Teekay Returns to Black

The fourth quarter of 2019 marked a return to profitability for Teekay Corporation, as the company booked a consolidated adjusted net income of USD 31 million compared to an adjusted net loss of USD 2 million in the same period of the prior year.

Image Courtesy: Teekay Corporation

The company generated total adjusted EBITDA of USD 324 million, an increase of 53% year-on-year, excluding the contribution from Teekay Offshore which was sold in May 2019.

“Our fourth quarter consolidated results were positively impacted by significantly stronger spot tanker rates at Teekay Tankers, the start-up of various growth projects and higher charter rates secured on certain LNG carriers at Teekay LNG, improved results from our directly owned FPSO units and lower G&A expenses across the group,” Vincent Lok, Teekay’s Executive Vice President and Chief Financial Officer, said in a conference call.

Teekay Tankers reported GAAP net income of USD 63.1 million in the fourth quarter of 2019, against USD 11.5 million in the comparative quarter a year earlier.

“With average crude spot tanker rates reaching their highest levels since 2008, Teekay Tankers had one of its most profitable quarters since the end of the tanker market super-cycle in 2009, generating adjusted net income of approximately USD 83 million, or USD 2.47 per share,” commented Kevin Mackay, Teekay Tankers’ President, and CEO.

“This strength continued into the early part of 2020, and I am pleased that the spot rates our fleet has secured in the first quarter of 2020 to-date are significantly higher than those achieved in the fourth quarter. Crude spot tanker rates have come under pressure in recent weeks, primarily due to the coronavirus and the removal of sanctions against COSCO; however, we continue to believe that the tanker supply and demand fundamentals point towards an improved rate environment in the medium-term.”

According to Mackay, Teekay Tankers had a smooth transition to lower sulphur fuels, primarily due to extensive preparations over the past three years.

During the quarter, Teekay Tankers took advantage of the strong tanker market and fixed out four Suezmax tankers at attractive levels and secured a new five-year, USD 533 million revolving credit facility, while continuing to delever its balance sheet with significant cash flows from the strong spot tanker market and the proceeds from asset sales.

Teekay LNG Partners reported a strong fourth quarter and fiscal 2019 results, generating total adjusted EBITDA of USD 184 million and adjusted net income of USD 50 million.

“We expect these results to continue to grow in 2020 with adjusted earnings per unit expected to be 45% to 73% higher than 2019,” Kenneth Hvid, Director, President and Chief Executive Officer of Teekay Corporation, said.

In 2019, Teekay LNG completed its growth program, with the delivery of its fifth and sixth 50% ARC7 LNG carrier newbuilding for the Yamal LNG project, which immediately commenced their respective 26-year charter contracts.

In addition, the company’s 30% owned Bahrain regas terminal completed mechanical construction and commissioning and began receiving revenues in early January.

In early January, Awilco LNG fulfilled its obligation to repurchase two of TGP’s LNG carriers, resulting in the receipt of over USD 260 million in cash that was used to delever the company’s balance sheet and increased its liquidity by over USD 100 million.

“Looking ahead, the company believes the medium-term fundamentals remain intact with a record year in 2019 for new LNG projects reaching final investment decision that are expected to start up in 2022 onwards, and long-term demand for LNG expected to rise by 4% to 5% per year to 2030, as LNG continues to displace coal,” Hvid added.

“By virtue of Teekay LNG’s current 97 percent fixed employment in 2020 and 92 percent in 2021 for its LNG fleet, we are well-insulated from the current weak spot LNG shipping market, and we expect to continue benefitting from these stable cash flows. Meanwhile, we believe Teekay Tankers’ attractive operating leverage and ongoing balance sheet delevering, position us for increased tanker cash flows on the back of positive underlying tanker supply and demand fundamentals in the medium-term.”