Business Context and Reporting Period
Company: Teekay Tankers Ltd.
Filing Type: Form 6-K (Earnings Release)
Report Date: May 15, 2009
Period Covered: Fourth Quarter and Full Year ended December 31, 2008.
Teekay Tankers operates a fleet of double-hull Aframax and Suezmax tankers, managed through a mix of fixed-rate time-charter contracts and spot market trading. As of May 1, 2009, the fleet consisted of 11 vessels (9 Aframax, 2 Suezmax).
Key Financial Metrics
Income Statement Highlights (Q4 2008 vs. Q3 2008)
| Metric | Q4 2008 | Q3 2008 |
|---|---|---|
| Net Voyage Revenues | $32.0 million | $41.4 million |
| Net Income (Loss) | ($0.8) million | $19.6 million |
| Earnings Per Share (EPS) | ($0.03) | $0.78 |
| Adjusted Net Income (excl. swap loss) | $13.0 million | $20.9 million |
| Adjusted EPS | $0.52 | $0.84 |
Full Year 2008 Results
- Net Income: $51.8 million ($2.03 per share), compared to $40.6 million ($2.76 per share) in 2007.
- Net Voyage Revenues: $142.3 million, an increase from $108.2 million in 2007.
- Unrealized Loss Impact: A $14.2 million unrealized loss on an interest rate swap reduced full-year net income.
Liquidity and Debt
- Total Liquidity (Dec 31, 2008): $72.4 million ($26.7 million cash + $45.7 million undrawn credit facility).
- Total Liquidity (Mar 31, 2009): $78.1 million.
- Long-term Debt (Dec 31, 2008): $325.2 million.
- Operating Cash Flow (2008): $77.6 million.
Operational Performance (Q4 2008)
- Aframax Spot TCE: $33,971 per day (down from $47,425 in Q3 2008).
- Suezmax Spot TCE: $46,497 per day (down from $65,254 in Q3 2008).
- Time-Charter Coverage: 62% of 2009 operating days fixed at an average rate of ~$30,000 per day.
Material Changes vs. Prior Period
- Revenue Decline: Q4 2008 net voyage revenues dropped 23% compared to Q3 2008 due to slowing global oil demand and a significant decrease in spot rates from record highs.
- Net Loss vs. Profit: The company reported a net loss of $0.8 million in Q4 2008, contrasting with a $19.6 million profit in Q3 2008. This shift was primarily driven by a $13.8 million unrealized loss on an interest rate swap, compared to a $1.4 million loss in the prior quarter.
- Dividend Reduction: The Q1 2009 dividend was declared at $0.59 per share, a decrease from the Q4 2008 dividend of $0.72 per share, reflecting lower spot market earnings.
Guidance, Outlook, and Risks
Management Commentary
CEO Bjorn Moller emphasized that active fleet management between fixed-rate and spot charters allows the company to maintain attractive dividends despite weak market fundamentals. With 62% of 2009 days fixed, the company estimates it could pay an annualized dividend of ~$0.90 per share even if spot rates fell to $10,000 per day.
Outlook
- 2009: Spot rates expected to remain under pressure due to weak global economic fundamentals.
- 2010: Anticipated recovery in oil demand and the mandated phase-out of single-hull tankers are expected to support market rates.
- Dividend Policy: Variable quarterly dividends equal to Cash Available for Distribution, subject to board reserves.
Risks and Contingencies
- Market Volatility: Significant exposure to spot market rates for the remaining 38% of 2009 operating days.
- Derivatives: Continued volatility in interest rate swaps impacts reported net income.
- Regulatory: Timing of single-hull phase-out regulations.
Investor Verification Checklist
- Swap Valuation: Verify the magnitude of unrealized losses on interest rate swaps and their impact on reported GAAP net income versus adjusted cash flow.
- Fixed-Rate Coverage: Confirm the specific terms and expiration dates of the 62% of 2009 days fixed at ~$30,000/day to assess downside protection.
- Liquidity Position: Review the $45.7 million undrawn revolving credit facility terms and covenants.
- Dividend Sustainability: Compare the estimated Q2 2009 dividend scenarios provided in the filing against current spot market rates.
- Fleet Expansion: Assess the status of the option to purchase two Suezmax tankers from Teekay Corporation and potential capital requirements.