Teekay Tankers Ltd. — 2021 Form 20-F Summary
Business context and reporting period
Teekay Tankers is an international owner and operator of crude oil and refined-product tankers, with additional U.S. Gulf lightering, ship-to-ship support, and tanker management activities. The filing is an annual Form 20-F for the fiscal year ended December 31, 2021, filed April 6, 2022. It does not provide a separate fourth-quarter income statement; the available comparable figures are for full-year 2021 versus full-year 2020.
- Fleet at December 31, 2021: 49 owned or leased tankers, three chartered-in tankers, one jointly owned VLCC, and two chartered-in ship-to-ship support vessels.
- Approximately 72.0% of 2021 net revenues came from spot-market operations, compared with 74.3% in 2020.
- Teekay Corporation held approximately 29.8% of economic interest and 54.7% of voting interest, including all Class B shares.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $542.4 million | $886.4 million | -38.8% |
| Net revenues | $227.2 million | $589.2 million | -61.4% |
| Loss from operations | $(194.1) million | $141.6 million income | Unfavorable swing |
| Net loss | $(242.4) million | $87.3 million income | Unfavorable swing |
| Diluted loss/earnings per share | $(7.16) | $2.57 | Unfavorable swing |
| Adjusted EBITDA | $3.0 million | $335.6 million | -99.1% |
| Operating cash flow | $(107.3) million | $347.9 million | Unfavorable swing |
| Cash and cash equivalents | $50.6 million | $97.2 million | -48.0% |
| Total debt | $639.8 million | $613.0 million | +4.4% |
| Total equity | $838.4 million | $1,078.9 million | -22.3% |
Approximate derived margins were a 35.8% operating loss margin, a 44.7% net loss margin, and a 0.6% adjusted EBITDA margin in 2021, compared with positive margins in 2020. TCE rates fell sharply: total tanker-segment average TCE declined to $11,704 per revenue day from $28,402, primarily reflecting multi-decade-low spot tanker rates.
- 2021 revenue mix included $485.9 million of voyage-charter revenue, $46.2 million of time-charter revenue, and $10.3 million of other revenue.
- Cash flow used in financing activities was $21.9 million in 2021, while investing activities generated $38.1 million, principally reflecting vessel-sale proceeds.
- Interest expense declined to $35.0 million from $51.5 million, mainly due to lower debt and lease balances, lower interest rates, and prior refinancing activity.
- Vessels and equipment declined to $1.35 billion from $1.56 billion after impairments, vessel sales, and depreciation.
Material changes versus the prior comparable period
- Weak tanker markets, COVID-19 effects, OPEC+ production cuts, inventory drawdowns, vessel deliveries, and higher bunker costs reduced realized rates and net revenues.
- Net revenues decreased by $362.0 million, including a $198.1 million reduction from lower spot rates and a $91.0 million reduction related to time-charter vessels earning lower rates or returning to the spot market.
- The company recorded $92.4 million of write-downs and losses on asset sales in 2021, including $85.0 million of impairments on three Suezmax, three LR2, and one Aframax tanker, compared with $69.4 million in 2020.
- The High-Q joint venture investment was written down by $11.6 million, contributing to a $14.1 million equity-accounted loss versus $5.1 million of equity income in 2020.
- Four Aframax tankers were sold in 2021 for aggregate proceeds of $56.7 million. The company also repurchased eight vessels previously subject to sale-leaseback arrangements for $185.5 million and completed 2021 sale-leaseback financings totaling $141.7 million before issuance costs.
- Dry-docking and ballast-water-treatment activity increased off-hire days to 611 from 520. Ten owned and leased vessels were scheduled for dry docking in 2022, with three additional vessels scheduled for ballast-water-treatment installation without dry docking.
- The non-U.S. ship-to-ship support and LNG terminal management businesses had already been sold in 2020; remaining ship-to-ship support operations were integrated into the tanker segment.
Debt, liquidity, outlook, and risks
- At December 31, 2021, long-term debt was approximately $324.5 million, finance-lease obligations were approximately $295.8 million, and $73.7 million remained available under the revolving credit facility. The working-capital facility had $25.0 million drawn and $45.4 million of aggregate availability.
- Total consolidated liquidity, including cash and undrawn facilities, was $144.8 million at year-end, down from $372.6 million at December 31, 2020.
- The company was in compliance with its debt, liquidity, vessel-value, and finance-lease covenants at December 31, 2021. Its principal refinancing needs include approximately $33.7 million in 2023 and $148.2 million in 2024 under the term loan and revolving facility.
- Management estimated that year-end liquidity, expected operating cash flow, 2022 vessel sales, and the March 2022 sale-leaseback financing would fund requirements for at least one year, assuming weak spot rates through the first half of 2022 and recovery beginning in the second half. This assessment includes an assumption that the working-capital facility would continue to be extended beyond its May 2022 maturity.
- Management expected spot tanker rates to recover from 2021 lows as oil demand and production improved, with a potentially more favorable 2023 outlook due to limited fleet growth. The Russia-Ukraine conflict, sanctions, high energy prices, and possible cargo rerouting made the 2022 outlook highly uncertain.
- In March 2022, the company completed a $177.3 million sale-leaseback financing for eight Suezmax tankers. It also agreed to sell one Suezmax and two Aframax tankers for $43.6 million, with the Suezmax delivered in February 2022 and the Aframax vessels expected to be delivered in April 2022.
- Key risks include spot-rate volatility, vessel-value declines and impairment, refinancing and covenant risk, floating interest rates and the transition from LIBOR to SOFR, sanctions and geopolitical disruption, COVID-19, environmental and greenhouse-gas regulation, ballast-water compliance, cyberattacks, insurance limitations, and dependence on Teekay Corporation.
- Ballast-water-treatment installations were estimated at approximately $1.5 million per vessel, with 22 vessels equipped as of December 31, 2021. Approximately 30% of the fleet was at least 15 years old, creating potential fleet-renewal requirements.
- No dividends were declared under the company’s discretionary dividend policy. The policy prioritizes balance-sheet deleveraging and reducing the cost of capital.
- A pending $7.3 million claim sought reimbursement for breakage costs related to interest-rate swaps associated with repurchased sale-leaseback vessels; the company rejected the claim and recorded no provision.
Most important facts for an investor to verify
- Verify quarterly and fourth-quarter operating results separately, because this annual filing primarily provides full-year comparisons rather than a standalone 2021 Q4 income statement.
- Verify current spot tanker rates, utilization, TCE performance, and the timing of any expected market recovery.
- Verify liquidity after the 2022 vessel sales, the $177.3 million sale-leaseback, debt repayments, and any changes to the working-capital facility.
- Review 2023–2024 refinancing requirements and the sensitivity of vessel-value and liquidity covenants to lower tanker prices.
- Assess the potential for additional vessel impairments; 35 vessels had market values below carrying values at year-end, including 10 with only marginal undiscounted cash-flow headroom.
- Monitor sanctions and trade-flow effects arising from Russia’s invasion of Ukraine, including counterparty exposure and changes in voyage distances.
- Review the $45.6 million of recognized uncertain freight-tax liabilities, the $28.1 million High-Q joint-venture loan guaranteed 50% by the company, and the unresolved $7.3 million sale-leaseback claim.
- Consider governance and related-party exposure arising from Teekay Corporation’s voting control, the long-term management agreement, and potential conflicts of interest.