Q4 2019 Earnings Call
Good day and welcome to Teekay Corporation's fourth quarter in fiscal 2019 earnings results conference call. During the call all participants will be any listen only mode. Afterwards, she will be invited to participate in a question and answer session.
Time, if you have the question participants will be asked to press star One to register for question.
Assistance during the call. Please press star zero on your Touchtone phone.
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. Please go ahead.
[laughter] before it begins I'd like to direct all participants to our website at www Dot Teekay dot com, where you'll find a copy of the fourth quarter and annual 2019 earnings presentation, and I've said and Vince Lok will review. This presentation. During today's conference call. Please allow me to remind you that our discussion today contains fourth.
Actual results may differ materially from the results projected by those forward looking statements.
Additional information concerning factors that could cause actual results to materially different from those in the forward looking statements is contained in the fourth quarter and annual 2019 earnings release and earnings presentation available on our website.
I'll now turn the call over to Vince to begin.
Thanks, Ryan and thank you all for joining us today for Teekay Corporation's fourth quarter and annual 2019 earnings Conference call.
I will briefly review our fourth quarter results before I hand, the call over to Canada.
Starting with slide three of the presentation.
The fourth quarter of 2019 marked a return to profitability for Teekay.
As we recorded consolidated adjusted net income of 31 million or 31 cents per share compared to an adjusted net loss of 2 million or two cents per share in the same period over the prior year [noise].
We also generated total adjusted EBITDA of 324 million, an increase of 113 million or 53% from the same period in the prior year, excluding the contribution from Teekay offshore, which we sold in May of 2019.
Our fourth quarter consolidated results were positively impacted by significantly stronger spot tanker rates at Teekay tankers.
The startup of various growth projects and higher charter rates secured on certain LNG carriers at Teekay LNG.
Proved results from our directly owned Fts, so units and lower Gionee expenses across the group.
In addition, we narrowed our consolidated adjusted net loss in fiscal year 2019 to 19 million from 53 million in 2018, and we continue to expect 2020 to be a profitable year.
Teekay parent generated positive adjusted EBITDA of 14 million in the fourth quarter.
This includes EBITDA from our directly owned assets and cash distributions from our publicly traded daughter entities.
Our results were up compared to the fourth quarter of 2018, mainly as a result of lower interest expense due to a bond repurchases over the past year and our bond refinancing completed in May 2019.
Higher contributions from the bands and Hummingbird spirit FPSO units.
36% increase in Tgps quarterly desk cash distribution and lower Gionee expenses.
For further details on our fourth quarter results as well as our first quarter outlook. Please refer to the slides in the tendencies to this presentation.
Overall, we are expecting another strong Q1 as a strong quarter in Q1.
On the balance sheet side in January 2020, Teekay parent eliminated 52 million of debt guarantees previously provided to Teekay tankers as a result of their 533 million refinancing completed during that month.
And we fully repaid the remaining balance on our 2020 unsecured bond with cash.
I will now I'll turn the call over to Kenneth.
Thank you Vince and the Hello, everyone turning to slide four.
When we presented at our Investor Day in November all key message was that over the past three years, we have significantly de risked the Teekay group and that we expect stronger earnings and continued balance sheet delevering across all businesses.
We believe that the de risking of the Teekay group has set us up so not only weather, but actually it continues to thrive during market volatility.
First let's stop all from the near term.
On the gas side, we've seen significant declines in LNG prices in Asia, and Europe with Asia, reaching levels below $3 per M. B to you.
Primarily due to the Corona virus outbreak and lives a winter weather, which has put pressure on spot LNG shipping rates.
On the tanker side crude spot tanker rates reached the highest level since 2008 juice and positive underlying saying that supply and demand fundamentals normal winter seasonality as well as one off events. So says U.S. sanctions on Costco that removed 26, vlccs from the trading fleet float.
Things towards ahead of the implementation of IMO Twentytwenty and the removal of vessels from the global trading fleet to retrofit scrubbers. However, the group's spot tanker market has come under pressure in recent weeks on the back of the Corona virus and the U.S. lifting sanctions on Costco with the former leading to.
A downgrade and all demand by the I.E.
It is highly uncertain how long this volatility will continue but we believe the teekay group as well position without gas business being very well insulated from the need some weakness in the spot LNG shipping market due to its unrivaled portfolio of long term contracts with no jada magana exposure was.
So wherever through the first half of the year, 97% fixed employment in 20 to 20, <unk> and 92% in 2021 forged LNG fleet and what else Hangup business, having greater financial flexibility as a result of a stronger balance sheet at a much healthier liquidity position, which we'll talk.
Sean in more detail later in this presentation.
Looking ahead, we believe the medium term fundamentals remain intact with a record year in 29 seem for new LNG projects, reaching final investment decision that I expected to start off in 2000 seats Wenzhou on wants and long term demand for LNG expects to rise by 4% to 5% per year. So 20 to 30 as.
LNG continues to displace coal.
Crude tankers, we see strong underlying supply and demand fundamentals the crude tanker order book at 20 year lows measured as a percentage of the existing fleet.
Turning to slide five we have provided the graph Oh annual total adjusted EBITDA over the past three years that adjusted fall sale of Teekay offshore has increased by 66% since 2017.
Primarily underpinned by all stable and growing cash flows from all gas business that have increased by 52% during this time.
We expect all total adjusted EBITDA to continues to grow in 20 to 20 <unk> without gas cash flows expects it to grow and although tends to 14% and 20th century compared to 29 scene and a full year all potentially stronger earnings from all tanker business.
Turning to slide six I'll provide a brief update on all three directly owned and if so.
On the Foinaven nephew, so we're now in advanced stages of discussions with BP for new contracting structure on the unit to address the negative EBITDA that we've incurred on this journey and will provide an update to the market at the appropriate time.
Hummingbird Spirit continues to operate on his contract out to 2023 and the customer continues to execute on as previously announced drilling campaign aimed at extending the production life of the field and we're continuing to proceed with divestment of this asset.
On the band if you also as highlighted at our Investor day in November they'll likely be no for the contract extensions on the existing fields as a result of low gas prices and we now preparing for the cessation of production on the field and decommissioning commencing in mid Twentys when she and we're marketing this unit for sale.
Oh, if these old results improved significantly in the fall in the fourth quarter at the units ramped up production following planned maintenance in the third quarter of and the recognition of approximately $8 million in operational tariff revenues.
From a the Foinaven, which is typically recognized in the fourth quarter of each year.
Looking ahead to the first quarter, we expect our if there's all cash flows to be lower mainly due to the annual operational and heres a revenue recognized in the fourth quarter and high operating expenses in the first quarter relating to the Foinaven.
As mentioned earlier the negative EBITDA is driven all by the Foinaven, if there's over which we are in advanced stages of addressing.
Consistent with all reason Teekay group Investor Day, we have decided to change the order of all earnings calls with Teekay Corporation going first followed by Teekay LNG and then Teekay tankers as a result, I will only briefly touched on the results on highlights of our daughter companies I know I would encourage you to listen to their respective.
Earnings Conference calls for more details following this call.
On slide seven we have summarized Teekay LNG is reasons results and highlights Teekay LNG partners reported a strong false four and fiscal 29 seen results that were within its guidance generating total adjusted EBITDA of 100 and.
$84 million and adjusted net income of $50 million of 56 cents per unit up significantly during the quarter compared to the same period of the prior year growth projects continue to drive higher earnings and cash flows.
We expect these results continue to grow in Twentytwenty with adjusted earnings per unit expected to be 45 to 7% to 3% higher than 29 scene.
Teekay LNG has reached an important milestone with the completion of its growth program, where the delivery of its fifth and sixth 50% ox seven LNG carrier Newbuildings faulty Yamal LNG project within each of which immediately commenced their respective twentys six year charter contracts as well as its.
30% own Bahrain, recast terminal or completed mechanical construction and commissioning and began receiving revenues in early January.
Also in early January Wilco, LNG fulfilled its obligation to repurchase true up gdps LNG carriers, resulting in receipt of over $260 million in cash that was used to de lever its balance sheet and increased its liquidity by over $100 million.
Additionally, teekay LNG continues to execute on its balanced capital allocation strategy, which includes prioritizing balance sheet Delevering for now and a second consecutive year of over 30% increase in quarterly cash distributions with a 32% increase commencing in May twentytwenty.
As outlined on the graph on the fall right. This approach has allowed for significant de levering from a proportion admit that.
Total adjusted EBITDA of 9.1 times in 2018, So 6.4 times based on our Q4 19 annualized results pro forma faulty a wilco transaction that I've touched on earlier.
This is creating significant exits of value for all Teekay LNG unitholders with more to come at Teekay LNG approaches its target leverage of around four and a half to five and a half times and which is expected to result in significant <unk> increased financial flexibility Lastly, since December 28.
I mean, C.G.P. has opportunistically repurchase repurchased 3.5% of its outstanding common units and that average repurchase price up $12, an 85 cents per unit.
Turning to slide eight Teekay tankers reported record high adjusted net income in the fourth quarter generating total adjusted EBITDA of $132 million up from $62 million in the same period of the prior year and adjusted net income up $83 million or $2.47 per.
A share in the fourth quarter and improvement from $14 million or 42 cents per share in the same period of the prior year.
She encase results were driven by stronger spot tanker rates, which reached the highest level since 2008.
This strength continued into the first quarter of 20 to 20 and I'm pleased to report that the tanker rates. We have secured so far in Q1 I, even higher was 77% of Q1 Suezmax days fixed at $51700 per day, and 63% of Q1, Aframax and they like to date.
Yes, fix that 38600, but they compared to 39000 133000 per day in the fourth quarter respectively.
Since November 29 seen Teekay tankers has taken significant steps to bolster its balance sheet from strong operating cash flows securing $104 million of opportunistic asset sales and securing and new year, new five year 533.
Million dollar long term revolving credit facility, which on a pro forma basis has reduced she encase net that by $153 million a 15% since the end of the third quarter and significant increased its liquidity to approximately $260 million looking.
Ahead, TNK continues to maintain significant operating leverage as highlighted in the graph on the bottom right hand side on the slide on an annualized spaces. The rates that we achieved in the fourth quarter of 29 seen would translate to over $322 million, a free cash flow over $9 and faced a sense.
Per share.
This is compelling railing relative so she encase closing share price yesterday of $12 and six to six cents per share and equates to a free cash flow yield of 75%.
Turning to slide nine.
In spite of the market volatility we have continued to execute on our business plan to create intrinsic value across the Teekay group as laid out on this summary slide.
We also continue to focus on further simplification of the group, which includes the ultimate divestment of all three of Fpsos as well as a potential IDR monetization.
In closing I would like to thing all my colleagues at sea and shore worked tirelessly to put the Teekay group in a significant into stronger position as we enter into a new decade with that operator, we're now available to take questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using that speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
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At this time, we have no question from Q.
Well, we look forward to reporting all business results and all to daughter companies Oh right. After this call and reporting back to a on all grew progress next quarter. Thank you for listening in this morning.
Thank you. This concludes todays call. We appreciate your participation you may now disconnect.
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