Teekay Tankers sees earnings slide

Teekay-LNG

Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE:TNK) today reported the Company’s results for the quarter ended March 31, 2017:

Three Months Ended
(in thousands of U.S. dollars, except per share data) March 31,
2017
December 31,
2016
March 31,
2016
GAAP FINANCIAL COMPARISON
Total revenues 125,096 117,704 164,950
Income from vessel operations 9,012 5,660 53,838
Net income 2,828 6,846 38,980
Earnings per share 0.02 0.04 0.25
Weighted-average number of common shares – basic 164,352,065 156,712,832 156,083,657
NON-GAAP FINANCIAL COMPARISON
Adjusted net income (1) 7,028 5,104 45,958
Adjusted net income per share (1) 0.04 0.03 0.29
Total cash flow from vessel operations (1) 42,471 43,134 86,225
Free cash flow (1) 34,358 34,207 66,218
(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).

GAAP net income and adjusted net income were affected by lower spot tanker rates in the first quarter of 2017 compared to the same period of the prior year. GAAP net income was also affected by losses on the sales of two Suezmax tankers and two Medium Range (MR) tankers, which were sold in the first quarter of 2017 and the second half of 2016, respectively.

GAAP net income and adjusted net income were positively impacted by higher spot tanker rates in the Company’s Aframax and LR2 product tanker fleets in the first quarter of 2017 compared to the fourth quarter of 2016, as well as lower freight tax accruals. Compared to the fourth quarter of 2016, GAAP net income for the first quarter of 2017 was also affected by lower unrealized gains on derivative instruments, partially offset by lower losses on vessel sales.

CEO Commentary

“During the first quarter of 2017, we generated cash flow from operations of $34.4 million, and paid a quarterly dividend of 3 cents per share,” commented Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer. “While spot tanker rates were largely in-line with those for the fourth quarter of 2016, the tanker market experienced downward pressure over the course of the recent quarter, primarily due to heavy refinery maintenance, OPEC supply cuts and higher tanker fleet growth. Overall, we anticipate the tanker market to weaken into 2017 as a result of ongoing OPEC supply cuts and higher tanker fleet growth; however, robust global oil demand growth and changing trading patterns due to OPEC supply cuts are expected to provide support to mid-size tanker demand as more crude oil moves long-haul from the Atlantic basin to Asia. Looking ahead to 2018, we anticipate a renewed market upturn driven by a lack of new tanker ordering, increased scrapping due to regulatory changes, and a more balanced oil market.”

“In addition to completing the sale and delivery of our older tonnage and generating strong cash flow from operations during the quarter, we are continuing to focus on further strengthening our balance sheet,” commented Mr. Mackay. “We have recently signed a term sheet on a 12-year sale-leaseback financing transaction for four of our modern Suezmax tankers. Once finalized, this transaction is expected to increase our liquidity position by approximately $30 million and strengthen our financial position to manage the current spot market weakness, while maintaining our exposure to what we anticipate will be a renewed tanker market upturn in 2018.”

Highlights

  • Reported GAAP net income of $2.8 million, or $0.02 per share, and adjusted net income(1) of $7.0 million, or $0.04 per share, in the first quarter of 2017.
  • Generated free cash flow(1) of $34.4 million in the first quarter of 2017.
  • Declared cash dividend of $0.03 per share for the first quarter of 2017, representing the minimum quarterly dividend.
  • In April 2017, Teekay Tankers signed a term sheet for a sale-leaseback financing for four of its modern Suezmax tankers, which is expected to increase liquidity by approximately $30 million.
  • Completed the sale of two older Suezmax tankers in January and March 2017 and agreed to sell an older Aframax tanker, the Kyeema Spirit, which is scheduled to deliver in the second quarter of 2017.

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