Teekay Offshore Partners L.P. announced that it has agreed to acquire a 50 percent interest in the Cidade de Itajai (Itajai) floating production, storage and offloading (FPSO) unit from Teekay Corporation (Teekay) for a purchase price of approximately $204 million. The acquisition will be financed with assumed debt and proceeds from the recently completed equity private placement. The acquisition is expected to be completed on June 1, 2013, subject to customary closing conditions. The Itajai FPSO is operating on the Bauna and Piracaba (previously named Tiro and Sidon) fields in the Santos Basin offshore Brazil under a nine-year fixed-rate time-charter contract (plus extension options) with Petroleo Brasileiro SA (Petrobras). The remaining 50 percent interest in the Itajai FPSO is owned by Brazilian-based Odebrecht Oil & Gas S.A.
The Partnership's 50 percent interest in the Itajai FPSO unit, which will be equity accounted for, is expected to generate annual Cash Flow from Vessel Operations of approximately $25 million, and annual Distributable Cash Flow of approximately $14 million.
"We are pleased to be completing another strategic FPSO acquisition, our second to-date in 2013, which will bring the Partnership's total FPSO fleet size to five units," commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. "The Itajai FPSO will add to our growing FPSO franchise in Brazil, where we currently own and operate two other FPSO units, and further builds on our strong relationship with Petrobras. In addition, the stable fixed-rate cash flow contributed from the Itajai FPSO will be accretive to the Partnership's distributable cash flow."
The Board of Directors of the Partnership's general partner and its Conflicts Committee have approved the transaction. The Conflicts Committee retained independent legal and financial advisors to assist in evaluating the transaction.
1.Cash flow from vessel operations from equity accounted vessels represents income from vessel operations before depreciation and amortization expense, amortization of in-process revenue contracts and includes adjustments for direct financing leases to a cash basis. Cash flow from vessel operations from equity accounted vessels 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 ventures. Cash flow from vessel operations from equity accounted vessels is not required by United States generally accepted accounting principles (GAAP) and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.
2.Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-controlling interest, non-cash items, distributions relating to equity financing of newbuilding installments, vessel acquisition costs, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, non-cash income taxes 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.
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