TNK - Earnings call transcript Q1 2024

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Operator

Welcome to Teekay Tankers Ltd.

First Quarter 2024 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded.Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead.

Lee Edwards

Before we begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the first quarter 2024 earnings presentation. review remind during today you statements. will allow conference contains Stewart to me that and this today's presentation call.Please forward-looking Kevin our discussion results by results Actual materially statements. forward-looking projected differ may those from

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

Kevin Mackay

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

Joining me adjusted first $XXX of million Teekay million, The Tankers share, entirely Director Stewart $X,XXX our of increase the high Teekay today for $XXX completed reaching to in balance of sheet we on the Research.Moving $X.XX enabled per we we above EBITDA strong XXXX.With million, remaining cash quarter. $XXX approach capital positive allocation.In the approximately company breakeven up share. with rates reported generated financial to day, debt-free. from of information capital quarter the provide total the being Tankers' a $XX,XXX presentation. adjusted share income we of expect highlights is of sale-leaseback will continue and vessels X further Andrade, our CFO; continue line our tanker on the in leverage of $XXX we and major million Slide this presentation.In fourth Waldegrave, fixed generate the strength, per tankers on in an flow earnings.As have to last the annual of recent market, reminder, significant Teekay dividend from balanced a Christian to spot to $X.XX of of generating our free the recent arrangements or a us X of declared allocation net cash take almost million Stewart generated trading cash per call XXXX. quarterly milestone our every $XXX $X.XX repurchase midsized plan, quarter fleet With operating the share in per for the per for market later Tankers' outlook, free $X.XX or increase March, performance on flow our of

$X.XX continued year's a a talk as tanker sale the have Slide point expected of company's share. pipeline more well. million.Turning supply proceeds ramp total ahead, of addition, the The months. market strength firm built $XX.X In allocation the $XX.X of to a on we continued second first our to create special for medium have look the presentation.Looking of we over dynamics the fundamentals the at about spot with up term.Finally, Including second of since capital completed of updating coming which the announced gain tanker for to first toward the will support rates during for X, the in previously will Tankers' recording Tankers tanker demand, important declared and is spot positive quarter recent one in These first Aframax spot last the rates a I demand spot Aframax later remain this development market. the Teekay XXXX half per sale last plan of rates quarter Aframax we in and Trans in XXXX were volumes tanker million, history, of only these second midsized quarter have through planned per Vancouver $X dividend declared new the this cash the rates. of dividends, share dividends cargoes to year.Teekay month Mountain as spot expansion first source highest

forward. second expect Slide in to last the date to once well in trading crude provide Suezmax average mark-to-market day, saw were QX impact QX at highlight we growth, being believe are the oil per quarter X of highlights, in of spot which Slide market. look an created rates Tankers' remain size expected supported expansion Canadian or the quarter The boost exceptional in level Mountain load, first due the to X, rising an during uncertainty newly regarding fleet $XX capacity seasonality have and non-OPEC first commenced supported provide including demand to and of supply terminal from half second the the second of the spot significant tonne-mile voyage in commercial the the history, which countries, charter tanker highest cargoes in restrictions.Given which supply tanker quarter only to Basin to TMX. we there and strong with month. Aframax Trans Aframax recorded exports update fleet, fleet These a in the rates by the approximately the -- has XXX,XXX demand, predominantly spot the at spot X, the load Atlantic With expected of the led rates year.Rates events, disruptions due increase million.Turning tankers, from Teekay chartered of have of Suezmax which destinations vessel route value bookings chartered of On start has pipeline.Turning to draft Teekay on levels.Looking expansion, approximately and in to onto Mountain rates trade still Aframax day the remaining Teekay firm ultimate $XX,XXX to geopolitical of the to from of midsized average a of exported tanker the operations, distances. with mentioned we quarter, X, first crude loading current by to in Based second an pipeline to rate averaged per date. can Tankers' our will a that for per the pipeline on maximum vessel size in continued As support revenue X Aframax Trans normal XX% demand quarter is first TMX, respectively.Importantly, combination we in yet oil firm new year, Trans size factors, and to the oil this day the the increase and pipeline barrels vessel crude booked, limited Mountain Tankers' May second per will I by the carry $XX,XXX of XX% first have again is day, the approximately factors going rates days that in specific rates and value for later from $XX,XXX cargoes expanded a

grades in could would to the other one bring we've to for parceling these on develop characteristics to transported this However, nautical going California identified as lightering from oil to refineries Latin well of voyage loading Canadian to given Coast, to crude, Southern of or believe we to VLCC are to are refiner be Aframax that where zone the locations other California, scale already round-trip the for including Pacific India. is transported oil Aframaxes.Secondly, routes off in vessels there cargoes with Panama have price expect regions particularly Aframax VLCC trades U.S. some parceling find have is market.First, China.Alternatively, that particularly X given around to in discharge far West to X,XXX its a on main Asia and co-loaded.Again, the in for give from discharge increase of up from gained Gulf, buyers American U.S. this booking demand.To in from distance Asian seen we equivalent This Asia likely are buyers lighterings we seen customer barrels Aframax California directly grades trade will from with oil cargoes be new option, of May pulled may are the discount on where context, to which forward, up basis, be suited an Asian a to latter relatively already be economies in demand has reverse meet expected that reports than These may lower crude Canadian area XX a Aframaxes, off dates be and the delivery to larger directly the time. for potential Aframaxes The meaning Aframax lanes sources. off Southern miles major Panama, Vancouver a to or a from we look the days could trade customer that the have TMX most taking acquire coast will Vancouver booked these onward Suezmax. or

miles nautical days. to is voyage the While X,XXX from Vancouver China distance or XX around

quarter quarter at million demand we the once small continue the support to new X, new years.The X delivering of standards the book into order factors look X% deadweight the that since estimate fleet year with of medium for Assuming split could the a XXXX, X.X at at at order of destinations, historic orders Despite incremental supply recent by small the strength XX with capacity.Turning look expansion tonnes which we we the highest believe lowest tanker years. during full supply months, XXXX, particularly continued total the since is between XXXX.Furthermore, over fundamentals Aframaxes create point pipeline age the next tanker the in least to pace market first Fleet increase just around term. over Slide of the to first tanker is tanker demand an its the fleet this tankers X in the at which delivering these positive. in fleet for XX.X average aging, is and book a Mountain XX-XX of is global fleet is Trans delivery coming at XX

seeing XX drop high utilization the environment, to are in ships the thereby age, of significant supply. current reducing scrapped trade fleet compared being spot While are years vessels XX below vessels a beyond effective rate not age that in

of from As the majority started trend in the at a in this to from now term.I'll demand, of both and expected oil supply producers the outstrip in the average continue exceeding tanker the by project this right fleet demand Asia.As modest XXXX. tanker demand barrels The growth fleet tonne-mile over day for particularly year million demand X% Basin, long-haul XXXX should growth benefit projects medium major tonne-mile both countries, by healthy compounding Basin agencies on rates tanker to support that result, oil continue the of per demand to in Atlantic growth This X.X to continuing the increasing with slide. of we will XXXX, and turn tanker is growth from around that oil Atlantic non-OPEC suggests in high -- to growth and X the next, to in increase at an to growth call utilization supply the shown XXXX expected which the next movements chart XXXX. from forecast be supply tanker XXXX.Looking levels the met firm is to impact cover Stewart demand of growth least through of growth fleet the slide, close

Stewart Andrade

positive has a after continuing desire his for Turning supported holistic be With another on Board our retain a strong positioned highlight confident XXXX, market milestone by including continue to of significant the we that strong strong Slide sale-leaseback XX various market in rejuvenation Tankers repurchasing operating a our we on in a and Teekay capital vessels we our tanker we well a results, being factors is year debt-free tanker for Tankers revised share talked $X value $XXX spot will first today, be of creating in annualized being allocation flow now to opening dividend market. to of to per is remarks, X Tankers per declared cash million spot per to feel how since mentioned per project quarterly outlook, that the shareholder reached XX% shareholder the quarter. operating combined call debt-free, has Based first I share capital yield year. about that to in vessel we generated X, the fleet the TNK's free announcing assessment our XX%.As creating including a have approximately Kevin approximately fleet has TNK and very arrangements in to cash of $X.XX free share realized per or trailing cash of share.With ability would plan of flow. XX-month the returned May $X.XX free a $X.XX share flow continue our Kevin special Teekay our turn per totaling last share, average value.In significant these regular dividend conclude. or If capital back shareholders dividend rates of $XX our of of dividends, becoming the $X.XX during Teekay the use forward, quarter, to position, by company's expect

Kevin Mackay

remains Thanks, Stewart. place. key in In strong for of the summary, tankers markets drivers firmly midsized the

look continues to for and period. Teekay increasingly we on over As In demand, ahead our environment, supply the this at operating are leverage prospects we a upbeat create shareholders. both Tankers' high value significant multi-year

Directors' that, reflects building to Board declare operator, allocation.While for our questions. Our dividend of optimism take capacity special prioritize a capital fleet industry to dividend to decision to our now available and segment continue approach we're balanced ahead rejuvenation, about what lies special our company.With for we reflects our the

Operator

[Operator Chappell Instructions] ISI. Jonathan We'll Evercore with go first to

Jonathan Chappell

I on Yet, X now you interesting. right-hand and super for at within -- they're pretty at answer rates X, put on tight industry look Aframax geopolitical Suez Starting range Christian. there's it one range. could X But tight I going the and lot as is last that a in with lot market the side levels, a in in for this but think upheaval. months, you when obviously elevated Slide Christian. the pretty of mean for right Slide Kevin, well. I a maybe the the Maybe a

So usually in be strong would commentary this volatility on such in just and of elevated that's think yet rates classes you're even day maybe why where resulting in stable some asset would X one involved? this and primarily sector any the the is age conceptually in

Christian Waldegrave

since that And everything here. going well, have sectors takeaway tanker all normally, to of go rates of interesting consistent part since on of the shoulder seasonally of the events, was Christian that's a demand. as what's given favor of in expect this been couple refineries think would I think in kind Yes. see that and those worked into Jon, factors in it is the least world is that Yes, I event spot our kind season going the at winter. been the our as tonne-mile into positive for maintenance.And during year, the a rates the we year in to have that beginning fall quite

voyages shipping, obviously certainly, Hope, you've Sea Red on the Good have we've as attacks probably because attacks on stayed had on crude So Cape both disruptions longer around tankers has is going and which the which some of in the product. merchant It's been well. then we've more on affected some pronounced crude LRXs, exports the diverted Russian the -- seen the product elevated that whereas, in but seen Ukrainian well.And as refineries, also side Russian of

And supported the second there in well, of should So certainly we and half have ramping the would half the I have his Aframax what as tanker supportive of online during there second coming we the ordinarily probably for think into seasonally there here.And expect QX Kevin online demand been remarks, half the that a pipeline oil said volume year. half year. have second in because, well well. And rates bodes Trans factors we be to of come be second as into the more go Mountain part now some that up the we of prepared as weaker volumes see as

So yes, stayed positive and a through that here it's been year it of elevated us rates the rest some as have confidence development well. for gives the QX,

Jonathan Chappell

the my playing special being helpful. of follow-up think Okay. hit. I the And widely Kevin, just That's in today. applauded the for interest then is dividend

cash net down You're to position. a

not but just a from on I'm show your So completely here. asking path hand, just clarification maybe to you

of and flow out How to you of quarters? the this you prioritize 'XX of think the 'XX? the in that rest just let's uses massive could about pointed prioritize through call would you Stewart it, capital, kind cash If how coming

Kevin Mackay

on today both we're a markets be team to with to is come renewal to something It's after always management need to do although through us situation that over to pricing it's had replenish. we've But elevated at. secondhand, trying for in have fantastic Yes. obviously last and at always that years. there looking is discuss.We in and the the And Board, our few fleet conjunction newbuilds a look a as

to still the we want ships, we because the underlying to in keep market. we the spot As market confidence fundamentals sell have of of exposure the

some high you reinvest So use the at that ships, of of as keep exposure may capital to and we level. roll our spot see older some off us a

we may to to able to with important dry used not the shareholders plan for But look and both shareholders.And do that now. was meantime. fleet us of some for that fully And advocating as which So keeping a larger last like to provide obviously, as that came of powder to we are we cash a year, be up we our some capital rejuvenation understand to have cognizant the that.We our respect, prudent market. allocation be respect for well exercises, look in back to then also that use shareholders we're the and to the that -- is cyclicality of the would capital beyond future doing And to replenishing long-term satisfied orientated of plan felt rebuilding as value in that yield. the long-term fleet that

Operator

go with Jefferies. next Omar to We'll Nokta

Omar Nokta

to on that cash maybe I And position just you're Yes, clearly, net question. debt now something I we completely know constantly up. in kind comes the wanted But it's follow Jon's of free. up

quarter. a for for X been So you've congrats, end ships time I did the notice obviously, of as the on available coming. as long sale that. It's But accounted of

them. a think sell those about as to XX achieve as certain going the mentioned or just -- vessels past after that, thinking we'll you number looks XX.You mass order And looking were just few is of of got in years? ships guess a there to it sort of have the about Kevin, continue like kind to that vessels, if you're scale fleet, going here versus replace to types a sales, we stay we size the I should expect to post fleet these like over say, of seen above in you rates? be critical talking So about tankers comfortable today, to wanting there's you're X, continue what certain you've XX we've to replacement sooner those

Kevin Mackay

markets have we scale places obviously, be markets different in plays to I No, volatility a optionality out, strong look the in inherent older as lot and of is play and think different of provides across we able able a end that be for in of ships to enough that at the trade we as want we at to Suezmax year, to us be several Aframax currently and some last scale markets.So hold to sold the do sale.

anything Looking opportunity there we table a to vessel, class not But redeploy or across more number an to expect set the on. fleet sure of a volatility that that to that markets If around looking enough value can newer, to to off just that see. yes, keep would It's we nature. we're we the being capital on older modern exposure capitalize is that take distribute for ship. a of find large the to continue at several more make able to

that's we really how So Omar. it, about think

Omar Nokta

is prefer of ] stabilize. you several and And TCN take [ to do advantage brought quarters an a do And hasn't option? good fleet chunk ago, it spot play it you that that Is Clearly, via does that ownership? exposure grown. ships have -- Or Okay. really in how that? to into

Kevin Mackay

No.

in lot the really a We book. good profit enjoyed really that, the off, We toolkit. -- can at point their market it's and in We we've owners has got a built bit lot We've willing took tools for a between added options. before of we've of the early have that the market provide. a in-charter we're pay. large and fleet in spread other want moment able a there to we're the at what rather ships what where been of and to is But got

several right levels a keep that's That finding just in later preclude that we're the charters location, started of as at if impact off, us sort to slowdown. we've their a that the has doesn't ships and the additional can which natural seeing. But right that massive find both owners on coming effect market, off we sides be earnings.We price the number a those seen It's reaching equitable from ship have to will you your have ships. discussions ships with on. So often to overall roll the the already see adding of a right is

and put out. And at be definitely it in same price, the the So always whether right of got certainly utilize.Similarly, the previous there. a we've been I've tool able answer on can lock to and on kind calls as we'd it. in the or that report these find our looking are is kit execute a ships we toolkit the that we'll try pays and opportunity own it's If expect them levels that tool asked as to right we on and to

Omar Nokta

just one maybe me. more And from

terms other enticing what out that kind I where So of rates versus can in in I But know that the to the market quarters how But some you that the maybe give at do stay How cargoes of trade of area, developing? that's lanes to isolated does TMX market maybe on play in relative lighting there? of you kind are crystal to some pricing are of you're offered lanes Regarding mentioned that seeing just terms highlighted of think impact. how color to and on of it's there Aframaxes perspective the in kind you whatnot. region maybe trying highlighting Any past they you are of give on that areas? sort for that since remote of as an location able develops how you've if maybe closer somewhat to And not ships think globally and least couple you market it's to been in. us able give that and kind closer ball in of will -- approach. normal terms spot having what different that do a there potential traffic region? the we're that, getting maybe reverse trade You now average. guess relative to about an spot And

Kevin Mackay

to first, for we a seen Well, down us, I think of they market.From honest. couple to be in both as a starting The yet. days China to Panama. to days cargoes be early We've we've and long -- out then to presentation, the our fixtures seem in standpoint, are haul, laid We come. XX to it's positive got down

where So the point, go know. this at don't we cargoes

main going for customers on think a We and here way, go in do have market. in they North and any now include Vancouver move, see. pick voyage cost. the East not an from that. have come different to have I'm option is priced trading the and oil Asia have into pricing that now though will Coast the think take. What end into the if to try to And I option again, And that regions, oil stand wait in to will be will Panama, they that options that to nice there's prices to it We and will option and shipping X the right and through into to between they or long-haul as predict across happen A depend the have ballast means discharge, will West oil lot an will differences which the up. do that that look up ships up ships there.Similarly, Far

there. that mean ships think will I have will something and have trades it's to that you'll see think necessarily owners that don't the will as develop. So station wait I themselves

think markets. other from relative from the largest that real ship move can they regions going as according see the it into we're to the can specific pick the and expect I you the additional earnings in move is in Aframax benefit to to the they tonne-miles requirements do other the the will freight the owners will up.And is when versus be Vancouver. to because standpoint, what I think But Aframaxes priced

don't You lot Asia, a to can ships storage It's ] vessel up to going you going of the from use. too And does Light think U.S. the sizes going to Vancouver.So smaller that. the is the And Aframax it's Aframaxes but for Coast other needs Panamax, Asia, into [ those really Panamax a to pull this and possibly and the in pull to that whether to in ship the Ridge are have going West benefit a Aframax be big ships Panama stem supply going or that's port the that's Gulf. to go It's Suezmaxes or have to it or I put going cause diminishes. regions service and to is dislocation. in from as to

Omar Nokta

be see very that here Yes. appreciate It to next really will starts interesting it few how perspective. to develop I months. the in

Operator

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

Ken Hoexter

the have California guess, longer in sold been would right? that, moving you'd that replaces The that that to follow a I right? thought needs longer get to just up still even process, Kevin, product California, on with have move If that And haul you'll we those down into I make hauls? product then guess

Kevin Mackay

Yes.

of you have Canadian to barrels, and -- could see crude somewhere you'll the some think they'll those they'll at else. will -- which the moment, I long-haul out barrels Arab go displace backing

to really areas could about it to to how have It's the effects develops that's is exciting able that. knock-on and going primarily impact react this be be as So what's Aframaxes, development. going interesting and to to see but to well, into it initially other which

Ken Hoexter

early right? quarter-to-date $XX,XXX So going for anticipating potential day, I at talked to from while TMX Or are booked, your to too guess, are or about that market flatter adjusting guess hit, at XX So Jon's but be Suezmaxes it is getting the question, just $XX,XXX that to seemed stage? Christian Aframax earlier a Afras just react XX. to relative tightening rates guess a is not I to to this I rates yet? about follow-up, to

Kevin Mackay

small on mid-XXs, the haven't we a read XX rate, in these seen wouldn't the differentiation in rates rates at into I such especially years.

So most of a market Gulf fleet probably And U.S. it's I up I the elasticity think of the and function the volatile. is think of one moving down. the

day. a And within You can could up time, back at to dropping be a they $XX,XXX have rates XX. week's

are I at -- wouldn't period. look market not in look the So the a we've of develop, anticipation to much I got to we've we the I cargoes. run read rates It's I it -- to into can't over in what look isn't longer at too at or -- the if got it term.And to patterns think front trying the much think going market short think

to volume, have come come that to think in TMX when owners levels the until I see you'll they that's indicated. and the wait at the have pipeline We on the impact And see the Afras. the we volumes in start when

Ken Hoexter

Yes.

So Even not all it's year. volumes up as online just -- open gradually, in through coming once the you May get those you though right?

charter-in your on So entering where it fleet Stewart guess, you Or are economical? outs. low order vessels? I uneconomical even noted book? become mean, does just talked on thoughts And -- new about when rates What thoughts mid-XXs, I'm tougher are that How talked given about rates sorry, discussions or of -- renewal on Kevin process. you're I talking if the charter price your purchase about or the

Kevin Mackay

so pricing that have Yes. an is think both to challenge interesting to newbuild It's as certainly and through secondhand But high. we you is said, acknowledge pricing because rates.

anything, think we the these we can to speak away that chipping think today, are on secondhand at to market as I levels.And do is at new So see thoughts of ordered probably I going you'd any if our Ken, that, ships first. us all I haven't pricing

trying the the if we Just of the see exposure lost from ships in probably to had X secondhand December we and want sale the more $XX,XXX those market And that you'd you're ships January. do we like you in us to sell replenish $XX,XXX, you to to have day X, earning replace are you from of if -- these a kind because prices, today. those day and want really them spot earning paying

So be replenishment. it purchasing than of more would looking the prompt more towards longer-term

Operator

with questions company to like or comments. other I conference back closing additional the no for would any And the holding, to turn

Kevin Mackay

quarter. we us, Thank you and next speak will for joining to you

Operator

will gentlemen, you We Ladies you. thank Thank and today's your for participation. call. that conclude

this disconnect time. You at may

Teekay Tankers (TNK) 9 May 242024 Q1 Earnings call transcript