Teekay's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Teekay Corporation (TK)

Q1 2012 Earnings Call

May 17, 2012; 11:00 am ET

Executives

Peter Evensen - President & Chief Executive Officer

Vince Lok - Chief Financial Officer

Kenneth Hvid - Chief Strategy Officer

Brian Fortier - Group Controller

Dave Drummond - Investor Relations

Analysts

Michael Webber - Wells Fargo Securities

Joshua Katzeff - Deutsche Bank

Brandon Oglenski - Barclays Capital

Fotis Giannakoulis - Morgan Stanley

Steve Pfeiffer - Wells Capital Management

Presentation

Operator

Welcome to Teekay Corporation’s first quarter 2012 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).

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.

Dave Drummond

Before Mr. Evensen begins, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the first quarter 2012 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 first quarter 2012 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 today for Teekay Corporation’s first quarter 2012 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.

During our call today I will be walking through the first quarter of 2012 earnings presentation, which can be found on our website. Beginning on slide three of the presentation, I will briefly review some recent highlights from Teekay Corporation and our three publicly traded daughter companies.

For the first quarter of 2012, Teekay Corporation generated total consolidated cash flow from vessel operations or CFVO of $203.5 million, an increase of approximately 37% from the first quarter of 2011. You will note that in this quarter’s earnings release that we’ve made a slight change in the format of our operating results table, to show our share of the CFVO generated from our equity accounted investments, given their increasing significance, in addition to the CFVO generated by our fully consolidated businesses.

Teekay Corporation reported a consolidated adjusted net loss of $20.8 million or $0.30 per share for the first quarter of 2012, compared to a consolidated adjusted net loss of $0.39 per share in the first quarter of 2011.

The reduction in our adjusted net loss for the quarter is mainly due to the benefit of these strategic acquisitions and new building deliveries that have occurred since the first quarter of 2011, as well as the progress we’ve made towards improving the profitability of our existing assets. This was partially offset by the Banff FPSO being out of service due to the storm incident in December of 2011.

In April, we reached an agreement to sell 13 of our 17 conventional tankers, along with the associated contracts, debt facilities and other rights and assets to Teekay Tankers for approximately $455 million, which I will discuss in more detail in a moment. Our three publicly traded daughter companies were also active in the past quarter, growing their distributions and raising capital for new accretive growth.

As our three daughter companies grow, Teekay Parent is increasingly benefiting from their access to multiple forms of capital and the growing cash flows received from our daughter companies, through the incentive distribution rights or IDRs, which we have as general partners of both of our MLPs.

On February 28 Teekay LNG completed its joint venture acquisition of six LNG carriers from Maersk, a total purchase price of $1.3 billion. Factoring in the increased cash flow contributions from this acquisition and from the new building LNG and LPG carriers, which delivered in the second half of 2011, Teekay LNG increased its quarterly distribution by 7% to $0.675 per unit.

As a result, our incentive distribution rights relating to our general partner interest in Teekay LNG have now moved into the 50% high splits, which means that a greater portion of future distributable cash flow increases will now go to Teekay Parent. In early May, Teekay LNG successfully completed a NOK 700 million or $125 million, equivalent five-year Norwegian bond offering, which positions the partnership for further accretive growth.

Moving on to Teekay Offshore, the partnership increased its quarterly distribution by 2.5% in the first quarter, reflecting the contribution from the Piranema Spirit FPSO unit, which was acquired as part of the Sevan transaction in November 2011. This distribution increase moves our IDRs in Teekay Offshore very close to reaching the 50% high splits level.

As a result of the distribution increases at Teekay LNG and Teekay Offshore in the first quarter of this year, Teekay Parent will receive approximately $15 million of incremental LP and GP cash flows on an annualized basis. Teekay Offshore was also active in the Norwegian bond market in the first quarter, with the issuance of NOK 600 million or approximately $100 million of five-year senior unsecured bonds. This is the second bond issued by Teekay Offshore in the Norwegian market and it highlights Teekay’s increasing diversification of capital sources for growth.

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