Teekay Tankers Ltd. today announced the company’s results for the three months ended June 30, 2022
Second quarter of 2022 versus first quarter of 2022
GAAP net income and non-GAAP adjusted net income for the second quarter of 2022 increased compared to the first quarter of 2022, primarily due to higher average oil tanker spot rates in the second quarter of 2022. In addition, GAAP net income in the second quarter of 2022 included a $1.2 million gain on the sale of two vessels, compared to a net charge of $0.4 million related to asset impairments recorded as part of the GAAP net loss in the first quarter of 2022.
Second quarter of 2022 versus second quarter of 2021
GAAP net income and adjusted non-GAAP net income for the second quarter of 2022 increased compared to the same prior year period, primarily due to higher average tanker prices and a lower number of dry-docking scheduled in the second quarter of 2022, partially offset by the sale of five vessels between the two periods. In addition, second quarter 2022 GAAP net income included a $1.2 million gain on the sale of two vessels, while second quarter 2021 GAAP net loss included an $86.7 million impairment of vessels. .
“The large-scale impacts of Russia’s invasion of Ukraine are reshaping global energy markets. As Europe reduces imports of Russian crude oil and replaces them with longer cargoes from across the Atlantic basin or through the Suez Canal, and Russian cargoes increasingly flow to China and India, the improvement in tanker ton-mile demand was significant. These changes look likely to continue as sanctions come into effect that will formalize import restrictions that have so far been largely voluntary. Given both draft and package size restrictions in many of the worst-affected ports, this new ton-mile demand has disproportionately benefited mid-size tankers, driving rates up to their highest level in two years. Meanwhile, tanker supply fundamentals are as favorable as they have been at any time in the past 25 years, with net supply growth in mid-sized segments expected to be negligible. or negative by 2025, and low capacity for additional orders that may deliver during that time.
“Following the oil tanker downturn that persisted through much of the COVID-19 era, we are pleased to have returned to profitability in the second quarter as our high operating leverage and cash market exposure led to a rapid capture of charter rates which have now reached several times their prior year levels.The strength in spot rates continued into the third quarter, where year-to-date rates are higher than in the second quarter. While we expect continued volatility, the strong fundamentals we saw building before the pandemic finally appear to be reasserting themselves in a way that supports a firmer oil market. At the same time, uncertainties remain regarding the possibility of further COVID-19-related lockdowns in China, the ongoing war in Ukraine and concerns about a possible recession. s use our increased cash flow to continue to strengthen our balance sheet, prioritizing our long-term financial strength and our ability to act opportunistically in the future, which we believe will maximize value for shareholders.
Summary of recent events
In July 2022, the company reached an agreement to sell an Aframax vessel built in 2005 for $24.8 million. The sale of the vessel is expected to be finalized during the third quarter of 2022, at which time the Company will record a gain on sale of approximately $8.0 million.
The company chartered an Aframax vessel for $23,000 per day for a period of 2 years. The ship was delivered at the end of July 2022.
Oil tanker spot rates rose in the second quarter of 2022 to their highest level in two years. The increase is largely due to the continued disruption to trade routes and longer travel distances resulting from Russia’s invasion of Ukraine, coupled with underlying positive supply and demand fundamentals. demand for tankers.
The increased demand for tanker ton-miles due to Russia’s invasion of Ukraine has proven to be long-lasting. Short-haul exports of Russian crude oil to Europe have declined significantly in recent months, with Russian crude oil increasingly being diverted to destinations east of Suez, particularly India and China, which increases the demand for tanker ton-miles. In turn, Europe must replace Russian barrels at close range with imports from other regions, including the United States Gulf, Latin America, West Africa and the Middle East, which which also leads to growth in ton-miles. These changes mainly benefit medium-sized sectors due to the charge and discharge regions involved. Furthermore, these changes look set to last a long time, with the EU planning to phase out all Russian crude oil imports by sea by the end of 2022.
Looking ahead, an increase in oil demand in the medium term is expected, with the IEA predicting growth of 1.7 million barrels per day (mb/d) in 2022 and further growth of 2.1 mb/d. j in 2023, despite high oil prices and concerns. on the health of the global economy. Much of this growth is expected to be driven by non-OECD countries and particularly China. While strict shutdowns have capped Chinese demand for oil for much of the past year, some restrictions have been eased in recent weeks, with any significant or sustained move in that direction likely requiring an increase in oil imports into China. Global oil supply is also rising, driven by both OPEC and non-OPEC sources, with the IEA predicting a 1.8mb/d increase in global oil production between June and December 2022. However, it remains to be seen how Russian oil supply and exports will be impacted once the EU embargo on imports of Russian crude oil comes into effect at the end of 2022. In China, are the main areas of uncertainty in the months to come.
The supply outlook for the tanker fleet continues to be very positive, due to historically low levels of new tanker orders, a rapidly shrinking order book and an aging tanker fleet. Only 2.1 million tonnes deadweight (mdwt) of tanker orders were placed in the first half of 2022, which is the lowest total over a 6-month period since Clarksons began reporting data in 1996. Additionally, most of these orders have been for smaller tankers, with no VLCC or Suezmax orders placed since June 2021 and only a small number of Aframaxes ordered. The company expects the level of new tanker orders to remain weak in the short term due to high prices for new builds, lack of storage space until the end of 2025 due to record levels of orders of container ships and LNG carriers, and the continued uncertainty regarding vessels. Technology. With a shrinking order book and an aging fleet, the company expects minimal global fleet growth in 2023 and negative fleet growth in 2024 and 2025 as retirements are expected to outweigh new ones. deliveries in the world fleet.
In summary, the past few months have seen significantly higher average spot rates year over year and a return of tanker market volatility due to changing business patterns and longer travel distances. in medium-sized sectors; the Company expects this volatility to continue in the near term. Looking further ahead, tanker supply and demand fundamentals currently look very positive, with the best fleet supply fundamentals seen in over 25 years and steady demand growth as global consumption oil continues to rebound from the COVID-19 pandemic.
The following table shows the operational performance of the Company’s time charter vessels and spot vessels negotiating revenue sharing agreements (RSAs), voyage charters and full service reliefs, in each case measured in net revenues( 1) per day of revenue, or time- Charter equivalent rates (TCE), before bunker charges excluding rental:
Q3 2022 Spot Tanker Performance Update
The following table summarizes Teekay Tankers’ recorded TCE rates to date in Q3 2022 for its cash-only fleet:
Teekay Tanker Fleet
The following table summarizes the Company’s fleet as of August 1, 2022:
As of June 30, 2022, the Company had total liquidity of $228.4 million (composed of $66.3 million in cash and cash equivalents and $162.1 million in undrawn capacity on its credit facilities ), compared to total cash of $178.2 million as of March 31, 2022. Pro forma for the sale of an Aframax vessel to be completed in the third quarter of 2022, the company’s total cash would have been $249.3 million as of June 30, 2022.
Source: Teekay Tankers