Teekay Corporation reported results for the three and nine months ended September 30, 2021.
CEO Commentary
“In the third quarter of 2021, we recorded a small consolidated adjusted net profit. Stronger results from our marine services business in Australia and lower vessel operating expenses offset weaker spot tanker rates during the quarter,” commented Kenneth Hvid, Teekay’s President and CEO. “In September 2021, Teekay Parent secured a contract with the Australian Government Department of Defence to provide marine services for five Australian Government vessels for a firm period of six years, with options to extend for up to an additional 10 years. Teekay has had a presence in Australia since 1997 and already operates four Australian Government vessels. We are proud to have the Australian Government as a strategic partner and an important customer, and we view this expanded role in providing services for nine Australian Government vessels to be a solid foundation to further grow our business there.”
“In early-October 2021, Teekay LNG and Stonepeak announced that they have entered into a merger agreement whereby Stonepeak will acquire all of Teekay LNG for $17.00 per unit or unit equivalent in cash, representing an enterprise value of $6.2 billion and common unit equity value of $1.5 billion,” commented Mr. Hvid. “We believe this transaction represents a unique opportunity for us and other Teekay LNG common unitholders to monetize existing investments in Teekay LNG at an attractive valuation, which will provide Teekay Parent with gross proceeds of approximately $640 million. This transaction also provides Teekay Parent with significantly greater financial flexibility and dry powder to leverage its existing operating franchise and industry-leading capabilities to pursue attractive investment opportunities in both the shipping sector and potentially in new and adjacent markets, which we expect to be dynamic as the world pushes for greater energy diversification.”
Recap
In the third quarter, Teekay Corporation reported a consolidated adjusted profit. Stronger results from our marine services business in Australia and lower vessel operating expenses offset weaker tanker rates and a heavy drydock schedule in our tanker business during this quarter, while our gas business performed as expected.
In September, Teekay Parent secured a contract with the Australian Government Department of Defence to provide marine services for five Australian Government vessels for a firm period of six years, with options to extend for up to an additional 10 years. Teekay has had a presence in Australia since 1997 and is proud to be a partner with this strategic customer which provides a solid foundation to further grow this business.
Teekay Tankers reported weak earnings results due to historically low spot tanker rates during the third quarter. This was primarily due to ongoing OPEC+ supply cuts as well as a series of unplanned outages in non-OPEC countries which led to relatively low trade volumes during the quarter. Despite another challenging quarter, Teekay Tankers continue to maintain a strong balance sheet with a healthy liquidity position and low financial leverage.
Looking ahead, and viewing the Teekay consolidated entity in its current configuration, we are expecting our fourth quarter results to be better than the third quarter, mainly due to improving spot tanker rates and fewer drydocking days for both our gas and tanker fleets, partially offset by higher vessel operating expenses mainly due to timing of repairs and maintenance. For guidance on our fourth quarter results, please refer to the appendix of Teekay Corporation’s Q3-21 Earnings Results Presentation.
As announced on October 4th, Teekay LNG and Stonepeak entered into a merger agreement whereby Stonepeak will acquire all the issued and outstanding common units and general partner units for $17 per unit in cash, representing an enterprise value of $6.2 billion and common unit equity value of $1.5 billion. Teekay Parent will be selling its entire position in TGP, including our GP interest, for gross proceeds of approximately $640 million.
This transaction transforms Teekay’s balance sheet and gives us the financial flexibility to pursue future opportunities. Teekay believes that the transaction will enable common unitholders to realize an attractive valuation and immediate liquidity on the closing of the transaction. In addition, under Stonepeak’s ownership, Teekay LNG is expected to have greater access to competitively priced capital for both fleet renewal and potential future growth, which has not been available to Teekay LNG through the public capital markets for many years.
