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Teekay Tankers Ltd. in the second quarter
Teekay Tankers Ltd. (Teekay Tankers or the Company) today reported its second quarter results for 2010. During the quarter, the Company generated $16.7 million in Cash Available for Distribution(1),
up from $13.8 million in the quarter ended March 31, 2010. Today, Teekay
Tankers declared a dividend of $0.34 per share for the second quarter
of 2010, representing a total cash dividend of $14.7 million(2), which
will be paid on August 27, 2010 to all shareholders of record on August
20, 2010.
Teekay Tankers’ policy is to pay a variable quarterly
dividend equal to its Cash Available for Distribution, subject to any
reserves its board of directors may from time to time determine are
required. Since the Company’s initial public offering in December 2007,
it has declared a dividend in 11 consecutive quarters, which now totals
$5.615 per share on a cumulative basis (including the $0.34 per share
dividend to be paid on August 27, 2010).
Summary of Recent Accretive Transactions
In
July 2010, Teekay Tankers loaned for three years a total of $115
million to another shipping company, with the loans secured by
first-priority ship mortgages on two Very Large Crude Carrier (VLCC)
newbuildings. The term loans earn an annual interest rate of 9.0 percent
and include a repayment premium feature which provides Teekay Tankers
with a total yield of approximately 10 percent per annum. Teekay Tankers
financed the loans using a portion of its undrawn revolving credit
facility, which bears interest at a rate of LIBOR plus 0.60 percent.
Subsequent
to making these loans, the Company entered into interest rate swap
agreements with a weighted-average maturity of 2.4 years and a weighted-
average interest rate of approximately 1 percent (or approximately 1.6
percent including the margin on the underlying loans). Based on its
current capitalization, Teekay Tankers expects these loans to increase
its annual dividend by approximately $0.20 per share during the
three-year loan term.
(1) Cash Available for Distribution represents
net income (loss) plus depreciation and amortization, unrealized losses
from derivatives, non-cash items and any write-offs or other
non-recurring items, less unrealized gains from derivatives and net
income attributable to the historical results of vessels acquired by the
Company from Teekay Corporation (Teekay), referred to herein as the
Dropdown Predecessor, for the period when these vessels were owned and
operated by Teekay.
(2) Please refer to Appendix A to this release for the calculation of the cash dividend amount.
In
addition, as previously announced, in April 2010 Teekay Tankers
acquired two Suezmax tankers and one Aframax tanker for a total purchase
price of $168.7 million, and sold one 15-year old Aframax tanker for
$17.3 million. To finance the vessel acquisitions, Teekay Tankers used
net proceeds of $103.2 million from a follow-on public offering of its
Class A common stock, proceeds from a $32 million concurrent private
placement to the Company’s sponsor, Teekay Corporation, and borrowings
under the Company?s revolving credit facility for the balance.
As a
result of the April and July 2010 transactions, and assuming an
illustrative average Aframax spot rate of $15,000 per day and an
illustrative average Suezmax spot rate of $25,000 per day, the Company
estimates that it would be able to pay a dividend of approximately $1.20
per share for the four- quarter period ending June 30, 2011. This
represents an increase of over 30 percent compared to the dividend using
the same illustrative example prior to the April and July 2010
transactions. This estimate is based on the Company’s current
capitalization, fleet size, time-charter contracts, anticipated expenses
and certain assumptions, including that the board of directors
establishes no additional reserves other than those established for
scheduled drydockings and debt repayments.
Tanker Market
Average
freight rates for crude oil tankers during the second quarter of 2010
were relatively unchanged from the previous quarter, in contrast to the
seasonal decline which typically occurs at the end of the winter season.
Second quarter tanker rate strength was primarily driven by the
continued recovery in global oil demand, led by China, where crude oil
imports reached a record high of 5.4 million barrels per day (mb/d) in
June 2010. Large crude oil tanker rates were aided by the temporary
removal from the active trading fleet of approximately 25 VLCCs to be
used as floating storage off the coast of Iran while the Suezmax sector
was supported by strong Asian demand for crude oil sourced from West
Africa, a relatively ton-mile intensive trade route.
The world tanker
fleet grew by 11.9 million deadweight tonnes (mdwt), or approximately
2.7 percent, in the first half of 2010. This compares to fleet growth of
20.3 mdwt, or 5.0 percent, in the same period of 2009. A higher level
of fleet removals compared to recent years has dampened tanker fleet
growth in 2010 to date. In total, 10.6 mdwt of tanker capacity was
removed for scrapping or conversion in the first half of the year. The
ongoing phase-out of the world’s remaining single-hull tankers should
continue to dampen tanker fleet growth in the near- to medium-term.
Tanker
freight rates have declined during the third quarter to date due to
seasonal factors such as increased oil field maintenance in the North
Sea, and the unwinding of floating storage contracts which has the
effect of increasing the actively trading tanker fleet.
In July 2010,
the International Monetary Fund (IMF) raised its forecast for global
GDP growth in 2010 from 4.2 percent to 4.6 percent, its fifth upward
revision since its April 2009 forecast of 1.9 percent GDP growth. The
International Energy Agency (IEA) is forecasting 2010 global oil demand
of 86.5 mb/d which constitutes growth of 1.8 mb/d, or 2.1 percent, over
2009 levels, the fastest rate of oil demand growth since 2004. China is
expected to account for approximately 40 percent of global oil demand
growth this year.
Financial Summary
The Company reported adjusted
net income(1) of $7.6 million, or $0.18 per share, for the quarter ended
June 30, 2010, compared to adjusted net income of $6.4 million, or
$0.20 per share, for the quarter ended March 31, 2010. The reduction in
the adjusted net income per share is primarily the result of the
scheduled drydocking of two vessels in the second quarter of 2010,
partially offset by the accretive vessel transactions completed in April
2010. Adjusted net income for the three months ended June 30, 2010,
excludes an unrealized loss relating to changes in the fair value of an
interest rate swap of $5.4 million, or $0.12 per share and a net loss
attributable to the Dropdown Predecessor of $0.1 million, or $nil per
share. Adjusted net income for the three months ended March 31, 2010
excludes an unrealized loss of $1.3 million, or $0.04 per share,
relating to changes in the fair value of an interest rate swap and $1.1
million, or $0.03 per share, related to net income attributable to the
Dropdown Predecessor. These adjustments are detailed in note (4) to the
Consolidated Statements of Income included in this release. Including
these items, the Company reported net income, on a GAAP basis, of $2.1
million, or $0.05 per share, for the quarter ended June 30, 2010,
compared to net income, on a GAAP basis, of $6.1 million, or $0.16 per
share, for the quarter ended March 31, 2010. Net voyage revenues(2) for
the second quarter of 2010 were $31.1 million compared to $33.8 million
in the prior quarter.
(1) Adjusted net income is a non-GAAP financial
measure. Please refer to Note (4) to the Consolidated Statements of
Income included in this release for a reconciliation of this non-GAAP
measure to the most directly comparable financial measure under United
States generally accepted accounting principles (GAAP) and information
about specific items affecting net income that are typically excluded by
securities analysts in their published estimates of the Company’s
financial results.
(2) Net voyage revenues represents voyage revenues
less voyage expenses. Net voyage revenues is a non-GAAP financial
measure used by certain investors to measure the financial performance
of shipping companies. Please see the Company’s website at
www.teekaytankers.com for a reconciliation of this non- GAAP financial
measure to the most directly comparable GAAP financial measure.
Source: Teekay Tankers Ltd.
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