Q1 2020 Earnings Call
[music].
Welcome to Teekay Corporation's first quarter Twentytwenty earnings results Conference call.
During the call all participants will be in listen only mode.
Afterwards, you will be invited to participate in a question answer session.
At that time, if you have a question participants will be asked the press star one to register for a question.
Persistence during the call. Please press star zero on your Touchtone phone.
As a reminder, this call is being recorded.
Now for opening remarks at introduction I'd like to turn the call over there to company. Please go ahead.
Before we begin I'd like to direct all participants were website.
W. dot dot com, where you'll find a copy of the first quarter 2020 earnings presentation.
Okay and bands where he this presentation during today's conference call.
Allow me to remind you that our discussion today contains forward looking statement actual results may differ materially from adult rejected by those forward looking statements.
Additional information concerning factors that could cause actual results may materially differ from those in the forward looking statements contained in the first quarter 2020, <unk> earnings release and earnings presentation available on our website.
I'll now turn the color in check kinda bid teekay corporations, president and CEO to begin.
Thank you Ryan.
Hello, everyone and thank you very much for joining us today for Teekay Corporation's first quarter up 20 to 20 earnings conference call Hope at your when your family's old safe and healthy.
On the call today, I'm joined by Vince Lok Teekays Group CFO.
Okay, we'll get into all results I'd like to take a moment to think all of our seafarers on shore based staff for their extraordinary dedication to maintain business continuity and bring energy to the world where Teekay spirit.
Well I called that 19 is having an unprecedented impacts upon the world and it's clearly a major focus for US we're truly proud of how long will seafarers and onshore colleagues have responded to covert 19, implementing new stand ups, which focus on the health and wellbeing, everyone involved and I'll organization.
Actually all colleagues that see why maintaining consistently safe and efficient operations fall customers.
We also fortunate to be in a position well operational Brussels strong so far into one just watching.
I've had minimal impact on all operations due to the pandemic.
Moving to all recent highlights on slide three of the presentation.
The first quarter Twentytwenty marked the second consecutive quarterly adjusted profit for Teekay as we reported consolidated adjusted net income of $25 million spent 25 cents per share compared to an adjusted net loss of switching million. Paul was awesome 13 cents per share in the same period last year.
Roles will generate a total adjusted EBITDA of $342 million, an increase of $128 million, 59% from the same period in the prior year.
As a reminder, Q1 2019 result included the contribution from 14% ownership stake Sarah infrastructure formally Teekay offshore which was sold in May 2019.
It is also important to note that these figures only include $11 million of the $67 million upfront payment received for the Foinaven FPSO contract. We entered into in late March I will touch on the accounting treatment for this in more detail in the presentation.
I will strong results in the first quarter can be attributed to higher earnings in all main businesses.
Hey, tangoes experienced significantly stronger spot tanker rates, reaching its highest first quarter levels in over a decade, which strengthened into the second quarter Watts Teekay LNG have robust earnings from a complete for contribution from its fully Delever LNG fleet.
Teekay parent generated positive adjusted EBITDA of $5 million, which improves EBITDA from all the directly owned assets and cash distributions from all publicly traded dollar instances, however, based on us gap and our definition of the adjusted EBITDA only $11 million of the six to 700.
Dollars upfront payment from the new Foinaven FPSO contract was included in our Q1 revenues. However, the remaining $56 million has been included in see case Teekay parents free cash flow.
As a result, teekay parent free cash flow increased to $53 million a significant improvement from negative $14 million in the same period of the prior year. The increase was also a result of lower interest expense due to bond repurchases over the past year and help on refinancing completed.
In May 2019.
32% increase in Teekay LNG is quarterly cash distribution and lower DNA expenses.
Further details on our first quarter results as well as our second quarter outlook. Please refer to the slides in the appendices. So this presentation.
Overall, we are expecting another strong quarter in June Sue supported by our stable LNG cash flows and the strong crude spot tanker rates secure so far in the second quarter.
Since reporting back in February we have been busy executing on all strategic priorities, which included the new capital contract for the Foinaven FPSO that covers the vessel all the way through to its eventual retirement and the monetization of our TGP incentive distribution rights.
In exchange for 10.75 million newly issued CGP common units I will touch on these two transactions more detail later in the presentation.
Turning to slide four I'll also provide an update on our current operations across the group during this unprecedented global Penn gaming.
The health and safety of our crew and shortstop is Paramount to Teekay group, we've implemented a strict measures on all of our assets to protect our seafarers, while the vast majority of offshore stop working remotely from home.
Crew changes on our CASM tanker fleets remain a major challenges for the industry as most countries have placed restrictions on travel.
Implications AMD cruise disembarking from vessels were working with the industry and inter governmental organizations to tackle this challenge why remaining in close continuous contact and supporting our colleagues FC through this period.
Im pleased to report that the team's dedication so health and safety and their professionalism. During this time has resulted in no covert cases on board all gas and tanker vessels and no negative impact on available vessel base. However on the FPSO side. We are also did experience to covert cases on the hummingbird.
So, but after a deep clean and a full crew chains were able to fully restart operations and have had on interrupted operations since.
We were well prepared so man this potential spare pops shortages as the teams identified critical items and made advanced purchases early in the outbreak in anticipation of deliberate challenges with respect to both manufacturing and logistics. In addition that seems have also been able to obtain class and slow.
Like extensions fall vessels, which we're doing some dry dog in the first half of this year.
Overall, our assets have performed well in the first quarter and second quarter to date and we expect this to continue.
We will of course remain vigilant in ensuring that we're taking all actions and precautions in line with prevailing best practices.
Turning to slide five.
And I'll Investor Day in November last year, we highlighted two themes for Teekay Corporation that would not be themes at our next Investor Day. These included the elimination of Tgps.
And the divestment and production of our exposure to the offshore business to further simplify and focus the group.
Starting with the ideas, we eliminated the GDP plus in exchange for 10.75 million newly issued GDP common units, which we believe this beneficial to both parties. This important transaction creates greater alignment between Teekay parent and the rest of GDP is unitholders simplifies the corporate structure.
And we believe that it removes one of the primary circumstances for investors and CK.
And TGP.
The transaction also increases our economic interest in GGP from 34% to approximately 42%, including our GP stake and increases Teekay parent free cash flows by almost $11 million per annum based on the current CGP distribution level.
On the offshore side of things were significantly reducing our exposure to this segment with the new employment contract and the upcoming decommissioning of the Banff FPSO and eventual GRI Green recycling of this unit starting in June.
In late March we secured a new up to 10 year papo contract on the Foinaven FPSO that affects and recall those the remaining life and the eventual green recycling of the unit.
New contract includes an upfront payment of $67 million, which was received in early April and nominal per day fee for the contract life that effectively covers any similar it costs and a lump sum payment at the end of the contract term that is expected to cover any cleanup and green.
I can costs of the unit.
Importantly, theres new contract eliminates our operational exposure, so the previous loss making contract.
Lastly, the hummingbird FPSO continues to operate on its fixed rate contract and is currently producing between seven and a half an 8.5 thousand barrels per day.
Production on the unit has increased recently following a successful drilling campaign on the field by our customer.
Transactions have also further strengthens our balance sheet or improves our profitability going forward over.
Over the next two slides I'll briefly touch on the results and highlights of our daughter companies I would encourage you to listen to their respective earnings conference calls for more details following this call.
On slide six we have summarize Teekay LNG reason results and highlights Teekay LNG partners reported record high adjusted net income during the quarter generating total adjusted EBITDA of $188 million and adjusted net income of $52 million.58 per unit.
Up significantly compared to the same period of the prior year as a result of a complete quarter contribution in Q1 from its fully delivered LNG fleet.
GGP has also reaffirmed its twentytwenty adjusted EBITDA and adjusted net income guidance with adjusted net income expenses have increased by 36% to 60% in switching swenson versus 29 scene.
Since reporting in February GGP has secured new time charter contracts on 352% owned LNG carriers and is now 100% faced in switch and Tracy and 94% faced in 2021 and CGP has also repaid it's Nok bond this week using existing cash.
GDP now has no remaining debt maturities in 2020.
Additionally, GDP continues to execute on its balanced capital allocation strategy, which includes prioritizing balance sheet delivering four now alongside a second consecutive year up over 30% increase in quarterly cash distributions with a 32% increase in May 2000 seats racing.
As highlighted on the graph on this slide GDP continues to deliver its balance sheet and has also opportunistically bought back approximately $44 million to $44 million of stock since the program was announced in December 2018 at an average price of $12 on 16 cents per unit.
We take a long term view on TGP business and properties with a strengthening financial foundation and de leveraging that is expected to provide financial flexibility market, leading positions and a very compelling valuation at a full size PE ratio based on the midpoint of its twentytwenty financial guidance, we believe GDP.
Has significant long term value potential, which benefits CK given out full alignment of interest and position as the largest common unit holder for every $1 per unit increase in Cgps unit price Teekays bankruptcy interest would increase by 37 cents per share or 12%.
Based on Yesterdays closing price of $3.11 per share.
Turning to slide seven Teekay tankers reported the highest quarterly adjusted profit generating total adjusted EBITDA of $155 million up from $63 million in the same period of the prior year and adjusted net income of $110 million all $3.27 per share.
The first quarter and improvement from $15 million.44 per share in the same period of the prior year.
C and case results were driven by stronger spot tanker rates with rates, reaching the highest Q1 levels in the past decade.
We also expect key encase Q2 results to be strong based on the spot rates. So far in Q2 was 69% of Q2 Suezmax base fixed at $52100 per day, and 62% of all through two aframax size vessels takes escalated 3006 on the dollars per day comps.
After $49100 per day at $34500 per day in the first quarter respectively.
During the quarter TNK continued to bolster its balance sheet from a strong operating cash flows and proceeds from asset sales TNK reduce this net by approximately $200 million over 22% since the beginning of the year, an increase of total liquidity to 368 million dollar.
Those and have subsequent to continue to make meaningful progress on both fronts. TNK also took advantage of the market strength at fixed out another nine vessels on fixed rate contracts ranging between six months and two years, but most of which offer one year at very attractive rates.
In total TNK has outpaced our 13 vessels on fixed rate contracts totaling approximately $170 million up for fixed rate revenues. These new contracts also reduce C and case free cash flow breakeven to approximately $10500 per day, which is expected to enable today.
Create shareholder value in almost any tanker market.
Looking ahead, while Teekay has lower as break even through his time charter coverage continues to maintain meaningful operating leverage as highlighted in the graph on the bottom right hand side of the slide.
We also take a long term view on TM case business and prospects seeing case has significantly grown its net asset value, earning over $240 million of free cash flow in just two quarters, which is compelling relative to its market cap of $540 million and is net debt balance of 700.
Increased by 10 cents per share of 3% based on yesterdays closing price of $3.11 per share.
In summary for every one dollar increase in CGP and TM case share prices Teekays equity interest will increase by 47 cents per share of 15% based on yesterdays closing price of $3, an 11 cents per share.
I'll now turn the call over to Vince.
Thanks, Ken turning to slide eight.
Over the past several years, we're focused on de risking our businesses and strengthening our foundation across the group.
This included divesting and reducing our offshore exposure with the sale of our remaining interest in Teekay offshore last year and the new bareboat contract structure for the Foinaven, FPSO, which Ken touched on earlier.
And completing key financings, including Teekay parent's bond last year and more recently Teekay LNG is unsecured revolver and the majority of Teekay tankers debt facilities at attractive all in pricing.
Looking at the graph on the Slide Teekay Corporation has reduced its pro forma consolidated net debt by 830 million or 19% since the beginning of 2019 and reduce its pro forma net debt to EBITDA from a peak of nine times to four and a half times, while increasing our pro forma consolidated liquidity.
The two over 900 million.
We have also reduced teekay parent's pro forma net debt by approximately 100 billion or 25% since the beginning in 2019 and reduce our daughter get guarantees to $190 million as of March 30 Onest.
Which we expect will be completely eliminated by the end of.
2020.
While also holding a healthy pro forma liquidity position of 150 million.
In short we have made great progress in reducing our debt.
Eliminating near term maturities, reducing remaining exposure to the offshore segment.
And significantly improving our financial vision physician all around.
With that I will now turn the call back to Canada for his closing remarks.
Thanks, Vince as you have hurt there was a very busy quarter with record TGP and TNK earnings and executing on our strategic approaches which included completing various asset sale, securing new charter contracts across the group and eliminating TGP I'd OS in exchange for new GDP common units innovate.
Mission in mid April we also published our 29 team sustainability report, which is our 10th consecutive annual sustainability report.
As a leading oil and gas transportation company Teekay kind of separate ourselves from the longer term challenges that the world is facing we've built our company on a deep commitment to responsible safety and environmental practices over the past decade, we've worked with industry to pioneer and invest in increasingly more.
Energy efficient vessels for instance, our latest LNG carrier newbuildings produce about 50% less CEO to emissions per cubic meter of LNG transporter.
As our industry has said to sell the challenge of progressive lead becoming carbon neutral by 20 to 50, we have an enormous task ahead of us we're embarking on new industry partnerships to drive necessary technological developments and we will in 2020 reassess our reporting framework so that we.
For the best possible Foundation for the important work ahead of us imposing with all balance sheets, continuing to strengthen total pro forma liquidity of over $900 million for the Teekay group extensive contracted revenue from Teekay LNG and higher contracted revenue in strong spot rates today at Teekay tankers.
And we'll know committed growth capex or significant upcoming debt maturities. We believe that the Teekay group is financially well positioned for both any potential market volatility in the near term and the longer term future of Marine energy transportation with that operator, we are now available to take.
Questions.
Thank you.
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Well pause for just a moment to let everyone an opportunity to signal for questions.
We will now take our first question from Michael Webber of Webber Research. Please go ahead.
Hey, good morning, guys how are you.
All right David How're you doing.
Good good.
I would love to touch base on the IDR takeout.
Just curious.
Maybe at the gate the.
Can you give us some color on how you came up with the valuation.
During the day or sorry, the money just.
Just curious.
What kind of methodology you guys have used to come up with evaluation and whether you're able to find the comp.
Other similar.
MLP that have already taken out when they were that are under yes.
But the Judy and even tiers.
Yeah, and just for for everybody's benefit who hasn't.
In the been following this transaction is closed areas as you have.
I'd say the perspective, we came in with is that over the past several years as we all know there's been a lot of investor focus on course to address ideas across the MLP space and.
We had many of our address those relationships that the CGP was basically on investable until the IDR were removed.
And so we talked about that at our Investor day as you know at that for one all strategic priorities was to consider an IDR elimination and remove what we've received feedback from address those that was the biggest overhang impacting teekay LNG is unit price.
So the valuation was.
Determined by all through floral and robust process, where we follow the TGP conflicts committee process, which is comprised of independent board members.
They reviewed and negotiated the transaction on behalf of GDP GDP conflicts committee appointed their own independent financial legal advisors to assist them with the process and the Els approaches that took several months and we went off part of that process from a ticket management side.
The ticket board did have a special committee to review the transaction, but but I was pretty much the extent of other work that was done on the on the financials there.
Because they want to add anything on on the valuation.
Finally, I mean, I know that the conflicts committee was involved right I'm just curious about the procedural process and more curious around.
You know how you arrived at that kind of a number for effectively an option that still that far out of the money right. So I think that.
I understand it's actually goes on conflicts committee and everyone has I guess I guess distance from alright, but ultimately.
The transition of $123 million, some LP and GP, just how did you arrive at that or how to add whoever came up with that number had a day right.
Yeah, Mike obviously anti in Tgps case, its unique in that we weren't to.
Currently in the high splits.
But typically you weren't any influence your several other MPD right. So it wasn't like later slides in the study at the moment.
So it is unique in that situation. However, teacher case cash flows are very predictable given its long term cash flows. So that that's I think one of the factors that enable us to the too.
Visors in that in the special committees to to look at the devaluation of the IDR as they clearly have value there given the stability of the cash flows and the fact that tgps continue to de lever its balance sheet.
An increase its distribution capacity overtime. So I guess, that's pretty much all we can really share.
With you in terms of the details evaluation.
I guess around the stability of the cash flows right. This cash flows have been there for quite a while yet you're still below the MPD and billing distribution.
All right, which show if I go back to people and remember the 2016 timeframe right same business and gasolines.
Having gone back then level.
It.
Just the guilty of the cash flows I guess.
Maybe you kind of coming at us a different way what kind of guidance as CGP, giving you in terms of distribution than we did.
Mix.
Didnt make forgone conclusion that they would get back into the islands'.
Well why because I know I don't believe they've given any public guidance I would suggest from Goldman.
You've followed the company for long time and have have confidence of goes on so you know exactly why the distribution rose reduce back in 2015, and that's because we have $3.5 billion ahead of us in terms of.
Newbuildings and email MLP market that wasn't working so we did what was prudent at the time, we we.
Reduced our distribution to retain.
The cash flows so that we could fund the Newbuilding program without issuing dilutive equity last point number one and if we look at the year cash flows we have today, you're absolutely right. The DCF in the in MLP terms is very strong that GDP, we have about 97 cents or $3, an 88 cents annualized.
In GDP, which is of course is well up while the year. This space that we're talking about if you look at the coverage we have about four times coverage of the distribution that we're paying out. So clearly there is a lot of.
Cash flows as that.
That's coming and then assessments pointed out.
No I understand but again like the I think the reference to 2015 2016 is that there is an option out there is variability to that right that I think any one and at that that timeframe, we predicted that.
Distribution you cut in the first place.
It's been several years well below the MTV. So I guess, the I kind of goes back to the valuation and looking at it has an inevitability level or afford start annuity as opposed to looking at it and I guess, an option and thats kind of the question as to how you always see if we're not getting that kind of forward visibility out of GGP from a common unitholders perspective.
The bad news it as it did then think about it as an inevitability when taking out the IDR split the disconnect. There. So I'm just curious as to how again from a methodology perspective, how did you arrive at 120 39.
Yes, no as you correctly pointed out I mean, we we have as analysts plan as management the ways to be surprised by major events in the world in the same way that nobody force all the equity the oil price collapse, we saw a though up 24 team and the prudent changes we needed to make back then but.
Again.
As we look at what we have been diligently executing on.
GDP in the in the last couple of years, we now have a business where all assets are delivered their cash flow. They are generating strong cash flows were giving out guidance in terms of what those cash flows will will there will be we also have a clear path on de leveraging the.
The balance sheet. So we think that visibility was clearly taking into account by the financial advisors that the conflicts committee use.
But that's as Ben said is really all we know we're not privy to so that work that they did they clearly got comfortable with the valuation that the transaction was conducted that.
So they didn't need to share the valuation methodology with you at all.
You literally I've no idea what they did.
Well the conflicts committee had their own advisors and they did their own work and and so does their presentation that anything or any now wondering any any any given that you have no idea.
Asian underpinned.
No its independent process of to protect the independent so that that's not shared with management, it's only share with the comp is going any.
So.
No idea whatsoever. So there's no there's no they don't share with the board. There is no you did they can pick another scenario, but you would know because it was on the problems for me.
The rack level, they I mean.
As you will understand that clearly look at the outlook for the business and the cash flows and what this business can do and that's obviously with what goes into their evaluation, but as we have said a couple of times now a the conflicts committee does not share their work with management.
Okay, and I think Thats why in please.
Now what I.
I guess, the best analogy I think I can come up with is if you say you have a golfer right. He standing on the ATP and Canadian Guy mice enough normal golfer little knowing the fine goes through the first first round lots of bar first the frontline lots of bars gifts for the back nine, but we'll start falling off.
Turning to double bogey triple bogey Triple bogey.
Really kind of scrambling and then the last 15 16 17, you kind of pull that together, it's kind of solvent place may still no somehow we save in part.
Yes, the ATP box anything sell Wow, that's if I actually if I hold this out.
I can actually get to get to then I'm ready to get to I can win.
And then he decided to take it gives me on the T. box so it doesnt never actually.
Right up the distribution growth, it's actually needed to get to the score.
It's just kind of assume they're going to get it and they get a big check because at the parent takes imposing the star going to drive away like the.
I guess the question is.
Why not actually deliver on the distribution growth. It is that inevitable before taking out the out years I know if there has been this isn't this amorphous or survey of the necessary to say this is the biggest overhang or what have you and I guess the overhang is really the will there won't be is not an actual issue or so far out of money.
The.
Maybe coming at a different way if I look at the if I look at your back and I look at the.
Rationale as to three data points, if theres nothing thats.
Just a quantitative data and then there is no there's nothing that's.
That kind of points doing accretion or a quantitative benefits from from at the dollar levels from this.
The first point is that then it helps alignment between the parents and the LP.
So I'm just how does it actually do that.
Yes, the only implication I can think of is it the GP wouldn't foresee LP to do something there wasn't in its best interest to get to put them in IDR is in the money because otherwise I don't know how this actually helps see alignment.
So maybe just the first.
The first the first data point of rationale on the idea we take out if you could just expand out how actually helps the aligned.
And then in common unitholders.
Okay.
Well first of all.
As you know this this this team has been focused on.
Putting.
This business on on there, even and strong to you last was there and say the outlook for GDP is very strong. So I clearly there is a lot of.
Dividend capacity in the company and that's obviously as a starting point for for any company. So the outlook here is very strong and then it becomes a debate of which would you on is about whether it's distributable whether its distributable cash flow and very and that can be to discussion purpose.
Turning point in any of these companies is obviously, whether we have the underlying cash flows.
And that's essentially what this management team has been focused on than they've been focusing on sprinkling add the underlying business and the de risking the company. So that we have that that the castillo certainty and thats clearly what's going into the evaluation of the of the conflicts committee here in terms of the alignment.
We we've made a capital changes since we started out in GDP we've.
Become a 10 99 filer as you know a week and this reason.
Linemen in removing the ideas, we firmly believe that that allows TGP too.
Turning to explore how they can create the most shareholder value to all parties without having an IDR consideration sitting in the mix of their capital allocation decisions and fundamentally I believe all I guess the campaign CK pick up that is most flexible way that we can allocate capital as we move this company forward.
I guess the question is because that so far out of the mix right in terms of being an actual.
Quantitative player with any kind of decision I guess I guess, how does it actually help that alignment.
I understand that you think it does that help.
Well I don't know, where you where you have the disconnect we talk about the cash flows which I clearly there.
True true.
To ramp up the distribution, so obviously that's going into the consideration.
If we had a business, which was a feeling and that wasn't a de levering and that one increasing their their cash flows on the distribution capacity. Then then clearly youre your points off relevant.
But you have to agree that this is a business and that that has one of the strength strongest outlooks in a in our facing the LNG space.
I read that gives us a separate topic that need to kind of coming out some different angle, what what aspect of the alignment was insufficient before.
What aspect the alignment of the students software.
Well I think just your maybe continue your with your question for its I I assume you're going to be on the next call as well and you're going to get them oxide advanced offs.
Perspective on it as well, but but.
We believe and then all of our investors I believe that this drives alignment and we accept that obviously you have.
The right to have a different view, but.
Hi, guys I would just wanted to hear I would just love to your house.
I mean, it's in the deck I mean, I I believe that you get me that I just I just don't know how actually.
But I can I can ask TGP, if they they know how.
Well I mean naturally when you have the GP is the GP IDR is and then the L. keys.
There's there are two different cost of securities. There. So now we've converted that into LP units, we have 42% MLP.
And we're aligned with the rest of the LP units to create maximize the value of those LP units going forward as opposed to the two different sets of securities.
If I said I guess the implication is it.
Otherwise you'd be looking to maximize the value of the IDR as opposed to the opinions.
Well when they are the ours were in place there are different scenarios, where where the I'd ours would create value and would've been a across to the LP unit holders now that's been eliminated.
Right, but the 160% from that right away.
Back back at the 70 cents per quarter distribution on our number one how are you guys are now.
Sure I got to it I I'll hop off I'll get on the TGP, calling thing gets more color on that going but I appreciate that thanks.
Thank you.
Thank you.
We'll move to our next question from GE needs.
Ms Meyer from values investors edge. Please go ahead.
Hi, good morning, gentlemen.
All right Rick.
So I'll stay out of the GP IDR mess I think that was a well litigated, let's see how the TGP call goes a little bit a housekeeping for you guys looking at that they have fts, though right. We know we have some green recycling coming up I'd have to be quite the bill what sort of a liability should we be guiding for on that I know previously.
As mentioned that it might be more in excess of current reserves is that still the case and its or some sort of benchmark for that.
Hi, Jay.
Yes, as you might know the Bam contract is quite unique from other.
The other up here so contracts.
Where we are responsible for some of the abandonment costs associated with parts of the subsea infrastructure. So that's where you need.
So this is something we've been accruing for during the life of the contract.
We have increased our what's called the our ROE asset retirement obligation accrual.
Which is now just 140 million net based on most recent estimates.
So this costs will be roughly half of that will be incurred during this year, which is phase one.
And the remaining amount so well be incurred next year, which is phase two.
So and so this 40 million that's been accrued these are costs that won't hit RPL going forward, obviously consider accrued.
Other than some additional operating expenses that will be incurred during the decommissioning period. Later this year. So that's that's a status on that.
All right. Thank you is that 40 million is estimated to be about enough or is there are risks that it could be higher than that.
I think we have a pretty good handle one of the phase one because it's a starting this june.
The phase two cost I think we've been fairly conservative in our and our current estimates here, but that's subject to further.
Relation later this year, but we feel we've been fairly conservative.
Alright fair enough looking at the rest of your Dsos like the Foinaven deal was good I'm glad you got that went out of the way it looks like the Banff is out the door. Its can dispatches liking reserved for that but let's talk about the hummingbird is that considered non core is that still up for sale or is that can be core asset going forward.
Yeah, it's clearly and no longer a core assets. So that's where say it's available to be repurchase then the that say if there is of course a contract value. So there's obviously a price what would be.
It goes on and there was a price where it makes more sense to keep the unit and so I would say with the oil price collapse in the in the last a couple of months obviously.
I haven't got a lot of activity in this space and let's see what we can get we look at it into in terms of the cash flows. The the contract is as you know fix out for for a couple of years and we were currently producing a around 8000 barrels.
Good day, and so I think a lot of the future off the unit is probably enjoying on all price and going forward.
And the and the appetite for for people to come in.
So to look at the asset it's a 13 years old. So it still has a lot of life left then if I sort of you look at the depreciated.
Replacement cost that that's obviously, a quite significant but you're still need to hire in order to to be able to offload.
It certainly makes sense. So it would the hummingbird not being delay core asset just holding onto that when you sell it it looks like Teekay only has a really two main assets right you have the T.K. a units that you have now into a 40% range of key TGP. How are you happy high ownership of TNK Teekay tankers.
And you had kind of a management structure. So I guess, a two part question.
Part one just for modeling purposes evaluation purposes, what is the expected run rate annualize gionee expense going forward like the just the corporate overhead that's not getting reimbursed right because I understand that teekay tankers and TGP LNG will reimburse you some of that so what's what's the non reimbursable part of GNS. So we can model that and in part.
To what is the future of Teekay here does teekay habit future is it just a holding company are you doing project development, what sort of vision. This teekay half.
Jay first of all to answer a question on these apparently DNA. If you look at our free cash flow statement in appendix to either release in the first quarter. Our net DNA actually was zero when you take into account some of the fees and other income that we generate from or for managing other businesses. So the Jay was about two.
<unk> million and the income was about you know and met.
So the second quarter, we'll have some little bit of lumpy costs. So the Jay will go up.
I'm, a little bit because some of the fees, we incurred on the on yard transaction as well as the timing of the recognition of equity comp, but that's sort of not a run rate figure for for the second quarter.
Going forward, I think where we're going to try to.
Look at that to almost on a run rate basis.
It seems to be a very fairly small net gene a figure going forward on a run rate basis.
And enter the second part I think we talked about this act at our Investor day, but just to share a bit more on the perspective that we have us as you know teekay was found that actually last month. There were found to their 47 years ago, and we've always wrong.
Group in an integrated manner, and we believe that that serves all long term shareholders are based on that includes our largest shareholder which of course is the Teekay Foundation.
So all the time all structure may may change to reflect the the public and financial markets. That's that's facing us and but we see that actually is being quite a separate from our business strategy and capital allocation decisions. It's over the past years, we have as a group in very focused on streamlining our business around.
Our core tank or I guess segments and selling all fall atrial segment as well as execution of a very large order book and were constrained during the financial foundation off of the group at this work has put I think now the group in a in a in a very.
On a very positive value creation path and we talk about that in November also and we think it represents a turning point and as we've said all along.
Are you.
Prerequisite for having strategic this decisions or discussions is that.
We have the financial flexibility to do so.
We are building that rapidly now and the and we were excited about starting that strategic discussion for the group and to look at how we as a group allocate capital and the I want to investing in next books a in in terms of how the group is one we continue to run it on a on a very.
Integrated a basis and I know that it at a low businesses there.
Yeah. Thanks for thanks for addressing the question it sounds like its DNA is pretty negligible going forward, which is good to hear a lot to circle back later on you kind of future Teekay and that's probably a whole new there can of worms, we'll have to what the bus out and we'll let the IDR ruminate a little bit first thanks for taking my questions and I'll hop on the other calls.
Thanks for the time.
Thank you, but if there is there no further questions at this time, Mr. Kenneth Hvid I'd like to turn the conference back to for any additional for closing remarks.
Well as we mentioned earlier, we have a true more teekay earnings calls coming over the next the two hours. So please stay tuned for for that and Furthermore, <unk> look forward to reporting back to next quarter and Meanwhile, we hope that you and your families will continue to stay safe.
Thank you for listening in to me.
This concludes today's call.
Thank you for your participation you may now disconnect.
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