Picture supply: The Motley Idiot.
Thursday, Oct. 30, 2025, at 11 a.m. ET
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President and Chief Govt Officer — Kenneth Hvid
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Chief Monetary Officer — Brody Speers
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Vice President, Finance and Company Growth — Brian Hamilton
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Director of Analysis — Christian Waldegrave
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Kenneth Hvid, Teekay Company and Teekay Tankers President and CEO to start. Thanks, Ed. Hiya, everybody, and thanks very a lot for becoming a member of us immediately for the Teekay Group’s third quarter 2025 Earnings Convention Name. Becoming a member of me on the decision immediately for the Q and A session is Brody Speers, Teekay Company’s and Teekay Tankers’ CFO, Brian Hamilton, our VP Finance and Company Growth, and Christian Waldegrave, our Director of Analysis. Beginning on slide three of the presentation, we’ll cowl Teekay Tankers’ current highlights.
Teekay Tankers reported the perfect quarter within the final twelve months with GAAP web earnings of $92.1 million or $2.66 per share and adjusted web earnings of $53.3 million or $1.54 per share within the third quarter. Third quarter spot charges remained counter-seasonally robust with charges meaningfully above the historic common for the third quarter. Additional, with spot charges nicely above our free money circulate breakeven ranges, the corporate generated roughly $69 million in free money circulate from operations and on the finish of the quarter, had a money place of $775 million with no debt. Teekay Tankers continues to execute on its fleet technique fleet renewal technique delivering on its beforehand introduced transactions.
For the reason that starting of the third quarter, we have now accomplished the acquisition of 1 Martin Suezmax and the remaining 50% possession curiosity in a VLCC from our three way partnership accomplice. As well as, the corporate accomplished the gross sales of 5 of 4 Suezmax tankers, which delivered to their new homeowners within the third and fourth quarters. The mixed gross proceeds of the 5 vessel gross sales and 100 and is $158.5 million, and we count on an estimated e-book acquire on gross sales of roughly $47.5 million recorded within the third and fourth quarters.
As well as, the power within the spot market supported the time constitution market and the corporate opportunistically out-chartered one Suezmax vessel for $42,500 per day and two Aframax-sized vessels for a mean time constitution fee of $33,275 per day for durations starting from twelve to eighteen months. Two of those charters have already commenced with the remaining constitution set to begin in November. Taking a look at our fourth quarter up to now, we have now secured spot charges of $63,745, $500, and $35,200 per day for our VLCC, Suezmax, and Aframax LR2 fleets, respectively, roughly 47 to 54% of spot days booked.
We consider the tanker market is well-positioned for a agency winter market which we’ll focus on in additional element within the subsequent few slides. Lastly, Teekay Tankers has declared its common fastened dividend of $0.25 per share. Shifting to slip 4, we have a look at current developments within the spot tanker market. Spot tanker charges improved throughout 2025 with charges on a par with a powerful degree seen over the previous three years and nicely above long-term common ranges. A rise in world oil provide as a result of unwinding of OPEC plus provide cuts and rising manufacturing within the Atlantic Basin led to a pointy improve in world seaborne crude commerce volumes throughout September to the best degree since early 2020.
Charges had been additional boosted by a rise in long-haul crude oil actions between the Atlantic and Pacific basins, significantly within the Suezmax and VLCC segments. As proven by the chart on the precise of the slide, spot tanker charges have strengthened additional at first of the fourth quarter, with charges in October close to the highest of the five-year vary. Turning to Slide 5, we have a look at the expansion in world crude oil manufacturing and exports, which is underpinning the current power in spot tanker charges. International oil manufacturing has been rising all year long attributable to will increase from each OPEC plus and non-OPEC plus sources.
The OPEC plus group started unwinding a number of the voluntary provide cuts, which had been in place since 2023 on the April, by September had accomplished the unwind of the primary spherical of cuts totaling 2.2 million barrels per day. The group is now within the technique of unwinding the following spherical of cuts totaling 1.65 million barrels per day at a fee of 137,000 barrels per day each month over the following 12 months. Oil manufacturing has additionally been boosted by new provide coming on-line from non-OPEC plus nations, significantly in America the place new offshore manufacturing in Brazil and Guyana is within the technique of ramping up.
The rise has been significantly evident throughout the third quarter with provide rising by 1.6 million barrels per day in comparison with Q2 ranges. The online results of the upper oil manufacturing has been a pointy improve in seaborne crude oil commerce volumes, most notably since September as extra Center East crude has been made obtainable for export following the top of the summer season direct crude burn season. Actually, if we exclude the interval in early 2020, Saudi Arabia and Russia flooded the market with oil, throughout the transient oil value battle world seaborne crude oil commerce volumes are at present at a document excessive.
With OPEC plus anticipated to proceed to unwind provide cuts within the coming months, we count on world seaborne commerce volumes to extend additional throughout the fourth quarter. Turning to Slide six, we have a look at a number of the near-term oil market fundamentals, which we consider will help spot tanker demand within the coming months. One of many penalties of upper oil manufacturing this 12 months has been a lower in crude oil costs. As proven by the chart on the left of the slide, for nations exterior The US, the weaker US {dollars} has led to a fair steeper drop in actual oil costs.
Decrease oil costs are typically optimistic for tankers because it spurs oil consumption and lowers bunker gasoline costs, which is our largest working price. Low oil costs additionally stimulate demand for stockpiling, each for business and strategic functions. On condition that world oil inventories are beneath long-term common ranges, we consider that there’s sufficient spare capability to soak up a chronic interval of extra oil provide. Ought to world oil provide development proceed to exceed demand within the coming months, as many analysts predict? Then we might even see a contango oil value construction emerge which might additional stimulate tanker demand. Turning to Slide seven.
We have a look at the geopolitical occasions, that are creating commerce inefficiencies and including additional volatility to what’s already a agency underlying tanker market. In current weeks, we have now seen quite a lot of bulletins close to sanctions and port charges, that are serving to create uncertainty and inefficiency within the tanker market. It’s optimistic that The U. S.-China commerce settlement introduced earlier immediately features a postponement of the introduced port and delivery charges by at the least a 12 months.
Because it pertains to sanctions, we have now seen an escalation of efforts to curb Russia’s earnings from oil gross sales by way of a sequence of recent sanctions by each the EU and The US most notably the current actions to sanction Rosneft and 50% of Russian oil manufacturing and exports. Whereas this can be a fast-evolving state of affairs, it’s reported that some refiners in India and China are backing off from Russian imports and trying to various suppliers in The Center East, and Atlantic Basin.
That is optimistic for the tanker market as these volumes will must be transported by way of the fleet of compliant tankers reasonably than the fleet of shadow tankers, which at present transport nearly all of Russian crude oil to India and China. We consider that these components coupled with the robust crude oil commerce volumes described earlier, in addition to regular winter seasonal components will assist drive a agency spot tanker market within the coming months. Turning to Slide eight. We evaluate the important thing drivers for the medium-term outlook.
International oil demand is projected to extend by 1.1 million barrels per day in 2026 as per the typical forecast from the three main oil companies, which is consistent with common development degree because the finish of the COVID pandemic. International oil provide can be set to rise with extra attributable to come on-line from non-OPEC nations. It stays to be seen how OPEC will reply ought to oil inventories proceed to fill and oil costs come underneath additional strain. Nevertheless, we consider that there’s nonetheless loads of room for inventories to construct in 2026 significantly in China, the place the federal government is reportedly trying so as to add 169 million barrels of recent strategic storage by the top of the 12 months.
The fleet provide facet continues to look balanced the order e-book dimension steady in current months at round 16% of the prevailing fleet. A continued lag of tanker scrapping implies that the fleet continues to age with the typical age of the worldwide tanker fleet now at its highest level because the Nineteen Nineties. Within the midsized tanker fleet, 344 vessels or 20% of the entire fleet is now aged twenty years or older. Most of that are sanctioned vessels engaged in shadow trades. We consider that these older tankers is not going to return to traditional buying and selling even within the occasion that sanctions are lifted.
Whereas the medium-term tanker market outlook seems nicely balanced, there are a selection of geopolitical uncertainties, which might affect the course of the tanker market relying on how they unfold. These embrace the result of the battle in Ukraine and the destiny of the shadow fleet serving Russian commerce. Developments in The Center East, and disruptions to Purple Sea transits. and OPEC plus manufacturing coverage. The affect of tariffs and commerce obstacles on the worldwide economic system, Turning to slip 9, we spotlight Teekay Tankers’ worth proposition. First, our working leverage stays important and the corporate is well-positioned to generate substantial money flows in almost any tanker market.
With the three new out charters and no debt we have now lowered our fleet’s free money circulate breakeven from $13,000 per day to $11,300 per day. With this low free money circulate breakeven, each $5,000 per day improve in spot charges above the edge produces $1.66 per share of annual free money circulate or almost 3% on a free money circulate yield foundation. Second, Teekay Tankers has a powerful stability sheet with no debt and a $775 million money place which offers capability for disciplined accretive fleet development. Third, we proceed to return capital to shareholders in a disciplined method by our quarterly dividend. And lastly, the corporate’s efficiency is underpinned by our built-in platform.
We consider our in-house business and technical administration is a aggressive benefit. Mixed with our fifty years of working expertise within the tanker trade, we offer superior service to our prospects and transparency by the worth chain which drives shareholder returns. In abstract, the corporate’s technique during the last a number of years has been to maximise shareholder worth by our publicity to the robust spot market. This 12 months, we started taking measured motion to resume our fleet by making incremental investments in additional trendy vessels which on the similar time whereas on the similar time promoting a few of our oldest tonnage.
As we glance forward, our best-in-class working platform and powerful monetary footing positions the corporate nicely to proceed renewing our fleet incomes money circulate and constructing intrinsic worth. With that, operator, we at the moment are obtainable to take questions.
Operator: Thanks. If you’re dialed in by way of the phone and want to ask a query, please sign by urgent star 1 in your phone keypad. If you’re utilizing a speakerphone, please ensure that your mute perform is turned off to permit your sign to achieve our gear. Once more, press star 1 to ask a query. We are going to go first to Omar Nokta with Jefferies.
Omar Mostafa Nokta: Thanks. Hello, Kenneth. Thanks for the replace. Simply wished to ask possibly I had a few questions, however possibly first, simply in the marketplace and sort of the place issues sit proper now. Clearly, issues have gotten a lot stronger. After we assume I believe a number of occasions once we form of speak about or take into consideration rising OPEC manufacturing, assume loads about, say, VLCCs definitely, these charges have been shot in the direction of, you recognize, previous $100,000 a day. However we’re additionally seeing some actual power within the Suezmax and Aframax segments, that are you recognize, your bread and butter.
Are you able to simply discuss a bit bit about how these segments possibly work together with one another or possibly transfer collectively, and what’s actually been driving a number of the power we have now seen within the mid-sized segments right here not too long ago? Yeah. Thanks. Thanks, Omar.
Kenneth Hvid: You might be completely proper. I imply, I believe once we have a look at this 12 months, I believe the second half of the 12 months has positively been one going from power to power, and I might argue possibly even stronger than most of us anticipated. What we have now seen, simply during the last week, actually, is that power simply continues to select up. So the week is ending stronger, each within the VLCC, the Suezmax, and the Aframax segments in addition to the LR2s, proper? So it’s actually transferring up in all the classes.
And, in case you look again during the last, nicely, since April 2022, what we had was that we had a interval the place the Aframax completely outperformed all sectors as you recognize. And I believe what we have now sort of reverted to is extra of the standard dynamics the place the most important ships paved the way. They pull up the Suezmaxes and that pull up the Aframaxes. And, underlying that, in fact, is that we have now a really robust product commerce as nicely that’s taking place. So all the pieces is de facto working in all the completely different segments the place possibly it’s extra a matter of within the final three years, the Aframaxes had been actually the outliers as a result of they actually all the pieces.
However now we’re sort of again to do you say can be the conventional dynamics in a powerful tanker market the place all the pieces is balanced. And I believe what we’re seeing now could be that we have now, as we are saying, a document variety of barrels which are being transported on the water. After all, most of those barrels in a standard sense at all times goes on essentially the most environment friendly vessels, that are VLCCs. However when there’s this a lot oil and the sort of provide, then it simply pulls up the entire market. And that’s, I believe, in all simplicity what we’re seeing right here.
Omar Mostafa Nokta: Yeah. Yeah. Thanks for that. Useful shade.
Jonathan Chappell: And I assume possibly simply sort of excited about you recognize, the place Teekay stands. You recognize, clearly, you guys have been in a really robust monetary place for the previous a number of quarters, maybe a number of years. Money is constructing. And, you recognize, you have got reiterated, you recognize, a number of occasions, be affected person, be affected person, which makes an entire lot of sense. Given all of the unknowns. As we sort of take into consideration the place you’re headed, I believe it was final quarter or possibly quarter earlier than you had talked, you recognize, when it got here time to possibly reinvest or add extra publicity, you had been sort of trying to scale extra maybe into the MR section, into product?
Is that also the case in case you sort of take into consideration the place you stand in case you wished to deploy extra capital or extra web capital? Would you wish to go into merchandise extra deeply, or do you’re feeling you’d wish to both scale up into the VLCCs or maybe possibly simply keep inside your you recognize, your again utilizing the time period bread and butter, however the Suezmax, Aframax section. Yeah. That could be a nice query. I imply, simply to be very clear, our core companies is totally the medium-sized tankers and we continually search for the place there’s the place we are able to discover incremental worth each in our core, but in addition the adjoining sectors.
I believe once we had this name virtually a 12 months in the past, we talked concerning the MR sector, which regarded fascinating on the time relative to a number of the different sectors. I believe as we’re sitting right here immediately, we’re one 12 months additional down the street right here. And taking a look at how we have now renewed the fleet or have taken motion on a few of our older tankers and began to resume our core fleet. Our focus is, our primary precedence proper now could be investing in our core franchise.
I might not say that there by no means can be a chance in MR, comparatively talking now, we truly assume that the higher worth for us is to allocate capital in the direction of our core segments, that are Aframaxes and Suezmaxes.
Omar Mostafa Nokta: Okay. That could be very clear.
Jonathan Chappell: I respect that. Thanks. I’ll cross it again.
Omar Mostafa Nokta: Thanks. Bye.
Operator: We are going to go subsequent to Ken Hoexter with Financial institution of America.
Ken Hoexter: Hello. That is Tim Chang on for Ken Hoexter. Thanks for taking my query. To sort of prolong on Omar’s query, you have got bought 11 vessels 12 months up to now and whereas gross sales sort of outpaced purchases up to now, you talked about final quarter, you’re specializing in accelerating tempo of fleet renewal going ahead. So do you’re feeling you’re near the minimal fleet dimension now? And do you maybe purpose for purchases of recent core AFRAs and SUAs to offset any following gross sales?
Kenneth Hvid: I believe the quick reply is sure.
Ken Hoexter: Bought it. And noticed your new time constitution out settlement with three vessels locking in very favorable charges. Do you count on to have interaction in additional of these given elevated charges close to time period in 2026?
Kenneth Hvid: Yeah. That could be a good query. I imply, we have a look at each deal opportunistically. There may be at all times a timing, and we take into account what’s the outlook. And it is vitally dynamic. We expect it’s prudent whenever you see robust time constitution charges to log it in, particularly whether it is with good prospects. So it’s an ongoing dialogue. It isn’t a state of technique that we have to have a x share of our fleet. We’re pleased to have spot publicity. However these ranges, we all know in historic phrases, are very robust ranges.
So once we can log it in and as we identified in our ready remarks, each time we do this, we decrease our free money circulate breakeven even additional. In order you’ll be able to see, it’s a very, very robust place that we’re in, when it comes to producing money flows within the spot market. However on the similar time, even when we did one other couple of those at these ranges, in fact, our free money breakeven would go down even additional. So it’s, we have a look at it as a portfolio and on a deal by deal foundation. Thanks. Respect all of the perception.
Ken Hoexter: Thanks for the questions.
Operator: We are going to go subsequent to Ford Macdall with Clarkson Securities. Thanks.
Ford Macdall: Hello, guys. My first query is on this new nicely, China US deal. I assume the Aframax is underneath the earlier, USTR regulation was not exempt. Proper? So now with the US TR port charges, being suspended for a 12 months, does that enhance the Aframax alternatives for you guys? Perhaps they are going to you recognize, in fact, the exports out of The US Gulf but in addition possibly lightering alternatives. Any shade you have got that? On that, please?
Kenneth Hvid: Yeah. Clearly, the deal could be very, very new. I believe the place we took, first one, the USTR, got here in and not too long ago additionally the China port charges is that with the best way that our fleet consists, we wouldn’t have large publicity to both sector. And due to this fact, I believe the result of this settlement, I believe, general is optimistic for the trade. However I don’t assume it has any important affect on Teekay per se in the identical method because the port charges didn’t have a major affect on us both. So general, I believe it’s a optimistic.
Because it was clearly driving some inefficiencies, which I don’t assume serves the trade nicely over the long run. However, however allow us to see. I imply, to date, it’s only one 12 months we notice that has been agreed.
Ford Macdall: Yeah. Positive. Is sensible. Subsequent query. I assume, extra typically talking, you have got clearly confirmed, I assume, that you’ve got excessive whole shareholder returns, proper, TSR? Which does probably not require a excessive payout mannequin. So you recognize, how assured are you that the inventory market would you recognize, respect that strategy immediately. And you recognize, given that there’s nonetheless a slight low cost in a 12 months, you what may shut the remaining valuation hole on your view?
Kenneth Hvid: Yeah. I believe, over the previous seven years, we have now been very, very clear on that we first give attention to worth earlier than we give attention to valuation. And valuation follows. And I believe to your level, I believe that’s what we’re pleased to see that’s truly being acknowledged by the market. So once we have a look at it, by a five-year lens, you’re completely proper. I believe that mannequin is true. An organization ought to at all times give attention to worth creation, and that’s what we’re targeted on right here.
I believe it’s in any enterprise and delivery, it’s about that we proceed to have a powerful stability sheet that we are able to act, at occasions once we see good shopping for alternatives, that we are able to act once we see good promoting alternatives, and that we have now a powerful working platform with low money circulate breakeven. And that’s the lucky place that we, after a few years of arduous work, have put Teekay again in. And working with that mannequin delivers worth daily. And we predict we’re in a really robust place to proceed to construct intrinsic worth and we basically consider that can at all times be acknowledged by the markets finally.
Ford Macdall: Yeah. I agree. Thanks very a lot.
Kenneth Hvid: Thanks for the questions.
Operator: Thanks. With no further questions holding, I’ll now flip the convention again to the corporate for any further or closing remarks.
Kenneth Hvid: Thanks for listening into our name immediately. We look ahead to reporting again to you subsequent 12 months. Okay. Thanks.
Operator: Thanks. Girls and gents, that can conclude immediately’s name. We thanks on your participation. Chances are you’ll disconnect presently.
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Teekay (TK) Q3 2025 Earnings Name Transcript was initially revealed by The Motley Idiot