Highlights
- Reported GAAP net loss of $27.4 million, or $0.10 per share, and adjusted net loss(1) of $28.7 million, or $0.11 per share, in the second quarter of 2018.
- Generated GAAP loss from operations of $13.4 million and total cash flow from vessel operations(1) of $16.6 million in the second quarter of 2018.
- Signed term sheets for two new financings; upon completion, combined with the sale-leaseback transaction previously-announced, these financings will increase liquidity by approximately $110 million(2). On a pro-forma basis, these financings would increase the Company’s total liquidity to approximately $190 million as of June 30, 2018.
HAMILTON, Bermuda, Aug. 02, 2018 (GLOBE NEWSWIRE) — 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 Hamilton
Tel: +1 (604) 609-2963
Website: 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 | |||||||||||||||||||||||