Welcome to Teekay Tankers Ltd. Fourth Quarter and Fiscal 2011 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 Mr. Bruce Chan, Teekay Tankers Ltd. Chief Executive Officer. Please go ahead, sir.

Before Mr. Chan begin, I would like to direct all participants to our website at www.teekaytankers.com, where you will find a copy of the fourth quarter and fiscal 2011 earnings presentation. Mr. Chan 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 and fiscal 2011 earnings release and earnings presentation available on our website. I will now turn the call over to Mr. Chan to begin.

Thank you, Mr. Razonaga [ph]. Hello, everyone, and thank you very much for joining us. With me here in Vancouver is Vince Lok, Teekay Tanker's Chief Financial Officer; Brian Fortier, Corporate Controller of Teekay Corporation; and Peter Evensen, Teekay Corporation's CEO. During today's conference call, I will discuss Teekay Tankers results for the fourth quarter and fiscal year 2011. The associated presentation slides I will be walking through can be found on our website. I will begin on Slide 3 of the presentation by reviewing our recent highlights. We continue to pay out essentially all of our cash flow in the form of dividends to shareholders. In the fourth quarter, Teekay Tankers declared a dividend of $0.11 per share. Our fourth quarter dividend, which is our 17th consecutive quarterly dividend, will be paid out on February 28 to all shareholders of record on February 21. Despite the extreme weakness in the spot tanker market over the past few years, Teekay Tankers has been able to pay a total cumulative dividend of $6.87 per share since we went public in December of 2007. This dividend payment is based on actual cash generated and after debt payments and drydocking expenses. With the spot tanker market further weakening in the fourth quarter and with seasonal rate strengthening coming late in December, we generated an adjusted net loss of $1.3 million or $0.02 per share, excluding the impact of noncash items, which have been summarized in Appendix A to the earnings release. And cash available for distribution of $9.3 million for the quarter. Teekay Tankers' ability to pay quarterly dividends from cash flow generated after debt payments and other reserves even in this current tanker market trough, reflects a key benefit of our tactical approach to managing our fleet employment and the merits of…

[Operator Instructions] Your first question comes from Jon Chappell of Evercore Partners.

Bruce, a couple of quick questions for you off the dividend matrix. First of all, I just want to be clear on the share count that's going to be used for the first quarter dividend. Is that going to be the weighted average as the note states, or will it be off the share count post the follow-on offering?

Good question. As consistent with prior quarters where we've done equity offering, it's done off the weighted average for that quarter.

Okay, good. And then, I think I've asked this before, but just about the geographic exposure of your fleet. So in the Teekay Corporation quarter-to-date bookings for Aframax, as they said they have done about $10,000 to 2/3, and for Teekay Tankers, you've done about $13,000. Now I realize the Caribbean market has been a lot stronger than a lot of the other markets. So I'm just wondering about the remaining 1/3 of the quarter, where is the fleet primarily located right now and which markets may you have more exposure to?

All right. Just to be clear on the difference between what Teekay Corp. was reporting and what Teekay Tankers reports is because Teekay Corporation has older Aframax tankers, greater than 15 years of age, which doesn't participate in the Aframax pool. The Aframax pool is just for modern ships. So all of TNK's Aframaxes participated in the pool. And so the $13,000 per day is representative of the pool just for clarity risk, Teekay Corporation is more of a mix. And so that pool is geographically spread with exposure to the Caribbean and majority in the Pacific, so that's a little bit of a mix. And so in certain quarters, obviously, when the Caribbean is stronger, we take advantage of it, but it is primarily in the Pacific.

Okay. So when we think about the last third of the year or the quarter, I know it's difficult to say, but would a 50-50 mix be accurate, or it's still be a little bit more skewed to the Pacific?

Probably more skewed to the Pacific, like 60-40 or 2/3, 1/3.

Got it. And then just a question on the charter-ins that will be expiring in March and April this year. When would you need to extend the options by? I mean, March is just around the corner. And then also, what are the rates on the extensions for those ships?

The rates on extensions for the first extensions are the same as the $10,000 and $10,500, and they are coming up in the next couple of weeks here. So we will be taking a view of how we're seeing the market on the declaration date. And I would say, at the likeliness is that we will extend the charters.

Okay. And that's your decision not the owners?

That's right, that's our decision.

Got it. And then also on charter-outs, obviously, the charter coverage falls pretty significantly in the second half of the year. And as you said, kind of times well with your views on the market. But if the time-charter market lags, the spot market, as it typically does, what's your view of kind of going into 2013 with more spot exposure than you would normally like to have?

I think as we've seen, as our track record proves, if there are opportunities and some of our customers continuing to prefer our tonnage and offer us extensions to extend the charters and/or have new requirements, we may see again some additional fixed cover into 2013, which is to continue with the hedge book, and then provide with more upside as the year progresses.

Okay. And then last one, your liquidity situation has obviously been talked about and I won't even try to get you to talk about what you may buy and the timing of that. But if you were to make a transformative acquisition with significant new tonnage, have you thought at all about changing the dividend policy to where you'd have a more fixed payout and more visibility around the payout of the dividend?

It's certainly something that we would consider at the time. Obviously, a transformative transaction would involve a lot of moving parts. And we look at our pro forma leverage and the fleet composition and spot exposure, and kind of manage all of the risks together, and I think that combines. And obviously, the dividend policy would be one of the factors that we would evaluate.

And our next question comes from Michael Webber with the Wells Fargo.

So I do want to ask about actual -- about acquisitions, and I know just on the Teekay call, and I know you guys are not going to get into specifics. But you raised capital a year ago at a high level, you came back to the market more recently. Clearly, a pretty big signal you guys are close to something or looking at something, can you talk about whether or not you guys have done any vessel vettings? Would you place any bid deal with Teekay or with third-party owners? Can you maybe just give a little bit of color in terms of how aggressively you guys are looking to deploy that capital to the best that you can.

Right. I can't comment on any specifics. We're clearly looking at all of our alternatives, third-party, and waiting for Peter to make me an offer I can't refuse. So I think there are -- I think cash right now and having the liquidity is a competitive advantage and it gives us the ability to survey the landscape. And there are more opportunities to buy than for people who are looking to sell right now.

Okay, fair enough. You mentioned in your last slide, you're considering an expansion of the product tanker market, either obviously, 3 MRs up at the parent that have charters on them, but there are also some LRs and competitors and might be up for bid, can you talk a little bit about which specific asset segment within the product tanker market you guys have looked at, or what's really peaking your interest here?

Right. Well, from our -- looking at our sponsors, Teekay Corporation's pooling and commercial presence, we have -- they have the Taurus Tankers pool, which is LR2 pool, and we think that it's complementary, Aframaxes and coded Aframaxes that gives the optionality of trading dirty when the dirty market is higher. But then, if the long-haul product market develops and becomes stronger with the results of these refinery closures in Europe and the U.S., that's been -- it gives ability for the shipowner to trade in the market, both clean or dirty, whichever happens to be in those advantageous. So we see that, that is a very interesting market for us and would be one that we focus on.

So more focused on that Aframax segment?

Yes, I think that's just a natural synergy. We would look at the other areas, but that is -- having the ability to trade flexibly, as well as have a Teekay-managed pool that we have other -- which where we have scale is an advantage.

That makes sense. You've had some time now within your pools, or you had some tankers leave your pools, I guess, more than a couple of months ago, so you've had some operational time now. Have you noticed any major difference in terms of pool performance? Maybe you can talk about that going forward.

Well, the pools, as you say, we've had some people come in and some people leave. It's still pretty early there. Overall, the pools are continuing to perform well and the scale is there. And so it's -- if anything, our pools, the change has allowed us to reduce the average age and have a more modern fleet, and that on balance should be beneficial going forward.

[Operator Instructions] And we do have a question from Martin Roher from MSR Capital Management.

But the question I have, Bruce, is how confident are you that the investment opportunities will be sufficient to offset the apparent dilution from the recent equity offering? Nobody posed a question quite that way, but can you give us your thoughts that led up to the equity offering when you already have a very liquid balance sheet?

Right. Good question. We are -- that was clearly part of the analysis when we looked at raising the equity. And where we see ship values now and number of potential opportunities or alternatives out there, we're pretty confident that we will be able to employ the capital in either a transformative deal or another use that will increase both the operating leverage to the upside for this -- to the tanker market, as well as increase all kind of key metrics accretive to dividends and number of ships per share, et cetera. So that was definitely part of the analysis we've looked at.

And our next question comes from Justin Yagerman with the Deutsche Bank.

This is Josh Katzeff on for Justin. I just wanted to jump back into the acquisitions and follow on maybe some of Mike's comments. As far as deploying capital within kind of the accrued or products space, do you have maybe a target mix where you want to kind of, I guess, spend that cash? Or are you just going to ,I guess, be opportunistic with the new space?

I think it's a little bit of both. You want to be opportunistic, it depends on just how opportunistic the alternatives are, but there's certainly is some merit into expanding into complementary areas like LR2s, which are just very similar to -- just a coded Aframax and provide the ability to take advantage of crude and clean markets when the opportunities present itself. So I won't say there's a target. It's kind of a way of looking at the best way to spend the money.

And as far as, I guess, deploying that capital, I guess, how do you think about your leverage going forward? And are you planning on really levering up now that we've, I guess, kind of -- we're at/or near a bottom?

Yes, I guess, traditional way of looking at it and in terms of a cyclical industry like ours is that more leverage at the bottom as you head into recovery is beneficial. It provides greater equity returns and upside and leverage to the recovery. And so, that is a general rule of thumb that we do look at is that we would be willing to lever up more as we head into a recovery.

Can you quantify maybe a max? Should we go to maybe, I guess, 60%, 70% debt-to-cap?

It really depends on how much -- again, as we said, how much spot exposure you would have, what type of contracts you have in place at the time. And so, there isn't really -- I mean, obviously, there's a -- you'd be -- you wouldn't want to hit a high-level where you're into a potential distress if something goes wrong. But we'll be willing to take a higher leverage.

And as far as newbuildings go, are they still on the table? You have the one VLCC JV that was clearly a one-off event, but would you like to maybe buy newer ships with, I guess, more efficient engines?

It's certainly an alternative. There are pros and cons to both. One is not being on the water. You don't immediately realize the benefits of any recovery. And obviously, it involves more capital, invest -- higher invested capital per asset. But there's also, as you say, upside in terms of more efficiencies and a newer fleet. So it's certainly an alternative that is we will be weighing off as one of the uses of our capital.

Got it. And just one more question. Just with regards to the Nassau Spirit and Kareela Spirit, those are 2 older Aframaxes. I understand you're still trading the pool, but they're also spot. Is there any thought about maybe selling those and using some of the proceeds to buy more modern Aframaxes?

It certainly -- obviously, just in any market we looked at, as certain assets get older, we look at the ability to modernize and sell and then move up. It also depend on market conditions at the time. Right now, secondhand older units have fallen in value greater than modern units. And so, one could argue there's greater upside potential when the market returns on those units and there are others, so it's something that we will look at. At some point, obviously, you do have to renew those ships.

Thank you. There are no further questions at this time. Please continue.

Well, thank you, everyone, for your support. We look forward to speaking to you next quarter.

Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for participation. You may now disconnect your line and have a great day.