Q2 2021 Teekay Corp Earnings Call
Welcome to Teekay Corporation's second quarter 2021 earnings results conference call. During the call all participants will be in a listen only mode.
Afterwards, you'll be invited to participate in a question and answer session.
At that time, if you have a question participants will be asked of press star 1 on to register for a question for.
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As a reminder of 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.
Before we begin I'd like to direct all participants to our website at www Dot Teekay dot com, where you'll find a copy of the second quarter of 2021 earnings presentation.
The guys, President and CEO, Kenneth <unk> and Teekay CFO, Vince Lok will review this presentation. During today's conference call. Please allow me to remind you of our discussion today contains forward looking statements actual results may differ materially from results projected by those forward looking statements additional information concerning factors that could cause actual results to materially differ from those of the forward looking.
It was contained to the second quarter of 2021 earnings release and earnings presentation available on our website.
I'll turn the call over to Vince to begin.
Thanks, Brian and good morning, everyone and thank you for joining us today for Teekay Corporation's second quarter 2021 earnings Conference call.
Before I hand, the call over to Kenneth I will briefly review our financial results for the quarter.
Starting with our recent highlights on slide 3 of the presentation in the second quarter, we reported a small consolidated adjusted profit of $30000 down from 11 million or <unk> 11 per share in the prior quarter.
We also generated total adjusted EBITDA of $172 million down from $202 million in the previous quarter.
We reported another strong quarter in our gas business, however, compared to Q1, our tanker business results were weaker due to lower spot tanker rates and the expiration of certain fixed rate time charters that were secured during last year's strong tanker market.
Our second quarter results also reflected a higher than normal number of scheduled dry dockings in both of our gas and tanker businesses.
Looking ahead, we are expecting our third quarter results to be lower than the second quarter, mainly due to weaker spot tanker rates and another heavy drydock schedule for both for gas and tanker fleets.
We are expecting our fourth quarter results to be stronger due to a lighter drydocking schedule and the anticipation of a stronger spot tanker market, especially during the winter months.
For guidance on our third quarter results. Please refer to the appendix of this presentation.
In May we reached a major milestone towards our strategic objective of winding down our Sps So segment.
Including the fulfilling our remaining obligations relating to the Banfield, which resulted in a $33 million gain from the reversal of our associated asset retirement obligation in the second quarter.
And this will discuss this in more detail on the next slide.
Lastly, despite the lower earnings the Teekay group has maintained a strong financial position with total consolidated liquidity of over $800 million at the end of the quarter.
With that I will turn the call over to Kenneth.
Thank you Vince and the good morning, everyone.
Turning to slide for as Vince just mentioned, we have reached a major milestone in winding down our if you sort of segment all the subs.
Briefly on some of the updates since our conference call last quarter. The band 50, ASO ownership was safely handle over to the miles of recycling yard in Denmark on May <unk>.
Evans, where it is in the process of being recycled.
In accordance with the EU recite ship recycling regulation and in late May we come. So you did all of all remaining conditions precedent on our decommissioning agreement with <unk>, whereby the customer to go on all remaining phase II decommissioning of responsibilities on the Banfield.
This should enable the C and also complete our phase 2 work in conjunction with the other decommissioning work at the Banfield in a more efficient manner. This agreement eliminates all remaining exposure to the field and as a result, we of reversal of asset retirement obligation liability by $33 million during the second quarter during the quarter we.
We incurred approximately $5 million of costs relating to the balance if P. S O associated with towards cost of the mast shipyard and payments to the of recycling jobs and we're not expecting any material remaining cost for this unit in the future.
As previously announced the point, even if peso, which is the only running of nominal day rate is expected to be redelivered to us next year as a result of Bp's recent decision to suspend production on the for uneven field. We now expect the units of be redelivered to us on the third quarter of 'twenty to 'twenty 2 rather than in the second quarter following the re delivery.
We plan for Green recycled the unit with the associated costs expected to be covered by of fixed contracts for lump sum payment from the customer as a result of this we have now largely eliminated all remaining exposure to both of the bands and point of an episode the hummingbird. If peso continues to produce on the chest the field with state of the oil production.
High uptime and given the continued strength in oil prices. We now expect for the unit will continue operating on this field into next year.
On slide 5 I'll briefly touch on the results and highlights of our daughter companies as always I encourage you to listen to their respective earnings conference calls for more details. Following this call starting with Teekay LNG all of gas business continues to deliver solid performance of strong earnings despite of heavier than normal dry.
The off on schedule during the quarter the.
The outlook for the LNG shipping market is positive as reflected in the current strong spot and time charter of LNG shipping rates, which we believe should provide tailwind wins for GGP through its spot market linked job of contract as well as upcoming charter renewals in 'twenty to 'twenty 2.
GDP does however continue to have 98% of its LNG fleet fixed for the remainder of 2021 and 89% fixed for 2022.
Which generates a significant amount of stable cash flows with upside from 1 spot market linked job of contract.
Turning to Teekay tankers, although the near term outlook is uncertain due to the continued impact of COVID-19, we believe many of the leading indicators for tango market recovery continues to improve including planned increases in OPEC plus production declining global oil inventories, which are below 5 year average levels.
As well as positive tanker fleet supply fundamentals with heightened the scrapping at a very limited amount of new tanker orders in anticipation of the tanker market recovery TNK counter cyclically in charter free vessels for periods of 18 to 24 months with extension options, which we believe for.
It presents an attractive risk reward and has been a profitable liver fostering pass the tanker market cycles. TNK also has a strong balance sheet with a healthy liquidity position and low financial leverage which enables us to continue reducing our overall cost of capital by unwinding expensive sale leasebacks on replacing them with low.
Cost of financings.
Turning to slide 6 Teekay Corp continues to be a level of play on our daughter companies Teekay LNG and Teekay tankers and is an attractive and diversified way to participate in the potential share price appreciation of these companies. In addition, as we highlighted earlier, we have now reversed our asset retirement obligation.
Relating to the bandwidth DSO, which increased our some of the pops value by $33 million Offloaded the <unk> per share.
Looking at the table on this slide we highlight the Teekay Corporation's current sum of the parts of value based on our door.
The company ownership and their respective share prices as of yesterday's close which shows the Teekay Corp share price has 12% of upsides to its current solve the pops value.
Based on 10% to 20% dollar share price appreciation Teekay Corporation's offside to solve the past value is between 34 and 5% to 6% based on the closing prices yesterday.
In closing I want to thank our seafarers and onshore colleagues for their continued dedication to providing safe and uninterrupted service to our customers throughout the course of the pandemic, we're not out of the woods, yet, but we successfully managed through uniquely challenging circumstances over the last 1 of the half year and on.
Confident that we are taking all measures tremendous through the current situation.
In addition, we continue to see a strong correlation between global vaccination programs and the increase in the oil.
Oil demand, which we estimate to be approximately 3% to 4% low oil currently compared to pre pandemic levels as the world recovers from the pandemic, we expect the demand for oil and gas and related transportation services to gradually return to 2019 levels, which we believe will be positive for coal gas and all of their shipping business.
And for the Teekay group overall with that operator, we're now available to take questions.
Thank you.
As a reminder, if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off July youre sticking out of reach our equipment.
Again that is star 1 to ask a question, we'll pause for just a moment to allow everyone an opportunity the signal.
Our first question comes from Sandy Burns with Stifel.
Hi, good morning, everyone.
Just wanted to on a follow up a little bit just on the wind down of.
The the F T O F dsos so for Vornado.
When you mentioned that the green recycled costs will be covered by a lump sum payment is that the 67 million you got last year of well you'll receive another payment to cover those future costs.
Hi, Sandy it's Vince here no. The the $67 million was already received last April April of 2020. So we will be receiving of separate amount. In addition to that when you.
The re deliveries of the unit back to US next year and that amount will cover the green recycling costs at that time.
Okay and then.
For the Hummingbird I guess, maybe you won't have a feel for this yet but when you eventually do get it back would there be any material costs associated with that vessel for <unk>.
Redeploy it or or or recycle it as such.
Hey, yes, we've touched on on the some of our earlier calls hummingbird as a smaller and the and younger of units, but the I think as we've all witnessed the redeployment of opportunities by a few of those are somewhat limited, but but it is a unit that theoretically could be redeployed the.
On the costs in connection with the decommissioning.
Is of much more limited the scope than what we've seen on the on both the especially of the band, but also even on the on the point of in field because it is the smaller unit and smallest of we have.
Some ngos that needs to be pulled up but then there's basically in say the save the sale of way ready condition. So it should be should be smaller than the than the other 2.
Right right, so maybe what I'm trying to get at is at the parent level.
Really now you're only cash obligations on the interest expense.
Corporate expenses.
Net debt you have up there there's really no other material obligations you need to have.
Well require casual liquidity or anything my thinking about that correctly.
That's correct yes.
Okay, great good job on all of that.
That's all I have.
Thank you.
And once again as a reminder, that the star 1 to ask a question.
That does.
For today's question and answer session. At this time I will turn the conference back to the company for any additional or closing remarks.
Well. Thank you for listening in today I'm sure that the many of you will be joining all told the company Kohl's that follows this call and we look forward to reporting back to you. The next quarter. Thank you.
Okay.
That does conclude today's conference. We thank you for your participation you may now disconnect.
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Okay.