Teekay has signed an agreement with the Foinaven operator Britoil and the Foinaven Co-venturers to amend the operating contract for Teekay's Foinaven Floating Production Storage and Offloading (FPSO) unit, which also includes transportation services provided by two shuttle tankers. The Foinaven FPSO unit operates under an evergreen contract on the Foinaven oil field, West of Shetland on the UK Continental Shelf, where it has been stationed since 1997. The amended contract provides a commercial agreement which secures the provision of operating services for the Foinaven field until at least 2021 and includes operating performance incentives which increase the revenue generated by the Foinaven FPSO unit.
The amended contract, which applied from January 1, 2010, is comprised of the following components:
As a result, the Foinaven FPSO unit is expected to generate incremental operating cash flow and net income of approximately $30 million to $40 million per annum over the anticipated life of the contract period.
Under the amended contract, Teekay will also receive payments of approximately $60 million, relating to the Foinaven FPSO unit's operations in previous years. The first installment of approximately $30 million is payable by the end of April 2010 and the balance is expected to be payable in the third quarter of 2010.
"The amended Foinaven FPSO contract reflects the desire of both Teekay and the Foinaven Co-Venturers to continue working together to maximize the value of the important Foinaven field," commented Bjorn Moller, Teekay Corporation's President and Chief Executive Officer. "The Foinaven FPSO unit has been operating successfully on this field since 1997 and plays a critical role in the future development of the Foinaven oil field. The updated contract structure, with operating incentives and a supplemental tariff rate that adjusts with the price of oil, provides an effective alignment of incentives between us and the Foinaven Co-Venturers."
Mr. Moller added, "We are pleased to take this major step towards our stated objective of improving the profitability of our existing assets. The Foinaven FPSO unit is the second of the four FPSO units associated with our Petrojarl transaction that has now been amended or renewed. We are currently engaged in negotiations to extend the contract on another FPSO unit and hope to announce further progress later in 2010."
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