Market Overview

JDP Responds To Teekay Offshore's Updated Company Asset Valuation Of $5.3 Billion


NEW YORK, June 25, 2019 /PRNewswire/ -- On June 21, 2019, Teekay Offshore (NYSE:TOO) announced an updated valuation figure for the Company's consolidated assets of $5.3 billion across 60 vessels or approximately $2.80 per unit, net of all obligations.

JDP Managing Partner Jeremy Deal commented: "While there are many ways to value a business, one of the easiest is to simply look at the net book asset value. In a leasing business with a large moat such as TOO's, over time, management should be able to achieve a premium over net book asset value. Otherwise the company can improve its market value by selling assets, retiring debt or returning the excess cash to shareholders."

As of March 31, 2019 TOO reported total liabilities and preferred equity of $4.2 billion for a net asset value of $1.1 billion or approximately $2.80 per unit assuming 410 million shares outstanding. Note this value is 2.6X higher than the $1.05 per unit that majority owner Brookfield Business Partners (NYSE:BBU) offered for the remaining units in an unfair attempt to disadvantage minority investors.

With stable contracted run-rate Adjusted EBITDA of over $700 million, as well as over $850 million in new long-term debt facilities to finance growth, TOO is positioned to reward owners for their patience. Adjusted EBITDA has consistently hit new all-time highs over the past year and this is before a full recovery in the North Sea and Offshore Brazil drilling markets. Further, TOO's leverage ratio has been reduced down to its long-term target range and its blended debt maturity profile has been significantly extended. 

Brookfield, just 20 months ago, touted itself as a white knight savior who reshaped Teekay Offshore's capital structure through a $610 million cash injection at $2.50 per unit. Unfortunately, Brookfield has now shown its true colors with an attempt to squeeze out remaining small shareholders at the all-time low price of $1.05.

JDP will not accept a distressed a price which simply ignores both stated hard asset value, and/or going concern value that we believe is at least $4 per unit based on a reasonable multiple of cash flow.

Please see the following links for more information:

The Numbers Don't Lie: Interpreting Brookfield Business Partner's Offer For Teekay Offshore, June 19, 2019

JDP Letter to Teekay Offshore Conflicts Committee, May 21, 2019

Merger Presentation: Strategic Partnership with Brookfield, July 27, 2017

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SOURCE JDP Capital Management

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