Teekay Tankers Ltd. Q3 FY2024 earnings call

Structure Simplification - The Teekay Group has streamlined the organization, including TNK's planned acquisition of Teekay Australia and Teekay Corp transferring remaining management service companies to TNK. - Teekay Corp is allocating up to $230 million of its cash back into the business, including returning $144 million to shareholders, authorizing a new $40 million share buyback plan, and purchasing $50 million of TNK Class A common shares. ### Teekay Tankers Highlights - Third quarter earnings and free cash flow were strong with spot rates in the low to mid $30,000 per day. - Strategically dry docked 10 vessels in the weakest quarter to ensure fleet availability for winter market uplift. - Acquired Teekay Australia, which is an asset-light business with stable government contracts, $100 million+ revenues, and ~$10M annual EBITDA. ### Tanker Market Outlook - Spot tanker rates were historically firm in Q3, with seasonal downturn in Q3 compared to Q2 but firming in Q4. - Supported by seasonally stronger oil demand, increase in crude oil export volumes, and geopolitical events like Middle East shipping attacks causing tankers to divert. - Fleet supply: New tanker deliveries set to increase in 2025-2026, but order book still below long-term average; fleet aging with modest order book and lack of shipyard capacity until 2027.

Teekay Tankers' third quarter earnings and free cash flow remained strong. Adjusted net income was $63.5 million or $1.84 per share and adjusted EBITDA was nearly $76 million. Spot rates were in the low to mid $30,000 per day. Teekay Australia is an asset-light and CapEx-light services business with total revenues in excess of $100 million and an average annual EBITDA of approximately $10 million, contributing around 10% of the relevant revenue segment.

- The company plans to continue to deliver shareholder value through flexible capital allocation. - TNK is well positioned to continue to generate significant free cash flow and build equity value. - Fourth quarter performance is closely in line with where it stood at this point last year, and spot tanker rates are expected to remain relatively firm through the winter.

- Geopolitical events in the Middle East, such as ongoing attacks on shipping in the Red Sea region, causing tankers to divert and adding to voyage distances and market volatility. - Potential escalation of Middle East events could impact oil production and shipping, further destabilizing the region and adding to tanker market volatility.

Q: Is there anything else within the Teekay Corp structure that would need to be consolidated within the TNK? What's the plan regarding the ownership structure with 31% ownership and Class B shares?

A: The plan is that the current structure is simplified, with no remaining consolidation needed at Teekay Corp. Regarding the ownership structure, the legacy ownership structure is maintained as it has worked well, and there's no immediate plan to simplify to one class of shares but it's an option to consider in the future.

Q: Is any of the $10 million of EBITDA from the Australia business subject to tax?

A: The business is subject to tax in Australia at 30% and there are some deductions that can be taken.

Q: Why still have the dual listing and will we see further consolidation into that?

A: Teekay has a historical legacy ownership structure. The dual listing gives added flexibility with two strong balance sheets. There may be consideration of consolidation in the future, but for now, the current structure is beneficial.