Teekay Corporation reported results for the three and six months ended June 30, 2022. These results include the Company’s publicly listed consolidated subsidiary, Teekay Tankers Ltd. (Teekay Tankers) (NYSE:TNK), and all remaining subsidiaries and equity-accounted investments. As a result of Stonepeak’s acquisition of Teekay LNG Partners L.P. (Teekay LNG) (now known as Seapeak LLC) in January 2022, certain information in this release presents Teekay LNG and various subsidiaries that provided the shore-based operations for Teekay LNG and certain of Teekay LNG’s joint ventures under management services contracts (collectively, the Teekay Gas Business) as a discontinued operation. Teekay, together with its subsidiaries other than Teekay Tankers, is referred to in this release as Teekay Parent.
“Our consolidated financial results for the second quarter of 2022 were higher than the previous quarter, primarily due to higher spot tanker rates and lower general and administrative expenses, partially offset by the sale of all of our interests in Seapeak LLC in mid-January 2022,” commented Kenneth Hvid, Teekay’s President and CEO.
“In addition, I am pleased to report that we successfully completed the sale of the Sevan Hummingbird FPSO to a third party on July 1, 2022. The proceeds from the sale of the Sevan Hummingbird FPSO combined with a contractual lump sum from our customer on the Petrojarl Foinaven FPSO, which is expected to be received in the third quarter of 2022, are anticipated to largely cover the remaining decommissioning costs relating to these two units and we expect to substantially complete the wind-down of our FPSO segment by the end of the year.”
“The impact of Russia’s invasion of Ukraine is reshaping the global energy markets. We believe that the increased tanker tonne-mile demand due to changes in crude oil trading patterns, combined with increasing oil consumption as part of continuing economic re-opening and the low tanker orderbook are all constructive for tanker rates. During the second quarter of 2022, Teekay Tankers saw charter rates reach their highest level in two years and rates have further strengthened into the third quarter of 2022. Teekay Tankers’ fleet of nearly 50 medium-sized tankers provides attractive operating leverage in a strengthening tanker market.”
“Following our recent $10 million investment in Teekay Tankers at an average price of $11.03 per share, we now own 10.57 million common shares of Teekay Tankers, increasing our economic ownership to 31.2%. With a net cash position of nearly $300 million, we believe our strong balance sheet, which provides financial flexibility and optionality, is particularly valuable during times of extreme volatility and global economic uncertainty, and we will continue pursuing future investments patiently and selectively where we can leverage our operating franchise and the proven capabilities of the Teekay platform to create long-term shareholder value.”
Summary of Results
Teekay Corporation Consolidated
The Company’s adjusted net income attributable to shareholders of Teekay(1) for the second quarter of 2022 increased compared to the same quarter of the prior year, primarily due to higher earnings from Teekay Tankers as a result of higher spot tanker rates and lower vessel operating expenses in the second quarter of 2022, compared to the second quarter of 2021, and lower interest expense in Teekay Parent due to bond repurchases completed during the first half of 2022, which was partially offset by the loss of earnings contribution from the Teekay Gas Business as a result of the sale of the Teekay Gas Business on January 13, 2022.
In addition, consolidated GAAP net income attributable to shareholders of Teekay increased during the second quarter of 2022, compared to the same quarter of the prior year, mainly due to a $86.7 million write-down of vessels by Teekay Tankers in the second quarter of 2021, partially offset by an asset retirement obligation (ARO) extinguishment gain of $33 million realized in Teekay Parent in the second quarter of 2021 in relation to the Petrojarl Banff FPSO.
Summary Results of Teekay Tankers
Teekay Tankers’ GAAP net income and adjusted net income(1) in the second quarter of 2022 increased compared to the same quarter of the prior year, primarily due to higher average spot tanker rates and a lower number of scheduled dry dockings, partially offset by the sale of five vessels between the two periods. In addition, GAAP net income in the second quarter of 2022 included a $1.2 million gain on the sale of two vessels and a $2.5 million foreign exchange gain, while GAAP net loss in the second quarter of 2021 included a $86.7 million write-down of vessels and a $0.6 million foreign exchange loss.
Crude tanker spot rates increased during the second quarter of 2022 to the highest level in two years. The increase was largely due to ongoing trade route disruption and longer voyage distances resulting from Russia’s invasion of Ukraine coupled with positive underlying tanker supply and demand fundamentals.
The following table highlights the operating performance of Teekay Tankers’ vessels trading in revenue sharing arrangements (RSAs), voyage charters and full service lightering, in each case measured in net revenues(a) per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses:
The following table summarizes Teekay Tankers’ TCE rates booked to-date in the third quarter of 2022 for its spot- traded fleet only:
Summary of Recent Events
In April 2022, Teekay Parent entered into an agreement to sell the Sevan Hummingbird FPSO unit to a third party, which closed on July 1, 2022. The proceeds from the sale are expected to cover the decommissioning costs for the unit, a large portion of which is anticipated to be paid in the third quarter of 2022.
In July 2022, Teekay Tankers entered into an agreement to sell a 2005-built Aframax vessel for $24.8 million. The vessel sale is expected to be completed in the third quarter of 2022, at which time Teekay Tankers will record a gain on sale of approximately $8.0 million.
Teekay Tankers in-chartered one Aframax vessel for $23,000 per day for a 2-year period, which commenced in late- July 2022.
As at June 30, 2022, Teekay Parent had total liquidity of approximately $297.3 million (consisting of cash and cash equivalents and short-term investments). On a consolidated basis, as at June 30, 2022, Teekay had consolidated total liquidity of approximately $525.8 million (consisting of $363.6 million of cash and cash equivalents and short- term investments, and $162.2 million of undrawn capacity from its credit facilities).
As at August 1, 2022, Teekay Parent had total liquidity of approximately $316.5 million. The increase compared to June 30, 2022 was mainly due to various timing differences.