Teekay Corporation Reports Second Quarter Results

Thursday, September 03, 2009 8:08 AM

HAMILTON, BERMUDA, Sep. 3, 2009 (Marketwire) -- Teekay Corporation (Teekay or the Company) (NYSE:TK) today reported an adjusted net loss attributable to stockholders of Teekay(1) of $21.8 million, or $0.30 per share, for the quarter ended June 30, 2009, compared to adjusted net income of $77.1 million, or $1.05 per share, for the same period of the prior year. Adjusted net income (loss) attributable to stockholders of Teekay excludes a number of specific items which had the net effect of increasing net income by $181.2 million (or $2.49 per share) for the three months ended June 30, 2009 and $106.3 million (or $1.45 per share) for the three months ended June 30, 2008, as detailed in Appendix A to this release. Including these items, the Company reported net income attributable to the stockholders of Teekay, on a GAAP basis, of $159.4 million(2), or $2.19 per share, for the quarter ended June 30, 2009, compared to net income attributable to the stockholders of Teekay, on a GAAP basis, of $183.4 million(2), or $2.50 per share, for the same period of the prior year. Net revenues(3) for the second quarter of 2009 were $469.5 million compared to $621.3 million for the same period of the prior year.

(1) Adjusted net income (loss) attributable to stockholders of Teekay is a non-GAAP financial measure. Please refer to Appendix A to this release for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP) and information about specific items affecting net income which are typically excluded by securities analysts in their published estimates of the Company's financial results.

(2) Effective January 1, 2009, Teekay adopted Statement of Financial Accounting Standards No. 160 (SFAS 160), "Non-controlling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51." SFAS 160 amended the accounting and reporting for non-controlling interest, which is now classified as a component of equity. SFAS 160 requires retrospective adoption of the presentation and disclosure requirements for existing non-controlling interests. All other requirements of SFAS 160 are applied prospectively.

(3) Net revenues represents revenues less voyage expenses. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company's web site at www.teekay.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable financial measure under United States GAAP.

For the six months ended June 30, 2009, the Company reported an adjusted net loss attributable to stockholders of Teekay of $10.9 million, or $0.15 per share, compared to adjusted net income attributable to stockholders of Teekay of $137.8 million, or $1.88 per share, for the same period of the prior year, excluding a number of specific items which had the net effect of increasing net income by $251.7 million (or $3.45 per share) and decreasing net income by $59.5 million (or $0.81 per share), respectively, as detailed in Appendix A to this release. Including these items, the Company reported net income attributable to the stockholders of Teekay, on a GAAP basis, of $240.9 million, or $3.30 per share, compared to net income attributable to the stockholders of Teekay, on a GAAP basis, of $78.3 million, or $1.07 per share, for the same period of the prior year. Net revenues for the six months ended June 30, 2009 were $995.4 million compared to $1.2 billion for the same period of the prior year.

On June 4, 2009, the Company declared a cash dividend on its common stock of $0.31625 per share for the quarter ended June 30, 2009. The cash dividend was paid on July 24, 2009, to all shareholders of record on July 10, 2009.

"Teekay benefited from its large portfolio of stable, fixed-rate business during the second quarter, allowing us to generate $130 million of cash flow from vessel operations during a quarter of weak spot tanker market rates," commented Bjorn Moller, Teekay Corporation's President and Chief Executive Officer. "The combination of our stable cash flows generated from fixed-rate offshore, liquefied gas and conventional tanker businesses, our more than $2 billion in consolidated liquidity and our favorable debt maturity profile contributes towards Teekay's financial strength."

Mr. Moller continued, "We remain focused on our key priorities which include reducing our exposure to the current weak spot tanker market, improving profitability through cost reductions and contract improvements and reducing leverage at Teekay Parent by executing on our strategy of selling assets to our daughter companies and third parties. Since the end of the first quarter, we have reduced our spot exposure through the redelivery of 12 spot traded in-charter vessels and the sale of four spot traded conventional tankers. We have begun to see significant results from our cost management initiatives through lower overhead and operating expenses in the second quarter, compared to the same period last year. In addition, we have now successfully completed follow-on equity offerings at each of our daughter companies this year raising a combined $238 million of equity capital used to finance dropdown acquisitions. We have recently offered the Petrojarl Varg FPSO to Teekay Offshore and, if accepted, this transaction will result in further significant de-leveraging of Teekay Parent's balance sheet, and will provide Teekay with further financial flexibility."

Mr. Moller added, "A key strength of our business model lies in our global project management activities and our ability to focus our attention on any given segment of our business where a new project may develop. Over the past decade, our successful project management business has seen us build our fixed-rate cash flow from vessel operations to over $550 million per year. Our ability to deliver value-added solutions to our customers gives us access to profitable, fixed-rate projects throughout the tanker cycle. An excellent example is our purchase this month of a modern product tanker against a specialized charter requirement. Upon completion of modification work, the vessel will commence a 10-year fixed-rate charter to Caltex Australia, a long-standing customer who outsourced its Australian marine operations to us in 1997."

Operating Results

The following tables highlight certain financial information for each of Teekay's four publicly-listed entities: Teekay Offshore Partners L.P. (Teekay Offshore) (NYSE:TOO), Teekay LNG Partners L.P. (Teekay LNG) (NYSE:TGP), Teekay Tankers Ltd. (Teekay Tankers) (NYSE:TNK) and Teekay, excluding results attributed to Teekay Offshore, Teekay LNG and Teekay Tankers, referred to herein as Teekay Parent. A brief description of each entity and an analysis of its respective financial results follows the tables below. Please also refer to the "Fleet List" section below and Appendix B to this release for further details.

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Three Months Ended June 30, 2009
(unaudited)
(in Teekay Teekay
thousands Offshore LNG Teekay Teekay
of U.S. Partners Partners Tankers Teekay Consolidation Corporation
dollars) LP LP Ltd. Parent Adjustments Consolidated
----------------------------------------------------------------------------

Net
revenues(1) 150,791 79,902 30,491 253,434 (45,070) 469,548
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Vessel
operating
expenses(1) 46,936 18,178 7,911 67,504 - 140,529
Time-charter
hire expense 29,144 - - 132,377 (45,070) 116,451
Depreciation
and
amortization 34,588 20,160 7,230 46,214 - 108,192
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Cash flow
from Vessel
operations
(2)(3) 58,262 52,911 18,694 (181) - 129,686
----------------------------------------------------------------------------
Net debt(4) 1,395,230 1,411,957 289,453 1,082,050 - 4,178,690
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(1) Commencing in 2009 and applied retroactively, the gains and losses
related to non-designated derivative instruments have been reclassified
to a separate line item in the Statements of Income and are no longer
included in the amounts above.
(2) Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense, vessel/goodwill
write-downs, gains or losses on the sale of vessels and unrealized gains
and losses relating to derivatives, but includes realized gains and
losses on the settlement of foreign currency forward contracts. Cash
flow from vessel operations is a non-GAAP financial measure used by
certain investors to measure the financial performance of shipping
companies. Please see the Company's web site at www.teekay.com for a
reconciliation of this non-GAAP measure as used in this release to the
most directly comparable GAAP financial measure.
(3) Excludes the cash flow from vessel operations relating to assets
acquired from Teekay Parent for the periods prior to their acquisition
by Teekay Offshore, Teekay LNG and Teekay Tankers, respectively, as
those results are included in the historical results for Teekay Parent.
(4) Net debt represents current and long-term debt less cash and, if
applicable, current and long-term restricted cash.

----------------------------------------------------------------------------
Three Months Ended June 30, 2008
(unaudited)
----------------------------------------------------------------------------
(in Teekay Teekay
thousands Offshore LNG Teekay Teekay
of U.S. Partners Partners Tankers Teekay Consolidation Corporation
dollars) LP LP Ltd. Parent Adjustments Consolidated
----------------------------------------------------------------------------

Net
revenues(1) 164,673 70,943 42,126 383,009 (39,434) 621,317
----------------------------------------------------------------------------

Vessel
operating
expenses(1) 45,768 20,792 8,059 86,325 - 160,944
Time-charter
hire expense 32,262 - - 149,874 (39,434) 142,702
Depreciation
and
amortization 36,447 18,872 6,837 44,544 - 106,700
----------------------------------------------------------------------------

Cash flow
from vessel
operations
(2)(3) 68,552 44,406 25,788 88,451 - 227,197
----------------------------------------------------------------------------
Net debt(4) 1,505,486 2,211,814 300,922 1,387,332 - 5,405,554
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Teekay Offshore Partners L.P.

Teekay Offshore is an international provider of marine transportation and storage services to the offshore oil industry. Through its 51 percent ownership interest in Teekay Offshore Operating L.P. (OPCO), Teekay Offshore operates a fleet of 33 shuttle tankers (including eight chartered-in vessels), four Floating Storage and Offtake (FSO) units, nine double-hull conventional oil tankers and two lightering vessels. Teekay Offshore also has direct ownership interests in two shuttle tankers and one FSO unit and has the right to participate in certain Floating Production, Storage and Offloading (FPSO) opportunities. As at June 30, 2009, Teekay Parent directly owned the remaining 49 percent interest in OPCO, as well as a 49.99 percent interest in Teekay Offshore (including the two percent General Partner interest).

Cash flow from vessel operations from Teekay Offshore decreased to $58.3 million in the second quarter of 2009, from $68.6 million in the same period of the prior year, primarily due to lower shuttle tanker utilization resulting from lower oil production and start-up delays at certain North Sea oil fields. In addition, during the second quarter of 2009, Teekay Offshore incurred $1.5 million in restructuring costs relating to the re-flagging of certain of its shuttle tankers. Teekay Offshore's operating expenses in the second quarter of 2009 declined from the previous quarter reflecting the re-flagging and other cost reduction initiatives.

On August 4, 2009, Teekay Offshore completed a follow-on equity offering of 7.475 million common units (including underwriters' overallotment option which was exercised in full), raising net proceeds of $104.3 million. Proceeds from the offering were used to repay amounts drawn under Teekay Offshore's revolving credit facilities and for general corporate purposes.

In late-August 2009, Teekay Offshore received a formal offer from Teekay Parent to acquire the FPSO unit, the Petrojarl Varg, which is currently being reviewed by the board of directors of Teekay Offshore's General Partner and its Conflicts Committee.

Teekay LNG Partners L.P.

Teekay LNG provides liquefied natural gas (LNG), liquefied petroleum gas (LPG) and crude oil marine transportation services under long-term, fixed-rate time-charter contracts with major energy and utility companies through its current fleet of fifteen LNG carriers, two LPG carriers and eight Suezmax crude oil tankers. In addition, Teekay LNG expects to take delivery of four newbuilding LPG carriers in late-2009 and 2010. Teekay Parent currently owns a 53 percent interest in Teekay LNG (including the two percent General Partner interest).

Cash flow from vessel operations from Teekay LNG during the second quarter of 2009 increased to $52.9 million from $44.4 million in the same period of the prior year. This increase was primarily due to lower operating expenses, the scheduled drydockings of two LNG carriers, one LPG carrier and two Suezmax vessels during the second quarter of 2008, the delivery of the first of five Skaugen LPG carriers in April 2009, and a decrease in general and administrative expenses.

In August 2009, Teekay LNG acquired Teekay Parent's 70 percent interest in two 155,000 cubic meter newbuilding LNG carriers (the Tangguh LNG Carriers). These vessels have commenced their 20 year time-charters to a consortium led by a subsidiary of BP plc to provide transportation services to the Tangguh LNG Project in Indonesia.

Teekay Tankers Ltd.

Teekay Tankers currently owns a fleet of nine double-hull Aframax tankers and three double-hull Suezmax tankers. Seven of the 12 vessels are currently employed on fixed-rate time charters mostly ranging from one to three years in duration. Teekay Parent currently owns a 42.2 percent interest in Teekay Tankers (including 100 percent of the Class B common shares).

Cash flow from vessel operations from Teekay Tankers decreased to $18.7 million in the second quarter of 2009, from $25.8 million in the same period of the prior year, primarily due to a decrease in spot tanker rates in the second quarter of 2009 compared to the same period of the prior year.

On June 24, 2009, Teekay Tankers completed a follow-on equity offering of 7.0 million Class A common shares, raising net proceeds of $65.8 million. Proceeds from the offering were used fund the acquisition of one Suezmax tanker from Teekay Parent for $57.0 million with the remaining proceeds used to reduce amounts drawn under Teekay Tankers' revolving credit facility.

Teekay Parent

In addition to its equity ownership interests in Teekay Offshore, Teekay LNG and Teekay Tankers, Teekay Corporation directly owns a substantial fleet of vessels. As at August 31, 2009, this included 28 conventional tankers (including two Suezmax newbuildings under construction), five FPSOs, a 33 percent interest in four newbuilding LNG carriers under construction, four Aframax shuttle tanker newbuildings under construction, and one FSO unit currently under conversion. In addition, as at August 31, 2009, Teekay Parent had 41 chartered-in conventional tankers (including 10 vessels owned by its subsidiaries) and two chartered-in LNG carriers owned by Teekay LNG.

Cash flow from vessel operations from Teekay Parent decreased by $88.6 million in the second quarter of 2009 compared to the same period of the prior year, primarily due to a decrease in average spot tanker rates in the second quarter of 2009, partially offset by higher cash flow from the FPSO fleet and lower operating and overhead expenses as a result of cost reduction initiatives.

Tanker Market

Despite a short-lived increase late in the quarter, average spot rates for crude oil tankers declined in the second quarter of 2009 reflecting a reduction in global oil demand coupled with growth in the world tanker fleet. The market was also adversely affected by seasonal factors such as refinery maintenance and the start of North Sea oil field maintenance. The removal from active trading of a number of vessels used for floating oil storage continues to be a factor in temporarily reducing available tanker supply.

Crude tanker rates have declined further in the third quarter of 2009 to date, to levels approaching operating cost breakeven, due to weak market fundamentals. Production outages in Nigeria caused by militant attacks on oil infrastructure and weaker refining fundamentals have put further downward pressure on tanker rates.

As of August 12, 2009, the International Energy Agency (IEA) projected global oil demand of 83.9 million barrels per day (mb/d) in 2009, a 2.4 mb/d (or 2.7 percent) decline from 2008. The IEA forecasts a recovery in global oil demand during 2010 to 85.3 mb/d, an increase of 1.3 mb/d (or 1.6 percent) over 2009 based on a projected global GDP growth rate of 1.9 percent for the year.

The world tanker fleet grew by approximately 4.9 percent in the first half of 2009, a generally higher level of fleet growth than in recent years.

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