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Teekay enlist Damen to upgrade FPSO for lease to QGEP for work offshore Brazil

18th December 2014

Teekay Offshore Partners has entered into an agreement with a consortium led by Queiroz Galvão Exploração e Produção SA (QGEP) to provide a floating production, storage and offloading (FPSO) unit for the Atlanta field located in the Santos Basin offshore Brazil

Teekay Offshore Partners has entered into an agreement with a consortium led by Queiroz Galvão Exploração e Produção SA (QGEP) to provide a floating production, storage and offloading (FPSO) unit for the Atlanta field located in the Santos Basin offshore Brazil
The acquisition of the Petrojarl I has been approved by the Partnership's Conflicts Committee and Board of Directors and the transaction is expected to close by the end of January 2015

In connection with the contract with QGEP, the Partnership has agreed to acquire the Petrojarl I FPSO from Teekay Corporation for USD 57m.

"We continue to secure new, accretive growth in our offshore production business with our second contract award in just three months," commented Peter Evensen, chief executive officer of Teekay Offshore GP LLC.

“The QGEP contract award further strengthens the Partnership's position in the fast-growing Brazilian offshore market and highlights the Partnership's ability to provide cost-effective solutions to its customers by redeploying our Sponsor's existing FPSO units."

Subsequent to the acquisition, the FPSO will undergo upgrades at the Damen Shipyard Group's DSR Schiedam Shipyard in the Netherlands for a fully built-up cost of approximately USD 240m, which includes the cost of acquiring the Petrojarl I.

The FPSO is scheduled to commence operations in the first half of 2016 under a five-year charter contract with QGEP. The charter contract is expected to generate annual cash flow from vessel operations of approximately USD 55m to USD 60m.

The Petrojarl I FPSO will be used as an early production system (EPS) unit on the Atlanta field which is located 185 kilometres offshore from the Brazil coast at a water depth of approximately 1,550 metres and contains an estimated 260 million recoverable barrels of oil equivalent.

The acquisition of the Petrojarl I has been approved by the Partnership's Conflicts Committee and Board of Directors and the transaction is expected to close by the end of January 2015.

"In addition to our acquisition of the Petrojarl 1 FPSO, the Partnership's Board of Directors also recently approved the acquisition of the Petrojarl Knarr FPSO from Teekay, subject to the unit achieving first oil and commencing its charter contract," Evensen continued.

"The purchase price for the FPSO, which is based on a fully built-up cost of approximately USD 1.2bn, is expected to be financed through the assumption of an existing USD 815m long-term debt facility and up to USD 400m of short-term credit financing from Teekay. The installation and offshore testing of the Petrojarl Knarr FPSO on its North Sea field is progressing; however, recent unfavourable weather conditions have delayed certain of these activities. Depending on weather conditions, the Partnership currently expects to complete the acquisition of the Petrojarl Knarr and commence its charter with BG Group during the first quarter of 2015."

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