Teekay Tankers plans to deploy capital to renew its fleet after ending a long hiatus as a vessel buyer, says chief executive Kevin Mackay.
But he said the New York-listed company must take a selective and measured approach.
“We do recognise, and I think it’s important for our investors to recognise, that we have to keep reinvesting in our fleet,” he said during a conference call to discuss quarterly earnings.
“Having said that, I think it’s important that we do the timing right.”
TradeWinds reported on Wednesday that the company bought a 113,000-dwt, 2021-built aframax tanker from Union Maritime that is now named Orchid Spirit.
Jefferies analyst Omar Nokta pointed out in the earnings call that it has been at least six or seven years since Teekay Tankers bought a vessel. He questioned whether the purchase was a sign that the company would be more aggressive.
Mackay said the company is happy with its fleet, but is also happy that it is finally in a position to deploy capital.
But tanker prices are on the rise, which is both an opportunity to sell and grounds for caution.
“While there is a need to deploy a significant amount of capital towards fleet renewal, given where asset prices are, we feel that at this point in time, it would be more prudent to be more selective in how we go about renewing our fleet,” he said.
In the Orchid Spirit deal, one modern aframax replaced two 2005-built ships that Teekay Tankers had sold.
Mackay acknowledged a willingness to shrink the fleet size in order to buy newer vessels.
“Scale is obviously important. It gives us the ability to deploy assets in different markets and capture the volatility that’s inherent in tanker trading,” he said.
“But at the same time, we’re not fixated on the number of ships we have.”
VesselsValue’s tanker price index has risen by 18.5% in the past year.
In a rising asset price market, Mackay said the company has to keep its eye on value.
“If we can sell off some of the older units that have a limited lifespan left, we’ll look at doing that,” he said.
“But on the other hand, we’re also generating an awful lot of free cash flow from those older assets, so it’s a question of doing the maths and seeing which one provides us the best value.”
