Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Teekay Tankers Ltd (TNK, Financial) generated a strong quarterly result with total adjusted EBITDA of $124 million.
- The company reported an adjusted net income of $107 million or $3.11 per share.
- Midsized tanker spot rates remained strong, supported by increased exports from the Trans Mountain pipeline expansion.
- Teekay Tankers Ltd (TNK) sold two older ships for nearly $65 million and acquired a modern eco-design Aframax for $70.5 million.
- The company has a high operating leverage, with 96% of its fleet deployed in the spot market, generating significant free cash flow.
Negative Points
- Adjusted EBITDA decreased from $151 million in the previous quarter to $124 million.
- Adjusted net income decreased from $132 million or $3.96 per share in the first quarter of 2024.
- The company faces potential volatility and seasonality in spot rates despite a positive outlook.
- There is a modest tanker order book and limited shipyard capacity until the second half of 2027, which could impact fleet growth.
- Asset prices are elevated, making it challenging to deploy capital for fleet renewal without being selective.
Q & A Highlights
Q: Congratulations on your recent acquisition. Given your financial position and market outlook, are you planning to be more aggressive with acquisitions or remain methodical?
A: Kevin Mackay, President and CEO, responded that while they are in a position to deploy capital, they will be selective and prudent in fleet renewal due to elevated asset prices. They have been selling older assets and reinvesting in modern ships, but there will not be a large-scale fleet renewal at this time.
Q: Are you willing to shrink the fleet to modernize, given you have a critical mass?
A: Kevin Mackay stated that they are not fixated on fleet size and are open to selling older units if it provides better value. They focus on value rather than maintaining a specific number of ships.
Q: Regarding the Aframax one-year charter at $49,750, was this for the newly acquired 2021-built Aframax, and what drove the decision?
A: Kevin Mackay explained that they view their fleet as a portfolio and decided to lock in $50,000 a day for 12 months as a good hedge. The decision was based on portfolio management rather than specific ships.
Q: How do you see the sustainability of LR2 ships shifting to clean trade, and its impact on Aframax tightness?
A: Kevin Mackay noted that LR2 vessels are fungible and can switch between crude and clean trades based on earnings. While the shift may not be temporary in the immediate term, over time, these assets can move between trades.
Q: Has the Trans Mountain pipeline impacted your outlook on ton-mile demand?
A: Kevin Mackay mentioned that while the pipeline is not at full capacity yet, it has added demand for Aframaxes in the Pacific. The trade patterns are still developing, and they expect more demand from TMX in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
