Teekay Corporation's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Teekay Corporation (TK)

Q2 2012 Earnings Call

August 9, 2012 11:00 AM ET

Executives

Kent Alekson – IR

Peter Evensen – President and CEO

Vincent Lok – EVP and CFO

Analysts

Josh Katzeff – Deutsche Bank

Michael Webber – Wells Fargo

Brandon Oglenski – Barclays

Fotis Giannakoulis – Morgan Stanley

Greg Lewis – Credit Suisse

Presentation

Operator

Welcome to Teekay Corporation’s Second 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) 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.

Kent Alekson

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 second 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 and 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 second 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, Kent. Good morning, everyone, and thank you for joining us today for Teekay Corporation’s second 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.

During our call today, I’ll be walking through the second quarter of 2012 earnings presentation, which can be found on our website. Beginning on Slide 3 of the presentation, I will briefly review some recent highlights for Teekay Corporation and our three publicly traded daughter companies.

For the second quarter of 2012, Teekay Corporation generated total consolidated cash flow from vessel operations or CFVO of $208.4 million, an increase of approximately 26% from the second quarter of 2011.

As a reminder, last quarter we changed the format of our operating results table to include 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 $17 million or $0.25 per share for the second quarter of 2012, just under half of the consolidated adjusted net loss of $0.51 per share that we reported in the second quarter of 2011. The reduction in our adjusted net loss for the quarter reflects the contributions from the strategic acquisitions and new building deliveries over the past year, in addition to the progress we’ve made on our profitability enhancement initiatives for our existing assets.

In late June, we completed the previously announced sale of 13 of our 17 conventional Teekay Tankers, two Teekay Tankers for $454.2 million. As a result of the transaction, which closed late in the second quarter, we will not see the full quarter effect until next quarter.

With completion of this transaction, Teekay Parent’s exposure to the conventional tanker market will now be mostly indirect through our minority, but controlling equity ownership in the significantly larger Teekay Tankers.

At our June Investor Day in New York, we announced we had offered to sell the Voyageur Spirit FPSO to Teekay Offshore Partners upon commencement of its charter contract in the North Sea in the fourth quarter of 2012.

This transaction is currently being reviewed by Teekay Offshore’s Conflicts Committee. This is another example of a drop down transaction, which supports the growth of our daughter companies and which also leads to enhanced net asset value for the Teekay Parent level as our MLP daughter companies grow their GP and LP cash flows. All three of our publicly traded daughter entities were busy this past quarter integrating acquisitions and negotiating charter contracts that will enhance the stability of their future cash flows.

In the next few weeks, we will take over technical management of the final vessel of the six LNG carriers acquired by Teekay LNG in February 2012 through its joint venture with Marubeni Corporation and thereby complete the integration of this purchase.

In June, Teekay LNG took advantage of the strong fundamentals in the LNG shipping market to secure a new forward start three-year charter for the Magellan Spirit LNG carrier, which will commence immediately after expiration of the current charter in September 2013, at a 20% increase from its current charter rate.

For the quarter ended June 30, 2012, Teekay LNG declared a cash distribution of $0.675 per unit, which based on Teekay Parent’s current GP and LP ownership interest in Teekay LNG, results in $22.5 million of cash flow to Teekay Parent for the quarter.

Moving on to Teekay Offshore, Talisman Energy, the charter of the Petrojarl Varg FPSO, declared their three-year option to extend the firm period of this contract to June 30, 2016. Talisman has two remaining three-year options.

For the second quarter, Teekay Offshore declared a cash distribution of $0.5125 per unit, which based on Teekay Parent’s current GP and LP ownership interests results in $14.3 million of cash flow to Teekay Parent for the quarter.

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