The group generated GAAP consolidated loss from vessel operations of $189.8 mill (inclusive of $243.7 mill of impairment charges) and consolidated total cash flow from vessel operations of $238.1 mill in 3Q17.
These results include the company’s three publicly-listed subsidiaries Teekay LNG Partners, Teekay Tankers and Teekay Offshore Partners and all remaining subsidiaries of the company.
“Since reporting earnings in August 2017, we have been focused on completing strategic transactions, vessel deliveries and financing initiatives across the Teekay Group, which we believe will strengthen each of our businesses,” said Kenneth Hvid, Teekay’s President and CEO. “Teekay and Teekay Offshore have completed their strategic partnership with Brookfield, Teekay Tankers has secured support from two leading independent proxy advisory firms for its proposed charter amendment to permit its merger with TIL and Teekay LNG continues to execute on the delivery and financing of its newbuilding projects. Teekay LNG and Teekay Offshore’s projects are now starting to deliver, which are expected to provide significant future cash flow growth.
“With respect to Teekay Parent’s directly-owned assets, we believe Centrica Energy’s previously announced drilling campaign on the Chestnut field in the North Sea, which is serviced by our ‘Hummingbird Spirit’ FPSO unit, is expected to increase production, thereby increasing Teekay Parent’s cash flows. Our new three-year contract extension for the ‘Hummingbird Spirit’ FPSO contract took effect in October, 2017, and now includes a component providing potential upside based on oil production and oil prices, as is also the case with Teekay Parent's other two FPSO units, the ‘Banff’ and ‘Foinaven’ FPSO units.
“We are starting to see green shoots of an energy recovery in our LNG, offshore and crude oil tanker businesses. With market-leading positions and strong operational platforms, we believe each of our businesses are well-positioned to benefit from and take advantage of future opportunities as our markets continue to recover,” he said.
Teekay Corp's consolidated results during 3Q17, compared to the same period in 2016, were impacted primarily by $243.7 mill of impairment charges. In addition, as a result of the Brookfield transaction, the company recorded a $103.2 mill loss on de-consolidation of Teekay Offshore and recognised previously deferred gains of $349.6 mill within net loss attributable to non-controlling interests related to previous sales of vessels from Teekay Parent to Teekay Offshore.
In addition, the consolidated results were impacted by lower cash flows from Teekay Parent related to the scheduled maintenance for the ‘Foinaven’ FPSO in 3Q17 and an insurance recovery recognised for the ‘Banff’ FPSO unit in 3Q16; lower income and cash flows from Teekay LNG's six LPG carriers on charter to IM Skaugen as a result of uncollected hire; a reduction in income and cash flows in Teekay Tankers, due to lower average spot tanker rates; and lower income and cash flows in Teekay Offshore, primarily due to the redelivery of the ‘Petrojarl Varg’ FPSO in July, 2016, the redelivery of an FSO in October, 2016 and the non-payment of charter hire for the ‘Arendal Spirit’ UMS since early-November, 2016 and subsequent charter termination in April, 2017.
These decreases were partially offset primarily by higher results for the ‘Banff’ FPSO, due to a production tariff linked to oil price commencing 1st August, 2017, and higher income and cash flows from Teekay LNG, as a result of the deliveries of two MEGI LNC newbuildings ‘Oak Spirit’ and ‘Torben Spirit’, in 2016 and 2017, which commenced their respective charter contracts.
Teekay Parent GPCO cash flow, which includes distributions and dividends paid to Teekay Parent from Teekay’s daughter entities in the following quarter, less Teekay Parent’s corporate general and administrative expenses, was $7.2 mill for 3Q17, compared to $6.4 mill for 3Q16.
Teekay Parent OPCO cash flow, which includes cash flow attributable to assets directly-owned by, or chartered-in to, Teekay Parent, net of interest expense and drydock expenditures, decreased to negative $19.1 mill from negative $13.1 mill for the same period in 2016.
Teekay LNG's results decreased during the quarter, compared to 3Q16, primarily due to lower revenues from six LPG carriers on charter to Skaugen, as a result of uncollected hire and lower revenues from Teekay LNG’s 50%-owned joint venture with Exmar, due to lower spot rates.
These decreases were partially offset by, among other things, the deliveries of two MEGI LNGCs and the commencement of their respective charter contracts in 2016 and 2017 and the deliveries of three mid-size LPG carriers in Teekay LNG's 50%-owned joint venture with Exmar in 2016 and 2017.
Teekay Tankers' results also decreased during the quarter, primarily due to lower average spot tanker rates in 3Q17, compared to the same period of 2016. Seasonal weakness, combined with global inventory drawdowns, as crude oil pricing moved into backwardation, contributed to weak spot tanker rates.
Since then, crude tanker rates have improved into 4Q17, supported by refineries returning from seasonal maintenance and an increase in long-haul movements from the Atlantic to the Pacific, which is increasing tanker tone/mile demand.
Teekay Offshore’s results also decreased during the quarter, due to the redelivery to Teekay Offshore of the ‘Varg’ FPSO, the redelivery of an FSO in October, 2016, the non-payment of charter hire for the ‘Arendal Spirit’ UMS since early-November, 2016 and subsequent charter termination, and higher operating expenses relating to Teekay Offshore's FPSO fleet.
These decreases were partially offset by higher project revenues during 3Q17 and lower operating expenses from Teekay Offshore's shuttle tanker fleet.
In October, 2017, Teekay Parent terminated the charter contracts prior to their expiration dates for its two remaining in-chartered conventional tankers, the ‘Constitution Spirit’ and ‘Sentinel Spirit’, resulting in a net termination fee payment of about $1.6 mill. These terminations are expected to improve Teekay Parent's cash flows in the future.
On 7th November, 2017, the US District Court for the Western District of Washington ruled in the company's favour on all claims and dismissed with prejudice the securities law class action complaint that had been filed against Teekay and certain of the company's officers on 1st March, 2016 in the US District Court for the District of Connecticut and which had been transferred to Washington in November last year.
In October and November, 2017, Teekay LNG took delivery of two MEGI LNG carrier newbuildings, the ‘Macoma’ and ‘Murex’, chartered to Shell, which immediately commenced their six and seven-year charter contracts, plus extension options, respectively.
In October, 2017, Teekay LNG’s 30%-owned joint venture with China LNG Shipping (Holdings) and CETS (an affiliate of CNOOC) took delivery of an LNGC newbuilding, the ‘Pan Asia’, which immediately commenced its 20-year charter contract with Shell.
In September, 2017, Teekay Offshore completed its strategic partnership with Brookfield.
In October, 2017, the ’Randgrid’ FSO, which was converted from a Teekay Offshore shuttle tanker at Sembcorp’s Sembawang shipyard in Singapore, commenced its charter contract with Statoil on the Gina Krog oil and gas field in the Norwegian sector of the North Sea.
In November, 2017, Teekay Offshore entered into a heads of terms with Premier Oil to extend the employment of the ‘Voyageur Spirit’ FPSO on the Huntington field for an additional 12 months through April, 2019. The new contract, which will take effect in April, 2018, will include a fixed rate component and an upside component based on the oil production and oil prices.
Teekay Offshore received notice from the charterer, Petrobras, that it plans to redeliver the ‘Rio das Ostras’ FPSO upon completion of the unit's charter contract in January, 2018. As a result, Teekay Offshore is seeking redeployment opportunities.
In October and November 2017, Teekay Offshore took delivery of the first two East Coast Canada shuttle tanker newbuildings, the ‘Beothuk Spirit’ and ‘Norse Spirit’, which are scheduled to commence long-term charters in December, 2017 and January, 2018 with a group of companies that includes Canada Hibernia Holding Corp, Chevron Canada, ExxonMobil, Husky Energy, Mosbacher Operating, Murphy Oil, Nalcor Energy, Statoil and Suncor Energy.
These newbuildings will replace two existing shuttle tankers that are currently operating in East Coast Canada, with the first replaced vessel transferring to the North Sea to provide required capacity in Teekay Offshore's CoA fleet and the second replaced vessel redelivering to its owner.
Since August, 2017, Teekay Tankers had entered into agreements to sell two 1999-built Aframaxes for aggregate proceeds of around $12.7 mill. One Aframax was delivered to the buyer in September, 2017 and the other is expected to be delivered in the second half of November, 2017.
Teekay Tankers also secured a timecharter-out contract on an Aframax for a firm period of 12 months at a daily rate of $15,000, plus a 12-month extension option at a higher rate, which commenced in October, 2017.
As at 30th September, 2017, Teekay Parent had total liquidity of around $271.9 mill and, on a consolidated basis, Teekay had consolidated total liquidity of about $627.7 mill.