Teekay Offshore Partners acquire Petrojarl Varg FPSO

Teekay Offshore Partners acquire Petrojarl Varg FPSO

Teekay Offshore Partners has agreed to acquire the Petrojarl Varg Floating Production Storage and Offloading unit (FPSO) from Teekay Corp. for a purchase price of $320 million.  Teekay has agreed to provide vendor financing in the amount of $220 million which, together with the $104 million of equity raised in August 2009, will enable them to complete the acquisition by mid-September 2009.

The Petrojarl Varg FPSO recently commenced a new a four-year fixed-rate contract extension with Talisman Energy on the Varg oil field in the North Sea, where the FPSO has been operating for over ten years. Talisman also has options to extend the new contract for up to an additional nine years.  The contract is comprised of a daily base rate plus an incentive component based on the operational performance of the FPSO, a tariff component based on the volume of oil produced and an annual adjustment for cost escalations.  There is potential for additional upside from the tariff component if, as expected, nearby oil fields become operational and are tied into the Petrojarl Varg FPSO.