Teekay Corporation Ltd. · NYSE:TK
Teekay — Teekay Shipping — Deutsche Bank Transportation Conference 2004
35 slides from Teekay's conference presentation, February 2004
Slide 1: Teekay Shipping – Deutsche Bank Transportation Conference
Teekay Shipping Deutsche Bank Transportation Conference Peter Evensen Chief Financial Officer NYSE: TK www.teekay.com
Slide 2: Forward Looking Statements
Forward Looking Statements This document contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements regarding anticipated EBITD
Slide 3: Teekay Shipping Highlights
Teekay Shipping Highlights We transport over 10% of the world’s seaborne crude oil The largest crude oil tanker company measured by market capitalization, enterprise value, and fleet size Growing fixed-rate business = Growing cash generating power – approximately $8.85 mid- cycle CEPS* equatin
Slide 4: This is Teekay
This is Teekay World’s largest medium-size spot tanker franchise World’s largest shuttle tanker operator – North Sea / Brazil Proven track record of accretive acquisitions High return organic growth 15 vessels on order 11 vessels delivered in last 13 months Attractively priced given po
Slide 5: Successful Acquisition Strategy
Successful Acquisition Strategy Bona Shipholding Acquisition (1999) - $450 million Significant entry into Atlantic Aframax trades World leadership in Aframax market Ugland Nordic Shipping (UNS) Acquisition (2001) - $780 million Strategic beachhead into shuttle tanker market ConocoPhillip
Slide 6: Teekay 5 Years Ago
Teekay 5 Years Ago Teekay circa 1998 Teekay was a price 43 ships owned, 3 chartered-in taker in a highly Predominantly regional spot market fragmented and operator cyclical commodity $3m long-term fixed-rate cash flows business 8 offices worldwide 47% leverage $0.54 billion market capi
Slide 7: Teekay's Transformation Strategy of 1999
Teekay’s Transformation Strategy of 1999 Increase size of spot fleet Teekay needed to further increase scale, capacity, flexibility and utilization but still had to time the market to achieve goals Build a direct customer sales force Biggest portfolio of strategic contracts with blue chip cu
Slide 8: Unique Blend of Financial Stability and Operating Leverage
Unique Blend of Financial Stability and Operating Leverage Teekay has two complementary businesses: 1. Leading Spot Tanker Franchise 2. Growing Profitable Long-term Contract Business Teekay Shipping Corporation 8
Slide 9: World's Largest Operator of Medium-Sized Tankers
World’s Largest Operator of Medium-Sized Tankers Aframax Sized Vessels 90 80 14 Vessels Newbuildings 70 60 # of vessels 50 40 71 4 30 20 32 1 1 10 23 13 10 0 (a) Teekay Shipping Malaysian Intn'l General Maritime Overseas Tanker Pacific Shipping Corp. Shipholding Group Mngmt (a) Includes owned and in
Slide 10: Leading Spot Tanker Franchise
Leading Spot Tanker Franchise Transformed from a regional operator to the only real global mid-size tanker operator Built a strategic contract portfolio in the conventional market with strong customer relationships Leading consolidator in a fragmented industry Increasingly chartering-in ship
Slide 11: The Tanker Market
The Tanker Market Spot Tanker Market Drivers Demand for Oil Supply of Oil Tanker Supply Tanker Demand EU and IMO Regulations GLOBAL DRIVERS IN A TIGHT MARKET Time Charter Rates (TCE) Teekay Shipping Corporation 11
Slide 12: Quarterly Average TCEs
Quarterly Average TCEs VLCC Suezmax Aframax 90,000 80,000 70,000 60,000 US$ per Day 50,000 40,000 30,000 20,000 10,000 0 1q90 1q91 1q92 1q93 1q94 1q95 1q96 1q97 1q98 1q99 1q00 1q01 1q02 1q03 Source: CRS Teekay Shipping Corporation 12
Slide 13: Tanker Demand 2004 – Oil Demand
Tanker Demand 2004 Oil Demand Strong global economic growth over 4% - led by China & US High oil prices (Brent - $25-27 / barrel) Global Oil Demand : +1.6% in 2004 (potential for over 2.0%) Strong growth in China – under estimated by IEA Japanese nuclear plants returning but not 100% as yet
Slide 14: Tanker Demand 2004 – Oil Supply
Tanker Demand 2004 Oil Supply Non-OPEC growth estimated at +1.5 mb/d in 2004 (0.9 mb/d in 2003 v IEA forecast of 1.4 mb/d). Increase from FSU, W.Africa, Lat Am & North Am. OPEC keeps high price policy = loss of market share Call on OPEC + stock change = 25.5 mb/d (-0.4 mb/d) on 2003 OPEC N
Slide 15: Tanker Supply 2004
Tanker Supply 2004 Fleet growth restrained in 2003 due Oil/Bulk/Ore carriers trading dry – net decline of 1% OBOs still switching to dry – expect another 1% move in 2004 IMO regulations come into force April 5, 2005 38 million dwt in mandatory scrapping by end-2005 Scrapping ahead of manda
Slide 16: Yard Capacity Constrained
Yard Capacity Constrained Yards full for 2004, 2005 and 2006 If a ship is ordered today, it won’t be received until 2007 2007 capacity restricted as yards focus on other ship types Strong demand from LNG sector that will occupy tanker berths (Aframax or VLCC) Teekay Shipping Corporation 16
Slide 17: Tanker Supply - Outlook
Tanker Supply - Outlook Deliveries Deletions On Order Net Change 40 Deliveries of ~60 mdwt 30 M illion Deadweight 20 10 0 Scrapping -10 of ~ 45 mdwt -20 (est.) 4.5 mdwt mandatory scrapping 17.4 mdwt voluntary scrapping -30 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 18: Conclusion
Conclusion Strong tanker market fundamentals for 2004 with seasonality Demand Several strong positives on demand side of equation Other short term factors could provide further upside Supply Fleet growth restricted by regulations & charterer discrimination Scrapping ahead of mandatory
Slide 19: Unique Blend of Financial Stability and Operating Leverage
Unique Blend of Financial Stability and Operating Leverage Teekay has two complementary businesses: 1. Leading Spot Tanker Franchise 2. Growing Profitable Long-term Contract Business Teekay Shipping Corporation 19
Slide 20: The World Leader in Offshore Loading
The World Leader in Offshore Loading Approximately half of Teekay’s capital is now invested in “floating pipelines” Navion - the leading offshore loading logistics provider UNS - the leading shuttle tanker time-charter entity Significant long-term stable cash flow High profitability Teekay
Slide 21: Significant Growth Potential in Offshore Oil
Significant Growth Potential in Offshore Oil Rapid growth in deepwater exploration BP has indicated its intention to spend over $15 billion over the next 10 years finding and producing new energy supplies Upside in core North Sea market Improving extraction technology Tax incentives New
Slide 22: Predictable & Stable Earnings
Predictable & Stable Earnings EBITDA from Fixed-rate Long-term Contracts 300 280 260 240 220 200 ($) millions 180 160 140 120 100 80 60 40 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Shuttle Tankers Fixed Rate Conventional Tankers Offshore Average ROE > 20% Average contract length appro
Slide 23: Teekay Today
Teekay Today Teekay circa 1998 Teekay today 43 ships owned, 3 chartered-in 89 ships owned, 53 chartered-in, 18 managed Predominantly spot market operator Balanced mix of spot / fixed-rate business $3 million long-term fixed-rate cash $285 million in long-term fixed-rate flows cash flows
Slide 24: Teekay is an Integrated Logistics Provider
Teekay is an Integrated Logistics Provider 21 Ships Managed Ships Offshore Loading Logistics / Outsourcing 53 Ships COA Time Chartered-in Floating Storage Tailored mix of Ships fixed-rate and TEEKAY and Offtake market related NETWORK Long-term Fixed- pricing 104 Ships * rate time charter Spot Charte
Slide 25: Consistent Balance Sheet and Market Cap. Growth while Maintaining Leverage
Consistent Balance Sheet and Market Cap. Growth while Maintaining Leverage $4,000 70% Total Assets Net Debt to Capitalization 16% $3,500 60% R = CAG $3,000 50% $2,500 in millions 40% $2,000 $1,500 30% $1,000 20% $500 10% $0 1999 2000 2001 2002 Sept. 30, 0% 2003 1999 2000 2001 2002 2003 (est.) * $3,0
Slide 26: Complementary Businesses Create Cash Floor with No Ceiling
Complementary Businesses Create Cash Floor with No Ceiling Fixed-Rate EBITDA Spot-based EBITDA 800 700 600 ($) millions 500 400 Floor 300 * 200 100 0 Low-cycle Mid-cycle High-cycle ($13,000/day) ($18,000/day) ($27,500/day) Proforma 2004 EPS $0.68 $4.10 $10.55 Spot Rate Increase EBITDA Increase $1,00
Slide 27: Growing Earnings Power
Growing Earnings Power 12.00 11.00 2004: Spot Rate Increase EPS Increase Growing operating 10.00 $1,000 TCE/day ~ $0.68/year leverage 9.00 8.00 Increasing Earnings Per Share ($) earnings power 7.00 6.00 5.00 4.00 Declining net 3.00 income break-even TCE rate 2.00 1.00 - $10,000 $12,000 $14,000 $16,0
Slide 28: How Should Teekay be Valued?
How Should Teekay be Valued? Historically, tanker companies have been valued based on ‘steel value’ alone. Teekay is an integrated logistics provider, and not just a conventional tanker company Teekay Shipping Corporation 28
Slide 29: Valuation Method
Valuation Method Multiple of Fixed-Rate EBITDA + Book Value of Spot Fleet In millions (except per share data) Balance Sheet data as at Sept 30, 2003 FIXED-RATE SEGMENT SPOT SEGMENT Fixed-rate segment EBITDA * $285 Book value of spot fleet + JVs $1,365 Multiple *** x9 Multiple ** x 1.6 Total fixed-ra
Slide 30: Share Value Matrix
Share Value Matrix Stock Price Multiple of Spot Book Value Matrix 1.0x 1.1x 1.2x 1.3x 1.4x 1.5x 1.6x 1.7x Fixed 8 52.25 55.49 58.74 61.99 65.24 68.49 71.75 75.00 Rate Segment 9 59.03 62.28 65.53 68.78 72.03 75.28 78.54 81.78 EBITDA Multiple 10 65.82 69.07 72.32 75.56 78.81 82.06 85.32 88.57 Value Ga
Slide 31: Investment Highlights
Investment Highlights An integrated supplier of Midstream oil services, not just a ship owner Financial strength to pursue continued profitable growth Profitable throughout the cycle; large base of long-term fixed-rate business coupled with significant spot market upside Market has not yet r
Slide 32: Appendix
Appendix NYSE: TK www.teekay.com
Slide 33: Multiple Comparisons
Multiple Comparisons Price to book value multiples for shipping group TEV / EBITDA 2004 Multiples Teekay 1.6 x Pipelines & Transportation Frontline 1.7 x Buckeye Partners 13.7 x General Maritime 1.3 x Enbridge Energy 12.4 x Stelmar Shipping 1.2 x Enterprise Products 12.6 x OMI 1.5 x Kinder Morgan En
Slide 34: Teekay Fleet Composition
Teekay Fleet Composition Teekay Shipping Corporation Fleet List as at Jan. 16, 2004 Number of Vessels Chartered-in Newbuildings Owned Vessels Vessels on Order Total Spot Tanker Fleet: VLCC's 1 2 - 3 Suezmaxes 1 5 - 6 Aframaxes 43 15 12 70 OBOs - 5 - 5 Large Product Tankers - 2 - 2 Small Product Tank
Slide 35: Appendix – EBITDA Reconciliation
Appendix – EBITDA Reconciliation EBITDA represents net income (loss) before interest expense, income tax expense, depreciation and amortization expense, minority interest, foreign exchange gains (losses) and gains (losses) on disposition of assets. EBITDA is included because such data is used by c
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