Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE: TNK)
today reported the Company's results for the quarter ended
September 30, 2019:
Consolidated Financial Summary
|
Three Months Ended |
(in thousands of U.S.
dollars, except per share data) |
September 30, 2019 |
June 30, 2019 |
September 30, 2018 |
GAAP FINANCIAL COMPARISON |
|
|
|
|
|
|
Total
revenues |
182,304 |
|
|
202,277 |
|
|
175,915 |
|
|
(Loss) income from operations |
(4,873 |
) |
|
5,051 |
|
|
(2,166 |
) |
|
Net loss |
(19,850 |
) |
|
(14,307 |
) |
|
(17,484 |
) |
|
Loss per share |
(0.07 |
) |
|
(0.05 |
) |
|
(0.07 |
) |
|
NON-GAAP FINANCIAL COMPARISON |
|
|
|
|
|
Total Adjusted EBITDA (1) |
27,837 |
|
|
36,197 |
|
|
27,750 |
|
|
Adjusted net loss (1) |
(21,173 |
) |
|
(12,142 |
) |
|
(18,001 |
) |
|
Adjusted loss per share
(1) |
(0.08 |
) |
|
(0.05 |
) |
|
(0.07 |
) |
|
Free cash flow (1) |
11,735 |
|
|
19,383 |
|
|
12,558 |
|
|
(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).
Third Quarter of 2019 Compared to Second Quarter of 2019
GAAP net loss and non-GAAP adjusted net loss for
the third quarter of 2019 increased compared to the prior
quarter. The change was primarily due to lower average spot
tanker rates in the third quarter of 2019, partially offset by
lower operating expenses. GAAP net loss in the third quarter of
2019 included unrealized gains on derivative instruments, while
GAAP net loss in the second quarter of 2019 included unrealized
losses on derivative instruments.
Third Quarter of 2019 Compared to Third Quarter of 2018
GAAP net loss and non-GAAP adjusted net loss for
the third quarter of 2019 increased compared to the same period of
the prior year, primarily due to more scheduled dry dockings in the
third quarter of 2019 and the expiration of fixed rate time
charter-out contracts that had higher rates, partially offset by
higher average spot tanker rates in the third quarter of 2019.
CEO Commentary
“As expected, crude spot tanker rates declined
from the second to the third quarter of 2019, mainly due to normal
seasonality,” commented Kevin Mackay, Teekay Tankers’ President and
CEO. “Crude spot tanker rates subsequently began to firm in
September 2019 on the back of stronger market fundamentals. Against
that supportive fundamental backdrop, a series of market events in
late-September and into October 2019 drove rates to the highest
levels since the peak of the super cycle in 2008. Teekay Tankers
has been able to benefit from this strengthening tanker market as
evidenced by the strong Suezmax and Aframax tanker rates we have
secured in the fourth quarter of 2019 to-date, which have so far
averaged approximately 133 percent and 105 percent higher than
rates we earned in the third quarter of 2019, respectively. Looking
ahead, as the strong underlying supply and demand fundamentals
persist, we continue to have a positive view of the tanker market
into the winter months and 2020.”
“Last year and in early-2019, after
consideration of various alternatives, Teekay Tankers entered into
several higher-cost sale-leaseback transactions to bolster its
liquidity position during a period of pronounced weakness in the
tanker market, which enabled us to avoid issuing dilutive common
equity or selling assets at less than optimal trough valuations,
but resulted in increasing our balance sheet leverage and our
overall cost of capital. Therefore, we believe that the most
prudent and accretive allocation of our capital at this time is to
transition away from our current earnings-based formulaic dividend
policy and to instead allocate our growing cash flows towards
reducing our financial leverage, which will further build net asset
value and reduce our cost of capital. We also believe that having a
strong balance sheet should help to narrow the valuation gap
between our share price and our net asset value, which would
further contribute directly to shareholder returns,” continued Mr.
Mackay. “As our balance sheet delevers, Teekay Tankers believes
that it will ultimately have greater financial flexibility to
allocate capital towards a variety of uses, including returning
capital to shareholders through dividends and/or share repurchases
and potential vessel acquisitions at attractive times in the tanker
cycle. However, given our current strong market position and
significant operating leverage, we do not intend to acquire vessels
at this time but instead, may seek to crystallize vessel values and
further accelerate our balance sheet delevering by
opportunistically selling some of our existing assets as values
continue to strengthen.”
Mr. Mackay added, “To improve the marketability
of Teekay Tankers’ shares to a broader base of potential investors,
we have decided to increase the market price of the Company’s
common shares through a one-for-eight reverse stock split. This
change is expected to take effect at the opening of the market on
November 25, 2019.”
With regard to the IMO 2020 regulations, Mr.
Mackay highlighted, “On January 1, 2020, the shipping industry will
move to a new emissions standard based on 0.5 percent sulphur fuel.
Teekay Tankers fully supports the use of cleaner burning fuels
across the industry as it aligns directly with our core value of
Sustainability. Our journey towards ensuring compliance with these
new regulations has been three years in the making and having
commenced purchasing these lower sulphur, cleaner burning fuels in
recent weeks, we are confident that our extensive preparations will
result in a seamless transition to operating with the new fuel
standard.”
“With significant operating leverage, expected
increases in asset values and the potential to close the valuation
gap, we believe that Teekay Tankers is one of the best positioned
companies in our sector to create shareholder value both in the
near-term and over time. We look forward to presenting at our
Teekay Group investor and analyst meeting tomorrow morning starting
at 8:30 am in New York, which will include more in-depth
discussions on our strategy and financial position, our views on
the tanker market, and our IMO 2020 preparations.”
Summary of Recent Events
In October 2019, Teekay Tankers entered into
one-year time charter-out contracts for three Suezmax tankers at an
average rate of approximately $37,500 per day, two of which
commenced in mid-October 2019 and one in early-November 2019.
In November 2019, the Company made the
determination to transition away from its previous formulaic
dividend policy, which was based on a payout of 30 to 50 percent of
its quarterly adjusted net income, to primarily focus on building
net asset value through balance sheet delevering and reducing its
cost of capital. As Teekay Tankers’ balance sheet delevers, the
Company believes that it will ultimately have greater financial
flexibility to allocate capital towards a variety of uses,
including returning capital to shareholders through dividends
and/or share repurchases and potential vessel acquisitions at
attractive times in the tanker cycle.
Also in November 2019, Teekay Tankers' Board of
Directors determined to effect a one-for-eight reverse stock split
of the Company's Class A common shares, par value $0.01 per share,
and Class B common shares, par value $0.01 per share, which will be
approved by its controlling shareholder, Teekay Corporation. The
reverse stock split is expected to take effect, and the Company's
Class A common shares are expected to begin trading on a
split-adjusted basis on the New York Stock Exchange (NYSE), as of
the opening of trading on November 25, 2019. The trading symbol
for the Company's Class A common shares will remain "TNK." The
CUSIP number of Y8565N 300 will be assigned to the Company's Class
A common shares when the reverse stock split becomes effective.
When the reverse stock split becomes effective, every eight of the
Company's issued common shares will be combined into one issued
common share, without any change to the par value per share. This
will reduce the number of outstanding Class A and B common shares
from approximately 232.0 million and 37.0 million to approximately
29.0 million and 4.6 million, respectively. No fractional shares
will be issued in connection with the reverse stock split.
Shareholders who would otherwise hold a fraction of a common share
of the Company will be entitled to receive a cash payment in lieu
thereof at a price equal to that fraction of a share to which the
shareholder would otherwise be entitled, multiplied by the closing
price of the Company's Class A common shares on the NYSE on
November 22, 2019. Shareholders with shares held in book-entry form
or through a bank, broker, or other nominee are not required to
take any action and will see the impact of the reverse stock split
reflected in their accounts on or after November 25, 2019. Such
beneficial holders may contact their bank, broker, or nominee for
more information.
In November 2019, the Company signed a term
sheet to refinance 36 vessels with a new 5-year, $595 million
revolving credit facility. When completed, the facility will
replace three of Teekay Tankers' existing loan facilities that
currently have an aggregate availability of $510 million, of which
$495 million was drawn. The new facility, which will have
substantially similar terms and will extend balloon maturities from
2020/2021 until late-2024, is expected to be completed in December
2019.
Tanker Market
Crude tanker spot rates declined during the
third quarter of 2019 compared to the second quarter of 2019. This
was primarily due to reduced refinery throughput as a result of
extended seasonal maintenance to prepare for the implementation of
IMO 2020, high tanker fleet growth through the first nine months of
2019, and the impact of continued OPEC oil supply cuts.
Crude tanker spot rates started firming in
September 2019 on the back of tighter market fundamentals prior to
spiking in late-September and into October 2019 to the highest
level since the peak of the super cycle in 2008. The recent
volatility in crude tanker spot rates has been driven by a
combination of firm underlying supply and demand fundamentals and a
series of other events, which have significantly increased tanker
fleet utilization. Factors that have driven tanker fleet
utilization higher include:
- Increase in global refinery
throughput - According to the International Energy Agency, global
refinery throughput is expected to increase by 0.6 million barrels
per day (mb/d) quarter-on-quarter in the fourth quarter of 2019,
and by 1.1 mb/d year-on-year. This could be further supported by
the upcoming IMO 2020 regulations and the need for refiners to
increase throughput in order to produce sufficient low sulphur fuel
for the marine bunker market.
- Increase in crude tanker
tonne-miles as a result of longer voyage distances - This has been
primarily due to an increase in crude oil movements from the
Atlantic basin to Asia, driven by the rise in U.S. crude oil
exports. U.S. crude oil exports have averaged 2.9 mb/d in 2019
year-to-date vs. 2.0 mb/d in 2018 and are expected to rise further
as new pipeline capacity is brought online linking the Permian
basin to the U.S. Gulf coast. In October 2019, U.S. crude oil
exports have been averaging 3.4 mb/d as a result of new pipeline
capacity coming online, including the Cactus II and EPIC pipelines
which began operations in the third quarter of 2019.
- Geopolitical instability in the
Middle East region - Following the attacks on Saudi Arabian oil
infrastructure on September 14, 2019, Asian buyers have been
diversifying their sources of oil supply away from the Middle East,
which has further added to the increase in crude oil movements from
West to East.
- Increase in floating storage as a
result of IMO 2020 - More than 20 VLCCs are currently being used to
store compliant fuels ahead of the new regulations coming into
force on January 1, 2020, particularly off Singapore. This is tying
up a significant portion of the VLCC fleet and tightening available
fleet supply.
- Slowdown in tanker fleet growth -
Global fleet growth in the first nine months of the year was
relatively high with net fleet growth of 28 million deadweight
tonnes (mdwt), or 4.7 percent. This pace of growth is set to slow
considerably with just 7 mid-size tankers scheduled to deliver in
the remainder of the year and 44 vessels scheduled to deliver in
2020 (versus 75 deliveries in the first nine months of 2019). As a
result, the Company estimates that global tanker fleet growth will
fall to approximately 2 percent in 2020 versus expected growth of 5
percent in 2019.
- Drydocking of ships for scrubber
installation - Recent weeks have seen an increase in the number of
vessels in the global fleet heading into drydock for the
installation of scrubbers ahead of IMO 2020, peaking at close to 9
mdwt of capacity during the third quarter of 2019. This has further
squeezed available fleet supply, and will continue to do so in the
coming weeks as ship owners look to install scrubbers ahead of the
January 1, 2020 implementation date.
These factors have significantly tightened the
crude tanker supply / demand balance with the consequence that any
near-term disruptions are likely to give rise to significant tanker
rate volatility. This point was evidenced at the start of October
2019 when U.S. sanctions on two subsidiaries of leading Chinese
state-owned shipping and logistics company COSCO removed up to 50
VLCCs from the spot tanker market and charterers scrambled for
replacement tonnage. This led to an extremely sharp spike in crude
spot tanker rates in a very short period of time. Crude spot tanker
rates have since come off the extreme highs, but remain at firm
levels compared to the third quarter of 2019. This illustrates that
the tanker market is very tight at the moment and that periods of
rate volatility can be expected in the coming months, particularly
during the winter when weather-related vessel delays are
typical.
Given the above, the tanker market fundamentals
are expected to be strong through the upcoming winter months and
into 2020 on the back of firm tanker tonne-mile demand, low fleet
growth over the next two years, and supportive near-term factors,
including the impact of IMO 2020 and geopolitical factors.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(v)
per revenue day, or time-charter equivalent (TCE) rates, before
off-hire bunker expenses:
|
Three Months Ended |
|
September 30, 2019(i) |
June 30, 2019(i) |
September 30, 2018(i) |
Time Charter-Out Fleet |
|
|
|
|
|
|
Suezmax revenue days |
|
92 |
|
|
|
91 |
|
|
|
162 |
|
|
Suezmax
TCE per revenue day |
$ |
20,488 |
|
$ |
17,281 |
|
|
$ |
17,630 |
|
|
Aframax
revenue days |
|
— |
|
|
|
— |
|
|
|
393 |
|
|
Aframax
TCE per revenue day |
|
— |
|
|
|
— |
|
|
$ |
20,559 |
|
|
LR2
revenue days |
|
— |
|
|
|
— |
|
|
|
92 |
|
|
LR2 TCE
per revenue day |
|
— |
|
|
|
— |
|
|
$ |
17,732 |
|
|
|
|
|
|
|
|
|
Spot Fleet |
|
|
|
|
|
|
Suezmax
revenue days |
|
2,576 |
|
|
|
2,418 |
|
|
|
2,476 |
|
|
Suezmax
spot TCE per revenue day (ii) |
$ |
16,321 |
|
|
$ |
17,267 |
|
|
$ |
15,825 |
|
|
Aframax
revenue days |
|
1,821 |
|
|
|
1,763 |
|
|
|
1,402 |
|
|
Aframax
spot TCE per revenue day (iii) |
$ |
14,850 |
|
|
$ |
20,075 |
|
|
$ |
13,693 |
|
|
LR2
revenue days |
|
781 |
|
|
|
840 |
|
|
|
644 |
|
|
LR2 spot
TCE per revenue day (iv) |
$ |
14,686 |
|
|
$ |
15,679 |
|
|
$ |
12,527 |
|
|
|
|
|
|
|
|
|
Total Fleet |
|
|
|
|
|
|
Suezmax
revenue days |
|
2,668 |
|
|
|
2,509 |
|
|
|
2,638 |
|
|
Suezmax
TCE per revenue day |
$ |
16,465 |
|
|
$ |
17,268 |
|
|
$ |
15,936 |
|
|
Aframax
revenue days |
|
1,821 |
|
|
|
1,763 |
|
|
|
1,795 |
|
|
Aframax
TCE per revenue day |
$ |
14,850 |
|
|
$ |
20,075 |
|
|
$ |
15,197 |
|
|
LR2
revenue days |
|
781 |
|
|
|
840 |
|
|
|
736 |
|
|
LR2 TCE
per revenue day |
$ |
14,686 |
|
|
$ |
15,679 |
|
|
$ |
13,178 |
|
|
(i) 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
but is not employed, are included in revenue days.(ii) Includes
vessels trading in the Teekay Suezmax RSA, Teekay Suezmax Classic
RSA and non-pool voyage charters.(iii) Includes vessels trading in
the Teekay Aframax RSA, Teekay Aframax Classic RSA, non-pool voyage
charters and full service lightering voyages.(iv) Includes vessels
trading in the Teekay Taurus RSA and non-pool voyage charters.(v)
Net revenues is a non-GAAP financial measure. Please refer to
"Definitions and Non-GAAP Financial Measures" for a definition of
this term.
Fourth Quarter of 2019 Spot Tanker Rates Update
Below is Teekay Tankers’ spot tanker fleet
update for the fourth quarter of 2019 to-date:
- The portion of the Suezmax fleet
trading on the spot market has secured TCE rates per revenue day of
approximately $38,000 on average, with 52 percent of the available
days fixed(1);
- The portion of the Aframax fleet
trading on the spot market has secured TCE rates per revenue day of
approximately $30,500 on average, with 43 percent of the available
days fixed(2); and
- The portion of the Long Range 2
(LR2) product tanker fleet trading on the spot market has secured
TCE rates per revenue day of approximately $25,200 on average, with
41 percent of the available days fixed(3).
(1) Combined average TCE rate includes Teekay
Suezmax RSA, Teekay Suezmax Classic RSA and non-pool voyage
charters.(2) Combined average TCE rate includes Teekay Aframax RSA,
Teekay Aframax Classic RSA, non-pool voyage charters and full
service lightering voyages.(3) Combined average TCE rate includes
Teekay Taurus RSA and non-pool voyage charters.Teekay Tankers’
Fleet
The following table summarizes the Company’s
fleet as of November 4, 2019 (including three committed time
charter-out contracts for three Suezmax tankers which commenced in
October and November 2019):
|
Owned andLeased Vessels |
Chartered-inVessels |
Total |
Fixed-rate: |
|
|
|
Suezmax
Tankers |
4 |
— |
4 |
Total Fixed-Rate Fleet |
4 |
— |
4 |
Spot-rate: |
|
|
|
Suezmax
Tankers |
26 |
— |
26 |
Aframax
Tankers(i) |
17 |
4 |
21 |
LR2
Product Tankers(ii) |
9 |
2 |
11 |
VLCC Tanker(iii) |
1 |
— |
1 |
Total Spot Fleet |
53 |
6 |
59 |
Total Conventional Fleet |
57 |
6 |
63 |
STS Support Vessels |
2 |
3 |
5 |
Total Teekay Tankers' Fleet |
59 |
9 |
68 |
(i) Includes four Aframax tankers with
charter-in contracts that are scheduled to expire in November 2019,
December 2019, 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 September 30, 2019, the Company had
total liquidity of $95.1 million (comprised of $76.7 million in
cash and cash equivalents and $18.4 million in undrawn capacity
from its revolving credit facilities) compared to total liquidity
of $119.5 million as at June 30, 2019.Investor and Analyst
Meeting
Teekay Corporation (Teekay), Teekay LNG Partners
L.P. (Teekay LNG) and Teekay Tankers plan to host an investor and
analyst meeting on Thursday, November 14, 2019 at 8:30 a.m. (ET)
with presentations from the Senior Leadership of Teekay, Teekay LNG
and Teekay Tankers. A live webcast of the presentations will be
available to the public in advance of the event on Teekay’s
website, www.teekay.com. Please allow extra time prior to the
presentation to visit the site and download the necessary software
required to listen to the internet broadcast. A recording of the
webcast will be archived on the same website following the live
presentations.About Teekay Tankers
Teekay Tankers currently owns a fleet of 56
double-hull tankers (including 30 Suezmax tankers, 17 Aframax
tankers and nine LR2 product tankers), and two ship-to-ship support
vessels, and also has nine 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. 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 Relationsenquiries
contact:
Ryan HamiltonTel: +1 (604) 609-2963Website:
www.teekay.comDefinitions 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 Loss, Free Cash
Flow, Net Revenues and, commencing in the first quarter of 2019,
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.
In prior periods, the Company reported cash flow
from vessel operations (CFVO) as a non-GAAP measure. In the first
quarter of 2019, the Company made certain changes to its non-GAAP
financial measures to more closely align with internal management
reporting, Company reporting in its SEC Annual Report on Form 20-F
and metrics used by certain investors. Total CFVO and CFVO from
Equity-Accounted Joint Venture are replaced with Total Adjusted
EBITDA and Adjusted EBITDA from Equity-Accounted Joint Venture,
respectively, for current and comparative periods.
Non-GAAP Financial Measures
Adjusted net loss excludes items of income or
loss from GAAP net 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 loss, the
most directly comparable GAAP measure reflected in the Company’s
consolidated financial statements.
Adjusted EBITDA represents net 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 gains and losses on derivative instruments
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 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 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 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 Loss(in
thousands of U.S. dollars, except share and per share data)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
June 30, |
September 30, |
|
September 30, |
September 30, |
|
|
|
2019 |
2019 |
2018 |
|
2019 |
2018 |
|
|
|
(unaudited) |
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Voyage charter
revenues (1) |
173,034 |
|
186,805 |
|
152,047 |
|
|
576,256 |
|
432,017 |
|
|
Time-charter
revenues |
1,909 |
|
1,456 |
|
12,326 |
|
|
6,775 |
|
51,820 |
|
|
Other
revenues (2) |
7,361 |
|
14,016 |
|
11,542 |
|
|
34,051 |
|
32,202 |
|
|
Total
revenues |
182,304 |
|
202,277 |
|
175,915 |
|
|
617,082 |
|
516,039 |
|
|
|
|
|
|
|
|
|
|
|
Voyage expenses
(1) |
(87,726 |
) |
(92,668 |
) |
(83,048 |
) |
|
(277,733 |
) |
(249,974 |
) |
|
Vessel operating
expenses |
(48,539 |
) |
(53,600 |
) |
(52,161 |
) |
|
(156,726 |
) |
(157,808 |
) |
|
Time-charter hire
expenses |
(10,637 |
) |
(10,792 |
) |
(4,317 |
) |
|
(30,877 |
) |
(14,697 |
) |
|
Depreciation and
amortization |
(31,536 |
) |
(30,658 |
) |
(29,595 |
) |
|
(92,059 |
) |
(88,598 |
) |
|
General and
administrative expenses |
(8,739 |
) |
(9,508 |
) |
(8,747 |
) |
|
(27,412 |
) |
(27,939 |
) |
|
Gain on sale of
vessel |
— |
|
— |
|
— |
|
|
— |
|
170 |
|
|
Restructuring charges |
— |
|
— |
|
(213 |
) |
|
— |
|
(1,195 |
) |
|
(Loss)
income from operations |
(4,873 |
) |
5,051 |
|
(2,166 |
) |
|
32,275 |
|
(24,002 |
) |
|
|
|
|
|
|
|
|
|
Interest
expense |
(16,134 |
) |
(16,607 |
) |
(15,006 |
) |
|
(49,683 |
) |
(41,666 |
) |
|
Interest
income |
138 |
|
221 |
|
250 |
|
|
724 |
|
568 |
|
|
Realized and
unrealized gain (loss) |
|
|
|
|
|
|
|
on
derivative instruments (3) |
1,453 |
|
(1,778 |
) |
596 |
|
|
(1,172 |
) |
4,725 |
|
|
Equity income
(loss) (4) |
68 |
|
(169 |
) |
(359 |
) |
|
652 |
|
265 |
|
|
Other
expense |
(502 |
) |
(1,025 |
) |
(799 |
) |
|
(4,506 |
) |
(3,940 |
) |
|
Net loss |
(19,850 |
) |
(14,307 |
) |
(17,484 |
) |
|
(21,710 |
) |
(64,050 |
) |
|
|
|
|
|
|
|
|
|
Loss per share
attributable |
|
|
|
|
|
|
|
|
to shareholders of Teekay
Tankers |
|
|
|
|
|
|
|
|
- Basic and Diluted |
(0.07 |
) |
(0.05 |
) |
(0.07 |
) |
|
(0.08 |
) |
(0.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of total common |
|
|
|
|
|
|
|
shares outstanding |
|
|
|
|
|
|
|
|
- Basic and Diluted |
268,990,399 |
|
268,990,399 |
|
268,558,556 |
|
|
268,887,485 |
|
268,470,804 |
|
|
|
|
|
|
|
|
|
|
|
Number of
outstanding shares of common stock at the end of the period |
268,990,399 |
|
268,990,399 |
|
268,558,556 |
|
|
268,990,399 |
|
268,558,556 |
|
|
(1) 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 $9.0 million, $19.5
million and $12.4 million for the three months ended September 30,
2019, June 30, 2019 and September 30, 2018, respectively, and $39.9
million and $56.7 million for the nine months ended September 30,
2019 and September 30, 2018, respectively.
(2) Other revenues include lightering support
and liquefied natural gas services revenue, and pool management
fees and commission revenues.
(3) Includes realized gains on interest rate
swaps of $0.6 million, $0.8 million and $0.7 million for the three
months ended September 30, 2019, June 30, 2019 and September 30,
2018, respectively, and realized gains of $2.4 million and $1.6
million for the nine months ended September 30, 2019 and 2018,
respectively. The Company also recognized realized gain of $0.4
million and realized losses of $29 thousand and $0.1 million for
the three months ended September 30, 2019, June 30, 2019 and
September 30, 2018, respectively, and realized gain of $0.4 million
and realized loss of $0.1 million for the nine months ended
September 30, 2019 and 2018, respectively, relating to its forward
freight agreements.
(4) Equity income (loss) relates to the
Company’s 50 percent interest in the High-Q Investment Ltd.
(High-Q) joint venture, which owns one VLCC tanker.
Teekay Tankers Ltd.Summary Consolidated Balance Sheets(in
thousands of U.S. dollars)
|
As at |
As at |
As at |
|
September 30, |
June 30, |
December 31, |
|
2019 |
2019 |
2018 |
|
(unaudited) (4) |
(unaudited) (4) |
(unaudited) |
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
76,705 |
|
|
35,429 |
|
|
54,917 |
|
|
Restricted cash |
2,341 |
|
|
1,916 |
|
|
2,153 |
|
|
Pool receivable from
affiliates |
562 |
|
|
15,330 |
|
|
56,549 |
|
|
Accounts receivable |
52,245 |
|
|
51,451 |
|
|
17,365 |
|
|
Due from affiliates |
1,634 |
|
|
1,240 |
|
|
39,663 |
|
|
Current portion of derivative
assets |
1,878 |
|
|
1,229 |
|
|
2,905 |
|
|
Bunker and lube oil inventory
(1) |
50,473 |
|
|
63,441 |
|
|
23,179 |
|
|
Prepaid expenses (1) |
14,108 |
|
|
10,146 |
|
|
10,917 |
|
|
Other current assets |
61,598 |
|
|
48,296 |
|
|
17,943 |
|
|
Total current assets |
261,544 |
|
|
228,478 |
|
|
225,591 |
|
|
Restricted cash -
long-term |
3,437 |
|
|
3,437 |
|
|
3,437 |
|
|
Vessels and equipment –
net |
1,310,541 |
|
|
1,327,480 |
|
|
1,401,551 |
|
|
Vessels related to finance
leases – net |
525,597 |
|
|
529,286 |
|
|
482,010 |
|
|
Operating lease right-of-use
assets (2) |
23,595 |
|
|
19,089 |
|
|
— |
|
|
Investment in and advances to
equity-accounted joint venture |
26,418 |
|
|
26,351 |
|
|
25,766 |
|
|
Derivative assets |
82 |
|
|
240 |
|
|
2,973 |
|
|
Intangible assets – net |
9,955 |
|
|
10,498 |
|
|
11,625 |
|
|
Other non-current assets |
910 |
|
|
1,010 |
|
|
74 |
|
|
Goodwill |
8,059 |
|
|
8,059 |
|
|
8,059 |
|
|
Total assets |
2,170,138 |
|
|
2,153,928 |
|
|
2,161,086 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
101,343 |
|
|
103,980 |
|
|
52,002 |
|
|
Short-term debt (3) |
50,000 |
|
|
15,000 |
|
|
— |
|
|
Due to affiliates |
1,241 |
|
|
12,320 |
|
|
18,570 |
|
|
Current portion of derivative
liabilities |
— |
|
|
— |
|
|
57 |
|
|
Current portion of long-term
debt |
101,295 |
|
|
101,264 |
|
|
106,236 |
|
|
Current obligations related to
finance leases |
24,875 |
|
|
24,397 |
|
|
20,896 |
|
|
Current portion of operating
lease liabilities (2) |
16,405 |
|
|
12,224 |
|
|
— |
|
|
Other current liabilities |
255 |
|
|
316 |
|
|
— |
|
|
Total current liabilities |
295,414 |
|
|
269,501 |
|
|
197,761 |
|
|
Long-term debt |
507,665 |
|
|
491,962 |
|
|
629,170 |
|
|
Long-term obligations related
to finance leases |
396,059 |
|
|
402,539 |
|
|
354,393 |
|
|
Long-term operating lease
liabilities (2) |
7,190 |
|
|
6,865 |
|
|
— |
|
|
Other long-term
liabilities |
37,474 |
|
|
37,166 |
|
|
32,829 |
|
|
Derivative liabilities |
49 |
|
|
— |
|
|
— |
|
|
Equity |
926,287 |
|
|
945,895 |
|
|
946,933 |
|
|
Total liabilities and equity |
2,170,138 |
|
|
2,153,928 |
|
|
2,161,086 |
|
|
(1) Commencing in 2019, the Company is
separately presenting bunker and lube oil inventory on its balance
sheets. Such amounts were previously classified as prepaid
expenses. Bunker and lube oil inventory has increased significantly
commencing in the first quarter of 2019 as a result of changes to
the Company’s RSAs whereby the Company now directly procures and
has legal title to the bunker fuel for the vessels in the RSAs,
with such assets being used as collateral for the new loan to
finance its pool management operations entered into by the
Company. Bunker and lube oil inventory is stated at cost which
is determined on a first-in, first-out basis. Comparative
figures have been reclassified to conform to the presentation
adopted in the current period.
(2) Upon adoption of the new lease accounting
standard on January 1, 2019, the Company's chartered-in vessels,
with lease terms of more than one year, are now treated as
operating lease right-of-use assets and operating lease
liabilities. This resulted in increases in the Company’s assets and
liabilities of $23.6 million and $19.1 million at September 30,
2019 and June 30, 2019, respectively. This adoption had no impact
on the Company’s Consolidated Statements of Loss.
(3) Short-term debt relates to the Company’s
loan to finance its pool management operations that was initially
drawn during the first quarter of 2019.
(4) In late 2018, the Company initiated a new
RSA structure under a newly formed subsidiary, Teekay Tankers
Chartering Pte. Ltd (TTCL). In the third quarter of 2019, the
Company had substantially completed the transition of its RSA
activities under TTCL. Under the TTCL structure, the balances in
the RSA are consolidated, reflecting the Company’s rights and
obligations as per the TTCL RSA agreements, whereas the previous
RSA structure had an agency agreement and therefore balances were
not consolidated. The transition to TTCL has therefore resulted in
notable increases in various balance sheet working capital
categories.
Teekay Tankers Ltd.Summary Consolidated Statements of Cash
Flows(in thousands of U.S. dollars)
|
|
Nine Months Ended |
|
|
September 30, |
September 30, |
|
|
2019 |
2018 |
|
|
(unaudited) |
(unaudited) |
Cash, cash
equivalents and restricted cash provided by (used for) |
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
Net loss |
(21,710 |
) |
|
(64,050 |
) |
|
Non-cash
items: |
|
|
|
|
Depreciation and amortization |
92,059 |
|
|
88,598 |
|
|
Gain on sale of vessel |
— |
|
|
(170 |
) |
|
Unrealized loss (gain) on derivative instruments |
3,960 |
|
|
(3,287 |
) |
|
Equity income |
(652 |
) |
|
(265 |
) |
|
Freight tax expense |
4,181 |
|
|
3,859 |
|
|
Other |
3,690 |
|
|
4,307 |
|
|
Change in
operating assets and liabilities |
18,685 |
|
|
(17,402 |
) |
|
Expenditures for dry docking |
(37,430 |
) |
|
(17,035 |
) |
|
Net operating cash flow |
62,783 |
|
|
(5,445 |
) |
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
Proceeds from
short-term debt |
125,000 |
|
|
— |
|
|
Proceeds from
long-term debt, net of issuance costs |
56,788 |
|
|
46,128 |
|
|
Scheduled
repayments of long-term debt |
(76,216 |
) |
|
(92,380 |
) |
|
Prepayments of
long-term debt |
(109,688 |
) |
|
(102,717 |
) |
|
Prepayments of
short-term debt |
(75,000 |
) |
|
— |
|
|
Proceeds from
financing related to sales and leaseback of vessels |
63,720 |
|
|
156,644 |
|
|
Scheduled
repayments of obligations related to finance leases |
(18,075 |
) |
|
(8,841 |
) |
|
Cash dividends
paid |
— |
|
|
(8,052 |
) |
|
Other |
(126 |
) |
|
(92 |
) |
|
Net financing cash flow |
(33,597 |
) |
|
(9,310 |
) |
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
Proceeds from sale
of vessel |
— |
|
|
589 |
|
|
Expenditures for
vessels and equipment |
(7,210 |
) |
|
(3,463 |
) |
|
Return
of capital from equity-accounted joint venture |
— |
|
|
746 |
|
|
Net investing cash flow |
(7,210 |
) |
|
(2,128 |
) |
|
|
|
|
|
|
Increase
(decrease) in cash, cash equivalents and restricted cash |
21,976 |
|
|
(16,883 |
) |
|
Cash,
cash equivalents and restricted cash, beginning of the period |
60,507 |
|
|
75,710 |
|
|
Cash, cash equivalents and restricted cash, end of the
period |
82,483 |
|
|
58,827 |
|
|
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 |
|
|
|
September 30, 2019 |
|
September 30, 2018 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
$ |
$ PerShare(1) |
|
$ |
$ PerShare(1) |
|
Net
loss - GAAP basis |
(19,850 |
) |
|
($0.07 |
) |
|
(17,484 |
) |
|
($0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
Add specific items affecting net
loss: |
|
|
|
|
|
|
|
|
|
Unrealized gain on derivative instruments (2) |
(405 |
) |
|
— |
|
|
(4 |
) |
|
— |
|
|
|
Other
(3) |
(918 |
) |
|
($0.01 |
) |
|
(513 |
) |
|
— |
|
|
Total adjustments |
(1,323 |
) |
|
($0.01 |
) |
|
(517 |
) |
|
— |
|
|
Adjusted
net loss attributable to shareholders of |
|
|
|
|
|
|
|
|
|
Teekay Tankers |
(21,173 |
) |
|
($0.08 |
) |
|
(18,001 |
) |
|
($0.07 |
) |
|
(1) Basic per share amounts.
(2) 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 and
forward freight agreements.
(3) The amount recorded for the three months
ended September 30, 2019 primarily relates to unrealized foreign
exchange gains. The amount recorded for the three months ended
September 30, 2018 primarily relates to foreign exchange gains,
debt issuance costs that were written off in connection with the
refinancing of the Company's debt facilities and restructuring
charges.
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 |
|
|
|
September 30, 2019 |
September 30, 2018 |
|
|
|
(unaudited) |
(unaudited) |
|
|
|
|
|
|
|
|
Net
loss - GAAP basis |
(19,850 |
) |
|
(17,484 |
) |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
Depreciation and amortization |
31,536 |
|
|
29,595 |
|
|
|
|
Proportionate share of free
cash flow from equity-accounted joint venture |
522 |
|
|
92 |
|
|
|
|
Equity loss (1) |
— |
|
|
359 |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
Equity income (1) |
(68 |
) |
|
— |
|
|
|
|
Unrealized gain on derivative
instruments |
(405 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
Free cash
flow |
11,735 |
|
|
12,558 |
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding for the period
- basic |
268,990,399 |
|
|
268,558,556 |
|
|
(1) Equity (income) loss 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 |
|
September 30, 2019 |
September 30, 2018 |
|
(unaudited) |
(unaudited) |
Net loss - GAAP basis |
(19,850 |
) |
(17,484 |
) |
Depreciation and amortization |
31,536 |
|
29,595 |
|
Interest expense, net of interest income |
15,996 |
|
14,756 |
|
Freight tax and other tax expenses |
1,435 |
|
2,050 |
|
EBITDA |
29,117 |
|
28,917 |
|
|
|
|
Add (subtract) specific income
statement items affecting EBITDA: |
|
|
Foreign exchange gain |
(918 |
) |
(1,251 |
) |
Realized gain on interest rate swaps |
(613 |
) |
(711 |
) |
Unrealized gain on derivative instruments |
(405 |
) |
(4 |
) |
Equity (income) loss |
(68 |
) |
359 |
|
Other loss – net |
— |
|
119 |
|
Consolidated adjusted
EBITDA |
27,113 |
|
27,429 |
|
Adjusted EBITDA from equity-accounted joint venture (See Appendix
D) |
724 |
|
321 |
|
Total Adjusted EBITDA |
27,837 |
|
27,750 |
|
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 |
|
September 30, 2019 |
September 30, 2018 |
|
(unaudited) |
(unaudited) |
|
At |
Company's |
At |
Company's |
|
100% |
Portion (1) |
100% |
Portion (1) |
Revenues |
2,022 |
|
1,011 |
|
1,363 |
|
682 |
|
Vessel and other operating
expenses |
(575 |
) |
(287 |
) |
(722 |
) |
(361 |
) |
Depreciation and
amortization |
(908 |
) |
(454 |
) |
(903 |
) |
(452 |
) |
Income (loss) from vessel operations of equity-accounted joint
venture |
539 |
|
270 |
|
(262 |
) |
(131 |
) |
|
|
|
|
|
Net interest expense |
(403 |
) |
(202 |
) |
(456 |
) |
(228 |
) |
Equity income (loss) of equity-accounted joint
venture |
136 |
|
68 |
|
(718 |
) |
(359 |
) |
|
|
|
|
|
Equity income (loss) of
equity-accounted joint venture |
136 |
|
68 |
|
(718 |
) |
(359 |
) |
Depreciation and amortization |
908 |
|
454 |
|
903 |
|
452 |
|
Interest expense, net of interest income |
403 |
|
202 |
|
456 |
|
228 |
|
Adjusted EBITDA from equity-accounted joint
venture |
1,447 |
|
724 |
|
641 |
|
321 |
|
(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, the occurrence and expected duration of
a tanker market recovery, the impact of geopolitical tensions,
forecasts of worldwide tanker fleet growth or contraction and
newbuilding tanker deliveries, estimated growth in global oil
demand and supply, future tanker rates, future OPEC oil production,
the expected increase in global refinery throughput, the expected
increase in U.S. crude oil production, pipeline capacity and
exports and the corresponding impact on tanker demand, tanker spot
rates and the Company’s full service lightering business, the
estimated impact of IMO 2020 regulations on refinery throughput and
tanker demand and the estimated increase in and impact of scrubber
installations; the effect of delevering and having a strong balance
sheet on the Company’s share price, net asset values and cost of
capital; the Company’s intentions not to acquire vessels at this
time; potential asset sales by the Company; the Company's liquidity
and market position; and the timing for completion of the Company’s
debt refinancing. 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: 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 tanker rates; changes in the production of,
or demand for, oil or refined products; changes in trading patterns
significantly affecting overall vessel tonnage requirements; 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; changes in vessel
valuations; 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; increased costs; the availability under the Company's
revolving credit facilities and loans; credit market conditions and
the ability of the Company to complete its debt refinancing; 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, 2018. 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.
Teekay Tankers (NYSE:TNK)
Historical Stock Chart
From Feb 2024 to Mar 2024
Teekay Tankers (NYSE:TNK)
Historical Stock Chart
From Mar 2023 to Mar 2024