Teekay Tankers Ltd. yesterday reported the Company’s results for the quarter ended March 31, 2021:

(1)These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP).
(2)Net debt is a non-GAAP financial measure and represents short-term, current and long-term debt and current and long-term obligations related to finance leases less cash and cash equivalents and restricted cash.
(3)Net debt to capitalization is a non-GAAP financial measure and represents net debt, as described in note (2) above, divided by the sum of net debt and equity. This measure is used by certain investors and management to evaluate the Company’s use of financial leverage.

First Quarter of 2021 Compared to Fourth Quarter of 2020

GAAP net loss and non-GAAP adjusted net loss for the first quarter of 2021 improved, compared to the fourth quarter of 2020, primarily due to higher average spot tanker rates and a lower number of scheduled drydockings during the first quarter of 2021. GAAP net loss for the fourth quarter of 2020 was negatively impacted by a one-time $18.1 million freight tax accrual adjustment, of which $10.5 million is related to 2020 and is included in non-GAAP adjusted net loss. In addition, GAAP net loss in the first quarter of 2021 included a $0.7 million write-down of an asset, while GAAP net loss in the fourth quarter of 2020 included a $24.3 million write-down of assets.

First Quarter of 2021 Compared to First Quarter of 2020

GAAP net loss and non-GAAP adjusted net loss for the first quarter of 2021, compared to the first quarter of 2020, were impacted primarily by lower average spot tanker rates in the first quarter of 2021 and the sale of five tankers during the first quarters of 2020 and 2021. These decreases were partially offset by lower vessel operating expenses and interest expense in the first quarter of 2021 compared to the same period of the prior year. In addition, GAAP net loss in the first quarter of 2021 included a $0.7 million write-down of an asset, while GAAP net income in the first quarter of 2020 included a $3.1 million loss and write-down on sale of assets.

CEO Commentary

“While improved relative to the fourth quarter of 2020, crude spot tanker rate weakness generally continued into the first quarter of 2021 due to ongoing OPEC+ production cuts resulting from reduced oil demand related to the COVID-19 pandemic, as well as the continued unwinding of floating storage,” commented Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer. “However, we did experience some pockets of strength in the mid-size crude tanker sector during the latter part of the first quarter as a result of weather-related disruptions and the short-lived Suez Canal blockage.”

“In the second quarter, the tanker market has thus far remained relatively soft, and with the continued impact of COVID-19, the near-term outlook remains uncertain. At the same time, we are seeing early positive indicators which point towards an anticipated tanker market recovery, including improvements in the global economy, a continued decline in global oil inventories, a planned increase in OPEC+ production, and positive tanker fleet supply fundamentals. We are already seeing a positive shift in crude tanker sentiment as evidenced by the recent strengthening of asset values.”

“Our strong financial position has enabled us to continue reducing our overall cost of capital on an opportunistic basis,” commented Mr. Mackay. “In March 2021, we declared additional purchase options for six vessels on higher-cost sale-leaseback financings for a total of $129 million, bringing our total of such purchase options exercised since November 2020 to eight, with the transactions expected to close in May and September 2021. We are currently negotiating terms sheets to refinance a portion of these vessels with lower-cost sale-leaseback financings with the remaining expected to be funded with our existing liquidity.”

Mr. Mackay added, “With a strong liquidity position, decreasing cost of capital, low balance sheet leverage, no significant debt maturities until 2024 and high operating leverage, we believe that Teekay Tankers is well-positioned to weather the current market challenges and benefit from an anticipated tanker market recovery.”

Summary of Recent Events

In March 2021, Teekay Tankers declared options to repurchase six Aframax vessels that are currently on long-term sale-leaseback financings for approximately $129 million, which are expected to close in September 2021. This is in addition to the declared purchase options on two Suezmax vessels that are currently on long-term sale-leaseback financings for approximately $57 million, which are expected to close in May 2021. The Company intends to fund these purchases with new long-term sale-leaseback financings and existing liquidity.

Operating Results

The following table highlights the operating performance of the Company’s time-charter vessels and spot vessels trading in revenue sharing arrangements (RSAs), voyage charters and full service lightering, in each case measured in net revenues(i) per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses:

(i) Net revenues is a non-GAAP financial measure. Please refer to “Definitions and Non-GAAP Financial Measures” for a definition of this term.
(ii) Revenue days are the total number of calendar days the Company’s vessels were in its possession during a period, less the total number of off-hire days during the period associated with major repairs, dry dockings or special or intermediate surveys. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when the vessel is available to earn revenue but is not employed, are included in revenue days.
(iii) Includes vessels trading in the Teekay Suezmax RSA, Teekay Suezmax Classic RSA and non-RSA voyage charters.
(iv) Includes Aframax vessels trading in the Teekay Aframax RSA, non-RSA voyage charters and full service lightering voyages.
(v) Includes LR2 vessels trading in the Teekay Aframax RSA, non-RSA voyage charters, and full service lightering voyages.

Second Quarter of 2021 Spot Tanker Performance Update

The following table summarizes Teekay Tankers’ TCE rates fixed to-date in the second quarter of 2021 for its spot-traded fleet only:

(1) Rates and percentage booked to-date include Aframax RSA, full service lightering (FSL) and non-RSA voyage charters for all Aframax vessels.
(2) Rates and percentage booked to-date include Aframax RSA, FSL and non-RSA voyage charters for all LR2 vessels, whether trading in the clean or dirty spot market.

Teekay Tankers’ Fleet

The following table summarizes the Company’s fleet as of May 1, 2021:

(i) Includes one Aframax tanker with a charter-in contract that is scheduled to expire in September 2021, with an option for the Company to extend for one additional year.
(ii) The Company’s ownership interest in this vessel is 50 percent.

Liquidity Update

As at March 31, 2021, the Company had total liquidity of $371.7 million (comprised of $87.6 million in cash and cash equivalents and $284.1 million in undrawn capacity from its credit facilities) compared to total liquidity of $372.6 million as at December 31, 2020.

Source: Teekay Tankers