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Teekay Tankers Ltd. Reports Profitable Quarter On Improving Tanker Market Conditions

Teekay Tankers Ltd. reported the Company’s results for the quarter ended March 31, 2019:

In the first quarter of 2019, the Company made certain changes to its non-GAAP financial measures to more closely align with internal management reporting and annual reporting filed with the U.S. Securities and Exchange Commission (SEC) under Form 20-F. Total Cash Flow from Vessel Operations (CFVO) and CFVO of Equity-Accounted for Investment are replaced with Total Adjusted EBITDA and Adjusted EBITDA from Equity-Accounted Vessel, respectively. Please refer to “Definitions and Non-GAAP Financial Measures” in this release for definitions of these non-GAAP financial measures and information about the changes made.

(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).

First Quarter of 2019 Compared to Fourth Quarter of 2018

GAAP net income and non-GAAP adjusted net income for the first quarter of 2019 improved compared to the prior quarter, primarily as a result of higher average spot tanker rates and lower general and administrative expenses. This was partially offset by higher vessel operating expenses due to the timing of purchases.

First Quarter of 2019 Compared to First Quarter of 2018

GAAP net income and non-GAAP adjusted net income for the first quarter of 2019 significantly improved compared to the GAAP net loss and non-GAAP adjusted net loss in the same period of the prior year, primarily due to substantially higher average spot tanker rates, partially offset by higher interest expense associated with the sale-leaseback transactions relating to ten tankers that were completed in September and November 2018.

CEO Commentary

“Average crude tanker spot rates moderately increased during the first quarter of 2019, which resulted in another profitable quarter and slightly improved results over the prior quarter,” commented Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer. “However, spot tanker rates declined towards the latter half of the first quarter, and the market faces a number of seasonal and other short-term headwinds, which are expected to reduce our earnings during the second quarter of 2019. We believe these factors are temporary in nature and expect a significant firming in the tanker market from the second half of 2019 due to positive underlying oil demand, an expected increase in U.S. crude oil exports, higher OPEC production, lower tanker fleet growth, and the positive impacts of IMO 2020.”

Mr. Mackay added, “With a stronger liquidity position, market-leading position in our vessel sectors and significant operating leverage, we believe we are well-positioned to benefit from a tanker market recovery in the second half of 2019 and into 2020.”

Summary of Recent Developments

In May 2019, Teekay Tankers completed the previously announced sale-leaseback transaction relating to two Suezmax tankers. The transaction increases the Company’s liquidity position by approximately $25 million after the repayment of outstanding debt related to these vessels.

In addition, in May 2019, Teekay Tankers increased the amount available under the loan to finance working capital for the Company’s revenue sharing agreement (RSA) pool management operations, which provides $15 million of additional liquidity.

In April 2019, Teekay Tankers entered into a time charter-in contract for an Aframax vessel for a firm period of 2 years, plus an extension option, which is expected to commence by July 2019 at a daily rate of $21,000.

In January 2019, Teekay Tankers entered into a time charter-out contract for one Suezmax tanker for a firm period of six months at a daily rate of $27,500.

Teekay Tankers’ current dividend policy is to pay out 30 to 50 percent of its quarterly adjusted net income, subject to reserves the Board of Directors may determine are necessary for the prudent operation of the Company. Given losses generated during the first three quarters of 2018, and the additional debt incurred from recent financing transactions to improve Teekay Tankers’ liquidity position as well as the current tanker market weakness, the Company has elected to reserve the amount that would have otherwise been paid out as a dividend for the first quarter of 2019 to reduce outstanding debt.

Operating Results

The following table highlights the operating performance of the Company’s time-charter vessels and spot vessels trading in RSAs, voyage charters and full service lightering, in each case measured in net revenues(v) per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses:

(i) Revenue days are the total number of calendar days the Company’s vessels were in its possession during a period, less the total number of off-hire days during the period associated with major repairs, dry dockings or special or intermediate surveys. Consequently, revenue days represents the total number of days available for the vessel to earn revenue. Idle days, which are days when the vessel is available to earn revenue yet is not employed, are included in revenue days.

(ii) Includes vessels trading in the Teekay Suezmax RSA, Teekay Suezmax Classic RSA and non-pool voyage charters.

(iii) Includes vessels trading in the Teekay Aframax RSA, Teekay Aframax Classic RSA, non-pool voyage charters and full service lightering voyages.

(iv) Includes vessels trading in the Teekay Taurus RSA and non-pool voyage charters.

(v) Net revenues is a non-GAAP financial measure. Please refer to “Definitions and Non-GAAP Financial Measures” for a definition of this term.

Second Quarter of 2019 Spot Tanker Rates Update

Below is Teekay Tankers’ spot tanker fleet update for the second quarter of 2019 to-date:

• The portion of the Suezmax fleet trading on the spot market has secured TCE per revenue day of approximately $17,300 per day on average with 61 percent of the available days fixed(1);
• The portion of the Aframax fleet trading on the spot market has secured TCE per revenue day of approximately $21,200 per day on average with 55 percent of the available days fixed(2); and
• The portion of the Long Range 2 (LR2) product tanker fleet trading on the spot market has secured TCE per revenue day of approximately $15,000 per day on average with 54 percent of the available days fixed(3).

(1) Combined average TCE rate includes Teekay Suezmax RSA, Teekay Suezmax Classic RSA and non-pool voyage charters.

(2) Combined average TCE rate includes Teekay Aframax RSA, Teekay Aframax Classic RSA, non-pool voyage charters and full service lightering voyages.

(3) Combined average TCE rate includes Teekay Taurus RSA and non-pool voyage charters.

Teekay Tankers’ Fleet

The following table summarizes the Company’s fleet as of May 1, 2019:

(i) Includes three Aframax tankers with charter-in contracts that are scheduled to expire in November 2019, December 2019 and March 2021, respectively.

(ii) Includes two LR2 product tankers with charter-in contracts that are scheduled to expire in January 2021, each with an option to extend for one additional year.

(iii) The Company’s ownership interest in this vessel is 50 percent.

Liquidity Update

As at March 31, 2019, the Company had total liquidity of $116.2 million (comprised of $75.0 million in cash and cash equivalents and $41.2 million in undrawn from its revolving credit facilities and working capital loan) compared to total liquidity of $66.7 million as at December 31, 2018. With the completion of the two-vessel sale-leaseback financing transaction and an increase in the limit of the Company’s working capital loan facility in May 2019, the Company had total liquidity of approximately $160 million on May 22, 2019.

Full Report

Source: Teekay Tankers

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