Teekay Corp. Ltd. Q3 FY2024 earnings call

Streamlining Efforts

• Simplified group management and decision-making structure, with TNK's planned acquisition of Teekay Australia and Teekay Corporation transferring remaining management service companies to TNK.

Financial Moves

• Teekay Corp. returned $144 million to shareholders since early August, including $59 million in share buybacks at an average price of $8.56 per share and a $1 per share special cash dividend. Authorized a new $40 million share buyback plan. Purchased $50 million of TNK Class A shares.

Teekay Australia

• Asset-light business with ~$100M annual revenue, ~$10M annual EBITDA, serving Australian government on 11 vessels, with strong government and industry relations.

Tanker Market Outlook

• Spot tanker rates firming in Q4, supported by seasonally stronger oil demand, increase in crude exports, and geopolitical events in the Middle East. Fleet supply: New deliveries to increase but order book below long-term average, fleet aging with average age at highest since 2002.

Teekay Tankers: Third quarter adjusted net income was $63.5 million or $1.84 per share, adjusted EBITDA nearly $76 million, with spot rates in the low to mid-$30,000 per day. Teekay Australia has annual revenues over $100 million and average annual EBITDA of approximately $10 million. Teekay Corp. allocated up to $230 million of cash back into the business, including returning $144 million to shareholders since early August (via share buybacks and a special cash dividend) and purchasing $50 million of TNK Class A common shares, increasing ownership in TNK to 31% and 55% economically and voting-wise respectively.

Capital Allocation

• Allocated up to $230 million of cash back into the business, including returning capital to shareholders and purchasing TNK shares. ### Market Outlook
• Expect spot tanker rates to remain relatively firm through winter, but uncertain if they'll match last year's Q4. Optimistic about medium-term tanker market fundamentals due to positive demand (global oil consumption growth) and supply (modest order book, lack of shipyard capacity) dynamics, despite potential geopolitical volatility.

Geopolitical Risks

• Attacks on shipping in the Red Sea region causing tankers to divert, adding to voyage distances and tanker tonne-mile demand. Potential escalation in the Middle East could impact oil production and shipping, adding to market volatility. Shadow fleet of tankers servicing sanctioned trades adds to market volatility.

Q: Any remaining consolidation within Teekay Corp. structure into TNK? Plan for share structure?

A: The simplification is complete, with no remaining consolidation at Teekay Corp. The shareholder structure is a legacy but working well, with Teekay as a strong supportive sponsor to TNK.

Q: Australian business closing timeline and cost breakdown?

A: Aim to close the transaction by the end of 2024 (December 31). At Teekay Tankers, it's expected to show roughly $100 million of revenue and ~$90 million of OpEx.

Q: Tax on Australian business EBITDA?

A: The business is subject to 30% tax in Australia with some deductions.

Q: TNK's strategic priority?

A: Continue delivering value, focus on maximizing spot market exposure, evaluating fleet renewal, potential sales of older ships, purchases of younger ships, and chartering decisions.

Q: Dual listing and future consolidation?

A: Legacy ownership structure, but flexibility with two strong balance sheets. Focus is on creating value using in-house skills to service customers.

Q: Valuation of Australian asset sale?

A: Independent review done, valuation was middle of the road, with TNK Board and independent directors reviewing fairness.

Q: Time charter activity and cycle position?

A: Monitoring, comfortable with current spot exposure, but will consider time charters selectively as winter progresses, with liquidity currently quiet for time charters