Teekay Corp. (TK)

Q3 2011 Earnings Call

November 10, 2011 01:00 pm ET

Executives

Peter Evensen – President & Chief Executive Officer

Vince Lok – Executive Vice President & Chief Financial Officer

Kenneth Hvid – Executive Vice President & Chief Strategy Officer

Brian Fortier – Group Controller

Kent Alekson – Investor Contact

Analysts

Michael Webber – Wells Fargo

Josh Casavant – Deutsche Bank

Michael Pack – Clarkson Capital Markets

[Fotis Stianakulous] – Morgan Stanley

Name - Company

Name - Company

Presentation

Operator

Welcome to the Teekay Corporation’s Q3 2011 Earnings Results Conference Call. (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.

Kent Alekson

Before Mr. Evensen begins, I’d like to direct all participants to our website at www.teekay.com where you will find a copy of the Q3 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 Q3 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, Kent. Good morning from Vancouver, everyone, and thank you for joining us today for Teekay Corporation’s Q3 earnings call. I’m joined this morning by our CFO Vince Lok, and for the Q&A session we also have our Chief Strategy Officer Kenneth Hvid, and our Group Controller Brian Fortier.

If we begin on Slide 3 of the presentation, I will briefly review some recent highlights for Teekay Corporation and our three daughter companies. For Q3 2011, Teekay Corporation generated a consolidated $157 million of cash flow from vessel operations, or CFVO, an increase of 18% from Q3 2010. We reported a consolidated adjusted net loss of $40.6 million, or $0.58 per share in Q3 on a consolidated basis. This was a disappointment. The profits from our fixed-rate businesses were not enough to make up for the losses from our spot tanker operations, including in-chartering of tonnage which took place in previous years.

While the third quarter of the year is usually the weakest quarter on a seasonal basis it was particularly weak this quarter. In addition we also looked at our tanker franchise including the booked value of our tanker assets and, after analysis, recorded some non-cash write downs to the goodwill and the booked value of some of our MR product tankers and older crude tankers.

Despite the weak spot tanker markets, our fixed-rate businesses continue to grow and in the past month we have announced significant acquisitions in both our offshore and L&G businesses. Starting with offshore, Teekay and Teekay Offshore have agreed to acquire three existing FPSO units from Sevan Marine for approximately $790 million, and Teekay will also invest $25 million to acquire a 40% ownership interest in a new net debt-free Sevan. This transaction positions Teekay as one of the top global operators of leased FPSOs.

Also in October, our daughter company Teekay LNG Partners announced that it would form a joint venture with Marubeni Corporation to acquire the Maersk LNG fleet, which is comprised of interests in eight modern LNG carriers for a total purchase price of approximately $1.4 billion. I’ll talk more about both these transactions in a moment.

Since we reported last during our Q2 earnings release on August 10 th, we’ve repurchased approximately 770,000 Teekay Corporation shares at a total cost of approximately $18.5 million, which brings the total amount repurchased to date under our current share repurchase authorization to 5.2 million shares at a total cost of $162 million. Since our current authorization began in November, 2010, we’ve bought back approximately 7% of Teekay Corporation’s outstanding shares. For the time being, we have suspended further share buybacks as a result of the need to finance and complete these pending acquisitions.

Our three daughter companies have also been active in Q3 and Q4 to date. Related to its joint venture acquisition of the Maersk LNG fleet with Marubeni, this week Teekay LNG Partners completed a follow-on public equity offering raising net proceeds of approximately $180 million. Teekay LNG Partners Q3 distribution of $0.63 per unit is payable on November 14, and based on the expected cash flow accretion from the Maersk LNG transaction and the delivery of LNG and LPG new buildings in the last four months of this year, Teekay LNG management announced it intends to recommend a 7% increase to the Teekay LNG distribution effective for Q1 2010, which will be payable in May.

Just this morning, Teekay Offshore Partners announced its intention to acquire the [Paranima] FPSO from Sevan Marine directly for a purchase price of $165 million and concurrently signed an equity private placement agreement, raising net proceeds of approximately $170 million which will be used to partially finance the purchase. In October, Teekay Offshore Partners acquired the Scotts Spirit new building shuttle tanker from Teekay parent for approximately $116 million, not including an earn-out under which Teekay parent may receive an additional $12 million. And for Q3, Teekay Offshore declared a distribution of $0.50 per unit in line with the previous quarter.

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