Please standby. We are about to begin. Welcome to the Teekay Group Fourth Quarter 2024 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. To press star one to register for 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 contain 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. Thank you, Ed.

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 Tankers CFO, Ryan Hamilton, our VP of Finance, Corporate Development, and Christian Waldegrave, our Director of Research. Starting on slide three of the 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 $450 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 have sold a total of five 2005-2009 build vessels for combined proceeds of $160 million resulting in expected book gains on sale of nearly $60 million. Further, I am pleased to report that just today, we lifted subjects and signed an MOA to acquire a modern LR2 tanker which we expect to close in the second quarter. These sales and purchases are part of our ongoing fleet management 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 completed CNK's acquisition of…

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 speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you are in the event via the web interface and would like to ask a question, simply type your question in the ask a question box and click send. We will 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. It just seems a little curious given, you know, it is a part of the tanker sector that Teekay has not really been involved in much in the past. I get it is cheap, so is TNK. And it is also just, like, a lot less liquid than TNK as an investment is concerned. 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, Jon. Good morning. I am expecting that question. I just want to emphasize that our number one product is obviously our core fleet and our core business at Teekay with the fleet renewal, which we get a chance to discuss as well. But the investment here is not straying really away from what we have done in the past. As you will remember, we have always had some MR exposure. We have not 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 thought it was opportunistic, and it 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 brought us into the 5.1%. But just want to emphasize it is a small investment. We think it is good value, and you have a bit of investment here. I think it keeps us 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 are purchasing that you are going to get in the second quarter. You are still selling, you know, at a quicker pace than you are replacing, which I think makes sense in this asset value environment. So 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 have had special dividends. I would think that given the cash balance today, the proceeds that you are raising from these vessel sales, you are in a stronger position. But on the other hand, the market is a bit more uncertain. So a lot in there, but kind of, you know, pace replacement and capital allocation within that.

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

Okay. Thanks for the thoughts, Kenneth. Thanks.

We will 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 Jon's question and then a market-related question. Just kind of on the last topic. Obviously, you are flush with cash. No debt, plenty of liquidity. And, you know, the cash is coming in much faster than you are able to deploy it. Maybe just kind of bigger picture on how you see TNK from here. Do you see the platform maybe evolving in terms of, you know, the Ardmore stake perhaps is not a one-off and that you have, you know, you have your operating tanker fleet. You have got the marine business with Teekay Australia. Do you think that you are going to have a growing portfolio approach perhaps where you are taking stakes in other equities, and that is sort of an avenue of exposure to the sector without having to put capital to work physically?

Yeah. No. I do not. I just want to emphasize that the Ardmore investment is really small in our total capital allocation plan here. The number one priority is 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 are looking to add assets where we can bring value to those assets by putting them on our platform. And that is obviously not by investing in other companies. So I just want to be very clear that that is our number one priority. As you point out, Omar, we are generating cash fast when we are able to deploy. I would say it is not a problem to deploy cash. I think it is maybe hard to be patient in the market like we are in, but we are. And, I mean, we have been through a lot of cycles over the past fifty years as a company, and many of us have been through a few cycles. So I think we know that to be patient sometimes pays off, but that is exactly what we are doing here. So I do not think it is a matter of that we cannot deploy it. I think it is a matter of being patient.

Okay. Thank you. And then just one quick follow-up just on that note and appreciate your comments of having taken a sub-five percent stake, but by virtue of the buyback, you have now had to file the 13G. I take it that this is just as you say, it is a small opportunistic holding with no plans perhaps of wanting to increase the size of that position.

Yeah. That is right. I had a fellow CEO call yesterday, and we chuckled about it. But they clearly saw that there was good value there as well, and it was not really our fault. So yeah, you are right.

Okay. Alright. And then if I could just ask a question about the market, and you referenced this in your presentation, just all the sanction discussion and how potentially there are 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 the US. Obviously, there is all kinds of uncertainty as to how long those sanctions may hold. Just wanted to get a sense from you given, you know, 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, Omar. I think we have seen an impact from the sanctions that were placed on January tenth. Of those ships that were sanctioned, there were over one hundred and fifty tankers, and the majority of those were serving the Russian Far East trade out of Kozmino. And in the weeks following that, we have certainly seen difficulties in Russia getting that oil out of Kozmino into China. And we have also seen India as well having to look at alternative sources. So if you look at what has 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 sources of crude. So we have seen an increase in volumes from the Middle East but also from West Africa and other parts of the Atlantic to make up for the shortfall here. Which is why we have seen some volatility on the VLCC side in particular, which is then helping out the Suezmaxes a little bit as well. So, you know, the OFAC sanctions, they are having an impact. As you said, we do not know what the future is from here, whether we are going to get more sanctions or relaxation on sanctions. But as Kenneth said in his remarks, all this 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 going to evolve in the coming months.

Good. Thanks, Christian. I appreciate the color there, and Kenneth, thank you as well. I will turn it over.

Thanks a lot.

Moving next to Ken Hoexter with Bank of America.

Hey. Great. Good morning. If I guess talking about the rates. Right? So we had $24,000 and $28,000 per day per the Suezmax Aframax with just about two-thirds and just over half of the quarterly days booked. That is 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 bigger overhang? What is your thoughts on what is driving the rates pressure on rates near term here?

Yeah. I mean, for sure, we I think in Suezmaxes, that was a weaker finish to 2024 and a weaker start to 2025. And I think what we have seen now is an uptick certainly this week. The Suezmax list is significantly stronger than what we averaged. So I think what is driving that, as we talked about in the prepared remarks, Ken, is really the West-East arbitrage that is moving up and the VLCCs that have been moving up and then some replacement barrels that are really beginning to kick in now. As you recall, sanction vessels, there was a bit of a delay on, and they needed to offload. And then they were scrambling for cargoes, and that is driving it. So we just see more cargo demand in that.

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

Yeah. I think that is where we are in uncharted territory. We have not really, as I think back, historically had this situation before. As I said, if we just look at the medium-sized tankers, what really stands out is that before the invasion, we just had just over a hundred ships that were over twenty years old, and they were typically trading with charterers that did not have the typical age restriction, and they were typically lifting cargoes from countries where you had various degrees of sanctioned oil. Of course, what the war created was this demand for additional vessels to facilitate that trade. As we point out, that fleet has now grown up to, well, the fleet is larger, but the number of vessels over twenty today is over three hundred vessels. Right? So it has grown just in three years from a hundred to three hundred basically because nothing has been scrapped. And what we are then also saying is that if that continued the sanctions, even though you can argue that the parallel fleet is maybe becoming saturated, but then you have another round of sanctioned vessels that are taking place, and then there is demand for more vessels that are not sanctioned that can carry the oil. So as long as that persists, I think there is a demand for the older tankers. So if nothing happens, and we did not scrap any vessels in that category, as we point out, we would actually be at six hundred vessels that are over twenty. And there is nothing in history that kind of tells us 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 kind of the regular trade, I mean, we do see the age restrictions that especially at twenty where you start sticking in at in some cases. With some charters 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 scrapyard hubs. At what pace that is going to happen? I think that is the million-dollar question. And I think it is the right question to ask, but I am afraid we do not have the answer.

Appreciate that. That is true. That is an awful lot compared to normal. So maybe just two quick ones just to wrap up. The seasonality that you normally see in through Q1 into Q2, maybe you could just remind us of that. And then you know, you mentioned the vessel purchase. Are you seeing a lot of, you know, especially with that much overcapacity potentially hitting and what that could do to rates, are you seeing more books come across your desk in terms of vessel sale opportunities?

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

Very helpful. Appreciate the thoughts. Thanks, guys.

Thanks, Ken.

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, all, 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.