Several factors hit Teekay results

Nov 04 2016


Teekay Corp has reported a consolidated GAAP net income of $6.1 mill for the third quarter of this year, compared with a loss of $12.2 mill in 3Q15 and an adjusted net loss of $19.5 mill, compared to a profit of $2.8 mill during the same period last year.

Third quarter 2016 consolidated cash flow from vessel operations was $285.5 mill, down from $341.3 mill reported in 3Q15.

“On a consolidated basis, Teekay’s results for the third quarter of 2016 were partially affected by seasonal factors in our conventional tanker and shuttle tanker segments, as well as the scheduled redelivery of the ‘Varg FPSO at the end of July 2016,” explained Peter Evensen, Teekay’s outgoing president and CEO. “Looking ahead, we expect a stronger fourth quarter primarily as a result of the reversal of some of the previous quarter’s seasonal factors, lower operating costs, and higher revenues from our FPSO business.”

“In October 2016, Teekay Parent completed the sale of its last remaining directly-owned conventional tanker, the VLCC ‘Shoshone Spirit , which will reduce our financial leverage by $63 mill in the fourth quarter of 2016.

“During the recent quarter, we successfully secured key commercial contracts in each of our businesses. Teekay Offshore secured its largest shuttle tanker contract award in five years, Teekay LNG entered into charter contracts for its two remaining previously-unchartered LNG carrier newbuildings, and Teekay Tankers secured two new ship-to-ship lightering contracts. Including these contracts, Teekay’s consolidated portfolio of forward fee-based revenues totals over $20 bill.

“The execution of our existing growth projects at Teekay Offshore and Teekay LNG continues to be a major focus. Teekay Offshore’s projects are progressing well except that we are expecting a delay and additional costs associated with the upgrade of the ‘Petrojarl I FPSO unit for the Atlanta project in Brazil, which we are currently discussing with the charterer, shipyard and our lenders.

“Teekay LNG’s growth projects are progressing as scheduled and significant progress has been made on securing the financing for these projects, including approximately $1.3 bill of new long-term loan and lease facilities expected to be secured over the next few months. In addition, Teekay LNG has again demonstrated its access to the capital markets and has bolstered its liquidity position through the recent issuances of $125 mill in preferred equity and $110 mill of five-year Norwegian Kroner  denominated unsecured bonds in an over-subscribed offering. Once Teekay Offshore’s and Teekay LNG’s projects are delivered, these growth projects are expected to add significantly to our annual cash flow from vessel operations.

“As announced last week, I have decided to retire after 13 years with the company, including five years as President and CEO of Teekay, and I am confident that Kenneth Hvid is the right person with the required experience to be my successor to lead Teekay into the next phase of its strategy. Kenneth has had multiple roles in his 16 years at Teekay, including leadership positions in offshore, LNG, tankers, strategy, operations, and his current role as President and CEO of Teekay Offshore Group. The company is well-positioned with market-leading businesses, a pipeline of growth projects at Teekay LNG and Teekay Offshore, which are expected to provide significant cash flow growth, and a great team now led by Kenneth, including Teekay’s corporate finance team, led by our CFO Vince Lok, which will continue to be responsible for the Teekay Group’s financings,” Evensen concluded.

The company’s consolidated results decreased during the quarter, compared to the same period in 2015, primarily due to lower revenues from Teekay Parent related to lower usage of the LNGCs ‘Polar Spiritand ‘Arctic Spirit as one vessel was on a 23-day charter during the quarter while the other vessel was in lay-up; a new contract for the ‘Hummingbird SpiritFPSO at a lower fixed charter rate that took effect on 1st July, 2016; lower income and cash flows in Teekay LNG mainly as a result of the sales of two conventional tankers in April and May, 2016.

In addition, lower income from Teekay LNG’s Exmar LPG joint venture; lower income and cash flows in Teekay Offshore due to the redelivery of a shuttle tanker upon completion of its timecharter-out contact and higher operating expenses related to preparing this vessel for operations in the North Sea, higher operating expenses for the ‘KnarrFPSO related to completion of the final performance test in August, 2016, the redelivery of the ‘Varg FPSO in July, 2016, and lower towage fleet charter rates and utilisation; and lower income and cash flows in Teekay Tankers due to lower spot tanker rates, all affected the results.

Consolidated income from vessel operations was also reduced in 3Q16, due to an asset impairment relating to an MR that is expected to be delivered to buyers in November, 2016.

These decreases were partially offset by higher income and cash flows as a result of Teekay Tankers’ acquisition of 19 conventional tankers during 2015 and higher income and cash flows from Teekay LNG as a result of the deliveries of the ‘Creole Spirit and ‘Oak SpiritMEGI LNGC newbuildings, which commenced their five-year charter contracts with Cheniere Energy in late-February, 2016 and early-August 2016, respectively, and higher income and cash flows from Teekay Offshore as a result of an increase in charter rates under certain shuttle tanker contracts.

Total Teekay Parent free cash flow, which is the total of GPCO and OPCO cash flows, was negative $6.8 mill during 3Q16, compared to positive $59.8 mill for the same period of 2015.

As for the daughter companies (subsidiaries), Teekay LNG’s results increased during 3Q16, compared to 3Q15, primarily due to the deliveries of the LNGCs ‘Creole Spiritand ‘Oak Spirit’. These increases were partially offset by lower revenues from two vessels in the Partnership’s 52%-owned LNG joint venture with Marubeni Corp as the charterer temporarily closed its LNG operations in 2015, lower revenues from Teekay LNG’s 50%-owned joint ventures with Exmar LPG, due to a reduction in mid-sized LPG carrier spot rates and unscheduled off-hire days related to some of the LPG carriers and the redelivery of an older in-chartered LPG carrier (net of the additions of three LPG carrier newbuildings delivered from September, 2015 to June, 2016), lower revenues from two Suezmaxes upon the charterer exercising its one-year extension options between September, 2015 and January, 2016, and the sales of two conventional tankers in April and May, 2016.

Teekay Offshore’s results decreased in 3Q16, compared to the same period of 2015, primarily due to the redelivery of the ‘Varg FPSO (which left the field at the end of July, 2016), the redelivery of a shuttle tanker upon completion of its timecharter-out contract and higher operating expenses related to preparing this vessel for operations in the North Sea, as it joins the contract of affreightment fleet, higher operating expenses for the ‘KnarrFPSO related to the successful completion of the final performance test in August, 2016 as required under the charter contract, lower towage fleet charter rates and utilisation, and the sale of two conventional tankers and sale-leaseback transactions on two conventional tankers in 2015 and 2016.

These decreases were partially offset by an increase in charter rates under certain shuttle tanker contracts.

Finally, Teekay Tankers’ results decreased during 3Q16, compared to the same period in 2015, primarily due to lower average spot tanker rates in the quarter, compared to 3Q15, partially offset by an increase in fleet size, as a result of the acquisition of 19 modern, mid-size tankers during 2015.

The spot tanker market during the quarter was affected by various factors, including normal seasonality, reduced oil supply, due to temporary outages in key export regions, and lower refinery throughput.

Many of the seasonal factors and temporary outages have now diminished or passed, resulting in higher tanker rates so far in 4Q16, compared with August.

As at 30th September, 2016, Teekay Parent had total liquidity of $287.9 mill (consisting of $154.8 mill of cash and cash equivalents and $133.1 mill of undrawn revolving credit facilities) and, on a consolidated basis, Teekay Corp had total liquidity of around $1.1 bill (consisting of $705.3 mill of cash and cash equivalents and $415.7 mill of undrawn revolving credit facilities).

At a conference call, Teekay Tankers’ CEO Kevin Mackay, said the company reported an adjusted net loss of $1.5 mill in 3Q16, compared to adjusted net income of $40.3 mill in the same period of 2015.

“We generated free cash flow of $26.6 mill during the quarter compared with $59.4 mill in the same period of the prior year.

“Our results during the quarter were impacted by the lowest quarterly crude tanker rates in three years. Various factors affected rates, including normal seasonality reduced supply and to temporary outages in key export regions and lower refinery throughput.

“Many of the seasonal factors and temporary outages have now diminished or passed resulting in higher tanker rates so far in the fourth quarter, compared with this past August.

“In October, Teekay Tankers agreed to sell its last remaining MR and two 2002-built Suezmaxes for total combined proceeds of $47 mill, which along with the cash flow generated during the quarter is expected to further deliver our balance sheet to below 49% on a net debt to book capitalisation basis.

“Since reporting earnings in August, we have continued to grow our ship-to-ship lightering business having secured two new significant lightering contracts with major oil companies for periods of up to 24 months.

“These contracts help strengthen our position in the lightering business by providing us with cargo volume to employ up to three Aframaxes equivalents per year,” he explained.  



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