More tanker repurchases could be in the offing for Teekay Tankers as the company looks to navigate an uncertain market.
The New York-listed, Vancouver-based shipowner has $373m in liquidity, no debt maturities until 2023 and the option to buy back eight more tankers up to the end of the year after spending $57m on two suezmaxes earlier this month.
"It's certainly possible, and we're looking at all of those sale and leasebacks," Teekay Tankers chief financial officer Stewart Andrade said on the company's fourth-quarter earnings call when asked if it could continue to wind those deals down.
The suezmax repurchases — due for delivery in May — followed the $29.6m spent on buying back two aframaxes in November.
Of the eight sale-and-leaseback options available this year, Andrade said half are on leases with interest rates "closer to 9%", with some "in the 6% range".
"We have a keener focus on the 9% leases," he said. "We are looking at those and considering exercising those."
In total, exercising all 10 options — including the two leases bought back this month — would cost Teekay Tankers about $350m, although Andrade said the company could find other ways to finance the repurchases.
Teekay Tankers took out debt in the form of those sale-and-leaseback deals in 2018 in an effort to free up liquidity in a down market.
The company then axed dividends in late 2019 as it announced its intention to focus on reducing debt, which fell to $419m for the fourth quarter.
In addition to the repurchases, the company also sold two aframaxes for $32m and chartered in an aframax newbuilding — due for delivery in 2022 — for seven years.
Both Andrade and chief executive Kevin Mackay said the focus would remain on keeping a strong balance sheet, as the tanker market continues to reel due to depressed oil demand as a result of Covid-19 and unwinding floating storage after the oil price collapse last spring.
They said fleet renewal and expansion would be possible, but only if the right opportunity presented itself.
"Given the uncertainty in the market, we're going to focus on maintaining our balance sheet," Andrade said.
That weakened, uncertain market saw Teekay Tankers report a $73.3m loss — down considerably from the $63m profit posted for the fourth quarter of 2019.
Echoing the expectations of others, the company expects the tanker market to remain depressed in the near-term until oil demand begins to recover in the second half — although Mackay said it was unclear exactly when.
"We are confident that the oil demand environment will rebound in 2021," he said.
"We’re confident about the future, but the actual timing of it, we’re uncertain. We’re starting to hear more positive commentary from Opec+ on increasing supply. But we're 8m barrels per day below our pre-Covid run rate.
"Even if the increase is in the very near term, we’re not going to see 8m barrels return all at once. Our uncertainty is around the timing on when all that comes together."
