Teekay Offshore Partners LP (TOO - US$ 15.74) 2-Equal weight
Initiation of Coverage
Visible Growth Potential with Parent TK

Investment Conclusion

We are initiating coverage of Teekay Offshore Partners, LP with a 2-Equal Weight rating and $19 PT based on a 12-month cash distribution run rate of $1.70 and a target yield of 9%.

Summary
􀂉 We believe that with the support of parent Teekay Corporation (TK), Teekay Offshore Partners, LP (TOO) could have the opportunity to leverage operational expertise and participate in accretive drop-down transactions to drive both organic growth and acquisitions within the Marine Transportation sector.
􀂉 On June 5, 2008, TOO agreed to acquire an additional 25% of OPCO from Teekay Corporation for a purchase price of $205 million. TOO will own 51% of OPCO, inclusive of GP interests, and TK will own the remaining 49% of OPCO, which it may choose to sell to TOO in the future.
􀂉 We believe TOO could capitalize on the growing demand for deepwater offshore oil exploration and production.
􀂉 We believe TOO can grow the distribution at a 3-year CAGR of 12% and can offer an attractive total return potential for a partnership that comprises stable cash flows and strong parent support.