HAMILTON, BERMUDA -- (MARKET WIRE) -- 05/14/08 -- Teekay Corporation (NYSE: TK) -
Highlights
- Generated cash flow from vessel operations of $184.8 million, up from $138.4 million in the prior quarter
- Reported first quarter net income of $15.2 million, or $0.21 per share (including specific items, predominantly unrealized losses relating to foreign exchange translation and interest rate swaps, which decreased net income by $45.6 million, or $0.62 per share)(1)
- Completed follow-on equity offering of Teekay LNG Partners L.P. in April 2008
- Repurchased 499,200 shares for $20.5 million
Teekay Corporation (Teekay or the Company) today reported net income of $15.2 million, or $0.21 per share, for the quarter ended March 31, 2008, compared to net income of $76.4 million, or $1.02 per share, for the quarter ended March 31, 2007. The results for the quarters ended March 31, 2008 and 2007 included a number of specific items (predominantly unrealized losses relating to foreign exchange translation and interest rate swaps) that had the net effect of decreasing net income by $45.6 million, or $0.62 per share, and by $7.4 million, or $0.10 per share, respectively, as detailed in Appendix A to this release. Net revenues(2) for the first quarter of 2008 increased to $567.7 million from $459.5 million for the same period in 2007, and income from vessel operations decreased to $110.9 million from $125.5 million.
Teekay LNG Partners Follow-on Equity Offering
On April 23, 2008, Teekay LNG Partners L.P. (Teekay LNG) completed a follow-on public offering of 5.0 million common units at a price of $28.75 per unit, for gross proceeds of $143.75 million. Subsequently, on May 8, 2008, the underwriters exercised 50 percent, or 375,000 common units, of their 30-day over-allotment option resulting in an additional $10.8 million in gross proceeds to Teekay LNG. The underwriters can exercise the remaining amount of their over-allotment option until May 23, 2008.
Concurrent with the public offering, Teekay acquired 1.74 million common units of Teekay LNG at the same public offering price for a total cost of $50.0 million. As a result of the above transactions, Teekay LNG has raised gross equity proceeds of $208.7 million (including the general partner's proportionate capital contribution), and Teekay's ownership of Teekay LNG has been reduced from 63.7 percent to 57.7 percent (including its 2 percent general partner interest).
The total net proceeds from the offering of approximately $202.5 million will be used to reduce amounts outstanding under Teekay LNG's revolving credit facilities which were, and will be used to fund the acquisitions of the Kenai and RasGas 3 LNG vessels.
Supplemental Financial Information
Appendix B to this release includes supplemental financial information for each of the Company's publicly-listed subsidiaries, Teekay LNG Partners L.P., Teekay Offshore Partners L.P., Teekay Tankers Ltd., Teekay Petrojarl ASA, and the remaining businesses (referred to as Teekay Corp. Standalone) and the consolidation adjustments required to reconcile to Teekay Corporation's consolidated balance sheet and statement of income as at and for the three months ended March 31, 2008.
(1) Please refer to Appendix A to this release for information about specific items affecting net income.
(2) 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 GAAP financial measure.
Operating Results
During the first quarter of 2008, fixed-rate businesses generated approximately 63 percent of the Company's cash flow from vessel operations compared to 65 percent in the first quarter of 2007.
The following table highlights certain financial information for Teekay's four main operating segments: the offshore segment, the fixed-rate tanker segment, the liquefied gas segment, and the spot tanker segment (please refer to the "Teekay Fleet" section of this release below and Appendix B for further details):
Three Months Ended March 31, 2008
---------------------------------------------
(unaudited)
Fixed-Rate Liquefied Spot
(in thousands of Offshore Tanker Gas Tanker
U.S. dollars) Segment Segment Segment Segment Total
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Net revenues 219,887 60,135 55,982 231,664 567,668
Vessel operating expenses 86,353 16,370 11,623 31,097 145,443
Time-charter hire expense 35,475 11,720 - 97,726 144,921
Depreciation & amortization 46,074 9,673 14,195 27,765 97,707
Cash flow from vessel
operations(i) 52,065 24,742 38,748 69,227 184,782
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Three Months Ended March 31, 2007
---------------------------------------------
(unaudited)
Fixed-Rate Liquefied Spot
(in thousands of Offshore Tanker Gas Tanker
U.S. dollars) Segment Segment Segment Segment Total
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Net revenues 220,149 44,029 37,472 157,806 459,456
Vessel operating expenses 62,714 11,690 6,458 16,579 97,441
Time-charter hire expense 41,317 3,837 - 53,347 98,501
Depreciation & amortization 45,722 8,468 10,794 14,279 79,263
Cash flow from vessel
operations(i) 67,128 24,026 25,815 64,264 181,233
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(i) Cash flow from vessel operations represents income from vessel
operations before depreciation and amortization expense and vessel
write-downs/(gain) loss on sale of vessels. 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.
Offshore Segment
The Company's offshore segment is comprised of shuttle tankers, floating storage and off-take (FSO) units, and floating production storage and offtake (FPSO) units.
Cash flow from vessel operations from the Company's offshore segment decreased to $52.1 million in the first quarter of 2008, compared to $67.1 million in the first quarter of 2007, primarily due to an increase in crewing expenses, the depreciation of the U.S. dollar, and higher than normal vessel repair costs and an associated increase in unscheduled off-hire days in the shuttle tanker fleet. This was partially offset by the transfer of an FSO unit, the Navion Saga, to the Offshore Segment in May 2007 upon its commencement of a three-year time-charter, and the delivery of two shuttle tankers upon their commencement of 13-year charters during 2007.
In February 2008, the Siri FPSO was delivered to Brazil and commenced a two-year charter on a milestone heavy crude oil production project for Petroleo Brasileiro S.A. (Petrobras). At that time the FPSO was formally named the Petrojarl Cidade De Rio Das Ostras. The FPSO completed all of its on-field testing, and began to earn its full charter-hire rate in April 2008.
Teekay today announced that it has offered to sell an additional 25 percent interest in Teekay Offshore Operating L.P. (OPCO) to Teekay Offshore. The terms of the offer have not yet been finalized and will be subject to the approval of Teekay Offshore's board of directors and Conflicts Committee. If Teekay Offshore accepts this offer, Teekay will still hold a 49 percent direct interest in OPCO.
Fixed-Rate Tanker Segment
The Company's fixed-rate tanker segment includes its conventional tankers, which are operating on period out-charters with an initial term of three or more years.
Cash flow from vessel operations from the Company's fixed-rate tanker segment increased to $24.7 million in the first quarter of 2008, compared to $24.0 million in the first quarter of 2007. This increase was primarily due to an increase in the size of the Company's fixed-rate tanker fleet, partially offset by an increase in vessel crewing costs.
Liquefied Gas Segment
The liquefied gas segment includes liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers.
The Company's cash flow from vessel operations from its LNG and LPG carriers during the first quarter of 2008 was $38.7 million compared to $25.8 million in the first quarter of 2007. This increase was primarily due to the acquisition of the two Kenai LNG carriers in December 2007, and the inclusion of the results of two of the three RasGas II LNG carriers for only a portion of the first quarter 2007, since these vessels delivered during that quarter.
The first of four RasGas 3 LNG carriers delivered in early May 2008 and the remaining vessels are scheduled to deliver during the second and third quarters of 2008. Teekay has previously agreed to sell its 40 percent interest in these vessels to its subsidiary, Teekay LNG.
Teekay announced today that it has agreed to take over the existing shipbuilding contracts for two advanced 12,000 cubic meter Multigas ships capable of carrying LNG, LPG and Ethylene from subsidiaries of IM Skaugen ASA (Skaugen) and Teekay LNG has agreed to acquire the vessels from Teekay upon their delivery. The vessels have a total cost of approximately $94 million and are expected to deliver in the first and second quarters of 2010 and will then immediately commence service on 15-year fixed-rate charters to Skaugen, collectively generating approximately $9.5 million per annum in operating cash flow.
Spot Tanker Segment
The Company's spot tanker segment includes its conventional tankers, which are operating on voyage and period out-charters with an initial term of less than three years.
Cash flow from vessel operations from the Company's spot tanker segment increased to $69.2 million for the first quarter of 2008, from $64.3 million for the first quarter of 2007, primarily due to an increase in the size of the Company's spot tanker fleet, partially offset by an increase in time-charter hire expense and an increase in vessel crewing costs.
On a net basis, fleet changes increased the total number of revenue days in the Company's spot tanker segment to 7,848 for the first quarter of 2008, compared to 5,118 for the first quarter of 2007. Revenue days represent the total number of vessel calendar days less off-hire associated with major repairs, drydockings, or mandated surveys.
During the first quarter of 2008, spot tanker freight rates strengthened from the previous quarter primarily driven by growing tanker demand, limited fleet growth, and increasing discrimination against single-hull tankers. Early in the second quarter of 2008, freight rates for crude tankers experienced a considerable counter seasonal increase and have thus far averaged above those experienced during the first quarter of 2008. The strength of the spot tanker markets is being driven primarily by higher volumes of crude imports into China (up approximately 15 percent from the prior year), which in turn is driving higher volumes of ton-mile intensive Atlantic to Pacific crude oil movements.
In its May 2008 report, the International Energy Agency (or IEA) estimated 2008 oil demand growth of 1.0 million barrels per day (mb/d), a 1.2 percent increase from 2007. Nearly all of the growth in global oil demand in 2008 is expected to originate from energy intensive developing economies which have so far been only marginally affected by the economic slowdown in the United States.
The trend of tanker sales for conversion to offshore units and dry bulk vessels continues to dampen tanker supply growth. In addition, record-high scrap steel prices have led to an increase in oil tankers being sold for demolition. The removal of these tankers should help keep tanker supply and demand finely-balanced during the remainder of 2008.
The following table highlights the operating performance of the Company's spot tanker segment measured in net revenues per revenue day or time-charter equivalent (TCE), and includes the effect of forward freight agreements (FFAs) which are entered into as hedges against a portion of the Company's exposure to spot market rates or for speculative purposes:
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Three Months Ended
March 31, December 31, March 31,
Spot Tanker Segment 2008 2007 2007
Suezmax Tanker Fleet ------------------------------------
Spot revenue days 553 524 242
Average spot rate(1) $ 46,670 $ 35,645 $ 50,860
Timer Charter revenue days 668 838 182
Average Time Charter rate(2)(3) $ 28,172 $ 30,204 $ 27,307
Aframax Tanker Fleet
Spot revenue days 3,708 3,407 2,678
Average spot rate(1) $ 36,253 $ 25,347 $ 38,006
Timer Charter revenue days 142 - -
Average Time Charter rate(2) $ 31,759 - -
Large/Medium-Size Product
Tanker Fleet
Spot revenue days 1,062 949 859
Average spot rate(1) $ 27,585 $ 21,761 $ 24,470
Timer Charter revenue days 813 828 261
Average Time Charter rate(2) $ 22,794 $ 22,759 $ 29,171
Small Product Tanker Fleet
Spot revenue days 902 900 896
Average spot rate(1) $ 13,745 $ 12,274 $ 16,017
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(1) Average spot rate includes short-term time-charters and fixed-rate
contracts of affreightment less than 1 year, and realized gains and
losses from FFAs less than 1 year.
(2) Average time charter rate includes short-term time charters and
fixed-rate contracts of affreightment between 1-3 years, and realized
gains and losses from synthetic time charters and FFAs between
1-3 years.
(3) Suezmax average time charter rate excludes the cost of spot
in-chartering vessels for COA cargoes.
Teekay Fleet
As at April 30, 2008, Teekay's fleet consisted of 200 vessels, including chartered-in vessels, and newbuildings on-order, but excluding vessels managed for third parties.
The following table summarizes the Teekay fleet as at April 30, 2008:
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Number of Vessels(1)
-----------------------------------------
Owned Chartered-in Newbuildings
Vessels Vessels /Conversions Total
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Offshore Segment
Shuttle Tankers(2) 28 12 4 44
Floating Storage & Offtake
("FSO") Units(3) 5 - - 5
Floating Production Storage &
Offtake ("FPSO") Units(4) 5 - - 5
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Total Offshore Segment 38 12 4 54
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Fixed-Rate Tanker Segment
Conventional Tankers(5) 17 4 21
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Total Fixed-Rate Tanker
Segment 17 4 21
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Liquefied Gas Segment
LNG Carriers(6) 9 - 10 19
LPG Carriers 1 - 3 4
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Total Liquefied Gas Segment 10 - 13 23
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Spot Tanker Segment
Suezmaxes(7) 6 5 10 21
Aframaxes(8) 21 26 - 47
Large/Medium Product Tankers 12 10 1 23
Small Product Tankers - 10 - 10
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Total Spot Tanker Segment 39 52 11 102
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Total 104 68 28 200
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(1) Excludes vessels managed on behalf of third parties.
(2) Includes six shuttle tankers in which the Company's ownership interest
is 50 percent.
(3) Includes one unit in which the Company's ownership interest is 89
percent.
(4) Includes four FPSOs owned by Teekay Petrojarl ASA, and one FPSO jointly
owned by Teekay and Teekay Petrojarl.
(5) Includes eight Suezmax tankers owned by Teekay LNG.
(6) Seven of the existing LNG vessels are owned by Teekay LNG. Teekay LNG
has agreed to acquire Teekay's 70 percent interest in two of the LNG
newbuildings and Teekay's 40 percent interest in four LNG newbuildings
upon delivery of the vessels. Teekay has offered Teekay LNG the
opportunity to acquire two of the existing LNG vessels.
(7) Includes two Suezmax tankers owned by Teekay Tankers.
(8) Includes nine Aframax tankers owned by Teekay Offshore and chartered to
Teekay and nine Aframaxes owned by Teekay Tankers.
Capital Expenditures and Liquidity
As of March 31, 2008, the Company's remaining capital commitments relating to its portion of newbuildings and conversions, were as follows:
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