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Teekay LNG’s Cash Flow Expected to Climb the Ladder

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TGP’s DCF

For 4Q15, Teekay LNG Partners (TGP) generated DCF (distributable cash flow) of $61.5 million, which was in line with the DCF generated in the previous quarter. The distributable cash flow per limited partner common unit for the fourth quarter was $0.77 per unit, which was higher than the previous quarter. It generated a 6% higher CFVO (cash flow from vessel operations) of $121.1 million.

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What is DCF?

DCF represents net income adjusted for non-cash items, estimated maintenance and capital expenditures, and unrealized gain and losses from derivatives. DCF is a quantitative standard used in the publicly traded partnership investment community to assist in evaluating a partnership’s ability to make quarterly cash distributions.

DCF growth comparison with peers

Teekay LNG Partners’ (TGP) DCF per unit decreased by 1% in 4Q15 compared to same period last year. Gaslog Partners’ (GLOP) annualized DCF per unit compared to 4Q14 increased by 20%. Dynagas LNP Partners’ (DLNG) DCF decreased by 2.8% in 4Q15 compared to 4Q14. Among the other LNG carriers, Hoegh LNG Partners (HMLP) and Golar LNG Partners (GMLP) have yet to release their fourth quarter earnings.

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Future CFVO and DCF

In its fourth quarter conference call, Teekay LNG Partners (TGP) gave its expectations of future CFVO. The company anticipates a CFVO run rate of approximately $470 million. It expects the CFVO to increase moderately through 2017.

Most of the company’s newbuilds should join its active fleet at the end of 2017, which should ramp up TNG’s CFVO after 2017. The company expects to add an incremental $250 million of annual CFVO by 2020. As the company does not have plans to issue equity, it expects its DCF per unit to be higher in the future.

Teekay LNG Partners’ (TGP) CFVO and DCF has increased, but it is also important to see how the company’s cash distributions to its shareholders have changed. We’ll look at this in the next article.

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