TK - Earnings call transcript Q1 2024

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Operator

Welcome to Teekay Tankers Limited's 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. Kevin and Stewart will review this presentation during today's conference call.Please allow me to remind you that our discussion today contains forward-looking statements. materially projected differ statements. those may results from by results forward-looking Actual

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

Kevin Mackay

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

income from Joining me of Teekay last increase an generated Tankers' in our in our leverage Waldegrave, of adjusted earnings. us on Tankers $XXX the is, company almost tankers per the million, The per X from enabled Stewart high quarter. up adjusted fourth trading $XXX $XXX to presentation. the call our fleet quarter $XXX Tankers' significant Andrade, today net continue total million $X.XX recent Research.Moving share market, or Slide of to generated Christian we Teekay of CFO; strong on reported Teekay XXXX.With highlights spot $X.XX mid-size the and or share, EBITDA generating Director operating million, of of the million entirely

arrangements allocation of the information financial XXXX. we and balance provide in $X.XX we of capital have a of of take March, milestone balanced vessels presentation.In continue repurchase free reminder, for will quarterly the $XX,XXX quarter In $X.XX approach later our sheet every being to fixed cash declared completed rates positive the strength, sale-leaseback As Stewart reaching the of With a free this million, remaining capital first dividend flow share. further $X,XXX tanker annual of outlook, flow expect with X in $XXX our our line share debt allocation. cash a approximately we per plan, generate breakeven to to for market increase per major on cash performance recent above per free. on we the the for day,

I month to planned of with Trans to coming Pipeline The are declared the spot quarter is second demand spot new tanker in per expected presentation.Looking Aframax remain toward second allocation In which medium-term. will cargos and up $X.XX mid-size recent and declared of $X highest of last first for rates have since These of have only our spot as capital cash expansion XXXX quarter company's months. tanker for first first year.Teekay point Including continued the addition, in continued a Vancouver source the dividends, we Tankers this the positive development firm last Mountain volumes supply rates a Tankers' these as dividend talk have history, dividends updating Aframax of important later ahead, the through plan more strength ramp the per Teekay spot special over support rates. the year's second rates the to half about this will well. share market fundamentals share. of tanker the create demand, in

the announced Slide a recording million.Turning we Aframax gain $XX.X quarter at XXXX-built in on of of sale Finally, tanker the previously for spot $XX.X we market. total completed the of to proceeds million, during dynamics the look sale first X X,

rates were first the levels.Looking in to saw of supported with the in Teekay crude Atlantic led support As $XX,XXX XX% the from a Aframax average second-highest an non-OPEC days history, update Mountain to Suezmax a continued the second XX% tanker per quarter-to-date. year, supply of X, expect recorded These on start in size to in oil countries, demand, spot due rates well exceptional expected quarter last oil mid-size and spot and an at day the Pipeline.Turning the bookings the will Slide half to increase Teekay factors supply the year. rates we trade quarter from limited on for size of and book, QX in seasonality including respectively. Rates geopolitical per second to quarter-to-date, basin, vessel Aframax newly-expanded Based firm we during remain our an mentioned spot tanker provide firm supported tonne-mile predominantly factors rates by approximately normal averaged $XX,XXX second fleet of and which growth, distances. disruptions rising Tankers' Suezmax first and the have second exports to in the voyage and route the increase events rates revenue have Trans in tanker Tankers' approximately highlights. combination QX demand, day only of rates by remaining

per a an commenced Importantly, day, average the per $XX,XXX the later pipeline destinations in Pipeline I a due from chartered value XXX,XXX a cargos in-charter maximum of the that has of has trading X-vessel can mark-to-market Aframax-specific Mountain uncertainty operations size going would the On level vessel yet the forward. load demand being this by the we value With crudes Pipeline TMX, there fleet, TMX. first loading market. first the carry rate Slide to that for to once the in impact of have of draft exported still May significant spot X again terminal created is restrictions.Given Tankers' load, crude fleet is commercial expected from look ultimate to of with to of which boost Trans $XX Trans million.Turning month. Teekay the strong or of which onto regarding approximately capacity Expansion, Mountain Xst, barrels highlight oil the chartered-in day which The believe we tankers, are Aframax to at X, Canadian current will provide the new cargos Expansion

have we to could develop However, X market. potential identified to oil this which trades bring

particularly believe cargoes where transported barrels would we the US in that Canadian are in well crude, West California, refineries to be Aframaxes. characteristics of directly First, given suited the on Coast, the

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

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

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

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

Stewart Andrade

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

Teekay back conclude. returned year.I last call of since has to shareholders announcing capital allocation revised per $X.XX turn totaling in to share plan With to Tankers the will capital these now Kevin May dividends, our

Kevin Mackay

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

multi-year at environment, upbeat what to this we that, we're are Tankers' balanced create lies Board on significant reflects ahead continues value company.With our high a demand, now a special prospects of to period. As to for operating over prioritize capital look operator, industry rejuvenation. continue take for while dividend supply shareholders.Our declare Teekay leverage ahead building we and our optimism Directors' The our decision for and both our the allocation, In special increasingly about segment capacity available our dividend questions. fleet to we approach to reflects

Operator

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

Jonathan Chappell

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

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

Christian Waldegrave

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

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

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

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

Jonathan Chappell

dividend hits, being Kevin, for just I widely playing follow-up, of today. in then think And the my special applauded the interest the is

position. net You're cash down to a

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

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

Kevin Mackay

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

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

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

used some be for the may So, of that. cash

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

Operator

We'll go to Jefferies. with Nokta Omar next

Omar Nokta

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

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

you're like to were looks scale going So, continue as to you just Kevin. about, talking

XX to got tankers fleet. X, XX. You in those After the going there's be

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

Kevin Mackay

a Yes. the different to provides And No, be scale have is scale optionality different to able to want be several of that be markets I trade to and as strong think volatility plays markets we in in inherent to enough markets. places able obviously in out. across play lot us

table opportunity that continue look sure as last around a take ships at to on, distribute anything at just to capital nature. enough the a more sold Aframax more we volatility older but would large fleet and we're not we on of class or that markets can an is across we see. that of set capitalize the expect some exposure It's to several to of to an we redeploy ship. year, make vessel, currently a there a looking yes, find we for at of looking the sale, to able newer, for that being hold end keep number Suezmax If we to that value the that off modern do older the So,

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

Omar Nokta

[ play a do of chunk how that fleet spot you that? to do Is in that prefer really ownership? grown. ] option, an into you ships take ago, good And exposure. it TCNs several or that do stabilized, brought and and hasn't have That's quarters Clearly, to advantage via

Kevin Mackay

No, market we But provide. good off, between rather book. the in spread, lot really a lot fleet's options. what got we're the willing of what before the We've We've early of a We built and we've been profit the a ships enjoyed that toolkit. that took moment at a the large got and have and really tools point in is added in we're owners at a where bid/ask for to other able there it's market to want pay. their in-charter

a That us So, a you additional reaching right from the at preclude It's slowdown. of often is the natural right impact finding ships. we're market ship levels that the which on but that just has have doesn't overall earnings. seen effect massive in right a seeing, your the location, the price, adding

and owners ships we sides number We off to have can see started will on. both keep their find if to equitable coming later those that's discussions already ships charters be with that several a to as we've the roll off,

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

Omar Nokta

And me. one maybe for more just

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

Kevin Mackay

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

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

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

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

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

put stem smaller can You sizes are too a ] a have but for don't Panamax, big [ Vancouver. lot in a up Panamax in you and storage of

going Aframax is that's think port Panama ship it or or to those have and really that it to is Aframaxes to the the possibly to whether that, does dislocation. it's And from Suezmaxes [ going vessel Asia, benefit the go as needs going the to the Gulf, to So, that's from light west service Asia, use. to diminishes. to pull and the other U.S. to It's supply pull in or going ridge regions coast and going ] ships cause it's I Aframax this be going the ships to whether into

Omar Nokta

very starts see appreciate in months. be Well, it develop how to perspective. next Really the it'll thanks, the interesting here few Kevin. Yes, to

Operator

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

Ken Hoexter

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

Kevin Mackay

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

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

Ken Hoexter

up, getting talked to I So, rates I hit, Afras but be seem question, that to are Jon's quarter-to-date Christian booked. about relative rates guess, earlier to your follow to guess

while yet, at just Aframax market to or it or $XX,XXX Suezmaxes $XX,XXX day, to the So potential it, going that flatter at $XX,XXX. react early to too $XX,XXX guess, is stage? a adjusting from, TMX I are for not this to just call tightening is anticipating

Kevin Mackay

a read small into the especially such on I differentiation mid-XXs. at rates in wouldn't the rate,

We years. rates haven't XX in seen these

function I fleet of the So, moving of it's up elasticity think a down. the and

I market probably of is think the one the most U.S. Gulf volatile.

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

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

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

Ken Hoexter

Yes.

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

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

Kevin Mackay

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

the you're see new at you'd of from at these all replenish pricing we the as of lost probably haven't us away think today, secondhand that that, market replace any have to a like that are And thoughts levels. the chipping probably earning to ships prices, I see are earning our and to X trying market you ordered more, going is we I Ken, I just speak can if on to think first, And spot So, sale exposure do December X, anything, to if do day $XX,XXX, those. day today. had paying ships we you'd $XX,XXX these if and want want we in secondhand us them Because we ships X the sell you in January. those from

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

Operator

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

Kevin Mackay

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

Operator

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

this may You disconnect time. at

Teekay (TK) 9 May 242024 Q1 Earnings call transcript