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Teekay Corporation. (



Q4 2011 Earnings Call

February 23, 2012 11:00 a.m. ET


David Drummond -- Investor Relations

Peter Evensen -- President and Chief Executive Officer

Vince Lok -- Chief Financial Officer and Executive Vice President


Justin Yagerman -- Deutsche Bank

Michael Webber -- Wells Fargo

Gregory Lewis -- Credit Suisse

Justine Fisher -- Goldman Sachs

John Fusek – GCA

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Welcome to the Teekay Corporation’s Fourth Quarter and Fiscal 2011 Earnings Results Conference Call. 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. (Operator Instructions) As a reminder, this call is being recorded.

Now, for opening remarks and introductions, I would like to turn the call over to Mr. Peter Evensen, Teekay’s President and Chief Executive Officer. Please go ahead, sir.

David Drummond

Before Mr. Evensen begins, I would like to direct all participants to our website, at, where you will find a copy of the fourth quarter and fiscal 2011 earnings presentation. Mr. Evensen and Mr. Lok will review this presentation during today’s conference call.

Please allow me to remind you that our discussion today contains 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 fourth quarter and fiscal 2011 earnings release and earnings presentation, available on our website.

I will now turn the call over to Mr. Evensen to begin.

Peter Evensen

Thank you, Dave. Good morning, everyone, and thank you for joining us for Teekay Corporation’s fourth quarter and fiscal 2011 earnings call. I’m joined this morning by our CFO, Vince Lok; and for the Q&A session, we also have our Group Controller, Brian Fortier, and our Chief Strategy Officer, Kenneth Hvid.

During our call today, I’ll be walking through our fourth quarter and fiscal year 2011 earnings presentation, which can be found on our newly redesigned website, at Beginning on slide three of the presentation, I will briefly review some recent highlights for Teekay Corporation and our publicly traded three daughter companies.

Our investments in fixed-rate businesses and efforts to improve profitability in our existing fleet are showing progress. For the fourth quarter of 2011, Teekay Corporation generated a consolidated $190 million of cash flow from vessel operations, or CFVO, an increase of approximately 21% from fourth quarter of 2010. I’m also pleased to report that after 10 consecutive quarters of reported adjusted net losses, for the fourth quarter of 2011, Teekay Corporation is reporting a profit, albeit a modest one. On a consolidated basis, we reported adjusted net income of $1.6 million or $0.02 per share compared to a consolidated net loss of $0.58 per share in the third quarter.

I caution everyone that our reported adjusted net income for the fourth quarter should not be considered a run rate as our positive contributions that we receive under fixed-rate contract in the fourth quarter that make it atypical compared to the other three quarters. A large contributor to our fourth quarter results was the $35 million of additional cash flow we received based on certain annual production and oil price revenue components of the Foinaven FPSO contract, which are recognized annually in the fourth quarter.

Although, Foinaven cash flows are expected to return to normal levels in the first quarter, we do expect our average quarterly cash flow to increase in 2012 as a result of the recent impending acquisitions that I’ll talk about. Our transaction with Sevan Marine was completed on November 30th and our fourth quarter results include one month of fixed-rate cash flows from the newly acquired Hummingbird and Piranema FPSOs. I’ll talk more about the Sevan transaction in a few moments.

In the current constrained global financial environment, Teekay’s daughter company structure is proven to be a source of competitive strength. During the fourth quarter and first quarter to-date, we’ve completed equity offerings at each of our daughter companies raising over $450 million of net equity proceeds to finance their growth.

Starting with Teekay LNG Partners, the partnerships acquisition of the Maersk LNG fleet through its joint venture with Marubeni is now fully financed by debt and equity and is expected to close on February 20. For the fourth quarter, Teekay LNG paid a distribution of $0.63 per unit, however, as we announced on the last earnings call, management is recommending a distribution increase of 7% commencing with the first-quarter distribution payable in May to reflect the increase in cash flows resulting from the Maersk LNG acquisition and the Angola and – new building that delivered during the course of 2011 and early 2012.

If approved by the Teekay LNG board, this increase will move the partnership’s quarterly distribution through the 50% incentive distribution right threshold or split making first future distribution increases even more accretive to the general partnership cash flows that Teekay Corporation receives.

In November, Teekay offshore partners completed the accretive acquisition of the Piranema FPSO from Sevan and raised 170 million through an equity private placement to finance the transaction. For the fourth quarter, Teekay offshore paid a distribution of $0.50 per unit. The partnerships distributable cash flow will realize the full benefit for the Piranema acquisition in the first quarter when this FPSO contributes a full quarter of cash flows.

In early February, Teekay tankers completed a public equity offered raising $66 million including the green shoe which was exercised in full which increased Teekay tankers total liquidity to approximately $360 million. Given that 20 to 30% decline in conventional tanker asset values over the past year, Teekay tankers is now well-positioned to make a significant investment in accretive fleet growth.

Teekay tankers continues to tactically manage its fleet in favor of fixed cover and with the recent timecard extension of an additional Aframax tanker, Teekay tanker’s fixed cover is estimated to be 58% for the first quarter and 47% for all of 2012. For the fourth quarter, Teekay tankers declared a dividend of $0.11 per share.

Turning to slide four of the presentation I will review some of our highlights for the fiscal year 2011 using the same three key strategic drivers format we introduced at our October 2010 Investor Day, which we said would guide our value creation in 2011 and beyond. These included a focus on activities that lead to growth and the value of our general partner interest in Teekay offshore and Teekay LNG, investment in higher return fixed rate businesses that can deliver the kind of stable returns necessary to provide accretion and support higher cash flows to the general partner as our MLPs move into the high split and returning capital to shareholders in the form of consistent dividend payments from all of the Teekay group entities and share repurchases at the Teekay parent level.

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