Earnings call transcript Q2 2023

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Operator

Welcome to Teekay Tankers Ltd.

Second Quarter 2023 Earnings Results Conference Call.

During the call, all participants will be in a listen-only mode. Afterwards, you'll be invited to participate in a question-and-answer session. [Operator Instructions] 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

you copy Before we earnings presentation our where during to direct presentation. all find begin, I will call. would website like Kevin and today's at review quarter conference the second of to Stewart participants will XXXX a this www.teekay.com,

results Please results may Actual contains forward-looking allow me statements. statements. to forward-looking remind materially you projected from that those our discussion today by differ

to earnings factors materially forward-looking on concerning could earnings that in in actual results presentation from information the differ Additional statements the cause those second release available contained is website. quarter our XXXX and

call President will to begin. turn the Mackay, Kevin and over I CEO, Tankers' Teekay now to

Kevin Mackay

joining Conference for XXXX Thank Second Quarter us Call. Tankers' you, Hello, much today and Ed. Teekay Earnings everyone, thank you for very

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

of total of million Moving second million slide recent Teekay triple the quarter in three on we $XXX approximately year. presentation, of $XX generated generated to the highlights in more EBITDA than same the Tankers last quarter, our the adjusted

levels adjusted $XX.X per $XXX net income quarter $X.XX or or share, million six reported times year's share, second million respectively. almost $X.XX last We per of of

flow expect our we a share. to our in day generate free for $X.XX As rates per given high day, every approximately reminder, annual above $XX,XXX of cash leverage, operating $X,XXX cash free per increase flow of breakeven

have the line $X.XX cash generated fixed a fleet of of of total per dividend million quarter with eight second of Our quarter reflect fleet In XXXX. quarter, dividend share announced operating last quarterly cash our the results a our flow. for we policy free and as second declared high vessels chartered-in leverage owned $XXX

leaseback this $XX vessels vessels have continued giving sale on an options four million. to exercise case, for additional notice in also on We purchase

$XXX four ability credit September, Once previously be our repurchased $XXX reducing mentioned, the revolving with these XXXX, debt refinancing to repurchases vessels of our and to expense and lease since total interest manage will cash better vessels sale will vessels million March facility. back As million and we balances. us our giving bring in these XX

we the for quarter, very spot driven rates the United by second in strong market, and as and exports in the imports Indian States. as tankers strong midsized a saw Chinese both In firm oil Russia well oil

have levels above seasonal we the normal well into quarter, seen spot remaining time pattern, moved have quarter-to-date for As historical third rates following while the year. this we of the

tanker coming positioning that for demand the extended both are period well believe and to supply fundamentals continue market the We winter -- thereafter.

two further a we rate to at each $XX,XXX we per an chartered-in Finally, XX-month day, average of months an per This attractive rate an eight takes our is believe additional day. rate. one while extended average in-charter $XX,XXX what option at XX also on for vessels for vessel securing vessels

remain We time charter in that this million a flow, and approximately earnings of QX $XX incremental cash book free generated substantial active year. including in managing

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

be India Indian during of with Europe. a with least moving at Gulf and oil of crude strong to proportion was quarter. very tankers on the high, haul export US combination As due a large the remained spot noted, volumes long second to crude transported volumes three-year majority to exports to and an rates imports, and a strong Russian in the from tanker midsized This increase oil China high Chinese continuing

the have year, spot of QX typical date, due is rates at moderated this primarily to in to seasonal As time factors.

weeks, available due to in which refinery increase As demand, oil meet less the we believe past Russian oil is an throughput leaving volumes summer in export crude decreased the crude an example, to few have for Russian export.

lower third seasonally red spot earnings our decade. that levels prior important QX it's seen on in indicate and well-above chart. as dots the far rates The chart well-above note in last quarter quarter the shown the thus third quarter However, historic showed by remain to current any averaging the

in quarter in are any quarter-to-date the of the higher recent with In fact, winter. past most rates than the exception decade the

shown seasonal the over during the expect the tanker this during last we has is fundamentals, almost market As always typically And QX by year in follow XX same chart, to which given reversed the rates, the years, dip observed pattern. QX.

seasonal leading our Suezmax date, the third to market more coupled rates second an even quarter, conditions quarter the rising Aframax fourth in with spot tanker favorable [Technical the winter third quarter demand of lead Difficulty] the into date. move onset provide in half the to winter through to oil and factors, to we another firm could on As of than update the year

third In per effectively. Average approximately per day to third well-above $XX,XXX Tankers' the XXXX quarter been days and $XX,XXX averaged have strong on of Based and strong. of day rates and vessel both Aframax XX% third rates. quarter-to-date have bookings quarter historically Teekay booked, approximately XX% revenue instances, Suezmax spot date

firm from rate market current market these have While rates volatility quarterly periods is strength. rates, spot of expected, date very decreased particularly in

$XX,XXX value highlight being created vessels traded by spot million. market per the day market, $XX fleet has the approximately value TNK's continued of the would chartered-in eight With mark-to-market average strength. current in-fleet, an given I in and a rate vessel Importantly, chartered the of six

a travel the global X. very of we Starting COVID-XX robust, two column, years. removal look restrictions. demand due petrochemical in market demand remains the left over following slide which oil non-OECD in will next and by three at support driven and to Turning the countries to China, the particular, believe rebound some of the in to to strong factors, continue tanker We fundamental

increase record XXX with projected for the by barrels demand X.X per year growth million set million global over to to is of oil million day per IEA, further this per barrels high day barrels per just X.X As of XXXX. a day

continues as United producers Brazil States, nations supply While to Guyana. non-OPEC and OPEC+ group grow. of from Basin is the from growth Most production the such from this uncertain, Atlantic is

is positive ton Pacific a the driver demand in the the Given demand Pacific tanker over Asia growth region, the be from Atlantic increase medium-term. should of movements an in concentrated long-haul to mile

businesses EU trade haul XXXX. In the long patterns changing middle, of invasion have crude China. show in approximately early Russian ban been result the last India Russian XX% Since average voyage on Russian as a increase introduced continued to Ukraine imports and year, of due we all exports to oil on late to moving oil were

from this VLCCs the that directly has load primarily sectors. and Given Suezmax Russian change Aframax cannot benefited ports,

of in have and Although TNK does year. Suezmax overall benefited a in the XX% last oil, start carry vessels not increase Aframax from voyage Russian distances

trade Importantly, the to ton-mile durable, changes foreseeable be continued meaning for midsized expect pattern these tanker we future. support demand for

remaining fundamentals Finally, existing at with lows continue X% very of tanker the order historic the positive, fleet fleet. supply book of tanker around to look

Although levels this average. low year the in of actually seen is to has XX-year the year, in XXXX an line ordering increase ordering when last tanker compared with

the is the older Furthermore, still years, be of vessels next meaning the may out medium order tanker the remain that book in few to term. fleet that small phased low over compared could fleet growth

expected medium XXXX. in set XXXX out with largely growth approximately fleet in and The and growth growth deliveries. this the both X% over shipyard fleet capacity to is but year close term XXXX Low for all sold X% now

two in XXXX, In are which that to outlook durable upturns in market the short-term years is sum, transitory factors. be will and as positive next supporting our by This we factors upturn driven such to in over three early recent believe for are nature. and retain this tanker rates contrast more the which

to Stewart call the over will slide. to turn I now the financial cover

Stewart Andrade

Thanks Kevin.

created has we to value. highlight Teekay the months are Turning XX how the continue seven, slide shareholder Tankers and we to creating over shareholder value last positioned significant well

the the has of operating With demonstrated recent leverage and high firm XX% spot in generate free TNK's of our cash spot our a trading quarters. XX-vessel fleet market to ability flow combination substantial market, in

generated the over or past $XXX flow. illustration million an of As share over has of quarters, company cash the per free $XX.XX four that,

flow. the to would a four Looking cash quarters, equates of the on of XXXX to yield free forward, in achieved cash free rates per expect This XX%. spot if over next $XX.XX average a we about approximately generate share total QX flow were

With million. to debt $XXX quarter, our in cash by we decreased continued $XX.X million second flows the strong just our net

Given further the first are fleet ability part the the time when now market is our free, capital the to the in quarter, of supporting we net third and debt shareholders. right in the tanker return continued to our TNK strength reinvest in to

acquire related tankers sale four have million, However, which leaseback we September, we obligations will X the $XXX QX XXXX. options with of under arrangements approximately remaining million we to available on sale-leaseback purchase when in repay still vessels in financings totaling $XX

back to Kevin to now turn call will I the conclude.

Kevin Mackay

balance Tankers' market have build in sheet Stewart. capital Thanks, condition. enabled tankers us excellent summary, for midsized allocation strong to Teekay In discipline the into our and

great midsized deal of to fleet positions flow us employed well a of Our cash free forward. moving tankers spot market generate

midsized Our tanker sustainable multiyear market. tight fundamentals support a

cash remain disciplined believe policy, in our and we drive allocation will value that are significant to up set We shareholder well we that deploying capital creation. under

to operator, questions. that, now With we're available take

Operator

ISI. comes of first [Operator question Instructions] from Our line with Chappell you. the Thank Jon Evercore

Jon Chappell

afternoon morning. the and leasebacks on that already you can pretty good with I will what because of Thank it. in a good where quarter, partially start be? sale the of you. But or you line the coming answered and rest already anticipated Good if probably you having Stewart, first off, left up sight spend

capital free with is or clear for debt leaseback, really fourth make dividend net that XQ if exclusive mutually anticipate just today, starting you say, a seasonal decks ratcheting up uplift, that being the or not base event that does where let's really either dividend? the of the can up saving there kind quarter, special a maybe on the And sale and you do in

Stewart Andrade

Thanks, Jon.

I X total good the on you this about which in as $XXX are visibility million. the said, of think groups we've point, got -- remaining purchase options, at

continue on moving don't I allocation So you're see thinking to I term. about, change dividends. that near-term a in that wouldn't near that's I the needle to to think capital of think We to our in of in see $X.XX just don't quarter. something quarter, per term, expect think change the we last our to change the policy that the but terms going significantly to near a a announced

But to more we've know, share the decided capital basis. doing you shareholders program, going special we something quarter. look on that something As returning use last not announced that avenue on extra will we're using for periodic dividends be to a and/or as we'll a buyback at basis, that which that's quarter-to-quarter we the

and we'll that see unfold few in think the we what I on want call next probably how of do side So to things. quarters then make to a wait of terms

Jon Chappell

maybe even fair a up for amount Okay. good as out or Kevin, this Thank you. the has Christian, job laying come market expected. Seasonality then, And is outlook too.

have We of a that. long history

barrel, per to back at $XX now compliance about all of of However, that I and within on reading trading some Have of the breaking fearful and the a fleet favorable in Russian the with crude, pressure midsized price violating near-term those really of yet? and core some that And impact coming maybe just still in maybe more not were your euros you maybe does segments. Mediterranean disruption putting was sanctions, being within that the seen cap manner of view of vessels two supply/demand any on. kind your the lines

Kevin Mackay

oil, drop probably the Russian Russian And but XX% history Gulf Hey, day. is it. $XX,XXX right of we into think about I at and Far since have function the market US a now, the of off current I we've a off in seen supply this, have I think which can May. versus quite come oil of is some holding still Yeah, significantly in East, seen Jon. drop spot going Obviously, that seen exports confirm which Europe we a think

those have what people provided up they doesn't of export are and for the getting I still that the refining who breach, And than towards trade. sort cap market. more participate But that crude, think some do, load from driven we're from they rather still. attestation price also But are TNK picking is indicated in the ability example, owners your the I think, get oil, to there sector attestation with the

customers, we putting that, as immediate the their did pressure list seen said the of that now in is they number increase haven't the been who on Having able are from trade, participate returning get tonnage which obviously to to have some spot rates. the an in our and players attestation

into I think we see up volumes forward, refineries I think the go the move we the back as fall. pick as in will working maintenance

get should that into So we we as export volume be see the quarter fourth supportive picking more as up.

Jon Chappell

helpful. Thank really Kevin. That's you, Stewart. Thanks,

Kevin Mackay

Jon. Thanks,

Stewart Andrade

Jon. Thanks,

Operator

Nokta We will with go next Jefferies. to Omar

Omar Nokta

morning. good Kevin Stewart, Thank and you. Hey,

balance the exercised Stewart, cash the question amount, large Obviously, you've coming those net million. just Do of little bit up you're focus sheet. that of on mentioned, deleveraging sort on quickly. a guess, sort to as maybe ships this $XXX purchase, looking using position. to plan $XX finance a four just you pretty you're in Just buy I in And you on facility is cash do follow million for or a you flow is the the to first really out. to utilize cash to and want

Stewart Andrade

to generate. for question. thanks the will -- for goes. it in the we on will depend Really, how others then order quarter flow we quarter Omar, to the how on significant as the more cash It we much finance decision. I first on in next cash need again, depend sufficient on September have those it on purchase repayments. like a just to draw for is depends And depend cash or in near-term on guess, and how bank options flow those in revolver next the use will opposed cash hand QX, if the or consideration whether a make to that

we facility. this form for of will part vessels security facility, that are and repurchasing go The into they will that the

we've So it. prearranged

in those will to But we not on vessels will there. whether that or to order in market. repurchase depend draw spot the to need go So just it make

Omar Nokta

sort the the I it market from obviously of trying figure and you because then next was the like exercise got that leave clearly, looks depending the Yeah. on just facility year. goes -- -- million -- could to could Okay. here, you you $XXX could how freight that you've cash, were pay that mentioning those down alone, with options the obviously, you exercise

do probably could You that cash well. with as

a lease is the aim balance and You've -- wondering, balance yours better completely to sheet? the debt and that you envision get have just both is debt. still to to debt eliminated yours the have you cash bank Can of the still the the lease an goal to it debt so of And debt zero take on sheet bank free?

Stewart Andrade

Yeah.

on we're exercise whether We going the QX. haven't decision the a on final in options to made vessels purchase

and As about I available, said, million. are $XXX that's they

we completely We if it may cash do that. haven't decision And that do, we is being balance would with But -- made on debt-free we sheet. yet. the envision

to priority opportunities remind at the reinvestments arise. to is build on. in and As everybody, time outlined allocation introduced we capacity we when right our capital number one And policy making fleet the quarter last the the one that is just things for focused when the of that we're

acquired haven't a We tanker since XXXX.

time. disciplined We've investments been that. we have result, really opportunities sheet it's long prepare our that being we as a if to But getting we're So could do And for a make order. been focused and the quite arise. ourselves balance on trying significant in

long-term for and this creation in in value XX do our cash The past. moment going generating need opportunities investments all reason reinvest we that flow have arise. made we're we're because is that the a And way to to disciplined fleet we the view when we the the that shareholders in trading our at is because tanker vessels for

Omar Nokta

opportunities Okay. how makes we'll you. play Thank to sense. guess That see start I And out. those

one just next I was undrawn. a to saw the credit follow-up mature release, Just year. canceled terminated due you and was back that or you've debt, final to facility mentioned It $XX in that million the

what that? for curiosity, was of out terminating of kind wondering Just the reason

Stewart Andrade

Yeah.

which million, to Given we really our you for provided liquidity end -- of have the that $XXX facility saw the need didn't that, extra liquidity the QX, at is need us. over

having really quickly accumulating facilities that was carrying or optimization availability it, need operations, cost a extra facilities case, really credit revolving just avoid an any revolving quite decision all the we an flow optimization credit And cost. of to and don't really cash when decision. in we're our course, it Of so have from

Omar Nokta

Got it.

it turn Okay. Thank you. That's I'll helpful. over.

Stewart Andrade

Thank you.

Operator

go with Hoexter America. next Ken Bank We'll to of

Nathan Ho

Hey. for a This I quick question. in just Ho, Nathan dialing is Ken. have housekeeping

your impressive TCEs through And the me math free a breakeven pickup just pretty spite $XX,XXX slight quarter. maybe you what's slight First, Could to presentation, deleveraging in increase? flow last moves. of this driving $XX,XXX is there there's walk I in that the in from see cash on some

Stewart Andrade

question. Hi higher will that a increase I at of time some the for that, the extended Thanks reason is don't on rates the than -- for I incrementally have but breakdown the big Nathan. detail charters we've picture we previously. had fine

average our $XX,XXX So in very is a current markets. freight compelling obviously charter is about now versus day, rate which very,

some driver primary breakeven. take like. those to help -- -- charters, the lot incrementally are a and if extending So you it be at the you with but increase to give specifically, you the that's sense them of higher bridge were can of behind time than it makes rates We they the of offline before, to that

Nathan Ho

Got it.

Okay. little on impressive a capital possibly sounds like helpful. to the could the That's decisions that super in the contingent mark-to-market just in million slight on And those time spot continuing how spot in maybe exposure? $XX mark-to-market lot a slight see point, of anticipate some or it seem the performs. charter-in the And could of we market a be a as XX% exposure gains actualizations we contracts, increase decrease on charter

Kevin Mackay

and on have And ago calls quarters of the on couple market market fleet, mean, crystallize in the in gain we those. the think our the relative always I time this to lock an put -- in-charter out and and eye spot I margin them we actually the past. to on eight several said made decision Yes, that we keeping or on We're vice versa. charter

and we if opportunities our them It's with of target think spot we'll that what set over view arise, versus forward the compelling best we we market with our always more value, opportunistic. fleet, lock strategize return that reflective to the are as feeling period gives in. what And spot a charter. we compare adds But on. will It's of Similarly, time, us not is more is. time something of it's

Nathan Ho

clear. That's you Thank very it. Got much.

Kevin Mackay

Thank you.

Operator

There this are no other time. at questions

Kevin Mackay

much very quarter. joining and next Goodbye. for you again we speaking forward to you Thank us, with look

Operator

conclude your participation. today's you This does call. conference for Thank

disconnect. now may You

Teekay Tankers (TNK) 3 Aug 232023 Q2 Earnings call transcript