Please standby. We are about to begin. Welcome to the Teekay Group Fourth Quarter 2024 Earnings Results Conference. 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 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. Before we begin, I would like to direct all participants to our website.

At www.teekay.com, you will find a copy of the Teekay Group's Fourth Quarter and Annual 2024 Earnings Presentation. Kenneth will review this presentation during today's conference call. Please allow me to remind you that our discussions today can include 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 Fourth Quarter and Annual 2024 Earnings Releases, and the Teekay Group Earnings Presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation's and Teekay Tankers' President and CEO, to begin.

Hello, everyone, and thank you very much for joining us today for the Teekay Group's Fourth Quarter and Annual 2024 Earnings Conference Call. Joining me on the call today for the Q&A session is Brody Speers, Teekay Corporation's and Teekay Tanker's CFO, Ryan Hamilton, our VP of Finance and Corporate Development, and Christian Waldegrave, our Director of Research. Starting on slide three of the press presentation, we will cover Teekay Tankers' recent highlights. Teekay Tankers reported adjusted net income of $52 million or $1.50 per share for the fourth quarter, and for the full year 2024, adjusted net income of $355 million or $10.31 per share. Despite softer than expected spot rates towards the end of the year, the company still generated $69 million in free cash flow in the fourth quarter and $415 million for the year. In the last few weeks, as part of our opportunistic approach to ongoing fleet management, we sold two 2009-built Suezmaxes and one 2006-built LR2 for a combined $96 million. Two of these vessels have already been delivered to their buyers while the third is expected to be delivered by mid-March upon completion of its current voyage. Including the previously announced two vessels we sold during Q4, we've sold a total of five 2005 to 2009 build vessels, for combined proceeds of $160 million resulting in expected book gains on sale of nearly $60 million. Further, I'm pleased to report that just today, we lifted Supix and signed an MOA to acquire a Martin LR2 tanker which we expect to close in the second quarter. These sales and purchases are part of our ongoing fleet management and fleet renewal plan, where we naturally sell older vessels and acquire more modern tonnage over time when the opportunity is right. In addition, we have now…

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. Using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. A question, simply type your question in the ask a question box and click send. We'll move to our first question from Jon Chappell with Evercore ISI.

Thank you. Good morning. Kenneth, you touched on it briefly in your introduction. But if you could just provide a little bit more insight on the Ardmore investment, Just seems a little curious given, you know, it's a part of the tanker sector that Teekay hasn't really been involved in much in the past. I get it cheap. So it's TNK. And it's also just, like, a lot less liquid than T and K as an investment's concern. So maybe explain the thought process behind that and also how you looked at that investment vis a vis buying back your own shares.

Yeah. Thanks, Jim. Good morning. I'm expecting that question. I just wanted to emphasize that our number one product is obviously our core fleet. And our core business at Teekay with the fleet renewal, which I hope we get a chance to discuss as well. But the investment here is not a stray really away from what we've done in the past. As you will remember, always had some MR exposure We haven't had it for some time. We looked around. The market was up for some time. When it took a big dip last year towards the end, we thought Ardmore was just very good value, and we made a very small investment as you can see, in that company relative to our asset base here. And it was always meant to be small. We just it was opportunistic, and there was a financial investment. And then what happened was, as you saw last week, Ardmore announced that they bought back 4% of their shares, and that kind of falls into the 5.1%. But just wanna emphasize it's a small investment. We think it's good value, and it's where you have a bit of investment here, I think it keeps us as focused on the adjacent sectors in a different manner.

Okay. And then in my follow-up, you know, you just announced this morning, the new LR2 that you're purchasing that you're gonna get in the second quarter. You're still selling at a quicker pace than you're replacing, which I think makes sense. In this asset value environment. So know, kind of a similar question. How do you think about the continued pace of renewal buying versus selling. And then also in the last two years in the first quarter, you've had special dividends I would think that given the cash balance today, the proceeds that you're raising from You know, these awful sales, you're in a in a in a stronger position, But on the other hand, the market's a bit more uncertain. So a lot in there, but kind of, you know, pace of replacement and and capital allocation within that.

Yeah. Great great questions. And, obviously, what we're spending all our time discussing and making decisions around here I would say on the fleet renewal, you're right. And as I commented on in the remarks and the Q&A at last quarter we're looking at selling some of all the vessels and we're looking at buying some newer vessels. And that's all part of being an operating company, obviously, and the renewal of our fleet. As you all know, we've been sweating our assets heavily over the past three years, and I think that's been great. We've also been running off ship years, and we think now is a pretty good time start leaning in. You're correctly pointing out that we are we're selling more vessels than we're buying up to now. If you look at it in ship years, we are we're actually buying more ship years than we're selling. So I think it just speaks to how we're trying to manage where we are in the cycle and at the same time try and renew the fleet here. So we're leaning in. To your second question on capital allocation, It's clear we're in a very strong position when we embarked on this cycle a couple of years ago here, we always had it as stated objective that we wanted to rebuild financial strength and financial flexibility at Teekay and think everybody anybody looking at our balance sheet can say that that's what we have done, and we're pretty excited about that. That's what you need to do in a cyclical business. That is capital intensive. I think the next couple of years are gonna be interesting. So clearly, for people that have the capital to make investments, I think we are in a position where we can hopefully make some investments that's gonna create some good long-term shareholder value. And then that brings you to the question that you're asking around special dividends. Which is always part of the capital allocation plan. As you know, we're not the company out there that's paying out all our earnings, and we've been very clear on that from the beginning. And we have a fixed dividend, which we also declared this quarter. And once a year, we have the discussion with the board whether there's special dividend coming and that's on the agenda for this board meeting that's coming up soon. Okay. Thanks for the thoughts, Kelly.

Thanks.

We'll move next to Omar Nokta with Jefferies.

Thank you. Hi, Kenneth and team. Couple from my side. Maybe just first kind of a follow-up to to to John's question and then a market related question. Just kind of on the the last topic, obviously, you're flush with cash. No debt, plenty of liquidity. And, you know, the cash is coming in much faster than you're able to deploy it. Maybe just kinda bigger picture on on how you see TNK from here The do you see the platform maybe evolving in terms of you know, the the Ardmore stake perhaps is not a one off and that you have, you know, you have your operating tanker fleet. You've got the marine business with Teekay Australia. You think that you're gonna have a growing portfolio approach perhaps where you're taking stakes in other equities and that's sort of a an avenue of exposure to the sector without having to to to put capital to work. Physically?

Yeah. No. I I I don't. I I think I I just wanna emphasize that the Ardmore investment is really small in our total capital allocation plan here. The number one, priority is obviously looking after our core fleet. We are an operating company, and we are keen to deploy capital in a manner where we invest in our operating platform, which as you know is fully integrated with technical management and all the commercial management. So we're looking to add assets that we where we can bring value to those assets by putting them on our platform. That's obviously not by investing in other companies. So I just wanna be very clear that that's our number one priority. As you point out, Omar, it's we're generating cash fast when we're able to deploy I would say it's not a problem to deploy cash. I think it's maybe hard to keep patients in a to be patient in the market like we're in. But we are. And, I mean, we've been through a lot of cycles over the past fifty years as a company, and many of us have been through been through a few cycles. So I think we know that to be patient sometimes pays off and but but that's exactly what we're doing here. So I don't think it's a matter of that we cannot deploy it. I think it's a matter of being patient.

Okay. Thank you. And then just one one quick follow-up just on that note, and appreciate your comments of know, having taken a sub five percent stake, but by virtue of the buyback, you've you've now had to file the, the thirteen g. I take it that this is just as you say, it's a small opportunistic holding with no plans perhaps of wanting to to increase the size of that position.

Yeah. That's right. I had a fellow CEO call yesterday, and we we travel about it. But they they clearly saw that there was good value there as well, and it wasn't really our fault. So Yeah. You're right.

Okay. Alright. And then if if I could just ask question about the market, and you you referenced this in your press presentation, just all the sanction discussion. And how potentially there's seventy-three ships coming on into sanction next week. I think you said from the EU, Just, like, I guess, you know, in general, given your significant kind of market presence within the Aframaxes, the hundred and fifty or so tankers that were sanctioned in January by by the US Obviously, there's all kinds of uncertainty as to how long those sanctions may hold. Just wanted to get a sense from you given, you know, your your active participation in the space, have you seen an effect or an impact of those sanctions yet on the Aframax market And then how do you see it affecting things if those get lifted?

Yeah. Hi, Emma. I think we have seen an impact from the sanctions that were placed on January tenth. Of those ships that were sanctioned, there was over one hundred and fifty tankers, and the majority of those were serving the Russian Far East trade out of Cosmino. And in the weeks following that, we've certainly seen difficulties in Russia getting that all out of Cosmo, into China. And we've also seen India as well having to look at alternative sources. So if you look at what's happened in the market over the past month, We are seeing a bit of a drop in Russian exports, and Chinese and Indian buyers are having to look for alternative stores of crude. So we've seen an increase in volumes from their Middle East But also from West Africa and other parts of the Atlantic, to make up for the shortfall here. Which is why we've seen some volatility on the VLCC side in particular. Which is then helping out the Suezmaxes a little bit as well. So the OFAC sanctions, they are having an impact. As you said, we don't know what the future is from here, whether we're gonna get more sanctions or relaxation on sanctions. But as Ken said in his remarks, all this some uncertainty does create volatility, you know, when you have changes to trade patterns, disruptions, it all speaks to volatility. So we are seeing a bit of an impact in the freight market, but as you said, very difficult to sort of project forward how this is gonna evolve in the in the coming months.

Good. Thanks, Christian. I appreciate the the color there, and and kinda thank you as well. I'll turn it over.

Thanks a lot.

Moving next to Ken Hoexter with Bank of America.

Hey. Great. Good morning. If if I I guess talking about the rates. Right? So we had twenty-four and twenty-eight. Thousand dollars per day per per the Suezmax, Aframax at at with just about two-thirds and and just over half. Of the the quarterly days booked. That that's down a bit from the fourth quarter, but yet talking about more sanctions having a positive impact, seasonally colder weather, increasing power needs. So is the additional capacity creating the the bigger overhang? What what's what's driving what what's your your thoughts on what's driving the rates pressure on rates near term here?

Yeah. I mean, for for sure, we I think in Suresh Maxes, there was a a a week or a finish to to twenty twenty-four and a and a weaker start to twenty twenty-five. And I think what we've seen now is is an update certainly this week The the picture list is is significantly stronger than than what we we average So I think what's what's driving that as as we talked about in the prepared remarks, so it came as is is really the where's these arbitragers that that's moving up and and the the VLCCs that's been moving up and and then some replacement barrels that that's really beginning to to kick in now as you recall. The sanction vessels that was a bit of a a delay on, and and they needed to to offload. And then they were scrambling for for for cargoes, and and that's driving it. So we just see more more cargo demand in in that.

Alright. Okay. And then if we think about you know, I I guess, the the delays in the tariffs and and some of the delays that are gonna If we start getting toward a point of of peace in between Russia, Ukraine, and that's gonna take some time to develop. Same thing in the Middle East with with the Houthis. You know, what what's your thought on how that pans out? You know, what what shifts you you see first? How quick, I guess, based on historical experience?

Yeah. I I think that's where we you know, on President territory. We we we haven't really as I think back historically, had this situation before As I said, if we just look at the medium-sized tankers, what what what really stands out is that before the invasion, that we just had, over just over a hundred ships that were over twenty years old and they were typically trading with with charter or so that that didn't have the the typical age restriction and they were typically lifting cargoes from from countries where you had a various degrees of of sanctioned oil. Of course, the what what the the war created was this demand for additional vessels to facilitate that that trade. As we point out, that fleet has now grown up to well, fleet is is larger, but the number of vessels over twenty today is over three hundred vessels. Right? So it's growing just in three years from a hundred so to three hundred basically because nothing has been trapped. And what we are then also saying is that if if that continued, the sanctions even though you can argue that the the the the parallel feature is It's maybe being becoming saturated, but then you have another round of of sanctioned vessels that are that's taking place and then there's demand for more vessels that that are about sanction that can carry the oil. So as long as that persists, think there is a demand for for the older tankers. So if nothing happens, and we didn't strap any vessels in in that category, As we point out, we would actually be a safe harbor vessels that are over twenty. And there's nothing in history that that kind of tells us what how quickly that can unfold. I think what we can say is that if the trade normalizes, and what we all are subjected to in in count the regular trade. I mean, we do see the the age restrictions that especially at at at twenty, really starts kicking in at in some cases. With some charters even even earlier than that. So there is a lot of vessels here that I think will either be operating with very low utilization or will be parked somewhere. Or will start going to the scrap yards. At what pace that that's gonna happen? I think that's the million dollar question. And I think it's it's it's it's the right question to ask, but I'm afraid we don't have the answer.

Appreciate that. That's true. That that's an awful lot. Compared to normal. So maybe just two quick ones just to wrap up. The the seasonality that you normally see in in through one Q into two Q, maybe you could just remind us of that. And then you know, you you mentioned the vessel purchased. Are you seeing a lot of you know, especially with that much overcapacity potentially hitting and what that could do to rates, are you team. More books come across your desk in terms of of vessel sale opportunities?

Yeah. Good good good question. So first of all, just on on where we see the the rates, I I think we we we kind of touched on it and and we when we looked at it, typically, when you come into Q4 and go out of Q1, you kind of have rates that that that start low and go up and then they start coming down as we get into Q2. This this past two quarters, we've kind of seen the the inverse of of that, I would say. So a little bit unusual, but we've had unusual years in in the past past couple of years. But but that's that's kind of where where rates have been going. So we definitely looks like we're moving stronger into Q2 but it's kind of the inverse of what we saw last year. Yeah. And in in terms of of S and P opportunities, yeah, market has has come down on on vessels, which is also why we're beginning to lean in a bit as we as we said to to John. I mean, and and as we talked about on the last quarter, we we kind of see ourselves maybe selling a little bit faster than we're buying, but but have fleet replenishment, and and we haven't we haven't done a lot in in recent years. And seeing prices come into kind of a a ZIP code that that that we're beginning to like again. So so that's why we we we require one one chip today, and we'll continue to to look for opportunities. When people have had a couple of good years as as most tank owners have had, Some owners have have different priorities and as as as we continue to say, I mean, we're an operating company. We like to have a certain scale in the market. So so we'll obviously be focused on trying to renew the favor. We'll do at a very mission to pay you.

Very helpful. Appreciate the thought. Thanks, guys.

Thanks, Bridget. Okay.

And that will conclude the Q&A portion of today's call. I will now turn the call back to the company for any additional or closing remarks.

Thank you very much for listening in to our call today. We look forward to reporting back to you next quarter. Thank you. Have a good day.

Thank you, ladies and gentlemen. That will conclude today's call. You may now disconnect.