Q4 2014 Teekay LNG Partners LP Earnings Call

Feb 20, 2015 AM EST
TGP - Teekay LNG Partners LP
Q4 2014 Teekay LNG Partners LP Earnings Call
Feb 20, 2015 / 04:00PM GMT 

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Corporate Participants
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   *  Scott Gayton
      Teekay LNG Partners LP - IR
   *  Peter Evensen
      Teekay LNG Partners LP - CEO
   *  Vince Lok
      Teekay LNG Partners LP - CFO

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Conference Call Participants
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   *  Darren Horowitz
      Raymond James & Associates, Inc. - Analyst
   *  Michael Webber
      Wells Fargo Securities - Analyst
   *  Fotis Giannakoulis
      Morgan Stanley - Analyst
   *  Sunil Sibal
      Global Hunter Securities - Analyst
   *  Spiro Dounis
      UBS - Analyst

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Presentation
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Operator   [1]
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 Welcome to Teekay LNG Partners fourth-quarter and FY14 earnings results conference call.

 (Operator Instructions)

 Now for opening remarks and introductions, I would like to turn the call over to Mr. Peter Evensen, Teekay LNG Partners' Chief Executive Officer. Please go ahead, sir.

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 Scott Gayton,  Teekay LNG Partners LP - IR   [2]
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 Before Mr. Evensen begins I would like to direct all participants to our website at www.teekaylng.com where you will find a copy of the fourth-quarter and FY14 earnings presentation. Mr. Evensen will review this presentation during today's conference call.

 Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth-quarter and FY14 earnings release and earnings presentation available on our website.

 I will now turn the call over to Mr. Evensen to begin.

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [3]
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 Thank you, Scott. Good morning, everyone, and thank you for joining us on our fourth-quarter 2014 earnings conference call. I'm joined today by Teekay Corporation's CFO Vince Lok and MOP Controller David Wong.

 During our call today I will be taking you through the earnings presentation which can be found on our website. Turning to slide 3 of the presentation, I will review some of Teekay LNG's recent highlights. For the third quarter of 2014 the Partnership generated distributable cash flow of $69 million, an increase of 9% from the same period of the prior year. For the third quarter of 2014 the Partnership declared a cash -- or for the fourth quarter, the partnership declared a cash distribution of $0.70 per unit, an increase of 1.2% from the previous quarter, reflecting the increased cash flow contribution from our existing fleet and our recent LPG acquisition. The Partnership reported a strong Q4 coverage ratio of 1.09 times, which includes the fourth-quarter distribution increase.

 In early December the Partnership secured time-charter contracts with the shipping subsidiary of Royal Dutch Shell for five newbuilding LNG carriers. I'll talk about this important transaction more in a moment, which we believe validates our strategy of pre-ordering optimally-sized MEGI LNG carriers to meet the expected demand for modern fuel-efficient vessels in the global LNG market. In order to meet our Shell time-charter commitment, in December 2014 the partnership exercised options to order three MEGI LNG carrier newbuildings at DSME, with two of the partnerships' previously ordered uncommitted newbuildings also allocated to the Shell time charters. Subsequently, in early February we ordered an additional MEGI LNG newbuilding and received options to order up to four additional LNG newbuildings. All told, Teekay LNG currently has two uncommitted newbuildings with options to order an additional four newbuildings.

 In November, Teekay LNG acquired the 2003-built LPG carrier Norgas Napa for $27 million from I.M. Skaugen, and concurrently entered into a five-year charter-back to Skaugen at a fixed rate plus potential upside through a profit sharing component. This immediately accretive on the water acquisition represents another example of how the Partnership can deliver near-term distributable cash flow growth to supplement the Partnership's portfolio of visible organic growth projects delivering from 2015 to 2020.

 Lastly, in January of this year, Teekay LNG's LPG joint venture with Exmar took delivery of a fourth of its 12 mid-size LPG carrier newbuildings, which formed part of that joint venture's fleet renewal and growth strategy.

 Turning to slide 4, I will discuss Teekay LNG's five new time-charter contracts with Shell. The five MEGI LNG carrier newbuildings are scheduled to deliver between the second half of 2017 and into 2018, and will operate under fixed-rate time charters with initial firm periods ranging between six and eight years, each with extension options. We view this transaction as strategic for Teekay LNG because it both builds upon and strengthens our existing relationship with Shell, and provides another validation for a major oil company for our innovative MEGI-propelled newbuildings which are designed to be significantly more fuel-efficient and have lower emission levels than engines currently used in LNG shipping.

 Including our two time-charters with Cheniere, which are expected to commence in early 2016, seven out of the Partnership's currently ordered nine MEGI LNG newbuildings are now contracted upon their delivery. And we are actively working with customers to time-charter the two remaining MEGI newbuildings prior to their delivery.

 Turning to slide 5, I'd like to spend a few moments looking at the expected impact of the current low oil price environment on large LNG project timelines. Over the past few months, both spot and oil-linked LNG prices have fallen. And this is affecting the short-term time-charter market as well as long-term plans for new LNG export projects. As shown by the chart on the top right of the slide, LNG spot prices in Asia have declined over the past 12 months from $19 per BTU at the beginning of 2014 to less than $7 per BTU today. This decline is due to a combination of high inventories in Asia following a mild winter, and the impact of new LNG supply from export projects coming on in the Pacific.

 The rapid decline in LNG spot prices has weakened arbitrage trading from the Atlantic to the Pacific in recent months, and has contributed to significantly lower short-term LNG charter rates as utilization of the fleet has dropped. This drop in oil prices has also reduced the price of LNG sold under long-term oil price-linked contracts particularly in Asia. If oil prices remain low in the future it will negatively impact the economics of new oil price-linked supply projects and will also reduced the price advantage of Henry Hub linked LNG exports in the United States.

 This may delay or cancel development plans for some projects that require a high LNG price to break even, as most greenfield sites do. As a result, we have slightly lowered our own outlook for LNG supply growth to 2020 as shown by the chart on the bottom right of the slide. However, the change is relatively small, as we had initially taken a fairly conservative view of which LNG projects were likely to proceed. While we have slightly delayed our forecast of capacity additions, roughly 80% of the volumes in our forecast have already taken FID. Most of these projects are already under construction. Therefore we continue to have good visibility of LNG trade growth through the end of this decade, and it gave us further confidence to order more LNG carriers for later delivery.

 We also see demand upside from lower LNG prices. Over the past few years the high price of LNG has kept some buyers out of the market, and this has led to renewed competition from other energy sources. Lower LNG prices will therefore attract new buyers, which in turn better supports long-term demand growth.

 Turning to slide 6, given the current weakness in the global energy markets, it's important to highlight that, with the exception of two of our 52%-owned vessels, Teekay LNG's entire LNG fleet is employed on long-term fixed-rate contracts. And as a result we have minimal near-term exposure to the weak LNG shipping spot market I spoke about a moment ago. In fact, with the recent award of time charters from Shell, the Partnership has added to an already strong base and now has over $11 billion of forward fee-based revenues with a large and diversified group of high-quality customers. Within each of our main asset classes we've assembled an attractive long-term average contract profile, led by our LNG sector, which collectively has an average remaining contract duration of over 13 years and comprises over 90% of our total forward revenue.

 On slide 7 I will review our financial results for the fourth quarter of 2014 as compared to the third quarter of 2014. For a reconciliation of distributable cash flow to net income, please refer to appendix B of our earnings release. Starting at the top of the statement, net voyage revenues decreased due to the sale of the Huelva Spirit Suezmax tanker in August 2014, and scheduled and unscheduled off-hire days related to two vessels, partially offset by the acquisition of the Norgas Napa in November 2014 and the Madrid Spirit being off-hired during Q3 for its scheduled dry dock.

 Vessel operating expenses remain consistent with the prior quarter. Higher crew training and repair costs for certain vessels were partially offset by a decrease due to the sale of the Huelva Spirit Suezmax tanker. The maintenance capital expenditure reserve was consistent with the prior quarter, with a slight increase due to the Norgas Napa acquisition. General and administrative expenses decreased by $1.3 million, as we had higher business development costs in Q3.

 The Partnership's share of the distributable cash flow related to our equity accounted joint ventures, net of estimated maintenance capital expenditure reserves, decreased by $600,000, primarily due to unscheduled off-hire for the repairs on the Woodside Donaldson, which is in our 52%-owned MALT joint venture. We expect the Partnership's share of distributable cash flow related to the MALT joint venture to decrease by approximately $3 million in the first quarter of 2015, compared to the fourth quarter of 2014, due to off-hire related to the Magellan Spirit's grounding incident, further off-hire days for the repair of the Woodside Donaldson, and a lower expected hire rate on the redeployment of the Methane Spirit as its existing above market charter expires in mid-March.

 Interest expense net of interest income remained consistent with the prior quarter. However, both interest expense and interest income decreased by similar amounts, primarily due to the termination of interest rate swaps in the RasGas II joint venture in conjunction with lease terminations.

 Capitalized distributions relating to equity financing of newbuildings increased by $800,000, due to additional installments paid on the newbuilding MEGI LNG carriers in the fourth quarter, using proceeds from the units issued under our continuous offering program during Q4.

 Other adjustments increased by $2.5 million, primarily due to the charter rates on the Bermuda Spirit and Hamilton Spirit reverting back to their original charter rates on October 1. As a result, our coverage ratio improved to 1.09 times during the fourth quarter compared to 1.05 times in the third quarter. Wrapping up on slide 8, we've updated a slide we presented to you last quarter for our recent transactions, including the four newbuilding vessels ordered from DSME and the acquisition charter-back with I.M. Skaugen. Teekay LNG's total committed growth CapEx now stands at approximately $3.4 billion.

 Despite the recent headwinds in the global energy markets and short-term weakness in LNG shipping rates, the long-term fundamentals of the LNG and LPG shipping markets remain strong. We believe our strategy of pre-ordering optimally sized MEGI LNG carriers will continue to serve the partnership well, as these vessels are attractive to a wide range of potential LNG and floating storage projects. The robust pipeline of growth projects depicted on this slide will provide Teekay LNG with steady and consistent distributable cash flow growth over the next several years, and I look forward to updating you on new projects that will employ our two current uncommitted newbuilding vessels, and hopefully, our options as well.

 Thank you for joining us on the call today. And Operator, I'm now available to take questions.

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Questions and Answers
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Operator   [1]
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 Thank you.

 (Operator Instructions)

 Darren Horowitz, Raymond James.

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 Darren Horowitz,  Raymond James & Associates, Inc. - Analyst   [2]
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 Good morning, Peter. Two quick questions for you.

 The first one if we could just revisit slide 5 that chart that you have on LNG supply growth forecast on the lower right-hand side of the chart. How much of the downward revision is due to a delay versus cancellation of liquefaction capacity additions?

 I'm trying to get a feel if some of that revision to LNG supply growth that you've outlined in 2019 and 2020 might just be pushed out? And I guess more importantly how you think that might align with LNG vessel deliveries?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [3]
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 Sure. Well, we actually looked at more on the US side of things and we saw for example that probably Lake Charles will be delayed by at least a year. BG made an announcement as it related to that.

 So we still think the brownfield projects that were originally regassed will get turned around. We still think for example Dominion's Cove Point will go forward.

 And we think that the projects that were put on for British Columbia will be deferred. So they've fallen away.

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 Darren Horowitz,  Raymond James & Associates, Inc. - Analyst   [4]
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 Okay. Based on the current commodity price environment and that revised LNG supply growth forecast that you outlined, how has that changed the bidding activity for either FSU or FSRU projects either in terms of the amounts of bids that are outstanding, or from a competitive perspective how your peers might be looking at those bids? And are you seeing any variation with maybe them sacrificing margin just to try and attain that contract stability?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [5]
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 Well, that's actually where we've been really pleased, because our 174,000 MEGI LNG carriers that are delivering into the proper window will be competing with some of the speculatively ordered 160,000 TFDE ships. And what we've seen is that on a lot of these tenders, people are specifying that they want MEGI.

 And while some of the tenders allow you to order -- to put in TFDE, you have to realize that if you have a ship now you're putting it in for a tender three years from now and you have to put it in at a discount. So we actually see a three-tier market and we take a lot of comfort in that.

 People want long-term MEGI LNG carriers as you saw with the Shell tender, and the 160,000 TFDE are going to have to discount themselves to make up for the fuel savings, as well as for the cargo carrying capacity being less. So we're happy with that and of course steam, we're not quite sure what will happen with steam. Steam may be heavily discounted or it may get scrapped early, in which case that would help the demand for the MEGI as well as for the DFDE TFDE ships.

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 Darren Horowitz,  Raymond James & Associates, Inc. - Analyst   [6]
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 Thanks Peter. That's all I have.

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Operator   [7]
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 Thank you. Michael Webber, Wells Fargo.

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 Michael Webber,  Wells Fargo Securities - Analyst   [8]
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 Good morning. Peter, I wanted to jump back and touch a bit on some of the competition around new tenders and where returns are right now. It seems like across the space that returns on some of the recent tenders sector-wide have been coming as they've been more competitive regardless of asset class.

 Can you talk to where without giving specifics where the Shell tenders fell on an IRR basis maybe relative to your historical hurdle rates? And then maybe talk to how much pressure if any you are really seeing on some of these newer tenders?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [9]
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 Well, I have to say that the competition is -- continues to be pretty fierce. And so that's the general environment and that's what you would expect.

 But as I said to Darren, what is comforting to us is that the existing 160,000 ships even if you discount them are not preferred over the MEGIs. So we have an advantage because we have ships as we had with Shell that are in the right delivery window.

 If you order one today you're going to be taking delivery in 2018 or 2019. And so DSME is basically sold out.

 So we've -- we like the fact that we have been able to get the tonnage with the right delivery window. And for example, BP ordered six MEGIs at Daewoo, which took up a lot of their slots for their Freeport volumes.

 So we like our market position, but it is tough and it is competitive. But we are very happy that Shell took us for five rather than split the order.

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 Michael Webber,  Wells Fargo Securities - Analyst   [10]
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 Sure. Sure, I'm just curious as to where that relative IRR fell compared to say the Cheniere or some of the more recent business that you have done.

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [11]
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 We're very happy with it. It's accretive.

 But it was a hard-fought area. I'm not going to get specific on levered IRRs for competitive reasons.

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 Michael Webber,  Wells Fargo Securities - Analyst   [12]
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 No, that's helpful though. I appreciate the color.

 Actually sticking with tenders, it looks like the GAIL tender just went unfilled, at least from what we're reading. And I know you and a bunch of your competitors were looking at that, but there's a build in India component to it that I think was scaring people away. Is that something you are still looking at?

 Can you maybe kind of talk through how you thought about that tender? And whether that's -- is that a realistic opportunity going forward if they can reconfigure it, or is it just off the board at this point.

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [13]
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 No, GAIL needs ships in order to fill their requirements to lift gas from Sabine Pass. So it was just a question of whether -- so we have pre-qualified along with a limited number of our competitors. Not everyone is qualified.

 And the question was are you interested in building one out of three ships in India. The fact is India like the United States has no shipyard that can build LNG carriers.

 So we were not interested in being part of a tender, nor were any of our competitors, because you're asking yourself to do something that's impossible, which is to build an LNG carrier in India where it doesn't exist. So there's a lot involved with building an LNG carrier, and we expect that tender will ultimately come out with just ships built outside of India. But they need nine ships.

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 Michael Webber,  Wells Fargo Securities - Analyst   [14]
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 In terms of how you think about it from a capital budgeting perspective, would that be kicked into 2016 by the time the tender actually comes around and gets awarded, or how long would that reboot process take if everyone stayed away from it this go around? Or do you have a sense yet?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [15]
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 I think they are already past the point, but they may do like Exxon did with Papua, New Guinea of chartering short-term ships until they're long-term more efficient MEGI-type or DFDE ships come in. So that's what Exxon did because they ordered some ships in China for Papua, New Guinea and those came later than the volume, so they just -- I mean there are enough existing ships out there that you can charter in short term.

 I think that's probably given the delay in GAIL what will happen. But they will still charter long term in order to lift those volumes.

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 Michael Webber,  Wells Fargo Securities - Analyst   [16]
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 Okay. That makes sense. One more for me and I'll turn it over, but you mentioned something in your -- at the end of your prepared remarks I think around not quite sure what's going to happen with steam assets on a go forward basis.

 I'm just curious, you have a diversified fleet and you have been replenishing it, but you have steam assets. And just curious as to whether any of your counterparties at this point are looking -- are talking to you about potentially replacing existing tonnage on long-term contracts with say newer tonnage or whether or not those conversations would be still a couple years down the line?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [17]
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 We actually haven't seen that. That has -- we haven't seen that. And all of our esteemed contracts go out well into the 2020s.

 So -- with I think the first one being 2022 maybe. So that isn't a concern for us right now.

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 Michael Webber,  Wells Fargo Securities - Analyst   [18]
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 Okay, that's all I've got. Thanks for the time.

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Operator   [19]
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 Fotis Giannakoulis, Morgan Stanley.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [20]
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 Yes. Hello, Peter.

 I would like to ask you or if you can give us your outlook similar to what you did for LNG vessels for the LPG sector and how the lower oil prices have impacted the trade and the future outlook that you have on this particular sector?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [21]
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 Sure. I would just give a couple of caveats. First of all when people think about the LPG market as far as investors are concerned, they usually think about the VLGC market.

 And that of course looks like it has a lot of newbuildings that are coming on order now. So ultimately we think that has short-term strength and it has longer-term weakness, because there are, as you know 50% of the fleet is on order in the VLGCs.

 However, Teekay is not in the VLGC market. We've been selling our existing ships out of the joint venture for very handsome gains. Instead we're in the medium-size market.

 And I've been very pleased with what's happening there because of the environmental rules in the eco-zones we've been able to charter up our ships. And so you see in the slide that we've got Statoil and Potash which is a continuation of some existing charters.

 So we've been able to charter up those ships on time-charter. So we aren't as much exposed to the spot market as other LPG players.

 But to answer your question in a bigger realm, I don't think we've really seen that market. Or we haven't seen the effects of the market because we don't really know what the production changes will be.

 And that will of course affect whether there is as much cargo available for export from the US as people had previously seen. If oil production goes down and you miss the associated gas -- but that isn't really our market. So I would say nobody really has a crystal ball on that right now.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [22]
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 And can you also explain to us all these long-term contracts, the offtake agreements that we see primarily in the LNG space? But if you can also comment on the LPG space?

 Do they have any flex in terms of volume? And although the FIDs have already been taken, if oil prices and gas prices stay low can that have any impact on the volume that will be transported and consequently on the number of vessels that will be needed?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [23]
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 Well, I'm actually going to punt on that question because that's VLGCs, and we don't have any. So I am not going to answer that question.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [24]
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 Let me ask also about the LNG market and the offtake agreements in the LNG market.

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [25]
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 Okay. Well, I think that what as I said in my remarks, the market used to be pretty easy because you could deliver gas out for $9 or $10 into Asia and sell it for $13 to $18. And that margin has gone away.

 So what we're seeing now is people are reverting back to where we were a few years ago where people are looking for long-term agreements. And I think that's what is going to hold up FID on some future projects is people are going to wait until they get more confirmed agreements.

 Because the sense that you could always sell your gas has disappeared from the market because they're not sure you can sell it at a profit. And I think that's true in Australia where you're seeing some write-downs because that gas comes in at $16, $17, $18 breakeven. And right now you are selling it for $9 or $10.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [26]
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 And given this in your situation, we used to think that the 8 million ton of manufacturing capacity corresponds to 1 1/2 vessels. How much of this multiplier can range in your opinion?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [27]
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 My personal opinion is that Henry Hub type projects will continue to get sanctioned. I think there are certain flexibility built into the US export projects that make it very attractive to export LNG out of Henry Hub.

 So I also believe, as I said yesterday at the Teekay corp call, that oil prices ultimately will end up higher. So people are just taking a wait and see attitude toward things.

 So I -- if I look at the BP energy outlook I still believe LNG will be the fastest-growing energy source. And it's still environmentally friendly. Now it's cost competitive.

 And so and we actually see in places like India and China many more projects probably -- we are more excited about regasification opportunities in India and other places because of the low price. Because it shows that the consumers can actually afford it.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [28]
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 And my last question is regarding the number of vessels that they have right now without long-term charters, if you can give us an estimate? And I'm talking about the ones that they are currently in the water plus the ones that they are coming the next couple of years.

 And what is the split between tri-fuel vessels and conventional steam turbine vessels? And if you can give us your view in a normalized market a couple of years from now of the potential discount that the steam turbine vessel might have to accept in order to be chartered versus the tri-fuel vessels?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [29]
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 Well, I don't have all those figures to hand. But if you want it, Fotis, I would refer you to our research people and they can give you that data offline.

 But we sit and look at -- since we're sold out short term and we're not really exposed to the spot market, we sit and look at what the LNG carrier order book is. And we see a lot of ships have been ordered, but we see out of 140 ships on order 28 not -- 28 without contract.

 And so that's what we're focused in on. And then when we look at the 28 we see how many of those are TFDE and how many of those are MEGI or the [varksula] solution.

 And that's how we're looking at it. Because we're very comfortable not being exposed to the spot market readily now. And so we're sitting there looking at what ships can compete with us.

 I think it's difficult if you have a ship on the water now and you want to compete for a tender that starts in 2018 or 2019, because that severely limits your ability to trade the vessel in the meantime. And so -- and you therefore have to accept some sort of discount to it.

 So that's why we're not seeing the competition from existing ships. Because people would rather take their chances in the spot market.

 Obviously as I said the spot market is low, but that could turn around if the arbitrage comes back. Right now to be quite honest with you LNG is moving regionally. It's not the Atlantic to Pacific arbitrage isn't open. So people are selling their gas regionally inside the Atlantic or flipping it around to Chile. So that's what's cutting the ton miles.

 But that can flip. That can flip. So we should all be careful about looking at the market right now and assuming that's going to stay forever.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [30]
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 Thank you very much.

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Operator   [31]
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 Sunil Sibal, Global Hunter Securities.

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 Sunil Sibal,  Global Hunter Securities - Analyst   [32]
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 Hello, good morning and thanks for taking my questions.

 My first question related to your broader view on the LNG market. It seems like you're seeing on the pricing action side it spurs long-term demand, how on the supply side some of the high cost supply side probably comes under pressure. I was curious you know in this kind of situation playing out do you anticipate all the net sources of LNG coming in and trying to fill this disconnect? I know you probably cement trust in floating LNG projects through [usava] joint venture, and any thoughts you have there?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [33]
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 Sure. So I think again, these are the questions that we ask our customers. So we're just a supplier on the shipping inside.

 As I said, what our customers are telling us is that they are trying to line up longer-term supply and therefore we're seeing that the growth that we thought we would have is going to take a little bit longer time. But we think as I said that the US projects, especially the brownfield projects, will go ahead.

 They're just trying to get a little bit more certainty as to where they'll sell the gas. So if there is one takeaway, it's that the trading of gas is reverting back to where it was a few years ago where it was more long-term supply. And as a shipper, that sets up well for us because that means they want long-term contracts so that they know they have the ships in order to move the volumes on dedicated trades.

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 Sunil Sibal,  Global Hunter Securities - Analyst   [34]
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 Okay, that's helpful. And then on your distribution growth for 2015, I think that at analyst day the number that you had shown and you had suggested valuation [at the trow] was basically practically no distribution growth for TGP in 2015.

 And I was wondering if you had any thoughts there considering on the MGC side it seems like market has firmed up a little bit. And any thoughts or any updates there on distribution growth?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [35]
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 No, I don't have an update on that. As we said we've lost some -- one of our short-term charters is expiring in March. We're still picking up. We have a high coverage ratio of 1.09.

 So that gives us some room, but right now the real growth in our partnership will come in a 2016 to 2020 timeframe. So we're not giving any guidance as to 2015 distribution growth.

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 Sunil Sibal,  Global Hunter Securities - Analyst   [36]
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 Okay. Thanks. That's all I had.

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Operator   [37]
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 (Operator Instructions)

 Spiro Dounis, UBS.

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 Spiro Dounis,  UBS - Analyst   [38]
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 Thanks for taking the question. Peter, you talked about near-term growth and maybe getting some more on the water growth.

 I'm just wondering, and I'm sorry if you've touched on this in the past, but is there any ability or does it make sense for you to maybe fully acquire some of your JV-owned vessels? And could that actually also help simplify the structure?

 And if not, maybe could you be more specific in terms of near-term growth? How big are we talking here? Something more along the lines of a Skaugen again, or something bigger?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [39]
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 We continue to look at on the water acquisitions, but we haven't found anything in significant size that would significantly lead to big distribution growth. We've done it in the past.

 But we're pretty picky because of this technology change. And so when we look at the idea of buying an existing LNG carrier with a contract as opposed to ordering a MEGI LNG carrier, we like the economics of the MEGI better than buying an existing contract because we think that the MEGI will become the de facto standard.

 So that has meant we've been more picky on our acquisition side of it. I don't rule out that we could make on the water acquisitions, which will lead to meaningful distribution growth in 2015 and 2016, but that isn't anything I'm guiding on.

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 Spiro Dounis,  UBS - Analyst   [40]
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 Fair enough. And then just the second question with respect to the $2.5 billion, $2.6 billion of LNG capital commitments, could you just remind us again when full financing of Yamal comes through how much that will impact those commitments and how much it will bring those down?

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [41]
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 Sure. Our -- David, do you want to take that?

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 Vince Lok,  Teekay LNG Partners LP - CFO   [42]
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 This is Vince here. Most of that you're right is related to the Yamal ships there.

 In addition to that we're in the process of financing the MEGI newbuildings. So those are the two big chunks of ships that we're going to be financing over the next little while.

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 Spiro Dounis,  UBS - Analyst   [43]
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 The question was more around when you finance them through the JV, you'll actually see the capital commitments required by TGP go down from that $2.5 billion. Is that correct?

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 Vince Lok,  Teekay LNG Partners LP - CFO   [44]
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 Well the $2.5 billion is shown on a 50% basis there, if that's what you're -- I'm not sure if that's what you're getting at. So this is on an enterprise basis as opposed to on an equity basis. So what we've shown there is really 50% of the CapEx payments for the Yamal ships on that table.

------------------------------
 Spiro Dounis,  UBS - Analyst   [45]
------------------------------
 Got it. Okay. Great, thanks.

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Operator   [46]
------------------------------
 There are no further questions at this time. Please continue.

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 Peter Evensen,  Teekay LNG Partners LP - CEO   [47]
------------------------------
 All right. Thank you all very much. We look forward to reporting back to you next quarter.

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Operator   [48]
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 Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.




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