Teekay Tankers Ltd. reported the Company’s results for the quarter and year ended December 31, 2024. As a result of the Company’s acquisition of Teekay’s Australian operations and management services companies (collectively, the Acquired Operations) on December 31, 2024, financial information (excluding non-GAAP financial measures) in this release related to all periods shown has been retroactively adjusted or recast to include the Acquired Operations on a consolidated basis in accordance with Common Control accounting as required under GAAP.

Fourth Quarter of 2024 Compared to Third Quarter of 2024

GAAP net income for the fourth quarter of 2024 increased compared to the third quarter of 2024, primarily due to the inclusion of a $27.9 million gain from the sale of two vessels. In contrast, non-GAAP adjusted net income for the fourth quarter of 2024 decreased compared to the third quarter of 2024, primarily due to lower average spot tanker rates, partially offset by a lower number of scheduled dry dockings.

Fourth Quarter of 2024 Compared to Fourth Quarter of 2023

GAAP net income and non-GAAP adjusted net income for the fourth quarter of 2024 decreased compared to the same period of the prior year, primarily due to lower average spot tanker rates, the sale of four vessels during late 2023 and in 2024, as well as the redelivery of three chartered-in vessels in the second half of 2024, partially offset by higher interest income and a lower number of scheduled dry dockings. In addition, GAAP net income in the fourth quarter of 2024 included a $27.9 million gain from the sale of two vessels, while GAAP net income in the fourth quarter of 2023 included a $10.4 million gain from the sale of one vessel.

CEO Commentary

“Teekay Tankers posted strong financial results for the fourth quarter and full year 2024, generating $355 million in adjusted net income in 2024,” commented Kenneth Hvid, Teekay Tankers’ President and Chief Executive Officer. “Although mid-size spot tanker rates were above long-term averages in the fourth quarter, limited seasonal weather factors and weaker VLCC spot rates due to lower Chinese oil demand had an impact on mid-size tanker rates. However, tanker markets experienced positive volatility early in the first quarter of 2025 resulting from expanded OFAC sanctions and other geopolitical factors. In addition, as part of our fleet renewal plan to sell older vessels and acquire more modern tonnage, we have taken advantage of strong asset prices and sold, or agreed to sell, three additional older vessels in the first quarter of 2025, two of which have already been delivered. Taken together with the previously-announced sales of two vessels that closed in the fourth quarter of 2024, we expect to receive total combined sale proceeds of approximately $160 million, resulting in expected gains of approximately $58 million.”

“Looking ahead at the wide range of potential outcomes from the various current issues impacting global trade, security, and energy, we continue to see positive underlying tanker fundamentals supporting our segments. Oil demand is expected to increase, and tonne-mile demand is expected to grow as oil production increases disproportionately in the Atlantic and refineries continue to expand primarily in Asia. On the supply side, the global tanker fleet is older than it has been in decades, and the number of vessels currently on order relative to the number of ships reaching age 20 during the same timeframe, suggests low tanker fleet growth over the medium term.”

“Going forward, we believe that Teekay Tankers’ balance sheet strength, low cash flow break-even levels and operating platform position us well to continue to drive long-term shareholder returns.”

Summary of Recent Events

In October and December 2024, the Company completed the previously-announced sales of a 2005-built Aframax vessel and a 2005-built Suezmax vessel for $64.8 million. The aggregate gain on sales of approximately $27.9 million is reflected in our fourth quarter of 2024 results.

In December 2024, the Company completed the acquisition of the Acquired Operations, including (a) Teekay’s Australian operations for a purchase price of $65.0 million plus a related working capital adjustment of $15.9 million, and (b) all of Teekay’s management service companies not then owned by the Company for a purchase price equal to their net working capital value of $17.3 million. In addition, Teekay transferred to the Company its $6.0 million supplemental defined contribution pension plan liability, which relates to the management services companies included in the Acquired Operations. The total consideration paid by the Company for these transactions, net of the $6.0 million pension plan liability, was $92.2 million. Following the completion of these acquisitions, the Company directly employs all of the employees supporting its businesses and is the sole operating platform within the Teekay Group.
In January 2025, the Company agreed to sell two 2009-built Suezmax vessels and one 2006-built LR2 vessel for total combined proceeds of $95.5 million. The LR2 vessel and one Suezmax vessel were delivered to their new owners in February 2025 and the remaining vessel is expected to be delivered later in the first quarter of 2025. The estimated gains from sales are approximately $30.5 million, which are expected to be reflected in the first quarter 2025 results.
The Company currently holds a passive, 5.1% minority investment in Ardmore Shipping Corporation, a publicly traded shipping company which owns and manages a fleet of 26 Medium-range (MR) product and chemical tankers (including four chartered-in tankers).

The Company’s Board of Directors declared a fixed quarterly cash dividend in the amount of $0.25 per outstanding common share for the quarter ended December 31, 2024. This dividend is payable on March 14, 2025 to all of Teekay Tankers’ shareholders of record on March 3, 2025.

Tanker Market

Mid-size crude tanker spot rates were counter-seasonally lower during the fourth quarter of 2024, but remained above long-term average levels for a fourth quarter, and well above Teekay Tankers’ free cash flow break-even level of approximately $14,300 per day. Spot tanker rates were below expectations as weak Chinese oil demand weighed on the VLCC sector, which in turn dampened demand for Aframax and Suezmax tankers. Weather delays, which typically help spot tanker rates during the winter, have not had a material impact on the market thus far.

Average spot tanker rates to date during the first quarter of 2025 are approximately in line with fourth quarter 2024 levels. However, the recent imposition of additional U.S. sanctions on Russian shipping has increased rate volatility, particularly in the larger crude tanker asset classes. In January 2025, the U.S. placed sanctions on 153 tankers servicing the Russian oil trade. Freight rates for large crude tankers rose following the announcement as replacement vessels were booked for transporting oil to China and India. In addition, Atlantic based crude oil has been priced attractively compared to Middle Eastern crude in recent weeks, which has opened the arbitrage for the long-haul movement of oil from the Atlantic Basin to Asia. This has been positive for tanker tonne-mile demand in the near-term, particularly for VLCC and Suezmax tankers.

For the balance of 2025, underlying oil market fundamentals appear supportive of tanker demand growth. Global oil demand is projected to grow by 1.3 million barrels per day (mb/d) in 2025 based on the average of forecasts from the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and OPEC. Virtually all of this demand growth is being driven by non-OECD countries, led by Asia. Oil supply from non-OPEC+ countries is projected by the IEA to increase by 1.5 mb/d during 2025, led by the United States, Brazil, Norway, Canada, and Guyana. Given that these sources of oil are mostly in the Atlantic Basin, while oil demand growth is focused on Asia, we expect an increase in long-haul crude oil movements from West to East, which we anticipate will support tanker tonne-mile demand. The OPEC+ group could provide additional seaborne transportation volumes should they start unwinding voluntary oil supply cuts from April 2025 onwards, consistent with their most recently announced plan.

Tanker fleet growth is expected to remain relatively low during 2025. The pace of newbuilding deliveries during 2025 is expected to increase compared to 2024 levels; however, with the average age of the global tanker fleet at its highest point since 2002, we expect that the phase-out of older vessels will act as a partial offset. Looking further ahead, there are 307 mid-size tankers currently on order for delivery through 2028 compared with 312 existing mid- size tankers that will turn age 20 over the same timeframe. In addition, there are a further 301 mid-size tankers which are currently over the age of 20, the majority of which operate as part of the “shadow” fleet servicing sanctioned trades and which are facing increased scrutiny from U.S. and European authorities. With a lack of available shipyard capacity until 2028, we believe that the combination of a modest orderbook, an aging tanker fleet, and constraints on available yard space will result in continued low levels of tanker fleet growth over the next three years.

While underlying tanker market fundamentals continue to appear supportive, there are a number of geopolitical factors which are likely to have an impact on the direction of the tanker market in the near term. These include:

•War in Ukraine. A potential end to the Russia-Ukraine war could impact tanker tonne-miles should sanctions be removed while also potentially eliminating the need to utilize the “shadow” fleet of ships currently servicing Russian oil exports. Until the Russia-Ukraine war ends, sanctions against Russia and the fleet of ships transporting Russian oil may continue to increase. This could lead to reduced Russian oil exports, which would lead to China and India looking for replacement barrels from alternative sources, or may force Russia to use compliant tankers to carry their oil at a price below the G7’s price cap of $60 per barrel.

•Iranian sanctions. The United States has reimposed its “maximum pressure” campaign against Iran in a bid to reduce Iranian oil exports to zero. In 2024, Iranian crude oil exports averaged 1.5 mb/d, the majority of which went to China. Tougher sanctions on Iranian crude oil exports could lead China to import oil from other sources via the compliant fleet, which would be positive for tanker demand.
•Return of Red Sea tanker transits. The Houthi group in Yemen has pledged to stop attacks on shipping in the Red Sea should the ceasefire in Gaza hold. This may result in the resumption of tanker transits through the Red Sea region, which could impact seaborne trade patterns and reduce tanker tonne-mile demand.
•Impact of U.S. tariffs on China, Canada, and Mexico. The imposition of any tariffs on U.S. imports of Canadian and Mexican oil could lead to an increase in U.S. seaborne imports from other sources while also pushing more Canadian and Mexican oil to Asia, both of which could be positive for tanker tonne-mile demand. The impact of U.S. tariffs on China is less certain but could impact levels of Chinese oil demand and imports as well as seaborne oil trade patterns. Future tariffs by the U.S. on other countries or economic blocs could also affect seaborne oil trade patterns.

At this stage it is difficult to predict how these factors will unfold during 2025, what their impact will be on the tanker market, or if there will be additional geopolitical events. However, geopolitical uncertainty, and changes to seaborne oil trade patterns, typically lead to increased tanker market volatility.

In summary, the Company believes that underlying tanker supply and demand fundamentals continue to be supportive of tanker market strength over the medium term. However, geopolitical events are likely to have an impact on the direction of the tanker market in the near-term.

Source: Teekay Tankers