Teekay Corporation Reports Fourth Quarter and Annual Results
Friday, 24 February 2012 | 00:00
Teekay Corporation yesterday reported adjusted net income attributable to stockholders of Teekay(2) of $1.6 million, or $0.02 per share, for the quarter ended December 31, 2011, compared to adjusted net loss attributable to the stockholders of Teekay of $37.8 million, or $0.51 per share, for the same period of the prior year. Adjusted net income attributable to stockholders of Teekay excludes a number of specific items that had the net effect of increasing GAAP net income (loss) by $46.8 million (or $0.67 per share) for the three months ended December 31, 2011 and increasing GAAP net income by $123.7 million, (or $1.67 per share,) for the three months ended December 31, 2010, as detailed in Appendix A to this release. Including these items, the Company reported on a GAAP basis, a net income attributable to the stockholders of Teekay of $48.4 million, or $0.69 per share, for the quarter ended December 31, 2011, compared to net income attributable to the stockholders of Teekay of $85.9 million, or $1.16 per share, for the same period of the prior year. Net revenues(3) for the fourth quarter of 2011 were $472.7 million, compared to $449.7 million for the same period of the prior year.
For the year ended December 31, 2011, the Company reported adjusted net loss attributable to stockholders of Teekay(2) of $103.1 million, or $1.47 per share, compared to adjusted net loss attributable to the stockholders of Teekay of $121.0 million, or $1.67 per share, for the year ended December 31, 2010. Adjusted net loss attributable to stockholders of Teekay excludes a number of specific items that had the net effect of increasing GAAP net loss by $265.8 million, (or $3.78 per share) for the year ended December 31, 2011 and increasing GAAP net loss by $146.2 million, (or $2.00 per share) for the year ended December 31, 2010, as detailed in Appendix A to this release. Including these items, the Company reported on a GAAP basis, net loss attributable to the stockholders of Teekay of $368.9 million, or $5.25 per share, for the year ended December 31, 2011, compared to net loss attributable to the stockholders of Teekay of $267.3 million, or $3.67 per share, for the year ended December 31, 2010. Net revenues(3) for the year ended December 31, 2011 were $1.78 billion, compared to $1.85 billion for the prior year.
On January 5, 2012, the Company declared a cash dividend on its common stock of $0.31625 per share for the quarter ended December 31, 2011. The cash dividend was paid on January 31, 2012, to all shareholders of record on January 20, 2012.
"The improvement in our fourth quarter results compared to the prior year reflects our increased investment in fixed-rate businesses and efforts to improve profitability in our existing fleet throughout 2011," commented Peter Evensen, Teekay Corporation's President and Chief Executive Officer. "In addition to one month of cash flows from the two Sevan FPSO units we acquired from Sevan Marine at the end of November 2011, we realized approximately $35 million of additional cash flow in the quarter based on certain annual production and oil price revenue components of the Foinaven FPSO contract which are recognized annually in the fourth quarter. Apart from the timing differences associated with the Foinaven FPSO revenues and the net reduction in cash flows associated with the Banff FPSO off-hire, we expect Teekay Parent's average quarterly cash flow to be enhanced in 2012, partly due to the Hummingbird FPSO acquisition in November 2011 and expected growth in general partnership cash flows from Teekay LNG Partners and Teekay Offshore Partners as a result of the respective Maersk LNG fleet and Piranema FPSO acquisitions. Our 2011 initiatives to increase the cash flows from our existing assets, including the renewal of contracts at higher rates and reduction of operating expenses in our shuttle tanker fleet, the negotiation of improved terms under the existing Petrojarl 1 FPSO contract, redelivery of our time-chartered in vessels, and taking advantage of the strong spot LNG shipping market to secure new charters for the Arctic Spirit and Polar Spirit LNG carriers, are also expected to contribute enhanced cash flows and profitability in 2012."
Mr. Evensen added, "As we redeliver our time-chartered in conventional tanker fleet which continues to generate losses, add and extend time-charter out contracts at fixed rates, and find operational savings through initiatives such as slow steaming, we believe we will continue to lower the cash flow breakeven levels of our conventional tanker fleet as well. While spot tanker rates strengthened in the fourth quarter and into the first two months of 2012, primarily due to seasonal factors and record high global oil production, the high level of tanker supply growth relative to demand growth projected for 2012 is expected to result in continued spot rate weakness and volatility through much of the year. With this in mind, we will continue to manage our operating costs and spot tanker exposure in anticipation of a potential tanker market recovery in late 2012 or early 2013."
"In the current constrained global financial environment, Teekay's diversified business model and corporate structure is proving to be a source of competitive strength," Mr. Evensen added. "In fiscal 2011, Teekay Parent completed over $1.1 billion of asset sales to its publically traded subsidiaries which, on a combined basis, raised approximately $640 million of third party equity financing. Having recently completed, and soon to complete, major acquisitions in our offshore and LNG businesses, we are commencing 2012 with a renewed focus on deleveraging our parent company balance sheet and rebuilding liquidity to provide the Company with greater financial flexibility and the ability to selectively grow our project portfolio in the future."
Teekay Offshore Partners L.P.
Teekay Offshore is an international provider of marine transportation and oil production and storage services to the offshore oil industry through its fleet of 40 shuttle tankers (including four chartered-in vessels, and four committed newbuildings), three floating, production, storage and offloading (FPSO) units, five floating, storage and offtake (FSO) units and 10 conventional oil tankers, in which Teekay Offshore's interests range from 50 percent to 100 percent. Teekay Offshore also has the right to participate in certain other FPSO and vessel opportunities. As at December 31, 2011, Teekay Parent owned a 33.0 percent interest in Teekay Offshore (including the 2 percent sole general partner interest).
Cash flow from vessel operations from Teekay Offshore increased to $101.6 million in the fourth quarter of 2011, from $94.4 million in the same period of the prior year. This increase was primarily due to a decrease in vessel operating costs, lower time-charter hire expense, the acquisition of the Piranema FPSO on November 30, 2011, and a full quarter's contribution of the Nansen Spirit and Peary Spirit. Vessel operating costs decreased due to temporary lay-up of the Basker Spirit commencing in the first quarter of 2011 and from repair costs incurred on certain shuttle tankers in the fourth quarter of 2010. This was partially offset by an increase in general and administrative expenses mainly related to higher business development and project costs.
On October 1, 2011, Teekay Offshore completed the acquisition from Teekay Parent of another newbuilding shuttle tanker, the Scott Spirit, for a cost of $116 million, including $93.3 million of debt which was assumed by Teekay Offshore. The purchase price is subject to adjustment for up to an additional $12 million based upon incremental shuttle tanker revenues secured during the two years following acquisition.
On November 30, 2011, Teekay Offshore completed the sale of 7.1 million common units in a private placement to a group of institutional investors for net proceeds of $170 million (excluding its general partner's proportionate capital contribution). Teekay Offshore used the net proceeds to finance the acquisition of the Piranema FPSO, as described below, and to partially fund Teekay Offshore's previously-announced acquisition of four newbuilding shuttle tankers that are scheduled to deliver in mid-2013.
On November 30, 2011, in connection with Teekay Parent's previously-announced transaction to acquire FPSO units from Sevan, Teekay Offshore completed the acquisition of the Piranema FPSO unit directly from Sevan for $165 million. The 2007-built Piranema FPSO is currently operating under a long-term charter to Petrobras S.A. on the Piranema field located in the Brazil offshore region. The charter includes a firm contract period through March 2018, with up to 11 one-year extension options that includes cost-escalation clauses.
In late January 2012, Teekay Offshore issued NOK 600 million in senior unsecured bonds that mature in January 2017 in the Norwegian bond market. The aggregate principal amount of the bonds is equivalent to approximately 100 million U.S. dollars (USD) and all interest and principal payments have been swapped into USD and fixed at an interest rate of 7.49 percent. Proceeds from the bond offering were used to reduce amounts outstanding under Teekay Offshore's revolving credit facilities and for general partnership purposes, including future acquisitions. Teekay Offshore is in the process of listing these bonds on the Oslo Stock Exchange.
For the fourth quarter of 2011, Teekay Offshore's quarterly distribution was $0.50 per common unit. The cash distribution received by Teekay Parent based on its common unit ownership and general partnership interest in Teekay Offshore totaled $13.7 million for the fourth quarter of 2011, as detailed in Appendix D to this release.
Teekay LNG Partners L.P.
Teekay LNG provides liquefied natural gas (LNG), liquefied petroleum gas (LPG) and crude oil marine transportation services under long-term, fixed-rate charter contracts with major energy and utility companies through its current fleet of 21 LNG carriers, five LPG/Multigas carriers and 11 conventional tankers, in which vessels Teekay LNG's interest range from 33 to 100 percent. Teekay LNG also expects to acquire, through its joint venture with Marubeni Corporation (Marubeni), indirect 52 percent ownership interests in six LNG carriers as described below. As at December 31, 2011, Teekay Parent owned a 40.1 percent interest in Teekay LNG (including the 2 percent sole general partner interest).
Cash flow from vessel operations from Teekay LNG during the fourth quarter of 2011 increased to $70.9 million from $68.3 million in the same period of the prior year. This increase was primarily due to the acquisition in 2011 of two Multigas carriers and an LPG carrier, partially offset by the sale of the Dania Spirit LPG carrier in November 2010 and a greater number of off-hire days in the fourth quarter of 2011 related to scheduled drydockings. The increase does not include cash flows from Teekay LNG's three equity accounted joint ventures, which increased to $20.0 million for the fourth quarter of 2011 from $11.9 million for the same period in the prior year, mainly due to the Partnership's acquisition in 2011 of a 33 percent interest in 3 LNG carriers and a full quarter of cash flows from the Partnership's 50 percent interest in 2 LNG carriers acquired from Exmar in November 2010.
In October 2011, Teekay LNG announced that its joint venture with Marubeni Corporation (the Teekay LNG-Marubeni Joint Venture) agreed to acquire ownership interests in eight LNG carriers (the Maersk LNG Carriers) from Denmark-based global conglomerate, A.P. Moller-Maersk A/S for a total purchase price of approximately $1.4 billion. Subsequently, the majority owners of the two LNG carriers in which the Teekay LNG Marubeni JV was expected to purchase a 26 percent interest exercised their rights to acquire the remaining interests in these vessels. As a result, the Teekay LNG-Marubeni Joint Venture will acquire 100 percent interests in only six of the Maersk LNG carriers at a lower purchase price of approximately $1.33 billion. Teekay LNG and Marubeni own a 52 percent and a 48 percent economic interest in the Teekay LNG Marubeni Joint Venture, respectively, but share control of the Joint Venture. To finance this transaction the Teekay LNG Marubeni Joint Venture has received bank commitments to finance up to 80 percent of the purchase price, or approximately $1.1 billion. The remaining $266 million of the purchase price will to be financed with pro-rata equity contributions from Teekay LNG and Marubeni, commensurate with the respective joint venture ownership interests. The transaction is expected to close by the end of February 2012.
In early November 2011, Teekay LNG completed a public equity offering of 5.5 million common units raising net proceeds of approximately $179.5 million (including Teekay Parent's contribution to maintain its 2 percent general partnership interest) which will be used to fully finance Teekay LNG's $138 million pro rata equity purchase price for the six Maersk LNG Carriers.
In January 2012, Teekay LNG acquired from Teekay Parent a 33 percent interest in the last of four newbuilding Angola LNG carriers for a total equity purchase price of approximately $19 million.
For the fourth quarter of 2011, Teekay LNG's quarterly distribution was $0.63 per unit. The cash distribution received by Teekay Parent based on its common unit ownership and general partnership interest in Teekay LNG totaled $19.4 million for the fourth quarter of 2011, as detailed in Appendix D to this release.
Teekay Tankers Ltd.
Teekay Tankers' fleet includes 11 Aframax tankers and six Suezmax tankers (including two time-chartered in Aframax tankers). In addition, Teekay Tankers owns a 50 percent interest in a VLCC newbuilding scheduled to deliver in April 2013 and has invested $115 million in first-priority mortgage loans secured by two 2010-built Very Large Crude Carriers (VLCCs). Of the 17 vessels currently in operation, 10 are employed on fixed-rate time-charters, generally ranging from one to three years in initial duration, with the remaining vessels trading in Teekay's spot tanker pools. Teekay Tankers' currently has fixed-rate coverage of approximately 58 percent for the first quarter of 2012 and 47 percent for fiscal 2012. Teekay Parent currently owns a 20.4 percent interest in Teekay Tankers (including 100 percent of the outstanding Class B common shares, which together with its current ownership of Class A common shares, provides Teekay voting control of Teekay Tankers).
Cash flow from vessel operations from Teekay Tankers decreased to $12.3 million in the fourth quarter of 2011, from $16.3 million in the same period of the prior year, primarily due to lower average realized tanker rates for its spot and fixed-rate fleets during the fourth quarter of 2011, compared to the same period of the prior year.
In early February 2012, Teekay Tankers completed a public offering of 17.25 million shares of Class A common shares. Teekay Tankers used the net proceeds of approximately $66 million from this equity offering to repay a portion of its outstanding debt under its revolving credit facility, which may be redrawn to finance future acquisitions.
On February 7, 2012, Teekay Tankers declared a fourth quarter 2011 dividend of $0.11 per share which will be paid on February 28, 2012 to all shareholders of record on February 21, 2012. Based on its ownership of Teekay Tankers Class A and Class B shares, the dividend to be paid to Teekay Parent will total $1.8 million for the fourth quarter of 2011.
In addition to its equity ownership interests in Teekay Offshore, Teekay LNG and Teekay Tankers, Teekay Parent directly owns a substantial fleet of vessels. As at February 1, 2012, this fleet included 17 conventional tankers and six FPSO units (including two which are currently under construction or conversion), in which Teekay Parent's interests range from 50 to 100 percent. In addition, as at February 1, 2012, Teekay Parent had 15 chartered-in conventional tankers (including six vessels owned by its publicly-traded subsidiaries), two chartered-in LNG carriers owned by Teekay LNG and two chartered-in shuttle tankers owned by Teekay Offshore.
In the fourth quarter of 2011, Teekay Parent generated cash flow from vessel operations of $5.1 million, compared to negative cash flow from vessel operations of $21.7 million in the same period of the prior year. The increase in cash flow is primarily due to higher revenues from the Foinaven FPSO unit due to improved annual operational performance measures, oil production levels and average oil prices, as well as lower time-charter hire expense as a result of redeliveries of time-chartered in vessels during 2011, and increased revenues from the Arctic Spirit and Polar Spirit as a result of new contracts signed in 2011. This increase was partially offset by a decrease in average realized spot tanker rates for the fourth quarter of 2011 compared to the same period in the prior year and lower revenue from the Petrojarl Banff FPSO.
On December 7, 2011 the Petrojarl Banff FPSO unit (Banff FPSO), which operates on the Banff field in the U.K. sector of the North Sea, encountered a severe storm event and sustained damage to its moorings, turret and subsea equipment which necessitated the shutdown of production on the unit. Due to damage incurred, on December 8, 2011 the Company declared force majeure and the Banff FPSO commenced a period of off-hire which is currently expected to continue until the second quarter of 2013 while repairs are assessed and completed. As a result, for the quarter ended December 31, 2011 the Company experienced a loss of revenue totaling approximately $3 million. In addition, the Company expects to incur a loss of operating cash flow of approximately $35 million and $15 million in fiscal years 2012 and 2013, respectively. Following repairs, the Banff FPSO unit is expected to resume production on the Banff field where it is expected to remain under contract until the end of 2018. The Company is insured against damage to the Banff FPSO and associated equipment related to this incident, subject to a $750,000 deductible. The Company expects repair costs to the Banff FPSO/equipment and costs associated with the emergency response to prevent loss or further damage during the December 7, 2011 storm event, will be reimbursed through its insurance coverage subject to the terms and conditions of the applicable policies.
In October 2011, Teekay Parent sold to Teekay Offshore the Scott Spirit shuttle tanker newbuilding, the fourth and final vessel in the "Explorer" class of shuttle tankers which includes the Amundsen Spirit, Peary Spirit and Nansen Spirit, for a total purchase price of approximately $116 million, including $93.3 million of debt which was assumed by Teekay Offshore. The purchase price is subject to adjustment for up to an additional $12 million based upon incremental shuttle tanker revenues secured during the two years following acquisition.
In November 2011, in connection with Teekay's previously-announced transaction to acquire three FPSO units (the Hummingbird, the Piranema and the Voyageur), including their existing charter contracts, from Sevan, Teekay Parent completed the acquisition of the Hummingbird FPSO for a total purchase price of approximately $179 million. As part of the agreement, Teekay Parent also invested $25 million to acquire approximately 40 percent of a recapitalized Sevan and entered into a cooperation agreement relating to joint marketing of offshore projects, the development of future projects, and the financing of such projects. In addition, Teekay Parent will fund the remaining cost required to complete the upgrade of the Voyageur FPSO. The purchase of the Voyageur FPSO is expected to be completed upon the completion of the upgrade and the commencement of the Voyageur FPSO charter contract, which is expected to be in the fourth quarter of 2012.
Crude tanker rates strengthened during the fourth quarter of 2011 due to seasonal factors and an increase in global oil production to record highs. In the Atlantic, weather in the North Sea and Baltic Sea and transit delays through the Turkish Straits led to an increase in European Aframax and Suezmax rates. The return of Libyan oil production to approximately 1.0 million barrels per day (mb/d) by the end of the year also provided support to tanker rates in the Mediterranean. In the Pacific, an increase in Asian oil imports to meet peak winter demand caused rates to firm up, particularly in the large crude oil tanker sectors. Weather disruptions in the Atlantic have continued to give support to crude tanker rates in early 2012.
The tanker fleet grew by 26.1 million deadweight tonnes (mdwt), or 5.8 percent, during 2011, compared to an increase of 17.7 mdwt, or 4.1 percent, during 2010. A total of 39.6 mdwt of new tankers entered the fleet in 2011, a decrease from 41.5 mdwt in the previous year. A total of 13.6 mdwt of tankers were removed for scrapping or conversion during 2011, a decrease from 23.8 mdwt in 2010. Approximately 50 mdwt of tankers are scheduled for delivery during 2012; however, the Company anticipates an order book slippage rate of around 33 percent due to construction delays and order cancellations and estimate actual deliveries of approximately 33.5 mdwt. Assuming scrapping of 12 mdwt occurs, the Company estimates that the tanker fleet will grow by approximately 21.5 mdwt, or 4.5 percent, during 2012.
Based on the average range of forecasts from the International Energy Agency (IEA), the Energy Information Agency (EIA) and the Organization of Petroleum Exporting Countries (OPEC), global oil demand is expected to grow by 1.0 mb/d in 2012, with growth expected to be driven entirely by non-OECD regions. This increase in oil demand is expected to increase demand for tankers through 2012. In addition, the Company anticipates that average voyage distances will lengthen during 2012 due to a narrowing in the price spread between crude oil produced in the Atlantic - such as Brent - and Middle Eastern grades, which makes Atlantic basin crude more attractive to Asian buyers.
With tanker supply growth expected to exceed demand growth for at least the first half of 2012, the current seasonal strength is expected to give way to spot tanker rate weakness and volatility similar to that experienced in 2011. These conditions are expected to persist through much of 2012 before an anticipated reduction in tanker supply growth begins to provide support for potentially stronger rates in the latter part of the year.
Source: Teekay Corporation