November 3, 2022
On November 3, Teekay Corporation and Teekay Tankers released Q3-2022 earnings results.
Teekay Corporation reported a higher consolidated adjusted profit than the previous quarter, primarily due to higher spot tanker rates and lower interest expense in Teekay Parent due to bond repurchases completed as a result of the sale of the Teekay Gas Business during the first half of 2022.
During the third quarter of 2022, we completed the sale of the Sevan Hummingbird, and in late October, we transferred the ownership of our last remaining FPSO, the Petrojarl Foinaven, to a European shipyard for green recycling. The sale proceeds from the Sevan Hummingbird and the lump sum payment received from the customer on the Petrojarl Foinaven are now expected to fully offset our decommissioning and recycling costs relating to these units.
Spot tanker rates continued to firm during the third quarter, counter to normal seasonal trends with average mid-size spot tanker rates being the highest for a third quarter since 2008. The strength in rates was primarily due to a combination of the continued rerouting of Russian oil exports from Europe to Asia, which has created significant tonne-mile demand in the mid-size segments, as well as Europe replacing Russian barrels with imports from more distant sources including the US Gulf, Latin America, West Africa, and the Middle East.
In summary, with a very limited number of newbuilds set to join the global fleet between now and 2025, we see significant structural support for the current strong spot market, despite potential macroeconomic headwinds to oil demand. On top of that, the tonne-mile impact of Europe turning away from Russian oil has proven to be sizable and appears to be long-lasting, and the forthcoming EU ban from early December is set to significantly increase that impact. By positioning our fleet to trade spot, we are very heavily exposed to the current tanker market strength, and our high operating leverage means that the strong market translates directly into TNK’s free cash flow. We continue to focus on reducing our leverage in a manner that we think is prudent and that positions us well to be successful over the long term.
We believe our strong balance sheet has created the financial flexibility and optionality that we now have which is particularly valuable during times of extreme volatility and global economic uncertainty. It positions us well to pursue future investments patiently and selectively where we can leverage our operating franchise and proven capabilities of the Teekay platform.
Below you will find the highlights from our earnings results. For detailed information, visit our Investor pages: $TK, $TNK.