Teekay Offshore is targeting several redeployment opportunities for a floating production, storage and offloading (FPSO) unit after Repsol cancelled a long-term contract for the unit.

The Teekay spinoff revealed today that the Spanish oil company will return the 57,000-barrels-per-day Petrojarl Varg (built 1998) in August.

Repsol cancelled the contract in November after deciding to shut down production at its Varg field operations in Norwegian waters of the North Sea, though Teekay Offshore did not provide details on the redelivery until now.

The offshore vessel, tanker and FPSO owner played down the impact of the cancellation, which comes at a time when exploration-and-production companies are clamping down on capital costs amid an oil price slump.

But the company pointed out that the FPSO Varg meets strict Norwegian standards, presumably giving it an advantage in the North Sea market.

No cash flow worry in 2016

Chief executive Peter Evensen said the cancellation won’t stop Teekay Offshore from hiking its cash flows this year.

“Looking ahead to 2016, despite the sale of the conventional tankers and the anticipated redelivery of the Varg FPSO after operating on the Varg field for almost 18 years, the partnership’s cash flows are expected to increase compared to 2015 supported by high uptime and fleet utilisation and the delivery of various growth projects in 2016,” he said.

As TradeWinds reported earlier today, Teekay reported adjusted net income of $53.7m for the fourth quarter, which marked an improvement on the $40.1m booked a year earlier.

Below consensus

The distributed cash flow per unit of $0.62 was below the consensus estimate of $0.69.

The New York-listed company also revealed the sale of four conventional tankers for $130m, including two that were sold to sister company Teekay Tankers.