Teekay LNG Partners L.P. Acquire Two LNG Carriers

Source: Teekay

Teekay GP LLC, the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership), today announced that Teekay LNG has agreed to acquire two 1993-built, 88,000 cubic meter specialized LNG vessels, the Arctic Spirit and the Polar Spirit, from Teekay Corporation (Teekay) for a total cost of $230 million. Teekay LNG expects to acquire these vessels on April 1, 2008, and immediately charter the vessels back to Teekay for a period of ten years (plus options exercisable by Teekay to extend up to an additional fifteen years). These charters are expected to generate approximately $27 million per annum in operating cash flow to the Partnership. Teekay LNG intends to finance the acquisition initially with its existing cash balances and undrawn revolving credit facilities.

In December 2007, Teekay purchased the two vessels from a joint venture between ConocoPhillips and Marathon Oil Corporation for $230 million and chartered back the vessels to the sellers until April 2009 (with options exercisable by the charterers to extend up to an additional seven years). Teekay was obligated to offer these vessels to Teekay LNG in accordance with the Omnibus agreement between the parties.

“We are pleased that Teekay LNG has been able to make this accretive acquisition,” commented Peter Evensen, Teekay GP LLC’s Chief Executive Officer. “Given the uncertain length of the charters to the ConocoPhillips and Marathon Oil joint venture company, we believe that the long-term charters to Teekay are a better alternative for Teekay LNG since they will provide long-term stable cash flows for the Partnership. These two vessels, together with our nine scheduled newbuilding deliveries, should allow us to meaningfully increase Teekay LNG’s cash distributions in both 2008 and 2009. Teekay LNG’s current annualized distribution of $2.12 per unit already represents an attractive yield of over 7.7% based on our March 18, 2008 closing price of $27.45.”