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Teekay LNG Partners Reports Second Quarter 2021 Results

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·39 min read
In this article:
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Highlights

  • GAAP net income attributable to the partners and preferred unitholders of $53.3 million and GAAP net income per common unit of $0.53 in the second quarter of 2021.

  • Adjusted net income(1) attributable to the partners and preferred unitholders of $57.0 million and adjusted net income per common unit of $0.57 in the second quarter of 2021 (excluding other items listed in Appendix A to this release).

  • Total adjusted EBITDA(1) of $183.5 million in the second quarter of 2021.

  • The Partnership’s LNG fleet is 98 percent fixed for the remainder of 2021, and 89 percent fixed for 2022.

  • Current strong LNG shipping fundamentals expected to persist into 2022.

HAMILTON, Bermuda, Aug. 05, 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 June 30, 2021.

Consolidated Financial Summary

Three Months Ended

June 30, 2021

March 31, 2021

June 30, 2020

(in thousands of U.S. Dollars, except per unit data)

(unaudited)

(unaudited)

(unaudited)

GAAP FINANCIAL COMPARISON

Voyage revenues

148,769

152,802

148,205

Income from vessel operations

64,736

70,611

69,589

Equity income

28,940

37,516

32,155

Net income attributable to the partners and preferred unitholders

53,288

87,591

44,934

Limited partners’ interest in net income per common unit

0.53

0.92

0.46

NON-GAAP FINANCIAL COMPARISON

Total adjusted EBITDA(1)

183,512

184,287

192,340

Distributable cash flow (DCF)(1)

78,979

82,019

83,170

Adjusted net income attributable to the partners and preferred unitholders(1)

57,017

60,466

62,643

Limited partners’ interest in adjusted net income per common unit

0.57

0.61

0.67


(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).

Second Quarter of 2021 Compared to First Quarter of 2021

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders were reduced for the three months ended June 30, 2021, compared to the three months ended March 31, 2021, primarily due to an increase in scheduled dry dockings during the second quarter of 2021, and the timing of planned repairs and maintenance activities.

GAAP net income attributable to the partners and preferred unitholders for the three months ended June 30, 2021 was also negatively impacted by changes in unrealized gains and losses on non-designated derivative instruments in the second quarter of 2021 compared to the first quarter of 2021.

Second Quarter of 2021 Compared to Second Quarter of 2020

GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended June 30, 2021, compared to the same quarter of the prior year, were impacted primarily by an increase in scheduled dry dockings during the second quarter of 2021, the redeployment of an LNG carrier under a market-linked contract in March 2021, and the timing of vessel operating expenditures for certain of the Partnership's LNG carriers. These decreases were partially offset by a decrease in operational claims under certain of the Partnership’s charter contracts and lower net interest expense during the second quarter of 2021.

GAAP net income attributable to the partners and preferred unitholders was also positively impacted by changes in unrealized gains and losses on non-designated derivative instruments and foreign currency exchange in the second quarter of 2021 compared to the second quarter of 2020.

CEO Commentary

“Teekay LNG reported another quarter of strong results today, with second quarter of 2021 adjusted net income(1) of $0.57 per common unit and over $183.5 million of total adjusted EBITDA(1),” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “As expected, our results in the second quarter reflect a heavier than normal drydock schedule. Looking ahead, our third quarter 2021 results are also expected to be impacted by a heavy drydock schedule; however, for the fourth quarter of 2021, we are expecting a bounce back as a result of a substantially reduced number of drydock days across the fleet.”

Mr. Kremin continued, “The spot and term charter market for LNG carriers has been counter-seasonally strong over the past six months, and LNG supply and demand fundamentals are pointing to continued strength through the rest of 2021 and into 2022. This should benefit the Creole Spirit, which is on a market-linked contract until mid-February 2022.” Mr. Kremin continued, “We believe this market strength could also be a tailwind for Teekay LNG next year as we have a few LNG carriers expected to roll-off of their current contracts during the first half of next year. We do, however, continue to have nearly all of our 2021 and the vast majority of our 2022 revenue days already secured on fixed-rate charters and generating consistent cash flow.”

(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).

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

June 30, 2021

June 30, 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

136,764

12,005

148,769

137,822

10,383

148,205

Income (loss) from vessel operations

65,868

(1,132)

64,736

69,232

357

69,589

Equity income

26,000

2,940

28,940

27,795

4,360

32,155

NON-GAAP FINANCIAL COMPARISON

Consolidated adjusted EBITDA(i)

100,222

557

100,779

103,190

1,420

104,610

Adjusted EBITDA from equity-accounted vessels(i)

72,186

10,547

82,733

75,824

11,906

87,730

Total adjusted EBITDA(i)

172,408

11,104

183,512

179,014

13,326

192,340


(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 June 30, 2021, compared to the same quarter of the prior year, decreased primarily due to scheduled dry dockings during the second quarter of 2021, the redeployment of an LNG carrier under a market-linked contract in March 2021 and the timing of vessel operating expenditures for certain of the Partnership's LNG carriers. These decreases were partially offset by reduced operational claims on certain of the Partnership's LNG carriers during the second quarter of 2021.

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LNG segment for the three months ended June 30, 2021, compared to the same quarter of the prior year, decreased 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 April 2021, and an increase in off-hire days for scheduled dry dockings and unscheduled repairs in certain of the Partnership's joint ventures during the second quarter of 2021.

Liquefied Petroleum Gas Segment

Loss from vessel operations increased and consolidated adjusted EBITDA(1) decreased for the LPG segment for the three months ended June 30, 2021, compared to the same quarter of the prior year, primarily due to the scheduled dry docking of one of the Partnership's LPG carriers during the second quarter of 2021. This decrease was partially offset by higher spot LPG rates earned during the second quarter of 2021.

Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LPG segment for the three months ended June 30, 2021, compared to the same quarter of the prior year, decreased primarily due to the scheduled dry docking of one of the LPG carriers in the Partnership's 50 percent-owned LPG joint venture with Exmar NV (the Exmar LPG Joint Venture). This decrease was partially offset by higher spot LPG rates earned during the second quarter of 2021.

(1)

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

Teekay LNG's Fleet

The following table summarizes the Partnership’s fleet as of August 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 June 30, 2021, the Partnership had total liquidity of $381.9 million (comprised of $144.2 million in cash and cash equivalents and $237.7 million in undrawn credit facilities) compared to $406.2 million as of March 31, 2021.

Conference Call

The Partnership plans to host a conference call on Thursday, August 5, 2021 at 1:00 p.m. (ET) to discuss the results for the second 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) 430-8332 or 1 (647) 792-1240, if outside North America, and quoting conference ID code 4740273.

  • 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 Second 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 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 and equity income, respectively, which are the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.

Adjusted Net Income Attributable to the Partners and Preferred Unitholders excludes items of income or loss from GAAP net income that are typically excluded by securities analysts in their published estimates of the Partnership’s financial results. The Partnership believes that certain investors use this information to evaluate the Partnership’s financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net income, and refer to footnote (2) of the Consolidated Statements of Income for a reconciliation of adjusted equity income to equity income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.

Distributable Cash Flow (DCF) represents GAAP net income adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, 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, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.


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

Three Months Ended

Six Month Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2021

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Voyage revenues

148,769

152,802

148,205

301,571

288,092

Voyage expenses

(6,360)

(7,183)

(5,329)

(13,543)

(7,646)

Vessel operating expenses

(32,536)

(30,089)

(28,407)

(62,625)

(54,511)

Time-charter hire expenses

(5,867)

(5,850)

(5,368)

(11,717)

(11,290)

Depreciation and amortization

(32,349)

(31,902)

(31,629)

(64,251)

(64,268)

General and administrative expenses

(6,921)

(7,167)

(7,883)

(14,088)

(14,050)

Write-down of vessels(1)

(45,000)

Income from vessel operations

64,736

70,611

69,589

135,347

91,327

Equity income(2)

28,940

37,516

32,155

66,456

32,528

Interest expense

(30,084)

(29,652)

(35,143)

(59,736)

(71,847)

Interest income

1,302

2,006

1,697

3,308

4,067

Realized and unrealized (loss) gain on non-designated derivative instruments(3)

(2,870)

6,618

(8,516)

3,748

(28,987)

Foreign currency exchange (loss) gain (4)

(2,843)

6,960

(11,624)

4,117

(6,885)

Other expense(5)

(1,088)

(3,769)

(679)

(4,857)

(1,040)

Net income before income tax expense

58,093

90,290

47,479

148,383

19,163

Income tax (expense) recovery

(1,815)

777

1,804

(1,038)

(708)

Net income

56,278

91,067

49,283

147,345

18,455

Non-controlling interest in net income

2,990

3,476

4,349

6,466

6,515

Preferred unitholders' interest in net income

6,425

6,425

6,425

12,850

12,850

General partner's interest in net income (loss)

823

1,426

713

2,249

(76)

Limited partners’ interest in net income (loss)

46,040

79,740

37,796

125,780

(834)

Limited partners' interest in net income (loss) per common unit:

• Basic

0.53

0.92

0.46

1.45

(0.01)

• Diluted

0.53

0.92

0.46

1.44

(0.01)

Weighted-average number of common units outstanding:

• Basic

86,970,999

86,955,664

82,197,665

86,963,374

79,629,623

• Diluted

87,133,146

87,091,656

82,262,235

87,112,516

79,629,623

Total number of common units outstanding at end of period

86,984,843

86,964,523

86,927,558

86,984,843

86,927,558


(1)

In the first quarter of 2020, the Partnership wrote-down six wholly-owned multi-gas carriers (the Pan Spirit, Unikum Spirit, Vision Spirit, Camilla Spirit, Sonoma Spirit and Cathinka Spirit) to their estimated fair values. The total impairment charge of $45.0 million related to these six multi-gas carriers is included in write-down of vessels for the six months ended June 30, 2020.

(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

Six Month Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2021

2021

2020

2021

2020

Equity income

28,940

37,516

32,155

66,456

32,528

Proportionate share of unrealized loss (gain) on non-designated interest rate swaps

2,310

(15,410)

3,806

(13,100)

26,010

Proportionate share of unrealized credit loss provisions (reversals)

635

6,677

(423)

7,312

8,557

Proportionate share of other items

182

(320)

362

(138)

(177)

Equity income adjusted for items in Appendix A

32,067

28,463

35,900

60,530

66,918


(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

Six Month Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2021

2021

2020

2021

2020

Realized losses relating to:

Interest rate swap agreements

(3,925)

(4,473)

(3,662)

(8,398)

(6,573)

Interest rate swap agreement termination(i)

(18,012)

(18,012)

Foreign currency forward contracts

(241)

(3,925)

(22,485)

(3,662)

(26,410)

(6,814)

Unrealized gains (losses) relating to:

Interest rate swap agreements

1,055

29,103

(4,854)

30,158

(22,375)

Foreign currency forward contracts

202

1,055

29,103

(4,854)

30,158

(22,173)

Total realized and unrealized (losses) gains on non-designated derivative instruments

(2,870)

6,618

(8,516)

3,748

(28,987)


(i)

The termination of an interest rate swap agreement during the three months ended March 31, 2021 and the six months ended June 30, 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.

Foreign currency exchange (loss) gain includes realized gains (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 (loss) gain also includes unrealized (losses) gains relating to the change in fair value of such derivative instruments and unrealized gains (losses) on the revaluation of the NOK bonds as detailed in the table below:


Three Months Ended

Six Month Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2021

2021

2020

2021

2020

Realized losses on cross-currency swaps

(1,293)

(1,345)

(1,430)

(2,638)

(3,247)

Realized losses on cross-currency swaps maturity

(33,844)

(33,844)

Realized gains on repurchase of NOK bonds

33,844

33,844

Unrealized (losses) gains on cross currency swaps

(2,262)

5,129

45,881

2,867

(3,659)

Unrealized gains (losses) on revaluation of NOK bonds

2,217

(1,189)

(53,794)

1,028

179


(5)

Includes unrealized credit loss provisions of $0.7 million, $3.7 million and $0.3 million for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively, and $4.4 million and $0.2 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

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

As at June 30,

As at March 31,

As at December 31,

2021

2021

2020

(unaudited)

(unaudited)

(unaudited)

ASSETS

Current

Cash and cash equivalents

144,206

163,480

206,762

Restricted cash – current

8,610

5,702

8,358

Accounts receivable

12,230

15,100

7,631

Prepaid expenses

11,948

13,566

9,259

Current portion of derivative assets

258

124

Current portion of net investments in direct financing leases, net

14,285

14,022

13,969

Current portion of advances to equity-accounted joint ventures, net

8,160

10,994

10,991

Advances to affiliates

6,940

6,844

4,924

Other current assets

3,071

237

237

Total current assets

209,708

230,069

262,131

Restricted cash – long-term

37,384

39,034

42,823

Vessels and equipment

At cost, less accumulated depreciation

1,197,551

1,209,622

1,220,355

Vessels related to finance leases, at cost, less accumulated depreciation

1,644,654

1,650,959

1,654,814

Operating lease right-of-use assets

13,887

17,357

20,750

Total vessels and equipment

2,856,092

2,877,938

2,895,919

Investments in and advances to equity-accounted joint ventures, net

1,117,271

1,118,104

1,056,792

Net investments in direct financing leases, net

487,276

492,027

500,101

Other assets

26,386

24,386

22,382

Derivative assets

6,925

9,532

4,505

Intangible assets, net

30,082

32,296

34,510

Goodwill

34,841

34,841

34,841

Total assets

4,805,965

4,858,227

4,854,004

LIABILITIES AND EQUITY

Current

Accounts payable

3,721

4,104

4,883

Accrued liabilities

64,113

71,512

81,706

Unearned revenue

17,800

23,700

30,254

Current portion of long-term debt

355,081

350,273

250,508

Current obligations related to finance leases

72,925

72,422

71,932

Current portion of operating lease liabilities

13,887

14,164

14,003

Current portion of derivative liabilities

26,375

26,047

56,925

Advances from affiliates

8,086

9,353

11,047

Total current liabilities

561,988

571,575

521,258

Long-term debt

1,062,298

1,094,044

1,221,705

Long-term obligations related to finance leases

1,232,130

1,250,647

1,268,990

Long-term operating lease liabilities

3,193

6,747

Other long-term liabilities

56,104

55,544

56,063

Derivative liabilities

29,131

30,293

32,971

Total liabilities

2,941,651

3,005,296

3,107,734

Equity

Limited partners – common units

1,545,448

1,523,746

1,465,408

Limited partners – preferred units

285,159

285,159

285,159

General partner

47,613

47,225

46,182

Accumulated other comprehensive loss

(72,272)

(61,375)

(103,836)

Partners' equity

1,805,948

1,794,755

1,692,913

Non-controlling interest

58,366

58,176

53,357

Total equity

1,864,314

1,852,931

1,746,270

Total liabilities and total equity

4,805,965

4,858,227

4,854,004


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

Six Months Ended

June 30,

June 30,

2021

2020

(unaudited)

(unaudited)

Cash, cash equivalents and restricted cash provided by (used for)

OPERATING ACTIVITIES

Net income

147,345

18,455

Non-cash and non-operating items:

Unrealized (gain) loss on non-designated derivative instruments

(30,158)

22,173

Depreciation and amortization

64,251

64,268

Write-down of vessels

45,000

Unrealized foreign currency exchange (gain) loss including the effect of the settlement of cross currency swaps

(8,199)

3,660

Equity income, net of distributions received $28,589 (2020 – $14,852)

(37,867)

(17,676)

Amortization of deferred financing issuance costs included in interest expense

2,840

3,001

Change in unrealized credit loss provisions included in other expense

4,417

160

Other non-cash items

1,786

1,663

Change in operating assets and liabilities:

Receipts from direct financing and sales-type leases

7,285

267,463

Expenditures for dry docking

(8,412)

(1,927)

Other operating assets and liabilities

(57,704)

17,621

Net operating cash flow

85,584

423,861

FINANCING ACTIVITIES

Proceeds from issuance of long-term debt

212,691

446,650

Scheduled repayments of long-term debt and settlement of related swaps

(150,528)

(194,831)

Prepayments of long-term debt

(111,543)

(525,021)

Financing issuance costs

(2,461)

(2,601)

Scheduled repayments of obligations related to finance leases

(35,867)

(34,893)

Repurchase of common units

(15,635)

Cash distributions paid

(60,426)

(47,295)

Dividends paid to non-controlling interests

(2,670)

Acquisition of non-controlling interest in certain of the Partnership's subsidiaries

(2,219)

Net financing cash flow

(150,804)

(375,845)

INVESTING ACTIVITIES

Expenditures for vessels and equipment

(12,853)

(8,832)

Proceeds from repayments of advances to equity-accounted joint ventures

10,330

Net investing cash flow

(2,523)

(8,832)

(Decrease) increase in cash, cash equivalents and restricted cash

(67,743)

39,184

Cash, cash equivalents and restricted cash, beginning of the period

257,943

253,291

Cash, cash equivalents and restricted cash, end of the period

190,200

292,475

Supplemental cash flow information

The accompanying notes are an integral part of the consolidated financial statements.

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

June 30,

March 31,

June 30,

2021

2021

2020

(unaudited)

(unaudited)

(unaudited)

Net income – GAAP basis

56,278

91,067

49,283

Less: net income attributable to non-controlling interests

(2,990)

(3,476)

(4,349)

Net income attributable to the partners and preferred unitholders

53,288

87,591

44,934

Add (subtract) specific items affecting net income:

Foreign currency exchange losses (gains)(1)

1,550

(8,305)

10,194

Unrealized credit loss provisions (reversals), unrealized losses and (gains) on non-designated derivative instruments and other items from equity-accounted investees(2)

3,127

(9,053)

3,745

Unrealized (gains) losses on non-designated derivative instruments and realized loss from interest rate swap termination(3)

(1,055)

(11,091)

4,854

Unrealized credit loss provisions and other items(4)

383

823

(1,619)

Non-controlling interests’ share of items above(5)

(276)

501

535

Total adjustments

3,729

(27,125)

17,709

Adjusted net income attributable to the partners and preferred unitholders

57,017

60,466

62,643

Preferred unitholders' interest in adjusted net income

6,425

6,425

6,425

General partner's interest in adjusted net income

889

950

1,044

Limited partners’ interest in adjusted net income

49,703

53,091

55,174

Limited partners’ interest in adjusted net income per common unit, basic

0.57

0.61

0.67

Weighted-average number of common units outstanding, basic

86,970,999

86,955,664

82,197,665


(1)

Foreign currency exchange losses (gains) primarily relate to the Partnership’s revaluation of all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized losses (gains) 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 included in this release for further details.

(2)

Reflects the proportionate share of unrealized credit loss provisions (reversals) and unrealized losses or gains 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 included in this release for further details.

(3)

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 included in this release for further details.

(4)

Includes adjustments for unrealized credit loss provisions and adjustments relating to changes in deferred tax balances.

(5)

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

June 30,

March 31,

June 30,

2021

2021

2020

(unaudited)

(unaudited)

(unaudited)

Net income

56,278

91,067

49,283

Add:

Partnership’s share of equity-accounted joint ventures' DCF net of estimated maintenance capital expenditures(1)

40,356

36,356

42,725

Depreciation and amortization

32,349

31,902

31,629

Direct financing lease payments received in excess of revenue recognized and other adjustments

3,694

3,576

3,392

Foreign currency exchange loss (gain)

1,550

(8,305)

10,194

Unrealized credit loss provisions

744

3,673

260

Deferred income tax and other non-cash items

652

(1,216)

271

Subtract:

Unrealized (gains) losses on non-designated derivative instruments and realized loss from interest rate swap termination

(1,055)

(11,091)

4,854

Distributions relating to preferred units

(6,425)

(6,425)

(6,425)

Estimated maintenance capital expenditures

(14,511)

(14,365)

(14,513)

Equity income

(28,940)

(37,516)

(32,155)

Distributable Cash Flow before non-controlling interest

84,692

87,656

89,515

Non-controlling interests’ share of DCF before estimated maintenance capital expenditures

(5,713)

(5,637)

(6,345)

Distributable Cash Flow

78,979

82,019

83,170

Amount of cash distributions attributable to the General Partner

(447)

(447)

(411)

Limited partners' Distributable Cash Flow

78,532

81,572

82,759

Weighted-average number of common units outstanding, basic

86,970,999

86,955,664

82,197,665

Distributable Cash Flow per limited partner common unit

0.90

0.94

1.03


(1)

The Partnership’s share of estimated maintenance capital expenditures relating to its equity-accounted joint ventures were $15.2 million, $15.1 million and $15.2 million for the three months ended June 30, 2021, March 31, 2021 and June 30, 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

June 30,

March 31,

June 30,

2021

2021

2020

(unaudited)

(unaudited)

(unaudited)

Net income

56,278

91,067

49,283

Depreciation and amortization

32,349

31,902

31,629

Interest expense, net of interest income

28,782

27,646

33,446

Income tax expense (recovery)

1,815

(777)

(1,804)

EBITDA

119,224

149,838

112,554

Add (subtract) specific income statement items affecting EBITDA:

Foreign currency exchange loss (gain)

2,843

(6,960)

11,624

Other expense

1,088

3,769

679

Equity income

(28,940)

(37,516)

(32,155)

Realized and unrealized loss (gain) on non-designated derivative instruments

2,870

(6,618)

8,516

Direct financing lease payments received in excess of revenue recognized and other adjustments

3,694

3,576

3,392

Consolidated adjusted EBITDA

100,779

106,089

104,610

Adjusted EBITDA from equity-accounted vessels (See Appendix E)

82,733

78,198

87,730

Total adjusted EBITDA

183,512

184,287

192,340

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 June 30, 2021

(unaudited)

Liquefied
Natural
Gas
Segment

Liquefied
Petroleum
Gas
Segment

Total

Voyage revenues

136,764

12,005

148,769

Voyage expenses

(841)

(5,519)

(6,360)

Vessel operating expenses

(27,260)

(5,276)

(32,536)

Time-charter hire expenses

(5,867)

(5,867)

Depreciation and amortization

(30,660)

(1,689)

(32,349)

General and administrative expenses

(6,268)

(653)

(6,921)

Income (loss) from vessel operations

65,868

(1,132)

64,736

Depreciation and amortization

30,660

1,689

32,349

Direct financing lease payments received in excess of revenue recognized and other adjustments

3,694

3,694

Consolidated adjusted EBITDA

100,222

557

100,779

Three Months Ended June 30, 2020

(unaudited)

Liquefied
Natural
Gas
Segment

Liquefied
Petroleum
Gas
Segment

Total

Voyage revenues

137,822

10,383

148,205

Voyage expenses

(806)

(4,523)

(5,329)

Vessel operating expenses

(24,599)

(3,808)

(28,407)

Time-charter hire expenses

(5,368)

(5,368)

Depreciation and amortization

(30,566)

(1,063)

(31,629)

General and administrative expenses

(7,251)

(632)

(7,883)

Income from vessel operations

69,232

357

69,589

Depreciation and amortization

30,566

1,063

31,629

Direct financing lease payments received in excess of revenue recognized and other adjustments

3,392

3,392

Consolidated adjusted EBITDA

103,190

1,420

104,610


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

June 30, 2021

June 30, 2020

(unaudited)

(unaudited)

At

Partnership's

At

Partnership's

100%

Portion(1)

100%

Portion(1)

Voyage revenues

247,932

106,795

258,426

111,365

Voyage recoveries (expenses)

264

123

(1,360)

(638)

Vessel operating expenses, time-charter hire expenses and general and administrative expenses

(77,413)

(33,567)

(72,316)

(31,551)

Depreciation and amortization

(25,588)

(12,811)

(25,123)

(12,530)

Income from vessel operations of equity-accounted vessels

145,195

60,540

159,627

66,646

Net interest expense

(61,882)

(25,112)

(73,082)

(29,351)

Income tax (expense) recovery

(359)

(126)

225

110

Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provisions

(21,026)

(6,362)

(17,786)

(5,250)

Net income / equity income of equity-accounted vessels

61,928

28,940

68,984

32,155

Net income / equity income of equity-accounted LNG vessels

55,917

26,000

60,105

27,795

Net income / equity income of equity-accounted LPG vessels

6,011

2,940

8,879

4,360

Net income / equity income of equity-accounted vessels

61,928

28,940

68,984

32,155

Depreciation and amortization

25,588

12,811

25,123

12,530

Net interest expense

61,882

25,112

73,082

29,351

Income tax expense (recovery)

359

126

(225)

(110)

EBITDA from equity-accounted vessels

149,757

66,989

166,964

73,926

Add (subtract) specific income statement items affecting EBITDA:

Other items including realized and unrealized losses on derivative instruments and unrealized credit loss provisions

21,026

6,362

17,786

5,250

Direct financing and sales-type lease payments received in excess of revenue recognized

28,493

10,327

26,381

9,499

Amortization of in-process contracts

(1,738)

(945)

(1,738)

(945)

Adjusted EBITDA from equity-accounted vessels

197,538

82,733

209,393

87,730

Adjusted EBITDA from equity-accounted LNG vessels

176,443

72,186

185,577

75,824

Adjusted EBITDA from equity-accounted LPG vessels

21,095

10,547

23,816

11,906


(1)

The Partnership's equity-accounted vessels for the three months ended June 30, 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 June 30, 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

544,217

227,017

549,454

225,049

Other current assets

100,022

38,945

67,580

25,415

Property, plant and equipment, including owned vessels, vessels related to finance leases and operating lease right-of-use assets

1,910,189

973,272

1,961,820

1,000,386

Net investments in sales-type and direct financing leases, current and non-current

5,308,933

2,049,238

5,384,652

2,077,707

Derivative assets

10,158

5,085

Other non-current assets

94,795

53,958

87,248

51,812

Total assets

7,968,314

3,347,515

8,050,754

3,380,369

Current portion of long-term debt and obligations related to finance leases and operating leases

324,331

137,890

306,185

129,538

Current portion of derivative liabilities

69,363

28,153

68,966

27,988

Other current liabilities

153,601

60,435

164,266

65,311

Long-term debt and obligations related to finance leases and operating leases

4,649,780

1,878,654

4,789,260

1,938,748

Shareholders' loans, current and non-current

327,977

113,816

341,113

121,778

Derivative liabilities

190,039

76,509

280,480

112,922

Other long-term liabilities

82,170

36,443

70,743

33,353

Equity

2,171,053

1,015,615

2,029,741

950,731

Total liabilities and equity

7,968,314

3,347,515

8,050,754

3,380,369

Investments in equity-accounted joint ventures

1,015,615

950,731

Advances to equity-accounted joint ventures

113,816

121,778

Unrealized credit loss provisions

(4,000)

(4,726)

Investments in and advances, net to equity-accounted joint ventures, current and non-current

1,125,431

1,067,783


(1)

The Partnership's equity-accounted vessels as at June 30, 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; expected upcoming decreases in the overall number of drydocks for the Partnership’s vessels and the anticipated financial benefits to the Partnership from such drydock reductions; the counter-seasonal strength in LNG shipping rates, including the expected supply and demand fundamentals in the near-term charter market for LNG carriers and the potential positive impact these tailwinds may have on the Creole Spirit and the Partnership's other vessels rolling off contract in 2022; 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 charter contracts of existing vessels in the Partnership's fleet; higher than expected costs and expenses, including as a result of off-hire days or drydocking requirements (both scheduled and unscheduled); delays in the Partnership’s ability to successfully and timely complete drydockings; the potential for the COVID-19 pandemic to impact the Partnership's drydock activities, or operations in general; general market conditions and trends, including spot, multi-month and multi-year charter rates; the potential for the COVID-19 pandemic to impact global demand for LNG and LPG and the associated impact on LNG and LPG 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 charter 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's 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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