Teekay (TK)

Q4 2012 Earnings Call

February 21, 2013 11:00 am ET

Executives

Kent Alekson

Peter Evensen - Chief Executive Officer, President and Director

Vincent Lok - Chief Financial officer, Principal Accounting Officer and Executive Vice President

Analysts

Justin B. Yagerman - Deutsche Bank AG, Research Division

Michael Webber - Wells Fargo Securities, LLC, Research Division

Fotis Giannakoulis - Morgan Stanley, Research Division

Keith Mori - Barclays Capital, Research Division

Presentation

Operator

Welcome to Teekay Corporation's Fourth Quarter and Fiscal 2012 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, 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 fourth quarter and fiscal 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 fourth quarter and fiscal 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 Fourth Quarter and Fiscal Year 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'll be walking through the fourth quarter and fiscal year 2012 earnings presentation, which can be found on our website.

Beginning on Slide 3 of the presentation, I'll briefly review some recent highlights for Teekay Corporation and our 3 publicly-traded daughter companies. For the fourth quarter of 2012, Teekay Corporation generated $218 million of total consolidated cash flow from vessel operations or CFVO, an increase of approximately 3% from the fourth quarter of 2011. On a fiscal year basis, Teekay Corporation generated $821 million of total consolidated cash flow from vessel operations in 2012, an increase of approximately 18% from 2011. Teekay Corporation reported a consolidated adjusted net profit of $2.9 million or $0.04 per share for the fourth quarter of 2012, a slight improvement from the $0.02 per share consolidated adjusted net profit that we reported in the fourth quarter of 2011. I should note that in our reported GAAP earnings, we incurred a large vessel impairment charge in the fourth quarter mainly relating to certain conventional tankers in Teekay Tankers, which Vince will discuss in detail later on the call.

On a full year basis, the company's results highlight the continued progress made during the year toward improving profitability. For fiscal 2012, Teekay Corporation reported an adjusted net loss of $54.9 million, which is almost a 50% reduction from the adjusted net loss of $103.1 million we've reported in 2011. The improvement reflects a combination of profitable growth, including contributions from the strategic acquisitions and newbuilding deliveries during 2011 and 2012 and profitability-enhancement initiatives that Vince will discuss in detail later. And this improvement comes despite the continued weak spot rates and approximately $9 million per quarter of lost cash flow due to the off-hire of the Petrojarl Banff FPSO for repairs following damage from the December 2011 storm event.

Teekay continues to execute on its growth projects, and I'm pleased to report today that this past Saturday, February 16, the Cidade de Itajai FPSO achieved first oil on its field in the Campos Basin in offshore Brazil and commenced its 9-year time-charter with Petrobras. We also continued to execute on our financial priorities. In late December, Teekay Parent completed a $200 million 3-year corporate revolving credit facility secured by a portion of its common unit holding in Teekay LNG and Teekay Offshore.

Our publicly-traded daughter entities have also been active during the quarter, executing on their respective business plans. In December 2012, Teekay LNG Partners, fast-paced on the attractive fundamentals in the LNG industry for the post-2015 period, ordered 2 fuel-saving 173,000 cubic meter LNG carrier newbuildings from Daewoo or DSME of South Korea. The newbuildings will be constructed with M-type electronically controlled gas injection or MEGI twin engines, which are expected to be significantly more fuel efficient and have lower emission levels than engines currently being utilized in LNG shipping. The partnership expects to secure long-term contract employment for both vessels prior to their scheduled delivery in the first half of 2016.

In early February, Teekay LNG completed its accretive acquisition of a 50% interest in Exmar LPG, a new joint venture with Belgium-based Exmar, which controls a fleet of 25 LPG carriers. This acquisition partners Teekay LNG with what we consider to be the leading player in the attractive midsized LPG sector. The new joint venture is a natural extension to Teekay LNG's already sizeable gas shipping business and provides another channel for future distributable cash flow growth. For the quarter ended December 31, 2012, Teekay LNG declared a cash distribution of $0.675 per unit. The cash distribution received by Teekay Parent based on GP and LP ownership interest in Teekay LNG totaled $23 million of cash flow for the quarter.

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