Author Topic: TOO - Teekay Offshore Partners L.P.  (Read 59542 times)



racemize

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #131 on: February 08, 2019, 07:15:10 AM »
Brookfield on TOO:

Early in 2018, Teekay Offshore completed the last of its growth projects that were underway when we acquired
the business and these new vessels have driven improved financial results. Despite this performance, the public
unit market price for Teekay Offshore decreased during the fourth quarter reflective of, in our estimate, negative
sentiment toward the oil and gas industry. In contrast to much of the oil and gas industry, Teekay Offshore’s
recurring cashflows and EBITDA were stable year over year. Teekay Offshore has limited commodity exposure,
with medium to long term contracts with premium petroleum companies which provide stability of forward
revenues. In 2018 we assisted Teekay Offshore to refinance its near term debt maturities. Teekay Offshore’s
enhanced capital structure, together with its on-going growth projects, position the company well for the years
ahead.

heth247

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #132 on: February 08, 2019, 12:05:43 PM »
Seth,

Fantastic post. Thank you for continuing to contribute your thoughts here.

Your synopsis of the MS report is fascinating in terms of the analysis of TOO, and as a data point in a larger picture of the quality and process of analyst reports. Assuming you are 100% correct, if Michael Lewis could make a book out of how such a flawed research report came to be produced and disseminated, I would read the book and watch the movie. I'd probably even buy copies of the book for all my friends. Michael Lewis, if you're reading this, here's a candidate for your next million dollar idea.

Well, I am disappointed that we don't hear Seth on the call today. But again, thanks Seth, hope to see you continue coming back here!

On the call the MS analyst has confirmed his own mistake that Seth pointed out -- that the $40MM facility is not due for 2019.

It looks like Piranema is debt free now, and has a good chance of entering longer and more profitable contract once Petrobra find a buyer for the field. Arendal continue to have challenge to find a contract. Don't know about the outlook for Ostras though. Seems no talk about it longer future. Did I missed it?


« Last Edit: February 08, 2019, 12:07:16 PM by heth247 »

bjakes00

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #133 on: February 08, 2019, 02:35:27 PM »
+ve FCF and improving ROCE/RONOA - we're moving towards a cost of capital business here which is helpful.

A few more quarters of that and this business will start to look a lot less sick.

Steven B

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #134 on: February 11, 2019, 12:02:22 PM »
A few thoughts if I may....

Obviously a tough year from a unitholder standpoint, however in securities like this that trade in the short term on so many short term themes ( TK complex, Oil, etc.) can't say that I expected them straight to the sky once I bought in. There are a lot of storm clouds priced in right now. Still tough though. I didn't have a big position to begin with which obviously helped.

Operationally things seems to be going OK. Yes, you'd like to see more movements on the FPSOs but this is the environment we live in. Comes and goes, it's what we signed up for. Obviously the real issue is refinancing, which hopefully won't be to much of an issue. As Seth pointed out earlier the presence of a quality sponsor is huge.

I've noticed that the last two years changes in WC were ~ -60M, -80M. Is this a trend that we can expect to continue? Does anyone have insight into this? If I remember correctly over the last decade or so Changes in WC had pretty much evened out so I was hoping to ignore it on year in, year out basis but if there was a shift obviously that would change.

Which brings me to my last point about TOO for now; this is the security that I understand the least in my portfolio. Lots of moving part and really tough to compare to it's peers, not that that's why I own it. Sure, I modeled all the vessels to the best of my ability but there are still tons that I don't know about contract terms, supply and demand dynamics around the industry etc. My continued ownership is based on the fact that I believe that it's at a low point in it's history post BBU recap where the bad stuff has already happened while being in a good position to refinance while generating and having the future capacity to generate FCF at a high yield of it's current MC. I don't have any special insight into the inner workings of TOO, which makes it the scariest and least favorite position to own (even before the drop). In fact I frequently question based on the above if I'm qualified to own at all.

Literally just my 2 cents.

Seth Lowry

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #135 on: February 12, 2019, 02:06:10 PM »
@Steven B - I think most people share this view including myself.

For what its worth, I continue to think approaching valuation on a FCF yield basis is best, starting with Adjusted EBITDA, then subtracting normalized expenses: maintainance capex (dry dock), then replacement capex, then cash interest.  Even on conservative assumptions this is compelling.
 
Further, 2019 is set to grow from 1) full year operations of 1H18 delivered fleet in 1h2018 and the Petrojarl I contract resets by +$30M in 2H19, so the business is growing well and will continue to do so.

This quarter was another step in the right direction in terms of fundamentals and improved shareholder communication although the sell-side remains 'lost in the sauce'

And for what its worth I did dial into the call but they blocked me this time :)

heth247

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #136 on: February 12, 2019, 05:12:24 PM »
Hi, Steve, Seth, thanks for sharing your thoughts. Although I agree that  this one is traded for something close to 40%~50% FCF yield if we value it based on Seth's "normalized" approach, I still couldn't help drilling in to details in the short term, just to make sure that I understand it. So here it goes ... 

In their released full year results, they have adjusted EBITDA of $782MM in 2018 vs $522MM in 2017, that is a huge increase of $260MM of adjusted ebidta. However, their net operation cash flow has surprisingly decreased from $305M in 2017 to $280MM in 2018. How could that happen? Generally shouldn't we think operation cash flow should be approximately equal to (ajusted Ebitda - interest expense), which should equal to the amount available for (CAPEX/replacement + FCF/delevering)? But here there is such a big gap. I know that operation cash flow exclude the equity income from their JV, but that still does not explain it. What exactly is masking the true FCF here? Is it due to the $83MM of "change of non-cash working capital" ? How should we think of it?  thanks.
« Last Edit: February 12, 2019, 05:21:15 PM by heth247 »

Steven B

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #137 on: February 12, 2019, 07:42:09 PM »
@Seth, why did they block you?

@Heth, I cannot explain it fully all I can say that keep in mind adjusted EBITDA includes what I believe to be real cash expenses. The "adjusted" part kinda means normalized, but for instance the $55M loss on the bonds are a real cash charge. Probably better to work it through the CF statement using the adjusted EBITDA to figure out what the one-off things are....

heth247

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #138 on: February 12, 2019, 08:08:49 PM »
@Seth, why did they block you?

@Heth, I cannot explain it fully all I can say that keep in mind adjusted EBITDA includes what I believe to be real cash expenses. The "adjusted" part kinda means normalized, but for instance the $55M loss on the bonds are a real cash charge. Probably better to work it through the CF statement using the adjusted EBITDA to figure out what the one-off things are....

Steve, but shouldn't the $55M loss on bonds mostly be cancel out by the 50M they received from Petrobra settlement?

Excluding growth from future FPSO/Shuttles, I was expecting $350~400M operation cash flow from 2018, but they only did $280M. I think the most likely explanation is due to the -$83M of  "change of non-cash working capital", which basically means that they have used more cash in 2018 to increased their working capital. Is that right? I know these are probably short term noises, but I still want to make sure I understand it.


petec

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Re: TOO - Teekay Offshore Partners L.P.
« Reply #139 on: February 12, 2019, 10:04:02 PM »
What is working capital in this business? Is it just payment timings or do they carry inventory?

Also, why would they need to increase it? Could it be due to the new vessels delivered in 2018 starting service?

Finally, on the “normalised FCF” method, why would you only include maintenance and replacement capex? Growth capex is usually excluded from FCF too. And you have  to have a lot of confidence in the ROIC on growth capex to consider growth capex FCF to equity.