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Operator: Please standby. We are about to begin. Welcome to the Teekay Group Fourth Quarter 2024 Earnings Results Conference. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question and answer session. At that time, if you have a question, participants will be asked to press star one to register a question. For assistance during the call, please press star zero on your touch-tone phone. As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead. Before we begin, I would like to direct all participants to our website.

Ed: At www.teekay.com, you will find a copy of the Teekay Group’s Fourth Quarter and Annual 2024 Earnings Presentation. Kenneth will review this presentation during today’s conference call. Please allow me to remind you that our discussions today can include forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Teekay Corporation and Teekay Tankers Fourth Quarter and Annual 2024 Earnings Releases, and the Teekay Group Earnings Presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation’s and Teekay Tankers’ President and CEO, to begin.

Kenneth Hvid: Hello, everyone, and thank you very much for joining us today for the Teekay Group’s Fourth Quarter and Annual 2024 Earnings Conference Call. Joining me on the call today for the Q&A session is Brody Speers, Teekay Corporation’s and Teekay Tanker’s CFO, Ryan Hamilton, our VP of Finance and Corporate Development, and Christian Waldegrave, our Director of Research. Starting on slide three of the press presentation, we will cover Teekay Tankers’ recent highlights. Teekay Tankers reported adjusted net income of $52 million or $1.50 per share for the fourth quarter, and for the full year 2024, adjusted net income of $355 million or $10.31 per share. Despite softer than expected spot rates towards the end of the year, the company still generated $69 million in free cash flow in the fourth quarter and $415 million for the year.

In the last few weeks, as part of our opportunistic approach to ongoing fleet management, we sold two 2009-built Suezmaxes and one 2006-built LR2 for a combined $96 million. Two of these vessels have already been delivered to their buyers while the third is expected to be delivered by mid-March upon completion of its current voyage. Including the previously announced two vessels we sold during Q4, we’ve sold a total of five 2005 to 2009 build vessels, for combined proceeds of $160 million resulting in expected book gains on sale of nearly $60 million. Further, I’m pleased to report that just today, we lifted Supix and signed an MOA to acquire a Martin LR2 tanker which we expect to close in the second quarter. These sales and purchases are part of our ongoing fleet management and fleet renewal plan, where we naturally sell older vessels and acquire more modern tonnage over time when the opportunity is right.

In addition, we have now completed C and K’s acquisition of the Teekay Australia business and the transfer of all the remaining management services companies not previously owned by CNK. These transactions transform Teekay Tankers into a fully integrated shipping company and the sole operating platform within the Teekay Group. We also made a passive investment in Ardmore Shipping Corporation where we now own 5.1% of the company. Historically, Teekay has had investments in adjacent sectors to our medium-sized crude tanker business, including some exposure to the MR sector in the past. We believe that this investment represents good value in the product sector. Looking at our first quarter to date spot rates, our rates booked to date are slightly below our fourth quarter levels but remain volatile and trending upwards based on the latest Clarkson Support.

Spot rates, although these rates are down from historical highs from 2023 and 2024, current rates are well above our fleet’s free cash flow breakeven levels, meaning Teekay Tankers can generate substantial free cash flow and earnings in the current market environment. We will discuss the drivers of the market in subsequent slides. Lastly, Teekay Tankers declared this quarterly fixed dividend of $0.25 per share payable in March. For the full year, we have paid $3 per share in dividends. Moving to slide four, look at recent developments in the spot market. We’ve seen Chinese automating the latter part of the year weighed on the VLCC market, in turn had a dampening effect on Suezmax and Aframax spot rates. What seasonal weather delays failed to give any uplift on to the tanker market, during the winter months.

Rates were still above long-term average levels and well above TNK’s pre-cash flow breakeven of approximately $14,300 per day. Average Q1 to date spot tanker rates are slightly below fourth quarter levels but have been trending upwards in recent weeks. Imposition of additional US sanctions on 153 tankers servicing the Russian oil trade has increased rate volatility, particularly in the larger crude tanker asset classes. Replacement shipping capacity was booked for transporting oil to China and India. In addition, At Lansing? Based crude oil has been attractively priced when compared to Middle Eastern crude in recent weeks, which has opened the avatars for the long haul movement of oil, from the Atlantic basin to Asia. This has been positive for ton mile demand in the near term, particularly for VLCC and Suezmax tankers.

Turning to slide five. Look at some of the geopolitical events that are currently unfolding which seems to change day by day and there are likely more questions and answers on how things will progress over the course of this year. As highlighted by the slide, there are an unusually large number of factors this year could influence the direction of the tanker market. I won’t go into every single point in detail, but it’s worth highlighting three of the key factors which we believe could impact the tanker market. Depending on how they unfold in the coming weeks and months. Firstly, the red highlights the current conflicts in Ukraine and the Middle East, Starting with the war in Ukraine, the situation has become extremely dynamic in recent weeks.

While we do not know how events will unfold, or continue to unfold in the future, We do know that there could be wide-ranging consequences for both tankers on mild demand and the future of the shadow fleet ships? That are currently servicing Russian oil exports, should a peace agreement be reached. In the meantime, we can envision scenarios whereby sanctions against Russia are either tightened or loosened depending on how discussions between the various parties develop. For example, we understand that the EU is planning a new round of sanctions next week. Which will include another seventy-three ships being added to the sanctions list. These sanctions could further impact the ability to export oil evidenced by the last round of sanctions in January where logistical constraints meant that India and China had to source replacement barrels from the Middle East and Atlantic basin on non-sanctioned vessels to make up for the shortfall in Russian supply.

In the Middle East, the recent ceasefire between Israel and Hamas has led to the Houthi group in Yemen pledging to stop attacks on shipping. This may eventually result in the resumption of tanker transit through the Red Sea region which depending on how things unfold could impact seaborne trade patterns and reduce tanker ton mile demand. However, the situation is fragile. For the time being, we expect that owners like Teekay, and CargoInterest will continue to stay away from the region until there’s more certainty around the safety of crews, vessels, and cargoes. Secondly, the yellow highlights the impact on of sanctions on crude oil exports from Russia, Iran and Venezuela as well as the fleet of ships servicing them have already chuffed on the situation with regards to Russia But another key development this year is the return of the United States maximum pressure campaign on Iran in a bid to reduce Iranian oil exports to zero.

In 2024, Iranian crude oil exports averaged 1.5 million barrels per day, majority of which went to China. Tahoe sanctions on Iranian crude oil exports could therefore lead China to import oil from other sources via the compliant fleet, which would be positive for tanker demand. Finally, the blue highlights the potential impact of tariffs on oil trade flows. In early February, the US announced 25% tariffs on imports from Mexico and Canada with a lower 10% tariff on Canadian energy. Though the implementation of these tariffs was suspended for 30 days, should these tariffs come into force, we could see Canada and Mexico looking to divert some of their crude exports away from the US to other regions. Subsets, Europe, and Asia, while the US refiners may have to find replacement barrels.

From further afield, both of which would be positive for tankers on mile per minute. Regarding Canadian exports, we know that their plans commence nighttime loading from the Trans Mountain pipeline terminal in Vancouver later this year. Which would allow the terminal to reach twenty-eight to thirty Apple Max Skyward per month compared to twenty-two to twenty-four at Prestige. It is difficult to predict 2025 impacts, but due political uncertainty and changes to seaborne oil trade, add ons usually increase tanker market volatility and supply chain inefficiencies. Turning to slide six. Look at the underlying tanker demand and supply factors, which we believe continue to support a balanced market, notwithstanding the geopolitical events that are just tough stuff.

Starting with tango demand drivers, global oil consumption is projected to grow by 1.3 million barrels per day in 2025, Virtually, all of this demand growth is being driven by non-OECD Not obviously countries led by Asia. Global oil supply is also set to grow with production from non-OPEC plus countries set to increase by 1.5 million barrels per day in 2025. Led by United States, Brazil, Norway, Canada, and Keana. Given that these sources of oil are mostly in the Atlantic basin, while oil demand growth is focused on Asia, we expect an increase in long haul crude oil movements from west Two east. Which should boost tangled ton mile demand. The OPEC plus group could also provide additional seaborne transportation volumes should they start unwinding their voluntary oil supply cuts from April 2025 onwards.

Consistent with the most recently announced plan. Turning to fleet supply, midsize tanker fleet growth is expected to remain relatively low in the medium term. As shown by the chart on the bottom right of the slide, the current size of the tanker order book is relatively similar to the fleet of older tankers turning eight twenties during the same time period. With three hundred and seven midsized tankers currently on order for delivery, through 2028, compared with three hundred and twelve existing midsized tankers that will turn twenty over the same time frame. In addition, there are three hundred and one midsized tankers, which are already over the age of twenty. The majority of which operate as part of the shadow fleet, servicing sanctioned trains.

And which are facing increased scrutiny from US and European authorities. In sum, assuming no scrapping, we could have over six hundred midsize tankers or approximately thirty percent of the fleet. Over the age of twenty years old in three years’ time, which is unprecedented And for comparison, at the end of 2021, there were around one hundred and fifteen midsized tankers over the age of twenty. This illustrates the scale of the excess fleet supply that could be phased out should trade normalize. While it is difficult to predict what will ultimately happen with the shadow fleet, And it is uncertain when we may see an uptick in vessel recycling. We believe that with a manageable order book, a lag of available shipyard capacity until 2028 and tanker fleet which is currently the oldest in well over twenty years tanker fleet growth will remain at low levels over the next Three.

Yes. In sum, while there are a wide range of potential outcomes from the various current issues impacting global trade security, and energy, we we remain encouraged by the underlying tanker supply and demand fundamentals which we believe point towards a balanced tanker market over the medium term. Turning to slide seven, we highlight how Teekay Tangos is positioned for any market conditions. With our high operating leverage and a low free cash flow breakeven of $14,300 per day, We can generate significant cash flow in almost any market conditions. To emphasize, every $5,000 an increase in spot rates above our breakeven produces $2.15 per share of annual free cash flow or over 5% on a free cash flow yield basis. Combined with our strong balance sheet, we’ve built optionality and capacity to maximize shareholder value in any market outcome.

With that operator, we’re now available to take questions.

Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. Using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. A question, simply type your question in the ask a question box and click send. We’ll move to our first question from Jon Chappell with Evercore ISI.

Jonathan Chappell: Thank you. Good morning. Kenneth, you touched on it briefly in your introduction. But if you could just provide a little bit more insight on the Ardmore investment, Just seems a little curious given, you know, it’s a part of the tanker sector that Teekay hasn’t really been involved in much in the past. I get it cheap. So it’s TNK. And it’s also just, like, a lot less liquid than T and K as an investment’s concern. So maybe explain the thought process behind that and also how you looked at that investment vis a vis buying back your own shares.

Kenneth Hvid: Yeah. Thanks, Jim. Good morning. I’m expecting that question. I just wanted to emphasize that our number one product is obviously our core fleet. And our core business at Teekay with the fleet renewal, which I hope we get a chance to discuss as well. But the investment here is not a stray really away from what we’ve done in the past. As you will remember, always had some MR exposure We haven’t had it for some time. We looked around. The market was up for some time. When it took a big dip last year towards the end, we thought Ardmore was just very good value, and we made a very small investment as you can see, in that company relative to our asset base here. And it was always meant to be small. We just it was opportunistic, and there was a financial investment.

And then what happened was, as you saw last week, Ardmore announced that they bought back 4% of their shares, and that kind of falls into the 5.1%. But just wanna emphasize it’s a small investment. We think it’s good value, and it’s where you have a bit of investment here, I think it keeps us as focused on the adjacent sectors in a different manner.

Jonathan Chappell: Okay. And then in my follow-up, you know, you just announced this morning, the new LR2 that you’re purchasing that you’re gonna get in the second quarter. You’re still selling at a quicker pace than you’re replacing, which I think makes sense. In this asset value environment. So know, kind of a similar question. How do you think about the continued pace of renewal buying versus selling. And then also in the last two years in the first quarter, you’ve had special dividends I would think that given the cash balance today, the proceeds that you’re raising from You know, these awful sales, you’re in a in a in a stronger position, But on the other hand, the market’s a bit more uncertain. So a lot in there, but kind of, you know, pace of replacement and and capital allocation within that.

Kenneth Hvid: Yeah. Great great questions. And, obviously, what we’re spending all our time discussing and making decisions around here I would say on the fleet renewal, you’re right. And as I commented on in the remarks and the Q&A at last quarter we’re looking at selling some of all the vessels and we’re looking at buying some newer vessels. And that’s all part of being an operating company, obviously, and the renewal of our fleet. As you all know, we’ve been sweating our assets heavily over the past three years, and I think that’s been great. We’ve also been running off ship years, and we think now is a pretty good time start leaning in. You’re correctly pointing out that we are we’re selling more vessels than we’re buying up to now.

If you look at it in ship years, we are we’re actually buying more ship years than we’re selling. So I think it just speaks to how we’re trying to manage where we are in the cycle and at the same time try and renew the fleet here. So we’re leaning in. To your second question on capital allocation, It’s clear we’re in a very strong position when we embarked on this cycle a couple of years ago here, we always had it as stated objective that we wanted to rebuild financial strength and financial flexibility at Teekay and think everybody anybody looking at our balance sheet can say that that’s what we have done, and we’re pretty excited about that. That’s what you need to do in a cyclical business. That is capital intensive. I think the next couple of years are gonna be interesting.

So clearly, for people that have the capital to make investments, I think we are in a position where we can hopefully make some investments that’s gonna create some good long-term shareholder value. And then that brings you to the question that you’re asking around special dividends. Which is always part of the capital allocation plan. As you know, we’re not the company out there that’s paying out all our earnings, and we’ve been very clear on that from the beginning. And we have a fixed dividend, which we also declared this quarter. And once a year, we have the discussion with the board whether there’s special dividend coming and that’s on the agenda for this board meeting that’s coming up soon. Okay. Thanks for the thoughts, Kelly.

Jonathan Chappell: Thanks.

Operator: We’ll move next to Omar Nokta with Jefferies.

Omar Nokta: Thank you. Hi, Kenneth and team. Couple from my side. Maybe just first kind of a follow-up to to to John’s question and then a market related question. Just kind of on the the last topic, obviously, you’re flush with cash. No debt, plenty of liquidity. And, you know, the cash is coming in much faster than you’re able to deploy it. Maybe just kinda bigger picture on on how you see TNK from here The do you see the platform maybe evolving in terms of you know, the the Ardmore stake perhaps is not a one off and that you have, you know, you have your operating tanker fleet. You’ve got the marine business with Teekay Australia. You think that you’re gonna have a growing portfolio approach perhaps where you’re taking stakes in other equities and that’s sort of a an avenue of exposure to the sector without having to to to put capital to work. Physically?

Kenneth Hvid: Yeah. No. I I I don’t. I I think I I just wanna emphasize that the Ardmore investment is really small in our total capital allocation plan here. The number one, priority is obviously looking after our core fleet. We are an operating company, and we are keen to deploy capital in a manner where we invest in our operating platform, which as you know is fully integrated with technical management and all the commercial management. So we’re looking to add assets that we where we can bring value to those assets by putting them on our platform. That’s obviously not by investing in other companies. So I just wanna be very clear that that’s our number one priority. As you point out, Omar, it’s we’re generating cash fast when we’re able to deploy I would say it’s not a problem to deploy cash.

I think it’s maybe hard to keep patients in a to be patient in the market like we’re in. But we are. And, I mean, we’ve been through a lot of cycles over the past fifty years as a company, and many of us have been through been through a few cycles. So I think we know that to be patient sometimes pays off and but but that’s exactly what we’re doing here. So I don’t think it’s a matter of that we cannot deploy it. I think it’s a matter of being patient.

Omar Nokta: Okay. Thank you. And then just one one quick follow-up just on that note, and appreciate your comments of know, having taken a sub five percent stake, but by virtue of the buyback, you’ve you’ve now had to file the, the thirteen g. I take it that this is just as you say, it’s a small opportunistic holding with no plans perhaps of wanting to to increase the size of that position.

Kenneth Hvid: Yeah. That’s right. I had a fellow CEO call yesterday, and we we travel about it. But they they clearly saw that there was good value there as well, and it wasn’t really our fault. So Yeah. You’re right.

Omar Nokta: Okay. Alright. And then if if I could just ask question about the market, and you you referenced this in your press presentation, just all the sanction discussion. And how potentially there’s seventy-three ships coming on into sanction next week. I think you said from the EU, Just, like, I guess, you know, in general, given your significant kind of market presence within the Aframaxes, the hundred and fifty or so tankers that were sanctioned in January by by the US Obviously, there’s all kinds of uncertainty as to how long those sanctions may hold. Just wanted to get a sense from you given, you know, your your active participation in the space, have you seen an effect or an impact of those sanctions yet on the Aframax market And then how do you see it affecting things if those get lifted?

Kenneth Hvid: Yeah. Hi, Emma. I think we have seen an impact from the sanctions that were placed on January tenth. Of those ships that were sanctioned, there was over one hundred and fifty tankers, and the majority of those were serving the Russian Far East trade out of Cosmino. And in the weeks following that, we’ve certainly seen difficulties in Russia getting that all out of Cosmo, into China. And we’ve also seen India as well having to look at alternative sources. So if you look at what’s happened in the market over the past month, We are seeing a bit of a drop in Russian exports, and Chinese and Indian buyers are having to look for alternative stores of crude. So we’ve seen an increase in volumes from their Middle East But also from West Africa and other parts of the Atlantic, to make up for the shortfall here.

Which is why we’ve seen some volatility on the VLCC side in particular. Which is then helping out the Suezmaxes a little bit as well. So the OFAC sanctions, they are having an impact. As you said, we don’t know what the future is from here, whether we’re gonna get more sanctions or relaxation on sanctions. But as Ken said in his remarks, all this some uncertainty does create volatility, you know, when you have changes to trade patterns, disruptions, it all speaks to volatility. So we are seeing a bit of an impact in the freight market, but as you said, very difficult to sort of project forward how this is gonna evolve in the in the coming months.

Omar Nokta: Good. Thanks, Christian. I appreciate the the color there, and and kinda thank you as well. I’ll turn it over.

Kenneth Hvid: Thanks a lot.

Operator: Moving next to Ken Hoexter with Bank of America.

Ken Hoexter: Hey. Great. Good morning. If if I I guess talking about the rates. Right? So we had twenty-four and twenty-eight. Thousand dollars per day per per the Suezmax, Aframax at at with just about two-thirds and and just over half. Of the the quarterly days booked. That that’s down a bit from the fourth quarter, but yet talking about more sanctions having a positive impact, seasonally colder weather, increasing power needs. So is the additional capacity creating the the bigger overhang? What what’s what’s driving what what’s your your thoughts on what’s driving the rates pressure on rates near term here?

Kenneth Hvid: Yeah. I mean, for for sure, we I think in Suresh Maxes, there was a a a week or a finish to to twenty twenty-four and a and a weaker start to twenty twenty-five. And I think what we’ve seen now is is an update certainly this week The the picture list is is significantly stronger than than what we we average So I think what’s what’s driving that as as we talked about in the prepared remarks, so it came as is is really the where’s these arbitragers that that’s moving up and and the the VLCCs that’s been moving up and and then some replacement barrels that that’s really beginning to to kick in now as you recall. The sanction vessels that was a bit of a a delay on, and and they needed to to offload. And then they were scrambling for for for cargoes, and and that’s driving it. So we just see more more cargo demand in in that.

Ken Hoexter: Alright. Okay. And then if we think about you know, I I guess, the the delays in the tariffs and and some of the delays that are gonna If we start getting toward a point of of peace in between Russia, Ukraine, and that’s gonna take some time to develop. Same thing in the Middle East with with the Houthis. You know, what what’s your thought on how that pans out? You know, what what shifts you you see first? How quick, I guess, based on historical experience?

Kenneth Hvid: Yeah. I I think that’s where we you know, on President territory. We we we haven’t really as I think back historically, had this situation before As I said, if we just look at the medium-sized tankers, what what what really stands out is that before the invasion, that we just had, over just over a hundred ships that were over twenty years old and they were typically trading with with charter or so that that didn’t have the the typical age restriction and they were typically lifting cargoes from from countries where you had a various degrees of of sanctioned oil. Of course, the what what the the war created was this demand for additional vessels to facilitate that that trade. As we point out, that fleet has now grown up to well, fleet is is larger, but the number of vessels over twenty today is over three hundred vessels.

Right? So it’s growing just in three years from a hundred so to three hundred basically because nothing has been trapped. And what we are then also saying is that if if that continued, the sanctions even though you can argue that the the the the parallel feature is It’s maybe being becoming saturated, but then you have another round of of sanctioned vessels that are that’s taking place and then there’s demand for more vessels that that are about sanction that can carry the oil. So as long as that persists, think there is a demand for for the older tankers. So if nothing happens, and we didn’t strap any vessels in in that category, As we point out, we would actually be a safe harbor vessels that are over twenty. And there’s nothing in history that that kind of tells us what how quickly that can unfold.

I think what we can say is that if the trade normalizes, and what we all are subjected to in in count the regular trade. I mean, we do see the the age restrictions that especially at at at twenty, really starts kicking in at in some cases. With some charters even even earlier than that. So there is a lot of vessels here that I think will either be operating with very low utilization or will be parked somewhere. Or will start going to the scrap yards. At what pace that that’s gonna happen? I think that’s the million dollar question. And I think it’s it’s it’s it’s the right question to ask, but I’m afraid we don’t have the answer.

Ken Hoexter: Appreciate that. That’s true. That that’s an awful lot. Compared to normal. So maybe just two quick ones just to wrap up. The the seasonality that you normally see in in through one Q into two Q, maybe you could just remind us of that. And then you know, you you mentioned the vessel purchased. Are you seeing a lot of you know, especially with that much overcapacity potentially hitting and what that could do to rates, are you team. More books come across your desk in terms of of vessel sale opportunities?

Kenneth Hvid: Yeah. Good good good question. So first of all, just on on where we see the the rates, I I think we we we kind of touched on it and and we when we looked at it, typically, when you come into Q4 and go out of Q1, you kind of have rates that that that start low and go up and then they start coming down as we get into Q2. This this past two quarters, we’ve kind of seen the the inverse of of that, I would say. So a little bit unusual, but we’ve had unusual years in in the past past couple of years. But but that’s that’s kind of where where rates have been going. So we definitely looks like we’re moving stronger into Q2 but it’s kind of the inverse of what we saw last year. Yeah. And in in terms of of S and P opportunities, yeah, market has has come down on on vessels, which is also why we’re beginning to lean in a bit as we as we said to to John.

I mean, and and as we talked about on the last quarter, we we kind of see ourselves maybe selling a little bit faster than we’re buying, but but have fleet replenishment, and and we haven’t we haven’t done a lot in in recent years. And seeing prices come into kind of a a ZIP code that that that we’re beginning to like again. So so that’s why we we we require one one chip today, and we’ll continue to to look for opportunities. When people have had a couple of good years as as most tank owners have had, Some owners have have different priorities and as as as we continue to say, I mean, we’re an operating company. We like to have a certain scale in the market. So so we’ll obviously be focused on trying to renew the favor. We’ll do at a very mission to pay you.

Ken Hoexter: Very helpful. Appreciate the thought. Thanks, guys.

Kenneth Hvid: Thanks, Bridget. Okay.

Operator: And that will conclude the Q&A portion of today’s call. I will now turn the call back to the company for any additional or closing remarks.

Kenneth Hvid: Thank you very much for listening in to our call today. We look forward to reporting back to you next quarter. Thank you. Have a good day.

Operator: Thank you, ladies and gentlemen. That will conclude today’s call. You may now disconnect.