Business Context and Reporting Period
Company: Teekay Tankers Ltd.
Filing Type: Form 6-K (Earnings Release)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2009
Date of Report: March 5, 2010
Teekay Tankers Ltd. operates a fleet of conventional oil tankers, managed through a mix of fixed-rate time-charter contracts and spot market trading. As of February 28, 2010, the fleet consisted of 12 vessels: nine Aframax and three Suezmax tankers.
Key Financial Metrics
| Metric | Q4 2009 | Q3 2009 | Full Year 2009 | Full Year 2008 |
|---|---|---|---|---|
| Net Voyage Revenues | $25.2 million | $20.6 million | $110.2 million | $161.0 million |
| GAAP Net Income | $7.9 million ($0.25/share) | ($1.5) million loss | $38.9 million ($1.28/share) | $58.1 million ($2.03/share) |
| Adjusted Net Income | $4.5 million ($0.14/share) | $1.8 million ($0.05/share) | $27.7 million ($0.97/share) | $64.9 million ($2.60/share) |
| Cash Available for Distribution (Q4) | $12.1 million | N/A | N/A | N/A |
| Total Liquidity (Dec 31, 2009) | $134.1 million | $137.1 million | N/A | N/A |
| Long-Term Debt (Dec 31, 2009) | $301.6 million | $302.5 million | N/A | N/A |
Operating Rates (Q4 2009):
- Spot Aframax TCE: $15,283 per day
- Spot Suezmax TCE: $20,939 per day
- Time-Charter Aframax TCE: $29,772 per day
- Time-Charter Suezmax TCE: $30,984 per day
Material Changes vs. Prior Period
- Revenue Growth: Net voyage revenues increased 22% quarter-over-quarter (Q4 vs. Q3 2009) but decreased 32% year-over-year (2009 vs. 2008) due to lower global spot rates.
- Profitability: GAAP net income improved from a loss of $1.5 million in Q3 2009 to a profit of $7.9 million in Q4 2009. However, full-year 2009 GAAP net income declined 33% compared to 2008.
- Adjusted Earnings: Adjusted net income for Q4 2009 was $4.5 million, excluding a $3.4 million unrealized gain on an interest rate swap. Full-year adjusted net income dropped significantly from $64.9 million in 2008 to $27.7 million in 2009.
- Liquidity: Total liquidity decreased slightly from $137.1 million in Q3 2009 to $134.1 million in Q4 2009, comprised of $10.4 million in cash and $123.7 million in an undrawn revolving credit facility.
Guidance, Outlook, and Management Commentary
Dividend Policy: The Company declared a cash dividend of $0.26 per share for Q4 2009 (totaling ~$8.3 million), payable March 15, 2010. This is an increase from $0.15 per share in Q3 2009. The policy is to distribute all Cash Available for Distribution, subject to reserves.
2010 Outlook:
- Fleet Positioning: Approximately 55% of 2010 vessel operating days are locked in at fixed rates averaging over $26,500 per day.
- Cash Flow Floor: Management expects fixed-rate revenues alone to cover all costs and debt repayments for 2010, allowing spot revenues to be paid out as dividends.
- Market View: CEO Bjorn Moller noted that spot rates strengthened late in Q4 and early 2010 due to seasonal factors and floating storage, though rates softened in late January/February. The IMF raised global GDP growth forecasts for 2010 to 3.9%.
Risks and Contingencies:
- Volatility in spot tanker rates and global oil demand.
- Changes in supply/demand fundamentals, including potential increases in scrapping due to IMO regulations on single-hull tankers.
- Forward-looking statements regarding estimated Q1 2010 dividends are based on assumptions and may differ materially from actual results.
Investor Verification Checklist
- Dividend Sustainability: Verify the Company's ability to maintain the $0.26/share dividend if spot rates decline below the $15,000-$20,000/day range assumed in the Q1 2010 guidance table.
- Debt Service Coverage: Confirm that fixed-rate revenues continue to cover operating costs and debt service as projected, given the high leverage (Long-term debt of ~$301.6 million).
- Derivative Impact: Monitor the fair value changes of the interest rate swap agreement, which caused significant volatility in GAAP net income ($3.4 million gain in Q4 2009 vs. $3.3 million loss in Q3 2009).
- Spot Rate Exposure: Assess the risk associated with the 45% of 2010 vessel days remaining exposed to the volatile spot market.
- Capital Expenditures: Review the adequacy of the $1.25 million reserve for drydocking and $0.3 million for vessel upgrades against actual upcoming maintenance schedules.