Teekay Tankers Q1 2025 Earnings Report

Teekay Tankers EPS Results

• Actual EPS: $1.21
• Consensus EPS: $1.53
• Beat/Miss: Missed by -$0.32
• One Year Ago EPS: $4.23

Teekay Tankers Revenue Results

• Actual Revenue: $115.64 million
• Expected Revenue: $146.31 million
• Beat/Miss: Missed by -$30.68 million
• YoY Revenue Growth: -37.10%

Teekay Tankers Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 11:00AM ET

Teekay Tankers (NYSE:TNK) provides crude oil and other marine transportation services to oil industries in Bermuda and internationally. The company offers voyage and time charter services; offshore ship-to-ship transfer services of commodities primarily crude oil and refined oil products; and tanker commercial and technical management services. It also engages management of vessels, procurement, and equipment rental businesses. Teekay Tankers Ltd. was incorporated in 2007 and is headquartered in Hamilton, Bermuda.

Teekay Tankers Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to the Teekay Group First Quarter twenty twenty five Earnings Results Conference Call. During the call, all participants will be in a listen only mode. Afterwards, you will be invited to participate in a question and answer session. At that time, if you have a question, participants will be asked to press 1 to register for a question. For assist assistance during the call, please press 0 on your touch tone phone.

[Operator]

As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead.

[Edward Lee, Manager - Corporate Development at Teekay Tankers]

Participants to our website at www.teekay.com, where you'll find a copy of The Teekay Group's first quarter twenty twenty five earnings presentation. Kenneth 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 first quarter twenty twenty five Teekay Group earnings presentation available on our website.

[Edward Lee, Manager - Corporate Development at Teekay Tankers]

I will now turn the call over to Kenafid, Teekay Corporation and Teekay Tankers' President and CEO, to begin.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Thank you, Ed. Hello, everyone, and thank you very much for joining us today for The Teekay Group's first quarter twenty twenty five earnings conference call. Joining me on the call today for the Q and A session is Brody Spears, Teekay Corporation's and Teekay Tankers' CFO Ryan Hamilton, our VP, Finance and Corporate Development and Christian Waldegrave, our Director of Research. Starting on Slide three of the presentation, we will cover Teekay Tankers' recent highlights. Teekay Tankers reported GAAP net income of $76,000,000 or $2.2 per share and adjusted net income of $42,000,000 or $1.21 per share in the first quarter.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Teekay Tankers also generated approximately $65,000,000 in free cash flow from operations during the quarter. Over the last several years, Teekay Tankers has created significant value through a strategy of maximizing our operating leverage to a strong tanker market both by keeping our fleet spot exposed as well as opportunistically increasing our exposures through well timed in charters. As asset values have been plateauing and remain at historically high levels, we are focused on reducing our exposure to eighteen- to 19 year old tankers as well as opportunistically selling some 2,009 build Suezmaxes. Altogether, since the beginning of the year, our pace of vessel sales has increased as we have sold six vessels for total gross proceeds of approximately $183,000,000 for a total expected accounting gain on sale of approximately $53,000,000 In addition, as previously announced, we have also agreed to acquire a Maarten LR2 vessel, which we expect to take delivery of at the end of the month. All of this is part of our fleet renewal plan, which includes selling older vessels and acquiring modern vessels.

[Kenneth Hvid, President & CEO at Teekay Tankers]

While we have been more active recently in selling rather than buying, we expect this trend to change over time as we see opportunities to acquire more modern tonnage. Looking at our second quarter to date rates, the spot tanker market has strengthened, and we are booking rates at meaningfully higher levels than the first quarter. We have secured spot rates of $40,400 per day and $36,800 per day for our Suezmax and Aframax LR2 fleets, respectively, with approximately 45% of our spot days booked. We will discuss the drivers of the market in the subsequent slides. Teekay Tankers has declared its regular quarterly fixed dividend of $0.25 per share.

[Kenneth Hvid, President & CEO at Teekay Tankers]

In addition, we have declared a special dividend of $1 per share for a total dividend payout of $1.25 per share payable in May. Since updating our capital allocation plan in May 2023, Teekay Tankers will have paid out a total of $6.25 per share, which includes both our regular quarterly fixed dividend of $0.25 per share and a total of $4 per share of special dividends. More importantly, over the same period, Teekay Tankers has grown its book equity per share by over $21 or close to over $27 including dividends to a book equity of approximately $53 per share as of 03/31/2025, as evidenced by our recent gains on asset sales current market values exceed our historical book values. Lastly, Teekay Corporation also declared a special dividend of $1 per share payable in July. Please refer to the appendix for more details on Teekay Corporation's updates and results.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Moving to Slide four, we look at recent developments in the spot market. After a sluggish start to the year, midsized tanker spot rates have increased to the highest levels in over twelve months. Pricing oil production, particularly from The Americas and the imposition of U. S. Sanctions on Russian and Iranian shipping since the beginning of the year has led to Asian buyers sourcing more crude from the Atlantic Basin, resulting in higher midsized tanker tonne mile demand.

[Kenneth Hvid, President & CEO at Teekay Tankers]

In addition, fleet supply has tightened as more vessels have been drawn into the Russian trade to replace sanctioned vessels and as the price of crude has fallen below the price cap of $60 per barrel, allowing some owners to carry Russian crude without penalty. Turning to Slide five. We have highlighted two examples of how trade dynamics have benefited the midsized tanker market since the start of the year. Starting with the chart on the left, Suezmax tanker tonne mile demand has benefited from a strong increase in the export of Kazakh crude oil from the Caspian Pipeline Consortium or CPC terminal in the Black Sea, with Suezmax loadings at a record high during March. In addition, we've seen an unusually high number of CPC cargoes hitting long haul to Asia, almost all of which are transiting via the Cape Of Good Hope due to ongoing instability in the Red Sea.

[Kenneth Hvid, President & CEO at Teekay Tankers]

A voyage from the CPC terminal to China via the Cape takes around fifty days compared to just five days of voyage to the Mediterranean or twelve days to Northwest Europe, thereby creating significant tonne mile demand. We have also seen an increase in Aframax loadings from Vancouver via the TMX pipeline in the past couple of months, with a record high of 30 loadings in both March and April. These cargoes have been increasingly transiting directly to Asia on Aframaxes with a record 14 direct transits in April. And Aframax voyage from Vancouver to China takes around eighteen days compared to four days to Southern California. The increase in direct transits to Asia is therefore leading to higher Aframax tanker ton mile demand in the Asia Pacific region, and we expect that this trend will continue as China and other Asian countries look to diversify their sources of oil supply.

[Kenneth Hvid, President & CEO at Teekay Tankers]

These are just two examples of the shift in trade patterns, which have boosted tanker rates since the start of the year with mid sized tanker tonne miles in March, reaching the highest level in eighteen months and holding at elevated levels during April. Turning to Slide six, we look at near term oil market fundamentals, which we believe could give support to tanker rates in the coming weeks and months. Global oil prices are currently at a four year low due to concerns over the impact of U. S. Tariffs on future oil demand and the announcement from the OPEC plus group that they will accelerate the unwind of voluntary supply costs during May and June and potentially beyond.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Low oil prices support the tanker market through reduced bunker fuel prices, which is our largest operational cost, and potentially higher oil demand. Tanker markets could find further support if the oil price futures curve move into a steeper contango structure, which typically stimulates additional storage demand. As shown by the chart on the right, OECD oil inventories, including both commercial and government stockpiles, are currently at the bottom of the five year range. Government and industry bodies could therefore use this window of lower oil prices as an opportunity to rebuild oil inventories, thereby driving additional tanker demand. We're already seeing some evidence of this in China with crude oil imports during March reaching the highest level since late twenty twenty three, while The United States has also signaled its desire to replenish its strategic petroleum reserve in the coming years.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Turning to slide seven, we look at some of the uncertainties surrounding the medium term tanker market outlook due to recent economic and geopolitical developments. The imposition of trade tariffs by The United States and subsequently retaliatory tariffs have clouded the outlook for the global economy and oil demand. While the outcome remains uncertain, industry analysts have started to adjust their global economic and oil demand forecast downwards due to concerns that tariffs may harm global trade and lead to lower economic growth. It is worth noting that all of the major oil forecasting agencies are still expecting demand growth for this year and next with the average of forecasts from the IEA, EIA and OPEC projecting 1,200,000 barrels of growth in 2025 and a further 1,000,000 barrels per day in 2026. However, uncertainty does exist with the potential for further downgrades on global oil demand growth depending on how things progress during the year with the increased risk of a potential global recession.

[Kenneth Hvid, President & CEO at Teekay Tankers]

In addition, last month saw an updated proposal from The U. S. Trade Representative regarding the imposition of fees on Chinese owners and operators and Chinese built ships calling at U. S. Ports.

[Kenneth Hvid, President & CEO at Teekay Tankers]

While the final outcome is still uncertain, the most recent proposal is less impactful to non Chinese tanker owners compared to the one which was initially put forward in February. We believe that the current proposal, should it be enforced, will be manageable, both from an industry and a TNK perspective, due to the various exemptions granted to non Chinese operators of Chinese built vessels. A further hearing of the proposal is due to be held on May 19, following which we would expect to have more clarity on how these rules will impact the wider tanker market. The geopolitical landscape adds another layer of complexity to the outlook, including the ongoing war in Ukraine, The U. S.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Maximum pressure campaign against Iran and the safety situation in the Red Sea, which continues to limit vessel transits. Any changes to these factors could impact the tanker market in the coming months, potentially adding to supply chain inefficiency or significantly significant rerouting of trade flows. Though it remains very difficult to predict how these events will unfold and what impact they will have on the market. Turning to Slide eight. We look at fleet supply dynamics, which remain supportive through at least the medium term.

[Kenneth Hvid, President & CEO at Teekay Tankers]

The pace of tanker newbuild orders has slowed significantly since the middle of twenty twenty four with just 2,800,000 deadweight tonnes of orders placed in the first quarter of twenty twenty five, the lowest quarterly total since Q3 of twenty twenty two. Although the pace of tanker ordering has slowed, shipyards continue to receive orders in other shipping sectors, and we estimate that global shipyard capacity is essentially full through 2027 and approximately 70% full for 2028. In addition, a lack of tanker scrapping means that the tanker fleet continues to age, with the average age of the global tanker fleet standing at 13.9 as of April 2025, the highest since 02/2001. Should tanker market conditions worsen, there would be increased pressure on the large and growing pool of scrap candidates to leave the market, providing a mechanism to rebalance the global fleet. We therefore believe the combination of the current order book, an aging tanker fleet and constraints on available yard space points toward a balanced supply outlook and should result in continued low levels of tanker fleet growth over the medium term.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Turning to Slide nine, we highlight how Teekay Tankers has strong cash flow generation while remaining patient for future fleet renewal. Teekay Tankers' free cash flow breakeven has declined over the last several years to its lowest level of $13,200 per day from a peak of $21,300 per day in 2022. Combined with our operating leverage, we can generate cash flow in almost any market conditions. To emphasize, every $5,000 increase in spot rates above our breakeven produces $2.1 per share of annual free cash flow or 4.4% on a free cash flow yield basis. The shipping industry is a cyclical capital intensive business, which requires reinvestments as vessels age.

[Kenneth Hvid, President & CEO at Teekay Tankers]

While we have been returning capital to shareholders through dividends, a key priority is to retain significant cash flows to ensure we can act when the right opportunities present themselves as part of our fleet renewal strategy. While we continue to exercise patience, we are well positioned to generate cash flows in almost any tanker market and are ready to use our balance sheet to take advantage of opportunities as they emerge. With that, operator, we are now available to take questions.

[Operator]

Thank you. And we'll take our first question from John Chappell with Evercore ISI.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Thank you. Good morning. Kenneth, on that last point of patience, and it's been brought up a couple times in the past as well. Obviously, you've been a more of a seller than a buyer. You insinuated in the press release that that strategy may shift.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

But I just kinda have a tough time aligning the positive view on the market with a view that asset prices may come back in to a level that's attractive to you. So can you talk maybe a little bit about, you know, market outlook, why asset values may become more attractive, and what it may take for you to shift from that seller mentality to to more of a renewal mode?

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yes. Good morning, John. It's it's it's obviously a very good question. Right? It's as as we point out, we're trying to to balance this thing of of having a a a fleet that still generates significant cash flows.

[Kenneth Hvid, President & CEO at Teekay Tankers]

And as we are running all ship years, as you know, we've been doing over the last years without really reinvesting in in new ship years, you come to a point where in a cyclical industry at some point, you you gotta reload with with new ship years, right? And the longer it goes, we're kind of back to the classic discussion that we had, as you and I remember, back in 02/2008 and 02/09, is this stronger for longer? And when is it going to turn? I think history tells us that it will turn at some point, and markets will come down. And when it does, it happens suddenly, and we tend to get surprised.

[Kenneth Hvid, President & CEO at Teekay Tankers]

And that's when opportunities to reload opens up. I think staying disciplined in this, we are very clear on what breakeven levels we can can run a calculator as most of our our peers can. We we understand what what what levels you you kind of it's a good time to make a a twenty year investment, where we think we can have a a a good chance of of making a return. But you're absolutely right. Of course, it's a challenge that we have a strong market and the medium term outlook is actually pretty good.

[Kenneth Hvid, President & CEO at Teekay Tankers]

And at the same time, we're kind of running off shipyards, and we would like to load on some new years. So that's why we're leaning in slowly and finding taking a couple of ships. So if if we look at at at at other sectors, you have seen ordering coming down. And and as that comes down, we we typically, see also shipyard prices coming down. That's what we expect will happen, towards the end of this year.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Mhmm. Okay. I understand it's difficult to to answer that. Maybe difficult to answer this follow-up too. You know, putting on your TK Corp hat for a second, I know that, you know, the group in general has had the struggle with with finding attractively priced assets in any subsegment.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

But here, you have this subsidiary that you own a big stake in in T and K trading by anyone's calculator in massive discount to NAV. I understand, you know, that that that you're trying to be patient and there's gonna be a reload opportunity at some point, but it it seems like it's almost not mutually exclusive when you have almost a billion dollars of liquidity at TNK. And I don't know what the liquidity is at TK, but I imagine it's it's quite large as well. Wouldn't TNK shares either from the TK corporate level or the

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

TNK subsidiary level just be the most attractive use of of that liquidity today as you wait for the asset values to to come in a little bit?

[Kenneth Hvid, President & CEO at Teekay Tankers]

I I think it's a good point. It's obviously one we are we are assessing. And as we we all saw every the the whole space took a a dive here in in in q one. I think everybody, irrespective of what our strategies are, what our fleet profiles are, what our dividend policy are, were largely trading at these discounts that you referred to. And that obviously always makes it complicated to you run that calculator and just increase your NAV by buying back stock.

[Kenneth Hvid, President & CEO at Teekay Tankers]

But at the same time, we're an operating company. At some point, we need to buy steel so we can generate future cash flows. But as you've seen in the past, we've been buying back stock at especially at Teekay actively. And we did that because we're trading at an even bigger discount there. Now we're trading in line, which we think is the right currency that we should have.

[Kenneth Hvid, President & CEO at Teekay Tankers]

So of course, we're looking at edits and especially at the valuation we have at T and K. I agree it looks attractive.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Okay. Thanks, Kenneth.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Thanks, John.

[Operator]

We'll now take our next question from Omar Nokta with Jefferies.

[Omar Nokta, Managing Director at Jefferies LLC]

Thank you. Hi, Kenneth. Kind of maybe just following up on John's line of questions. You mentioned clearly have been a net seller, but that could change as time goes on. But guess when we think about the footprint you have today, is there a level you need to stay above in terms of maintaining a critical mass?

[Omar Nokta, Managing Director at Jefferies LLC]

You have the 20 Suezmaxes, 15 Afras. What's the threshold where you don't wanna get below and that starts to maybe affect your commercial presence?

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yeah. That's, good morning, Omar. That's a that's a great question as well, and, obviously, the one we are we're looking at and and discussing. We I'll say we we still have a bit of room, but there is, of course, a level without giving you the exact number. I would say that there is a point being an integrated operating company that we we don't really wanna dip below.

[Kenneth Hvid, President & CEO at Teekay Tankers]

I would say from a commercial trading point of view, we we haven't really seen the the the impact on on commercial performance. We seem to be able to to to get our our ships around and and get the right charters on them. So I think the performance, considering the the profile of the fleet and everything, is is actually very good, especially on the Aframaxes on a relative basis. On the Suezmaxs, we're we're holding up as well. So so I think it's not really impeding the commercial trading of it.

[Kenneth Hvid, President & CEO at Teekay Tankers]

But, of course, there's always a a a scale consideration that that we have here. So that's also why we're saying that we're probably going to be slowing down on the sales and look for opportunities. So I would say it's close to where we are now. We would go a little bit lower. But of course, the exciting part is that we now have significant investment capacity to renew the fleet when when the right opportunities arise and then shipping, they they do come around. So so we we're excited about that outlook.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. That that that that's clear and helpful. And and maybe just a follow-up just to that. And I think I've I I know I'm I'm I've asked you this before, but just in general, I mean, clearly, you've gotten to a point where the cash is just coming in the door very, very quickly. You paid off all the debt, and now it's just you know, you you get to enjoy the benefit of just seeing that cash come in and completely understand the reluctance to wanna distribute it to shareholders given that there is a need to replenish and modernize the fleet.

[Omar Nokta, Managing Director at Jefferies LLC]

I guess maybe as you kinda think about that big picture, it still does it still make sense to wanna put capital to work in tankers? And you just said that there could be know, these opportunities show up very quickly. But does it make sense maybe to to maybe to shift the mindset altogether of the company where, you know, you've made these winnings, quote unquote, from a a strong spot market? Do you take that capital and try to maybe redeploy it into something completely different where the earnings quality is perhaps better than than a spot driven tanker business?

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yeah. That's that's another really good question, Omar. And and and we've spent a lot of time looking at at all the sectors and, also looking at it from a TK Corp perspective historically. And so far, I I think we're we're very happy not having invested in in in other sectors in the last couple of years. I think the sector we are in here has actually performed extremely well, and we clearly have an operating franchise that that is performing well, and that's where we have the the skill sets.

[Kenneth Hvid, President & CEO at Teekay Tankers]

I would say that what we what we are always looking at that that is is interesting is, of course, the adjacency to the the core segments that CK is in. So we have Aframaxes where we traditionally have been very large, and we have Suezmaxes where we're actually larger today. But of course, the adjacent sectors to that is moving up one size to VLCCs and is moving one size down to MRs. And that's all within our wheelhouse. So we are constantly comparing, contrasting the relative return expectations or attractiveness of each of those sectors.

[Kenneth Hvid, President & CEO at Teekay Tankers]

And and I think that gives us a a pretty sizable sandbox in which we can reallocate capital into in terms of segments where that we really feel are are are close to our core operations and core skills and where we have the the customer relationships. And I'm pretty sure that we'll find, what what we consider kind of good entry levels in in any of those, spaces here in the in the next year or two. I would be very surprised if that doesn't happen.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. Very good. Thanks, Thanks.

[Operator]

We'll now take a question from Ken Hoexter with Bank of America.

[Ken Hoexter, Managing Director at Bank of America]

Hey, great. Good morning, Kenneth. You talked about at the beginning of the call the kind of the super seasonality of rates lasting into 2Q here and maybe even staying a little stronger. Maybe you can talk a little bit about that strength and and your thoughts as we've moved, you know, deeper into May and and the continuation of that. And then on that same vein, you know, you threw out the the shift to to Asia coming out of Vancouver would would continue.

[Ken Hoexter, Managing Director at Bank of America]

Maybe just add on some thoughts on, you know, if we start getting increasing peace discussions, you know, with with the Houthis around the Red Sea or or Ukraine and Russia, would you see that abate and and see some rapid pressure on those rates, or or maybe just your thoughts on kind of that the the pace with which we could see it alter?

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yeah. That's, morning, Ken. That's that's a that's a good crystal ball question trying to predict what's, what's gonna happen in the world here. Right? But the the the way we I I I just think about it is that when you look back, the last, like, two quarters, were were lower than what we we have experienced in the past three years, so sequentially down.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Clearly, what's driving the rates right now are everything I mentioned in our prepared remarks, we have a low oil price, we're seeing these that, for the first time in three years, are actually outperforming the other sectors. So that's interesting. It's kind of it feels a little bit more back to normal how the tanker markets used to work. But when you look at the world, we're certainly not back to normal. Right?

[Kenneth Hvid, President & CEO at Teekay Tankers]

There's a lot of moving pieces in the world right now. So it's incredibly difficult to predict exactly what's how that's gonna flow down to tanker rates, I think. What I can say is that, as we also point out and what we focused on is that when you have low oil price and you have low inventories, you typically have a couple of quarters where where you see some some pretty good demand. But, of course, it it doesn't last forever. And, therefore, at some point, our expectation is that, yeah, there will probably be some some correction.

[Kenneth Hvid, President & CEO at Teekay Tankers]

But I would say the outlook, especially for the larger ships right now, looks looks very looks very positive.

[Ken Hoexter, Managing Director at Bank of America]

Yes. That's a great point on the low inventories and the sustainability of that. So let me jump over to your Slide eight, which had the $3.00 9,000,000 on the order book and 109,000,000 that are over twenty years. And then you got a range of three nineteen that that are 15 to 19. And and some of those obviously could be closer to 15 than 19.

[Ken Hoexter, Managing Director at Bank of America]

And and so I look at that and and see kind of an order book that continues to build and and maybe outpace kind of those retirements, which is why are you not fearful that that, you know, can put pressure? I mean, again, your your cash flow breakeven is so low. It's not like we're talking about those levels, but but just wondering your thoughts on why why we should not expect to see some some additional pressure on rates.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yeah. Wouldn't say we're not fearful. I think we're always running the business with being mindful of what could happen to rates. And I think you raised a good point. I mean, as and we pointed out in our on our call last quarter, if you look at the medium sized tanker space and include the LR2s and and so you look at Aframaxes and and Suezmaxes, as we pointed out last last quarter, If we don't have any scrapping happening over, the next, two years, three years, we will have a fleet which is, 600 which counts 600 vessels that are over, 20 years old in in that space.

[Kenneth Hvid, President & CEO at Teekay Tankers]

I think that is, to be honest, that is the big valve that that we're all looking at. Because as long as there's no scrapping happening in that age group and you see utilization of that age of visits of vessels, then I would say, at some point, the rates should come down. We're also pointing out in our remarks, prepared remarks here that as the market corrects, and we haven't seen that dip yet, you you have a big release valve here where there's a lot of of vessels that naturally should be scrapped. And I think from a historical point of view, that's very different, again, from what we saw in in 02/2008. The issue in 02/2008 that we had the youngest fleet that we've had in twenty years.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Today, we have the oldest average fleet age that we've had in in twenty years. And, of course, the incentive to scrap a twenty or 22 year old ship is very different from scrapping a seven year old ship as which was the situation we had back then. So I think that's that's how the situation is is a little bit different. We're we're kind of very mindful of that we're probably going to see some correction, but we also think that there are some valves that very effectively will take care putting some of the older tonnage away.

[Ken Hoexter, Managing Director at Bank of America]

Yeah. Certainly. If I could just get a follow-up there on the the restocking of the oil inventories. Anything you can kinda quantify in terms of the you know, where we are relative to normal levels on if you go back to that chart or how quickly you think that could absorb some capacity in a slow summer or a low period to keep the rates elevated again, putting that crystal ball back on?

[Kenneth Hvid, President & CEO at Teekay Tankers]

Yes. We have Christian Waldegrave on the call as well who follows us very closely. So I'll I'll I'll hand it over to him to to comment.

[Christian Waldegrave, Director of Research & Commercial Performance at Teekay Tankers]

Yeah. Thanks, Kenneth. Yeah. I think it's difficult to quantify in terms of how much actual demand or or how much it's going to to influence the rates. But the fact that the, inventories are at the bottom of the five year range, both commercial and strategic, as we pointed out in the remarks there, means that there's, as OPEC starts increasing production and we can get more non OPEC supply coming on year with I think we've got five FPSOs coming on in Brazil and Guyana over the next few months.

[Christian Waldegrave, Director of Research & Commercial Performance at Teekay Tankers]

We should have a relative oversupply of oil relative to demand. And given given where oil prices are at, it should add to inventories and flow into inventories. I think on land storage will get filled first. Who knows if the if the curve goes deeper into Contango, you know, at times you might see some floating storage as well, which which then starts to tie up tonnage. As Kenneth pointed out, it's not a a a situation that will last forever, but these periods where you do get, inventories being refilled, and a lower oil price in Contango situation, we know from the past that they can be quite positive for rates, and it's coming at a good time.

[Christian Waldegrave, Director of Research & Commercial Performance at Teekay Tankers]

Right? Because, normally, going into q two and q three and the summer months, you would you would start to see the, the seasonal dip in tanker rates, but, you know, we might get some counter seasonal strength here through the summer. And then beyond that, like Kenneth said, you know, the sort of the refilling the inventories is good for a period of time. After that, once the inventories are refilled, you might start to see OPEC cutting production again or non OPEC production coming off if the oil price stays stays low for longer. So it's definitely a window of opportunity here where we could see some counter seasonal strength.

[Christian Waldegrave, Director of Research & Commercial Performance at Teekay Tankers]

But like Kenneth said, I think the sort of longer term picture is still a little bit unclear given everything that's going on in the world.

[Ken Hoexter, Managing Director at Bank of America]

Great. Thanks, Christian. Thank you for the time.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Thank you.

[Operator]

And that does conclude our question and answer session. I'd like to turn the conference back to the company for additional or closing remarks.

[Kenneth Hvid, President & CEO at Teekay Tankers]

Thank you, everyone, for joining us on our call today. We look forward to reporting back to you next quarter. Have a great day.

[Operator]

And that does conclude today's conference. We thank you all for your participation. You may now disconnect.

Participants

Executives

• Edward Lee, Manager - Corporate Development
• Kenneth Hvid, President & CEO
• Christian Waldegrave, Director of Research & Commercial Performance

Analysts

• Jonathan Chappell, Senior Managing Director at Evercore ISI
• Omar Nokta, Managing Director at Jefferies LLC
• Ken Hoexter, Managing Director at Bank of America