Altera Infrastructure Reports Second Quarter 2021 Results

ABERDEEN, United Kingdom, July 29, 2021 (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, 2021.

• Revenues of $266.9 million and net loss of $28.5 million, or $(0.06) per common unit, in the second quarter of 2021

• Adjusted EBITDA⁽¹⁾ of $109.6 million in the second quarter of 2021

• Announced a series of measures to improve its debt maturity profile and enhance its liquidity and financial flexibility, including suspending the quarterly distributions on the Partnership’s preferred units and the launch of an exchange transaction relating to its 8.50% senior notes due 2023

The following table presents the Partnership's Consolidated Financial Summary:

		Three Months Ended
		June 30,			March 31,			June 30,
		2021			2021			2020
In thousands of U.S. Dollars, unaudited		$			$			$
IFRS FINANCIAL RESULTS
Revenues		266,935			272,754			304,462
Net Income (loss)		(28.488	)		5,901			(8,247	)
Limited partners' interest in net income (loss) per common unit - basic		(0.06	)		0.00			(0.04	)
NON-IFRS FINANCIAL MEASURE:
Adjusted EBITDA (1)		109,595			120,270			153,473

(1) Please refer to "Non-IFRS Measures" for the definition of this term and reconciliation of this non-IFRS measure as used in this release to the most directly comparable measure under IFRS.

The Partnership generated a net loss of $28 million for the three months ended June 30, 2021, compared to net loss of $8 million for the three months ended June 30, 2020. The results for the recent quarter were mainly impacted by lower revenues in the FPSO and FSO operations. This was partially offset by a $14 million lower loss on derivatives and a $9 million gain in the current quarter from sale of vessels compared to a $1 million loss from sale of vessels in the same period last year.

Adjusted EBITDA was $110 million in the second quarter of 2021, compared to $153 million in the same quarter of the prior year. Adjusted EBITDA was mainly impacted by the items described above, excluding loss on derivatives and gain on sale of vessels.

Operating Results
The commentary below compares certain results of the Partnership's operating segments on the basis of the non-IFRS measure of Adjusted EBITDA for the three months ended June 30, 2021 to the same period of the prior year.
The following table presents the Partnership's Adjusted EBITDA by segment:

	Three Months Ended
	June 30,			March 31,			June 30,
	2021			2021			2020
In thousands of U.S. Dollars, unaudited	$			$			$
FPSO	45,364			52,768			68,938
Shuttle Tanker	57,662			67,194			75,447
FSO	9,587			7,405			16,168
UMS	(1,627	)		(1,695	)		(1,341	)
Towage	(1,357	)		(2,350	)		(5,723	)
Corporate/Eliminations	(34	)		(3,052	)		(16	)
Partnership Adjusted EBITDA	109,595			120,270			153,473

Second Quarter 2021 Compared with Second Quarter 2020

The Partnership's FPSO segment generated Adjusted EBITDA of $45 million for the three months ended June 30, 2021, compared to $69 million for the three months ended June 30, 2020. The decrease of $24 million is mainly due to lower vessel utilization levels and higher maintenance costs related to operational issues on the Petrojarl I FPSO.

The Partnership's Shuttle Tanker segment generated Adjusted EBITDA of $58 million for the three months ended June 30, 2021, compared to $75 million for the three months ended June 30, 2020. The decrease of $17 million is mainly driven by lower contribution from two vessels operating in the conventional tanker spot market following a strong market in 2020, a favorable storage contract in 2020 and generally fewer shuttle tankers in operation in 2021.

The Partnership's FSO segment generated Adjusted EBITDA of $10 million for the three months ended June 30, 2021, compared to $16 million in the same period in 2020. The decrease of $6 million is mainly due to a reduction in the Randgrid FSO contract rate from October 2020 partially offset by absence of certain Dampier FSO end of contract costs in the second quarter 2020.

The Partnership's UMS segment generated Adjusted EBITDA loss of $2 million in the most recent quarter, in line with the same period in 2020.

The Partnership's Towage segment generated Adjusted EBITDA loss of $1 million in the most recent quarter, compared with a loss of $6 million in the same period in 2020. The increase in EBITDA is driven by higher utilization in the current quarter.

Liquidity Update

As at June 30, 2021 the Partnership had total liquidity of $241 million, representing an increase of $44 million from the prior quarter.

Strategic updates

Measures to improve the Partnership's maturity profile and enhance its liquidity
The Partnership today announced a series of measures to improve the Partnership’s maturity profile and enhance its liquidity and financial flexibility. As part of these measures, the Partnership has taken the following actions:

• Entered into an agreement with Brookfield Business Partners L.P., and certain of its affiliates and institutional partners (collectively, "Brookfield") to exchange at par approximately $700 million of indebtedness in Altera GP with maturities ranging from 2022 to 2024 (including $411 million of Altera’s 8.5% Senior Notes due 2023 (the "Notes") held by Brookfield) for 11.5% Senior Secured PIK Notes due 2026 and commenced an exchange transaction relating to the $276 million of Notes held by non-Brookfield parties.

• Suspended the payment of quarterly cash distributions on the Partnership’s outstanding 7.25% Series A Cumulative Redeemable Preferred Units (the “Series A Units”), 8.50% Series B Cumulative Redeemable Preferred Units (the “Series B Units”) and 8.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series E Units” and, together with the Series A Units and Series B Units, the “Preferred Units”) commencing with the distributions payable with respect to the period of May 15, 2021 to August 14, 2021. All distributions on the Preferred Units will continue to accrue and must be paid in full before distributions to Class A and Class B common unitholders can be made. No distributions on the Preferred Units will be permitted without noteholder consent while the new PIK notes issued in the exchange transactions described above remain outstanding.

“The measures we are announcing today are expected to significantly extend our debt maturity profile, improve the Partnership’s cash flows and enhance its overall financial flexibility” commented Ingvild Sæther, President and CEO of Altera Infrastructure Group Ltd. “Our Board of Directors has carefully assessed a number of different options to enhance our liquidity and maintain a strong cost focus. With the support of Brookfield, we believe these actions put the company on stronger footing to support its existing operations, including opportunities to secure new contracts.”

The Partnership expects to achieve in excess of $80 million in annual cashflow savings as a result of the agreement with Brookfield and suspension of quarterly distributions on the Preferred Units. In addition, there is potential for further annual cashflow savings depending on the outcome of the exchange of the Notes held by non-Brookfield parties. If all of the Notes are exchanged in the exchange transactions, which remain subject to the satisfaction of certain conditions, these measures will also extend maturities currently ranging from 2022 to 2024 on approximately $970 million of indebtedness to 2026, including indebtedness held by Brookfield.

Shuttle Tanker newbuildings
The Partnership's fifth and sixth LNG fueled E-Shuttles, the Altera Wave and Altera Wind, commenced operations in the second quarter of 2021. The Altera Thule is expected to be delivered early in 2022 and to operate off the East Coast of Canada.

Contract updates
In June 2021 Equinor exercised a one-year contract extension option for the Randgrid FSO until October 2022.

Vessel sales
During the recent quarter the Partnership sold three shuttle tankers and one FSO for $30 million.

Conference Call
The Partnership plans to host a conference call on Wednesday, July 29, 2021 at 09:00 a.m. (ET) to discuss the results for the second quarter of 2021. All interested parties are invited to listen to the live conference call by choosing from the following options:

• By dialing (conference ID code: 9502728)

  • Norway (Toll free) 800 14953

  • Norway (Local) +47 23 50 05 01

  • United Kingdom (Toll free) +44 (0)330 336 9434

  • United States (Local) +1 646-828-8193

  • Canada (Local) +1 888-394-8218
    

• 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 2021 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 Partnership’s strategic initiatives intended to improve its debt maturity profile and enhance its liquidity and financial flexibility, including the consummation and effect thereof; and the timing of vessel deliveries, the commencement of charter contracts and the employment of newbuilding vessels. 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: satisfaction of conditions to implement the strategic initiatives and participation by bondholders in the proposed exchange of outstanding bonds; delays in vessel deliveries or the commencement of charter contracts or changes in expected employment of newbuilding vessels; 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, 2020. 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 $4.3 billion, comprised of 47 vessels, including floating production, storage and offloading (FPSO) units, shuttle tankers (including one newbuilding), 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. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. Dollars)

		Three Months Ended									Six Months Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
		2021			2021			2020			2021			2020
		$			$			$			$			$
Revenues		266,935			272,754			304,462			539,689			616,863
Direct operating costs		(169,937	)		(161,841	)		(165,652	)		(331,778	)		(319,471	)
General and administrative expenses		(8,951	)		(12,668	)		(2,306	)		(21,619	)		(17,108	)
Depreciation and amortization		(81,560	)		(77,249	)		(77,606	)		(158,809	)		(156,140	)
Interest expense		(49,475	)		(47,684	)		(45,907	)		(97,159	)		(94,176	)
Interest income		21			28			43			49			710
Equity-accounted income (loss)		10,229			19,384			8,428			29,613			4,373
Impairment expense, net		—			—			(8,275	)		—			(180,277	)
Gain (loss) on dispositions, net		9,107			—			(1,388	)		9,107			(1,950	)
Realized and unrealized gain (loss) on derivative instruments		(1,513	)		13,860			(15,193	)		12,347			(106,116	)
Foreign currency exchange gain (loss)		(302	)		325			(949	)		23			(4,389	)
Other income (expenses), net		(1,831	)		(26	)		(4,137	)		(1,857	)		(5,366	)
Income (loss) before income tax (expense) recovery		(27,277	)		6,883			(8,480	)		(20,394	)		(263,047	)
Income tax (expense) recovery
Current		(1,211	)		(982	)		(1,465	)		(2,193	)		(3,601	)
Deferred		—			—			1,698			—			(531	)
Net income (loss)		(28,488	)		5,901			(8,247	)		(22,587	)		(267,179	)
Attributable to:
Limited partners - common units		(33,967	)		(302	)		(15,951	)		(34,269	)		(274,092	)
General partner		(260	)		(2	)		(143	)		(262	)		(2,050	)
Limited partners - preferred units		7,880			7,880			8,038			15,760			16,076
Non-controlling interests in subsidiaries		(2,141	)		(1,675	)		(191	)		(3,816	)		(7,113	)
		(28,488	)		5,901			(8,247	)		(22,587	)		(267,179	)
Basic and diluted earnings (loss) per limited partner common unit		(0.06	)		0.00			(0.04	)		(0.06	)		(0.67	)

ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands of U.S. Dollars)

		Three Months Ended									Six Months Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
		2021			2021			2020			2021			2020
		$			$			$			$			$
Net income (loss)		(28,488	)		5,901			(8,247	)		(22,587	)		(267,179	)
Other comprehensive income (loss)
Items that may be reclassified subsequently to net income (loss):
To interest expense:
Realized gain on qualifying cash flow hedging instruments		(196	)		(190	)		(208	)		(386	)		(416	)
To equity income:
Realized gain on qualifying cash flow hedging instruments		(211	)		(196	)		(259	)		(407	)		(514	)
Total other comprehensive income (loss)		(407	)		(386	)		(467	)		(793	)		(930	)
Comprehensive income (loss)		(28,895	)		5,515			(8,714	)		(23,380	)		(268,109	)
Attributable to:
Limited partners - common units		(34,371	)		(685	)		(16,413	)		(35,056	)		(275,014	)
General partner		(263	)		(5	)		(148	)		(268	)		(2,058	)
Limited partners - preferred units		7,880			7,880			8,038			15,760			16,076
Non-controlling interests in subsidiaries		(2,141	)		(1,675	)		(191	)		(3,816	)		(7,113	)
		(28,895	)		5,515			(8,714	)		(23,380	)		(268,109	)

ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. Dollars)

		As at			As at			As at
		June 30,			March 31,			December 31,
		2021			2021			2020
		$			$			$
ASSETS
Current assets
Cash and cash equivalents		241,132			197,078			235,734
Financial assets		21,061			48,621			103,514
Accounts and other receivable, net		198,080			217,392			222,629
Vessels and equipment classified as held for sale		4,400			7,500			7,500
Inventory		20,968			21,586			16,308
Due from related parties		707			2,723			9,980
Other assets		32,061			34,571			37,326
Total current assets		518,409			529,471			632,991
Non-current assets
Financial assets		45,755			45,753			36,372
Vessels and equipment		3,132,456			3,213,592			3,029,415
Advances on newbuilding contracts		26,991			26,094			127,335
Equity-accounted investments		249,300			243,698			241,731
Deferred tax assets		5,152			5,144			5,153
Other assets		158,652			169,887			185,521
Goodwill		127,113			127,113			127,113
Total non-current assets		3,745,419			3,831,281			3,752,640
Total assets		4,263,828			4,360,752			4,385,631
LIABILITIES
Current liabilities
Accounts payable and other		345,285			333,400			302,414
Other financial liabilities		45,709			40,307			198,985
Borrowings		335,966			349,890			362,079
Due to related parties		98,615			73,226			7
Total current liabilities		825,575			796,823			863,485
Non-current liabilities
Accounts payable and other		111,254			114,068			128,671
Other financial liabilities		195,088			207,425			144,350
Borrowings		2,720,530			2,799,400			2,808,898
Due to related parties		204,768			199,648			194,628
Deferred tax liabilities		700			700			700
Total non-current liabilities		3,232,340			3,321,241			3,277,247
Total liabilities		4,057,915			4,118,064			4,140,732
EQUITY
Limited partners - Class A common units		(2,940	)		(2,509	)		(2,505	)
Limited partners - Class B common units		(189,802	)		(156,267	)		(157,897	)
Limited partners - preferred units		376,488			376,488			376,512
General partner		6,566			6,826			6,828
Accumulated other comprehensive income		3,278			3,685			4,071
Non-controlling interests in subsidiaries		12,323			14,465			17,890
Total equity		205,913			242,688			244,899
Total liabilities and equity		4,263,828			4,360,752			4,385,631

ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)

		Six Months Ended June 30,
		2021			2020
		$			$
Operating Activities
Net income (loss)		(22,587	)		(267,179	)
Adjusted for the following items:
Depreciation and amortization		158,809			156,140
Equity-accounted (income) loss, net of distributions received		(5,639	)		16,160
Impairment expense, net		—			180,277
(Gain) loss on dispositions, net		(9,107	)		1,950
Unrealized (gain) loss on derivative instruments		(163,207	)		71,359
Deferred income tax expense (recovery)		—			531
Provisions and other items		188			(3,503	)
Other non-cash items		22,985			15,988
Changes in non-cash working capital, net		79,464			8,551
Net operating cash flow		60,906			180,274
Financing Activities
Proceeds from borrowings		75,000			72,015
Repayments of borrowings and settlement of related derivative instruments		(195,767	)		(159,869	)
Financing costs related to borrowings		(884	)		(1,330	)
Proceeds from borrowings related to sale and leaseback of vessels		71,400			35,703
Repayments of borrowings related to sale and leaseback of vessels		(5,700	)		—
Financing costs related to borrowings from sale and leaseback of vessels		(584	)		(65	)
Proceeds from borrowings from related parties		130,000			105,000
Prepayment of borrowings from related parties		(30,000	)		—
Lease liability repayments		(6,961	)		(11,147	)
Distributions to limited partners and preferred unitholders		(15,760	)		(16,076	)
Distributions to others who have interests in subsidiaries		(1,750	)		(4,750	)
Repurchase of preferred units		(24	)		—
Net financing cash flow		18,970			19,481
Investing Activities
Additions
Vessels and equipment		(168,979	)		(239,418	)
Equity-accounted investments		(2,336	)		(2,196	)
Dispositions:
Vessels and equipment		28,835			15,052
Restricted cash		67,633			66,079
Acquisition of company (net of cash acquired of $6.4 million)		—			6,430
Net investing cash flow		(74,847	)		(154,053	)
Cash and cash equivalents
Change during the period		5,029			45,702
Impact of foreign exchange on cash		369			(3,992	)
Balance, beginning of the period		235,734			199,388
Balance, end of the period		241,132			241,098

Non-IFRS Measures

To supplement the unaudited interim condensed consolidated financial statements, the Partnership uses Adjusted EBITDA, which is a non-IFRS financial measure, as a measure of the Partnership's performance. Adjusted EBITDA represents net income (loss) before interest expense, interest income, income tax (expense) recovery, 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 impairment expenses, gain (loss) on dispositions, net, unrealized gain (loss) on derivative instruments, foreign currency exchange gain (loss) and certain other income or expenses. Adjusted EBITDA also excludes: realized gain or loss on interest rate swaps (as the Partnership in assessing its performance, views these gains or losses as an element of interest expense); realized gain or loss on derivative instruments resulting from amendments or terminations of the underlying instruments; realized gain or loss on foreign currency forward contracts; and equity-accounted income (loss). Adjusted EBITDA also includes the Partnership's proportionate share of Adjusted EBITDA from its equity-accounted investments and excludes the non-controlling interests' proportionate share of Adjusted EBITDA. The Partnership does not have control over the operations of, nor does it have any legal claim to the revenues and expenses of its equity-accounted investments. Consequently, the cash flow generated by the Partnership's equity-accounted investments may not be available for use by the Partnership in the period that such cash flows are generated.

Adjusted EBITDA is intended to provide additional information and should not be considered as the sole measure of the Partnership's performance or as a substitute for net income (loss) or other measures of performance prepared in accordance with IFRS. In addition, this measure does not have a standardized meaning and may not be comparable to similar measures presented by other companies. This non-IFRS measure is used by the Partnership's management, and the Partnership believes that this supplementary metric assists investors and other users of its financial reports in comparing its financial and operating performance across reporting periods and with other companies.

Non-IFRS Financial Measures

The following table includes reconciliations of Adjusted EBITDA to net income (loss) for the periods presented in the Partnership's Consolidated Financial Summary.

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020
(in thousands of U.S. Dollars, unaudited)	$			$			$			$
Adjusted EBITDA	109,595			153,473			229,865			317,021
Depreciation and amortization	(81,560	)		(77,606	)		(158,809	)		(156,140	)
Interest expense	(49,475	)		(45,907	)		(97,159	)		(94,176	)
Interest income	21			43			49			710
Expenses and gains (losses) relating to equity-accounted investments	(10,606	)		(14,586	)		(15,475	)		(43,504	)
Impairment expense, net	—			(8,275	)		—			(180,277	)
Gain (loss) on dispositions, net	9,107			(1,388	)		9,107			(1,950	)
Realized and unrealized gain (loss) on derivative instruments	(1,513	)		(13,382	)		12,347			(103,002	)
Foreign currency exchange gain (loss)	(302	)		(949	)		23			(4,389	)
Other income (expenses), net	(1,831	)		(4,137	)		(1,857	)		(5,366	)
Adjusted EBITDA attributable to non-controlling interests	(713	)		4,234			1,515			8,026
Income (loss) before income tax (expense) recovery	(27,277	)		(8,480	)		(20,394	)		(263,047	)
Income tax (expense) recovery:
Current	(1,211	)		(1,465	)		(2,193	)		(3,601	)
Deferred	—			1,698			—			(531	)
Net loss	(28,488	)		(8,247	)		(22,587	)		(267,179	)

Adjusted EBITDA from equity-accounted investments, which is a non-IFRS financial measure and should not be considered as an alternative to equity accounted income (loss) or any other measure of financial performance presented in accordance with IFRS, represents our proportionate share of Adjusted EBITDA (as defined above) from equity-accounted investments. This measure does not have a standardized meaning, and may not be comparable to similar measures presented by other companies. Adjusted EBITDA from equity-accounted investments is summarized in the table below:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020
(in thousands of U.S. Dollars, unaudited)	$			$			$			$
Equity-accounted income (loss)	10,229			8,428			29,613			4,373
Less:	—
Depreciation and amortization	(7,551	)		(8,779	)		(15,116	)		(16,617	)
Interest expense, net	(1,932	)		(3,098	)		(4,000	)		(6,932	)
Income tax (expense) recovery
Current	21			(3	)		(26	)		(135	)
EBITDA	19,691			20,308			48,755			28,057
Less:
Realized and unrealized gain (loss) on derivative instruments	(2,005	)		(2,099	)		3,522			(17,177	)
Foreign currency exchange gain (loss)	861			(607	)		145			(2,643	)
Adjusted EBITDA from equity-accounted investments	20,835			23,014			45,088			47,877