Teekay Corporation Reports Third Quarter 2020 Results

Highlights
GAAP net loss attributable to shareholders of Teekay of $35.4 million, or $0.35 per share (inclusive of $66.3 million of impairment charges), and adjusted net income attributable to shareholders of Teekay(1) of $15.2 million, or $0.15 per share, in the third quarter of 2020 (excluding items listed in Appendix A to this release).Total adjusted EBITDA(1) of $227.0 million in the third quarter of 2020, an 18 percent increase over the same period of the prior year.Reduced consolidated net debt by $88 million in the third quarter of 2020; and total pro forma consolidated liquidity increased to $1.1 billion(2) as of September 30, 2020.Teekay Parent is nearing completion of Phase I of the Banff FPSO decommissioning project according to plan; repurchased $14.4 million in principal amount of its existing convertible bond and secured bond at average prices of 81.55 and 92.23, respectively; and completed $150 million refinancing of equity margin revolver.Teekay LNG extended a charter contract to early-2022 for a 52 percent-owned LNG carrier; LNG fleet is now 100 percent fixed for the remainder of 2020 and 96 percent fixed for 2021.Teekay Tankers secured a new time charter-out contract for an Aframax tanker and currently has 20 percent of its existing fleet on fixed-rate charters at levels well above current market rates.HAMILTON, Bermuda, Nov. 12, 2020 (GLOBE NEWSWIRE) — Teekay Corporation (Teekay or the Company) (NYSE:TK) today reported results for the third quarter ended September 30, 2020. These results include the Company’s two publicly-listed consolidated subsidiaries, Teekay LNG Partners L.P. (Teekay LNG) (NYSE:TGP) and Teekay Tankers Ltd. (Teekay Tankers) (NYSE:TNK) (collectively, the Daughter Entities), and all remaining subsidiaries and equity-accounted investments. Teekay, together with its subsidiaries other than the Daughter Entities, is referred to in this release as Teekay Parent. Please refer to the third quarter 2020 earnings releases of Teekay LNG and Teekay Tankers, which are available on Teekay’s website at www.teekay.com, for additional information on their respective results.
Financial Summary

CEO Commentary
“In the third quarter of 2020, we reported another adjusted profit, with adjusted net income of approximately $15 million, or $0.15 per share, and total adjusted EBITDA increased by approximately $34 million, or 18 percent, from the prior year period,” commented Kenneth Hvid, Teekay’s President and Chief Executive Officer.“Teekay LNG, which accounted for approximately 82 percent of our total adjusted EBITDA in the third quarter of 2020, generated strong earnings and cash flows despite a heavy scheduled drydock program. Teekay Tankers also reported positive adjusted net income and outperformed a weak spot tanker market on the strength of fixed-rate charters secured over the past several quarters at attractive levels. Teekay Parent’s adjusted EBITDA improved by $13 million in the third quarter of 2020 compared to the same period of the prior year, primarily as a result of higher cash distributions from Teekay LNG, lower net general and administrative expenses, and improved results from the Foinaven and Hummingbird FPSOs, partially offset by lower earnings from the Banff FPSO, which ceased production and commenced decommissioning in June 2020. We are nearing completion of Phase I of the Banff FPSO decommissioning project, which has been progressing well in terms of both schedule and budget. The FPSO unit left the field, as scheduled, in late-August 2020 and is now preparing for green recycling, with Phase II of the decommissioning project expected to be carried out in the summer of 2021,” commented Mr. Hvid.“We have continued to increase our financial strength across the Teekay group,” added Mr. Hvid. “During the past year, we have reduced our consolidated net debt by over $940 million, or approximately 22 percent, and increased our consolidated liquidity from $0.6 billion to $1.1 billion(1) on a pro forma basis as of September 30, 2020. In addition, at Teekay Parent, we used some of our cash balances to opportunistically repurchase $14.4 million in principal amount of our existing convertible and secured bonds for total consideration of $11.9 million at all-in average prices of 81.55 and 92.23, respectively.”Mr. Hvid concluded, “I want to thank our seafarers and onshore colleagues for their continued dedication to providing safe and uninterrupted service to our customers throughout the course of the pandemic. With our balance sheets continuing to strengthen, extensive contracted revenues at Teekay LNG and no committed growth capital expenditures or significant near-term debt maturities, we believe that we have made significant progress insulating our companies from near-term market volatility and positioning the Teekay Group to create long-term shareholder value.”
Summary of Results
Teekay Corporation ConsolidatedThe Company’s consolidated results during the third quarter of 2020 improved compared to the same period of the prior year, primarily due to: higher revenues from Teekay Tankers as a result of several fixed-rate charters secured during the past year at higher rates and higher average spot tanker rates in the third quarter of 2020 compared to the third quarter of 2019; improved results from the commencement of the Foinaven FPSO unit’s new bareboat charter contract in March 2020; lower interest expense due to debt reduction over the past year and lower interest rates; Teekay LNG’s earnings from the delivery and contract start-up on three equity-accounted LNG carrier newbuildings; fewer off-hire days for scheduled drydockings and repairs; and the commencement of terminal use payments to Teekay LNG’s equity-accounted Bahrain LNG Terminal in January 2020. These improvements were partially offset by: a reduction in Teekay Tankers’ earnings resulting from the sale of four Suezmax tankers during December 2019 and the first quarter of 2020; a reduction in Teekay LNG’s earnings following the sale of two non-core LNG carriers in early-2020; and a reduction in Teekay Parent’s earnings from the Banff FPSO unit due to the decommissioning of the Banff oil field, which commenced in June 2020.In addition, consolidated GAAP net loss decreased as the Company recognized fewer impairment charges in the third quarter of 2020, including write-downs totaling $66.3 million relating to five Aframax tankers, one FPSO unit and one in-chartered FSO unit under an operating lease, compared to write-downs of vessels totaling $175.8 million in the third quarter of 2019; and a gain of $1.1 million recognized in the third quarter of 2020 relating to the repurchase of Teekay’s 5 percent Convertible Senior Notes. These items were partially offset by an increase in unrealized credit loss provision adjustments and foreign currency exchange losses incurred in the third quarter of 2020, as compared to unrealized gains in the third quarter of 2019.Teekay ParentTotal Teekay Parent Free Cash Flow(1) was negative $17.1 million during the third quarter of 2020, compared to negative $18.8 million for the same period of the prior year, primarily due to: the elimination of the operating losses on the Foinaven FPSO unit as a result of the commencement of the new bareboat contract in the first quarter of 2020; higher distributions received from Teekay LNG as a result of Teekay LNG’s 32 percent increase in its quarterly cash distributions commencing in May 2020 and the newly-issued Teekay LNG common units Teekay Parent received as consideration for the Teekay LNG incentive distribution rights (IDR) transaction completed in May 2020; lower net general and administrative expenses; and a higher contribution from the Hummingbird FPSO unit mainly due to a new contract that took effect in the fourth quarter of 2019 at a higher rate. These increases are partially offset by: a lower contribution from the Banff FPSO unit due to the decommissioning of the Banff oil field, which commenced in June 2020, and the associated decommissioning costs incurred during the third quarter of 2020. The Banff FPSO unit’s estimated remaining net asset retirement obligation relating to the remediation of the subsea infrastructure was $34.2 million as of September 30, 2020 (net of customer recoveries and excluding any remaining operating expenses and recycling costs relating to the FPSO unit).Please refer to Appendix D of this release for additional information about Teekay Parent’s Free Cash Flow(1).
Summary Results of Daughter Entities
Teekay LNGTeekay LNG’s net income, adjusted net income(1) and total adjusted EBITDA(1) for the third quarter of 2020, compared to the same quarter of the prior year, were positively impacted by: additional earnings from the delivery and contract start-up of three 50 percent-owned LNG carrier newbuildings in late-2019 and the commencement of terminal use payments to the Bahrain LNG Terminal in one of Teekay LNG’s joint ventures; and fewer off-hire days. These increases were partially offset by a reduction in earnings as a result of the sale of non-core vessels and lower charter rates earned by three, 52 percent-owned LNG carriers. Teekay LNG’s net income and adjusted net income(1) were further positively impacted by lower net interest expense in the third quarter of 2020 as a result of debt repayments over the past year.In addition, Teekay LNG’s GAAP net income was negatively impacted by unrealized credit loss provision adjustments related to the adoption of new accounting standards (ASC 326) at the beginning of 2020 and unrealized foreign currency exchange losses incurred in the third quarter of 2020 as compared to unrealized gains in the third quarter of 2019; partially offset by unrealized gains on non-designated derivative instruments in the third quarter of 2020 compared to unrealized losses in the third quarter of 2019.Please refer to Teekay LNG’s third quarter 2020 earnings release for additional information on the financial results for this entity.Teekay TankersTeekay Tankers’ GAAP net loss increased for the third quarter of 2020, while non-GAAP adjusted net income(1) and total adjusted EBITDA(1) improved compared to the same period of the prior year. These measures were positively impacted primarily by higher revenues from several fixed-rate charters secured during the past year at higher rates and higher spot tanker rates in the third quarter of 2020 compared to the prior year, partially offset by the sale of four Suezmax tankers during December 2019 and the first quarter of 2020, as well as the sale of the non-US portion of the ship-to-ship support services and LNG terminal management business in the second quarter of 2020. Teekay Tankers’ GAAP net loss in the third quarter of 2020 also included a $45.0 million write-down of assets.Following three strong quarters, spot tanker rates came under pressure during the third quarter of 2020 as a result of seasonal weakness, lower oil demand, record OPEC+ production cuts, and the unwinding of floating storage. Teekay Tankers was able to partially mitigate the impact of these weaker rates with 22 percent of its fleet on fixed-rate charters during the third quarter at an average rate of $37,600 per day. The weakness in spot tanker rates has continued into the fourth quarter of 2020, with rates so far averaging below the levels in the third quarter of 2020.Please refer to Teekay Tankers’ third quarter 2020 earnings release for additional information on the financial results for this entity.
Summary of Recent EventsTeekay ParentIn early-October 2020, Teekay Parent closed on a new equity margin revolver of up to $150 million maturing in June 2022 to refinance the previous facility which was scheduled to mature in December 2020. The new revolver has substantially similar terms to the previous facility and currently remains fully undrawn.Since mid-September 2020, Teekay Parent has repurchased $12.8 million in principal amount of its existing 5 percent Convertible Senior Notes for total consideration of $10.5 million at an average all-in price of 81.55, and $1.6 million in principal amount of its existing 9.25 percent Secured Senior Notes for total consideration of $1.5 million at an average all-in price of 92.23.Teekay LNGIn August 2020, Teekay LNG issued the equivalent of $112 million of unsecured, 5-year notes in the Norwegian Bond market at an all-in fixed coupon rate of 5.74 percent. The net proceeds from the bond issuance were used to repay drawings on the Partnership’s revolving credit facilities and as a result, the new bond issuance did not increase Teekay LNG’s financial leverage.In October 2020, the charterer of the 52 percent-owned Marib Spirit exercised its options to extend the current charter by 14 months at a higher charter rate, extending the vessel’s charter coverage to early-2022.Teekay TankersIn August 2020, Teekay Tankers secured a three-year, $67 million term loan to refinance four Suezmax tankers. The net proceeds from the new debt facility, along with existing cash balances, were used to repay approximately $85 million outstanding on Teekay Tankers’ existing debt facility with respect to these vessels that was scheduled to mature in 2021.In September 2020, Teekay Tankers entered into a one-year time charter-out contract for an Aframax tanker at $18,700 per day, which commenced in early-October 2020.In October 2020, Teekay Tankers repurchased two of its Aframax vessels that were previously subject to long-term finance leases for a total purchase price of $29.6 million. The purchase was funded with existing cash balances and therefore, the two vessels are currently unencumbered. LiquidityAs at September 30, 2020, Teekay Parent had total liquidity of approximately $142.5 million (consisting of $54.7 million of cash and cash equivalents and $87.8 million of undrawn capacity from a revolving credit facility), compared to Teekay Parent liquidity of $165.5 million as at June 30, 2020. Including Teekay Parent’s equity margin revolver refinancing completed on October 1, 2020, Teekay Parent’s pro forma total liquidity would have been approximately $173.5 million as of September 30, 2020.On a consolidated basis, as at September 30, 2020, Teekay had consolidated total liquidity of approximately $1.0 billion (consisting of $376.6 million of cash and cash equivalents and $666.5 million of undrawn capacity from its credit facilities), up from total consolidated liquidity of $939.4 million as at June 30, 2020. Including Teekay Parent’s equity margin revolver refinancing completed on October 1, 2020, Teekay’s pro forma consolidated total liquidity would have been approximately $1.1 billion as of September 30, 2020.Conference CallThe Company plans to host a conference call on Thursday, November 12, 2020 at 11:00 a.m. (ET) to discuss its results for the third quarter of 2020. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:By dialing (800) 367-2403 or (647) 490-5367, if outside North America, and quoting conference ID code 9588810.By accessing the webcast, which will be available on Teekay’s website at www.teekay.com (the archive will remain on the website for a period of one year).An accompanying Third Quarter 2020 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.About TeekayTeekay is a leading provider of international crude oil and gas marine transportation services. Teekay provides these services primarily through its directly-owned fleet and its controlling ownership interests in Teekay LNG Partners L.P. (NYSE:TGP), one of the world’s largest independent owners and operators of LNG carriers, and Teekay Tankers Ltd. (NYSE:TNK), one of the world’s largest owners and operators of mid-sized crude tankers. The consolidated Teekay entities manage and operate total assets under management of approximately $9 billion, comprised of approximately 140 liquefied gas, offshore, and conventional tanker assets. With offices in 10 countries and approximately 5,500 seagoing and shore-based employees, Teekay provides a comprehensive set of marine services to the world’s leading oil and gas companies.Teekay’s common stock is listed on the New York Stock Exchange where it trades under the symbol “TK”.For Investor Relations enquiries contact:
Ryan Hamilton
Tel: +1 (604) 609-2963
Website: www.teekay.com

Definitions and Non-GAAP Financial MeasuresThis release includes various financial measures that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission (SEC). These non-GAAP financial measures, which include Adjusted Net Income (Loss) Attributable to Shareholders of Teekay, Teekay Parent Free Cash Flow, Total Adjusted Revenues, Net Interest Expense, Adjusted Equity Income and Adjusted EBITDA, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings across companies, and therefore may not be comparable to similar measures presented by other companies. The Company believes that certain investors use this information to evaluate the Company’s financial performance, as does management.Non-GAAP Financial MeasuresTotal Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation and amortization, and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include foreign currency exchange gains and losses, any write-downs and/or gains and losses on sale of operating assets, adjustments for direct financing and sales-type leases to a cash basis, amortization of in-process revenue contracts, unrealized gains and losses on derivative instruments, credit loss provision adjustments, write-downs related to equity-accounted investments, our share of the above items in non-consolidated joint ventures which are accounted for using the equity method of accounting, and other income or loss. Total Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Company’s performance, views these gains or losses as an element of interest expense and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments.Consolidated Adjusted EBITDA represents Adjusted EBITDA from vessels that are consolidated on the Company’s financial statements. Adjusted EBITDA from Equity-Accounted Vessels represents the Company’s proportionate share of Adjusted EBITDA from its equity-accounted vessels. The Company does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entity in which the Company holds the equity-accounted investments or distributed to the Company and other owners. In addition, the Company does not control the timing of any such distributions to the Company and other owners. Total Adjusted EBITDA represents Consolidated Adjusted EBITDA plus Adjusted EBITDA from Equity-Accounted Joint Ventures. Adjusted EBITDA is a non-GAAP financial measure used by certain investors and management to measure the operational performance of companies. Please refer to Appendices C and E of this release for reconciliations of Adjusted EBITDA to net income (loss) and equity (loss) income, respectively, which are the most directly comparable GAAP measures reflected in the Company’s consolidated financial statements.Total Adjusted Revenues represents the Company’s revenues from its consolidated vessels, as shown in the Company’s Consolidated Statements of (Loss) Income, and its proportionate ownership percentage of the revenues from its equity-accounted joint ventures, as shown in Appendix E of this release, and commencing in 2020, less the Company’s proportionate share of revenues earned directly from its equity-accounted joint ventures. Please refer to Appendix E of this release for a reconciliation of this non-GAAP financial measure to revenues and equity income, the most directly comparable GAAP measure reflected in the Company’s consolidated financial statements. The Company does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entity in which the Company holds the equity-accounted investments or distributed to the Company and other owners. In addition, the Company does not control the timing of any such distributions to the Company and other owners.Adjusted Net Income (Loss) Attributable to Shareholders of Teekay excludes items of income or loss from GAAP net income (loss) that are typically excluded by securities analysts in their published estimates of the Company’s financial results. The Company believes that certain investors use this information to evaluate the Company’s financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net (loss) income, and refer to footnote (6) of the statements of (loss) income for a reconciliation of adjusted equity income to equity income (loss), the most directly comparable GAAP measure reflected in the Company’s consolidated financial statements.Teekay Parent Financial MeasuresTeekay Parent Adjusted EBITDA represents the sum of (a) distributions or dividends (including payments-in-kind) relating to a given quarter (but received by Teekay Parent in the following quarter) as a result of ownership interests in its consolidated publicly-traded subsidiaries (Teekay LNG and Teekay Tankers), net of Teekay Parent’s corporate general and administrative expenditures for the given quarter and (b) Adjusted EBITDA attributed to Teekay Parent’s directly-owned and chartered-in assets.Teekay Parent Free Cash Flow represents Teekay Parent Adjusted EBITDA, less Teekay Parent’s net interest expense and, commencing in the second quarter of 2020, asset retirement costs incurred for the given quarter. Net Interest Expense includes interest expense (excluding the amortization of prepaid loan costs), interest income and realized losses on interest rate swaps. Please refer to Appendices B, C, D and E of this release for further details and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures reflected in the Company’s consolidated financial statements.

Teekay Corporation
Summary Consolidated Statements of (Loss) Income
(in thousands of U.S. dollars, except share and per share data)









Teekay Corporation
Summary Consolidated Balance Sheets
(in thousands of U.S. dollars)


Teekay Corporation
Summary Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)

Teekay Corporation
Appendix A – Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income (Loss)
(in thousands of U.S. dollars, except per share data)




Teekay Corporation
Appendix A – Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income (Loss)
(in thousands of U.S. dollars, except per share data)


Teekay Corporation
Appendix B – Supplemental Financial Information
Summary Statement of Income (loss) for the Three Months Ended September 30, 2020 
(in thousands of U.S. dollars)
(unaudited)


Teekay Corporation
Appendix C – Supplemental Financial Information
Teekay Parent Summary Operating Results
For the Three Months Ended September 30, 2020
(in thousands of U.S. dollars)
(unaudited)




Teekay Corporation
Appendix D – Reconciliation of Non-GAAP Financial Measures
Teekay Parent Free Cash Flow
(in thousands of U.S. dollars, except share and per share data)





Teekay Corporation
Non-GAAP Financial Reconciliations

Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Consolidated
(in thousands of U.S. dollars)


Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Equity-Accounted Vessels
(in thousands of U.S. dollars)


Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Total Adjusted Revenues 
(in thousands of U.S. dollars)


Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA – Teekay Parent
(in thousands of U.S. dollars)




Teekay Corporation
Appendix E – Reconciliation of Non-GAAP Financial Measures
Net Interest Expense – Teekay Parent
(in thousands of U.S. dollars)
Forward Looking StatementsThis release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements, among other things, regarding: the impact of COVID-19 and related global events on the Company’s business and financial results; fixed charter coverage for Teekay LNG’s and Teekay Tankers’ fleets for the remainder of 2020 and 2021; the timing and cost of the remediation of the Banff field’s subsea infrastructure and the Banff FPSO unit’s decommissioning and recycling; and the Company’s liquidity and the Teekay Group’s positioning for both near-term market volatility and to create long-term shareholder value. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: market or counterparty reaction to changes in exploration, production and storage of offshore oil and gas, either generally or in particular regions that would impact expected future growth; changes in the demand for oil, refined products, LNG or LPG; changes in trading patterns significantly affecting overall vessel tonnage requirements; greater or less than anticipated levels of vessel newbuilding orders and deliveries and greater or less than anticipated rates of vessel scrapping; changes in global oil prices or tanker rates; OPEC+ and non-OPEC production and supply levels; the duration and extent of the COVID-19 pandemic and any resulting effects on the markets in which the Company operates; the impact of the pandemic on the Company’s ability to maintain safe and efficient operations; issues with vessel operations; higher than expected costs and expenses, off-hire days or dry-docking requirements; higher than expected costs and/or delays associated with the remediation of the Banff field or the decommission/recycling of the Banff FPSO unit; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations, including IMO 2030; the potential for early termination of long-term contracts of existing vessels; changes in borrowing costs or equity valuations; declaration by Teekay LNG’s board of directors of common unit distributions; available cash to reduce financial leverage at Teekay Parent, Teekay LNG and Teekay Tankers; the impact of geopolitical tensions and changes in global economic conditions; and other factors discussed in Teekay’s filings from time to time with the SEC, including its Annual Report on Form 20-F for the fiscal year ended December 31, 2019. Teekay expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Teekay’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based. 
Reflects unrealized gains (losses) relating to the change in the mark-to-market value of derivative instruments that are not designated in qualifying hedging relationships for accounting purposes, including those gains (losses) included in the Company’s proportionate share of equity income (loss) from joint ventures.


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