Welcome to Teekay Corporation Fourth Quarter and Fiscal 2017 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. [Operator Instructions] As a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to Mr. Kenneth Hvid, Teekay's President and Chief Executive Officer. Please go ahead, sir.

Before we begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the fourth quarter of 2017 earnings presentation. Kenneth and Vince 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 fourth quarter of 2017 earnings release and earnings presentation available on our website. I will now turn the call over to Kenneth to begin.

Thank you, Lee. And thank you all for joining us today for Teekay Corporation's fourth quarter of 2017 earnings conference call. I'm joined this morning by our CFO, Vince Lok. Starting with Slide 3 of the presentation In the fourth quarter, Teekay Corporation generated total consolidated Cash Flow from Vessel Operations or CFVO of approximately $184 million, and a consolidated adjusted net loss of approximately $10 million or $0.11 per share, which has significantly improved from last quarter's loss of $0.41 per share on the back of stronger results across the Teekay Group, including our three directly-owned FPSOs, which have fixed-rate flows with upside exposure to production and oil prices. As a reminder, since we deconsolidated Teekay Offshore on September 25, our consolidated CFVO in the fourth quarter only includes 14% of Teekay Offshore's CFVO, whereas in the third quarter it included 100% of Teekay Offshore's CFVO up to September 25. Had we continued to consolidate Teekay Offshore, our reported CFVO would have been over $300 million in the fourth quarter of 2017. In mid-January, Teekay completed two capital issuances, $97.5 million of common equity and $125 million of convertible bonds, for growth proceeds of $222.5 million. We and our board viewed this as a prudent time to further strengthen Teekay Parent's balance sheet and begin addressing our January 2020 bond maturity, providing us with flexibility and optionality to do so with total liquidity of almost $540 million pro forma for these two capital raises. I won't spend a lot of time going through Teekay LNG's recent results and highlights on Slide 4, because I will assume most if you listened into their earnings call earlier today. Teekay LNG Partners generated Distributable Cash Flow or DCF, of approximately $52 million, resulting in the DCF per limited partner unit of $0.65…

Thank you. [Operator Instructions] And at this time, we'll take your first caller, will come from Michael Webber with Wells Fargo Securities.

Hey, good morning, guys. How are you?

Good morning, Mike.

Hey, Mike.

Hey. Kenneth, I wanted to kind of start off first with the recent capital raise and the idea that - I mean, it clearly seems that you guys are trying to kind of get ahead of the refinancing, the January 2020 bonds, seems like the biggest bogey out there. Can you talk a little bit about, one, how you would kind of attack that with, I guess, the recently raised capital as well as any eventual uptick in organic cash flow, and maybe just kind of help lay out the plan? You've got some time, obviously, but it does seem like you're trying to get ahead of it. So I feel like it's warranted to kind of run through it.

Hi, Mike. It's Vince here.

Hey, Vince.

Yeah. With the capital raises in January, first of all, we felt it was a prudent thing to do. As you've seen, financial strength is across the Teekay Group, and in fact, is one of our strategic initiatives. This allows us to delever the current balance sheet and increase our liquidity, which is over $500 million now. And it does give us a lot of financial flexibility and a lot more options to address our liability management going forward, and as you mentioned the 2020 bonds. And so this allows us to right size the balance, and ultimately refinance the smaller amount of the bond. So for example, if we were to be able to reduce our bond down to, say, $300 million, that would save annual interest expense of more than $25 million, which obviously increases our free cash flow, so for example. So in terms of addressing the bond, this is something that we are discussing with our banks and our board on our liability management strategy over the course of this year. We do have some time though. But we're going to look at through a number of alternatives and choose the one that's going to be - that's just going to create the most value over the long-term. But I think this gives us an opportunity to work from a position of strength. Our free cash flow is improving, as you noted, but our asset coverage is also improving, given that our Daughter companies have stable capital structures, their cash flows are increasing. Another potential source of capital, of course, is our three FPSOs. And if we're able to sell some of those over the next couple of years, that's another source of delevering.

Yeah, that was actually my next question was around whether there's a bid for those. It seems like the - at least the tariffs are closer to being in the money, at least with the slits [ph] work. And whether they're - is there a realistic opportunity to sell those today, if you needed or wanted to? I guess, it's such a thin market. I'm just curious whether that's something you would explore today. Or would you wait for the market to firm?

Yeah, this is a theme that we've been talking about, I guess, for the past couple of years. So - and I think we've been pretty consistent in terms of saying that we're definitely not sellers when the oil price were low and those zero interest for assets like this and in a recovering market. And that was a reason why we also, I think, restructured some of our contracts here, so that we'd be more participating with our customers in the market downturn, but also in the upturn. And as you point out, we are now seeing that upside. So with that, and not surprisingly, we are, of course, also seeing some inbound inquiry for some of the more marginal fields that are looking for to cheap development solutions. And so same as we're seeing on TOO, we do actually have inbound inquiries for - especially one of the assets that's coming up. Both of them - I mean, if you take Hummingbird, we just put on a new contract, the new well is flowing. There is a well simulation vessel on there. It's not quite flowing at the rate that we expected, but the oil is there. So our customers are working on that right now, actually, with the well stimulation. And we're looking at other means so we can try and further stimulate that well. So that looks pretty promising on the backing of the drilling campaign that our customer committed to there. On Banff, that continues to flow. There's a lot of gas coming in to that unit. But it's actually - even though it's a small unit. It's a fairly universal unit that is in good condition that can produce a number of different fields. So people know that this is an asset that's coming up potentially for renewal. And we are receiving some interest in that unit. And Foinaven, of course will continue for longer.

I guess, maybe if I take another run at that, maybe in a more straightforward way. Is it fair to say that in 2018, you're looking at kind of operational upside on those assets? And if you were to actually liquidate in that optimism, I guess, it would actually permeate into the SMP market for those. That would be more of a 2019 or 2020 event?

Not necessarily. I think we have always been on the stated path of not owning assets directly upstairs. And as we talked about it last quarter, we reduced our exposure to the conventional tanker markets and have no asset there. Our Polar and Arctic are redelivering over this quarter and next quarter, so that reduces that. And then, what we're left are the three FPSOs, as you pointed out. So we are, of course, in also evaluating the strategic alternatives. And in concert with that, we are trying to maximize the cash flows on those assets now. So I think the straight answer to your question is that we're quite flexible in terms of what makes the most sense if there is an interested party in those assets.

Right, with the inbound is in operational, you're not getting inbound from people looking to buy them?

Yes, we are.

Okay, okay, good. All right, that's helpful. I'll turn it over. Thanks, guys.

Thanks, Mike.

We'll hear next from Randy Giveans from Jefferies.

Hey, thanks. I don't think there are enough questions on those FPSOs, so I have a few more. Is the only - or is the only buyer going to be TOO or are you kind of bookmarking them for dropdown candidates? Are you open to kind of third-party sales as well?

We obviously have, dating back to when we established TOO, Omnibus agreement, where these assets have been offered or can be offered to Teekay Offshore. But the parties that we are having discussions with also now are external parties. So we don't have a restriction. There is an opportunity for TOO to buy, of course, but there is also an opportunity for other people to invest in these assets.

Sure. And then, I guess, you looked at those as a source of cash. Let's say, you were to sell all three, give us kind of a ballpark for the range of expected proceeds. And then - or I guess, more pointedly, the debt against those that you'd have to pay off, so the kind of net cash benefit of sales?

Yeah, and back to, I guess, my answer to Mike before. It's quite clear that these assets are either worth what is meaningful. And that all depends on what is the next opportunity and can somebody use the assets right. And that's where, in the last downturn here that we saw, there wasn't a lot of inbound inquiry. And therefore, assets like this don't have a lot of value. But if you can actually match it with an asset with the right field, then obviously, the conversation changes. So I don't think I really want to be drawn on what we have as a minimum sales price. But it's clear that the value from these assets comes from pairing them with the next opportunity. And that's, of course, a pretty exciting dialogue in a strengthening market.

In terms of the debts on these three assets, we had $83 million drawn on these three assets as of December 31. However, with the capital raises we did in January, that $83 million has been paid down in the revolvers. We have nothing drawn on those three assets.

So anything would be straight net cash?

From where we sit today, yes, that's right.

Perfect. All right, and then I guess one more question. Looking at the dividend, any chance of increasing that without distribution increases at the Daughter levels? Or is it kind of waiting on TGP to increase theirs before you increase your dividend?

Yeah, right now, we don't have any plans to change the dividend in the near term. I think as Kenneth mentioned in his prepared remarks, our focus is increasing the value of the entire group, first and foremost. But in terms of capital allocation decisions around dividends, it's something always is discussed with our Board.

Fair enough. I'm sure you all had a busy day. So I'll let you go. Thank you.

Thank you.

At this time, there are no additional callers on the queue. I'd like to turn the conference back over to Mr. Hvid for any additional or closing comments.

Well, thank you for your interest in all our calls today. And we look forward to reporting back to you next quarter on our progress. Thank you.

That does conclude today's teleconference. We thank you all for your participation.