HAMILTON, BERMUDA — (Marketwired) — 11/06/14 — Highlights
Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE: TNK) today reported adjusted net income attributable to its shareholders (1) of $2.6 million, or $0.03 per share, for the quarter ended September 30, 2014, compared to adjusted net loss attributable to its shareholders of $4.0 million, or $0.05 per share, for the same period in the prior year. The increase in adjusted net income attributable to its shareholders is primarily due to stronger spot tanker rates in the third quarter of 2014 compared to the same period in the prior year, an increase in fleet size due to the addition of six in-chartered vessels delivered during 2014 and higher equity income due to commercial and technical management fees earned through the Company–s 50 percent interest in the conventional tanker commercial management and technical management operations purchased from Teekay Corporation on August 1, 2014. Adjusted net income attributable to its shareholders excludes a number of specific items that had the net effect of increasing net income attributable to its shareholders by $3.3 million, or $0.04 per share, for the three months ended September 30, 2014 and increasing net loss attributed to its shareholders by $10.6 million, or $0.12 per share, for the three months ended September 30, 2013, as detailed in Appendix A to this release. Including these items, the Company reported, on a GAAP basis, net income attributable to its shareholders of $5.9 million, or $0.07 per share, for the quarter ended September 30, 2014, compared to a net loss attributable to its shareholders of $14.6 million, or $0.17 per share, for the quarter ended September 30, 2013. Net revenues(2) were $50.6 million and $39.0 million for the quarters ended September 30, 2014 and September 30, 2013, respectively.
For the nine months ended September 30, 2014, the Company reported adjusted net income attributable to its shareholders (1) of $15.3 million, or $0.18 per share, compared to adjusted net loss attributed to its shareholders of $13.9 million, or $0.17 per share, for the same period in the prior year. The increase in adjusted net income attributable to its shareholders is primarily due to stronger spot tanker rates for the first nine months of 2014 compared to the same period in the prior year, an increase in fleet size due to addition of six in-chartered vessels delivered during 2014, an increase in interest income recognized from the Company–s investment in term loans, which concluded in March 2014, and higher equity income from the Company–s equity accounted investments for the nine months ended September 30, 2014 as compared to the same period in the prior year. Adjusted net income attributable to its shareholders excludes a number of specific items that had the net effect of increasing net income attributable to its shareholders by $21.5 million, or $0.25 per share, and increasing the net loss attributable to its shareholders by $8.4 million, or $0.10 per share, for the nine month periods ended September 30, 2014 and September 30, 2013, respectively, as detailed in Appendix A to this release. Including these items, the Company reported, on a GAAP basis, net income attributable to its shareholders of $36.9 million, or $0.43 per share, for the nine months ended September 30, 2014, compared to net loss attributable to its shareholders of $22.3 million, or $0.27 per share, for the nine months ended September 30, 2013. Net revenues(2) were $151.7 million and $122.1 million for the nine months ended September 30, 2014 and September 30, 2013, respectively.
During the third quarter of 2014, the Company generated $16.2 million, or $0.19 per share, of Cash Available for Distribution(3), compared to $8.7 million, or $0.10 per share, in the third quarter of 2013 due to the reasons noted above. On October 3, 2014, Teekay Tankers declared a dividend of $0.03 per share for the third quarter of 2014, which was paid on October 31, 2014 to all shareholders of record on October 17, 2014. Since the Company–s initial public offering in December 2007, it has declared dividends in 28 consecutive quarters, which now total $7.395 per share on a cumulative basis.
“Crude spot tanker rates for the third quarter of 2014 reached their highest average for a third quarter since 2008,” commented Kevin Mackay, Chief Executive Officer of Teekay Tankers. “Stronger seasonal oil demand early in the quarter, an increase in long-haul crude tanker movements from the Atlantic to Pacific and an increase in oil purchases for onshore commercial and strategic storage were some of the key factors that combined to push average spot tanker rates higher during the quarter. Although rates weakened slightly in September, they rebounded again in October in part due to the completion of refinery turnarounds and an increase in global imports ahead of the winter season. Despite recent downward revisions in global economic growth forecasts, we believe that limited crude tanker fleet growth and a continued increase in long-haul crude tanker movements from the Atlantic to Pacific basins will continue to support a general firming of average spot tanker rates, while the impact of lower global oil prices, will result in a reduction in ship operating costs through reduced bunker fuel prices”.
“Given our positive spot tanker rate outlook, Teekay Tankers has continued to strategically increase its spot tanker exposure through new in-charter contracts at favourable rates and with option periods,” Mr. Mackay continued. “Last month, we secured two additional in-charter Aframax tankers, which will add over 1,175 days to our overall spot tanker exposure and bring our total in-chartered portfolio to ten vessels in time for what we expect will be a stronger winter tanker market. Combined with strong operating leverage and a low cash break-even rate, we believe Teekay Tankers is well-positioned to benefit from a sustained tanker market recovery.”
Summary of Recent Developments
New Time Charter-In Vessels
In October 2014, Teekay Tankers secured time charter-in contracts for two additional Aframax vessels, which increased Teekay Tankers– total time charter-in fleet to ten vessels. The new time charter-in contracts have an average daily rate of $18,000 and firm contract periods of six to 33 months, with extension options.
Investment in Tanker Investments Ltd.
In October 2014, Teekay Tankers acquired an additional 0.9 million common shares of Tanker Investments Ltd. (TIL) for a cost of approximately $10 million. The additional investment increases Teekay Tankers– total ownership of TIL to 3.4 million, or approximately 9.3 percent adjusted for TIL–s recent share repurchase program.
Acquisition of Teekay Corporation–s Commercial and Technical Operations
On August 1, 2014, the Company completed the acquisition of a 50 percent interest in Teekay Tanker Operations Ltd., which owns Teekay–s conventional tanker commercial and technical management operations, for an aggregate purchase price of approximately $24 million (including $7 million in net working capital). As consideration for this acquisition, the Company issued 4.2 million shares to Teekay Corporation (Teekay), which had a value of $17 million, or $4.03 per share, on the acquisition closing date, and paid Teekay approximately $7 million in cash for the net working capital it assumed in connection with the purchase.
Tanker Market
Crude tanker spot rates strengthened significantly during the third quarter of 2014, with rates achieving the highest average level for a third quarter since 2008. The increase in tanker rates was primarily due to a combination of stronger seasonal oil demand in July and August, an increase in long-haul crude movements from the Atlantic to Pacific and an increase in oil purchases for onshore commercial and strategic storage. These stronger tanker rates weakened towards the end of the third quarter due to the onset of seasonal refinery maintenance, but have since strengthened again in early October ahead of the peak winter demand season. The recent strength in tanker rates is in part due to the impact of lower global oil prices, which is having a positive impact on tanker rates in a number of ways:
Long Range 2 (LR2) product tanker spot rates also strengthened during the third quarter, with August rates averaging the highest level since December 2009. LR2 rates have been supported by high levels of Asian naphtha imports from the West coupled with an increase in long-haul product exports from new refineries in the Middle East and Asia. A reduction in global oil prices in recent weeks has also been positive for the LR2 trade, as lower naphtha prices in relation to liquefied petroleum gas (LPG) has led some petrochemical plants to process more naphtha instead of LPG.
The global tanker fleet grew by 4.9 million deadweight tonnes (mdwt), or 1.0 percent, in the first nine months of 2014. The majority of the fleet growth occurred in the product tanker sector while the crude tanker fleet grew by just 1.1 mdwt, or 0.3 percent. The global Very Large Crude Carrier (VLCC) fleet has grown by a net seven vessels, or 1.1 percent, in the first nine months of the year while the Suezmax and uncoated Aframax fleets have reduced in size by two vessels, or 0.4 percent, and 13 vessels, or 2.0 percent, respectively. Looking ahead, the Company forecasts 2.0 percent net global tanker fleet growth in 2015 with growth once again weighted towards the product tanker sector and another year of negative fleet growth for the Suezmax and uncoated Aframax sectors.
In October 2014, the International Monetary Fund lowered its outlook for global economic growth to 3.3 percent in 2014, from 3.7 percent, and reduced its 2015 outlook to 3.8 percent, from 4.0 percent. This downward revision has filtered through to global oil demand forecasts with expected demand growth of 0.9 million barrels per day (mb/d) in 2014 and 1.2 mb/d in 2015 compared to forecast growth of 1.2 mb/d and 1.4 mb/d, respectively, in previous forecasts (based on an average of forecasts from the International Energy Agency, the Energy Information Administration, and OPEC).
Despite this downward revision to oil demand forecasts, the tanker market outlook remains positive for the crude tanker sector due to a combination of a shrinking mid-size crude tanker fleet and a continued increase in tanker tonne-mile demand, as an increasing amount of crude oil moves long-haul from the Atlantic to Pacific basins, which is expected to drive an increase in tanker fleet utilization and spot tanker rates during the remainder of 2014 and 2015.
Operating Results
The following table highlights the operating performance of the Company–s time-charter and spot vessels measured in net voyage revenue per revenue day, or time-charter equivalent (TCE) rates, before related-party pool management fees, related-party commissions and off-hire bunker expenses:
Teekay Tankers– Fleet
The following table summarizes the Company–s fleet as of November 1, 2014 (including committed charter-in vessels to be delivered):
Liquidity
As of September 30, 2014, the Company had total liquidity of $238.7 million (which consisted of $46.4 million of cash and $192.3 million in an undrawn revolving credit facility), compared to total liquidity of $250 million as at June 30, 2014.
Conference Call
The Company plans to host a conference call on Thursday, November 6, 2014 at 1:00 p.m. (ET) to discuss its results for the third quarter of 2014. An accompanying investor presentation will be available on Teekay Tankers– website at prior to the start of the call. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:
The conference call will be recorded and available until Thursday, November 13, 2014. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 3098883.
About Teekay Tankers
Teekay Tankers directly owns a fleet of 27 double-hull vessels, including 11 Aframax tankers, 10 Suezmax tankers, three Long Range 2 (LR2) product tankers, three Medium-Range (MR) product tankers and has contracted six time charter-in Aframax tankers and four time charter-in LR2 product tankers. Teekay Tankers– vessels are employed through a mix of short- or medium-term fixed-rate time charter contracts and spot tanker market trading, and its vessels are commercially and technically managed by a joint venture company in which Teekay Tankers and Teekay Corporation (NYSE: TK) each own a 50 percent interest. The Company also owns a Very Large Crude Carrier (VLCC) through a 50 percent-owned joint venture. In addition, Teekay Tankers owns a minority interest in Tanker Investments Ltd. (OSLO: TIL), which currently owns a fleet of 14 modern tankers. Teekay Tankers was formed in December 2007 by Teekay Corporation as part of its strategy to expand its conventional oil tanker business.
Teekay Tankers– common stock trades on the New York Stock Exchange under the symbol “TNK.”
Set forth below is a reconciliation of the Company–s unaudited adjusted net income (loss) attributable to the shareholders of Teekay Tankers, a non-GAAP financial measure, to net income (loss) as determined in accordance with GAAP. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Company–s financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Company–s financial results. Adjusted net income (loss) attributable to the shareholders of Teekay Tankers is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.
Description of Non-GAAP Financial Measure – Cash Available for Distribution
Cash Available for Distribution (CAD) represents net income, plus depreciation and amortization, unrealized losses from derivatives, non-cash items, CAD from the equity accounted investments and any write-offs or other non-recurring items, less unrealized gains from derivatives, equity income from the equity accounted investments and other non-cash items.
Description of Non-GAAP Financial Measure – Net Revenues
Net revenues represents revenues less voyage expenses where voyage expenses are comprised of all expenses relating to certain voyages, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies; however, it is not required by GAAP and should not be considered as an alternative to revenues or any other indicator of the Company–s performance required by GAAP.
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management–s current views with respect to certain future events and performance, including statements regarding: the crude oil and refined product tanker market fundamentals, including the balance of supply and demand in the tanker market, estimated growth in the world tanker fleet in 2014 and 2015, estimated growth in global oil demand and crude oil tanker demand in 2015, changes in long-haul crude tanker movements from the Atlantic to Pacific basins and tanker fleet utilization and spot tanker rates during the remainder of 2014 and 2015; the potential impact of lower global oil prices, including oil stockpiling, a contango oil price structure, higher oil demand and reduced bunker fuel prices; the Company–s financial position and ability to take advantage of growth opportunities in an expected future tanker market recovery; and the timing of new charter-in vessel deliveries. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in the production of or demand for oil; changes in trading patterns significantly affecting overall vessel tonnage requirements; greater or less than anticipated levels of tanker newbuilding orders and deliveries and greater or less than anticipated rates of tanker scrapping; changes in global oil prices; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of short- or medium-term contracts and inability of the Company to renew or replace short- or medium-term contracts; changes in interest rates and the financial markets; increases in the Company–s expenses, including any dry docking expenses and associated off-hire days; delays in delivery of new charter-in vessels; failure of Teekay Tankers Board of Directors and its Conflicts Committee to accept future acquisitions of vessels that may be offered by Teekay Corporation or third parties; and other factors discussed in Teekay Tankers– filings from time to time with the United States Securities and Exchange Commission, including its Report on Form 20-F for the fiscal year ended December 31, 2013. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company–s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts:
Teekay Tankers Ltd.
Ryan Hamilton
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