Altera Infrastructure Reports Second Quarter 2020 Results

Thursday, 06. August 2020 07:15
  • Revenues of $304 million and a net loss of $16 million, or $0.06 per common unit, in the second quarter of 2020
  • Net loss of $16 million impacted by $15 million of realized and unrealized loss on derivatives and an impairment charge of $11 million relating mainly to the Dampier Spirit FSO
  • Adjusted EBITDA(1) of $143 million in the second quarter of 2020
  • Adjusted net loss attributable to the partners and preferred unitholders(1) of $18 million (excluding items listed in Appendix B to this release)
  • Signed a 5-year CoA contract for shuttle tanker operations on the Kraken field in the UK North Sea
  • Extended the Knarr FPSO financing to June 2023

PEMBROKE, Bermuda, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Altera Infrastructure GP LLC (Altera GP), the general partner of Altera Infrastructure L.P. (Altera or the Partnership), today reported the Partnership’s results for the quarter ended June 30, 2020.

Consolidated Financial Summary

  Three Months Ended
  June 30,March 31,June 30,
(in thousands of U.S. Dollars, except per unit data)20202020 (2)2019(2)
(unaudited)(unaudited)(unaudited)
     
GAAP FINANCIAL RESULTS   
Revenues304,463 312,401 319,774 
Net loss(16,162)(253,816)(27,979)
Limited partners' interest in net loss per common unit - basic(0.06)(0.61)(0.09)
    
NON-GAAP FINANCIAL RESULTS:   
Adjusted EBITDA (1)142,707 153,795 158,941 
Adjusted net (loss) income attributable to the partners and preferred unitholders (1)(17,867)9,517 4,735 
Limited partners' interest in adjusted net income (loss) per common unit (1)0.00 0.00 (0.01)
       

(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).
(2) Please refer to Appendices to the release announcing the first quarter results of 2020 and the second quarter results of 2019 attached as Exhibit 1 to the Forms 6-K filed with the Securities and Exchange Commission on May 6, 2020 and April 30, 2019, respectively, for reconciliations of these non-GAAP measures to the most directly comparable financial measures under GAAP.

Second Quarter of 2020 Compared to Second Quarter of 2019

Revenues were $304 million in the second quarter of 2020, a decrease of $16 million compared to $320 million in the same quarter of the prior year. This was primarily due to a $13 million decrease related to the termination of the Varg FPSO contract during the second quarter of 2019, a $10 million decrease due to lower utilization in the towage fleet, a $7 million decrease primarily due to an expected earlier end of contract for the Dampier Spirit FSO, a $4 million decrease from one shuttle tanker deemed off-hire by the customer during the quarter and a $4 million decrease due to temporarily lower uptime on the Petrojarl I FPSO. These unfavorable impacts were partly offset by increased revenue for the Foinaven FPSO of $18 million reflecting the first full quarter of operations under the new BP contract.

Net loss in the second quarter of 2020 was $16 million, compared to a net loss of $28 million in the same quarter of the prior year. The decrease in loss of $12 million was mainly due to a $25 million decrease in losses on derivatives, a $12 million decrease in depreciation and a $4 million decrease in net interest expense. These favorable variances were partly offset by increased write-downs and lower gain on sales with an impact of $24 million and the $16 million decrease in Adjusted EBITDA described below.

Non-GAAP Adjusted EBITDA was $143 million in the second quarter of 2020, a decrease of $16 million compared to $159 million in the same quarter of the prior year. The decrease is primarily related to an expected earlier end of contract for the Dampier FSO with a negative impact of $11 million and a $4 million decrease due to temporarily lower uptime and lower oil price tariff revenues on the Petrojarl I FPSO.

Non-GAAP Adjusted Net Loss was $18 million in the second quarter of 2020, representing a decrease of $23 million compared to Non-GAAP Adjusted Net Gain of $5 million in the same quarter of the prior year. This was mainly due to a $22 million increase in realized losses on interest rate swaps and a decrease in Non-GAAP Adjusted EBITDA of $16 million as described above, partly offset by a $12 million decrease in depreciation.

Second Quarter of 2020 Compared to First Quarter of 2020

Revenues were $304 million in the second quarter of 2020, a decrease of $8 million compared to $312 million in first quarter of 2020. This was mainly due to a $12 million decrease in revenue from the shuttle tanker segment reflecting strong utilization in the first quarter and one shuttle tanker deemed off-hire by the customer in the second quarter, a $7 million decrease due to an expected earlier end of contract for the Dampier Spirit FSO, a $6 million decrease due to temporarily lower uptime for the Petrojarl I FPSO and a $4 million decrease due to lower utilization of the towage fleet. The unfavorable variances are partly offset by increased revenue for the Foinaven FPSO of $18 million reflecting a full quarter of operations under the BP contract.

Net loss was $16 million in the second quarter of 2020, a decrease of $237 million, compared to the prior quarter, mainly due to a net decrease of $144 million in write-down and gain on sale of vessels and a $96 million decrease in unrealized fair value losses relating to derivative instruments.

Non-GAAP Adjusted EBITDA was $143 million in the second quarter of 2020, a decrease of $11 million compared to  the prior quarter, mainly due to the expected earlier end of contract for the Dampier Spirit FSO.

Non-GAAP Adjusted Net Loss was $18 million in the second quarter of 2020, a decrease of $27 million compared to the prior quarter, mainly due to $20 million of increased realized losses on interest rate swaps and the $11 million decrease in Non-GAAP Adjusted EBITDA described above, partly offset by $2 million in lower depreciation.

Please refer to “Operating Results” for additional information on variances by segment and Appendices A and B for reconciliations between GAAP net loss and Non-GAAP Adjusted EBITDA and Adjusted Net Income, respectively.

Summary of Recent Events

Contracts

Trion Pre-FEED

In June 2020, the Partnership entered into an agreement with BHP to undertake a paid competitive concept study for a newbuild FSO for the Trion field in the Mexican Gulf. The FEED is expected to be awarded around the first quarter of 2021. First oil for the Trion field is expected around 2025.

Randgrid FSO contract extension

In June 2020, Equinor ASA (or Equinor) exercised the first of twelve one-year options to extend the time-charter contract for the Randgrid FSO one year until at least October 2021.

Kraken Field CoA Contract

In June 2020, EnQuest PLC awarded the Partnership a 5-year contract of affreightment (CoA) for the Kraken field in the UK North Sea. The vessel requirement is equivalent to half a shuttle tanker.

Dorado Pre-FEED

In May 2020, the Partnership entered into a partly paid, competitive pre-FEED with Santos for an FPSO for the Dorado field.

Rosebank Pre-FEED

In April 2020, the Partnership entered into a partly paid agreement with Equinor to undertake a concept study for the potential redeployment of the Petrojarl Knarr FPSO on the Rosebank field, West of Shetlands, UK. The study is expected to be completed in August 2020.

Navion Stavanger contract extension

In April 2020, the Partnership entered into an amendment with Petróleo Brasileiro S.A. to extend the bareboat charter contract for the shuttle tanker Navion Stavanger by 18 months, until late-2021.

Navion Anglia contract

In April 2020, the Partnership entered into a new four-month time-charter contract with Suncor Energy Inc. for the Navion Anglia shuttle tanker, which charter commenced in May 2020, and pursuant to which the vessel is expected to primarily be used for storage.

Voyageur Spirit contract

The Voyageur Spirit FPSO completed its final commercial offloading with Premier Oil at the Huntington UK field at the end of June 2020 and is in the process of being decommissioned.

Sale of Vessel

In May 2020, the Partnership sold the HiLoad DP unit for green recycling and recorded a net loss of $1 million on the sale.

Financings

In August 2020, the Partnership agreed to amend the existing credit agreement for an unsecured revolving credit facility provided by Brookfield to increase the available amount by $75 million to $200 million and extend the maturity date from October 1, 2020 to October 31, 2024. The amendment, which was approved by the independent Conflicts Committee of our general partner's Board of Directors, is subject to completion of customary documentation, expected to be completed in August 2020.

In June 2020, the Partnership extended the $40 million commercial tranche related to the financing of the Knarr FPSO until June 2023. This extension was a condition for the $390 million ECA tranche not to mature in June 2020. The related interest rate swap portfolio was also extended, until June 2022. In relation to the extensions, certain deposit arrangements and reductions in negative mark-to-market values of the interest rate swaps were agreed with the lenders.

Delivery of Shuttle Tanker Newbuilding

In July 2020, the Partnership took delivery of the third LNG-fueled Suezmax DP2 shuttle tanker newbuilding, the Tide Spirit. The vessel is constructed based on the Partnership's E-shuttle design, which incorporates technologies intended to increase fuel efficiency and reduce emissions, using LNG fuel and recovered volatile organic compounds (VOCs) as a secondary fuel, as well as battery packs for flexible power distribution and blackout prevention. The Tide Spirit is expected to commence operations in October 2020.

The shuttle tanker newbuildings delivered in the first quarter, the Aurora Spirit and Rainbow Spirit successfully commenced operations under an existing master agreement with Equinor in the North Sea during April 2020 and May 2020, respectively.

The remaining three E-Shuttle newbuildings are expected to be delivered between August 2020 and January 2021, while the East Coast of Canada newbuilding is expected to deliver early-2022.

Changes to Board of Directors and Committees

Effective June 17, 2020, Kenneth Hvid, CEO of Teekay Corporation retired from his position as Director of the Altera GP's Board of Directors and committees.

COVID-19

In the second quarter of 2020 the Partnership did not experience any material business interruptions or financial impact as a result of the COVID-19 pandemic. The Partnership continues to focus on the safety of its operations and has proactive measures in place to protect the health and safety of its crews on its vessels as well as at onshore locations. A majority of the Partnership’s revenues are secured under medium term contracts that should not be materially affected by the short-term volatility in oil prices. The operational environment continues to be challenging and the Partnership's results of operation may be adversely affected under a prolonged pandemic. The Partnership is continuing to closely monitor counterparty risk associated with its vessels under contract and has measures in place to mitigate potential impacts on the business.

The extent to which COVID-19 may impact the Partnership’s results of operations and financial condition, including any possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact, among others. Accordingly, an estimate of the future impact cannot be made at this time

Økokrim Investigation

In January 2020, Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) and the local Stavanger police raided Teekay Shipping Norway AS' premises, based on a search warrant related to suspected violations of pollution and export laws in connection with the export of the Navion Britannia shuttle tanker from the Norwegian Continental Shelf in March 2018 and the sale of the vessel for recycling in Alang, India in June 2018. Having reviewed relevant materials together with its advisors, the Partnership continues to believe it acted in accordance with the relevant rules and regulations and denies the alleged violations.  The Partnership is continuing to cooperate with authorities in respect of this matter. There are no updates on this case in the second quarter of 2020.

Disputes

In May 2020, the Partnership was informed that the customer is claiming the shuttle tanker Bossa Nova was off-hire from the end of March 2020 until the vessel was back on rate starting in early July, due to certain specification issues. Contractual discussions relating to the disputed off-hire period of 100 days are ongoing.

In June 2020, the Partnership was informed that the customer is disputing certain invoiced amounts related to the day rates applied for the decommissioning of the Voyageur FPSO. Contractual discussions for the relevant periods are ongoing.

In July 2020, an English court ruled in the Partnership's favor in a contract dispute related to the Voyageur FPSO, and awarded to the Partnership its full claim of $12 million and contractual interest. The ruling may be appealed.

Liquidity Update

As of June 30, 2020, the Partnership had total liquidity of $241 million, a decrease of $38 million compared to March 31, 2020. The decrease in total liquidity was primarily due to a deposit made in connection with the refinancing of the Partnership’s term loan on the Knarr FPSO, and scheduled debt amortizations.

The Partnership continues to progress strategic plans to enhance the overall liquidity of the business. The Partnership is focused on managing discretionary spending as well as limiting planned capital expenditures to the committed shuttle tanker newbuilding program and mandatory vessel dry-dockings.

Operating Results

The commentary below compares certain results of the Partnership's operating segments (including the non-GAAP measure of Adjusted EBITDA) for the three months ended June 30, 2020 to the same period of the prior year and to the three months ended March 31, 2020,, unless otherwise noted.

FPSO Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues131,440  116,204  127,478  
Adjusted EBITDA74,150  75,643  72,169  
       

Adjusted EBITDA (including Adjusted EBITDA from equity-accounted vessels) was generally in line with the same quarter of the prior year.

Adjusted EBITDA decreased by $1 million, compared to the first quarter of 2020, mainly due to lower contribution from the Petrojarl I FPSO reflecting temporary lower uptime.

Shuttle Tanker Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues138,244  150,003  137,050  
Adjusted EBITDA66,082  62,174  67,688  
       

Adjusted EBITDA decreased by $2 million, compared to the second quarter of 2019, mainly due to the Bossa Nova dispute, partly offset by contribution from E-shuttle start-ups.

Adjusted EBITDA increased by $4 million, compared to the first quarter of 2020, mainly reflecting contribution from the two newbuilding shuttle tankers that delivered during the second quarter of 2020 and the absence of the pre-operating cost for those vessels, partly offset by lower utilization following the dispute for the Bossa Nova shuttle tanker.

FSO Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues27,747  34,897  34,605  
Adjusted EBITDA11,353  23,891  22,761  
       

Adjusted EBITDA decreased by $11 million and $12 million, compared to the second quarter of 2019 and first quarter of 2020, respectively, mainly due an expected earlier end of contract for the Dampier Spirit FSO.

UMS Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues452  447  431  
Adjusted EBITDA(1,341)(2,607)(1,884)
       

Adjusted EBITDA was in line with second quarter of 2019.

Adjusted EBITDA increased by $1 million compared to first quarter of 2020.

Towage Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues6,580  10,850  16,716  
Adjusted EBITDA(5,724)(4,003)(426)
       

Adjusted EBITDA decreased by $5 million, compared to the second quarter of 2019, and $1 million compared the first quarter of 2020, mainly due to lower utilization as a result of lower market activity during the COVID-19 pandemic.

Conventional Tanker Segment

 Three Months Ended
 June 30,March 31,June 30,
 202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
Revenues—  —  3,494  
Adjusted EBITDA—  —  (225)
       

The Partnership redelivered the two in-chartered vessels to their owners in March and April 2019, respectively, and no longer has activity in the conventional tanker segment.

Altera Infrastructure’s Fleet
The following table summarizes Altera’s fleet as of June 30, 2020. In comparison to the previously-reported fleet table in the release for the first quarter of 2020, Altera's total fleet decreased by one unit due to the sale of the HiLoad DP unit in the second quarter of 2020.

 Number of Vessels
 Owned VesselsChartered-in VesselsCommitted
Newbuildings
Total
FPSO Segment (i)—  —    
Shuttle Tanker Segment24  (ii)  (iii)31  
FSO Segment  —  —    
UMS Segment  —  —    
Towage Segment10   —  —   10  
Total47      54  

(i) Includes two FPSO units, the Cidade de Itajai and Pioneiro de Libra, in which Altera’s ownership interest is 50 percent.
(ii) Includes four shuttle tankers in which Altera’s ownership interest is 50 percent.
(iii) Includes five DP2 shuttle tanker newbuildings scheduled for delivery through early-2022, four of which will join Altera's contract of affreightment portfolio in the North Sea and one which will operate under Altera's existing contract off the East Coast of Canada (one of such newbuildings delivered in July 2020).

Conference Call

The Partnership plans to host a conference call on Thursday, August 6, 2020 at 09:00 a.m. (ET) to discuss the results for the second quarter of 2020. All interested parties are invited to listen to the live conference call by choosing from the following options:

  • By dialing  (conference ID code 3113822)
    • Norway +47 800 14947
    • United Kingdom +44 800 279 7204
    • United States +1 323 794 2094
    • Canada +1 800 347 6311
       
  • By accessing the webcast, which will be available on Altera's website at www.alterainfra.com (the archive will remain on the website for a period of one year).

An accompanying Second Quarter 2020 Earnings Presentation will also be available at www.alterainfra.com in advance of the conference call start time.

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, among others: the timing of vessel deliveries and the commencement of charter contracts; the completion of concept studies and time of related awards; the effect of COVID-19 on the Partnership's results; and the Partnership's strategic plans relating to liquidity. 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: delays in vessel delivery dates, the commencement of charter contracts or the completion of concept studies; unanticipated market volatility (such as volatility resulting from the recent COVID-19 outbreak); levels of expenses and access to capital; and other factors discussed in the Partnership’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2019. The Partnership expressly disclaims any obligation or undertaking 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.

About Altera Infrastructure L.P.

Altera Infrastructure L.P. is a leading global energy infrastructure services partnership primarily focused on the ownership and operation of critical infrastructure assets in the offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Altera has consolidated assets of approximately $4.8 billion, comprised of 54 vessels, including floating production, storage and offloading (FPSO) units, shuttle tankers (including five newbuildings), floating storage and offtake (FSO) units, long-distance towing and offshore installation vessels and a unit for maintenance and safety (UMS). The majority of Altera’s fleet is employed on medium-term, stable contracts.

Altera's preferred units trade on the New York Stock Exchange under the symbols "ALIN PR A", "ALIN PR B" and "ALIN PR E", respectively.

For Investor Relations enquiries contact:

Jan Rune Steinsland, Chief Financial Officer
Email: investor.relations@alterainfra.com
Tel:  +47 97 05 25 33
Website: www.alterainfra.com


Altera Infrastructure L.P.
Summary Consolidated Statements of Loss

  Three Months EndedSix Months Ended
  June 30,March 31,June 30,June 30,June 30,
(in thousands of U.S. Dollars, except per unit data)20202020201920202019
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
       
Revenues304,463  312,401  319,774  616,864  656,411  
Voyage expenses(27,945)(38,770)(32,624)(66,715)(66,690)
Vessel operating expenses(119,393)(105,332)(118,718)(224,725)(219,937)
Time-charter hire expenses(8,377)(12,475)(10,619)(20,852)(23,072)
Depreciation and amortization(76,228)(78,501)(88,666)(154,729)(178,132)
General and administrative(17,638)(19,798)(17,212)(37,436)(34,204)
(Write-down) and (loss) gain on sale of vessels(12,115)(156,292)11,756  (168,407)11,756  
Goodwill Impairment—  (2,032)—  (2,032)—  
Restructuring charge(4,281)(900)—  (5,181)—  
Operating income (loss)38,486  (101,699)63,691  (63,213)146,132  
      
Interest expense(46,172)(48,469)(51,443)(94,641)(103,857)
Interest income43  667  1,253  710  2,323  
Realized and unrealized loss     
 on derivative instruments(15,194)(90,923)(40,839)(106,117)(72,229)
Equity income (loss)7,340  (5,144)2,388  2,196  3,274  
Foreign currency exchange (loss) gain(1,044)(3,555)1,789  (4,599)1,221  
Other income (expense) - net145  (328)(1,640)(183)(1,994)
Loss before income tax expense(16,396)(249,451)(24,801)(265,847)(25,130)
Income tax recovery (expense)234  (4,365)(3,178)(4,131)(5,447)
Net loss(16,162)(253,816)(27,979)(269,978)(30,577)
      
Non-controlling interests in net loss(610)(11,025) (11,635)286  
Preferred unitholders' interest in net loss8,038  8,038  8,038  16,076  16,076  
General partner’s interest in net loss(179)(1,903)(274)(2,082)(357)
Limited partners’ interest in net loss(23,411)(248,926)(35,744)(272,337)(46,582)
Limited partner's interest in net loss per     
 common unit     
  - basic(0.06)(0.61)(0.09)(0.66)(0.11)
  - diluted(0.06)(0.61)(0.09)(0.66)(0.11)
Weighted-average number of common units:     
  - basic411,148,991  411,148,991  410,595,551  411,148,991  410,469,820  
  - diluted411,148,991  411,148,991  410,595,551  411,148,991  410,469,820  
Total number of common units outstanding     
 at end of period411,148,991  411,148,991  410,707,764  411,148,991  410,707,764  



Altera Infrastructure L.P.
Consolidated Balance Sheets

  As atAs atAs at
  June 30,March 31,December 31,
  202020202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)
     
ASSETS   
Current   
Cash and cash equivalents241,098  203,725  199,388  
Restricted cash20,789  23,053  17,798  
Accounts receivable220,586  214,169  204,020  
Vessels held for sale8,385  5,100  15,374  
Prepaid expenses26,572  31,455  29,887  
Other current assets17,335  11,897  7,467  
Total current assets534,765  489,399  473,934  
     
Restricted cash - long-term20,000  —  89,070  
Vessels and equipment   
At cost, less accumulated depreciation3,444,178  3,526,920  3,511,758  
Advances on newbuilding contracts198,024  170,419  257,017  
Investment in equity-accounted joint ventures217,971  214,198  234,627  
Deferred tax asset4,572  4,230  7,000  
Other assets219,842  237,408  220,716  
Goodwill127,113  127,113  129,145  
Total assets4,766,465  4,769,687  4,923,267  
     
LIABILITIES AND EQUITY   
Current   
Accounts payable65,420  71,894  56,699  
Accrued liabilities170,049  134,418  140,976  
Deferred revenues71,529  70,709  53,728  
Due to related parties125,000  50,000  20,000  
Current portion of derivative instruments177,999  206,232  18,956  
Current portion of long-term debt346,173  384,220  353,238  
Other current liabilities16,084  13,082  14,793  
Total current liabilities972,254  930,555  658,390  
     
Long-term debt2,751,705  2,796,117  2,825,712  
Derivative instruments56,551  38,805  143,222  
Other long-term liabilities206,032  199,620  223,877  
Total liabilities3,986,542  3,965,097  3,851,201  
     
Equity   
Limited partners - common units—  —  505,394  
Limited partners - Class A common units4,617  4,914  —  
Limited partners - Class B common units359,253  382,367  —  
Limited partners - preferred units384,274  384,274  384,274  
General Partner11,085  11,264  12,164  
Warrants—  —  132,225  
Accumulated other comprehensive income3,480  3,947  4,410  
Non-controlling interests17,214  17,824  33,599  
Total equity779,923  804,590  1,072,066  
Total liabilities and total equity4,766,465  4,769,687  4,923,267  



Altera Infrastructure L.P.
Consolidated Statements of Cash Flows

 Six Months Ended
 June 30, 2020June 30, 2019
(in thousands of U.S. Dollars)(unaudited)(unaudited)
Cash, cash equivalents and restricted cash provided by (used for)  
OPERATING ACTIVITIES  
Net loss(269,978)(30,577)
Adjustments to reconcile net loss to net operating cash flow:  
Unrealized loss on derivative instruments71,359  63,468  
Equity income, net of dividends received of $20,534 (2019 - $3,824)18,339  550  
Depreciation and amortization154,729  178,132  
Write-down and loss (gain) on sale of vessels168,407  (11,756)
Goodwill impairment2,032  —  
Deferred income tax expense530  2,351  
Amortization of in-process revenue contract—  (15,062)
Direct financing lease payments received1,857  —  
Expenditures for dry docking(3,785)(10,593)
Other6,646  (19,415)
Change in non-cash working capital items related to operating activities8,416  30,148  
Net operating cash flow 158,552  187,246  
FINANCING ACTIVITIES  
Proceeds from long-term debt72,015  148,480  
Scheduled repayments of long-term debt and settlement of related swaps(159,869)(169,214)
Financing issuance costs(847)(13,208)
Proceeds from financing related to sales and leaseback of vessels35,703  —  
Proceeds from credit facility due to related parties105,000  —  
Prepayments of credit facility due to related parties—  (75,000)
Cash distributions paid by the Partnership(16,076)(16,075)
Cash distributions paid by subsidiaries to non-controlling interests(4,750)(2,583)
Cash contributions paid from non-controlling interests to subsidiaries—  1,500  
Other—  (864)
Net financing cash flow31,176  (126,964)
INVESTING ACTIVITIES  
Net payments for vessels and equipment, including advances on newbuilding contracts(233,391)(112,849)
Proceeds from sale of vessels and equipment15,060  33,341  
Investment in equity accounted joint ventures(2,196)(3,824)
Acquisition of company (net of cash acquired of $6.4 million)6,430  —  
Net investing cash flow (214,097)(83,332)
Decrease in cash, cash equivalents and restricted cash(24,369)(23,050)
Cash, cash equivalents and restricted cash, beginning of the period306,256  233,580  
Cash, cash equivalents and restricted cash, end of the period281,887  210,530  


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 (SEC). These non-GAAP financial measures, including Consolidated Adjusted EBITDA, Adjusted EBITDA and Adjusted Net Income, are intended to provide additional information and should not be considered substitutes for net loss or other measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings, and may not be comparable to similar measures presented by other companies. These non-GAAP measures are used by the Partnership's management, and the Partnership believes that these supplementary metrics assist investors and other users of its financial reports in comparing financial and operating performance of the Partnership across reporting periods and with other companies.

Non-GAAP Financial Measures

Consolidated Adjusted EBITDA represents net loss before interest expense (net), income tax expense and depreciation and amortization and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include vessel write-downs, gains or losses on the sale of vessels, unrealized gains or losses on derivative instruments, foreign exchange gains or losses, losses on debt repurchases, and certain other income or expenses. Consolidated Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Partnership's performance, views these gains or losses as an element of interest expense, and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments. Consolidated Adjusted EBITDA also excludes equity income, as the Partnership does not control its equity-accounted investments, and as a result, the Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted investments is retained within the entity in which the Partnership holds the equity-accounted investment or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of any such distributions to the Partnership and other owners.

Adjusted EBITDA represents Consolidated Adjusted EBITDA further adjusted to include the Partnership's proportionate share of consolidated adjusted EBITDA from its equity-accounted joint ventures and to exclude the non-controlling interests' proportionate share of the consolidated adjusted EBITDA from the Partnership's consolidated joint ventures. Readers are cautioned when using Adjusted EBITDA as a liquidity measure as the amount contributed from Adjusted EBITDA from the equity-accounted investments may not be available or distributed to the Partnership in the periods such Adjusted EBITDA is generated by the equity-accounted investments. Please refer to Appendices A and C of this release for reconciliations of Adjusted EBITDA to net loss and equity income, respectively, the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.

Adjusted Net (Loss) Income represents net loss adjusted to exclude the impact of certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance, consistent with the calculation of Adjusted EBITDA. Adjusted Net (Loss) Income includes realized gains or losses on interest rate swaps as an element of interest expense and excludes income tax expenses or recoveries from changes in the valuation allowance or uncertain tax provisions. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net loss, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.


Altera Infrastructure L.P.
Appendix A - Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA

   Three Months EndedSix Months Ended
  June 30,June 30,
   2020201920202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)(unaudited)
       
Net loss(16,162)(27,979)(269,978)(30,577)
 Depreciation and amortization76,228  88,666  154,729  178,132  
 Interest expense, net of interest income46,129  50,190  93,931  101,534  
 Income tax (recovery) expense(234)3,178  4,131  5,447  
EBITDA105,961  114,055  (17,187)254,536  
Add (subtract) specific income statement items affecting EBITDA:    
 Write-down and loss (gain) on sale of vessels12,115  (11,756)168,407  (11,756)
 Goodwill impairment—  —  2,032  —  
 Realized and unrealized loss on derivative instruments15,194  40,839  106,117  72,229  
 Equity income(7,340)(2,388)(2,196)(3,274)
 Foreign currency exchange loss (gain)1,044  (1,789)4,599  (1,221)
 Other (income) expense - net(145)1,640  183  1,994  
 Realized loss on foreign currency forward contracts(1,813)(1,142)(3,116)(2,317)
Total adjustments19,055  25,404  276,026  55,655  
Consolidated Adjusted EBITDA125,016  139,459  258,839  310,191  
 Add: Adjusted EBITDA from equity-accounted vessels __(See Appendix C)21,926  22,619  45,690  43,415  
 Less: Adjusted EBITDA attributable to non-controlling __interests (1)(4,235)(3,137)(8,027)(6,515)
Adjusted EBITDA142,707  158,941  296,502  347,091  

(1)    Adjusted EBITDA attributable to non-controlling interests is summarized in the table below.  

     
     
   Three Months EndedSix Months Ended
  June 30,June 30,
   2020201920202019
(in thousands of U.S. Dollars)(unaudited)(unaudited)(unaudited)(unaudited)
Net loss attributable to non-controlling interests(610)  (11,635) 286  
 Depreciation and amortization1,825   2,749  3,832   5,433  
 Interest expense, net of interest income246   381  529   793  
EBITDA attributable to non-controlling interests1,461   3,131  (7,274) 6,512  
Add (subtract) specific income statement items affecting __EBITDA:    
 Write-down and loss on sale of vessels2,832   —  15,224   —  
 Foreign currency exchange (gain) loss(58)  77    
Total adjustments2,774    15,301    
Adjusted EBITDA attributable to non-controlling __interests4,235   3,137  8,027   6,515  



Altera Infrastructure L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures
Adjusted Net (Loss) Income

   Three Months EndedSix Months Ended
   June 30,June 30,
   2020201920202019
(in thousands of U.S. Dollars, except per unit data)(unaudited)(unaudited)(unaudited)(unaudited)
Net loss(16,162)(27,979)(269,978)(30,577)
Adjustments:    
 Net loss attributable to non-controlling interests(610) (11,635)286  
Net loss attributable to the partners and preferred unitholders(15,552)(27,980)(258,343)(30,863)
Add (subtract) specific items affecting net loss:    
 Write-down and loss (gain) on sale of vessels12,115  (11,757)168,407  (11,757)
 Unrealized (gain) loss on derivative instruments(12,490)36,225  71,359  63,468  
 Goodwill impairment—  —  2,032  —  
 Foreign currency exchange loss (gain) (1)1,044  (1,789)4,599  (1,657)
 Other (income) expense - net(145)1,639  183  1,993  
 Deferred income tax(1,699)1,523  530  1,957  
 Adjustments related to equity-accounted vessels (2)1,634  6,868  18,184  11,101  
 Adjustments related to non-controlling interests (3)(2,774) (15,301) 
Total adjustments(2,315)32,715  249,993  65,108  
Adjusted net (loss) income attributable to the partners and __preferred unitholders(17,867)4,735  (8,350)34,245  
Preferred unitholders' interest in adjusted net (loss) income8,038  8,038  16,076  16,076  
General Partner's interest in adjusted net (loss) income(179)(25)(2,094)138  
Limited partners' interest in adjusted net (loss) income(25,726)(3,278)(22,332)18,031  
Limited partners' interest in adjusted net (loss) income per common __unit, basic(0.06)(0.01)(0.05)0.04  
Weighted-average number of common units outstanding, basic411,148,991  410,595,551  411,148,991  410,469,820  

(1) Foreign currency exchange loss primarily relates to the Partnership's revaluation of all foreign currency-denominated assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized gain or loss related to the Partnership's cross-currency swaps related to the Partnership's Norwegian Krone (NOK) bonds, and excludes the realized gain or loss relating to the Partnership's cross-currency swaps and NOK bonds.
(2) Reflects the Partnership's proportionate share of specific items affecting the net income of the Cidade de Itajai FPSO unit and Pioneiro de Libra FPSO unit equity-accounted joint ventures, including the unrealized gain or loss on derivative instruments and the foreign exchange gain or loss.
(3) Items affecting net loss include amounts attributable to the Partnership’s consolidated non-wholly-owned subsidiaries. Each item affecting net loss is 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 adjustments relate to the gain or loss on sale or write-down of vessels and foreign currency exchange gain or loss within the Partnership's consolidated non-wholly-owned subsidiaries.

       

Altera Infrastructure L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA From Equity-Accounted Vessels

  Three Months EndedThree Months Ended
  June 30, 2020June 30, 2019
(in thousands of U.S. Dollars)(unaudited)(unaudited)
  At 100%Partnership's 50%At 100%Partnership's 50%
Revenues57,134  28,567  57,719  28,860  
Vessel and other operating expenses(13,282)(6,641)(12,481)(6,241)
Depreciation and amortization(17,542)(8,771)(16,294)(8,146)
Operating income of equity-accounted vessels26,310  13,155  28,944  14,473  
Net interest expense(6,196)(3,098)(10,604)(5,302)
Realized and unrealized loss on derivative instruments(1)(4,199)(2,099)(13,957)(6,979)
Foreign currency exchange (loss) gain(1,234)(617)326  163  
Total other items(11,629)(5,814)(24,235)(12,118)
Net income / equity income of equity-accounted vessels before14,681  7,341  4,709  2,355  
 income tax expense
Income tax (expense) recovery(1)(1)66  33  
Net income / equity income of equity-accounted vessels14,680  7,340  4,775  2,388  
 Depreciation and amortization17,542  8,771  16,294  8,146  
 Net interest expense6,196  3,098  10,604  5,302  
 Income tax expense  (66)(33)
EBITDA38,419  19,210  31,607  15,803  
Add (subtract) specific items affecting EBITDA:    
 Realized and unrealized loss on derivative instruments(1)4,199  2,099  13,957  6,979  
 Foreign currency exchange loss (gain)1,234  617  (326)(163)
Adjusted EBITDA from equity-accounted vessels43,852  21,926  45,238  22,619  

(1) Realized and unrealized loss on derivative instruments includes an unrealized loss of $2,0 million ($1,0 million at the Partnership’s 50% share) for the three months ended June 30, 2020 and an unrealized loss of $14.1 million ($7.0 million at the Partnership’s 50% share) for the three months ended June 30, 2019, related to interest rate swaps for the Cidade de Itajai and Pioneiro de Libra FPSO units.

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