Teekay Tankers Ltd. yesterday reported the Company’s results for the quarter ended September 30, 2024:

Third Quarter of 2024 Compared to Second Quarter of 2024

GAAP net income and non-GAAP adjusted net income for the third quarter of 2024 decreased compared to the second quarter of 2024, primarily due to lower average spot tanker rates, a higher number of scheduled dry dockings and the redelivery of two chartered-in vessels, partially offset by the acquisition of one vessel. In addition, GAAP net income in the third quarter of 2024 included restructuring charges of $6.0 million related to changes made to the Company’s senior management team.

Third Quarter of 2024 Compared to Third Quarter of 2023

GAAP net income and non-GAAP adjusted net income for the third quarter of 2024 decreased compared to the same period of the prior year, primarily due to lower average spot tanker rates, the sale of two vessels during late 2023 and early 2024, a higher number of scheduled dry dockings, as well as the redelivery of two chartered-in vessels, partially offset by lower net interest expense and the acquisition of one vessel. In addition, GAAP net income in the third quarter of 2024 included restructuring charges of $6.0 million related to changes made to the Company’s senior management team, while GAAP net income in the third quarter of 2023 included a $5.8 million reversal of income tax accruals.

CEO Commentary

“Teekay Tankers continued to generate strong earnings and free cash flow through the third quarter, as rates remained historically strong for what is typically the weakest quarter of the year,” commented Kenneth Hvid, Teekay Tankers’ President and Chief Executive Officer. “Tanker tonne-mile demand has remained firm, near-term fleet supply growth remains limited, and we are seeing several of the market’s seasonal headwinds already transitioning into tailwinds for the fourth quarter. With a large number of dry dockings completed within the third quarter and a fleet deployment strategy heavily weighted towards the spot market, we believe Teekay Tankers is well-positioned to benefit from the anticipated seasonal uplift.”

“Over the past few years, the Teekay Group has taken several important steps to streamline the organization, including the recent changes to our management team structure. With the planned accretive acquisition by Teekay Tankers of Teekay Australia — the Group’s asset-light ship management operations primarily servicing the Australian Government that currently generates approximately $10 million in annual EBITDA — Teekay Tankers becomes the sole operating platform within the Teekay Group. Teekay Tankers’ strategy and convictions remain consistent, and we are optimistic about the operating environment and the value-creation prospects for our fleet of Suezmax and Aframax / LR2 vessels. We believe that our discipline in deploying capital and our focus on long-term shareholder value have been key to our ability to generate best-in-class shareholder returns in recent years, and we intend to maintain that strategy moving forward.”

Summary of Recent Events

In October 2024, the Company agreed to acquire Teekay Australia from Teekay for $65.0 million in cash. Teekay Australia provides crew management, technical management, asset management, and procurement services primarily to the Australian government, as well as to other oil and gas customers in Australia. The Company’s Board of Directors’ Conflicts Committee, comprised of independent directors, reviewed the financial valuation of Teekay Australia and obtained an independent fairness opinion from Deloitte LLP (Canada) in respect of the purchase price.

In addition, the Company agreed to acquire from Teekay all management service companies not currently owned by the Company for a purchase price equal to their net working capital value. Following the completion of these acquisitions, the Company will employ directly all of the employees supporting its businesses and be the sole operating platform within the Teekay Group. These transactions are subject to customary closing conditions and are expected to be completed by December 31, 2024.

In July 2024, a 2021-built Aframax tanker acquired by Teekay Tankers for $70.5 million was delivered. The previously-announced purchase was completed with cash, and the vessel is currently unencumbered.

In October 2024, the Company completed the previously announced sale of a 2005-built Suezmax vessel for $34.0 million. The gain on sale, which will be reflected in our fourth quarter results, was approximately $9.5 million. Additionally, a 2005-built Aframax tanker from a previously announced sale is expected to be delivered to the buyer during the first quarter of 2025.

In October 2024, the Company transferred its legal domicile by changing its jurisdiction of incorporation from the Republic of the Marshall Islands to Bermuda.

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 September 30, 2024. This dividend is payable on November 22, 2024 to all of Teekay Tankers’ shareholders of record on November 12, 2024.

Tanker Market

Mid-size crude tanker spot rates fell seasonally during the third quarter of 2024, but remained well above long-term average levels. Lower crude oil export volumes due to seasonal and various short-term factors led to reduced tanker tonne-mile demand through the summer, while the onset of autumn refinery maintenance also impacted demand towards the end of the quarter. However, crude tanker spot rates have firmed at the start of the fourth quarter of 2024, in line with seasonal norms, and we expect rates to remain well supported through the winter.

Seaborne crude oil trade flows declined by approximately 1 million barrels per day (mb/d) during the third quarter of 2024. OPEC+ supply cuts continued to weigh on volumes from the Middle East, compounded by reduced exports from Saudi Arabia as more oil was used domestically for power generation. Lower exports from the North Sea and Brazil due to offshore oilfield maintenance and lower volumes from the U.S. Gulf due to adverse weather and high domestic demand also weighed on crude tanker demand. Finally, volumes from Libya declined during September as a dispute between the two regional governments cut exports in half. However, most of these supply issues seem to be in the process of being resolved, and we expect a steady increase in seaborne crude oil trade volumes through the remainder of the year which, coupled with normal seasonal weather delays, should support crude tanker spot rates in the coming months.

Global oil demand is projected to grow by 1.2 mb/d in 2024 and 1.3 mb/d in 2025 as per the average of forecasts from the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and OPEC. This is lower than last quarter’s forecast, primarily due to lower-than-expected Chinese oil demand. However, the Chinese government recently announced an economic stimulus package which could lead to a recovery in local oil demand and, therefore, increases in crude oil import volumes by China.

Oil supply from non-OPEC+ countries is projected to increase by 1.5 mb/d in both 2024 and 2025 as per the IEA, with the majority of growth led by the United States, Brazil, Guyana, and Canada. Export growth from Canada is being supported by the commencement in May 2024 of operations of the Trans Mountain Pipeline Expansion (TMX), which has averaged around 20 Aframax loadings per month, with volumes largely flowing to the U.S. West Coast and Asia. In addition to higher non-OPEC+ supply, volumes from the OPEC+ group could rise from December 2024 onwards as the group has announced plans to start unwinding 2.2 mb/d of voluntary production cuts over the course of the next 12 months, although the pace of the unwind will likely depend on future oil demand and price developments.

Geopolitical events continue to shape crude oil trade flows, particularly in the Middle East where ongoing attacks on shipping in the Red Sea region are causing a large number of tankers, particularly in the product sector, to divert around the Cape of Good Hope, thereby adding to voyage distances and boosting tanker tonne-mile demand. Recent events in the Middle East have the potential to further destabilize the region, which could impact oil production and shipping should they escalate. The full effects of any such disruption are uncertain, but they have the potential to further add to tanker market volatility in the near term.

2024 remains on track to be one of the lowest years for new tanker deliveries in recent history, with just 5.3 million deadweight tons (mdwt) delivered during the first nine months of the year. Deliveries are set to increase in 2025 and 2026 due to new vessel orders placed over the past 18-24 months; however, at just under 13% of the existing fleet, the global orderbook is still well below the long-term average of around 20%. Furthermore, forward orderbook cover at the major shipyards currently stretches three years or more with a lack of available shipyard capacity until the second half of 2027. In addition, the global tanker fleet continues to get older, with the average age of the tanker fleet currently at its highest level since 2002. We believe the combination of a modest orderbook, limited shipyard capacity, and an aging fleet should ensure that tanker fleet growth remains at relatively low levels over the next two to three years.

In sum, the Company expects a period of firm tanker rates in the coming months due to an anticipated rebound in global seaborne crude oil trade volumes and normal seasonality through the winter. We believe that the medium- term outlook continues to look positive due to supportive tanker demand and supply fundamentals, with geopolitical events adding a further layer of volatility.

Operating Results

The following table highlights the operating performance of the Company’s time-charter vessels and spot vessels trading in revenue sharing arrangements (RSAs), on voyage charters and in full service lightering, in each case measured in net revenues(1) per revenue day(2), or time-charter equivalent (TCE) rates, before off-hire bunker expenses:

Fourth Quarter of 2024 Spot Tanker Performance Update

The following table presents Teekay Tankers’ TCE rates booked to-date in the fourth quarter of 2024 for its spot- traded fleet only, together with the percentage of total revenue days currently fixed for the fourth quarter:

Teekay Tankers Fleet

The following table summarizes the Company’s fleet as of October 28, 2024:

Liquidity Update

As at September 30, 2024, the Company had total liquidity of $750.8 million (comprised of $462.9 million in cash and cash equivalents and $287.9 million in undrawn capacity from its credit facility), compared to total liquidity of $714.7 million as at June 30, 2024. The increase of $36.1 million in liquidity compared to the prior quarter is primarily due to positive net operating cash flow, partially offset by the purchase of an Aframax tanker and cash dividends paid on our common shares.

Source: Teekay Tankers