UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________

FORM 6-K
_________________________

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
_________________________

Date of Report: November 15, 2018

Commission file number 1-32479
_________________________

TEEKAY LNG PARTNERS L.P.
(Exact name of Registrant as specified in its charter)
_________________________

4th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)
_________________________

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ý           Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).
Yes ¨           No ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).
Yes ¨           No ý














 




Item 1 — Information Contained in this Form 6-K Report

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
TEEKAY LNG PARTNERS L.P.
 
 
 
By:
 
Teekay GP L.L.C., its general partner
Date: November 15, 2018
By:
 
/s/ Edith Robinson
 
 
 
Edith Robinson
Secretary




TEEKAY LNG PARTNERS REPORTS
THIRD QUARTER 2018 RESULTS

Highlights
GAAP net income attributable to the partners and preferred unitholders of $26.0 million, GAAP net income per common unit of $0.24 and income from vessel operations of $47.0 million in the third quarter of 2018.
Adjusted net income attributable to the partners and preferred unitholders(1) of $19.5 million and adjusted net income per common unit of $0.16 in the third quarter of 2018 (excluding items listed in Appendix A to this release).
Generated total cash flow from vessel operations(1) of $132.6 million in the third quarter of 2018.
Looking forward, net income and cash flow from vessel operations are expected to be positively impacted by increased exposure to the strong spot LNG shipping market and expected delivery of the four remaining 50 percent-owned ARC7 LNG carriers three to five months early.
Intend to increase quarterly cash distributions on common units by 36 percent in 2019 as part of a balanced capital allocation strategy.
Intend to amend the Partnership’s U.S. tax structure to elect to be treated as a corporation, instead of a partnership, subject to common unitholder approval. If approved, common and preferred unit investors will receive Form 1099s instead of Schedule K-1s commencing in taxation year 2019.
In early-November 2018, the Partnership refinanced and upsized its existing $190 million, 364-day revolving credit facility with a $225 million, two-year facility.

Hamilton, Bermuda, November 15, 2018 - Teekay GP L.L.C., 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 September 30, 2018.

Three Months Ended
 
September 30, 2018
June 30, 2018
September 30, 2017
  (in thousands of U.S. Dollars)
(unaudited)
(unaudited)
(unaudited)
GAAP FINANCIAL COMPARISON
 
 
 
Voyage revenues
123,336

122,315

104,285

Income from vessel operations
46,998

10,505

10,322

Equity income
14,679

11,194

1,417

Net income (loss) attributable to the partners and preferred unitholders
25,950

2,734

(18,896
)
Limited partners’ interest in net income (loss) per common unit
0.24

(0.05
)
(0.27
)
NON-GAAP FINANCIAL COMPARISON
 
 
 
Adjusted net income attributable to the partners and preferred unitholders (1)
19,474

13,535

20,925

Limited partners’ interest in adjusted net income per common unit
0.16

0.09

0.22

Total cash flow from vessel operations (CFVO) (1)
132,593

115,005

107,254

Distributable cash flow (DCF) (1)
41,214

31,116

40,224

(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).


Teekay LNG Partners L.P. Investor Relations Tel: +1 604 844-6654 www.teekaylng.com
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
1

 

GAAP net income (loss) and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended September 30, 2018, compared to the same quarter in the prior year, were positively impacted by the deliveries of liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carrier newbuildings between July 2017 and September 2018 and by the commencement of short-term charter contracts for certain of the vessels in the Partnership’s 52 percent-owned joint venture with Marubeni Corporation (the Teekay LNG-Marubeni Joint Venture). These increases were partially offset by lower earnings for the three months ended September 30, 2018 on the Partnership's multi-gas carriers following the termination by the Partnership of their previous charter contracts due to non-payment by the charterer, lower rates earned in 2018 on two conventional tankers upon the expiration of their fixed-rate charter contracts in 2017, and a reduction in earnings due to the sale of a conventional tanker and an LPG carrier in the first quarter of 2018.

In addition, GAAP net income (loss) attributable to the partners and preferred unitholders was positively impacted for the three months ended September 30, 2018, compared to the same quarter of the prior year, by various items, including increases in unrealized gains on non-designated derivative instruments, foreign currency exchange gains and a decrease in write-down of vessels.
CEO Commentary

“Teekay LNG’s results for the third quarter of 2018 improved substantially, with adjusted net income up 44 percent compared with the second quarter of 2018,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. “The earnings and cash flow from the delivery and contract start-up of our recent LNG carrier newbulidings are beginning to have a positive impact on our financial results, with eight newbuilds having now delivered since the start of 2018 and an additional seven LNG carriers, and the Bahrain regasification facility, expected to commence their fixed-rate contracts during 2019. Importantly, the vessels that have delivered to-date during 2018 only represent approximately 50 percent of the total $310 million of expected incremental cash flow from vessel operations relating to our existing LNG newbuilding program and therefore, we expect our fixed-rate cash flows will continue to increase through 2019 as the remaining projects deliver.”

“We are also excited about the fundamental strength in the current spot LNG carrier market and the Partnership’s direct exposure to it. In early-September 2018, we agreed to in-charter the Magellan Spirit from the Teekay LNG-Marubeni Joint Venture for two years, allowing us to take advantage of the strengthening spot LNG shipping market and I’m pleased to report that we have now fixed that ship on a five-month charter contract to the end of March 2019, which we expect will add approximately $8 million in incremental profit to Teekay LNG over the length of this charter alone. In addition, the Torben Spirit LNG carrier and two Teekay LNG-Marubeni Joint Venture LNG carriers are scheduled to come off-charter between December 2018 and May 2019 and we are currently in discussions to secure employment for these vessels at significantly higher rates.”

Mr. Kremin continued, “As announced earlier today under a separate release, the Board is recommending that Teekay LNG elect to be treated as a corporation, instead of a partnership, for U.S. federal income tax purposes, which we believe is in the best interests of our current and future unitholders because, by eliminating the burdensome K-1 reporting, we anticipate that Teekay LNG will be a more attractive investment for larger, institutional investors. A proxy statement has been filed today and we urge all common unitholders to vote in favor of the recommendation put forward by our Board, and alongside our sponsor, Teekay Corporation, at the special meeting of common unitholders to be held on December 18, 2018.”

“Furthermore, and as discussed under a separate release, with approximately half of our newbuilding program now delivered, and virtually all of our near-term financings completed, we are today providing 2019 distribution guidance of $0.76 per common unit on an annualized basis, representing a 36 percent increase from the current distribution. We believe that this distribution increase is prudent and is part of a balanced capital allocation strategy that will allow the Partnership to achieve its goals of delevering its balance sheet towards its targeted leverage of 5.5x CFVO, while also returning capital to unitholders in a sustainable manner.”


2

 

Summary of Recent Events
LNG Carrier In-charter

In early-September 2018, the Partnership agreed to charter-in the Magellan Spirit LNG carrier from its 52%-owned Teekay LNG-Marubeni Joint Venture for a period of two years. The vessel was idle for 29 days in September and early-October while awaiting a suitable charter contract. Since October 3, 2018, the vessel has been chartered in the spot market at rates well in excess of the charter-in rate and is now currently employed under a 5-month charter contract through until late-March 2019, prior to the vessel’s scheduled drydocking in April 2019.
LNG Carrier Newbuilding Deliveries

In July 2018, the Partnership’s 20 percent-owned joint venture with China LNG Shipping (Holdings) Limited (China LNG), CETS Investment Management (HK) Co. Ltd. (an affiliate of China National Offshore Oil Corporation (CNOOC)) and BW LNG Investments Pte. Ltd. (the Pan Union Joint Venture), took delivery of one LNG carrier newbuilding, the Pan Europe, which immediately commenced its 20-year charter contract with Royal Dutch Shell (Shell).

In July 2018, the Partnership took delivery of one M-Type, Electronically Controlled, Gas Injection (MEGI) LNG carrier newbuilding, the Megara, which immediately commenced its eight-year charter contract with Shell.

In August 2018, the Partnership took delivery of the Bahrain Spirit floating storage unit (FSU), which immediately commenced its 21-year charter contract with Bahrain LNG W.L.L (the Bahrain LNG Joint Venture), in which the Partnership has a 30 percent ownership interest.

In September 2018, the Partnership’s 50 percent-owned joint venture with China LNG (the Yamal LNG Joint Venture) took delivery of its second ARC7 LNG carrier newbuilding, the Rudolph Samoylovich, which immediately commenced its 27-year charter contract with the Yamal LNG project two months ahead of the original scheduled delivery date.

Crude Tanker Dispositions

In September 2018, the Partnership agreed to sell the 2003-built African Spirit Suezmax tanker, which had been trading in the spot tanker market, for gross proceeds of $13.1 million. The vessel was delivered to the buyers in October 2018.

In November 2018, the Partnership agreed to sell the 2003-built European Spirit Suezmax tanker, which had been trading in the spot tanker market, for gross proceeds of $16.0 million. The vessel is expected to be delivered to the buyers in late-2018.

3

 

Operating Results
The following table highlights certain financial information for Teekay LNG’s two segments: the Liquefied Gas Segment and the Conventional Tanker Segment (please refer to the “Teekay LNG’s Fleet” section of this release below and Appendices C through E for further details).
 
Three Months Ended
 
September 30, 2018
September 30, 2017
  (in thousands of U.S. Dollars)
(unaudited)
(unaudited)

Liquefied Gas Segment
Conventional Tanker Segment
Total
Liquefied Gas Segment
Conventional Tanker Segment
Total
GAAP FINANCIAL COMPARISON




 

Voyage revenues
118,188

5,148

123,336

92,700

11,585

104,285

Income (loss) from vessel operations
51,581

(4,583
)
46,998

44,902

(34,580
)
10,322

Equity income
14,679


14,679

1,417


1,417

NON-GAAP FINANCIAL COMPARISON
 
 
 
 
 
 
 CFVO from consolidated vessels(i)
84,624

128

84,752

68,448

6,188

74,636

 CFVO from equity-accounted vessels(i)
47,841


47,841

32,618


32,618

 Total CFVO(i)
132,465

128

132,593

101,066

6,188

107,254

(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 Gas Segment

Income from vessel operations and CFVO from consolidated vessels increased for the liquefied gas segment for the three months ended September 30, 2018, compared to the same quarter of the prior year. Results were positively impacted primarily by the deliveries of six LNG carrier newbuildings (the Macoma, Murex, Magdala, Myrina, Megara and Bahrain Spirit) between October 2017 and September 2018. These increases were partially offset by lower earnings on seven of the Partnership's multi-gas carriers following the Partnership's termination of their charter contracts due to non-payment by the charterer and the time-charter hire expense incurred on the Magellan Spirit in-chartered from the Teekay LNG-Marubeni Joint Venture as the vessel was waiting for its spot charter to commence on October 3, 2018.

Equity income and CFVO from equity-accounted vessels for the three months ended September 30, 2018, compared to the same quarter of the prior year, were positively impacted by: the deliveries of the two ARC7 LNG carrier newbuildings in January and September 2018 in the Yamal LNG Joint Venture; the deliveries of three LNG carriers between October 2017 and July 2018 in the Partnership’s Pan Union Joint Venture, with the Partnership's ownership interest in these vessels ranging from 20 to 30 percent; the deliveries of four LPG carriers in the Partnership's 50 percent-owned joint venture with Exmar NV (the Exmar LPG Joint Venture) between July 2017 and July 2018; and higher fleet utilization in the Teekay LNG-Marubeni Joint Venture as certain of the joint venture’s vessels commenced short-term charter contracts at higher rates compared to the previous period. These increases were partially offset by: the sale of the Courcheville LPG carrier in the Exmar LPG Joint Venture in January 2018; and the sale of the S/S Excelsior LNG carrier in the Partnership’s 50 percent-owned joint venture with Exmar NV (the Excelsior Joint Venture) in January 2018. In addition, equity income was positively impacted by an increase in net unrealized gains on designated and non-designated derivative instruments in the Partnership's equity-accounted vessels.


4

 

Conventional Tanker Segment

Loss from vessel operations improved and CFVO from consolidated vessels decreased for the conventional tanker segment for the three months ended September 30, 2018, compared to the same quarter of the prior year. These results were impacted by: the sale of the Teide Spirit in February 2018 and associated restructuring charges as a result of the sale; and lower rates earned in 2018 on the African Spirit and European Spirit upon the expiration of their fixed-rate charter contracts in 2017. In addition, loss from vessel operations for the three months ended September 30, 2018, compared to the same quarter of the prior year, was positively impacted by a reduction of vessel write-downs in 2018, which write-downs for 2018 related to the Partnership's two vessels held for sale as of September 30, 2018.

Teekay LNG's Fleet
The following table summarizes the Partnership’s fleet as of November 1, 2018, excluding the Partnership’s 30 percent interest in the Bahrain regasification terminal currently under construction which is expected to commence operations by mid-February 2019:

Number of Vessels

Owned and In-Chartered Vessels(i)
Newbuildings
Total
LNG Carrier Fleet
42(ii)
7(ii)
49
LPG/Multi-gas Carrier Fleet
29(iii)
29
Conventional Tanker Fleet
3(iv)
3
Total
74
7
81
(i)
Includes vessels accounted for as vessels related to capital leases.
(ii)
The Partnership’s ownership interests in these vessels and newbuildings range from 20 percent to 100 percent.
(iii)
The Partnership’s ownership interests in these vessels range from 50 percent to 99 percent.
(iv)
One of the Partnership's conventional tankers, the European Spirit, is classified as held for sale.

Liquidity
As of September 30, 2018, the Partnership had total liquidity of $310.5 million (comprised of $139.9 million in cash and cash equivalents and $170.6 million in undrawn credit facilities). Giving pro-forma effect to the refinancing and upsizing of the Partnership’s existing $190 million, 364-day revolving credit facility with a $225 million, two-year facility, which closed in early-November 2018, the Partnership’s total liquidity as at September 30, 2018 would have been $345.5 million.



5

 

Conference Call
The Partnership plans to host a conference call on Thursday, November 15, 2018 at 11:00 a.m. (ET) to discuss the results for the third quarter of 2018. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
By dialing (888) 204-4368 or (647) 484-0478, if outside North America, and quoting conference ID code 7444729.
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 Third Quarter 2018 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, LPG and crude oil marine transportation services primarily under long-term, fee-based charter contracts through its interests in 49 LNG carriers (including seven newbuildings), 22 mid-size LPG carriers, seven multi-gas carriers, and three conventional tankers. The Partnership's ownership interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in a regasification terminal, which is currently under construction. 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


6

 

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 U.S. Securities and Exchange Commission. These non-GAAP financial measures, which include Cash Flow from Vessel Operations, Adjusted Net Income, and Distributable Cash Flow, are intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings across companies, and therefore may not be comparable to similar measures presented by other companies. The Partnership believes that certain investors use this information to evaluate the Partnership’s financial performance, as does management.
Non-GAAP Financial Measures

Cash Flow from Vessel Operations (CFVO) represents income (loss) from vessel operations before depreciation and amortization expense, amortization of in-process revenue contracts, vessel write-downs, gain and losses on the sales of vessels and adjustments for direct financing leases to a cash basis, but includes realized gains or losses on a derivative charter contract. CFVO from Consolidated Vessels represents CFVO from vessels that are consolidated on the Partnership’s financial statements. CFVO from Equity-Accounted Vessels represents the Partnership’s proportionate share of CFVO from its equity-accounted vessels. The Partnership does not control its equity-accounted vessels and as a result, the Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entities 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 such distributions to the Partnership and other owners. Consequently, readers are cautioned when using total CFVO as a liquidity measure as the amount contributed from CFVO from Equity-Accounted Vessels may not be available to the Partnership in the periods such CFVO is generated by its equity-accounted vessels. CFVO is a non-GAAP financial measure used by certain investors and management to measure the operational financial performance of companies. Please refer to Appendices D and E of this release for reconciliations of these non-GAAP financial measures to income (loss) from vessel operations and income from vessel operations of equity-accounted vessels, respectively, the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.
Adjusted Net Income 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 (3) 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 adjusted for write-down of vessels, 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, ineffectiveness for derivative instruments designated as hedges for accounting purposes, distributions relating to equity financing of newbuilding installments, distributions relating to preferred units, adjustments for direct financing leases to a cash basis and foreign exchange related items, including the Partnership’s proportionate share of such items in 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.

7

 

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
Nine Month Ended
 
September 30,
June 30,
September 30,
September 30,
September 30,
2018
2018
2017
2018
2017
 
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Voyage revenues
123,336

122,315

104,285

360,957

306,369

 
 
 
 
 
 
Voyage expenses
(7,956
)
(7,951
)
(1,466
)
(21,708
)
(3,899
)
Vessel operating expenses
(27,621
)
(33,969
)
(26,724
)
(90,057
)
(76,113
)
Time-charter hire expense
(1,690
)


(1,690
)

Depreciation and amortization
(32,238
)
(29,794
)
(24,980
)
(91,299
)
(77,894
)
General and administrative expenses
(4,183
)
(7,096
)
(2,793
)
(17,850
)
(11,592
)
Write-down of vessels(1)
(2,201
)
(33,000
)
(38,000
)
(53,863
)
(50,600
)
Restructuring charges (2)
(449
)


(1,845
)

Income from vessel operations
46,998

10,505

10,322

82,645

86,271


 
 
 
 
 
Equity income (3)
14,679

11,194

1,417

52,597

6,797

Interest expense
(35,875
)
(28,171
)
(20,091
)
(88,752
)
(57,604
)
Interest income
980

902

602

2,796

2,035

Realized and unrealized gain (loss) on non-designated derivative instruments(4)
2,515

4,302

(2,178
)
14,818

(8,375
)
Foreign currency exchange gain (loss)(5)
1,445

8,443

(5,104
)
8,615

(24,497
)
Other income (expense) (6)
314

350

356

(51,918
)
1,137

Net income (loss) before tax expense
31,056

7,525

(14,676
)
20,801

5,764

Income tax expense
(1,549
)
(843
)
(750
)
(3,171
)
(1,143
)
Net income (loss)
29,507

6,682

(15,426
)
17,630

4,621

 
 
 
 
 
 
Non-controlling interest in net income (loss)
3,557

3,948

3,470

(4,160
)
10,533

Preferred unitholders' interest in net income (loss)
6,425

6,426

2,813

19,276

8,438

General Partner's interest in net income (loss)
391

(68
)
(434
)
51

(287
)
Limited partners’ interest in net income (loss)
19,134

(3,624
)
(21,275
)
2,463

(14,063
)
Limited partners' interest in net income (loss) per common unit:
 
 
 
 
 
• Basic
0.24

(0.05
)
(0.27
)
0.03

(0.18
)
• Diluted
0.24

(0.05
)
(0.27
)
0.03

(0.18
)
Weighted-average number of common units outstanding:
 
 
 
 
 
• Basic
79,687,499

79,687,499

79,626,819

79,671,051

79,614,731

• Diluted
79,859,471

79,687,499

79,626,819

79,832,978

79,614,731

Total number of common units outstanding at end of period
79,687,499

79,687,499

79,626,819

79,687,499

79,626,819


(1)
The African Spirit and European Spirit conventional tankers were classified as vessels held for sale upon the expiration of their time-charter contracts in 2017. The Partnership recorded aggregate write-downs of $2.2 million and $7.9 million for the three and nine months ended September 30, 2018, respectively, on these two conventional tankers as the estimated fair values of these vessels had decreased. In June 2018, the carrying values for four of the Partnership's seven wholly-owned multi-gas carriers (the Napa Spirit, Pan Spirit, Camilla Spirit and Cathinka Spirit) were written down to their estimated fair values, using appraised values, as a result of the Partnership's evaluation of alternative strategies for these assets, combined with the then current charter rate environment and the outlook for charter rates for these vessels. The total impairment charge of $33.0 million related to these four multi-gas carriers is included in write-down of vessels for the three months ended June 30, 2018 and nine months ended September 30, 2018. In addition, the Partnership recorded a write-down of $13.0 million for the nine months ended September 30, 2018 relating to the Alexander Spirit conventional tanker to its estimated fair value, using an appraised value. This was a result of changes in the Partnership's expectations of the vessel's future opportunities after its current contract ends in 2019. The write-down of vessels of $38.0 and $50.6 million for the three and nine months ended September 30, 2017, respectively, relates to the combined write-downs of the African Spirit and European Spirit of $12.5 million and $25.1 million for the three and nine months ended September 30,

8

 

2017, respectively, upon the Partnership marketing the vessels for sale in 2017; and the aggregate write-downs of the Teide Spirit and Toledo Spirit conventional tankers of $25.5 million for the three and nine months ended September 30, 2017 upon the charterer notifying the Partnership of its intention to sell the Teide Spirit in 2017 and the Partnership's expectation that the charterer would sell the Toledo Spirit in 2018.

(2)
In February 2018, the Teide Spirit conventional tanker was sold and as a result of this sale, the Partnership recorded restructuring charges of $0.4 million and $1.8 million relating to seafarer severance costs for the three and nine months ended September 30, 2018, respectively.

(3)
The Partnership’s proportionate share of items within equity income as identified in Appendix A of this release is 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
Nine Month Ended
 
September 30,
June 30,
September 30,
September 30,
September 30,
 
2018
2018
2017
2018
2017
Equity income
14,679

11,194

1,417

52,597

6,797

Proportionate share of unrealized gain on non-designated derivative instruments
(2,614
)
(2,977
)
(1,485
)
(13,812
)
(3,087
)
Proportionate share of ineffective portion of hedge-accounted interest rate swaps
(105
)
(1,809
)
968

(5,173
)
4,534

Proportionate share of write-down and loss on sale of vessel



257


Gain on sale of equity-accounted investment



(5,563
)

Proportionate share of other items
(185
)
(128
)
219

(185
)
460

Equity income adjusted for items in Appendix A
11,775

6,280

1,119

28,121

8,704


(4)
The realized (losses) gains on non-designated derivative instruments relate to the amounts the Partnership actually paid or received 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
Nine Month Ended

September 30,
June 30,
September 30,
September 30,
September 30,

2018
2018
2017
2018
2017
Realized (losses) gains relating to:
 

 

 

 
 
Interest rate swap agreements
(3,062
)
(4,310
)
(4,528
)
(11,850
)
(13,813
)
Interest rate swap and swaption agreements termination
(13,681
)


(13,681
)
(610
)
Toledo Spirit time-charter derivative contract
1,689

150

646

2,148

526

 
(15,054
)
(4,160
)
(3,882
)
(23,383
)
(13,897
)
Unrealized gains (losses) relating to:
 
 
 
 
 
Interest rate swap agreements
19,278

7,522

1,775

38,698

4,211

Interest rate swaption agreements


285

2

427

Toledo Spirit time-charter derivative contract
(1,709
)
940

(356
)
(499
)
884

 
17,569

8,462

1,704

38,201

5,522

Total realized and unrealized gains (losses) on non-designated derivative instruments
2,515

4,302

(2,178
)
14,818

(8,375
)


9

 

(5)
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 non-designated cross-currency swaps that were entered into as economic hedges in relation to the Partnership’s Norwegian Kroner (NOK) denominated unsecured bonds. Foreign currency exchange gain (loss) also includes unrealized gains relating to the change in fair value of such derivative instruments, partially offset by unrealized (losses) gains on the revaluation of the NOK bonds as detailed in the table below:

Three Months Ended
Nine Month Ended

September 30,
June 30,
September 30,
September 30,
September 30,

2018
2018
2017
2018
2017
Realized losses on cross-currency swaps
(1,744
)
(1,798
)
(1,598
)
(4,926
)
(7,219
)
Realized losses on cross-currency swaps termination
(42,271
)


(42,271
)
(25,733
)
Realized gains on repurchase of NOK bonds
42,271



42,271

25,733

Unrealized gains (losses) on cross-currency swaps
43,966

(16,566
)
20,523

49,734

58,128

Unrealized (losses) gains on revaluation of NOK bonds
(41,549
)
14,852

(17,906
)
(44,184
)
(54,837
)

(6) The Partnership owns a 70 percent interest in Teekay Nakilat Corporation (the Teekay Nakilat Joint Venture), which wholly-owns a subsidiary which was the lessee under three separate 30-year capital lease arrangements with a third party for three LNG carriers (the RasGas II LNG Carriers). Under the terms of these leases, the lessor claimed tax depreciation on the capital expenditures it incurred to acquire these vessels and paid the lessee an upfront benefit in the amount of $60.9 million at the lease inception. As is typical in these leasing arrangements, tax and change of law risks were assumed by the lessee, in this case the Teekay Nakilat Joint Venture. Lease payments under the lease arrangements were based on certain tax and financial assumptions at the commencement of the leases in 2006 and subsequently adjusted to maintain the lessor's agreed after-tax margin. On December 22, 2014, the Teekay Nakilat Joint Venture terminated the leases of the RasGas II LNG Carriers; however, it remained obligated to the lessor for changes in tax treatment.

The UK taxing authority (HMRC) has been challenging the use by third parties of similar lease structures in the United Kingdom courts. One of those challenges was eventually decided in favor of HMRC, with the lessor and lessee choosing not to appeal further. This case concluded that capital allowances are not available to the lessor. On the basis of this conclusion, HMRC asked lessees on other leases, including the Teekay Nakilat Joint Venture, to accept that capital allowances are not available to their lessors. Under the terms of the Teekay Nakilat Joint Venture lease, the lessor is entitled to make a determination that additional rentals are due, even where a court has not made a determination on whether capital allowances are available or where discussions are otherwise ongoing with HMRC on the matter (such that additional rentals paid may be rebated in due course if the final tax position is not as determined by the lessor). On May 10, 2018, the lessor made a determination that additional rentals are due under the leases. As a result, during the nine months ended September 30, 2018, the Teekay Nakilat Joint Venture recognized an additional tax indemnification guarantee liability of $53.0 million. The total liability of $63.0 million was paid during the second and third quarters of 2018.

10

 

Teekay LNG Partners L.P.
Consolidated Balance Sheets  
(in thousands of U.S. Dollars)
 
As at September 30,
As at June 30,
As at December 31,
 
2018
2018
2017
 
(unaudited)
(unaudited)
(unaudited)
ASSETS
  
 
 
Current
  
 
 
Cash and cash equivalents
139,854

177,071

244,241

Restricted cash – current
36,429

53,599

22,326

Accounts receivable
25,732

29,679

24,054

Prepaid expenses
9,277

4,800

6,539

Vessels held for sale
28,482

29,911

33,671

Current portion of derivative assets
1,453

3,054

1,078

Current portion of net investments in direct financing leases
12,273

10,453

9,884

Advances to affiliates
5,163

8,538

7,300

Other current assets
4,400

2,035


Total current assets
263,063

319,140

349,093

Restricted cash – long-term
30,159

29,823

72,868

Vessels and equipment
 

 

 
At cost, less accumulated depreciation
1,463,438

1,349,449

1,416,381

Vessels related to capital leases, at cost, less accumulated depreciation
1,597,418

1,406,462

1,044,838

Advances on newbuilding contracts
172,248

349,169

444,493

Total vessels and equipment
3,233,104

3,105,080

2,905,712

Investment in and advances to equity-accounted joint ventures
1,118,361

1,100,674

1,094,596

Net investments in direct financing leases
565,423

480,294

486,106

Derivative assets
19,164

12,878

6,172

Intangible assets – net
54,436

56,650

61,078

Goodwill – liquefied gas segment
35,631

35,631

35,631

Other assets
9,148

8,055

8,043

Total assets
5,328,489

5,148,225

5,019,299

 
  

 

 
LIABILITIES AND EQUITY
  

 

 
Current
 

 

 
Accounts payable
4,158

2,973

3,509

Accrued liabilities
67,977

123,713

45,757

Unearned revenue
23,080

25,227

25,873

Current portion of long-term debt
155,261

372,378

552,404

Current obligations related to capital leases
81,149

83,374

106,946

In-process contracts
1,803

3,445

7,946

Current portion of derivative liabilities
12,224

64,329

79,139

Advances from affiliates
20,061

18,959

12,140

Total current liabilities
365,713

694,398

833,714

Long-term debt
1,744,961

1,355,377

1,245,588

Long-term obligations related to capital leases
1,231,839

1,123,419

904,603

Other long-term liabilities
41,930

42,369

58,174

Derivative liabilities
30,877

37,059

45,797

Total liabilities
3,415,320

3,252,622

3,087,876

Equity
 
   
 
Limited partners – common units
1,510,650

1,502,492

1,539,248

Limited partners – preferred units
285,159

285,159

285,159

General partner
49,570

49,403

50,152

Accumulated other comprehensive income
18,158

11,772

4,479

Partners' equity
1,863,537

1,848,826

1,879,038

Non-controlling interest
49,632

46,777

52,385

Total equity
1,913,169

1,895,603

1,931,423

Total liabilities and total equity
5,328,489

5,148,225

5,019,299


11

 

Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
 
Nine Months Ended
 
September 30,
September 30,
 
2018
2017
 
(unaudited)
(unaudited)
Cash, cash equivalents and restricted cash provided by (used for)
 
 
OPERATING ACTIVITIES
 
 
Net income
17,630

4,621

Non-cash items:
 

 

   Unrealized gain on non-designated derivative instruments
(38,201
)
(5,522
)
   Depreciation and amortization
91,299

77,894

   Write-down of vessels
53,863

50,600

   Unrealized foreign currency exchange gain and other
(64,228
)
(5,415
)
   Equity income, net of dividends received of $11,583 (2017 - $28,781)
(41,014
)
21,984

   Ineffective portion on qualifying cash flow hedging instruments included in interest expense
(740
)
755

Change in operating assets and liabilities
3,422

(2,445
)
Expenditures for dry docking
(10,458
)
(17,067
)
Net operating cash flow
11,573

125,405

FINANCING ACTIVITIES
 

 

Proceeds from issuance of long-term debt
685,547

249,682

Scheduled repayments of long-term debt
(131,217
)
(136,582
)
Prepayments of long-term debt
(440,820
)
(67,040
)
Debt issuance costs
(8,534
)
(1,765
)
Proceeds from financing related to sales and leaseback of vessels
370,050

335,830

Scheduled repayments of obligations related to capital leases
(45,281
)
(27,411
)
Cash distributions paid
(52,535
)
(42,462
)
Dividends paid to non-controlling interest
(1,290
)
(658
)
Other

(605
)
Net financing cash flow
375,920

308,989

INVESTING ACTIVITIES
 

 

Capital contributions and advances to equity-accounted joint ventures
(29,113
)
(143,513
)
Return of capital and repayment of advances from equity-accounted joint ventures
5,000

40,320

Proceeds from sale of equity-accounted joint venture
54,438


Receipts from direct financing leases
8,361

9,203

Proceeds from sale of vessel

20,580

Expenditures for vessels and equipment
(559,172
)
(350,137
)
Net investing cash flow
(520,486
)
(423,547
)
 
 
 
(Decrease) increase in cash, cash equivalents and restricted cash
(132,993
)
10,847

Cash, cash equivalents and restricted cash, beginning of the period
339,435

243,173

Cash, cash equivalents and restricted cash, end of the period
206,442

254,020



12

 

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
September 30,
2018
2017
(unaudited)
(unaudited)
Net income (loss) – GAAP basis
29,507

(15,426
)
Less: Net income attributable to non-controlling interests
(3,557
)
(3,470
)
Net income (loss) attributable to the partners and preferred unitholders
25,950

(18,896
)
Add (subtract) specific items affecting net income:
 
 
Write-down of vessels(1)
2,201

38,000

Restructuring charges(2)
449


Unrealized foreign currency exchange (gains) losses(3)
(3,019
)
3,548

Unrealized gains on non-designated and designated derivative instruments and other items from equity–accounted investees(4)
(2,904
)
(298
)
Unrealized gains on non-designated derivative instruments(5)
(17,569
)
(1,704
)
Realized loss on interest rate swap termination
13,681


Other items
396

8

Non-controlling interests’ share of items above(6)
289

267

Total adjustments
(6,476
)
39,821

Adjusted net income attributable to the partners and preferred unitholders
19,474

20,925






Preferred unitholders' interest in adjusted net income
6,425

2,813

General Partner's interest in adjusted net income
261

362

Limited partners’ interest in adjusted net income
12,788

17,750

Limited partners’ interest in adjusted net income per common unit, basic
0.16

0.22

Weighted-average number of common units outstanding, basic
79,687,499

79,626,819

(1)
See Note 1 to the Consolidated Statements of Income (Loss) included in this release for further details.
(2)
See Note 2 to the Consolidated Statements of Income (Loss) included in this release for further details.
(3)
Unrealized 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 (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 5 to the Consolidated Statements of Income (Loss) included in this release for further details.
(4)
Reflects the unrealized gains due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes and any ineffectiveness for derivative instruments designated as hedges for accounting purposes within the Partnership’s equity-accounted investments. See Note 3 to the Consolidated Statements of Income (Loss) included in this release for further details.
(5)
Reflects the unrealized gains due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes. See Note 4 to the Consolidated Statements of Income (Loss) included in this release for further details.
(6)
Items affecting net income (loss) include items from the Partnership’s consolidated non-wholly-owned subsidiaries. The specific items affecting net income (loss) are analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests’ percentage share in this subsidiary to arrive at the non-controlling interests’ share of the amount. The amount identified as “non-controlling interests’ share of items listed above” in the table above is the cumulative amount of the non-controlling interests’ proportionate share of the other specific items affecting net income (loss) listed in the table.


13

 

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
September 30,
2018
2017
(unaudited)
(unaudited)
 
 
 

 

Net income (loss):
29,507

(15,426
)
Add:
 
 
Depreciation and amortization
32,238

24,980

Partnership’s share of equity–accounted joint ventures' DCF net of estimated maintenance capital expenditures(1)
19,599

11,008

Realized loss on interest rate swap termination
13,681


Deferred income tax and other non-cash items
3,011

(894
)
Direct finance lease payments received in excess of revenue recognized and other adjustments
2,823

1,901

Distributions relating to equity financing of newbuildings
2,340

1,589

Write-down of vessels
2,201

38,000

Less:
 
 
Unrealized foreign currency exchange (gain) loss
(3,019
)
3,548

Distributions relating to preferred units
(6,425
)
(2,813
)
Equity income
(14,679
)
(1,417
)
Estimated maintenance capital expenditures
(16,140
)
(13,232
)
Unrealized gain on non-designated derivative instruments
(17,569
)
(1,704
)
Distributable Cash Flow before Non-controlling interest
47,568

45,540

Non-controlling interests’ share of DCF before estimated maintenance capital expenditures
(6,354
)
(5,316
)
Distributable Cash Flow
41,214

40,224

Amount of cash distributions attributable to the General Partner
(228
)
(227
)
Limited partners' Distributable Cash Flow
40,986

39,997

Weighted-average number of common units outstanding
79,687,499

79,626,819

Distributable Cash Flow per limited partner common unit
0.51

0.50

 
(1)
The estimated maintenance capital expenditures relating to the Partnership’s share of equity-accounted joint ventures were $9.6 million and $8.3 million for the three months ended September 30, 2018 and 2017, respectively.


14

 

Teekay LNG Partners L.P.
Appendix C - Supplemental Segment Information
(in thousands of U.S. Dollars)
 
Three Months Ended September 30, 2018
 
(unaudited)
 
Liquefied Gas Segment
Conventional Tanker Segment
Total
Voyage revenues
118,188

5,148

123,336

Voyage expenses
(5,731
)
(2,225
)
(7,956
)
Vessel operating expenses
(23,905
)
(3,716
)
(27,621
)
Time-charter hire expense
(1,690
)

(1,690
)
Depreciation and amortization
(31,309
)
(929
)
(32,238
)
General and administrative expenses
(3,972
)
(211
)
(4,183
)
Write-down of vessels

(2,201
)
(2,201
)
Restructuring charges

(449
)
(449
)
Income (loss) from vessel operations
51,581

(4,583
)
46,998

 
 

 

 

 
Three Months Ended September 30, 2017
 
(unaudited)
 
Liquefied Gas Segment
Conventional Tanker Segment
Total
Voyage revenues
92,700

11,585

104,285

Voyage expenses
(716
)
(750
)
(1,466
)
Vessel operating expenses
(22,172
)
(4,552
)
(26,724
)
Depreciation and amortization
(22,580
)
(2,400
)
(24,980
)
General and administrative expenses
(2,330
)
(463
)
(2,793
)
Write-down of vessels

(38,000
)
(38,000
)
Income (loss) from vessel operations
44,902

(34,580
)
10,322




15

 

Teekay LNG Partners L.P.
Appendix D - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Consolidated Vessels
(in thousands of U.S. Dollars)
 
Three Months Ended September 30, 2018
 
(unaudited)
 
Liquefied Gas Segment
Conventional Tanker Segment
Total
Income (loss) from vessel operations (See Appendix C)
51,581

(4,583
)
46,998

Depreciation and amortization
31,309

929

32,238

Write-down of vessels

2,201

2,201

Amortization of in-process contracts included in voyage revenues
(1,089
)
(108
)
(1,197
)
Direct finance lease payments received in excess of revenue recognized and other adjustments
2,823


2,823

Realized gain on Toledo Spirit derivative contract

1,689

1,689

Cash flow from vessel operations from consolidated vessels
84,624

128

84,752

 
 

 
 

 
Three Months Ended September 30, 2017
 
(unaudited)
 
Liquefied Gas Segment
Conventional Tanker Segment
Total
Income (loss) from vessel operations (See Appendix C)
44,902

(34,580
)
10,322

Depreciation and amortization
22,580

2,400

24,980

Write-down of vessels

38,000

38,000

Amortization of in-process contracts included in voyage revenues
(935
)
(278
)
(1,213
)
Direct finance lease payments received in excess of revenue recognized
1,901


1,901

Realized gain on Toledo Spirit derivative contract

646

646

Cash flow from vessel operations from consolidated vessels
68,448

6,188

74,636





16

 

Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations from Equity-Accounted Vessels
(in thousands of U.S. Dollars)
 
Three Months Ended
 
September 30, 2018
September 30, 2017
 
(unaudited)
(unaudited)
 
At
Partnership's
At
Partnership's
100%
Portion(1)
100%
Portion(1)
Voyage revenues
159,337

68,693

117,013

52,310

Voyage expenses
(3,143
)
(1,572
)
(3,933
)
(2,015
)
Vessel operating expenses, time-charter hire expense and general and administrative expenses
(50,914
)
(22,626
)
(43,631
)
(20,246
)
Depreciation and amortization
(25,839
)
(12,860
)
(29,201
)
(14,486
)
Income from vessel operations of equity-accounted vessels
79,441

31,635

40,248

15,563

Other items, including interest expense, realized and unrealized gain (loss) on derivative instruments
(39,045
)
(16,956
)
(31,322
)
(14,146
)
Net income / equity income of equity-accounted vessels
40,396

14,679

8,926

1,417

 
 

 

 

 

Income from vessel operations of equity-accounted vessels
79,441

31,635

40,248

15,563

Depreciation and amortization
25,839

12,860

29,201

14,486

Direct finance lease payments received in excess of revenue recognized and other adjustments
11,711

4,310

10,018

3,636

Amortization of in-process revenue contracts
(1,800
)
(964
)
(2,065
)
(1,067
)
Cash flow from vessel operations from equity-accounted vessels
115,191

47,841

77,402

32,618

(1)
The Partnership's equity-accounted vessels for the three months ended September 30, 2018 and 2017 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 49 percent ownership interest in the Partnership’s joint venture with Exmar NV (the Excalibur Joint Venture), which owns one LNG carrier; the Partnership's 50 percent ownership interest up to January 2018 in the Excelsior Joint Venture, which owns one regasification unit; 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 Teekay LNG-Marubeni Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in Exmar LPG BVBA, which owns and in-charters 22 LPG carriers as at September 30, 2018, compared to 23 owned and in-chartered LPG carriers, including six LPG carrier newbuildings, as at September 30, 2017; the Partnership’s ownership interest ranging from 20 to 30 percent in three LNG carriers and one LNG carrier newbuilding as at September 30, 2018 for Shell, compared to four LNG carrier newbuildings as at September 30, 2017; the Partnership’s 50 percent ownership interest in two ARC7 LNG carriers and four ARC7 LNG carrier newbuildings in the Yamal LNG Joint Venture as at September 30, 2018, compared to six ARC7 LNG carrier newbuildings as at September 30, 2017; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal under construction in Bahrain.



17

 

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

As at September 30, 2018
As at December 31, 2017

(unaudited)
(unaudited)

At
Partnership's
At
Partnership's
100%
Portion(1)
100%
Portion(1)
Cash and restricted cash, current and non-current
390,537

168,686

295,148

128,004

Current portion of derivative assets
4,709

2,196

1,594

785

Other current assets
63,168

27,207

53,068

22,661

Vessels and equipment, including vessels related to capital leases
2,348,919

1,151,294

2,202,418

1,133,804

Advances on newbuilding contracts
1,210,375

445,543

1,211,210

450,523

Net investments in direct financing leases, current and non-current
3,104,728

1,169,737

2,013,759

722,408

Derivative assets
39,428

15,242

4,602

2,259

Other non-current assets
50,124

37,972

86,167

54,060

Total assets
7,211,988

3,017,877

5,867,966

2,514,504










Current portion of long-term debt and obligations related to capital leases
206,241

87,555

162,915

73,975

Current portion of derivative liabilities
13,773

4,716

21,973

7,217

Other current liabilities
132,194

59,655

98,657

43,193

Long-term debt and obligations related to capital leases
4,236,959

1,700,934

3,023,713

1,231,433

Shareholders' loans, current and non-current
360,814

127,226

368,937

131,685

Derivative liabilities
37,454

12,389

73,454

24,235

Other long-term liabilities
66,353

34,267

77,297

39,855

Equity
2,158,200

991,135

2,041,020

962,911

Total liabilities and equity
7,211,988

3,017,877

5,867,966

2,514,504










Investments in equity-accounted joint ventures


991,135



962,911

Advances to equity-accounted joint ventures


127,226



131,685

Investments in and advances to equity-accounted joint ventures
 
1,118,361

 
1,094,596


(1)
The Partnership's equity-accounted vessels as at September 30, 2018 and December 31, 2017 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 49 percent ownership interests in the Excalibur Joint Venture, which own one LNG carrier; the Partnership's 50 percent ownership interest up to January 2018 in the Excelsior Joint Venture, which owned one regasification unit as at December 31, 2017; 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 Teekay LNG-Marubeni Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in Exmar LPG BVBA, which owns and in-charters 22 LPG carriers, as at September 30, 2018, compared to 23 owned and in-chartered LPG carriers including three LPG carrier newbuildings, as at December 31, 2017; the Partnership’s ownership interest ranging from 20 percent to 30 percent in three LNG carriers and one LNG carrier newbuilding as at September 30, 2018 for Shell, compared to one LNG carrier and three LNG carrier newbuildings as at December 31, 2017; the Partnership’s 50 percent ownership interest in two ARC7 LNG carriers and four ARC7 LNG carrier newbuildings in the Yamal LNG Joint Venture as at September 30, 2018, compared to six ARC7 LNG carrier newbuildings as at December 31, 2017; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal under construction in Bahrain.


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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 timing of newbuilding vessel deliveries and completion of the Bahrain regasification facility, and the commencement of related contracts; the strength of the LNG carrier market; the effects of future newbuilding deliveries on the Partnership’s future net income and cash flows, and the expected amount of such incremental cash flow from vessel operations; the expected amount of incremental profit relating to the charter for the Magellan Spirit; Teekay LNG’s ability to secure employment for the Torben Spirit LNG carrier and two Teekay LNG-Marubeni Joint Venture LNG carriers at higher rates; the effects of Teekay LNG’s proposed amendments to its U.S. federal income tax status, including, greater appeal to certain investors, the administrative burden of K-1s, and the tax effect on and treatment applicable to Teekay LNG and unitholders upon conversion and in the future; Teekay LNG’s guidance as to 2019 cash distributions and the impact of Teekay LNG’s distribution policy and capital allocation strategy on Teekay LNG’s ability to achieve its targeted leverage; and Teekay LNG’s ability to benefit from future LNG fundamentals. 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: potential shipyard and project construction delays, newbuilding specification changes or cost overruns; 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; the inability to secure new charters at higher rates; the outcome of the common unitholder vote at the special meeting to approve the proposed amendments to the Partnership’s U.S. federal tax status
and related amendments to its partnership agreement, and the actual tax implications of any such amendments on the Partnership and unitholders; actual levels of quarterly distributions approved by the general partner’s board of directors; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels; the Partnership’s or the Partnership’s joint ventures’ ability to secure or draw on financings for its vessels; 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, 2017. 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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