Teekay’s First Quarter 2004 Earnings Presentation · Teekay’s First Quarter 2004 Earnings...

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Teekay’s First Quarter 2004 Earnings Presentation

April 22, 2004

Teekay’s Teekay’s First Quarter 2004 First Quarter 2004 Earnings PresentationEarnings Presentation

April 22, 2004April 22, 2004

NYSE: TK

Teekay Shipping Corporation 2

Forward Looking StatementsForward Looking Statements

This report 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 regarding the Company’s future growth prospects; tanker market fundamentals, including the balance of supply and demand in the tanker market, and spot tanker charter rates; anticipated annualized cash flow from vessel operations from the Company’s fixed-rate segment by the end of 2004 and 2005; newbuilding delivery dates and the commencement of service under long-term contracts; the impact of the Tapias acquisition to Teekay’s earnings, future cash flow from vessel operations and strategic position; the financing requirements for and the closing of the acquisition; the growth prospects of the LNG shipping sector and the joint venture company with the Tapias shareholders; and the anticipated distribution date for the stock split. 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: changes in production of or demand for oil, petroleum products and LNG, either generally or in particular regions; greater or less than anticipated levels of tanker newbuilding orders or greater or less than anticipated rates of tanker scrapping; changes in trading patterns significantly impacting overall tanker tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; changes in the typical seasonal variations in tanker charter rates; changes in the offshore production of oil; the potential failure to close the Tapias transaction; the potential inability of Teekay to integrate Tapias successfully; the potential for early termination of long-term contracts and inability of the Company to renew or replace long-term contracts; shipyard production delays; the Company’s future capital expenditure requirements; and other factors discussed in Teekay’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2002. The Company 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 the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.


11stst Quarter HighlightsQuarter Highlights

Highest quarterly net income of $189 million, or $4.37 per share

an EPS increase of over 230% compared to the first quarter of 2003

Record performance in every segment

Announced Naviera F. Tapias acquisition:Immediately accretive to earnings and adds approximately $115 million in annualized fixed-rate cash flow from vessel operations by the end of 2004

Announced 2-for-1 stock split effective May 17, 2004


World Oil Demand World Oil Demand YearYear--onon--Year ChangeYear Change

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,5001q

00

2q00

3q00

4q00

1q01

2q01

3q01

4q01

1q02

2q02

3q02

4q02

1q03

2q03

3q03

4q03

1q04

2q04

E

3q04

E

4q04

E

Source: IEA

Thou

sand

B/D

OECD China Other Non-OECD World


Global Oil Demand Global Oil Demand -- Growing Strongly Growing Strongly Throughout the SeasonsThroughout the Seasons

73.0

75.0

77.0

79.0

81.0

83.0

1st quarter 2nd quarter 3rd quarter 4th quarter

Source : IEA

Mill

ion

B/D

2004E

2003

2002

200120001999


Changes in World Oil Production Changes in World Oil Production vs. Changes in Oil Pricevs. Changes in Oil Price

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0Ja

n-01

Mar

-01

May

-01

Jul-0

1Se

p-01

Nov

-01

Jan-

02M

ar-0

2M

ay-0

2Ju

l-02

Sep-

02N

ov-0

2Ja

n-03

Mar

-03

May

-03

Jul-0

3Se

p-03

Nov

-03

Jan-

04M

ar-0

4

Source: IEA

Mill

ion

B/D

10

15

20

25

30

35

40

US$

per

Bar

rel

Non-OPEC OPEC WTI

Typical Spring oil price drop

High oil price spurs OPEC production


-30

-20

-10

0

10

20

30

4019

94

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

+

Source: CRS

Mill

ion

Dea

dwei

ght

Deliveries Deletions On Order Net Change

Tanker Supply Tanker Supply -- OutlookOutlook

Mandatory Scrapping 34 mdwt

4.5 mdwt mandatory scrapping

17.4 mdwt voluntary scrapping


World Tanker Supply / Demand Balance World Tanker Supply / Demand Balance to Remain Tight Through 2006to Remain Tight Through 2006

2004/2005 2006(mdwt) (mdwt)

Newbuilding deliveries 59 18

less: mandatory scrapping * 34 1

Net fleet growth 25 17

Tanker demand growth ** 23 12

Change in supply / demand

* excludes any voluntary scrapping

** based on 2% per annum oil demand growth, equal to3.5% per annum tanker demand growth

5balance 2


World Tanker Utilization vs. Aframax World Tanker Utilization vs. Aframax Average EarningsAverage Earnings

80

82

84

86

88

90

92

94

96

98

1001q

94

1q95

1q96

1q97

1q98

1q99

1q00

1q01

1q02

1q03

1q04

Source: Platou / CRS

Perc

ent F

leet

Util

izat

ion

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

US$

per

day

Utilization TCE

90% utilization is considered full use of

the tanker fleet.


Tanker Tanker Newbuilding Newbuilding Prices Prices Rising RapidlyRising Rapidly

Korean Shipyards – Waiting Time for New Deliveries

1.9 years

3.6 years

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan. 2003 Apr. 2004Based on CRS statistics on Compensated Gross Tons (as of April 2004)

Year

s

Japanese Steel Plate Price Indexed (Jan.2003=100)

90

100

110

120

130

140

150

160

170

Jan.2003 Apr.2004Source : CRS

$335 / Tonne

$524 / Tonne

Tanker Newbuilding Price Indexed (Jan.2003=100)

90

100

110

120

130

140

Jan. 2003 April 2004Source:CRS

Almost doubled

+ 55%

+ 30%

+

=


Spot Tanker RatesSpot Tanker Rates

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,00019

94

1995

1996

1997

1998

1999

2000

2001

2002

2003

1q04

Apr

-04

Source: CRS

US$

per

Day

Aframax Suezmax VLCC

Seasonal decline but rates remain historically high


0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005

$ m

illio

ns

Tapias

Navion

OrganicGrowth

Base

Quantum Leap in Quantum Leap in FixedFixed--rate Segment Cash Flowrate Segment Cash Flow

CAGR = 58%

*

* Long-term fixed-rate cash flow from vessel operations


Transaction SummaryTransaction Summary

Teekay will acquire Naviera F. Tapias S.A., Spain’s largest provider of marine energy transportation

Total enterprise value of approximately $810 million (cash and assumption of existing debt), and $540 million in newbuilding commitments

Large modern fleet of LNG carriers and crude oil tankersFour LNG carriers, all on long-term charters to major energy companiesNine Suezmax tankers, five on long-term charter to major oil company, and four on short-term charter or trading in the spot market

Creation of 50/50 joint venture company to pursue oil and gas shipping opportunities in Spain

On schedule to close by April 30, 2004

Transaction expected to be immediately accretive to earnings and generate approximately $125 million in annual cash flow


Investment RationaleInvestment Rationale

Provides attractive entry for Teekay into high growth LNG shipping sector

Further extends Teekay’s position as the world’s leading shipper of seaborne oil

Positions Teekay for further growth in Spain through joint venture with existing Tapias shareholders

Significantly increases Teekay’s cash flow from long-term fixed-rate contract business

High debt capacity of Tapias’ contracts minimizes the required cash outlay by Teekay


Summary of Operating ResultsSummary of Operating Results

(in thousands of U.S. dollars, except per share data) Mar. 31, 2004 Mar. 31, 2003 % change(unaudited) (unaudited)

Net voyage revenues 447,567$ 212,898$ 110%

Spot-rate cash flow from vessel operations 192,055$ 117,355$ 64%Fixed-rate cash flow from vessel operations 70,310$ 25,259$ 178%Total cash flow from vessel operations 262,365$ 142,614$ 84%

Income from vessel operations 208,751$ 103,484$ 102%

Net income 189,009$ 53,579$ 253%

Earnings per share 4.37$ 1.32$ 231%

Three Months Ended


Summary Income StatementSummary Income Statement

March 31, December 31,2004 2003

(unaudited) (unaudited)

NET VOYAGE REVENUES 447,567 340,599

OPERATING EXPENSESVessel operating expenses 48,912 57,239 Time-charter hire expense 108,665 102,274 Depreciation and amortization 53,614 52,447 General and administrative 27,625 26,362

238,816 238,322 Income from vessel operations 208,751 102,277

Write-downs and other charges (159) (58,462) Equity income from joint ventures 1,836 3,217 Operating Income 210,428 47,032

OTHER ITEMSNet interest expense (20,309) (22,097) Income tax expense (2,149) (13,315)

Other - net 1,039 (5,038) (21,419) (40,450)

Net income 189,009 6,582

Weighted avg. # of shares outstanding - diluted 43,261,082 41,832,176

Three Months Ended


Remaining Newbuild CommitmentsRemaining Newbuild Commitments

$ millions 2004 2005 2006 2007 2008

Arranged Financing $177 $135 $83 $71 0

In Negotiations $83 $103 0 $25 $51

Total $260 $238 $83 $96 $51

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

2004* 2005 2006 2007 2008

$ m

illio

ns

Teekay Tapias

* Note: Represents commitments from April 1, 2004 to December 31, 2004


Pro Forma Capital Structure Pro Forma Capital Structure Teekay as at March 31, 2004 adjusted for Tapias acquisition(in thousands of U.S. dollars)

Pro FormaMarch 31, 2004 Acquisition of March 31, 2004

Teekay Tapias Consolidated

Cash 304,009 304,009

Debt 1,569,715 780,000 ** 2,349,715

Net Debt 1,265,706 780,000 2,045,706

Shareholder’s Equity 1,921,428 - 1,921,428

Total Capitalization 3,187,134 780,000 3,967,134

Net Debt/ Total Capitalization* 35% 48%

*Teekay's Premium Equity Participating Security Units treated as equity.** Excludes $540 million in newbuilding commitments of which $302 million is prepaid, net of $30m deposit.


Total Fixed Charges Covered by Total Fixed Charges Covered by Fixed Rate Cash Flow AloneFixed Rate Cash Flow Alone

Fixed Charges Coverage from Fixed-rate Segment in 2005

in $ millions

Projected 2005 CFVO - Fixed - rate Segment Only 400.0$ * (A)

Projected 2005 Fixed Charges

Net Interest Payments 120.0$ *

Principal Payments 210.0$ *

Drydock Costs 20.0$ * 350.0$ (B)

Fixed-rate CFVO/ Total Fixed Charges 1.14 X = A / B

* Source: Company estimate

CFVO = Cash Flow from Vessel Operations


Significant Operating LeverageSignificant Operating Leverage

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000Aframax Rates ($ per day)

Qua

rter

ly E

arni

ngs

Per S

hare

($)

Quarterly for 2004

2004:Spot Rate increase $1,000 TCE/day above $13,000 / day

EPS Increase~ $0.16 - $0.17 / qtr

EPS using Clarkson Q2, 2004 quarter to date TCE

Actual Q1 2004 EPS


Appendix Appendix –– Reconciliation ofReconciliation ofCash flow from vessel operationsCash flow from vessel operations

Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense. Cash flow from operations is included because such data is used by certain investors to measure a company's financial performance. Cash flow from operations is not required by accounting principles generally accepted in the United States and should not be considered as an alternative to net income or any other indicator of the Company's performance required by accounting principles generally accepted in the United States.

The following table reconciles the Company's Income from vessel operations with Cash flow from operations for the periods presented on slides 12 and 19:

Year Ended Year EndedReconciliation of Cash flow from vessel Dec. 31, 2002 Dec. 31, 2003operations from fixed-rate long-term contracts ($000s)ActualIncome from vessel operations 56,863 105,007 Depreciation and Amortization 43,889 84,863 Cash flow from vessel operations 100,752 189,870

Year Ended Year EndedDec. 31, 2004 Dec. 31, 2005

ProjectionIncome from vessel operations 201,000 245,000 Depreciation and Amortization 135,000 155,000Cash flow from vessel operations 336,000 400,000

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