TNK - Earnings call transcript Q2 2022

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Operator

Welcome to the Teekay Tankers Ltd Second Quarter 2022 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] Thank you.

As a reminder, this call is being recorded.

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

Unidentified Company Representative

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

turn could Additional factors is Andrade, Stewart actual concerning quarter differ I earnings information CFO the materially Tankers' the on Teekay now from in in that XXXX begin. call statements cause forward-looking over available results and release website. presentation the to to to earnings first those our contained will

Stewart Andrade

Thank for Hello, quarter much thank joining Tankers you earnings us conference you, very second everyone, Teekay call. XXXX for [Ed]. and today

of today attending Joining Mikkel to me is moment, call matter of the a Kevin Seidelin, but on Waldegrave, personal are best. at Research; and Trading. his Director the and Chartering Freight sends Director Christian

For leading today, call. I’ll the be

million adjusted improvement of total $XX on per quarter. to an $XX $X.XX $X.XX per Teekay or the the generated from prior million Moving of approximately the loss first share million an adjusted from nearly second XXXX. of reported the quarter, income in in million XXXX, quarter We $XX an the net adjusted of share EBITDA highlights during or net $XX X second an Tankers increase of approximately presentation, our Slide recent of of quarter

supply same environment. chain significantly now are leverage driving longer voyages, been pronounced the trading by balance are improving market liquidity continuous high well-positioned has tankers. our Tankers benefiting disruption established spot for supply the will through just Ukraine direction current demand or strengthening and which strengthen Volatility right is Russian trading results is quarter-over-quarter chain average tanker and moving environment, Both key currently of with with and weak related results after in underscore were tanker a to the market, about our in average to XX% new that Ukraine Oil midsized With tankers sheet address improved of at primarily marked rates the years in medium-term midsized our spot shortly, Russia's it weathering supply rates. almost us. and about This upon the immediate least be In market is we to enabling market. remains leverage robust the the positive to from in important to market. for underlying market our vessels particularly based sheet At higher to The tanker us time, the a two for that balance spot tanker situation XX a our durable the higher. Our fleet term. oil not focus and of Teekay operating in maximize the proving is are outlook fundamentals. and invasion I is due story

and $X would million for us I July reflecting approximately to in $XX into XXXX-built a allowing Finally, Aframax recent the we crystallize an agreement out to entered point sell an depreciation million, values that gain. asset and

us the for to our Aframax per $XX,XXX to years, exposure spot for also have We in allowing market. maintain day two chartered in

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

the into The mid-XXXX. trade increase longer patterns. is mid-sized Encouragingly, rates the the has the the on corner later limited troughs more since and March volatility reaching generally and Russia's XXXX, chart, spot levels indicates distances Ukraine sectors has tanker part about fleet early utilization which has rates in than the since in that quarter following due on I presentation. quarter-on-quarter to invasion basis voyage higher mile spot strength ton of the tanker turned to rates growth since demand the over seen midsize of been to both the of past the February This market seen by this higher has in as fleet increased in QX few and not peak appears in been a talk a sustained continued months tanker durable. with be XXXX tanker have the a averaging shown detail impact will combination due second changing in in of rate As significantly year-on-year. that

the X, and Slide based XX% XX% day Tankers’ our a of In of Teekay date. to summary booked, to third we per bookings the XX,XXX and Turning and days XX,XXX quarter revenue on to spot have Aframax Suezmax approximately in provide quarter quarter spot day averaged date rates respectively. third approximately third per

booked. For fleet spot of on XX% our LRX based revenue days approximately

have bookings approximately per $XX,XXX date day. to quarter Third averaged

to this context, the improved third date weaker actually quarter, remained The our to far factors, due rates a they to achieved but has the in in seasonal second often put of this third To rates across higher in Xx have compared quarter market classes. good quarter quarter thus the XXXX. the Xx meaningfully vessel were strong than while core is to quarter

and to notably comes increased West mile demand. India from replace crude Aframax and from is to it approximately Aframaxes, EU Similarly, ton XX to mile the to imports Suezmax and all other demand when order diverted East crude oil changed demand. with Aframax have to Gulf America, helpful Middle Short from oil requirements, Europe benefiting changes days of and the at the to the tankers. pattern start load which Russian ton oil Turning oil improvements which patterns haul regions, from Tanker from crude with destinations Gulf, having In for tanker tanker an compared Suezmax start XX Europe is approximately changing particularly barrels phase Middle to out benefiting we've from per Baltic These due days midsize to imports fulfill the the a the now Aframax the on since we seen most obviously China to with five is came by mile long planning and ton Suez, haul XXX,XXX Europe, both example increasing around Africa, ton have likely of exports is of previously look trade mile Baltic patterns. to and Russian end of its since on significantly fallen primarily regions pre-invasion imported day being Slide X, oil barrels year. Latin short Suezmax East. into imports due China, Russian east demand XXXX. levels put, when oil tankers U.S. seaborne the XXXX, to the increasingly of of Simply trade These or discharge lasting days another involved. trade by are crude the be Russian recently, on U.S. that changes are

volumes. recovery. oil is XXXX X, at over next and and market demand toward tanker XXXX which to which Slide outlined demand rising consumption increase as the distances primarily rising the come tanker and two as point projected This corresponding further more a supply due to look patterns to supply, to world oil COVID-XX voyage to positive the fundamentals slide. the in a by adapts XXXX is in sustained in from tanker expected Turning we trade both years, in changing is the growth Strong non-OPEC supplemented pandemic we due in three believe to growth previous

outstrip approximately grow tanker from Clarksons X% the is mid-sized per in by fleet projected around X% further in by to would of demand As far X% X% same which projected years. growth XXXX and estimates in and XXXX,

small tanker by levels order positive tanker and Only a Aframax of the XXXX, orders Looking be for low total no rapidly of book, ahead, continues of the for small with a outlook to the only most number aging has historic fleet first an further placed. X.X which been tanker half million Furthermore, orders XXXX XXXX. were Suezmax period for supply at a or shrinking in tankers tons since tanker VLCCs and six-month deadweight placed orders global is June orders, this fleet. very since ordering placed least of of lowest driven

a has to record X.X%, order of fallen just which a the result, as low. fleet percentage a As the existing is book

remain of continuing containership yard lack level the tanker the in XXXX new end levels space high vessel a and expect We and will near technology. of due orders low through of carrier high term of orders over uncertainty prices, the due newbuilding to to LNG

tanker tanker an XXXX expected ships fleet, aging into removals the and zero negative to expect and growth fleet. XXXX we growth order in tanker in are the deliveries older global of fleet as XXXX fleet With new and outweigh diminished book

highlight Turning of to X, we key metrics. some company's the financial Slide

following been market improving been have charter market tanker COVID the a almost the strength driven two-year has some of fundamentals recent in rates current the While for time, fairly downturn.

leverage the rate currently with vessels However, this trading are cash we because higher of XX high our in in spot generating environment. already flow significant market, operating

third we our the quarter, drydocking per and booked the booked is cash flow capital $XX,XXX including and breakeven quarter in cash less we day. and to our on other significant is operating shown left, level, this second the those graph date, generation fleet leverage, at As breakeven our free have wide substantial. flow on annualized in rates the than free expenditures With spot

would be cash on to date QX In the flow order fact, at free XX%. levels, of yield our

remarks, earlier to the to use cash further sheet the my company flow leverage. mentioned intends As reduce in increased balance

of make after We that regard progress years starting market. a are two already in to weak

will volatility market to opportunistic the focus cycles. the throughout macro coming on the getting meantime and to Our both a ability some background the to in business optimistic in expect the strong of risks our sheet balance persist, the mid-sized and our notwithstanding years. that we our place and we that about tanker are tanker the be very In is short-term support and in the

that position and spot a puts us fleet, to in operator, a mid-size to take do Our strong in available market With well are great questions. trading market. now exposure, we orientation

Operator

first Instructions] Evercore. [Operator Thank you. our Jon question Chappell from with take We

ahead. open. line go is Your Please

Jon Chappell

Thank you. Good morning.

Stewart Andrade

Jon. morning, Good

Jon Chappell

get mean, on put want to, this before initiatives a able have walked difficult you in pandemic to very sheet to and market the Stewart, accelerating you that balance XXXX net bit need through today level capital even in it's kind whether to to market some deleverage a resuming, days sheet through, Tankers of balance of really little free you to, slide just you the back return? or the flow, last place the I you given now you of been what what's cash cap to you EBITDA? much opportunistic the about Teekay that some you've more pivot kind on of things How to do or of old to spoke based good more debt the see do those in

Stewart Andrade

Hi good Jon, question. yes,

you X, about to and we see Page So, on mid-XXXX, we to cap a the of that in in down can the net XXXX, end XX%. if that's probably at fact were debt you look the chart were XXXX, low-XXs the

that would say of us get levels I have our that our level. – first of that work we is down kind ahead to So, to kind those leverage of

a said, that of using As net lot cap metrics any. as as there's is you to probably use, could different debt good we but

XXXX is So, the first opportunities. the step try get at ability And our – the And opportunistically capital. if as renewal, in levels that's long-term zone. I'd fleet the of pike opportunities other XX% the part the needs and and to uses of start thinking looking down within those to that on we for market can our then we'll about be come act say charters aggressive down then they presents to is to

us in we and had a market in the even we of strength think was again. in our in rest the tanker for the financial saw come shareholders. the concern a the as create the to leverage two liquidity have low we be job quite a to of in XXXX, though good do magic And best a is concept had where position done were and reducing leverage already leverage we where that XXXX number levels value we're to. So, get We to for years, ultimately don't way recent trying

the to value. sure our of steps make market, we're that and be always tanker to financial shareholder take want opposed a strong advantage So, cyclicality sure as in could we opportunities we damage taking there position know that in that can position that to make

Jon Chappell

certainly the you I asset a And inflected. and ships Okay. your That mean, that's still opportunistic sense. from selling few you're standpoint, in older still legacy fleet, have then value makes

think earnings away? you So, about more fault do more how flow? mean, more to disciplined for the I I you, get adding to of the have you run a modernizing align would asset modern values are before do think inflection these no maybe in of kind modern again the fleet be one to when but at assets the especially through true you prices, cash when starting tonnage you that,

Stewart Andrade

Yes.

of a I first about fleet. So, little I mean, guess, all, talk bit maybe our

XX in QX our with results, got now, spot and of XX very exposure, percentage are seen as of we've rate lot you've right cash in you So, vessels vessels our our them know a doing generating flow. fix well

have this as in be have do And course, the think So, we to tanker of we perspective generate, fleet. ideally relative of that to our that we're that we a from a on the period of can renewal well. eye market, flow cash almost fleet like expect but we really what capital positioned they to strong have of our amount we invested forward

is we that's think a number want Making to You for tanker the I disciplined to about dangerous fleet market. know at use thing do look is renewal. there and the of at significant be top important, of do how and the disciplined, market acquisitions word we any

Of enjoying from bring acquisitions significant be be vessels few the a the I think some the the at in. right in in just the wouldn't being different course, a we patient. cycle and we'll market expect us. what XX could can we existing from tanker I do, if strong top on be thing at the flows meantime, cash that will fleet, The hope fleet to we added of still shifts but basis, points portfolio And

Jon Chappell

the And have benefit as sense. trading kicked yet, may great. beneficiaries that routes? truly been X haven't simply even I think At as pretty I immediate kind here, the well routes. of there look is obviously lays either but new point we the trade yet trade we're to routes from of Christian. VLCCs beneficiaries and if makes crude just of new flows. you've Okay. for of of does out mid-sized more Slide the mid-sized one The And in some carriers some out because at sanctions from of or That laid sanctions these the impact It direct some start cannibalization the not

Christian Waldegrave

I have the impacted. benefit of Jon. far pointed we've Hi, Like mid-size think you on Yes. the been out, regions where because that really seen the so

the Black So, or Sea. can't obviously, these trade Baltic into the into

really mid-size. and longer So, haul, stuff seen changing where patterns we've trade going it's the helped

that well, are, And market Atlantic obviously the oil lockdowns. in Chinese in out, had pointed we've As lagging. long And months the I has slowed changing. that's demand think backwardated more of I Pacific, recent strongly of VLCCs down of think a with a into of have the did movements sort but haul slowly factor import been from I or slowdown COVID QX kind we've think those both they’ve as the disincentivizes with

demand from to I China, Chinese going not balance higher year, to you we'll Guyana. again to be VLCC reflected of into certainly production to ahead, from think China volume in supply COVID, trade. Brazil this slowing year be is OpEx not further I to to of as capacity U.S. is but exports I the and sort think up is and or Atlantic and continues There's think come look if And [indiscernible] online in a demand recover next necessarily is months basin. increasing to months of through start see more XX increases being more ton then come next, over going going which XX into also, imports and naturally more there's starting now. It's the spare yet,

long kick we the again, start haul again, of if to VLCC then moving barrels more of will those And see sort market. again, that so start some

going sure beneficiaries really rest see back in start as trade that do mark VLCC I'm up a comes will the a patterns these [V think as those bring again we of I then change the but be help the market that So, haul healthy will well. not And result of long Russia, and big have a it's if tanker to of we movements China [ph]. the as rates] to

Jon Chappell

Thanks, Thanks so Christian. sense. all much, That Stewart. makes

Stewart Andrade

Jon. Thanks,

Operator

our Thank next We from you. take Omar with Nokta Jefferies. question

go line is open. Your Please ahead.

Omar Nokta

Thank guys. Hi you.

and the maybe of question to may debt leverage. being pull the wave maybe from itching around just of XX% where and before follow-up regarding achieve like leverage renewals Tankers next on it there year-end, we're you're judging the Jon's trying to on you and it it via like also you're feel be Stewart, that beyond start ratio but cap to the just potential were at Just to wanted aren't anything that able whether your does net – fleet here going you you or sort just line to mentioned of audio, and sound the XX% to looking before, yet. that trigger to ready around language get level, you path Is indicate else maybe body does to that's that lifecycle? the Teekay something from on

Stewart Andrade

call And to Jefferies. and Yes. welcome Hi, the working with for Omar. back

that profile to values we making be terms invest years. want we'll think long Yes, a tanker we on So, good look at presenting how also at we our than we're leverage our fleet renewal. to look and of to We themselves where and when the allocation. we that's look the look at us talk We the and just and number and last, be view in gauge flow to capital will cash forward trying much may to the think at would how going asset opportunities fleet more question we the decide in cycle look market, you. to clearly, at be good how might

sellers a have some and $XX XXXX older exposure, and a of we it to balance we Obviously, XXXX one, sell tankers. to almost agreed that over think trying tankers, years, million, to you've at so to the of sense one the built off big keep sold should to as those moment. in last just firm all we're looking seen be. leverage again, price tankers selling couple at made of walking been four, lot we where is our factors during We're maybe brought but, not market and asked very through question. And the sort the of our you've time as charter So, we a we quarter our which of of decide

themselves best all that add should we at if we much things that we that do our they is line if at sure in market have. take when first to and think leverage that position that's to market harm we're capital shareholder whenever countercyclically or that on And The to divesting shareholder one not capital sure the be in look or whether turn judge and to turns is think able to be raising we to have a we to where not the how divest the present then trying I lower carry we then to we to value. opportunistic assets the should do make sure make I guess we’d the best want expensive needing of that is make actions investments the And we're time. hand make does not of levels. And value much suppose deals third line with next they'll at ultimately those firepower rates how rather or

cash capital is forward to and do which breakeven [ph], of looking one every think free as about fleet in definitely Slide So, well. flow we as shareholder much to on eventual the having judging generate order that that how [NAV] the need goes to with value. toward of eyes that In our renewal creates above highlighted yield, our level flow meantime, dollar we cash creating

the start down the see as recognize hopefully create flows value. in also to a we debt reward enterprise. will is increase We space. And companies the that shareholder think that markets market, in across way value tanker So, and paying that hopefully creates to ultimately, cash the equity

Omar Nokta

I that just with Thank And you. Definitely nothing with to you. about forward, the think you and I at mentioned what guess it's point the fleet? at Aframax Teekay guess you this you agree kind pretty it there's – were of said sold, in paying that. debt that's if is much this it's That's seller, very we Tankers detail harvesting going well a characterize wrong down not point really existing

Stewart Andrade

existing of compelling. and are have Yes, before characteristics sold is honest, fleet I to sellers primarily vessel, characterized a themselves but positions be I a particular where but Opportunities is would buyer it's present can say focused, wouldn't for. we're that looking that on depending harvesting tanker, we what either, this that the as the

trading in replace to, again, considered sold this we we case, and a did had years in days. a extremely is, spot So, time firm that be trade, rate to really three of kind about what great we we a tanker of those at two-year which brought life charter

from ourselves, very not to So, able being net-net we the exposure spot our find in crystallize firm a value. materially sort to of position with but different a market,

add say looking So, moment, at opportunities that trades. for different through value we're not I but to of would we're sorts sellers the doing always

Omar Nokta

it And have you. and the a it I obviously obviously when TNK lot and be good strengthen I'm be think final one policy, nice, just would here, times just sounds about right, ask the hearing to if potential, old Thank A but talk foremost, mentioned Okay. you dividends dividend and balance dividend would like days, follow-up. we sheet. of great investors about Jon first maybe

once it's you've about got point That you the fleet thing, and to ready differently, done get an strengthening deploy modernizing fleet. to modernizing capital then you've that, after So, return to is eye the you're enhancing now shareholders? really and capital where the profile that it's

Stewart Andrade

we be a some here, of multi-year values an sees gets could sustained we to, Well, future seen have rates, that two unforeseen high or hold. a the that time macro cash things terms event. run, a and or great softer which I a could for for and in of could market in or something cash asset very firm for we've haven't run flows which don't what high come predict want discussed the period then will the risk of mean We of year to flows sort bear,

the don't I debt market, that is a shareholder decisions of levels. So, continue the ultimately the We're want try It's we for all the being, be view. mentioned tanker to and What predicting of view their position in think our done. most I the our but the the want add We a we're say forward in market we'll terms be needs things in to kind don't value, of view allocation the our get to to make we to time of will and that considering want our future. I of I position. not, need would it sort dynamic in earlier to of in market dogmatic reduce forward get capital and, how and monitor

Omar Nokta

Understood. it. for Thanks Got the time.

Stewart Andrade

Omar. Thanks, Great.

Operator

We’ll Thank Bank from next you. take Instructions] Hoexter [Operator with our Ken question of America.

open. Your line is

Ken Hoexter

rates that to negotiations this Great. talk to about get spot? will to TK maybe consider travel customers? to moving you gets levels? how And there charters Kevin. at Good at Are if Is morning, levels would Stewart about? talk going from What you to and are point start something with look safe certain

Stewart Andrade

Yes.

a So, level. there isn't magic

that, that view and vessels we and look – matter, we're in we forward where where we could market in same higher whenever the we higher are have for opportunities looking for relation windows where that than – happy it's the forward within And our that to of in to we the rates see compelling are have, chartering may we for much portfolio, the see chartering overall of or how out lock and of either the just some place our other rate spot we at think to that where market, being than looking exposure look we're flows. So, at time being sort perhaps cash able side we in vessels market forward opportunities. opportunities on hedge a be where of see guarantees

think compelling the market $XX,XXX spot up, which of a is actual we recently while in-charter day, the and that was adds has we value. entered charter an into So, moved

back we was As out market spiked, that shifts were driven opportunity. active you compelling saw was the putting we last the of an XXXX, thought spike that in more which event quite time in a

that on Suezmaxes two keep the in our for small market. a the eye not charter So, now being are year on There's up sort to and right time stepping that to are period. moment, trickle market. continually being three of chartered. and rates a I would vessels we'll the lot Aframax say the of in that At There's the put liquidity market

about number of XXXX, presentation, in good market based And feel forward to will we the our So, lot we outlined again, point vessels. liquidity view. up, right move now, of And continue that. but heading that on at be fundamentals. would really in expect But that our relative would rates not as I eye we a we the into XXXX those XXXX, lock if to a some keep will the certain on

Ken Hoexter

other spot where keep want the number we've a XX%, how to get be at your I'm of are say, there pick know, Kevin no, on got rates exposed for I you need to good know, we past, I given to, game a always we extended or much don't know, Is there XX% now, market said, I've don’t you'd you day, least, is a spot lock because new you period – an that's if time. that to and philosophy Stewart, the in who to in XX,XXX the point still exposed played

Stewart Andrade

Yes.

amount limitations the a spot that amount So, of can them certain moment, of in practically at market. of of are on put I vessels liquidity on just with there up XX the There's and speaking vessels think, you all, XX only that first time charter.

we'd to just where to to in out it market the put So, we put be half out, and point able a I choose aggressive more think number. if even we be we'd fleet thought unlikely were a to want than be would vessels

to will try spot charters. and have think and we ourselves then on how we'll healthy continue in I rate and TNK exposure out So, supplement to position value with add

Ken Hoexter

specific the that mentioned you maybe there. the the on being million Was a it That's the sale? gain, about asset thoughts to the some something parameter on as just maybe about great. on sale Put it Was was $XX vessel, thoughts opportunistic mentioned you more vessel? What vessel age? XXXX just

Stewart Andrade

mean, and first foremost, I market up. I Yes, think has the asset moved

So, up for asset when Suezmax you sure. values talked have segments Aframax across months ago and versus considerably moved to three we now,

So, underlying that just is market. say affirming we there I have would the thing

firm it's us. quite much it's tonnage. all, deliver don't But big could think moved and be to positioned in that today's market speaks people's For matter of mid-aged vessel firm asset it we really vessel, quite the quite paying there up market and to call generate. that is spot What on story high the that a it with for sort they're I particular sale, where in I – the really of and quite I the unique the to up the confidence really characteristics for a underlying but to of really and cash I think has number, was think of how able the prices and walked we've think that market, are through people there buyer terms going together is just are came outlook when our older flow

seeing are having people of lot the on asset values. a think it's I on that knock think I effect and

Ken Hoexter

you're it of of product you the firm on are true kind kind you crude, side could is your the in global the the see Great. side more of are see, Last the versus or tankers where slots everything to and fluctuations given capabilities? table, on for more build there guess there openings of the [indiscernible] – is any not really that container Stewart, or going and seeing opening of for number on discussions, yard me your one really I terms availability – in on backdrop economy

Stewart Andrade

in want take order you do the current to book? Christian, that one of terms

Christian Waldegrave

Yes, sure.

I XXXX, – through we through anything not think seeing you sailing full [yard and if of some we're half end LNG X, or the are certainly shipyards in [ph] Slide XXXX. even are the XXXX Certainly, at opening look of taking to through ordered orders put up. maybe shipyards terms pretty the on spots] container through chart way

late XXXX, massive still don't in find but to able think amounts. be I going may [indiscernible] few it's You to a be

is low XXXX the well. confident going will tanker in scheduled be to XXXX pretty be still we're delivery it that So, as very in as

really opportunity in XXXX. until So, order to see tankers don't really an scale we

of that fleet the the bit confidence low expectations two years. obviously some growth runway a to in So on over three very of next gives us terms

Ken Hoexter

setup. Stewart, very much stuff. Great it. Great for Christian, time. thank you I the appreciate

Stewart Andrade

Thanks Ken.

Operator

further you. any back no like closing for or this at questions host would additional Thank to appears turn to comments. time. call there It the your are I

Stewart Andrade

and forward to with Thank us you quarter. again you next look for we joining today speaking

Operator

Thank participation. your call. today's for And this concludes you

disconnect. You may now

Teekay Tankers (TNK) 4 Aug 222022 Q2 Earnings call transcript