Teekay Corporation Reports Fourth Quarter and Annual 2020 Results

February 25, 2021

Highlights

• GAAP net loss attributable to shareholders of Teekay of $19.4 million, or $0.19 per share, and adjusted net income attributable to shareholders of Teekay⁽¹⁾ of $2.8 million, or $0.03 per share, in the fourth quarter of 2020 (excluding items listed in Appendix A to this release).
• Total adjusted EBITDA⁽¹⁾ of $201.1 million in the fourth quarter of 2020.
• Fiscal year 2020 adjusted net income attributable to shareholders of Teekay⁽¹⁾ significantly improved to $83 million, or $0.82 per share, and total adjusted EBITDA increased to $1.1 billion, up over 14 percent from fiscal year 2019.
• Reduced consolidated net debt by $887.8 million⁽³⁾ in 2020; and total consolidated liquidity increased to $1.0 billion as of December 31, 2020.
• Teekay LNG expects to increase its common unit distributions by 15 percent to $1.15 per common unit on an annualized basis, commencing with the first quarter’s distribution to be paid in May 2021; and secured a fixed-rate charter for the 52-percent owned Methane Spirit to early-2023, resulting in its LNG fleet now 97 percent fixed for 2021 and 89 percent fixed for 2022.
• Teekay Tankers declared options to purchase two vessels currently under long-term sale-leaseback financings; and entered into a seven-year (plus options) in-charter agreement for an eco-Aframax tanker newbuilding, which is expected to deliver in the fourth quarter of 2022.

HAMILTON, Bermuda, Feb. 25, 2021 (GLOBE NEWSWIRE) — Teekay Corporation (Teekay or the Company) (NYSE:TK) today reported results for the fourth quarter and year ended December 31, 2020. These results include the Company’s two publicly-listed consolidated subsidiaries, Teekay LNG Partners L.P. (Teekay LNG) (NYSE:TGP) and Teekay Tankers Ltd. (Teekay Tankers) (NYSE:TNK) (collectively, the Daughter Entities), and all remaining subsidiaries and equity-accounted investments. Teekay, together with its subsidiaries other than the Daughter Entities, is referred to in this release as Teekay Parent. Please refer to the fourth quarter and annual 2020 earnings releases of Teekay LNG and Teekay Tankers, which are available on Teekay’s website at www.teekay.com, for additional information on their respective results.

Financial Summary

CEO Commentary

“In the fourth quarter of 2020, we recorded another consolidated adjusted profit with Teekay Parent and Teekay LNG reporting stronger adjusted results, while Teekay Tankers’ results reflected the recent weakness in the tanker market,” commented Kenneth Hvid, Teekay’s President and CEO. “Despite an unprecedented year marked by continuous volatility across energy markets, our gas business reported its highest ever adjusted net income in 2020, supported by the stable cash flows from its diversified portfolio of long-term contracts, and our tanker business reported its best year ever from a free cash flow perspective, as its spot exposure enabled it to benefit from an extraordinary surge of demand for tankers in the first half of 2020. In 2020, we reported consolidated adjusted net income of $83 million, or $0.82 per share, compared to the prior year’s adjusted net loss of $19 million, or $0.19 per share, and we increased our total adjusted EBITDA to $1.1 billion, up nearly 15 percent over the prior year.”

“We also continued to prioritize balance sheet strength and made significant progress in that effort,” continued Mr. Hvid. “In 2020, we reduced our consolidated net debt by approximately $890 million⁽¹⁾, or over 20 percent, and increased our consolidated total liquidity position to $1.0 billion as of year end.”

Mr. Hvid added, “Teekay LNG announced today that it plans to increase its common unit distributions by 15 percent, to $1.15 per common unit per annum, commencing with the first quarter’s distribution to be paid in May 2021. This increase will add to Teekay Parent’s free cash flows and represents the third consecutive year of double-digit increases in Teekay LNG’s distribution to common unitholders. Importantly, given Teekay LNG’s strong earnings and industry-leading backlog of long-term contracts, we believe the increased distribution is well-covered, which allows Teekay LNG to provide an attractive distribution to investors while continuing to delever its balance sheet.”

Mr. Hvid concluded, “All of the accomplishments during the past year would not have been possible without the dedication and perseverance of all our seafarers and onshore colleagues as we have so far successfully navigated through the unique challenges of the COVID-19 pandemic.”

Summary of Results

Teekay Corporation Consolidated

The Company’s consolidated results during the fourth quarter of 2020 decreased compared to the same period of the prior year, primarily due to lower earnings from Teekay Tankers as a result of lower average spot tanker rates and a higher number of scheduled drydockings during the fourth quarter of 2020, as well as the cessation of production of the Petrojarl Banff (Banff) FPSO unit in June 2020 due to the decommissioning of the Banff oil field. These decreases were partially offset by higher earnings from Teekay LNG due to the delivery of newbuildings and lower interest expense across Teekay due to both debt reduction over the past year and lower interest rates.

In addition, consolidated GAAP net loss during the fourth quarter of 2020, compared to the same period of the prior year, was impacted by an increase in asset write-downs and an increase in freight tax accruals, including adjustments relating to prior periods (as discussed in the Summary Results for Daughter Entities section).

Teekay Parent

Total Teekay Parent Free Cash Flow⁽¹⁾ was $0.4 million during the fourth quarter of 2020, compared to $4.9 million for the same period of the prior year, primarily due to the decommissioning of the Banff oil field beginning in June 2020 and the associated decommissioning costs incurred during the fourth quarter of 2020, as well as lower cash flows from third-party management services. These items were partially offset by higher distributions received from Teekay LNG as a result of Teekay LNG’s 32 percent increase in its quarterly cash distributions commencing in May 2020 and the newly-issued Teekay LNG common units Teekay Parent received as consideration for the Teekay LNG incentive distribution rights (IDR) transaction completed in May 2020, the elimination of the operating losses on the Foinaven FPSO unit as a result of the commencement of the new bareboat contract in the first quarter of 2020, and lower interest and corporate general and administrative expenses in the fourth quarter of 2020.

Please refer to Appendix D of this release for additional information about Teekay Parent’s Free Cash Flow⁽¹⁾.

Summary Results of Daughter Entities

Teekay LNG

Teekay LNG’s GAAP net income, adjusted net income⁽¹⁾ and total adjusted EBITDA⁽¹⁾ for the fourth quarter of 2020, compared to the same quarter of the prior year, were positively impacted by the delivery of LNG carrier newbuildings, the commencement of terminal use payments for the 30 percent-owned Bahrain LNG Terminal in one of Teekay LNG’s joint ventures and higher liquefied petroleum gas (LPG) rates. These increases were partially offset by more scheduled drydockings during the fourth quarter of 2020, lower charter rates earned by certain LNG carriers and, in addition, the increases in Teekay LNG’s non-GAAP adjusted net income⁽¹⁾ were partially offset by the sales of two LNG carriers in January 2020. Teekay LNG’s GAAP net income and adjusted net income⁽¹⁾ were further positively impacted by lower net interest expense in the fourth quarter of 2020 primarily as a result of debt repayments over the past year.

In addition, compared to the same period of the prior year, Teekay LNG’s GAAP net income in the fourth quarter of 2020 was negatively impacted by asset write-downs relating to four wholly-owned multi-gas carriers for $6 million and four 50 percent-owned LPG carriers for $17 million in the fourth quarter of 2020, a $14.3 million gain recognized in the fourth quarter of 2019 upon the derecognition of two LNG carriers as they were reclassified as sales-type leases, and lower unrealized gains on non-designated derivative instruments in the fourth quarter of 2020 compared to the fourth quarter of 2019.

Please refer to Teekay LNG’s fourth quarter 2020 earnings release for additional information on the financial results for this entity.

Teekay Tankers

Teekay Tankers’ GAAP net loss, adjusted net loss⁽¹⁾ and total adjusted EBITDA⁽¹⁾ for the fourth quarter of 2020, compared to the fourth quarter of 2019, were negatively impacted primarily by lower average spot tanker rates and a higher number of scheduled drydockings during the fourth quarter of 2020, as well as the sale of four Suezmax tankers during December 2019 and the first quarter of 2020 and the sale of the non-US portion of the ship-to-ship support services and LNG terminal management business in the second quarter of 2020. These decreases were partially offset by lower vessel operating expenses and interest expense in the fourth quarter of 2020, compared to the same period of the prior year. GAAP net loss for the fourth quarter of 2020 was also negatively impacted by an $18.1 million freight tax accrual adjustment, of which $10.5 million relates to 2020 and is included in non-GAAP adjusted net loss. In addition, Teekay Tankers’ GAAP net loss in the fourth quarter of 2020 reflects an $18.7 million increase in write-down of assets compared to the fourth quarter of 2019.

Crude spot tanker rate weakness persisted into the fourth quarter of 2020 as a result of OPEC+ production cuts related to reduced oil demand during the COVID-19 pandemic, as well as the return of ships to the global spot trading fleet from the unwinding of floating storage. Teekay Tankers was able to partially mitigate the impact of these weaker spot rates by employing 20 percent of its fleet on fixed-rate charters during the fourth quarter of 2020 at an average rate of $35,700 per day. The weakness in spot tanker rates has continued into the first quarter of 2021, with rates for Suezmax tankers and Aframax / LR2 tankers so far averaging slightly above levels reported in the fourth quarter of 2020.   Tanker demand is expected to improve later in 2021 as vaccination programs are implemented worldwide, at which time the OPEC+ group is expected to return oil supply to the market. Low tanker fleet growth should further help facilitate an improvement in the tanker market, particularly if tanker scrapping increases over the coming months.

Please refer to Teekay Tankers’ fourth quarter 2020 earnings release for additional information on the financial results for this entity.

Summary of Recent Events

Teekay Parent

Since reporting earnings in mid-November 2020, Teekay Parent has repurchased $5.0 million in principal amount of its existing 9.25 percent Secured Senior Notes for total consideration of $4.8 million at an average all-in price of 95.00. To-date, Teekay Parent has repurchased $12.8 million in principal amount of its existing 5 percent Convertible Senior Notes for total consideration of $10.5 million at an average all-in price of 81.55, and $6.6 million in principal amount of its existing 9.25 percent Secured Senior Notes for total consideration of $6.2 million at an average all-in price of 94.33.

Teekay LNG

In October 2020, the charterer of the 52 percent-owned LNG carrier, Marib Spirit, exercised its options to extend the current charter by 14 months at a higher charter rate, extending the vessel’s charter coverage to early-2022.

In December 2020, Teekay LNG’s 52 percent-owned joint venture with Marubeni Corporation (the MALT Joint Venture) secured a two-year, fixed-rate charter contract, with a one-year option, for the Methane Spirit, which is expected to commence after its current charter contract ends in March 2021.

In December 2020, Teekay LNG’s 50 percent-owned joint venture with Exmar NV (the Exmar LPG Joint Venture) successfully refinanced its $254 million revolving credit facility and term loan by entering into a new revolving credit facility in the amount of $310 million maturing in December 2023.

On February 8, 2021, Teekay LNG’s 70 percent-owned joint venture with PT Berlian Laju Tanker (the Tangguh Joint Venture), refinanced its $191.5 million term loan which was scheduled to mature in 2021, by entering into a new $191.5 million term loan maturing in February 2026.

Teekay Tankers

In November 2020, Teekay Tankers declared options to purchase two of its Suezmax vessels that are currently on long-term sale-leaseback financings for approximately $57 million, with expected delivery to Teekay Tankers in May 2021. Teekay Tankers intends to fund the purchase price with existing liquidity and potentially a new long-term debt facility.

In December 2020, Teekay Tankers entered into a seven-year in-charter agreement (plus extension and purchase options) for one eco-Aframax newbuilding vessel at an attractive rate of $18,700 per day, with expected delivery in late-2022.

In February 2021, Teekay Tankers entered into an agreement to sell two unencumbered 2008-built Aframax tankers for total gross proceeds of $32 million, with expected delivery to the buyer in March 2021.

Liquidity

As at December 31, 2020, Teekay Parent had total liquidity of approximately $173.4 million (consisting of $44.8 million of cash and cash equivalents, and $128.6 million of undrawn capacity from a revolving credit facility). On a consolidated basis, as at December 31 2020, Teekay had consolidated total liquidity of approximately $1.0 billion (consisting of $348.8 million of cash and cash equivalents and $658.8 million of undrawn capacity from its credit facilities).

Conference Call

The Company plans to host a conference call on Thursday, February 25, 2021 at 11:00 a.m. (ET) to discuss its results for the fourth quarter and year ended December 31, 2020. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:

• By dialing (866) 248-8441 or (647) 792-1240, if outside North America, and quoting conference ID code 9287182.
  
  
• By accessing the webcast, which will be available on Teekay’s website at www.teekay.com (the archive will remain on the website for a period of one year).

An accompanying Fourth Quarter and Annual 2020 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.

About Teekay

Teekay is a leading provider of international crude oil and gas marine transportation services. Teekay provides these services primarily through its directly-owned fleet and its controlling ownership interests in Teekay LNG Partners L.P. (NYSE:TGP), one of the world’s largest independent owners and operators of LNG carriers, and Teekay Tankers Ltd. (NYSE:TNK), one of the world’s largest owners and operators of mid-sized crude tankers. The consolidated Teekay entities manage and operate total assets under management of approximately $9 billion, comprised of approximately 135 liquefied gas, offshore, and conventional tanker assets. With offices in 10 countries and approximately 5,350 seagoing and shore-based employees, Teekay provides a comprehensive set of marine services to the world’s leading oil and gas companies.

Teekay’s common stock is listed on the New York Stock Exchange where it trades under the symbol “TK”.

For Investor Relations enquiries contact:
Ryan Hamilton
Tel: +1 (604) 609-2963
Website:   www.teekay.com

Definitions and Non-GAAP Financial Measures

This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission (SEC). These non-GAAP financial measures, which include Adjusted Net Income (Loss) Attributable to Shareholders of Teekay, Teekay Parent Free Cash Flow, Net Interest Expense, Adjusted Equity Income and Adjusted EBITDA, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings across companies, and therefore may not be comparable to similar measures presented by other companies. The Company believes that certain investors use this information to evaluate the Company’s financial performance, as does management.

Non-GAAP Financial Measures

Total Adjusted EBITDA represents net (loss) income before interest, taxes, depreciation and amortization, and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include foreign currency exchange gains and losses, any write-downs and/or gains and losses on sale of operating assets, adjustments for direct financing and sales-type leases to a cash basis, amortization of in-process revenue contracts, unrealized gains and losses on derivative instruments, credit loss provision adjustments, write-downs related to equity-accounted investments, our share of the above items in non-consolidated joint ventures which are accounted for using the equity method of accounting, and other income or loss. Total Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Company’s performance, views these gains or losses as an element of interest expense and realized gains or losses on interest rate swaps resulting from amendments or terminations of the underlying instruments.

Consolidated Adjusted EBITDA represents Adjusted EBITDA from vessels that are consolidated on the Company’s financial statements. Adjusted EBITDA from Equity-Accounted Vessels represents the Company’s proportionate share of Adjusted EBITDA from its equity-accounted vessels. The Company does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entity in which the Company holds the equity-accounted investments or distributed to the Company and other owners. In addition, the Company does not control the timing of any such distributions to the Company and other owners. Total Adjusted EBITDA represents Consolidated Adjusted EBITDA plus Adjusted EBITDA from Equity-Accounted Joint Ventures. Adjusted EBITDA is a non-GAAP financial measure used by certain investors and management to measure the operational performance of companies. Please refer to Appendices C and E of this release for reconciliations of Adjusted EBITDA to net (loss) income and equity income (loss), respectively, which are the most directly comparable GAAP measures reflected in the Company’s consolidated financial statements.

Adjusted Net Income (Loss) Attributable to Shareholders of Teekay excludes items of income or loss from GAAP net (loss) income that are typically excluded by securities analysts in their published estimates of the Company’s financial results. The Company believes that certain investors use this information to evaluate the Company’s financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net (loss) income, and refer to footnote (6) of the statements of (loss) income for a reconciliation of adjusted equity income to equity income (loss), the most directly comparable GAAP measure reflected in the Company’s consolidated financial statements.

Teekay Parent Financial Measures

Teekay Parent Adjusted EBITDA represents the sum of distributions or dividends (including payments-in-kind) relating to a given quarter (but received by Teekay Parent in the following quarter) as a result of ownership interests in its consolidated publicly-traded subsidiaries (Teekay LNG and Teekay Tankers), Adjusted EBITDA attributed to Teekay Parent’s directly-owned and chartered-in assets, and Teekay Parent’s corporate general and administrative expenditures for the given quarter.

Teekay Parent Free Cash Flow represents Teekay Parent Adjusted EBITDA, plus upfront cash receivable in respect of a sales-type lease, less Teekay Parent’s net interest expense and, commencing in the second quarter of 2020, asset retirement costs incurred for the given quarter. Net Interest Expense includes interest expense (excluding non-cash accretion and the amortization of prepaid loan costs), interest income and realized losses on interest rate swaps. Please refer to Appendices B, C, D and E of this release for further details and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures reflected in the Company’s consolidated financial statements.

Teekay Corporation
Summary Consolidated Statements of (Loss) Income
(in thousands of U.S. dollars, except share and per share data)

Teekay Corporation
Summary Consolidated Balance Sheets
(in thousands of U.S. dollars)

Teekay Corporation
Summary Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)

Teekay Corporation
Appendix A – Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income
(in thousands of U.S. dollars, except per share data)

Teekay Corporation
Appendix A – Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income (Loss)
(in thousands of U.S. dollars, except per share data)

Teekay Corporation
Appendix B – Supplemental Financial Information
Summary Statement of Income (Loss) for the Three Months Ended December 31, 2020  
(in thousands of U.S. dollars)
(unaudited)

Teekay Corporation
Appendix B – Supplemental Financial Information
Summary Statement of Income (loss) for the Year Ended December 31, 2020  
(in thousands of U.S. dollars)
(unaudited)

Teekay Corporation
Appendix C – Supplemental Financial Information
Teekay Parent Summary Operating Results
For the Three Months Ended December 31, 2020
(in thousands of U.S. dollars)
(unaudited)

Teekay Corporation
Appendix D – Reconciliation of Non-GAAP Financial Measures
Teekay Parent Free Cash Flow
(in thousands of U.S. dollars, except share and per share data)

Teekay Corporation
Non-GAAP Financial Reconciliations

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Consolidated
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Consolidated
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Equity-Accounted Vessels
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Equity-Accounted Vessels
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Teekay Parent
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Teekay Parent
(in thousands of U.S. dollars)

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Net Interest Expense – Teekay Parent
(in thousands of U.S. dollars)

Forward Looking Statements

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements, among other things, regarding: the impact of COVID-19, market volatility and related global events on the Company’s business and financial results, including the impact and timing of coronavirus vaccination programs; estimated fluctuations in global oil demand and supply levels, including anticipated future fluctuations in global oil inventories and the timing thereof; forecasts of worldwide tanker fleet growth or contraction and vessel scrapping; the future outlook of the tanker market; fixed charter coverage for Teekay LNG’s fleet for 2021 and 2022; the expected increase in Teekay LNG’s common unit distribution commencing in the first quarter of 2021 (and the coverage of such increased distribution payments), as well as the effect thereof on Teekay Parent’s free cash flows and on Teekay LNG’s delevering plans and investor returns; the timing of the delivery of the Teekay Tankers’ newbuilding subject to a new long-term in-charter agreement; Teekay Tankers’ plans to potentially finance, and the timing of closing, the re-purchase of sale-leaseback vessels; the financial impact and timing of closing additional vessel sales; continued receipt of terminal use payments in respect of the Bahrain LNG regasification terminal; and the timing of commencement of new charter contracts.

The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: market or counterparty reaction to changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; changes in the demand for oil, refined products, LNG or LPG; changes in trading patterns significantly affecting overall vessel tonnage requirements; greater or less than anticipated levels of vessel newbuilding orders and deliveries and greater or less than anticipated rates of vessel scrapping; changes in global oil prices or tanker rates; OPEC+ and non-OPEC production and supply levels; the duration and extent of the COVID-19 pandemic and any resulting effects on the markets in which the Company operates; the impact of the pandemic on the Company’s ability to maintain safe and efficient operations; the impact and timing of coronavirus vaccination programs; issues with vessel operations; higher than expected costs and expenses, off-hire days or dry-docking requirements (both scheduled and unscheduled); higher than expected costs and/or delays associated with the remediation of the Banff field or the decommission/recycling of the Banff FPSO unit; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations, including IMO 2030; the potential for early termination of long-term contracts of existing vessels; changes in borrowing costs or equity valuations; declaration by Teekay LNG’s board of directors of common unit distributions; potential lack of cash flow for Teekay LNG to continue paying distributions on its common units and other securities; available cash to reduce financial leverage at Teekay Parent, Teekay LNG and Teekay Tankers; the impact of geopolitical tensions and changes in global economic conditions; the ability to partially recover severance costs from the termination of the contract for an FSO unit based in Australia; and other factors discussed in Teekay’s filings from time to time with the SEC, including its Annual Report on Form 20-F for the fiscal year ended December 31, 2019. Teekay expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Teekay’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.