Welcome to Teekay Tankers Ltd’s Third Quarter 2021 Earnings Results Conference Call. During the call, all participants will be in a listen-only mode. [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.teekaytankers.com where you will find a copy of the third quarter 2021 earnings presentation. Kevin and Stewart 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 third quarter 2021 earnings release and presentation available on our website. I will now turn the call over to Kevin Mackay, Teekay Tankers’ President and CEO to begin.

Thank you, Ryan. Hello, everyone. Thank you very much for joining us today for Teekay Tankers third quarter 2021 earnings conference call. Joining me on the call today are Stewart Andrade, Teekay Tankers’ CFO and Christian Waldegrave, Director of Research. Moving to our recent highlights on Slide 3 of the presentation. Teekay Tankers had a negative adjusted EBITDA of $16 million during the third quarter, down from negative $7 million in the prior quarter. We also reported an adjusted net loss of $50 million or $1.48 per share during the third quarter compared to $42 million or $1.23 per share last quarter. Our results are largely due to weak spot tanker rates and a heavy drydock scheduled during this quarter. Despite another challenging quarter, we continue to maintain a strong balance sheet as pro forma liquidity of $209 million and then net debt to capitalization of 39% at the end of the third quarter. In addition, we completed the refinancing of 8 vessels with new lower cost sale leaseback financings, which lower our overall cost of capital. Stewart will elaborate on this later in the presentation. In the freight market spot tanker rates sank to historic lows during the third quarter with the weakest rates seen since the 1980s. However, rates have seen a modest improvement at the start of the fourth quarter due to a combination of higher trade volumes and positive short-term factors as further potential upside over the winter months. Although the timing of a more significant market recovery remains uncertain due to COVID-19. We believe many key indicators continue to trend in a positive direction, which I'll touch on in more detail later. Lastly, the company took advantage of relatively firm secondhand tanker prices are selling a 2003-built Aframax for approximately $12 million. Turning to Slide…

Thanks, Kevin. Turning to Slide 7, we highlight the company's strong financial foundation. As a result of our focus on reducing debt and building financial strength during last year's market upswing, we have maintained a strong balance sheet. The company has a pro forma liquidity position of $209 million, which provides financial resilience in this weak freight market. Since May 2021, the company repurchased 8 vessels that were under higher cost sale leaseback financings using existing liquidity. In May, two of these vessels were repurchased for $57 million, while the remaining 6 vessels were repurchased in September for $129 million. I'm pleased to announce that we completed lower cost sale leaseback refinancings for all 8 vessels in September and November. While our repurchases and refinancings decreased our quarter-over-quarter pro forma liquidity by approximately $30 million, we have materially reduced our overall cost of capital with estimated interest expense savings of approximately $11 million in the first 12 months alone. Lastly, we also have a low financial leverage with net debt to capitalization of 39% and a manageable debt repayment profile with no significant maturities until 2024. With that, I will turn the call over to Kevin to conclude.

Thank you, Stewart. As I've said in past quarters, I would again like to thank all of our seafarers on-shore based staff for their continued dedication to providing safe and uninterrupted service to our customers during these challenging times. We continue to focus on the safety and well-being of our seafarers. As we look forward to continue transitioning to a more normalized world. With a strong financial position, and high operating leverage. we believe that Teekay Tankers is well positioned to continue to weather the current market challenges and benefit from anticipated tanker market recovery. With that operator, we're now available to take questions.

Thank you. [Operator Instructions] Our first question comes from Jon Chappell with Evercore ISI.

Thank you, good morning or good afternoon. Kevin, just a big picture one maybe simple, maybe complicated. Where to from here, so two years ago, you laid-out this path in your Investor Day, a heck of a lot changed in that period. But you've accomplished everything on the financial side as far as the certainly specs are concerned in the balance sheet. And now here you are with probably the best balance sheet in the industry, but a bit of an older fleet on the precipice of what's hopefully a big recovery off, as you noted the worst market in -- since the 80s. Where's the focus for the next 12 months as it relates both to the operational leverage and the financial average?

Good question, Jon. I think the main focus right now is just keeping our eye on the ball as we look to what uncertainties COVID-19 puts in front of us, if any it appears on that front we seem to be getting ahead with vaccines around the world, and hopefully that plays into what we see as an improving tanker market. So strategically, I think what we've done, as you said over the last couple of years is really to strengthen the company and get our organization better place to get ready for the upturn. When it does come, it's really looking at maximizing our returns from the fleet that we have currently have 50 ships, we feel that's a comfortable size, gauge profile is average with the rest of the industry. So as you've seen us report this quarter we're selling some of the older units as they -- as we can get good pricing for them. So I think the focus right now is just making sure that we weather the rest of this storm is in front of us. And that we're -- we've been going through for the last two years. And then making sure that we can absolutely drive revenue going into a much stronger market. Beyond that, I think the eye is obviously on the challenges that the industry has facing in terms of reducing emissions and development of new technologies. And as our older fleet starts to sell-off, we'll have to look at some of that, that new technology and make some decisions with regards to fleet renewal. But I think that's further down the road at the moment. It's more focused on the next year or two years of maximizing our revenue generation, building an even stronger organization.

That makes sense. And then finally, just to be fair, I've asked all the other tanker companies this week, the same question, you've laid-out all these different inflection points for you it is on Page 6 of the slide deck that's just really compelling and how we're so much closer hopefully to the recovery. But what can go wrong? I mean, if we just take new variants and the pandemic out of the mix even though we're not necessarily completely through that, where else can maybe something kind of come up and trip a recovery before it really gets underway?

I think -- let's take the simple one. The -- on the fleet supply side, I don't see anything in the forecast that could trip up a recovery, the shipyards are full, the container ordering seems to continue unabated. There's LNG ordering to come. So I can't see in it, certainly in the next couple of years where fleet supply will be a challenge. So it really comes down to what's lining up on the oil side. And as we look at all the different variables that play into a market and that makes trying to judge when this recovery really starts to take-off in earnest. There's nothing in our line of sight other than reduced overall demand. That can drive a scenario that isn't positive for our industry. I think calling the actual inflection point is the [indiscernible] because nobody really knows when this thing is going to turn. But, as we've pointed out in our slides, all of the elements that we keep an eye on and more beyond that are all pointing to a much more positive environment for us going forward.

Okay. Appreciate your insights. Thank you, Kevin.

Thanks, Jon.

Thank you. Our next question comes from Randy Giveans with Jefferies.

Hey, gentlemen, how's it going?

Good. Thanks, Randy, how are you?

Great. Great. On the last call, we mentioned that you were starting to clean up a few of your dirty LR2 Aframax is to go back to the clean products trade. Any kind of updated thoughts or commentary around that? Are you getting more bullish on the product side of the equation or do you still think kind of crude [indiscernible]?

Yes, we did actually -- we followed on during the -- over the summer period and in total, we converted four ships in the fleet trading clean cargos which have had positive results. I think going forward though, the anticipated recovery in the product side sort of lead the crude side hasn't really materialized. And if you look at sort of the Aframax LR2 returns on balance today, I think we're uncertain whether the LR2s will continue to be the place to trade in. So we're actually got a couple of ships that are coming open in the next few weeks and termination at the moment and we probably could turn those back into crude trade. But, I've said this many times on calls before that's, that's the beauty of LR2, we can clean them up and if we don't like what we see going forward, we can turn them quite easily back into the crude side.

Sure. That’s fair. And then kind of a follow up question on the balance sheet, we're still in the high 30s, let's call it net debt to cap? Have you kind of announced or do you have any kind of real goal targets there on leverage ratios before you make a strategic shift in capital allocation or is it just all kind of market [dynamics] and timing?

No, we don't have a fixed number that we're aiming to get to. I think, a lot comes down to what we see is as lying ahead for us as a company both in terms of our market as well as the profile of our fleet and what we're doing. But also, we've said this many times that we're in the tanker market and the tanker industries are very cyclical business. So the stronger we can build our balance sheet and the lower we can lower the debt level that we can carry. That provides us financial flexibility that allow us to make the right decisions at the right points in the cycle. So I think, going forward I don't see us changing that strategy or that approach to how we run the company or our balance sheet.

Okay. That's fair. So nice to see some progress there on the quarter to-date rate. So hopefully, that continues. Thank you.

Thanks Randy.

Thank you. Our next question comes from Magnus Fyhr with H.C. Wainwright.

Yes, good afternoon. And or I guess it's morning on the West Coast still. Kevin, maybe there's a question for Stewart. But you guided I mean, OPEC you did a great job on OPEC in the quarter came in significantly below your guidance, I think you've got $44 million came in at $39 million and going forward, you're guiding for $40 million? Can you tell us a little bit of what's going on there and you've got a good run rate for 2022?

Sure, I can take that one. So in Q4, we had a little bit less expense related to some of our crew changes than we were expecting. So that helped reduce our OPEC. And we also tend to do a lot of bulk purchasing at the beginning of the year to try and get volume purchases to reduce our OPEC. And that bulk purchasing program is actually even a little more positive than we had expected, which reduced our spending in Q4 as well. So overall, we were as you said we had a good quarter for OPEC. In terms of our Q4 guidance, as you said, we've got it around $40 million for Q4. And I think for a run rate, probably about $41 million is a reasonable run rate. As I said, we tend to have a little bit higher than OPEC at the beginning of the year as we do bulk purchasing.

Okay, so I guess we were running higher through most of the earlier in the year. So what kind of costs besides the buying some of these supplies early in the year? Is there anything else there that contributes to the lower run rate because that's pretty a lot lower than the previous run rate?

Yes, I think the three -- the two main factors there as I said, is the bulk purchasing program. And then also some of the expenses related to COVID and crew changes and some of those things that we were taking on earlier in the year and that were a little more expensive earlier in the year. And they've -- those costs have come down through the year.

Okay. Thank you for answering my questions.

Yes, you're welcome.

Thank you. Our next question comes from Ken Hoexter with Bank of America.

Hey, great, good morning. Kevin, can you talk a little bit about trends historically on the drawdowns you mentioned the drawdown of inventory. So is there historically a level where you see the market say okay, that's as low as we want to go and start to build the stocks up again, is there kind of any inflection points you can point to historically?

Well, I think a year ago, I probably would have told you Kevin, if we get down to the five-year average historically are slightly below the five-year average, you typically start to see oil producers open the taps a little bit. But as we stand here today where 215 million or 220 million barrels below the five-year average, which is almost the same as what we were above it, we're in the second half of 2020, we were 215 million barrels above the average.\ So we have come down a massive amount. And, we might learn something later today when we open meeting at [indiscernible], but so far, it appears that the appetite is to release barrels into the market at a slow and steady pace rather than to open up fully. So I don't think there's a number -- there's certainly not a number that we TNK look at and say, okay, when we hit this number of inventory level things are going to change. I think it's just one more factor in the whole mix of variables that come into how our market operates. But I think we're optimistic it can go much lower where Christian, you might be more accurate on this, I think we're something like getting close to 60 days of reserve supply. I mean, historically, when you get down to those levels two things happen, one oil price goes up and two, eventually they turn the taps back on more significantly. Christian, anything to add?

No, no, I was just getting to that point, we're at about 62 days of full cover at the moment in the OECD. And like Kevin said, once you get below 60, that tends to be the point in which you get a bit of an oil price spike. So with inventories still drawing in the short-term here, I think we could expect the situation to stay pretty tight and inventories to come down a bit further. But as OPEC keeps releasing oil onto the market, at the pace that it's doing, plus some non-OPEC plus supply coming back, hopefully, we'll start to look a little bit better as we get into 2022 on the oil supply front. And that should then help to start replenish those inventories and that'll obviously positive for the tanker market.

Well, I guess that's not too encouraging. If we're going to be driving in the near-term. The structure -- let me -- Kevin, your moves -- I guess, if you're looking at rates that are rebounding, is there thoughts now of maybe adding more charter in vessels or do you -- are you mentioned I'm comfortable with the 50 vessels before would you take any moves now to position yourself even more for that inflection or it just given the unknown it's not worth setting it up?

No, I think, we've got different levers in the in-charter portfolio has been a very good lever for us historically going into we think is going to be a strengthening market. So although we say we're comfortable with the 50 ships that we have today. We say that because asset prices are 10-year highs and we don't feel that there's value there to be a purchaser ships that on the in-charter side, we've done this three in-charters already earlier in the summer. And we said after we did those, we would take a pause and we would look at where we see the economy going and the recovery coming and what COVID had to offer. And I'm glad we did because I think the markets softened or stabilized, I would say not softened but more stabilized. So I think we've got an opportunity to go back in and add to that portfolio of three ships. So I think as the as the green shoots appear I think you'll probably see us go back in and try and get some ships on a short-term to mid-term basis anywhere from six months out to three years kind of like that.

All depends on the ship and at the rate that we can bring it in that there's value to be add.

So maybe something we see more activity depending on where rates go. Yes, looking at your chart on Page 4 just looks like we're maybe a little delayed in the seasonal rebound from that I guess typically it starts a little bit more end of October I thought it was more Thanksgiving that you started to see that ramp up is that something you -- any reason to not see that seasonal strength given the environment you setup for the -- as we move to the end of the year here?

Well, I think, every year, we say that the fourth quarter is a stronger quarter, some years, I've seen it kick-off right at the beginning of end of September going into October and some years, I've seen it happen in the first week of December. So I don't think there's a specific week or a specific month where you'd expect things to take-off. And I think what we've seen already is in October, things picked up and that strength seems to have continued in November. Where it goes from here? I think it will be a stronger quarter definitely compared with Q3, but, will it return to sort of levels we saw in the early part of 2020? No, I don't think we're going to get to those kind of highs now when we have 4.7 million barrels of crude still not being transported around the world. But I think it'll still be a healthy quarter. And we may see further improvement as weather delays and other seasonal limitations on the logistics chain come into play. So there's certainly what we're seeing across the Aframax segment and the Suezmax segment to a lesser degree is we're getting more pockets of volatility. In the summer, it was more -- you had hurricane Ida and that affected the U.S. Gulf and everywhere else was a little bit flat, whereas now we're seeing the Med pick up a little bit. We're seeing some volatility in the North Sea. North Asia is starting to tighten. So to us, it's indicating that things are starting to tighten up not massively or overly tightening, but it's certainly more tight than it was during the -- what's called the trough in the summer. But I wouldn't sit here today and try and predict exactly how high it's going to go.

Great. Kevin Stewart. Appreciate that. Thanks.

Thanks, Ken.

Thank you. This concludes our question and answer session. I would like to now turn it back to the company for any closing remarks.

Thank you for joining us today, and thank you for your support and TNK. Talk to you next quarter. Bye-bye.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.