172,397   1,009,816   2,029,741   950,731  
Total liabilities and equity 8,059,004   3,389,012   8,050,754   3,380,369  
         
Investments in equity-accounted joint ventures   1,009,816     950,731  
Advances to equity-accounted joint ventures   123,027     121,778  
Unrealized credit loss provisions   (3,745 )   (4,726 )
Investments in and advances, net to equity-accounted joint ventures, current and non-current   1,129,098     1,067,783  
(1) The Partnership’s equity-accounted vessels as at March 31, 2021 and December 31, 2020 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 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 the Exmar LPG Joint Venture, 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.

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 Partnership’s ability to continue to generate strong earnings and cash flows despite market volatility and cyclicality; the counter-seasonal strength in LNG shipping rates and the Partnership’s ability to derive benefits from any upside in market strength; the ability of the Partnership to fully utilize certain of its vessels; the ability of the Partnership to execute on its balanced capital allocation strategy including delevering of its balance sheet and returning capital to unitholders while pursuing growth, including expected increases in financial flexibility as a result of implementing such strategy; fixed charter coverage for the Partnership’s LNG fleet for the remainder of 2021 and 2022; the ability of the Partnership to realize and receive the full benefits from its contractual backlog of revenue under its long-term charter contracts; the ability to continue to pay increased distributions on its common units; and the expected cash flows from, 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 (both scheduled and unscheduled); 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; potential lack of cash flow to continue paying distributions on the Partnership’s common units and other securities; 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, 2020. 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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