Teekay Tankers Ltd. today reported the Company’s results for the quarter ended March 31, 2020:
First Quarter of 2020 Compared to Fourth Quarter of 2019
GAAP net income and non-GAAP adjusted net income for the first quarter of 2020 improved compared to the fourth quarter of 2019, primarily due to higher average spot tanker rates, partially offset by the sale of four Suezmax tankers during December 2019 and the first quarter of 2020. GAAP net income in the fourth quarter of 2019 also included adjustments to freight tax accruals relating to prior periods.
First Quarter of 2020 Compared to First Quarter of 2019
GAAP net income and non-GAAP adjusted net income for the first quarter of 2020 significantly increased compared to the same period of the prior year, primarily due to higher average spot tanker rates and fewer off-hire days, partially offset by the sale of four Suezmax tankers since December 2019.
“In the first quarter of 2020, Teekay Tankers achieved its highest quarterly adjusted profit in more than 10 years, with adjusted net income of approximately $110 million, or $3.27 per share, and I am pleased to report that our fleet has continued to secure strong spot rates in the second quarter of 2020 to-date,” commented Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer. “While COVID-19 is having an unprecedented impact on the world and is clearly a major focus for us, we are fortunate to be in a position where our financial results are stronger so far in 2020 and we have had minimal impacts on our operations due to the pandemic. We are truly proud of how our seafarers and onshore colleagues have responded to COVID-19, implementing new standards which focus on the health and well-being of everyone involved in our organization, especially our colleagues at sea, while maintaining consistently safe and efficient operations for our customers.”
“We have continued to execute on our strategic priorities, taking advantage of the strong spot tanker market over the last couple of months and opportunistically securing time charter-out contracts for an additional nine vessels for periods of six months to two years. We have now secured a total of 13 time charter-out contracts since October 2019, locking in approximately $170 million of forward fixed rate revenues(1) at attractive rates and reducing our free cash flow breakeven to approximately $10,500 per day through the first quarter of 2021. Our low breakeven rate is expected to enable us to create shareholder value in almost any market which is important given the current market uncertainty for the second half of 2020.”
“In addition, we continue to focus on further increasing our financial strength. With the strong cash flows we generated from operations and the proceeds from vessel sales in the first quarter of 2020, we reduced our net debt by approximately $200 million, or over 20 percent, to $730 million as of March 31, 2020, while also significantly increasing our total liquidity to $368 million over the same period, and have subsequently continued to make meaningful progress on both fronts.”
Mr. Mackay added, “Our focus on debt reduction creates shareholder value directly through increased net asset value and also increased financial flexibility, which is important in all tanker markets. With a low free cash flow breakeven, a strong liquidity position, lower balance sheet leverage, no significant debt maturities until 2024 and our mid-size fleet profile, we believe that Teekay Tankers is one of the best positioned companies in our sector to continue creating shareholder value.”
Summary of Recent Events
Since the beginning of the year, Teekay Tankers has entered into time charter-out contracts for five Suezmax tankers, each for a duration of one year at an average rate of $45,600 per day, one Suezmax time charter-out contract for six months at $52,500 per day, and three time charter-out contracts for Aframax-sized vessels for one to two years at an average rate of $26,750 per day.
In late-April 2020, Teekay Tankers closed the previously announced sale of a portion of its oil and gas ship-to-ship transfer support business, which also provides gas terminal management and consulting services, for approximately $27.0 million, of which approximately $14.3 million has been received with the remaining amount due in the third quarter of 2020. Teekay Tankers retained its entire Full Service Lightering business that operates in the U.S. Gulf, which provides ship-to-ship oil transfers for both U.S. crude imports and exports. In addition, the Company will continue to operate oil ship-to-ship transfer support services in North America and the Caribbean, a business that has synergies with its core Full Service Lightering business.
The following table highlights the operating performance of the Company’s time-charter vessels and spot vessels trading in revenue sharing arrangements (RSAs), voyage charters and full service lightering, in each case measured in net revenues(i) per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses:
Second Quarter of 2020 Spot Tanker Rates Update
Below is Teekay Tankers’ spot tanker fleet update for the second quarter of 2020 to-date:
The portion of the Suezmax fleet trading on the spot market has secured TCE rates per revenue day of approximately $52,100 on average, with 69 percent of the available days fixed(1); and
The portion of the Aframax and LR2 fleet trading on the spot market has secured TCE rates per revenue day of approximately $33,600 on average, with 62 percent of the available days fixed(2)(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, non-pool voyage charters and full service lightering voyages.
(3) As of January 1, 2020, the Company’s Aframax tankers and LR2 product tankers, excluding those employed under non-pool voyage charters and full service lightering voyages, are operating as a combined RSA under the Teekay Aframax RSA.
As at March 31, 2020, the Company had total liquidity of $368.1 million (comprised of $205.3 million in cash and cash equivalents, including $2.0 million of cash in assets held for sale, and $162.8 million in undrawn capacity from its credit facilities) compared to total liquidity of $150.3 million as at December 31, 2019.
Source: Teekay Tankers