TNK - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to Teekay Tankers Ltd.’s Third Quarter 2020 Earnings Results Conference Call.

During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded.

Now, for opening remarks and introductions, I would now like to turn the call over to the Company. ahead. go Please

Ryan Hamilton

will I’d that website begins, those from of statements. direct participants statements. me may and all third conference results during Before Please Actual discussion call. www.teekaytankers.com, like projected today where results forward-looking our allow Stewart Kevin presentation. at XXXX remind copy materially this you’ll to by presentation quarter today’s you Kevin to earnings to review our find differ the forward-looking a contains

could actual third website. is earnings results and that earnings differ factors over those in statements on materially I’ll and concerning forward-looking from the President call CEO, contained to information Additional to our cause turn presentation available release quarter Kevin begin. to now Tankers’ the Mackay, the in XXXX Teekay

Kevin Mackay

Hello, families Thank us safe earnings conference much for Ryan. Teekay third that you, hope are your I very everyone. you quarter joining Tankers’ you and all call. XXXX for today healthy. Thank and And

the Stewart on today Research. me are of Tankers’ Andrade, CFO; Christian Director call Joining and Waldegrave, Teekay

the of $X XXXX. year. per reported an of third recent adjusted highlights total loss the quarter, of Teekay of of per share presentation. on an during million million adjusted X prior third slide generated $XX quarter million adjusted increase up $XX in third net from of our $XX $X.XX the quarter, of net Tankers’ share the income We approximately a or from $X.XX approximately the or EBITDA in the loss to of million period Moving

third spot market higher charters to fixed strength rates. secured of higher periods results revenues quarter due the from rate Our substantially improved at than rates lucrative are during largely several

$XX of quarter. free from which a build continue (sic) the liquidity million. end this million million to we was quarter, of cash nearly have [XX%] the been has have continued $XX financial reduced $XXX to $XXX and strength by at We million, flow to Net debt strong operations generating position,

net end XX% to declined to XX% approximately the quarter to Our year and debt a compared at September last of ago. total capitalization XX%

in a that Company the mature attractive finalized As in been secured $XX Suezmaxes in four scheduled rate the term earnings call XXXX. at mentioned to million August, an by to has refinance debt loan the facility three-year

-- the of debt does the Company completion With this maturities financing have refinancing, XXXX. any not until

rates year, mitigate primarily a more due next these touch rate of of of the weaker to impact significantly I to the fixed effects slide. in on number detail were knock-on able COVID-XX, We our rates. by the rate the for will our of charters per which securing day, $XX,XXX strength, us in of periods of quarter fixed which the above third on spot vessels acquired average this capital. million, higher $XX.X recent Lastly, third to October, our I’m tanker freight our and market, under XXXX capital. as crude half priorities in highlighted reduce the at debt for reducing of this Vessels Day to of cost liquidity first relatively of quarters, two that report our are in and we November previously exposure compared to vessels, XXXX is decreased one unencumbered. to cost Investor market charters an enabled have the during in quarter prevailing the on well at our XX% rates sale-leasebacks Aframax market were repurchased strategic using of now fleet spot existing to pleased rate In

the recent tanker spot to X, look we developments Turning in market. slide at

barrels prices in partners and and crude In slashed oil COVID-XX by million rates pandemic. record quarter demand leading oil a during demand, Global correction from day due mentioned, to both, the inventories to the on the spot a during its production of the in declined year response, tanker X.X the first XXXX due large rapidly mismatch of built between margins. impact supply continued half May. refining and As sharp OPEC per to the oil third

margins. per demand that Although And Refinery and to to placed transportation. this have of remains year some runs storage well been oil August, have significantly same floating cut have in dampened weak returned refiners imbalance. this to also production below supply trade. the into for has in the crude the returned pre-pandemic supply-demand as negative global barrels day adding further has fleet, hence crude time, of ships X At were respond the earlier tanker the been million for they levels, and

in rate saw Although first the that chart the first the late than slide. into shows of have XXXX particularly higher half were current much the left as half at by the The Teekay our bolstered rates were fallen entered the third charters further chart the XXXX Suezmaxes, of of where and by results year, months. to shown which on in the during was market. to fixed on spot a for compared Tankers year-on-year, extent of rates right quarter true slide earnings recent the drop time rates our higher we the the spot This

facing I winter, a to earlier. environment the described to due challenging fundamental we’re currently rate ahead Looking the headwinds that

barrels on see support to only around midsized per which per barrels day, day Suezmaxes. Libyan crude for and However, tankers exports, some Aframaxes oil quarter. the have risen moved around due predominantly crude to Libyan X XXX,XXX having is could return we of last million averaged

may could weather. we provide return support later in Furthermore, the QX that an form some demand the winter seasonality of winter exports in expect support of and delays to to vessel rates in provide Mediterranean. increase additional in heating bad normal So, the due

of resurgence weigh demand. may fresh On on the flip Europe, and the lockdowns, in coronavirus cases particularly side,

winter whole, anticipate years. prior compared typical strength we will to market that the be the On moderated

our respectively. in day, of averaged Teekay on Turning Aframax we give days five, fourth spot fourth XXXX quarter XX% to a quarter-to-date of and approximately booked, summary $X,XXX of Tankers’ fixtures Slide revenue approximately to the bookings Based and Suezmax XX% and date. $XX,XXX per have

averaged based day. periods per in has approximately of significant over fleet by Teekay attractive few fixed dirty, its on quarter-to-date last booked, trading predominantly tanker XX% the approximately in are bookings $X,XXX days revenue Tankers in which fleet, strength managing quarters. been rate during market LRX our in charters spot For proactive the locking have fourth

result, a current fixed significantly spot spot and in Company’s As have rates rates. far the so been market higher fleet QX than for combined

Our Suezmax QX of its XX% fleet has at revenue booked day. days per $XX,XXX

fleet quarter at our $XX,XXX per fourth for Our XX% XXXX. XX% Aframax day is is fleet booked day, both $XX,XXX the LRX per at of and

charters, rate For refer on the fixed of to details further our presentation. appendix the please

QX, to several day million Global recovered point has below levels. oil We demand barrels X. for XX outlook months. Turning the sharply the though pre-pandemic next remains to per slide demand the turn low in over tanker demand the from

demand help second expect of to XXXX, will oil year, particularly the this levels. We will during grow normal more the of back inventories and bring through course the half

As the deficit of the on the third to expected slide, oil shown by XXXX the in remainder chart during stock are draws continue moved into and the the quarter, a market for XXXX.

next first the may place build the inventories depending majority demand fully the half of it recovery, to year on large reverse of in However, of took take the XXXX. speed of which

will to from should both OPEC crude refining expect are drawn in oil margins, throughput. create demand lead recovers sources. This to This and recovery to additional really oil non-OPEC support an in improvement we give a and crude and demand oil prices. inventories production then which refinery lead down, As higher

rates. and exact that uncertain to XXXX recover of however recovery on tanker this and will expected sectors, vaccine is higher travel and hopeful a and The give how will demand to a available year. tanker support happens, become will demand and coronavirus timing this evolves depend We return a during large this the widely that normal in coronavirus demand. remain As to to transportation pandemic to oil leading more freight patterns accelerate extent is next

level slide diminished at outlook the book the order of very an fleet. to supply fundamentals. supply a for Turning aging to due scrapping continues we significantly X, to look new to ordering, build higher and due fleet positive tanker positive tanker fleet potential be for The reduced

over been a As the When this proportion or totaled of tanker lowest book the in fleet, this the years, of the order seen deadweight face future. Tanker existing older vessels, total near which very over over years. past book resulted XX of the scrapping and order has of tons buildup million two fleet. in XXXX, as low in measured tanker October global a just has is removal XX X% the

water the fleet has high. treatment in A months with chart, and tanker coming age fleet encourage XX an years, weaker currently to combined overall limit scrapping the the by almost XXXX a ballast shown higher is installations dry costs could system average rates of in growth. of potential help to As XX-year which dock period

cover average years. upcoming We given uncertainty deadweight annual tons help historic help XX remain this as ordering XX for years. remains environmental keep now order restrictive very scrapping an shrinking low book side million low the financial more XX.X facilitate future, system once When of combination will believe growth low at order tanker Around build type this taken potential the the call due to and near ordering the new over will to should has turn recovery tons far of so order will over what low order, I’ll help ordered lows. propulsion in new and keep This the around to of near slide. rate year two past the ordering, over higher the book or and and fleet together, relatively small market versus Finally, regulations. to the to been million normalizes. Stewart deadweight demand a the three next tanker financial landscape to

Stewart Andrade

Thanks, Kevin.

to Turning X. slide

which transformed be strength Over its any has balance resilient the in provides year, financial market. sheet tanker past Tankers us Teekay with to

million million, $XXX at XX% to above for end $XXX of fixed while current XX $XXX an flows generated debt We months, impact a XX position, which charters financial Company. net from September. strong free days million cash market. resilient per the XX% nearly million has platform decreasing the have for position our is the total and spot a by the currently $XX,XXX $XXX Company’s enormous over on at average day, months operations free of our on cash the rate ship completed asset had rate by flow of an has financial next million overall Over $XXX well last over the or Tankers improving to This of creating of of $XXX million sales, Teekay liquidity

debt flow charters, our fleet rate combined spot almost end $XX,XXX breakeven our in QX a of the per low $XXX free with for sale-leasebacks, the has of million resulted XXXX. and of fixed approximately through reduction Our unwinding day our of cash

closed As his refinancing XXXX. Kevin our and opening debt maturity maturities remarks, now debt in have of mentioned August until the no we in XXXX

to steps under starting have acquisition sale-leasebacks our capital sale-leasebacks vessels We October. two by unwind with previously cost taken of the to in reduce our of

purchase sale-leaseback when in options this more In month, the two are will intend vessels later addition, we cost our reduce XXXX. capital which of to declare further acquired May

$X Over have expense year, XX%. the reduced we quarterly our interest million past or by net

capital, shown as a delever to profile, the and to profile the bottom having financially our Kevin is positioned reduce our amount conclude. slide, to prepaid coming manageable our I repayment cost years. With of headwinds. significant at weather the market of that, debt along With debt a we to the of have over efforts repayment will ourselves in turn potential manageable with in Lastly, very debt XXXX, call

Kevin Mackay

have I’m during this Thanks. seafarers the of to the continuing our to focus In energy high-quality seafarers, the extraordinary world continued we execute shore-based spirit closing, of and challenges. quarter pandemic. on well-being like service again continuing with Teekay their our the Operationally, proud you to thank bringing our for despite of of deliver COVID-XX safety to to global would in impact continue all With while in sheet all and market efforts staff strong position. extremely I balance well-timed weakness fixed the to Teekay’s Commercially, for unprecedented team customers. the the to say months and times. profile, are to XX that create With over in flow these foundation, questions. a continue operator, mitigated we value and charters. transformed now Financially, have built Tankers is we believe Teekay last well-positioned to and a shareholder breakeven, by fleet our that, been the unprecedented financial has cash take we available to of our free midsized financial rate resilient uncertain our spot low even

Operator

Chappell take you, [Operator Instructions] sir. Jon This first Evercore. Thank from comes We’ll question. with our

Please go line is open. Your ahead.

Jon Chappell

quarter. you Good cost pursue you, then also, the morning, if leases done can the give mentioned when further of you us guys. have the those continue just you. paper? of to that And fourth like pieces what Thank higher to of looks magnitude time more those removal on that to capital into theme, you maybe line the leases? opportunity with two have Stewart, hope start you I by Can the of XXXX

Stewart Andrade

Hi, John. Yes.

are we And exercise So, just balance we in those November, this terms acquire later to intend would the two but month in million. lease May, of declare of actually that timing. them $XX we in about total would

about it’s about those $XX And is million, X%. $XX So, rate on million. the

So, are moving different by quite purchase then, The various available savings into And through significant leases from terms. XXXX those options. all of leases the XXXX, buying back. XX end the us have remaining actually, to --

of is of all Some more available. The are remaining exercising dates flexible during those the can But, end specific financing are roughly. by others X.X%, average $XXX a -- exercise, we them when year, like. the year when cost we’d all of the little about million of the in remaining the have terms of across and

opportunity substantial quite there’s savings. for So,

Jon Chappell

second to then, Great. both And leads kind and for that my you, question Stewart of Kevin.

think York where year next do have hasn’t to think continue certainly would have can day, steps out ago a XX this bring it the plan, would for offense? even like a you hoped. XXXX. laying to better gone things out you How November further more as Do raise continue dire to as executing of the as path even probably kind bit liquidity? and those Is year the were at that your this are months? down, period, pay shift they What’s your now up you You be, it’s the leases, New guys as the down you about than anyone uncertain, more little although plan in far we’re for now about in expected. turned almost you now But, And next to XXXX? leverage

Kevin Mackay

good That’s question, John.

very close when plan. lines to think, been we it, sticking been we’re you I successful what of than I position strength. anticipated to into that different executing It result, to. this in we has, a year last out very as year, the along November as everyone wanted forward look to in year. coming said, But, a a spoke can we think, I And we’ve we think, really, from

in year. as remarks, an XXXX I our However, think, we’ve is uncertain mentioned

on timing on does of the there fleet We’re side, COVID potential not for the The but supply recovery. leave clear fundamentals and are demand resurgence the marks. question

time, year. down the to what next look I the year, we’ll to out with I that of what at think, this year. looking I’m our of XXXX. managed And a we as to Board At going think, robust assess with discussion sit we’ve point conversation So, forward them about to end We’ll sort haven’t had plans in for yet. achieve we this we lay

when direction. to back and have come clarity the further So, market we

Stewart Andrade

to until continue We that it’s should priority. delever. assume Number just point one that

Kevin Mackay

Yes.

to upcoming Stewart I some sale-leasebacks think, and eliminate as we’ve of cost rid that like get we’d mentioned, that of higher got debt.

from that what we’ll it market. until differ should the finalized, is we’re to back come now, So, plan doing

Operator

Giveans next Jefferies. with Our comes Randy from question

ahead. go Please open. is line Your

Randy Giveans

your debt to possibly would you further, And with are at expanding of alluded you it be vessels just time repayment at secondhand operating of looking kind content following fleet that current or to. your maybe acquiring kind it your looking by or charter-ins? Well, additional it when right, comes that expansion, leverage,

Kevin Mackay

Yes. Good question, Randy.

and its our and fleet comfortable I with makeup. scale its think, with foremost, profile, first we’re very both

is, given where in I the or anything building think go further nature. here, see think, of that don’t us you’ll do in anything from market I where we of given the fleet of terms uncertainty, terms

got I we like. think, the scale we’ve

year. earlier have some older sold assets the in We of the

more where wait is think a I we see. stand of So, now and

demand we take to into have market sale-leaseback and play, of this lower cost care going, where capital. when that the out comes figure opportunities our recovery of the is Let’s

of shareholders, In for off. that those be which the various that as honest to secondhand. do that after time. would is newbuildings, we go contrast time, prices compare you, purchase we as cycle. sale based something and appropriate book come secondhand market. which during and or agnostic It’s value on varies the provides have terms monitor newbuilds long-term return the passive to It’s new are in a expected over we’re either weigh and what up we we points And with best and the at one growth decisions And with to

not for I we’re So, now, active. think,,

looking ships. to play not out. lot more It’s wait-and-see a add We’re things of how

Randy Giveans

your sheet following evidenced guess, I Okay. X that, balance rapidly is liquidity slide improving, clearly I guess, there. on,

NAV share think Now, the I one thing $XX removed calculation, that X been which has appendix is of also your a XQ. the slide at end was from and

have So, here asset Suezmax with months? recent today and what that, fared Aframax current NAV is values how and in your secondhand

Stewart Andrade

recently, haven’t like quarter. actually last NAV probably since -- we run last since the So, the

So, that pressure. have been to NAV provide. asset accurate under values an know have do I But, don’t I certainly

look XX%. last on If assets, the between on at over they of are depending age quarter, probably the probably you -- down based Clarksons, and X%

they So, have been under pressure.

of is lack there in course, a market. Of the liquidity

a of a know values makes probably in I So, there toXX% translate always for into is transactions, And last as NAV, guide, I it to difficult expected guess, you. would don’t number exact quarter. as have the But, rough not what which our are. that the down X% lot but really

Randy Giveans

Got right. it. All

it to at mid sounds maybe So, like? worst, low-XXs

Stewart Andrade

-- think ballpark right think, the that’s I that’s certainly. right the I

Randy Giveans

XX.XX. well Well, above

Stewart Andrade

Yes.

Randy Giveans

for All right. me. you. That’s Thank it

Operator

question Ken of with comes Hoexter Bank America. from next Our

Your Please go line is ahead. open.

Ken Hoexter

ultimately, see a bit now, from mentioned delay your that the Hey. Good until about storage Maybe that. of on to on a expand pickup? up, you you seasonal not just thoughts -- in typically it do Is kind when Thanksgiving? afternoon. just rates? And rates? impact wrap to Kevin, a spot where maybe to those where guess, thoughts seeing -- you’re on COVID just talk your is I

Kevin Mackay

tale a of the the different floating ledger. and market, of it’s of of last of a Sure, there interestingly, sort two crude they of storage, question steady stories. peak week, One, have was It’s the on in vessels VLCCs, I At interesting the as and think that you Ken. maintained had fairly side play. of level on VLCCs, With XX. part regards your the really XX the first to some

little a dropped pick it again. So, up then in and mid-summer bit

Aframaxes. on XX we Suezmaxes fairly were So, Where has on a in of the relative had the declines XX, steady. about in it’s I you been peak the as B were the at latest over think, figure Certainly, ledger, and that have the seen sort side Aframaxes would comparison, say peak. And we XX% where from Suezmaxes storage of down count. down at XXs, I the were in the at May. And now low last the is XX

the given spaces, the think cost storage And classes come on VLCC, seen those on you of you’ve that So, off the barrel is per that’s first than midsize I come are midsize higher obviously seen the you’ve the earlier saw ships what Suezmaxes that those than why off. rates unwind. VLCCs

Gulf. up relatively winter will not terms it’s benign. in had but months. on some a the in Bosphorus depend run least -- of a Aframax, In pickup QXs to so if get the and the delays far, getting fog That puts Suezmaxes. bolsters But, dynamic, And lot sort come And also typical to of especially you picked during these out But, start works, places Canal, that the getting it up the in into logistics, earlier and like than on into you weather. rolling of have start U.S. that hoping of seasonality, floor, now. supply you the the eats we’ve when we’re supply tends which been typically, on of the at

longer season than recent in I years. hurricane seen has think, the we’ve extended

this U.S. see. to We’ll bit the in season delayed will be little fog a Gulf the perhaps have year. and wait So,

Ken Hoexter

as versus the on dirty? thoughts or fundamental Any LRXs market outlook that. you not? better moving of for any having clean product the Do view Thanks to

Kevin Mackay

moving of We process is our coming are actually of in of the LRXs that out one drydock.

is cost clean She given we’re out We’re change has And coming really that. going over to going we’re of into and trading minimal, because she’s to absolutely dirty move fact the drydock. that been move doing market. her the that to Asian

going So, are, versus increase crude which first. the to markets it’s -- unclear clean seeing is where one the

cost us eggs anything decided shift we given that with it of to crude the one do fact So, going starting to the basket, wasn’t ship. our changeover, from some to this

Europe into would it, moment, we over. moving no some do felt future pandemic that that certain just So, it’s monitor to change demand at pickup. And if near Obviously, just it’s short-term we come very that might we’re cost-efficient the we drive over on it play lot rather in the daily. storage. ship be that resurgence efficient and one, may prospects the than that the spend one term. of And the we to something with a way of do do money most possibly over could But,

Ken Hoexter

any just read early early really costs, it’s I one, IMO those obviously, my early proposed of for to adapt or kind of new, know last and to but too thoughts and rules discussion is I ability And days? targets on on guess, on it XXXX beyond,

Kevin Mackay

docks, Yes, capital a absolutely coatings, Cap our go we’ve had fleet have inroads X% has fleet over X% in the had right. We hull It bill fuel dry to putting or to program that’s we’ll our several is they very successful do Mewis a early days. make or of made And that and it’s our upgrades into fitting into continue years. something upgrading Boss them saved Propeller already. which carbon our ships footprint efficient. But, more serious of around to reducing that some very into we history Fins Whether we when do. our technical to various last Ducts our

Operator

end to call the like I the for the the to would marks This Company closing over session. any question-and-answer turn of now back remarks.

Kevin Mackay

you. Thank And for your us keep joining safe today. and and dangerous yourselves these family you next during please Speak you difficult times. to Thank quarter.

Operator

your Thank call. concludes This you participation. today’s for

now may disconnect. You

Teekay Tankers (TNK) 12 Nov 202020 Q3 Earnings call transcript