Teekay Corporation
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Welcome to Teekay’s Corporation Third Quarter 2020 Earnings Results Conference Call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. As a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to the company.

[Ryan Hamilton:]

Before we begin, I'd like to direct all participants to our website at www.teekay.com, where you'll find a copy of the third quarter 2020 earnings presentation. Kenneth and Vince will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained the third quarter 2020 earnings release and earnings presentation available on our website.

[Vincent Lok:]

Thanks, Ryan. Hello, everyone. Thank you for joining us today for Teekay Corporation's third quarter 2020 earnings conference call, and we hope that you and your families are safe and healthy. I will briefly review our financial results for the quarter and provide an update on our three FPSOs before handing the call over to Kenneth. Starting with our recent highlights on Slide 3 of the presentation. In the third quarter of 2020, we reported our fourth consecutive quarterly adjusted profit with consolidated adjusted net income of $15 million, or $0.15 per share, compared to an adjusted net loss of $24 million, or $0.24 per share in the same period of the prior year. We also generated total adjusted EBITDA of $227 million, an increase of $34 million, or 18% from the same period of last year. Compared to the third quarter of last year, our stronger results this quarter is driven by higher adjusted earnings in each of our main businesses. With this growth program completed late last year, Teekay LNG generated strong earnings and cash flows this quarter, despite a heavy scheduled drydock program. Teekay Tankers also recorded positive adjusted net income and outperformed a weak spot tanker market on the strength of fixed rate charters secured over the past several quarters at attractive levels and TK Parent's results improved due to higher earnings from the Foinaven and Hummingbird FPSOs and lower net G&A expenses, partially offset by lower earnings from the Banff FPSO, which ceased production and commenced decommissioning in June 2020, which I will discuss in more detail on the next slide. Looking ahead, we are expecting to report another positive adjusted net income next quarter. Though we expect our tanker results to be weaker due to lower spot tanker rates and higher number of scheduled dry dockings in the tanker fleet, partially offset by stronger earnings from our gas business due to fewer scheduled dry dockings and a gas lead in Q4. For guidance on our fourth quarter results, please refer to the appendix of this presentation. Turning to the balance sheet. We have continued to increase the financial strength across the Teekay Group, which is one of our strategic priorities. Over the past year, we reduced our consolidated net debt by over $940 million, or 22%, which created significant equity value and reduced our interest expense throughout the group. We have also increased our total consolidated liquidity from $0.6 billion to $1.1 billion on a pro forma basis as of September 30, which provides the natural strength and flexibility.

[Kenneth Hvid:]

Thanks, Vince, and good morning, everyone. Over the next two slides, I will briefly touch on the results and highlights of our daughter companies. As always, I encourage you to listen to their respective earnings conference calls for more details following this call. On Slide 5, we have summarized Teekay LNG's recent results and highlights. Teekay LNG Partners generated total adjusted EBITDA of $187 million and adjusted net income of $59 million, or $0.59 per unit, all up from the previous year as a result of a complete quarter contribution in Q3 from its fully delivered growth program. The quarter's results also reflect a heightened dry docking schedule with earnings expected to increase from these levels in the fourth quarter as a result of fewer scheduled dry docks. TGP recently extended the charter contract on a 52% owned LNG carrier, the Marib Spirit by 14 months to early 2022, and its LNG fleet is now 100% fixed for the remainder of 2020 and 96% fixed in 2021. TGP’s average daily fixed charter rate in 2021 is expected to be approximately $80,000 per day. To be clear, this $80,000 per day figure is the rate earned on a 100% utilization basis because of the time charter nature of the employment. In addition, GDP has also reaffirmed its 2020 adjusted EBITDA and adjusted net income guidance. The spot LNG carrier market has strengthened significantly over the past three-and-a-half months, reaching recent highs of over $120,000 per day for MEGI and XDF vessels. The strength can be attributed to the reopening of the arbitrage window with LNG prices stronger in Asia versus Europe, positively impacting tonne mile demand, fewer LNG cargo cancellations with zero expected in December, as well as seasonal upswing with an expectation of the cold winter in Northeast Asia, including Japan, Korea and northern China. Lastly, TGP continues to further strengthen its balance sheet with strong liquidity position of approximately $430 million with its recent $112 million bond issuance at a record low interest rate. During the third quarter, TGP reduced its total proportionate net debt by nearly $95 million, or 8% on an annualized basis and reduced its net proportion of interest expense by over $6 million, or nearly 9% compared to the previous quarter and remains on track to reach its target leverage range next year.

[Kenneth Hvid:]

Well, thank you very much for listening in today. Stay safe during the holiday season and we do look forward to reporting back to you next year.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today's teleconference. We may now disconnect.