Welcome to the Teekay Group Third Quarter 2024 Earnings Results Conference Call. [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 the company. Please go ahead.

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 Third Quarter 2024 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 Teekay Corporation and Teekay Tankers Third Quarter 2024 Earnings Releases and the Teekay Group's 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.

Thank you, Ed. Hello, everyone, and thank you very much for joining us today for the Teekay Group's third quarter 2024 earnings conference call. With the recent management changes, this earnings call will cover both Teekay Corporation and Teekay Tankers' earnings for the quarter. 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 3 of the presentation. Over the past few years, the Teekay Group has taken several important steps to streamline the organization. Notably, this includes the recent simplification of our group management and decision-making structure and TNK's planned acquisition of our Teekay Australia business, which we will cover in more detail later in the presentation as well as Teekay Corporation's transfer of all of its remaining management service companies to TNK, which consists mainly of our shore-based staff. The results of these steps is a new structure that looks similar to historical Teekay where Teekay Tankers is positioned as the fully integrated sole operating platform for the Teekay Group and Teekay Corp. as a strong supportive sponsor. Throughout this streamlining process, we have focused the group on tankers while systematically reducing a significant debt load. I'm very proud to say that following a multiyear effort the Teekay Group today has one of the strongest balance sheets in the industry with no debt and considerable cash positions, which we believe is important in a cyclical industry as a strong balance sheet allows us to act countercyclically at the right times in the cycle. TNK will remain committed to disciplined fleet and reinvestment while Teekay will focus on managing its controlling interest in TNK and can provide financial support if necessary. On…

Thank you. [Operator Instructions] And our first question will come from Jon Chappell with Evercore.

Thank you. Good morning. Welcome to the hot seat Kenneth. So just multipart first question as we try to understand the structure going forward. First of all is there anything else within the Teekay Corp. structure that would need to be consolidated within TNK? And then secondarily what's the plan going forward? You have the 31% ownership, there's also the Class B shares, is there any plan to either simplify the structure into one class of shares or I guess become even closer through somewhat of a consolidation-type model?

Yeah. Morning Jon, good to be talking to you again, it's been a while, but happy to be back here. So the plan going forward here is that the structure that we have right now is really that we intend to -- first of all I want to say the business and the strategy remains the same, but we just have a simplified structure. As you can tell the accent is a little bit different from Kevin here. But what we've been really working towards here over the past couple of years is really just aligning Teekay Corp. and TNK with the main investment being Teekay Tankers. And with the improvement of the balance sheet right we basically saw that we could now take the last final step and align both the management structure do the drop-down of Teekay Australia and the management companies. So to your first question, that really completes that simplification. And there is nothing left at Teekay to be dropped down. The -- to your second question in terms of further aligning the structure as you know we have a shareholder legacy structure at Teekay which is important. And I think that's been particularly important over the past five years for the company. I think what we are doing hopefully with this transaction is that we're illuminating the value that we have in Teekay Corp. We think from management side, it's important to have a strong supportive shareholder. And from -- when we established TNK, it was always a controlled company of Teekay Corp. as you know. So I think we're very happy with that structure. And I think it's worked really well for us also in the last couple of years where I think the stock has performed extremely well.

Okay. Great. Just a quick follow-up on the modeling of the Australian business. So I get the $100 million of revenue and the $10 million of EBITDA. First of all, when does that close? Is that a fourth quarter event? Or does it start on kind of January one of next year? And second of all, if you can just break down a little bit of that cost structure. Is it – how much of it is D&A? How much of it is kind of core OpEx just to get the model set up?

Hey, Jon, it's Brody here. So the first part we're aiming to close the transaction by the end of this year so by December 31. In terms of the numbers and the breakdown, it's showing up right now just as revenue and OpEx. And so that's probably how you're going to see it going forward at Teekay Tankers is roughly $100 million of revenue and roughly $90 million of OpEx.

Okay. Thanks, Brody. Thanks, Kenneth.

Thank you.

And the next question will come from Omar Nokta with Jefferies.

Hey, guys. Good morning. Yes just maybe I wanted to ask a couple of questions but maybe just a quick follow-up to Jon's last one on the Australia business. Is any of that $10 million of EBITDA is there a tax that it's subject to?

Yes. The business is subject to tax in Australia at 30% and there's some kind of deductions that we can take on that but it is a taxable business, yes.

Okay. All right. Thank you. Okay. Good. So I just wanted to maybe ask a couple of questions from say the TNK perspective. Obviously continuing to build cash and you found a couple of low-hanging fruit items within the Teekay system to deploy some of that capital. Wanted to ask just in terms of other low-hanging fruit you mentioned that's it in terms of drop-downs. But I guess now that you're where you are today you've streamlined the structure, you eliminated all the debt at TNK, what would you say is your main strategic priority now for TNK?

Well TNK it's continued to deliver value and build value. I think the – we've said all along here that the profile that we've had through this tanker cycle with the fleet and Kevin has commented on that in the past, we really like because that's giving us maximum operating exposure to this market. With a low breakeven, we're obviously generating a lot of free cash flow. I think the – in a cyclical business, it's always the discussion around when do you start renewing your fleet and when do you keep your exposure to the spot market and when do you start taking some off and put some on time charter. And similar too in the past, we're looking at all of that all the time. We're looking at potentially selling some of our older ships. We're looking at potentially buying a few younger ships and we're looking at potentially chartering out some of our ships. So it remains very dynamic. But as you will know, Omar, we've kept and been very focused on keeping the fleet with as much spot exposure as we could. And I think that has been absolutely the right call. As we are now two, 2.5 years into the cycle I think we're still looking at it. As we said in my prepared remarks, we still like the fundamentals. I think we have a couple of rounds to go here still. The winter has not even begun yet. So we're kind of happy with the spot exposure we have right now. And the focus is really just trying to maximize as much as we can on this market that we're in.

Thanks, Kenneth. Yes. No I appreciate that. So it seems like more of the same the consistent strategy being methodical and no real major change in the approach post this investment simplification.

That's absolutely correct. Yes absolutely correct. I mean we've been very aligned on that from day 1. But obviously we have some legacy things. And then now I think we are really back to as I said also in my remarks if you think some years back we had Teekay which was the fully integrated company and that's really what Teekay Tankers has become. So I think that's a very exciting point to finally have reached that again. And I think that sets us up well and gives us a lot of flexibility for where we can go in the next years.

Yes. No absolutely. And then maybe just one final one just for me on the market and you talked about the setup. But I did want to ask kind of as we think about how things are set up at this point you could say perhaps that you've got a relatively stable say global Aframax fleet versus say last year or over the past 12 months. But you've now introduced this new trade pattern out of Vancouver via the TMX expansion. Clearly in the tanker market today and looking at stock prices and sort of overall sentiment there's a sense that rates are unexciting. But winter is on approach. Typically things get tighter as you were highlighting in your remarks. How do you think this winter plays out with TMX here at or near full capacity? Do you think the market is prepared for this? Are charters prepared? How do you think about that as we get closer to winter?

Yes. I would say, there is -- the winter is absolutely not over. It's not even begun. I think that's the key point. It feels a little bit like the market has called the winter over before it started. But there is absolutely a pulse in the market. We are not quite seeing the takeoff that we saw at this time last year as I also said. But when you look at the curve we're pretty close sitting at the same level that we actually were at this time. I think we have a few new dynamics this year. TMX is up and running and it continued to increase the loadings this month as well. The last month in October I think they were up to 24 loadings. I think the capacity is just over 30 loadings a month. We see more of the voyages going to Asia. I think nine of the cargoes went to Asia direct and four of them went down and did an STS. So that's all helpful obviously to the volume. And I think that's the thing on the medium-sized tanker fleet, right? I mean, we continue to see how those flows. They ebb and flow, right? And it's about being able and being global and being positioned to benefit from them. So we see variability but there's absolutely a pulse in the market I can tell you.

Very good. Great. Thanks, Kenneth, Thanks, Brody. I'll turn it over

And the next question will come from Ken Hoexter with Bank of America.

Good morning, So if -- I just want to revisit the question earlier. If you're buying all of the stuff and you said now Teekay TNK looks more like what Teekay did can you clarify why you still have the dual listing? And will we see further consolidation into that?

Yes. I mean we've had -- we've been listed -- Teekay has been listed since '95. And so it's a historical -- it's a legacy ownership structure that we have when we started the daughter companies. We've kind of been evolving it. I think what we are highlighting here -- I know it's a little bit of an unusual structure where we have two listed companies essentially invested in the same underlying business. But I think we've done a pretty good job now hopefully in illuminating the underlying value in TNK and then we see that should really be flowing through to Teekay going forward. I think the cost of combining the two maybe it's something we'll consider at some point. But for now, I think it gives us added flexibility that we have two strong balance sheets. And in this market, I think having one strong balance sheet is always a great thing but having two is arguably even better. So as I said in my earlier remarks as well we -- as you know we have a legacy ownership structure. TNK has always been a controlled company by Teekay and we like that structure and it's been beneficial for us over the years.

I get it Kenneth, but I think it brings or harkens back to the days of also a lot of concern about the daughter companies being the controlled entity and having no ability. I mean, look at the stocks one is up 13% the one that is sending stuff down to the daughter and the daughter being at least down at the open here this morning. I guess, it just confuses a little bit why there's still the need for the two, if it's all operating in one entity. But I'll -- that we'll figure it out over time. Does this represent the end of Teekay focusing then on other sectors or making investments in others? Obviously, you started off with that balance sheet to be able to invest in LNGs, FSRUs shuttle tankers. Will it now be only crude tankers and still be at TNK?

Yeah. I think you probably asked Kevin that, question in the past as well. I think, what's important about the company that we have is that the model we have at Teekay is that we are an integrated shipping company. And what that means to us at least is that we have in-house technical management. We have in-house commercial management. We have a global presence. And we think that's a value add and a differentiator in the market that we're in today. Of course, that's also a capability that gives us the ability to grow into other sectors. So should we go to adjacent sectors and for example decide to run as Kevin has said, any other conventional shipping assets like product tankers, or MRs, or VLCCs, we could do so. That's not the focus at the moment. But I think what's important is that we have the capacity to do so. And that's actually how we looked at the world also in the past. We've always grown out from our internal capability to move into other sectors. So I would say, Teekay Corp. has looked at a number of different sectors over the past two years, and there's been a very dynamic shipping market in different segments. But I got to say that, the market that we've liked the best and we've obviously been heavily invested in it, but it's performed extremely well has been crude oil tankers. And when we look around at the different sectors today, we still like that profile. We like the profile, we have in TNK, where we're able to generate a lot of cash flow. And that's quite frankly -- and then we like -- well we don't like where the share prices are but the valuation that we have in them we think represent good value. And that's why we've been buying back stock at Teekay and we've been buying more TNK stock. So for us it's all about creating value over long-term using our in-house skills to service our customers and that's really what guides us.

What was viewed as the advantage for TNK in selling the Australian asset down to TNK? And was an independent review I presume it was right of independent directors done on the valuation?

Yes. I mean, the timing of it was really, so we could make the final step of this streamlining. So we have consolidated management in one of the companies. You can argue that Teekay is becoming a bit more of the holding company. It's very important for us to find a valuation that was exactly middle of the road. And I think that's actually what we've done. There was a review done by of course the TNK Board, but also its independent directors separately on the fairness of this. And I think when -- and we have external valuation done of the company as well. And it was very important for us to find exactly the middle of the road of this valuation. I think that's exactly what we've done here.

Wonderful. On the business Kenneth you mentioned the move to balance spot or future the potential to look at some more time charter outs and balance when the right time in the market is away from spot. Is that something you think we'll see in the near term? Where do you think we are in the cycle in terms of rates that would get you to make that move? I think that's a little bit different than maybe Kevin had talked about in the past.

Yes. I mean, obviously, every quarter we're one quarter further into the cycle, right? So, but I think sitting here at the winter and looking at the liquidity and the number of time charters that are being done, I think, we're comfortable with the continued exposure to the spot market. But of course, selectively, I mean, yes, it will make sense. There isn't a ton of liquidity. There aren't a lot of one, two or three-year deals that are being done on time charter at the moment. So I think we just need to get a bit further into the winter to see how those opportunities will arise. But it's been a fairly quiet Q3, when it comes to opportunities in that respect but it's something we're looking at constantly.

On the flip side, do we keep watching the time charter-ins fade away then if we're not seeing much time charter activity?

Yes. I mean that's an option as well at our price point. I think we're quite -- we're there where there's -- everybody is kind of watching this market equilibrium, right? And I think that's always an interesting time. And that's where we say, okay, well, at the right levels, we would put some vessels away on time charter without giving you the exact number here. But at the same time given that we have a very low cash flow breakeven we can also stomach keeping on the exposure to what we still think should be a pretty healthy winter here and then see where next year goes.

Great. Appreciate the time and thank you.

Thanks.

And that does conclude the question-and-answer session. I'll now hand the conference back over to the company.

Well, thank you very much for listening to our earnings call today. We look forward to reporting back to you next quarter. Have a great day.

Well, thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.