The Teekay Corp daughter company generated GAAP income from operations of $31.2 mill and total cash flow from vessel operations of $62.3 mill during the period, compared to a loss of $2.2 mill and a positive $27.8 mill for 3Q18, respectively.
For the full year, the net loss of $52.5 mill was slightly down on the net loss of $58 mill recorded for 2017.
In November, 2018, Teekay Tankers completed two previously-announced financings that when fully drawn will amount to around $40 mill of additional liquidity; and, in February 2019, signed a term sheet for a further sale-leaseback transaction for two vessels, which is expected to increase liquidity by about $25 mill.
Since November, 2018, the company timechartered-in 2.5 Aframax tanker vessel-equivalents for periods ranging between one and two with extension options at a weighted daily average of $17,600.
GAAP net income and non-GAAP adjusted net income for 4Q18 improved compared to the previous quarter, primarily as a result of higher average spot tanker rates. However, this was partially offset by an increase in general and administrative expenses, a portion of which is non-recurring.
Compared to 4Q17, the GAAP net income and non-GAAP adjusted net income were positively affected by higher average spot tanker rates and the acquisition of Tanker Investments in late-November, 2017. This was partially offset by higher interest expense associated with the sale-leaseback transactions for 10 tankers that were completed in September and November, 2018.
“Crude tanker spot rates reached three-year highs during the fourth quarter of 2018, driven by winter seasonality underpinned by positive supply and demand fundamentals, which led to our results exceeding the prior quarter and the same quarter of the previous year,” commented Kevin Mackay, Teekay Tankers’ President and CEO. “This strength continued into early 1Q19 and I am pleased that our secured first quarter to-date spot rates are significantly higher than the fourth quarter.
“However, in the last few weeks, crude tanker rates have declined from those highs, as a result of OPEC supply cuts, higher fleet growth, and the impact of seasonal refinery maintenance, which we believe could weigh on crude tanker demand as we go through the first half of 2019.
“We believe the near-term headwinds should however give way to a much stronger second half of 2019 and 2020 due to positive underlying oil demand, an expected increase in US crude oil exports, higher OPEC production, lower tanker fleet growth, and the positive impacts of IMO 2020.
"We continue to focus on strengthening our balance sheet and financial position. Since the beginning of 2018, we have completed various financing initiatives and recently signed a term sheet for a further sale-leaseback transaction, all of which have or are expected to increase our liquidity position and extend our maturity profile."
“Consistent with our strategy and based on our forward views of the market, we recently entered into timecharter-in contracts for 2.5 Aframax/LR2 vessels for periods ranging from one to two years with extension options.
“Securing these new vessels at attractive charter rates, will add to our significant operating leverage and further position Teekay Tankers to add value and benefit from an expected strengthening global tanker market as we move through 2019 and into 2020," he concluded.
As for parent, Teekay Corp, the Group posted a GAAP net loss of $18.4 mill and adjusted net loss of $2 mill for 4Q18.
GAAP income from vessel operations was $88.8 mill and total cash flow from vessel operations was $246.7 mill for the period.
Teekay Corp’s results include the two publicly-listed consolidated subsidiaries - Teekay LNG Partners and Teekay Tankers and its equity-accounted investment in publicly-listed Teekay Offshore Partners, which was de-consolidated as of 25th September, 2017 and all remaining subsidiaries and equity-accounted investments.
“In the fourth quarter of 2018, our total CFVO increased by approximately $50 mill, or 25%, compared to the prior quarter, primarily driven by the contract start-up of various growth projects across the Teekay Group, certain LNG vessels commencing new contracts at firm rates, and higher spot tanker rates,” Kenneth Hvid, Teekay’s President and CEO explained. “The fourth quarter results also included our minority portion of Teekay Offshore’s previously-announced positive settlement with Petrobras.
“In addition, our consolidated and Teekay Parent cash flows this quarter would have been higher by approximately $8 mill were it not for the unplanned shutdown of the ‘Foinaven’ FPSO and the previously-guided shutdown of the ‘Banff’ FPSO. I am pleased to report that both FPSO units were back up and running as of early-January, 2019 and early-November, 2018, respectively.
“Since the beginning of 2018, the Teekay Group has continued to build financial strength and grow its cash flows while also benefiting from improving LNG and crude tanker macro fundamentals, all of which supports greater long-term value creation.
“We took advantage of multi-year highs in the LNG spot tanker shipping market by securing new charters at higher rates for the few vessels Teekay LNG has trading in the short-term market and we expect the LNG spot shipping market to be relatively strong through to the end of 2019 and into 2020.
"As announced last quarter, Teekay LNG will increase its quarterly cash distributions by 36% commencing in the first quarter of 2019. While Teekay LNG’s balanced capital allocation strategy results in a more moderate distribution increase in the near-term, we believe that this approach will enable Teekay LNG to delever its balance sheet faster and thus, maximise equity value for all of Teekay LNG’s unitholders over the long-term.
“In addition, in the fourth quarter, Teekay LNG announced a common unit repurchase programme and we believe that opportunistic repurchases by Teekay LNG will create further value. We are committed to creating long-term value for all unitholders, while also maximising the benefits to Teekay Parent through the incentive distribution rights structure.
“Teekay Tankers benefited from fourth quarter crude spot tanker rates reaching three-year highs. This strength continued into early-2019 with Teekay Tankers securing first quarter to-date crude spot tanker rates that are higher than the fourth quarter.
“While rates have recently softened from these levels, we believe we are at the beginning of a more sustained recovery that is expected to increase Teekay Tankers’ cash flows and asset values.
“Teekay Tankers has completed various financing initiatives and have signed a term sheet for an additional sale-leaseback transaction, which have or are expected to strengthen its liquidity position and extend its debt maturity profile. With significant operating leverage, we believe Teekay Tankers is well-positioned to benefit from a forecasted strengthening global tanker market in the second half of 2019 and into 2020.
“In addition to benefiting from the value creation taking place at its daughter entities, Teekay Parent is also benefiting from a delevering balance sheet and higher cash flows. Teekay Parent adjusted CFVO has increased by $51 mill in 2018 compared to 2017, driven primarily by higher cash flows generated by our directly-owned FPSO units, which have upside exposure to oil prices and production.
He concluded, “Since the beginning of 2018, Teekay Parent has used a portion of the capital raised in January 2018 to repay all of its secured debt and reduced its 2020 unsecured bond balance by approximately $95 mill, including the repurchase of $42.4 mill of our unsecured bonds at an all-in average price of 97.27 since the beginning of December, 2018. Looking ahead, one our key priorities will be to refinance our 2020 bond maturity with a smaller bond, which is in line with our strategy of strengthening our financial foundation.”
As at 31st December, 2018, Teekay Parent had total liquidity of around $333.4 mill (consisting of $220.2 mill cash and cash equivalents and $113.2 mill of undrawn revolving credit facilities) and, on a consolidated basis, Teekay had consolidated total liquidity of about $724.7 mill (consisting of $424.2 mill of cash and cash equivalents and $300.5 mill of undrawn revolving credit facilities).