Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE: TNK)
today reported the Company’s results for the quarter ended
June 30, 2020:
Consolidated Financial
Summary
| |
Three Months Ended |
| (in
thousands of U.S. dollars, except per share data) |
June 30, 2020 |
March 31, 2020 |
June 30, 2019 (3) |
| GAAP FINANCIAL COMPARISON |
|
|
|
|
Total revenues |
246,492 |
|
341,900 |
|
207,007 |
|
| Income from operations |
92,986 |
|
120,126 |
|
5,051 |
|
| Net income (loss) |
98,198 |
|
106,839 |
|
(14,307 |
) |
| Earnings (loss) per share (4) |
2.91 |
|
3.17 |
|
(0.43 |
) |
| NON-GAAP FINANCIAL COMPARISON |
|
|
| Total Adjusted
EBITDA (1) |
124,241 |
|
155,370 |
|
36,197 |
|
| Adjusted net
income (loss) (1) |
80,700 |
|
109,981 |
|
(12,142 |
) |
| Adjusted earnings
(loss) per share (1)(4) |
2.39 |
|
3.27 |
|
(0.36 |
) |
| Free cash flow
(1) |
125,799 |
|
141,334 |
|
19,383 |
|
(1) These are non-GAAP financial measures. Please
refer to “Definitions and Non-GAAP Financial Measures” and the
Appendices to this release for definitions of these terms and
reconciliations of these non-GAAP financial measures as used in
this release to the most directly comparable financial measures
under United States generally accepted accounting principles
(GAAP).
(2) Net debt is a non-GAAP financial measure and
represents short-term, current and long-term debt and current and
long-term obligations related to finance leases less cash and cash
equivalents and restricted cash.
(3) Comparative balances relating to the three
months ended June 30, 2019 have been updated to reflect results as
presented in the Company’s Annual Report on Form 20-F and Report on
Form 6-K for the year ended December 31, 2019 and three months
ended June 30, 2020, respectively.
(4) The per share amounts for all periods presented
have been adjusted to reflect a one-for-eight reverse stock split
completed in November 2019.
(5) Includes expenditures for drydock and ballast
water treatment system installation.
Second Quarter of 2020 Compared to First Quarter of
2020
GAAP net income and non-GAAP adjusted net income
for the second quarter of 2020 were lower compared to the first
quarter of 2020, primarily due to lower average spot tanker rates,
the sale of three Suezmax tankers during the first quarter of 2020,
as well as the sale of the non-US portion of the ship-to-ship
support services business and the LNG terminal management business
in the second quarter of 2020. GAAP net income in the second
quarter of 2020 also included a $15.2 million reduction in freight
tax accruals relating to prior periods and a $3.1 million gain on
sale of assets, while GAAP net income in the first quarter of 2020
included a $3.1 million loss and write-down on sale of vessels.
Second Quarter of 2020 Compared to Second Quarter of
2019
GAAP net income and non-GAAP adjusted net income
for the second quarter of 2020 significantly increased compared to
the same period of the prior year, primarily due to higher average
spot tanker rates and fewer off-hire days, partially offset by the
sale of four Suezmax tankers during December 2019 and the first
quarter of 2020, as well as the sale of the non-US portion of the
ship-to-ship support services business and the LNG terminal
management business in the second quarter of 2020. GAAP net income
in the second quarter of 2020 also included a $15.2 million
reduction in freight tax accruals relating to prior periods and a
$3.1 million gain on sale of assets.
CEO Commentary
“Teekay Tankers reported another profitable
quarter in the second quarter of 2020, generating adjusted net
income of approximately $80.7 million, or $2.39 per share,”
commented Kevin Mackay, Teekay Tankers’ President and Chief
Executive Officer. “The unprecedented impact of COVID-19 continues
to be a major area of focus for us, but we have thus far
successfully navigated the evolving logistical and regulatory
challenges with minimal impact on our operations. As a result of
the pandemic, the overall maritime industry has experienced
significant challenges related to crew changes, but I am pleased to
report that we have safely changed-out a number of crew members on
effectively all of our vessels. We continue to work hard with both
the industry and inter-governmental organizations to tackle this
challenge and bring our remaining overdue colleagues home safely as
soon as possible. I am truly proud of how our seafarers and onshore
colleagues have responded to ensure crew rotations are completed
safely and seamlessly, with no reported COVID-19 cases or
interrupted service for our customers.”
“We continue to increase our financial strength,
which is one of our strategic priorities,” continued Mr. Mackay.
“During the second quarter alone, we generated free cash flow of
approximately $126 million and opportunistically sold non-core
assets, contributing to a net debt reduction of over $180 million,
or approximately 25 percent, to $549 million and increasing our
liquidity to $468 million at June 30th. Over the past year, we have
transformed our balance sheet, reducing our net debt by
approximately $445 million, or 45 percent, and increasing our
liquidity by $348 million. In addition, we secured a new 3-year
term loan to refinance our last 2021 debt maturity, eliminating any
debt maturities until 2023 and further improving our financial
flexibility.”
Mr. Mackay added, “We experienced our third
straight quarter of strong spot tanker rates and earnings; however,
spot tanker rates have come under pressure since mid-May 2020 as a
result of the unwinding of floating storage and record OPEC+
production cuts, in addition to lower non-OPEC production, which
reduced crude exports. At this point, the near-term outlook is
uncertain, but we are pleased to have significantly reduced our
effective free cash flow breakevens and near-term spot exposure by
locking-in 23 percent of the tanker fleet on fixed-rate contracts
at attractive rates, and we are encouraged by fleet supply
fundamentals which are markedly more favourable relative to prior
market cycles. With a low free cash flow breakeven of approximately
$12,700 per day(1) through to mid-2021 as a result of recent
well-timed fixed-rate charter contracts, a strong liquidity
position, low balance sheet leverage and no debt maturities until
2023, we believe that Teekay Tankers is financially well-positioned
to continue creating shareholder value throughout a wide range of
possible near-term market conditions.”
(1) Includes expenditures for
drydock and ballast water treatment system installation.
Summary of Recent Events
In August 2020, Teekay Tankers secured a new
three-year, $67 million term loan to refinance four Suezmax
tankers. The proceeds from the new debt facility along with
existing cash are expected to be used to repay approximately $85
million outstanding on the Company’s existing debt facility with
respect to these vessels that was scheduled to mature in 2021. The
new facility is priced at LIBOR plus 225 basis points and matures
in 2023.
In late-April 2020, Teekay Tankers closed the
previously announced sale of a portion of its oil and gas
ship-to-ship transfer support business, which also provides gas
terminal management and consulting services, for approximately
$27.1 million, of which approximately $14.3 million was received in
May 2020 with the remaining cash received in July 2020. During the
second quarter of 2020, the Company recognized a gain on sale of
$3.1 million. Teekay Tankers retained its entire Full Service
Lightering business that operates in the U.S. Gulf, which provides
ship-to-ship oil transfers for both U.S. crude imports and exports.
In addition, the Company will continue to operate oil ship-to-ship
transfer support services in North America and the Caribbean, a
business that has synergies with its core Full Service Lightering
business.
Tanker Market
Crude tanker spot rates remained firm during the
second quarter of 2020, particularly during the early part of the
quarter. Crude trade volumes increased during April 2020 due to the
short-lived price war between Saudi Arabia and Russia, leading to
increased tanker demand. Floating storage also gave support to
crude tanker spot rates during the quarter, peaking in early May
2020 when almost 500 tankers, or over 60 million deadweight tonnes
(mdwt), were storing approximately 400 million barrels of oil. This
floating storage was driven by a significant mismatch between
elevated levels of global oil production and depressed oil demand
due to the impact of COVID-19, resulting in a large surplus of both
crude oil and refined products. Onshore storage filled rapidly
which then forced oil into floating storage, particularly as the
crude oil futures curve moved into a steep contango.
Crude tanker spot rates have softened since the
middle of May 2020 due to lower global oil production and the
return of some ships from floating storage. The OPEC+ group
implemented record oil production cuts of 9.7 million barrels per
day (mb/d) from the beginning of May 2020, with Saudi Arabia, UAE
and Kuwait pledging a further 1.2 mb/d of cuts during June 2020.
Compliance with these cuts has been relatively high and has led to
a significant reduction in crude trade volumes from May 2020
onwards. Oil production has also declined in non-OPEC countries due
to the impact of weak oil prices, with total global oil production
falling by 11.3 mb/d between April and May 2020 and by a further
2.4 mb/d during June 2020. According to the International Energy
Agency, global oil production of 86.9 mb/d during June 2020 was the
lowest in approximately nine years, which has weighed on tanker
demand from May 2020 onwards. In addition, floating storage has
come off from the record highs seen in May 2020 to around 250
ships, or 38 mdwt, storing 240 million barrels of oil as of
end-July 2020. Taken together, a reduction in trade volumes,
coupled with ships returning from floating storage, has put
pressure on crude tanker spot rates during the latter part of the
second quarter of 2020, and this weakness has continued into the
early part of the third quarter of 2020.
Looking ahead to the second half of the year,
global oil production is expected to increase as both OPEC and
non-OPEC countries are expected to increase oil supply to the
market. The OPEC+ group is set to return 2 mb/d of production from
August 2020 onwards, though this may not all ultimately translate
into additional export volumes, as Saudi Arabia has pledged to keep
its extra production for domestic use during the summer months when
local power demand is higher. Non-OPEC oil production could also
start to rebound, with global oil prices having stabilized above
$40 per barrel in recent weeks. In addition, global refinery
throughput is expected to increase by approximately 9 mb/d between
the second quarter and fourth quarter of 2020, which would create
additional crude oil demand. Although a portion of this additional
supply may be sourced from oil being pulled out of inventory - both
onshore and offshore - we should nevertheless anticipate an
increase in crude tanker demand during the second half of the year.
However, this may be offset by ships returning to the trading fleet
from floating storage and, therefore, the relative balance between
recovering tanker demand and increasing fleet supply will determine
crude tanker spot rates. Overall, we expect a relatively weaker
crude tanker market during the second half of 2020, especially
compared to the strong first half of 2020.
The long-term outlook remains very difficult to
forecast due to significant uncertainties over the strength and
pace of a potential oil demand recovery, with much depending on how
various countries and regions manage to contain the spread of
COVID-19 over the coming months. However, we remain encouraged by
supportive fleet supply fundamentals, with the tanker orderbook
currently at a 24-year low when measured as a percentage of the
existing fleet. We are yet to see any meaningful tanker scrapping
this year, but a period of lower rates could lead to higher levels
of removals over the coming months, which would help limit fleet
supply growth. Finally, new tanker ordering remains extremely low,
and will likely remain so in the near future. Overall, we expect
low levels of tanker fleet growth for at least the next two
years.
In summary, the tanker market looks set for a
more challenging period in the coming months following a very
strong first half of the year. Although the demand outlook is
highly uncertain, we remain encouraged by the tanker fleet supply
fundamentals which appear much more favourable compared to prior
market cycles.
Operating Results
The following table highlights the operating
performance of the Company’s time-charter vessels and spot vessels
trading in revenue sharing arrangements (RSAs), voyage charters and
full service lightering, in each case measured in net revenues(i)
per revenue day, or time-charter equivalent (TCE) rates, before
off-hire bunker expenses and fees associated with vessels exiting
the RSAs:
| |
Three Months Ended |
| |
June 30, 2020 (ii) |
March 31, 2020 (ii) |
June 30, 2019 (ii) |
|
Time Charter-Out Fleet |
|
|
|
|
|
|
|
Suezmax revenue days |
794 |
|
|
453 |
|
|
91 |
|
|
| Suezmax
TCE per revenue day |
$37,740 |
|
|
$33,752 |
|
|
$17,281 |
|
|
| Aframax
revenue days |
91 |
|
|
— |
|
|
— |
|
|
| Aframax
TCE per revenue day |
$22,925 |
|
|
— |
|
|
— |
|
|
| LR2
revenue days |
71 |
|
|
— |
|
|
— |
|
|
| LR2 TCE
per revenue day |
$25,463 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Spot Fleet |
|
|
|
|
|
|
| Suezmax
revenue days |
1,544 |
|
|
2,071 |
|
|
2,418 |
|
|
| Suezmax
spot TCE per revenue day (iii) |
$46,484 |
|
|
$49,067 |
|
|
$17,267 |
|
|
| Aframax
revenue days |
1,632 |
|
|
1,723 |
|
|
1,763 |
|
|
| Aframax
spot TCE per revenue day (iv) |
$29,569 |
|
|
$34,438 |
|
|
$20,075 |
|
|
| LR2
revenue days |
876 |
|
|
953 |
|
|
840 |
|
|
| LR2 spot
TCE per revenue day (v) |
$29,621 |
|
|
$34,494 |
|
|
$15,679 |
|
|
|
|
|
|
|
|
|
|
|
Total Fleet |
|
|
|
|
|
|
| Suezmax
revenue days |
2,338 |
|
|
2,524 |
|
|
2,509 |
|
|
| Suezmax
TCE per revenue day |
$43,516 |
|
|
$46,317 |
|
|
$17,268 |
|
|
| Aframax
revenue days |
1,723 |
|
|
1,723 |
|
|
1,763 |
|
|
| Aframax
TCE per revenue day |
$29,218 |
|
|
$34,438 |
|
|
$20,075 |
|
|
| LR2
revenue days |
947 |
|
|
953 |
|
|
840 |
|
|
| LR2 TCE
per revenue day |
$29,309 |
|
|
$34,494 |
|
|
$15,679 |
|
|
(i) Net revenues is a non-GAAP financial measure.
Please refer to “Definitions and Non-GAAP Financial Measures” for a
definition of this term.
(ii) Revenue days are the total number of calendar days
the Company’s vessels were in its possession during a period, less
the total number of off-hire days during the period associated with
major repairs, dry dockings or special or intermediate surveys.
Consequently, revenue days represent the total number of days
available for the vessel to earn revenue. Idle days, which are days
when the vessel is available to earn revenue but is not employed,
are included in revenue days.
(iii) Includes vessels trading in the Teekay Suezmax RSA,
Teekay Suezmax Classic RSA and non-pool voyage charters.
(iv) Prior to January 1, 2020, includes vessels trading in
the Teekay Aframax RSA, Teekay Aframax Classic RSA, non-pool voyage
charters and full service lightering voyages. Subsequent to January
1, 2020, includes Aframax vessels trading in the Teekay Aframax
RSA, non-pool voyage charters and full service lightering
voyages.
(v) Prior to January 1, 2020, includes vessels
trading in the Teekay Taurus RSA and non-pool voyage charters.
Subsequent to January 1, 2020, includes LR2 vessels trading in the
Teekay Aframax RSA, non-pool voyage charters, and full service
lightering voyages.
Third Quarter of 2020 Spot Tanker Rates
Update
Below is Teekay Tankers’ spot tanker fleet
update for the third quarter of 2020 to-date:
- The portion of the Suezmax fleet trading on the spot market has
secured TCE rates per revenue day of approximately $24,800 on
average, with 57 percent of the available days fixed(1); and
- The portion of the Aframax and LR2 fleet trading on the spot
market has secured TCE rates per revenue day of approximately
$15,200 on average, with 47 percent of the available days
fixed(2)(3).
(1) Combined average TCE rate includes Teekay
Suezmax RSA and non-pool voyage charters.
(2) Combined average TCE rate includes Teekay
Aframax RSA, non-pool voyage charters and full service lightering
voyages.
(3) As of January 1, 2020, the Company’s Aframax
tankers and LR2 product tankers, excluding those employed under
non-pool voyage charters and full service lightering voyages, are
operating as a combined RSA under the Teekay Aframax RSA.
Teekay Tankers’ Fleet
The following table summarizes the Company’s
fleet as of July 31, 2020:
|
|
Owned and Leased Vessels |
Chartered-in Vessels |
Total |
|
Fixed-rate: |
|
|
|
| Suezmax
Tankers |
9 |
— |
9 |
| Aframax
Tankers |
2 |
— |
2 |
| LR2
Product Tanker |
1 |
— |
1 |
|
Total Fixed-Rate Fleet |
12 |
— |
12 |
|
Spot-rate: |
|
|
|
| Suezmax
Tankers |
17 |
— |
17 |
| Aframax
Tankers(i) |
15 |
2 |
17 |
| LR2
Product Tankers(ii) |
8 |
2 |
10 |
|
VLCC Tanker(iii) |
1 |
— |
1 |
|
Total Spot Fleet |
41 |
4 |
45 |
|
Total Tanker Fleet |
53 |
4 |
57 |
|
STS Support Vessels |
— |
3 |
3 |
|
Total Teekay Tankers’ Fleet |
53 |
7 |
60 |
(i) Includes two Aframax tankers with charter-in
contracts that are scheduled to expire in March 2021 and September
2021, respectively, one with an option to extend for one additional
year.
(ii) Includes two LR2 product tankers with charter-in
contracts that are scheduled to expire in January 2021, each with
an option to extend for one additional year.
(iii) The Company’s ownership interest in this vessel is 50
percent.
Liquidity Update
As at June 30, 2020, the Company had total
liquidity of $467.5 million (comprised of $167.9 million in cash
and cash equivalents and $299.6 million in undrawn capacity from
its credit facilities) compared to total liquidity of $368.1
million as at March 31, 2020.
Conference Call
The Company plans to host a conference call on
Thursday, August 13, 2020 at 12:00 p.m. (ET) to discuss its results
for the second quarter of 2020. All shareholders and interested
parties are invited to listen to the live conference call by
choosing from the following options:
- By dialing (800) 437-2398 or (647) 792-1240, if outside of
North America, and quoting conference ID code 1825962.
- By accessing the webcast, which will be available on Teekay
Tankers’ website at www.teekay.com (the archive will remain on
the website for a period of one year).
An accompanying Second Quarter of 2020 Earnings
Presentation will also be available at www.teekay.com in
advance of the conference call start time.
About Teekay Tankers
Teekay Tankers currently has a fleet of 52
double-hull tankers (including 26 Suezmax tankers, 17 Aframax
tankers and nine LR2 product tankers), and also has four time
chartered-in tankers. Teekay Tankers’ vessels are typically
employed through a mix of short- or medium-term fixed-rate time
charter contracts and spot tanker market trading. Teekay Tankers
also owns a Very Large Crude Carrier (VLCC) through a 50
percent-owned joint venture. In addition, Teekay Tankers owns a
ship-to-ship transfer business that performs full service
lightering and lightering support operations in the U.S. Gulf and
Caribbean. Teekay Tankers was formed in December 2007 by Teekay
Corporation as part of its strategy to expand its conventional oil
tanker business.
Teekay Tankers’ Class A common stock trades on
the New York Stock Exchange under the symbol “TNK.”
For Investor Relations enquiries contact:
Ryan HamiltonTel: +1 (604) 609-2963Website:
www.teekay.com
Definitions and Non-GAAP Financial Measures
This release includes various financial measures
that are non-GAAP financial measures as defined under the rules of
the Securities and Exchange Commission (SEC). These non-GAAP
financial measures, which include Adjusted Net Income (Loss), Free
Cash Flow, Net Revenues, and Adjusted EBITDA, are intended to
provide additional information and should not be considered
substitutes for measures of performance prepared in accordance with
GAAP. In addition, these measures do not have standardized
definitions across companies, and therefore may not be comparable
to similar measures presented by other companies. These non-GAAP
measures are used by management, and the Company believes that
these supplemental metrics assist investors and other users of its
financial reports in comparing financial and operating performance
of the Company across reporting periods and with other
companies.
Non-GAAP Financial Measures
Adjusted net income (loss) excludes items of
income or loss from GAAP net income (loss) that are typically
excluded by securities analysts in their published estimates of the
Company’s financial results. The Company believes that certain
investors use this information to evaluate the Company’s financial
performance, as does management. Please refer to Appendix A of this
release for a reconciliation of this non-GAAP financial measure to
net income (loss), the most directly comparable GAAP measure
reflected in the Company’s consolidated financial statements.
Adjusted EBITDA represents net income (loss)
before interest, taxes, and depreciation and amortization and is
adjusted to exclude certain items whose timing or amount cannot be
reasonably estimated in advance or that are not considered
representative of core operating performance. Such adjustments
include foreign exchange gains and losses, gains and losses on sale
of vessels, unrealized credit loss adjustments, unrealized gains
and losses on derivative instruments and any write-offs and certain
other income or expenses. Adjusted EBITDA also excludes realized
gains or losses on interest rate swaps as management, in assessing
the Company’s performance, views these gains or losses as an
element of interest expense and realized gains or losses on
derivative instruments resulting from amendments or terminations of
the underlying instruments. Consolidated Adjusted EBITDA represents
Adjusted EBITDA from vessels that are consolidated on the Company’s
financial statements. Adjusted EBITDA from Equity-Accounted
Joint Venture represents the Company’s proportionate share of
Adjusted EBITDA from its equity-accounted joint venture, and as a
result, the Company does not have the unilateral ability to
determine whether the cash generated by its equity-accounted joint
venture is retained within the entity in which the Company holds
the equity-accounted joint venture or distributed to the Company
and other owners. In addition, the Company does not control the
timing of any such distributions to the Company and other owners.
Adjusted EBITDA is a non-GAAP financial measure used by certain
investors and management to measure the operational performance of
companies. Total Adjusted EBITDA represents Consolidated Adjusted
EBITDA plus Adjusted EBITDA from Equity-Accounted Joint Venture.
Please refer to Appendices C and D of this release for
reconciliations of Adjusted EBITDA to net income (loss) and equity
income (loss), respectively, which are the most directly comparable
GAAP measures reflected in the Company’s consolidated financial
statements.
Free cash flow (FCF) represents net income
(loss), plus depreciation and amortization, unrealized losses from
derivative instruments, loss on sales of vessels, equity loss from
the equity-accounted joint venture, and any write-offs and certain
other non-cash non-recurring items, less unrealized gains from
derivative instruments, gain on sales of vessels, equity income
from the equity-accounted joint venture and certain other non-cash
items. The Company includes FCF from equity-accounted joint venture
as a component of its FCF. FCF from the equity-accounted joint
venture represents the Company’s proportionate share of FCF from
its equity-accounted joint venture. The Company does not control
its equity-accounted joint venture, and as a result, the Company
does not have the unilateral ability to determine whether the cash
generated by its equity-accounted joint venture is retained within
the entity in which the Company holds the equity-accounted joint
venture or distributed to the Company and other owners. In
addition, the Company does not control the timing of such
distributions to the Company and other owners. Consequently,
readers are cautioned when using FCF as a liquidity measure as the
amount contributed from FCF from the equity-accounted joint venture
may not be available to the Company in the periods such FCF is
generated by the equity-accounted joint venture. FCF is a non-GAAP
financial measure used by certain investors and management to
evaluate the Company’s financial and operating performance and to
assess the Company’s ability to generate cash sufficient to repay
debt, pay dividends and undertake capital and dry-dock
expenditures. Please refer to Appendix B to this release for a
reconciliation of this non-GAAP financial measure to net income
(loss), the most directly comparable GAAP financial measure
reflected in the Company’s consolidated financial statements.
Net revenues represent revenues less voyage
expenses. Because the amount of voyage expenses the Company incurs
for a particular charter depends upon the type of the charter, the
Company uses net revenues to improve the comparability between
periods of reported revenues that are generated by the different
types of charters and contracts. The Company principally uses net
revenues, a non-GAAP financial measure, because the Company
believes it provides more meaningful information about the
deployment of the Company’s vessels and their performance than does
revenues, the most directly comparable financial measure under
GAAP.
Teekay Tankers Ltd.Summary Consolidated
Statements of Income (Loss)(in thousands of U.S. dollars,
except share and per share data)
| |
|
Three Months Ended |
Six Months Ended |
| |
|
June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
| |
|
2020 |
2020 |
2019 (1) |
2020 |
2019 (1) |
| |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
| |
|
|
|
|
|
|
| Voyage charter
revenues (2) |
207,926 |
|
317,478 |
|
191,495 |
|
525,404 |
|
413,572 |
|
| Time-charter
revenues |
34,986 |
|
15,567 |
|
1,496 |
|
50,553 |
|
4,906 |
|
| Other
revenues (3) |
3,580 |
|
8,855 |
|
14,016 |
|
12,435 |
|
26,690 |
|
| Total
revenues |
246,492 |
|
341,900 |
|
207,007 |
|
588,392 |
|
445,168 |
|
| |
|
|
|
|
|
|
| Voyage expenses
(2) |
(61,558 |
) |
(119,241 |
) |
(97,398 |
) |
(180,799 |
) |
(200,397 |
) |
| Vessel operating
expenses |
(46,218 |
) |
(50,649 |
) |
(53,600 |
) |
(96,867 |
) |
(108,187 |
) |
| Time-charter hire
expenses |
(9,296 |
) |
(9,879 |
) |
(10,792 |
) |
(19,175 |
) |
(20,240 |
) |
| Depreciation and
amortization |
(29,546 |
) |
(29,632 |
) |
(30,658 |
) |
(59,178 |
) |
(60,523 |
) |
| General and
administrative expenses |
(9,784 |
) |
(9,286 |
) |
(9,508 |
) |
(19,070 |
) |
(18,673 |
) |
| Gain (loss) on
sale of assets and |
|
|
|
|
|
|
write-down of assets |
2,896 |
|
(3,087 |
) |
— |
|
(191 |
) |
— |
|
| Income
from operations |
92,986 |
|
120,126 |
|
5,051 |
|
213,112 |
|
37,148 |
|
| |
|
|
|
|
|
| Interest
expense |
(13,492 |
) |
(15,135 |
) |
(16,607 |
) |
(28,627 |
) |
(33,549 |
) |
| Interest
income |
567 |
|
256 |
|
221 |
|
823 |
|
586 |
|
| Realized and
unrealized loss |
|
|
|
|
|
|
on derivative instruments (4) |
(589 |
) |
(827 |
) |
(1,778 |
) |
(1,416 |
) |
(2,625 |
) |
| Equity income
(loss) (5) |
3,188 |
|
1,940 |
|
(169 |
) |
5,128 |
|
584 |
|
| Other
income |
940 |
|
1,143 |
|
614 |
|
2,083 |
|
249 |
|
| Net income
(loss) before income tax |
83,600 |
|
107,503 |
|
(12,668 |
) |
191,103 |
|
2,393 |
|
| |
|
|
|
|
|
| Income
tax recoveries (expenses) (6) |
14,598 |
|
(664 |
) |
(1,639 |
) |
13,934 |
|
(4,253 |
) |
|
Net income (loss) |
98,198 |
|
106,839 |
|
(14,307 |
) |
205,037 |
|
(1,860 |
) |
| |
|
|
|
|
|
| Earnings (loss)
per share attributable |
|
|
|
|
|
| |
to shareholders of Teekay
Tankers |
|
|
|
|
|
|
|
- Basic (7) |
2.91 |
|
3.17 |
|
(0.43 |
) |
6.08 |
|
(0.06 |
) |
| |
- Diluted (7) |
2.89 |
|
3.15 |
|
(0.43 |
) |
6.04 |
|
(0.06 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Weighted-average
number of total common |
|
|
|
|
| |
shares outstanding |
|
|
|
|
|
| |
- Basic (7) |
33,727,978 |
|
33,669,967 |
|
33,623,800 |
|
33,698,972 |
|
33,604,397 |
|
| |
- Diluted (7) |
33,978,730 |
|
33,946,292 |
|
33,623,800 |
|
33,962,511 |
|
33,604,397 |
|
| |
|
|
|
|
|
|
| Number of
outstanding shares of common stock at the end of the period
(7) |
33,738,143 |
|
33,721,161 |
|
33,623,800 |
|
33,738,143 |
|
33,623,800 |
|
(1) Voyage expenses incurred that are recoverable
from the Company’s customers in connection with its voyage charter
contracts are reflected in voyage charter revenues and voyage
expenses. The Company recast the results for the three and six
months ended June 2019 to be consistent with the presentation in
the 2019 20-F and this report for the three months ended June 30,
2020. This had the impact of increasing both voyage charter
revenues and voyage expenses by $4.7 million and $10.4 million,
respectively, for the three and six months ended June 30, 2019.
(2) Voyage charter revenues include revenues earned
from full service lightering activities. Voyage expenses include
certain costs associated with full service lightering activities,
which include: short-term in-charter expenses, bunker fuel expenses
and other port expenses totaling $12.7 million, $18.7 million and
$19.5 million for the three months ended June 30, 2020, March 31,
2020 and June 30, 2019, respectively, and $31.4 million and $30.9
million for the six months ended June 30, 2020 and June 30, 2019,
respectively.
(3) Other revenues include lightering support and
liquefied natural gas services revenue, revenue earned from the
Company’s responsibilities in employing the vessels subject to the
RSAs, and bunker commissions earned. In April 2020, the Company
sold a portion of its oil and gas ship-to-ship transfer support
business, including its gas terminal management services.
(4) Includes realized gains on interest rate swaps
of $0.1 million, $0.5 million and $0.8 million for the three months
ended June 30, 2020, March 31, 2020 and June 30, 2019,
respectively, and realized gains of $0.6 million and $1.8 million
for the six months ended June 30, 2020 and June 30, 2019,
respectively. The Company also recognized realized losses of $0.2
million for the three and six months ended June 30, 2020, relating
to its forward freight agreements.
(4) Equity income relates to the Company’s 50
percent interest in the High-Q Investment Ltd. (High-Q) joint
venture, which owns one VLCC tanker.
(5) Income tax recoveries for the three months ended
June 30, 2020 includes a reduction in freight tax accruals of $15.2
million related to periods prior to 2020.
(6) The number of shares and per share amounts,
including comparative figures, have been adjusted to reflect the
changes resulting from the one-for-eight reverse stock split which
took effect on November 25, 2019.
Teekay Tankers Ltd.Summary Consolidated
Balance Sheets(in thousands of U.S. dollars)
| |
As at |
As at |
As at |
| |
June 30, |
March 31, |
December 31, |
| |
2020 |
2020 |
2019 |
| |
(unaudited) |
(unaudited) |
(unaudited) |
| ASSETS |
|
|
|
|
|
|
|
Cash and cash equivalents |
167,907 |
|
|
203,325 |
|
|
88,824 |
|
|
| Restricted cash |
4,766 |
|
|
3,318 |
|
|
3,071 |
|
|
| Accounts receivable |
88,663 |
|
|
108,326 |
|
|
95,648 |
|
|
| Bunker and lube oil
inventory |
30,885 |
|
|
50,430 |
|
|
49,790 |
|
|
| Prepaid expenses |
12,103 |
|
|
11,841 |
|
|
10,288 |
|
|
| Due from affiliates |
2,440 |
|
|
463 |
|
|
697 |
|
|
| Current portion of derivative
assets |
— |
|
|
— |
|
|
577 |
|
|
| Assets held for sale (1) |
— |
|
|
50,818 |
|
|
65,458 |
|
|
| Accrued
revenue |
42,153 |
|
|
66,664 |
|
|
106,872 |
|
|
|
Total current assets |
348,917 |
|
|
495,185 |
|
|
421,225 |
|
|
| Restricted cash –
long-term |
3,437 |
|
|
3,437 |
|
|
3,437 |
|
|
| Vessels and equipment –
net |
1,161,097 |
|
|
1,157,003 |
|
|
1,223,085 |
|
|
| Vessels related to finance
leases – net |
511,879 |
|
|
519,210 |
|
|
527,081 |
|
|
| Operating lease right-of-use
assets |
10,758 |
|
|
15,511 |
|
|
19,560 |
|
|
| Investment in and advances to
equity-accounted joint venture |
29,740 |
|
|
28,051 |
|
|
28,112 |
|
|
| Derivative assets |
— |
|
|
— |
|
|
82 |
|
|
| Other non-current assets |
1,453 |
|
|
1,667 |
|
|
1,923 |
|
|
| Intangible assets – net |
2,259 |
|
|
2,401 |
|
|
2,545 |
|
|
| Goodwill |
2,426 |
|
|
2,426 |
|
|
2,426 |
|
|
|
Total assets |
2,071,966 |
|
|
2,224,891 |
|
|
2,229,476 |
|
|
| |
|
|
|
|
|
|
| LIABILITIES AND
EQUITY |
|
|
|
|
|
|
| Accounts payable and accrued
liabilities |
100,012 |
|
|
106,820 |
|
|
130,713 |
|
|
| Short-term debt |
10,000 |
|
|
55,000 |
|
|
50,000 |
|
|
| Current portion of long-term
debt |
27,549 |
|
|
29,910 |
|
|
43,573 |
|
|
| Current portion of derivative
liabilities |
414 |
|
|
234 |
|
|
86 |
|
|
| Current obligations related to
finance leases |
26,281 |
|
|
25,775 |
|
|
25,357 |
|
|
| Current portion of operating
lease liabilities |
10,986 |
|
|
14,049 |
|
|
16,290 |
|
|
| Liabilities associated with
assets held for sale (1) |
— |
|
|
2,535 |
|
|
2,980 |
|
|
| Due to affiliates |
2,091 |
|
|
4,677 |
|
|
2,139 |
|
|
| Other current liabilities |
8,485 |
|
|
5,923 |
|
|
8,567 |
|
|
|
Total current liabilities |
185,818 |
|
|
244,923 |
|
|
279,705 |
|
|
| Long-term debt |
285,389 |
|
|
446,766 |
|
|
516,106 |
|
|
| Long-term obligations related
to finance leases |
376,238 |
|
|
382,905 |
|
|
389,431 |
|
|
| Long-term operating lease
liabilities |
417 |
|
|
1,462 |
|
|
3,270 |
|
|
| Other long-term
liabilities |
27,516 |
|
|
51,114 |
|
|
51,044 |
|
|
| Derivative liabilities |
789 |
|
|
494 |
|
|
— |
|
|
|
Equity |
1,195,799 |
|
|
1,097,227 |
|
|
989,920 |
|
|
|
Total liabilities and equity |
2,071,966 |
|
|
2,224,891 |
|
|
2,229,476 |
|
|
| Net
debt (2) |
549,347 |
|
|
730,276 |
|
|
929,135 |
|
|
(1) On April 30, 2020, the Company finalized the
sale of a portion of its oil and gas ship-to-ship transfer support
business, which also provides gas terminal management services, for
$27.1 million. The sale of a portion of the ship-to-ship support
services business and gas terminal management business, including
cash, cash equivalents and restricted cash of $2.4 million and $1.5
million, was classified as held for sale as at March 31, 2020 and
December 31, 2019, respectively. Also included in assets held for
sale at March 31, 2020 was one Suezmax vessel (December 31, 2019:
two Suezmax vessels), which was no longer classified as held for
sale at June 30, 2020.
(2) Net debt is a non-GAAP financial measure and
represents short-term, current and long-term debt and current and
long-term obligations related to finance leases less cash and cash
equivalents and restricted cash.
Teekay Tankers Ltd.Summary Consolidated
Statements of Cash Flows(in thousands of U.S. dollars)
| |
|
Six Months Ended |
| |
|
June 30, |
June 30, |
| |
|
2020 |
2019 |
| |
|
(unaudited) |
(unaudited) |
| Cash, cash
equivalents and restricted cash provided by (used for) |
|
|
|
|
| OPERATING
ACTIVITIES |
|
|
|
|
|
Net income (loss) |
205,037 |
|
|
(1,860 |
) |
|
| Non-cash
items: |
|
|
|
|
|
Depreciation and amortization |
59,178 |
|
|
60,523 |
|
|
|
Loss on sale of assets and write-down of assets |
191 |
|
|
— |
|
|
|
Unrealized loss on derivative instruments |
1,776 |
|
|
4,366 |
|
|
|
Equity income |
(5,128 |
) |
|
(584 |
) |
|
|
Income tax (recovery) expense |
(12,873 |
) |
|
3,795 |
|
|
|
Other |
(8 |
) |
|
2,743 |
|
|
| Change in
operating assets and liabilities |
60,379 |
|
|
23,198 |
|
|
|
Expenditures for dry docking |
(3,681 |
) |
|
(27,815 |
) |
|
|
Net operating cash flow |
304,871 |
|
|
64,366 |
|
|
| |
|
|
|
|
| FINANCING
ACTIVITIES |
|
|
|
|
| Proceeds from
short-term debt |
205,000 |
|
|
65,000 |
|
|
| Proceeds from
long-term debt, net of issuance costs |
477,822 |
|
|
16,421 |
|
|
| Scheduled
repayments of long-term debt |
(8,812 |
) |
|
(50,800 |
) |
|
| Prepayments of
long-term debt |
(717,368 |
) |
|
(109,688 |
) |
|
| Prepayments of
short-term debt |
(245,000 |
) |
|
(50,000 |
) |
|
| Proceeds from
financing related to sales and leaseback of vessels |
— |
|
|
63,720 |
|
|
| Scheduled
repayments of obligations related to finance leases |
(12,269 |
) |
|
(12,073 |
) |
|
|
Other |
(562 |
) |
|
(126 |
) |
|
|
Net financing cash flow |
(301,189 |
) |
|
(77,546 |
) |
|
| |
|
|
|
|
| INVESTING
ACTIVITIES |
|
|
|
|
| Proceeds from sale
of assets |
75,214 |
|
|
— |
|
|
| Expenditures for
vessels and equipment |
(3,076 |
) |
|
(6,545 |
) |
|
| Loan
repayments from equity-accounted joint venture |
3,500 |
|
|
— |
|
|
|
Net investing cash flow |
75,638 |
|
|
(6,545 |
) |
|
| |
|
|
|
|
| Increase
(decrease) in cash, cash equivalents and restricted cash |
79,320 |
|
|
(19,725 |
) |
|
| Cash,
cash equivalents and restricted cash, beginning of the period |
96,790 |
|
|
60,507 |
|
|
|
Cash, cash equivalents and restricted cash, end of the
period |
176,110 |
|
|
40,782 |
|
|
Teekay Tankers Ltd.Appendix A -
Reconciliation of Non-GAAP Financial
MeasuresAdjusted Net Income (Loss)(in
thousands of U.S. dollars, except per share amounts)
| |
|
|
Three Months Ended |
| |
|
|
June 30, 2020 |
|
June 30, 2019 |
|
| |
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
$ |
$ Per Share(1) |
|
$ |
$ Per Share(1) |
|
| Net
income (loss) - GAAP basis |
98,198 |
|
|
$ |
2.91 |
|
|
(14,307 |
) |
|
($ |
0.43 |
) |
|
| |
|
|
|
|
|
|
|
|
|
| Add (subtract) specific items affecting net
income (loss): |
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets and write-down of assets |
(2,896 |
) |
|
($ |
0.09 |
) |
|
— |
|
|
|
— |
|
|
| |
Unrealized loss on derivative instruments (2) |
475 |
|
|
$ |
0.02 |
|
|
2,578 |
|
|
$ |
0.08 |
|
|
|
|
Other
(3) |
(15,077 |
) |
|
($ |
0.45 |
) |
|
(413 |
) |
|
($ |
0.01 |
) |
|
|
Total adjustments |
(17,498 |
) |
|
($ |
0.52 |
) |
|
2,165 |
|
|
$ |
0.07 |
|
|
| Adjusted
net income (loss) attributable to shareholders of |
|
|
|
|
|
|
|
|
|
|
Teekay Tankers |
80,700 |
|
|
$ |
2.39 |
|
|
(12,142 |
) |
|
($ |
0.36 |
) |
|
(1) Basic per share amounts.
(2) Reflects unrealized losses due to the changes in
the mark-to-market value of derivative instruments that are not
designated as hedges for accounting purposes, including unrealized
gains or losses on interest rate swaps and forward freight
agreements.
(3) The amount recorded for the three months ended
June 30, 2020 primarily relates to a reduction to freight tax
accruals of prior years and unrealized foreign exchange losses. The
amount recorded for the three months ended June 30, 2019 primarily
relates to unrealized foreign exchange gains and debt issuance
costs that were written off in connection with the refinancing of
the Company's debt facilities.
Teekay Tankers Ltd.Appendix B -
Reconciliation of Non-GAAP Financial MeasuresFree
Cash Flow(in thousands of U.S. dollars, except share
data)
| |
|
|
Three Months Ended |
| |
|
|
June 30, 2020 |
June 30, 2019 |
| |
|
|
(unaudited) |
(unaudited) |
| |
|
|
|
|
|
|
|
|
Net
income (loss) - GAAP basis |
98,198 |
|
|
(14,307 |
) |
|
| |
|
|
|
|
|
|
| |
Add: |
|
|
|
|
|
|
|
Depreciation and amortization |
29,546 |
|
|
30,658 |
|
|
| |
|
Proportionate share of free
cash flow from equity-accounted joint venture |
3,664 |
|
|
285 |
|
|
| |
|
Unrealized loss on derivative
instruments |
475 |
|
|
2,578 |
|
|
| |
|
Equity loss (1) |
— |
|
|
169 |
|
|
| |
|
|
|
|
|
|
| |
Less: |
|
|
|
|
| |
|
Equity income (1) |
(3,188 |
) |
|
— |
|
|
| |
|
Gain on sale of assets and
write-down of assets |
(2,896 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
| Free cash
flow |
125,799 |
|
|
19,383 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding for the period
- basic |
33,727,978 |
|
|
33,623,800 |
|
|
(1) Equity income relates to the Company’s 50
percent interest in the High-Q joint venture, which owns one VLCC
tanker.
Teekay Tankers Ltd.Appendix C -
Reconciliation of Non-GAAP Financial MeasuresTotal
Adjusted EBITDA(in thousands of U.S. dollars)
|
|
Three Months Ended |
| |
June 30, 2020 |
June 30, 2019 |
| |
(unaudited) |
(unaudited) |
|
Net income (loss) - GAAP basis |
98,198 |
|
(14,307 |
) |
|
Depreciation and amortization |
29,546 |
|
30,658 |
|
|
Interest expense, net of interest income |
12,925 |
|
16,386 |
|
|
Income tax (recovery) expense |
(14,598 |
) |
1,639 |
|
|
EBITDA |
126,071 |
|
34,376 |
|
|
|
|
|
| Add (subtract) specific income
statement items affecting EBITDA: |
|
|
|
Foreign exchange loss (gain) |
87 |
|
(595 |
) |
|
Gain on sale of assets and write-down of assets |
(2,896 |
) |
— |
|
|
Realized gain on interest rate swaps |
(86 |
) |
(829 |
) |
|
Unrealized loss on derivative instruments |
475 |
|
2,578 |
|
|
Equity (income) loss |
(3,188 |
) |
169 |
|
|
Consolidated adjusted EBITDA |
120,463 |
|
35,699 |
|
|
Adjusted EBITDA from equity-accounted joint venture (See Appendix
D) |
3,778 |
|
498 |
|
|
Total Adjusted EBITDA |
124,241 |
|
36,197 |
|
Teekay Tankers Ltd.Appendix D -
Reconciliation of Non-GAAP Financial
MeasuresAdjusted EBITDA from Equity-Accounted
Joint Venture(in thousands of U.S. dollars)
| |
Three Months Ended |
| |
June 30, 2020 |
June 30, 2019 |
| |
(unaudited) |
(unaudited) |
| |
At |
Company's |
At |
Company's |
| |
100 |
% |
Portion (1) |
100 |
% |
Portion (1) |
|
Revenues |
8,113 |
|
4,056 |
|
1,750 |
|
875 |
|
| Vessel and other operating
expenses |
(557 |
) |
(278 |
) |
(754 |
) |
(377 |
) |
| Depreciation and
amortization |
(952 |
) |
(476 |
) |
(908 |
) |
(454 |
) |
|
Income from vessel operations of equity-accounted joint
venture |
6,604 |
|
3,302 |
|
88 |
|
44 |
|
| |
|
|
|
|
| Net interest expense |
(228 |
) |
(114 |
) |
(427 |
) |
(213 |
) |
|
Equity income (loss) of equity-accounted joint
venture |
6,376 |
|
3,188 |
|
(339 |
) |
(169 |
) |
| |
|
|
|
|
| Equity income (loss) of
equity-accounted joint venture |
6,376 |
|
3,188 |
|
(339 |
) |
(169 |
) |
|
Depreciation and amortization |
952 |
|
476 |
|
908 |
|
454 |
|
|
Interest expense, net of interest income |
228 |
|
114 |
|
427 |
|
213 |
|
|
EBITDA from equity-accounted joint venture |
7,556 |
|
3,778 |
|
996 |
|
498 |
|
| |
|
|
|
|
|
Adjusted EBITDA from equity-accounted joint
venture |
7,556 |
|
3,778 |
|
996 |
|
498 |
|
(1) The Company’s proportionate share of its
equity-accounted joint venture is 50 percent.
Forward Looking Statements
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, among other
things, statements regarding: crude oil and refined product tanker
market fundamentals, including the balance of supply and demand in
the oil and tanker markets and the volatility of such markets;
forecasts of worldwide tanker fleet growth or contraction and
newbuilding tanker deliveries and vessel scrapping; estimated
growth in global oil demand and supply; future tanker rates; future
OPEC+ and non-OPEC oil production or oil supply cuts, including the
resulting impact on export volumes; floating storage demand and
unwinding of existing floating storage and the resulting impact on
tanker rates; expected changes in global refinery throughput; the
impact of the COVID-19 outbreak and related developments on the
Company’s business and tanker and oil market fundamentals; future
free cash flow breakeven levels; the Company's ability to complete
remaining crew changes and anticipated timing thereof; the
Company’s continued operation of its oil ship-to-ship transfer
support services in North America and the Caribbean and the
synergies of that business with the Company’s core Full Service
Lightering business; the Company’s liquidity and market position;
the Company’s strategic priorities; and the Company’s ability to
deal with potential market volatility and create shareholder value.
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 tanker
rates; changes in the production of, or demand for, oil or refined
products; changes in trading patterns significantly affecting
overall vessel tonnage requirements; OPEC+ and non-OPEC production
and supply levels; the duration and extent of the COVID-19 outbreak
and any resulting effects on the markets in which the Company
operates; the impact of the COVID-19 outbreak on the Company’s
ability to maintain safe and efficient operations; the impact of
geopolitical tensions and changes in global economic conditions;
greater or less than anticipated levels of tanker newbuilding
orders and deliveries and greater or less than anticipated rates of
tanker scrapping; the potential for early termination of charter
contracts of existing vessels in the Company's fleet; the inability
of charterers to make future charter payments; the inability of the
Company to renew or replace charter contracts; changes in global
oil prices; changes in applicable industry laws and regulations and
the timing of implementation of new laws and regulations and the
impact of such changes, including IMO 2020 and IMO 2030; increased
costs; and other factors discussed in Teekay Tankers’ filings from
time to time with the United States Securities and Exchange
Commission, including its Annual Report on Form 20-F for the fiscal
year ended December 31, 2019. 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.
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