Highlights
Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE:TNK)
today reported the Company's results for the quarter ended
June 30, 2018:
|
Three Months Ended |
(in thousands of U.S. dollars, except per share
data) |
June 30, 2018 |
March 31, 2018 |
June 30, 2017 |
GAAP FINANCIAL COMPARISON |
|
|
|
|
|
|
Total revenues |
171,659 |
|
|
168,465 |
|
|
108,789 |
|
|
(Loss) income from operations |
(13,415 |
) |
|
(8,421 |
) |
|
1,587 |
|
|
Net loss |
(27,413 |
) |
|
(19,153 |
) |
|
(37,477 |
) |
|
Loss per share |
(0.10 |
) |
|
(0.07 |
) |
|
(0.21 |
) |
|
NON-GAAP FINANCIAL COMPARISON |
|
|
|
|
|
Total cash flow from vessel operations (1) |
16,554 |
|
|
22,312 |
|
|
27,981 |
|
|
Adjusted loss (1) |
(28,743 |
) |
|
(21,976 |
) |
|
(7,068 |
) |
|
Adjusted loss per share (1) |
(0.11 |
) |
|
(0.08 |
) |
|
(0.04 |
) |
|
Free cash flow (1) |
1,980 |
|
|
7,862 |
|
|
18,711 |
|
|
(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) These financings remain subject to customary
conditions precedent and the execution of definitive
documentation.
GAAP net loss and non-GAAP adjusted net loss for
the second quarter of 2018 compared to the same period of the prior
year were primarily affected by lower average spot tanker rates and
the expiry of time-charter out contracts for various vessels which
subsequently traded in the spot market at lower rates. GAAP net
loss in the second quarter of 2017 included an impairment on the
Company's investment in Tanker Investments Ltd. (TIL).
Compared to the first quarter of 2018, GAAP net
loss and non-GAAP adjusted net loss for the second quarter of 2018
were affected by lower average spot tanker rates.
CEO Commentary
“Including our sale-leaseback transaction
previously-announced in May, we have signed term sheets
for three financings which, upon completion, are expected
to increase our net liquidity position by approximately $110
million and extend our debt maturity profile,” commented Kevin
Mackay, Teekay Tankers’ President and Chief Executive
Officer. “In June 2018, we signed term
sheets for a sale-leaseback financing transaction relating to
six Aframax tankers and a loan to
fund working capital in our revenue sharing arrangement (RSA)
pooling operations.”
“While OPEC supply cuts and a further drawdown
of global oil inventories continued to weigh on crude tanker rates
during the second quarter of 2018, our fixed charter cover and full
service lightering business continued to support our results,”
commented Mr. Mackay. “Looking ahead, while we expect the tanker
market to remain under pressure in the near-term, we believe that
an inflection point will be reached in the later part of
2018 due to improving demand fundamentals and slowing fleet
supply growth resulting from elevated scrapping and
a shrinking mid-size tanker orderbook. The improved
tanker market is expected to be further boosted by positive demand
developments ahead of the new IMO fuel regulations in 2020.”
Summary of Recent Developments
Financing Transactions
In June 2018, Teekay Tankers signed a term sheet
for a sale-leaseback financing transaction relating to six modern
Aframax tankers, which is in addition to the signed term sheet for
a sale-leaseback transaction for seven mid-sized tankers announced
in May 2018.
In July 2018, Teekay Tankers signed a term sheet
for a loan to finance working capital for the Company's RSA pool
management operations.
Upon completion, these three transactions are
expected to increase liquidity by approximately $110 million after
the repayment of outstanding debt related to the 13 vessels. These
transactions are targeted to be completed in the third quarter of
2018 and remain subject to customary conditions precedent and the
execution of definitive documentation.
Secured Additional Fixed-Rate Charter
In July 2018, Teekay Tankers entered into a time
charter-out contract with a key customer for one Suezmax tanker for
a firm period of 12 months, plus an extension option, which is
expected to commence by mid-August 2018. The new charter contract
is expected to add approximately $6.4 million in fixed revenues
over the initial 12-month period.
Tanker Market
Crude tanker rates remained at cyclical lows in
the second quarter of 2018 due to continued OPEC supply cuts and a
further drawdown in global oil inventories. OPEC crude oil supply
fell to 31.6 million barrels per day (mb/d) in April 2018, the
lowest level in over three years. The decline in OPEC supply was
due to both high compliance with crude oil supply cuts and
plummeting output from Venezuela, where supply is at the lowest
level since the early 1950s. Firm oil demand, coupled with OPEC
supply cuts, resulted in a further decline in global oil
inventories during the second quarter of 2018, with OECD
inventories falling below the five-year average for the first time
since 2014. The large drawdown of global oil inventories seen over
the past 18 months has been negative for crude tankers, as it has
reduced import demand.
Although the tanker market has endured a very
weak first half of the year, the Company remains encouraged by
underlying tanker market fundamentals. On the fleet supply side,
the global tanker fleet experienced virtually zero net fleet growth
in the first six months of 2018. A total of 15.7 million deadweight
tonnes (mdwt) of vessels were removed from the fleet in the first
half of 2018 while 15.8 mdwt of newbuildings entered the fleet.
Looking ahead, the Company expects that fleet growth in the
remainder of 2018 will remain low due to elevated scrapping levels
and a shrinking orderbook for mid-size tankers. The Company is now
forecasting approximately 2.5 percent net Suzemax fleet growth and
1.5 percent net Aframax/Long Range 2 (LR2) fleet growth in 2018 and
approximately 1.5 percent net fleet growth in both fleets during
2019.
Global oil demand remains firm with forecast
growth of 1.6 mb/d in 2018 and a further 1.5 mb/d in 2019 (average
of IEA, EIA and OPEC forecasts). In response to this strong demand,
and given that oil inventories have now fallen below five-year
average levels, OPEC recently announced that it will increase oil
production in order to keep the markets adequately supplied to
prevent oil prices from rising too high. OPEC’s intention is to
return to 100 percent compliance with production cuts, having been
well above 100 percent through the first six months of the
year. This implies an increase in OPEC crude oil production
of up to 1 mb/d from current levels. An increase in OPEC oil
production through the second half of the year would be positive
for tanker demand, although uncertainty remains over the impact of
a potential decline in Iranian exports due to U.S. sanctions, which
could offset some of these gains.
Looking further ahead, the Company believes the
new IMO regulations on sulphur content in bunker fuels due to come
into force on January 1, 2020, could be positive for tanker demand.
Some of the potential impacts that would benefit the tanker market
include:
- An increase in crude tanker trade due to increased refinery
utilization and throughput in order to produce more low-sulphur
fuels;
- An increase in clean tanker trade due to the increased
production of low-sulphur fuel and the need to deliver these fuels
to global bunker markets; and
- Floating storage demand for both clean products (building
inventories of low-sulphur fuel prior to 2020) and dirty products
(a need to store excess fuel oil post-2020).
In summary, the tanker market has gone through a
period of very weak freight rates during the first half of 2018,
due primarily to OPEC supply cuts and a drawdown in global oil
inventories. However, the Company believes that an inflection point
will be reached later in 2018 due to improving demand fundamentals
and slow fleet supply growth. This is expected to lead to an
improved tanker market, further boosted by positive demand
developments ahead of the new IMO fuel regulations in 2020.
Operating Results
The following table highlights the operating
performance of the Company’s time-charter vessels and spot vessels
trading in RSAs, voyage charters and full service lightering, in
each case measured in net revenues(1) per revenue day, or
time-charter equivalent (TCE) rates, before off-hire bunker
expenses:
|
Three Months Ended |
|
June 30, 2018(i) |
March 31, 2018(i) |
June 30, 2017(i) |
Time Charter-Out Fleet |
|
|
|
|
|
Suezmax revenue days |
|
182 |
|
|
295 |
|
|
540 |
Suezmax TCE per revenue day |
$ |
21,508 |
|
$ |
20,236 |
|
$ |
25,694 |
Aframax revenue days |
|
512 |
|
|
597 |
|
|
544 |
Aframax TCE per revenue day |
$ |
21,269 |
|
$ |
21,024 |
|
$ |
22,621 |
LR2 revenue days |
|
137 |
|
|
179 |
|
|
200 |
LR2 TCE per revenue day |
$ |
17,214 |
|
$ |
17,162 |
|
$ |
17,371 |
|
|
|
|
|
|
Spot Fleet |
|
|
|
|
|
Suezmax revenue days |
|
2,516 |
|
|
2,375 |
|
|
1,222 |
Suezmax spot TCE per revenue day (ii) |
$ |
12,745 |
|
$ |
12,543 |
|
$ |
16,567 |
Aframax revenue days |
|
1,345 |
|
|
1,156 |
|
|
1,058 |
Aframax spot TCE per revenue day (iii) |
$ |
12,113 |
|
$ |
15,083 |
|
$ |
14,523 |
LR2 revenue days |
|
590 |
|
|
531 |
|
|
451 |
LR2 spot TCE per revenue day (iv) |
$ |
10,854 |
|
$ |
11,973 |
|
$ |
14,180 |
|
|
|
|
|
|
Total Fleet |
|
|
|
|
|
Suezmax revenue days |
|
2,698 |
|
|
2,670 |
|
|
1,762 |
Suezmax TCE per revenue day |
$ |
13,336 |
|
$ |
13,394 |
|
$ |
19,363 |
Aframax revenue days |
|
1,857 |
|
|
1,753 |
|
|
1,602 |
Aframax TCE per revenue day |
$ |
14,638 |
|
$ |
17,106 |
|
$ |
17,275 |
LR2 revenue days |
|
727 |
|
|
710 |
|
|
651 |
LR2 TCE per revenue day |
$ |
12,057 |
|
$ |
13,282 |
|
$ |
15,158 |
- 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 represents 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 yet is not employed,
are included in revenue days.
- Includes vessels trading in the Teekay Suezmax RSA and non-pool
voyage charters.
- Includes vessels trading in the Teekay Aframax RSA, Teekay
Aframax Classic RSA, non-pool voyage charters and full service
lightering voyages.
- Includes vessels trading in the Teekay Taurus RSA and non-pool
voyage charters.
(1) Net revenues is a non-GAAP financial measure. Please refer
to "Definitions and Non-GAAP Financial Measures" for a definition
of this term.
Teekay Tankers’ Fleet
The following table summarizes the Company’s
fleet as of August 1, 2018 (including one committed time
charter-out contract for a Suezmax tanker which is expected to
commence by mid-August 2018):
|
Owned and Capital Lease Vessels |
Chartered-in Vessels |
Total |
Fixed-rate: |
|
|
|
Suezmax
Tankers |
2 |
— |
2 |
Aframax
Tankers |
5 |
— |
5 |
LR2 Product
Tanker |
1 |
— |
1 |
Total Fixed-Rate Fleet |
8 |
— |
8 |
Spot-rate: |
|
|
|
Suezmax
Tankers |
28 |
— |
28 |
Aframax
Tankers(i) |
12 |
2 |
14 |
LR2 Product
Tankers |
8 |
— |
8 |
VLCC Tanker(ii) |
1 |
— |
1 |
Total Spot Fleet |
49 |
2 |
51 |
Total Conventional Fleet |
57 |
2 |
59 |
STS Support Vessels |
3 |
3 |
6 |
Total Teekay Tankers' Fleet |
60 |
5 |
65 |
- Includes two Aframax tankers with charter-in contracts that are
scheduled to expire in September 2018 and March 2021.
- The Company’s ownership interest in this vessel is 50
percent.
Liquidity Update
As at June 30, 2018, the Company had total
liquidity of $80.2 million (comprised of $48.5 million in cash and
cash equivalents and $31.7 million in undrawn revolving credit
facilities), compared to total liquidity of $100.7 million as at
March 31, 2018. Teekay Tankers has signed term sheets for two
separate sale-leaseback financing transactions and a working
capital loan, which, upon completion, are expected to increase
Teekay Tankers' liquidity by approximately $110 million. Including
these financings, the Company's pro-forma total liquidity position
would have been approximately $190 million as of June 30, 2018.
These financings transactions are targeted to be completed in the
third quarter of 2018 and remain subject to customary conditions
precedent and the execution of definitive documentation.
Conference Call
The Company plans to host a conference call on
Thursday, August 2, 2018 at 1:00 p.m. (ET) to discuss its results
for the second quarter of 2018. An accompanying investor
presentation will be available on Teekay Tankers’ website at
www.teekay.com 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:
- By dialing (800) 289-0571 or (647) 484-0477, if outside of
North America, and quoting conference ID code 5898868.
- 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 Earnings
Presentation will also be available at www.teekay.com in
advance of the conference call start time.
Availability of 2017 Annual Report
The Company filed its 2017 Annual Report on Form
20-F with the U.S. Securities and Exchange Commission (SEC) on
April 24, 2018. Copies of this report are available on Teekay
Tankers’ website, under “Investors - Teekay Tankers - Financials
& Presentations”, at www.teekay.com. Shareholders may
request a printed copy of this Annual Report, including the
complete audited financial statements, free of charge by contacting
Teekay Tankers’ Investor Relations.
About Teekay Tankers
Teekay Tankers currently owns a fleet of 52
double-hull tankers, including 26 Suezmax tankers, 17 Aframax
tankers, and nine Long Range 2 (LR2) product tankers, and has four
Suezmax tankers related to capital leases and two contracted time
charter-in vessels. Teekay Tankers’ vessels are employed through a
mix of short- or medium-term fixed rate time charter contracts and
spot tanker market trading. The Company 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.
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.”
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 U.S. Securities and Exchange Commission. These non-GAAP
financial measures, which include Adjusted Net (Loss) Income, Free
Cash Flow, Net Revenues and Cash Flow from Vessel Operations, are
intended to provide additional information and should not be
considered a substitute 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.
The Company believes that certain investors use this information to
evaluate the Company’s financial performance, as does
management.
Consolidated Financial
Measures
Adjusted net (loss) income excludes items of
income or loss from GAAP net income 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 (loss)
income, the most directly comparable GAAP measure reflected in the
Company’s consolidated financial statements.
Cash flow from vessel operations (CFVO)
represents income from operations before depreciation and
amortization expense, amortization of in-process revenue contracts,
vessel write-downs, and gains or losses on the sale of vessels and
equipment. CFVO - Consolidated represents CFVO from vessels
that are consolidated on the Company’s financial statements. CFVO -
Equity Investments represents the Company’s proportionate share of
CFVO from its equity-accounted vessels and other investments. The
Company does not control the equity-accounted vessels and
investments, and as a result, the Company does not have the
unilateral ability to determine whether the cash generated by its
equity-accounted vessels and other investments is retained within
the entity in which the Company holds the equity-accounted
investment 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 total CFVO as a liquidity measure
as the amount contributed from CFVO - Equity Investments may not be
available to the Company in the periods such CFVO is generated by
its equity-accounted vessels and other investments. CFVO is a
non-GAAP financial measure used by certain investors and management
to measure the operational financial performance of
companies. Please refer to Appendices C of this release for
reconciliations of these non-GAAP financial measures to income from
vessel operations and income from vessel operations of
equity-accounted investments, respectively, the most directly
comparable GAAP measures reflected in the Company’s consolidated
financial statements.
Free cash flow (FCF) represents net income, plus
depreciation and amortization, unrealized losses from derivatives,
certain non-cash items, FCF from equity-accounted investments, loss
on sales of vessels, and any write-offs or other non-recurring
items, less unrealized gains from derivatives, equity income from
the equity-accounted investments, gain on sales of vessels and
certain other non-cash items. The Company includes FCF from
equity-accounted investments as a component of its FCF. FCF from
the equity-accounted investments represents the Company’s
proportionate share of FCF from its equity-accounted investments.
The Company does not control its equity-accounted investments, and
as a result, the Company does not have the unilateral ability to
determine whether the cash generated by its equity-accounted
investments is retained within the entity in which the Company
holds the equity-accounted investment 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 investments may not be available to the Company in
the periods such FCF is generated by the equity-accounted
investments. 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 (loss) income, the most directly comparable GAAP
financial measure reflected in the Company’s consolidated financial
statements.
Entities under common control represent a
transfer of a business between entities under common control. As a
result, Teekay Tankers consolidated financial statements prior to
the date the interests in these entities were actually acquired by
the Company are retroactively adjusted to include the results of
these entities during the periods they were under common control of
Teekay Corporation and had begun operations.
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.
Important Notice to Reader
Effective January 1, 2018, the Company adopted
the new revenue accounting standard, which had no impact on net
loss but a material effect on revenues and voyage expenses. The
Company previously presented the net allocation for its vessels
participating in RSAs as net pool revenues. The Company has
determined that it is the principal in voyages its vessels perform
that are included in the RSAs. As such, commencing January 1, 2018,
revenue from those voyages is presented in voyage charter revenues
and the difference between this amount and the Company's net
allocation from the RSA is presented as voyage expenses. This had
the effect of increasing both voyage charter revenues and voyage
expenses for the three months ended June 30, 2018, and March 31,
2018 and the six months ended June 30, 2018 by $67.5 million, $61.3
million, and $128.8 million, respectively.
Teekay Tankers Ltd.Summary Consolidated
Statements of 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, |
|
|
|
2018 |
2018 |
2017 |
|
2018 |
2017 |
|
|
|
(unaudited) |
(unaudited) |
(unaudited)(1) |
|
(unaudited) |
(unaudited)(1) |
|
|
|
|
|
|
|
|
|
|
Voyage charter revenues (2)(4) |
144,328 |
|
135,642 |
|
30,140 |
|
|
279,970 |
|
69,484 |
|
|
Time-charter revenues |
17,384 |
|
22,110 |
|
30,091 |
|
|
39,494 |
|
60,421 |
|
|
Other revenues (3) |
9,947 |
|
10,713 |
|
15,458 |
|
|
20,660 |
|
29,080 |
|
|
Net pool revenues (4) |
— |
|
— |
|
33,100 |
|
|
— |
|
80,289 |
|
|
Total revenues |
171,659 |
|
168,465 |
|
108,789 |
|
|
340,124 |
|
239,274 |
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses (2)(4) |
(86,933 |
) |
(79,993 |
) |
(19,430 |
) |
|
(166,926 |
) |
(43,185 |
) |
|
Vessel operating expenses |
(52,652 |
) |
(52,995 |
) |
(46,853 |
) |
|
(105,647 |
) |
(90,991 |
) |
|
Time-charter hire expense |
(5,697 |
) |
(4,683 |
) |
(7,997 |
) |
|
(10,380 |
) |
(21,624 |
) |
|
Depreciation and amortization |
(29,573 |
) |
(29,430 |
) |
(24,415 |
) |
|
(59,003 |
) |
(49,324 |
) |
|
General and administrative expenses |
(9,407 |
) |
(9,785 |
) |
(8,365 |
) |
|
(19,192 |
) |
(17,253 |
) |
|
Gain (loss) on sales of vessels |
170 |
|
— |
|
(142 |
) |
|
170 |
|
(4,569 |
) |
|
Restructuring charge |
(982 |
) |
— |
|
— |
|
|
(982 |
) |
— |
|
|
(Loss) income from operations |
(13,415 |
) |
(8,421 |
) |
1,587 |
|
|
(21,836 |
) |
12,328 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
(13,931 |
) |
(12,729 |
) |
(7,076 |
) |
|
(26,660 |
) |
(14,382 |
) |
|
Interest income |
160 |
|
158 |
|
360 |
|
|
318 |
|
439 |
|
|
Realized and unrealized gain (loss) |
|
|
|
|
|
|
|
on derivative instruments (5) |
1,116 |
|
3,013 |
|
(1,560 |
) |
|
4,129 |
|
(1,099 |
) |
|
Equity (loss) income (6) |
(70 |
) |
694 |
|
(28,027 |
) |
|
624 |
|
(26,900 |
) |
|
Other expense |
(1,273 |
) |
(1,868 |
) |
(2,761 |
) |
|
(3,141 |
) |
(4,150 |
) |
|
Net loss |
(27,413 |
) |
(19,153 |
) |
(37,477 |
) |
|
(46,566 |
) |
(33,764 |
) |
|
|
|
|
|
|
|
|
|
Loss per share attributable |
|
|
|
|
|
|
|
|
to
shareholders of Teekay Tankers |
|
|
|
|
|
|
|
|
- Basic and
Diluted |
(0.10 |
) |
(0.07 |
) |
(0.21 |
) |
|
(0.17 |
) |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of total common |
|
|
|
|
|
|
|
shares
outstanding |
|
|
|
|
|
|
|
|
- Basic and
Diluted (1) |
268,558,556 |
|
268,292,374 |
|
179,197,658 |
|
|
268,426,201 |
|
178,665,430 |
|
|
|
|
|
|
|
|
|
|
|
Number of outstanding shares of common stock at the end of
the period |
268,558,556 |
|
268,558,556 |
|
179,224,094 |
|
|
268,558,556 |
|
179,224,094 |
|
|
(1) Prior to May 31, 2017, the Company owned 50 percent of
Teekay Tanker Operations Ltd. (TTOL) and accounted for this
investment using the equity method of accounting. The Company
acquired the remaining 50 percent of TTOL on May 31, 2017 from
Teekay Corporation, resulting in the Company owning 100 percent of
TTOL and consolidating its results. Periods prior to May 31, 2017
have been recast to include 100 percent of TTOL's results on a
consolidated basis in accordance with common control accounting as
required under GAAP. As a result, the weighted-average number of
common shares outstanding for periods prior to May 2017 has been
retroactively adjusted to include the approximately 13.8 million
shares of the Company's Class B common stock issued to Teekay
Corporation as consideration for the acquisition. The impact of
this recasting is referred to herein as the "Entities under Common
Control", and such amounts are summarized for the respective
periods in Appendix A.
(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 $22.9 million, $21.4 million and $15.0
million for the three months ended June 30, 2018, March 31, 2018
and June 30, 2017, respectively, and $44.3 million and $35.4
million for the six months ended June 30, 2018 and June 30, 2017,
respectively.
(3) Other revenues include lightering support and liquefied
natural gas services revenue, and pool management fee and
commission revenues earned from TTOL.
(4) Commencing January 1, 2018, the Company adopted Accounting
Standards Update 2014-09 as required under GAAP. The Company
previously presented the net allocation for its vessels
participating in RSAs as net pool revenues. The Company has
determined that it is the principal in voyages its vessels perform
that are included in the RSAs. As such, commencing January 1, 2018,
revenue from those voyages is presented in voyage charter revenues
and the difference between this amount and the Company's net
allocation from the RSA is presented as voyage expenses. This had
the impact of increasing both voyage charter revenues and voyage
expenses for the three months ended June 30, 2018 and March 31,
2018 and the six months ended June 30, 2018 by $67.5 million, $61.3
million, and $128.8 million, respectively. This change has been
adopted prospectively from January 1, 2018.
(5) Includes realized losses and gains relating to interest rate
swaps entered into by the Company. For the three months ended June
30, 2018, March 31, 2018 and June 30, 2017, the Company recognized
a realized gain on its interest rate swaps of $0.7 million, a
realized gain of $0.2 million and a realized loss of $0.3 million,
respectively, and a realized gain of $0.9 million and a realized
loss of $0.7 million for the six months ended June 30, 2018 and
2017, respectively. The Company recognized realized gains relating
to a time-charter swap agreement of $0.4 million for the three
months ended June 30, 2017 and $1.1 million for the six months
ended June 30,2017.
(6) Included in equity (loss) income are the Company’s 50
percent interest in the High-Q Investment Ltd. (High-Q) joint
venture, which owns one VLCC tanker, its 50 percent interest in
Gemini Tankers L.L.C. (until March 2018, when the remaining capital
was returned to the Company), and its proportionate 11.3 percent
share of earnings from its investment in TIL until November 27,
2017, when the Company completed a merger with TIL. From that
date, TIL became a wholly-owned subsidiary of the Company, and it
has been consolidated.
Components of equity (loss) income are detailed
in the table below:
|
|
Three Months Ended |
Six Months Ended |
|
|
June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
|
|
2018 |
2018 |
2017 |
2018 |
2017 |
High-Q Joint Venture |
(70 |
) |
|
694 |
|
|
756 |
|
|
624 |
|
|
1,549 |
|
|
Tanker Investments Ltd. |
— |
|
|
— |
|
|
(653 |
) |
|
— |
|
|
(320 |
) |
|
Fair value adjustment of |
|
|
|
|
|
|
|
|
|
|
|
Tanker
Investments Ltd. (i) |
— |
|
|
— |
|
|
(28,124 |
) |
|
— |
|
|
(28,124 |
) |
|
Gemini Tankers L.L.C. |
— |
|
|
— |
|
|
(6 |
) |
|
— |
|
|
(5 |
) |
|
Total equity (loss)
income |
(70 |
) |
|
694 |
|
|
(28,027 |
) |
|
624 |
|
|
(26,900 |
) |
|
- As part of the accounting for the TIL merger, GAAP treats the
Company's existing equity investment in TIL as being disposed of at
its existing fair value and concurrently repurchased at such fair
value, which is included in the cost of the acquisition of the 100
percent controlling interest in TIL. In June 2017, it was
determined at that time that recovery of the carrying value of the
Company's investment in TIL prior to closing of the merger would be
unlikely. Consequently, a non-cash impairment of $28.1 million was
required under GAAP to be recognized in the three months ended June
30, 2017 based on the difference between the carrying value of the
investment at June 30, 2017 and its fair value based on the TIL
share price on that date.
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, |
|
2018 |
2018 |
2017 |
|
(unaudited) |
(unaudited) |
(unaudited)(1) |
ASSETS |
|
|
|
Cash and
cash equivalents |
48,457 |
|
47,962 |
|
71,439 |
|
Restricted
cash |
1,858 |
|
1,252 |
|
1,599 |
|
Pool
receivable from affiliates |
24,714 |
|
13,693 |
|
15,550 |
|
Accounts
receivable |
15,912 |
|
15,520 |
|
19,288 |
|
Due from
affiliates |
50,034 |
|
56,211 |
|
49,103 |
|
Current
portion of derivative assets |
2,728 |
|
2,315 |
|
1,016 |
|
Prepaid
expenses |
21,523 |
|
23,045 |
|
18,690 |
|
Other
current assets |
3,103 |
|
1,302 |
|
— |
|
Restricted
cash - long-term |
2,672 |
|
2,672 |
|
2,672 |
|
Vessels and
equipment – net |
1,695,722 |
|
1,717,348 |
|
1,737,792 |
|
Vessels
related to capital leases – net |
221,825 |
|
224,791 |
|
227,722 |
|
Investment
in and advances to equity-accounted |
|
|
|
investments |
25,170 |
|
25,240 |
|
25,460 |
|
Derivative
assets |
5,797 |
|
5,750 |
|
4,226 |
|
Intangible
assets – net |
13,030 |
|
13,755 |
|
14,605 |
|
Other
non-current assets |
92 |
|
113 |
|
127 |
|
Goodwill |
8,059 |
|
8,059 |
|
8,059 |
|
Total assets |
2,140,696 |
|
2,159,028 |
|
2,197,348 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Accounts
payable and accrued liabilities |
39,885 |
|
35,725 |
|
42,468 |
|
Current
portion of long-term debt |
155,089 |
|
153,399 |
|
166,745 |
|
Current
portion of derivative liabilities |
16 |
|
— |
|
— |
|
Current
obligation related to capital leases |
7,454 |
|
7,338 |
|
7,227 |
|
Deferred
revenue |
61 |
|
3,242 |
|
557 |
|
Due to
affiliates |
39,422 |
|
19,371 |
|
19,717 |
|
Long-term
debt |
778,728 |
|
791,779 |
|
785,557 |
|
Long-term
obligation related to capital leases |
137,951 |
|
139,830 |
|
141,681 |
|
Other
long-term liabilities |
29,620 |
|
28,609 |
|
26,795 |
|
Equity |
952,470 |
|
979,735 |
|
1,006,601 |
|
Total liabilities and equity |
2,140,696 |
|
2,159,028 |
|
2,197,348 |
|
(1) See note 1 to the Summary Consolidated Statements of Loss
included in this release for further details.
Teekay Tankers Ltd.Summary Consolidated
Statements of Cash Flows (in thousands of U.S.
dollars)
|
|
Six Months Ended |
|
|
June 30, |
June 30, |
|
|
2018 |
2017 |
|
|
(unaudited) |
(unaudited)(1) |
Cash, cash equivalents and restricted cash (used for)
provided by |
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
Net loss |
(46,566 |
) |
|
(33,764 |
) |
|
Non-cash items: |
|
|
|
|
Depreciation and amortization |
59,003 |
|
|
49,324 |
|
|
(Gain) loss on sales of vessels |
(170 |
) |
|
4,569 |
|
|
Unrealized (gain) loss on derivative
instruments |
(3,283 |
) |
|
1,578 |
|
|
Equity (income) loss |
(624 |
) |
|
26,900 |
|
|
Other |
5,467 |
|
|
6,554 |
|
|
Change in operating assets and liabilities |
3,368 |
|
|
12,787 |
|
|
Expenditures for dry docking |
(6,725 |
) |
|
(3,417 |
) |
|
Net operating cash
flow |
10,470 |
|
|
64,531 |
|
|
FINANCING ACTIVITIES |
|
|
|
|
Proceeds from long-term debt, net of issuance costs |
45,659 |
|
|
14,300 |
|
|
Repayments of long-term debt |
(66,333 |
) |
|
(57,894 |
) |
|
Prepayment of long-term debt |
— |
|
|
(69,216 |
) |
|
Scheduled repayments of obligation related to capital
leases |
(3,503 |
) |
|
— |
|
|
Cash dividends paid |
(8,052 |
) |
|
(9,925 |
) |
|
Proceeds from equity offerings, net of offering costs |
— |
|
|
8,565 |
|
|
Proceeds from issuance of Class A common stock |
— |
|
|
5,000 |
|
|
Other |
(92 |
) |
|
(241 |
) |
|
Net financing cash
flow |
(32,321 |
) |
|
(109,411 |
) |
|
INVESTING ACTIVITIES |
|
|
|
|
Proceeds from sales of vessels |
589 |
|
|
40,686 |
|
|
Expenditures for vessels and equipment |
(2,207 |
) |
|
(2,628 |
) |
|
Return of capital from equity-accounted investment |
746 |
|
|
— |
|
|
Loan repayments from equity-accounted
investment |
— |
|
|
550 |
|
|
Net investing cash
flow |
(872 |
) |
|
38,608 |
|
|
|
|
|
|
|
Decrease in cash, cash equivalents and restricted cash |
(22,723 |
) |
|
(6,272 |
) |
|
Cash, cash equivalents and restricted cash,
beginning of the period |
75,710 |
|
|
94,907 |
|
|
Cash, cash equivalents and
restricted cash, end of the period |
52,987 |
|
|
88,635 |
|
|
(1) See note 1 to the Summary Consolidated Statements of Loss
included in this release for further details.
Teekay Tankers Ltd.Appendix A -
Reconciliation of Non-GAAP Financial
MeasuresAdjusted Net Loss(in thousands of
U.S. dollars, except per share amounts)
|
|
|
Three Months Ended |
|
|
|
June 30, 2018 |
|
June 30, 2017 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
$ |
$ Per Share(1) |
|
$ |
$ Per Share(1) |
|
Net loss - GAAP basis |
(27,413 |
) |
|
$ |
(0.10 |
) |
|
(37,477 |
) |
|
$ |
(0.21 |
) |
|
Subtract: |
|
|
|
|
|
|
|
|
|
Net income attributable to the Entities
under Common Control (2) |
— |
|
|
|
— |
|
|
(418 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to shareholders of Teekay
Tankers |
(27,413 |
) |
|
$ |
(0.10 |
) |
|
(37,895 |
) |
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
Add specific items affecting net loss: |
|
|
|
|
|
|
|
|
|
(Gain) loss on sales of vessels |
(170 |
) |
|
|
— |
|
|
142 |
|
|
|
— |
|
|
|
Unrealized (gain) loss on derivative instruments (3) |
(460 |
) |
|
|
— |
|
|
1,700 |
|
|
$ |
0.01 |
|
|
|
Other (4) |
(700 |
) |
|
$ |
(0.01 |
) |
|
28,985 |
|
|
$ |
0.16 |
|
|
Total adjustments |
(1,330 |
) |
|
$ |
(0.01 |
) |
|
30,827 |
|
|
$ |
0.17 |
|
|
Adjusted net loss attributable to shareholders of
Teekay |
|
|
|
|
|
|
|
|
|
Tankers |
(28,743 |
) |
|
$ |
(0.11 |
) |
|
(7,068 |
) |
|
$ |
(0.04 |
) |
|
(1) Basic per share amounts.
(2) See note 1 to the Summary Consolidated Statements of Loss
included in this release for further details.
(3) Reflects unrealized gains or 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, a time-charter swap and a
TIL common stock purchase warrant that was related to the period
prior to the Company acquiring TIL by merger in November 2017.
(4) The amount recorded for the three months ended June 30, 2018
primarily relates to adjustments relating to freight tax accruals
from prior years. The amount recorded for the three months
ended June 30, 2017 primarily relates to the write-down of the
Company's investment in TIL of $28.1 million (see note 6(i) to the
Summary Consolidated Statements of Loss included in this release).
In addition, the amount for the three months ended June 30, 2017
also includes unrealized foreign exchange losses in joint
ventures.
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, 2018 |
June 30, 2017 |
|
|
|
(unaudited) |
(unaudited) |
|
|
|
|
|
|
|
|
Net loss - GAAP basis |
(27,413 |
) |
|
(37,477 |
) |
|
|
Subtract: |
|
|
|
|
|
Net income attributable to the Entities
under Common Control (1) |
— |
|
|
(418 |
) |
|
Net loss attributable to shareholders of Teekay
Tankers |
(27,413 |
) |
|
(37,895 |
) |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
Depreciation and amortization |
29,573 |
|
|
24,415 |
|
|
|
|
Proportionate share of free cash flow from equity-accounted
investments |
380 |
|
|
1,983 |
|
|
|
|
Unrealized
loss on derivative instruments |
— |
|
|
1,700 |
|
|
|
|
Loss on
sales of vessels |
— |
|
|
142 |
|
|
|
|
Equity loss
(2) |
70 |
|
|
27,604 |
|
|
|
|
Other |
— |
|
|
762 |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
Unrealized
gain on derivative instruments |
(460 |
) |
|
— |
|
|
|
|
Gain on
sale of vessels |
(170 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Free cash flow |
1,980 |
|
|
18,711 |
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding for the
period - basic |
268,558,556 |
|
|
179,197,658 |
|
|
|
|
|
|
|
(1) See note 1 to the Summary Consolidated Statements of Loss
included in this release for further details.
(2) Included in equity loss is the Company’s 50 percent interest
in the High-Q joint venture, which owns one VLCC tanker. For
the three months ended June 30, 2017, equity loss also included the
Company's 50 percent interest in Gemini Tankers L.L.C. and its
proportionate 11.3 percent share of earnings from its investment in
TIL prior to the TIL merger. In the three months ended June 30,
2017, the Company also recognized an impairment of $28.1 million on
its investment in TIL (see note 6(i) to the Summary Consolidated
Statements of Loss included in this release).
Teekay Tankers Ltd.Appendix C -
Reconciliation of Non-GAAP Financial MeasuresCash
Flow from Vessel Operations - Consolidated(in thousands of
U.S. dollars)
|
Three Months Ended |
|
June 30, 2018 |
March 31, 2017 |
June 30, 2017 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(Loss)
income from operations - GAAP basis |
(13,415 |
) |
(8,421 |
) |
1,587 |
|
Depreciation and amortization |
29,573 |
|
29,430 |
|
24,415 |
|
(Gain) loss on sales of vessels |
(170 |
) |
— |
|
142 |
|
CFVO – Consolidated |
15,988 |
|
21,009 |
|
26,144 |
|
Less: CFVO attributable to the Entities under
Common Control |
— |
|
— |
|
(818 |
) |
CFVO – Equity Investments (See this Appendix
C) |
566 |
|
1,303 |
|
2,655 |
|
Total CFVO |
16,554 |
|
22,312 |
|
27,981 |
|
Teekay Tankers Ltd.Appendix C -
Reconciliation of Non-GAAP Financial MeasuresCash
Flow from Vessel Operations - Equity-Accounted
Investments(in thousands of U.S. dollars)
|
Three Months Ended |
|
June 30, 2018 |
March 31, 2018 |
June 30, 2017 |
|
(unaudited) |
(unaudited) |
(unaudited) |
|
At |
Company's |
At |
Company's |
At |
Company's |
|
100% |
Portion (1) |
100% |
Portion (1) |
100% |
Portion (1) |
Revenues |
2,012 |
|
1,006 |
|
3,375 |
|
1,688 |
|
28,825 |
|
4,578 |
|
Vessel and
other operating expenses |
(880 |
) |
(440 |
) |
(769 |
) |
(385 |
) |
(17,600 |
) |
(1,923 |
) |
Depreciation |
(849 |
) |
(425 |
) |
(830 |
) |
(415 |
) |
(9,572 |
) |
(1,403 |
) |
Income from
vessel operations of equity-accounted investments |
283 |
|
141 |
|
1,776 |
|
888 |
|
1,653 |
|
1,252 |
|
Interest
expense |
(436 |
) |
(218 |
) |
(407 |
) |
(204 |
) |
(4,809 |
) |
(692 |
) |
Realized
and unrealized gain (loss) on derivative instruments |
13 |
|
7 |
|
19 |
|
10 |
|
(37 |
) |
(19 |
) |
Other |
— |
|
|
— |
|
— |
|
(244 |
) |
(20 |
) |
Equity (loss) income of equity-accounted
vessels |
(140 |
) |
(70 |
) |
1,388 |
|
694 |
|
(3,437 |
) |
521 |
|
|
|
|
|
|
|
|
Income from
vessel operations of equity-accounted investments |
283 |
|
141 |
|
1,776 |
|
888 |
|
1,653 |
|
1,252 |
|
Depreciation and amortization |
849 |
|
425 |
|
830 |
|
415 |
|
9,572 |
|
1,403 |
|
Cash flow from vessel operations of
equity-accounted investments |
1,132 |
|
566 |
|
2,606 |
|
1,303 |
|
11,225 |
|
2,655 |
|
(1) The Company’s proportionate share of its
equity-accounted vessels and other investments ranges from 11.3
percent to 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 statements
regarding: the completion of the Company’s expected sale-leaseback
financing transactions and working capital loan, and the effect of
the transactions on the Company’s liquidity and future debt
maturity profile; future forward revenues; and crude oil and
refined product tanker market fundamentals, including the balance
of supply and demand in the tanker market, the occurrence and
expected timing of a tanker market recovery, the estimated slowdown
of growth in the mid-size tanker fleet, the amount of tanker
scrapping and newbuild tanker deliveries, estimated growth in
global oil demand and supply, future tanker rates, future OPEC oil
supply, and estimated impact of IMO 2020 regulations on tanker
demand. 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: failure to complete
the sale-leaseback financing transactions and working capital loan
and/or potential changes to the final terms of the transactions;
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 the
production of, or demand for, oil or refined products; 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 and the impact
of such changes; increased costs; 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, 2017. 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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