Teekay Tankers Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025

Key Takeaways

  • GAAP net income of $76 million ($2.20/share) and adjusted net income of $42 million ($1.21/share) in Q1, with approximately $65 million in free cash flow from operations.
  • Sold six older tankers for ~$183 million in gross proceeds and expects a $53 million gain as part of its fleet renewal plan to replace aging vessels with modern tonnage.
  • Q2 spot rates are significantly higher than Q1, with $40,400/day for Suezmaxes and $36,800/day for Aframaxes and ~45% of spot days already booked.
  • Declared a regular quarterly dividend of $0.25/share plus a special dividend of $1.00/share (total $1.25/share), while book equity per share has grown to ~$53/share since May 2023.
  • Fundamentals remain supportive—trade rerouting, low oil prices, limited newbuilding orders and an aging fleet—but uncertainties from tariffs, potential recession and geopolitical tensions persist.
AI Generated. May Contain Errors.
Earnings Conference Call
Teekay Tankers Q1 2025
00:00 / 00:00

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Operator

Welcome to the Teekay Group First Quarter 2025 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 Star One to register for a question. For assistance during the call, please press Star Zero on your touch-tone phone. 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.

Ed Lee
Head of Investor Relations at Teekay Group

Before we begin, I would like to direct all participants to our website at www.teekay.com, where you'll find a copy of the Teekay Group's First Quarter 2025 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 2025 Teekay Group earnings presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation and Teekay Tankers President and CEO, to begin.

Kenneth Hvid
President and CEO at Teekay Group

Thank you, Ed. Hello, everyone, and thank you very much for joining us today for the Teekay Group's First Quarter 2025 earnings conference call. Joining me on the call today for the Q&A session is Brody Speers, 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 million, or $2.20 per share, and adjusted net income of $42 million, or $1.21 per share in the first quarter. Teekay Tankers also generated approximately $65 million in free cash flow from operations during the quarter.

Kenneth Hvid
President and CEO at Teekay Group

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 exposure through well-timed enhancements. As asset values have been plateauing and remain at historically high levels, we have focused on reducing our exposure to 18 to 19-year-old tankers, as well as opportunistically selling some 2009-built 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 million for a total expected accounting gain on sale of approximately $53 million. In addition, as previously announced, we have also agreed to acquire a modern LR2 vessel, which we expect to take delivery of at the end of the month.

Kenneth Hvid
President and CEO at Teekay Group

All of this is part of our fleet renewal plan, which includes selling older vessels and acquiring modern vessels. 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 and CEO at Teekay Group

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 March 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.

Kenneth Hvid
President and CEO at Teekay Group

Please refer to the appendix for more details on Teekay Corporation's updates and results. Moving to slide four, we look at recent developments in the spot market. After a sluggish start to the year, mid-size tanker spot rates have increased to the highest levels in over 12 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 mid-size tanker ton-mile demand. 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.

Kenneth Hvid
President and CEO at Teekay Group

Turning to slide five, we have highlighted two examples of how trade dynamics have benefited the mid-size tanker market since the start of the year. Starting with the chart on the left, Suezmax tanker ton-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 heading long haul to Asia, almost all of which are transiting via the Cape of Good Hope due to ongoing instability in the Red Sea. A voyage from the CPC terminal to China via the Cape takes around 50 days compared to just five days for a voyage to the Mediterranean or 12 days to Northwest Europe, thereby creating significant ton-mile demand.

Kenneth Hvid
President and CEO at Teekay Group

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. An Aframax voyage from Vancouver to China takes around 18 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 and CEO at Teekay Group

These are just two examples of the shift in trade patterns, which have boosted tanker rates since the start of the year, with mid-size tanker ton-miles in March reaching the highest level in 18 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 cuts during May and June and potentially beyond. Lower oil prices support the tanker market through reduced tanker fuel prices, which is our largest operational cost and potentially higher oil demand.

Kenneth Hvid
President and CEO at Teekay Group

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 2023, while the United States has also signaled its desire to replenish its strategic petroleum reserve in the coming years. 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.

Kenneth Hvid
President and CEO at Teekay Group

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 forecasts 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 forecast from the IEA, EIA, and OPEC projecting 1.2 million barrels of growth in 2025 and a further 1 million 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 and CEO at Teekay Group

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. 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. 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 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.

Kenneth Hvid
President and CEO at Teekay Group

Turning to slide eight, we look at fleet supply dynamics, which remain supportive through at least the medium term. The pace of tanker new build orders has slowed significantly since the middle of 2024, with just 2.8 million deadweight tons of orders placed in the first quarter of 2025, the lowest quarterly total since Q3 of 2022.

Kenneth Hvid
President and CEO at Teekay Group

Although the pace of tanker ordering has slowed, shipyards continue to receive orders in other shipping sectors, and we estimate the 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 years as of April 2025, the highest since 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 and CEO at Teekay Group

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 break-even 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 break-even produces $2.01 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. 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.

Kenneth Hvid
President and CEO at Teekay Group

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. We'll take our first question from Jon Chappell with Evercore ISI.

Jon Chappell
Jon Chappell
Senior Managing Director at Evercore ISI

Thank you. Good morning. Kind of on that last point of patience, and it's been brought up a couple of times in the past as well. Obviously, you've been more of a seller than a buyer. You insinuated in the press release that that strategy may shift. I just kind of have a tough time aligning the positive view on the market with a view that asset prices may come back into a level that's attractive to you.

Jon Chappell
Jon Chappell
Senior Managing Director at Evercore ISI

Can you talk maybe a little bit about market outlook, why asset values may become more attractive, and what it may take for you to shift from that seller mentality to more of a renewal mode?

Kenneth Hvid
President and CEO at Teekay Group

Yeah. Good morning, Jon. It's obviously a very good question, right? As we point out, we're trying to balance this thing of having a fleet that still generates significant cash flows. And as we are running off ship years, as you know we've been doing over the last years without really reinvesting in new ship years, you come to a point where in a cyclical industry, at some point, you've got to reload with new ship years, right?

Kenneth Hvid
President and CEO at Teekay Group

The longer it goes, we're kind of back to the classic discussion that we had, as you and I remember, back in 2008 and 2009, it's just 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. When it does, it happens suddenly, and we tend to get surprised, and that's when opportunities to reload open up. I think staying disciplined in this, we are very clear on what break-even levels we can run a calculator, as most of our peers can. We understand what levels you kind of—it's a good time to make a 20-year investment where we think we can have a good chance of making a return. You're absolutely right.

Kenneth Hvid
President and CEO at Teekay Group

Of course, it's a challenge that we have a strong market, and the medium-term outlook is actually pretty good. At the same time, we're kind of running off ship years, and we would like to load on some new years. That's why we're leaning in slowly and picking a couple of ships. If we look at other sectors, you have seen ordering coming down, and as that comes down, we typically see also shipyard prices coming down. That's what we expect will happen towards the end of this year.

Jon Chappell
Jon Chappell
Senior Managing Director at Evercore ISI

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

Jon Chappell
Jon Chappell
Senior Managing Director at Evercore ISI

Here you have this subsidiary that you own a big stake in, in TNK, trading by anyone's calculator, a massive discount to NAV. I understand that you're trying to be patient, and there's going to be a reload opportunity at some point, but it seems like it's almost not mutually exclusive when you have almost a billion dollars of liquidity at TNK. I don't know what the liquidity is at Teekay, but I imagine it's quite large as well. Wouldn't TNK shares, either from the Teekay corporate level or the TNK subsidiary level, just be the most attractive use of that liquidity today as you wait for the asset values to come in a little bit?

Kenneth Hvid
President and CEO at Teekay Group

I think it's a good point. It's obviously one we are assessing, and as we all saw, the whole space took a dive here in Q1.

Kenneth Hvid
President and CEO at Teekay Group

I think everybody, irrespective of what our strategies are, what our fleet profiles are, what our dividend policies are, we're largely trading at these discounts that you refer to. That obviously always makes it complicated. Do you run that calculator and just increase your NAV by buying back stock? At the same time, we're an operating company, and at some point, we need to buy steel so we can generate future cash flows. As you've seen in the past, we've been buying back stock, especially at Teekay, actively. We did that because we were trading at an even bigger discount there. Now we're trading in line, which we think is the right currency that we should have. Of course, we're looking at it, and especially at the valuation we have at Teekay. I agree. It looks attractive.

Jon Chappell
Jon Chappell
Senior Managing Director at Evercore ISI

Okay. Thanks, Kenneth.

Kenneth Hvid
President and CEO at Teekay Group

Thanks, Jon.

Operator

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

Omar Nokta
Omar Nokta
Managing Director at Jefferies

Hi. Thank you. Hi, Kenneth. Kind of maybe just following up on John's line of questions. You mentioned clearly you've been a net seller, but that could change as time goes on. I 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? You have the 20 Suezmaxes, 15 Afras. What's the threshold where you don't want to get below, and that starts to maybe affect your commercial presence?

Kenneth Hvid
President and CEO at Teekay Group

Yeah. That's a great question as well, and obviously one we are looking at and discussing. I would say we still have a bit of room, but there is, of course, a level.

Kenneth Hvid
President and CEO at Teekay Group

Without giving you the exact number, I would say there is a point being an integrated operating company that we do not really want to dip below. I would say from a commercial trading point of view, we have not really seen the impact on commercial performance. We seem to be able to get our ships around and get the right charters on them. I think the performance, considering the profile of the fleet and everything, is actually very good, especially on the Aframaxes on a relative basis. On the Suezmaxes, we are holding up as well. I think it is not really impeding the commercial trading of it. Of course, there is always a scale consideration that we have here. That is also why we are saying that we are probably going to be slowing down on the sales and look for opportunities.

Kenneth Hvid
President and CEO at Teekay Group

I would say it's close to where we are now. We would go a little bit lower. Of course, the exciting part is that we now have significant investment capacity to renew the fleet when the right opportunities arise. In shipping, they do come around. We're excited about that outlook.

Omar Nokta
Omar Nokta
Managing Director at Jefferies

Okay. That's clear and helpful. Maybe just a follow-up to that. I think I know 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 you get to enjoy the benefit of just seeing that cash come in. I completely understand the reluctance to want to distribute it to shareholders, given that there is a need to replenish and modernize the fleet.

Omar Nokta
Omar Nokta
Managing Director at Jefferies

I guess maybe as you kind of think about that big picture, does it still make sense to want to put capital to work in tankers? You just said that there could be these opportunities show up very quickly. Does it make sense maybe to maybe shift the mindset altogether of the company where you've made these winnings, quote-unquote, from 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 a spot-driven tanker business?

Kenneth Hvid
President and CEO at Teekay Group

Yeah. That's another really good question, Omar. We've spent a lot of time looking at other sectors and also looking at it from a Teekay Corp perspective historically. So far, I think we're very happy not having invested in other sectors in the last couple of years.

Kenneth Hvid
President and CEO at Teekay Group

I think the sector we are in here has actually performed extremely well, and we clearly have an operating franchise that is performing well, and that's where we have the skill sets. I would say that what we are always looking at that is interesting is, of course, the adjacency to the core segments that Teekay is in. We have Aframaxes where we traditionally have been very large, and we have Suezmaxes where we're actually larger today. Of course, the adjacent sectors to that is moving up one size to VLCCs and is moving one size down to MRs. That is all within our wheelhouse. We are constantly comparing, contrasting the relative return expectations or attractiveness of each of those sectors.

Kenneth Hvid
President and CEO at Teekay Group

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

Omar Nokta
Omar Nokta
Managing Director at Jefferies

Okay. Very good. Thanks, Kenneth.

Kenneth Hvid
President and CEO at Teekay Group

Thanks.

Operator

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

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

Hey, great. Good morning, Kenneth. You talked about at the beginning of the call kind of the super seasonality of rates lasting into Q2 here and maybe even staying a little stronger. Maybe you can talk a little bit about that strength and your thoughts as we've moved deeper into May and the continuation of that.

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

On that same vein, you threw out the shift to Asia coming out of Vancouver would continue. Maybe just add on some thoughts on if we start getting increasing peace discussions with the Houthis around the Red Sea or Ukraine and Russia, would you see that abate and see some rapid pressure on those rates, or maybe just your thoughts on kind of the pace with which we could see that alter?

Kenneth Hvid
President and CEO at Teekay Group

Yeah. Morning, Ken. That's a good crystal ball question, trying to predict what's going to happen in the world here, right? The way we, I guess, think about it is that when you look back, the last two quarters were lower than what we have experienced in the past three years, so sequentially down. Clearly, what's driving the rates right now are everything I mentioned in our prepared remarks.

Kenneth Hvid
President and CEO at Teekay Group

We have a low oil price, and we're seeing VLCCs that for the first time in three years are actually outperforming the other sectors. That's interesting. It feels a little bit more back to normal how the tanker markets used to work. When you look at the world, we're certainly not back to normal, right? There are a lot of moving pieces in the world right now. It's incredibly difficult to predict exactly how that's going to flow down to tanker rates, I think. What I can say is that, as we also point out and what we've focused on, is that when you have low oil price and you have low inventories, you typically have a couple of quarters where you see some pretty good demand. Of course, it doesn't last forever.

Kenneth Hvid
President and CEO at Teekay Group

Therefore, at some point, our expectation is that, yeah, there will probably be some correction. I would say the outlook, especially for the larger ships right now, looks very positive.

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

Yeah. That's a great point on the low inventories and the sustainability of that. Let me jump over to your slide 8, which had the 309 on the order book and 109 that are over 20 years. Then you got a range of 319 that are 15-19. Some of those obviously could be closer to 15 than 19. I look at that and see kind of an order book that continues to build and maybe outpace kind of those retirements, which is why are you not fearful that that can put pressure? I mean, again, your cash flow break-even is so low, it's not like we're talking about those levels.

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

Just wondering your thoughts on why we should not expect to see some additional pressure on rates.

Kenneth Hvid
President and CEO at Teekay Group

Yeah. I would not say we are not fearful. I think we are always running the business with being mindful of what could happen to rates. I think you raise a good point. I mean, as we pointed out on our call last quarter, if you look at the medium-sized tanker space and include the LR2s, and so you look at Aframaxes and Suezmaxes, as we pointed out last quarter, if we do not have any scrapping happening over the next two years, three years, we will have a fleet which counts 600 vessels that are over 20 years old in that space. I think that is, to be honest, that is the big valve that we are all looking at.

Kenneth Hvid
President and CEO at Teekay Group

Because as long as there's no scrapping happening in that age group and you see utilization of that age of vintage of vessels, then I would say at some point, the rates should come down. We're also pointing out in our prepared remarks here that as the market corrects and we haven't seen that dip yet, you have a big release valve here where there's a lot of vessels that naturally should be scrapped. I think from a historical point of view, that's very different, again, from what we saw in 2008. The issue in 2008 was that we had the youngest fleet that we'd had in 20 years. Today, we have the oldest average fleet age that we've had in 20 years.

Kenneth Hvid
President and CEO at Teekay Group

Of course, the incentive to scrap a 20- or 22-year-old ship is very different from scrapping a 7-year-old ship, which was the situation we had back then. I think that's how the situation is a little bit different. 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 and put some of the older tonnage away.

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

Yeah. Certainly. If I could just get a follow-up there on the restocking of the oil inventories, anything you can kind of quantify in terms of where we are relative to normal levels 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 and CEO at Teekay Group

Yeah. We have Christian Waldegrave on the call as well, who follows this very closely. I'll hand it over to him to comment.

Christian Waldegrave
Director of Research at Teekay Group

Yeah. Thanks, Kenneth. Yeah. I think it's difficult to quantify in terms of how much actual demand or how much it's going to influence the rates. 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 as OPEC starts increasing production and we get more non-OPEC supply coming on this year with, I think we've got five FPSOs coming on in Brazil and Guyana over the next few months, we should have a relative oversupply of oil relative to demand. Given where oil prices are at, it should add to inventories and flow into inventories. I think on-land storage will get filled first.

Christian Waldegrave
Director of Research at Teekay Group

Who knows if the curve goes steeper into contango, at times you might see some floating storage as well, which then starts to tie up tonnage. As Kenneth pointed out, it is not a situation that will last forever. These periods where you do get inventories being refilled and a low oil price in a contango situation, we know from the past that they can be quite positive for rates. It is coming at a good time, right? Normally going into Q2 and Q3 and the summer months, you would start to see the seasonal dip in tanker rates. We might get some counter-seasonal strength here through the summer. Beyond that, like Kenneth said, sort of the refilling of the inventories is good for a period of time.

Christian Waldegrave
Director of Research at Teekay Group

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 low for longer. It is definitely a window of opportunity here where we could see some counter-seasonal strength. Like Kenneth said, I think the sort of longer-term picture is still a little bit unclear given everything that is going on in the world.

Ken Hoexter
Ken Hoexter
Managing Director at Bank of America

Great. Kenneth, Christian, thank you for the time.

Kenneth Hvid
President and CEO at Teekay Group

Thank you.

Operator

That does conclude our question and answer session. I would like to turn the conference back to the company for additional or closing remarks.

Kenneth Hvid
President and CEO at Teekay Group

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

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

Analysts
    • Ed Lee
      Head of Investor Relations at Teekay Group
    • Kenneth Hvid
      President and CEO at Teekay Group
    • Christian Waldegrave
      Director of Research at Teekay Group
    • Omar Nokta
      Managing Director at Jefferies
    • Ken Hoexter
      Managing Director at Bank of America
    • Jon Chappell
      Senior Managing Director at Evercore ISI
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