Teekay Corporation Ltd. · NYSE:TK
Teekay — Investor Day (January 2007)
123 slides from Teekay's investor day presentation, Jan 25, 2007
Slide 1: Analyst Day
TEEKAY CORPORATION Analyst Day January 25, 2007 New York f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 2: Forward Looking Statements
TEEKAY CORPORATION Forward Looking Statements This presentation 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 rega
Slide 3: Today’s Teekay Team
TEEKAY CORPORATION Today’s Teekay Team f C. Sean Day – Chairman of the Board f Bjorn Moller – Chief Executive Officer f Peter Evensen – Chief Strategy Officer f Vince Lok – Chief Financial Officer f Pankaj Khanna – VP, Strategic Development f Scott Gayton – Manager, Investor Relations f Dave Drummon
Slide 4: 2006 Highlights
TEEKAY CORPORATION 2006 Highlights f Generated ~$1.9b* of revenues and net income of ~$270m* f Generated ~$615m* of CFVO, ~58% or $343m* from fixed-rate businesses f Entered high growth FPSO sector through JV and subsequent acquisition of 64% of Petrojarl ASA f Completed IPO of Teekay Offshore Partn
Slide 5: Teekay in 1998 – A Tanker Company
TEEKAY CORPORATION Teekay in 1998 – A Tanker Company CUSTOMER CUSTOMER LOGISTICS LOGISTICS ASSET MIX AFRAMAX (HARDWARE) INDO-PACIFIC CENTRALIZED PEOPLE PEOPLE & & TECHNICAL SYSTEMS SYSTEMS AND (SOFTWARE) (SOFTWARE) COMMERCIAL OPERATIONS SCALE 45 SHIPS 8 OFFICES TOTAL SCALE SCALE 200 SHORE ASSETS 180
Slide 6: Teekay in 2007 – Much More than a Tanker Company
TEEKAY CORPORATION Teekay in 2007 – Much More than a Tanker Company We have created a unique platform through the Teekay Marine Midstream concept NCS CONOCO OFFSHORE BHPB CALTEX CEPSA EMISSIONS EMBEDDED PHILLIPS SPT OFFSHORE CUSTOMER LOADING MARINE AUSTRALIA STRATEGIC STRATEGIC CONTROL CHARTERING ST
Slide 7: Going for Leadership from Rig to Refinery
TEEKAY CORPORATION Going for Leadership from Rig to Refinery A leader in harsh A leader in high- weather FPSOs end FSO market World’s largest Shuttle tanker operator Emerging force in Atlantic product tanker market 50% owner of world’s leading lightering World’s largest operator of business mid-size
Slide 8: Leader in Marine Energy Transportation
TEEKAY CORPORATION Leader in Marine Energy Transportation 5 Floating, Production Storage & Offtake Units 40 Shuttle Tankers 28 Product 5 Floating 72 Crude Oil 17 Gas Tankers Storage Units Tankers Tankers CUSTOMER PEOPLE FINANCE OPERATIONS The Teekay Marine Midstream Concept Includes Includes 10 10 c
Slide 9: Teekay Corporation In Profile
TEEKAY CORPORATION Teekay Corporation In Profile f Teekay is an asset management company focused on the Marine Midstream space through: f A freight and vessel trading group f An integrated marine operations franchise f A global project management organization f An innovative corporate structure f Tr
Slide 10: Value Creation Approach – Four Components
TEEKAY CORPORATION Value Creation Approach – Four Components f Trading in a cyclical commodity industry f Market timing f Applying our operating expertise f Customer service f Chartering and pools f Technical and commercial management f HSEQ f Project management f Combining our expertise to get valu
Slide 11: Trading in a Cyclical Commodity Industry – Our Roots
TEEKAY CORPORATION Trading in a Cyclical Commodity Industry – Our Roots f Understanding trends f Market intelligence f Patience f Strong Balance Sheet $60,000 Spot Fleet Sold S/H Ships $55,000 Changes $50,000 $45,000 Realized Aframax TCE Sold S/H Ships $40,000 Ordered Newbuildings $35,000 $30,000 Or
Slide 12: Applying Our Operating Expertise – Our Roots
TEEKAY CORPORATION Applying Our Operating Expertise – Our Roots f Customer satisfaction f Maximizing revenues f Reputation for safety, quality and environmental stewardship f Opening doors to new business f Cost effectiveness f People and customer focus are key f Embodies the Teekay Brand OPERATIONA
Slide 13: Project Management – a New Focus
TEEKAY CORPORATION Project Management – a New Focus f Teekay has developed powerful internal project management expertise which allows us to work on numerous projects simultaneously Specialized Operational/ Engineering & Customer Financial Project Relationships + Commercial Expertise + Expertise + T
Slide 14: Project Management cont’d
TEEKAY CORPORATION Project Management cont’d f Built core competencies in securing strategic outsourcings as well as acquiring and integrating new businesses f Subsequently used each deal as a base for further expansion $60,000 Spot Fleet Sold S/H Ships Changes Awarded FPSO $55,000 Acquired L/T Proj
Slide 15: Innovative Corporate Structure
TEEKAY CORPORATION Innovative Corporate Structure ~70%* of Teekay’s assets are MLP eligible Strategic rationale for carving out fixed-rate businesses into MLPs: f Illuminates higher value of fixed-rate cash flows to Teekay investors f Cost of equity advantage accelerates more profitable growth f Gen
Slide 16: Assets Under Management
TEEKAY CORPORATION Assets Under Management 2000 2004 2007 In-charter - Spot - $1,171.6m $1,546.2m Fleet - Fixed-rate - 536.6m 958.1 Commercially Managed Fleet - - 251.5 MLPs - - 589.1 (minority interest portion) General Partnership Interests - - 33.9 Total - $1,708.2m $3,378.8 As a % of consolidated
Slide 17: Benefits of an Asset Management Platform
TEEKAY CORPORATION Benefits of an Asset Management Platform f Leverages existing operational expertise to enhance returns through fixed-rate/fee income f Provides capital to pursue large scale transactions f Reduces risk f Participation in value creation through G.P. Incentive Distribution Rights (I
Slide 18: Changing the Risk/Reward Ratio in our Favor
TEEKAY CORPORATION Changing the Risk/Reward Ratio in our Favor Low Profits High 100% Ownership Historical Fixed-rate Shipping during shipping shipping “Super-cycle” High Fixed-rate shipping in MLPs Capital Intensity In-chartering Trading spot ships 3rd Party Mngm’t Low MLP GP Pure Fee Ownership Busi
Slide 19: Growth in Stable Cash Flow
TEEKAY CORPORATION Growth in Stable Cash Flow f Teekay has diversified its cash flow streams beyond cyclical spot tanker markets: f Strategic acquisitions & recruitment of staff has built a project management capability that can bid on fixed-rate projects Historical Cash Flow $1,200 More than 50% $1
Slide 20: Our Ingredients for Success as a Project Organization
TEEKAY CORPORATION Our Ingredients for Success as a Project Organization CUSTOMER Customers trust us Teekay has PEOPLE Global reach and expertise built a sustainable competitive FINANCE Strength and discipline advantage OPERATIONS The “Teekay Standard” 21 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.t
Slide 21: Corporate Structure Supports Business Strategy
TEEKAY CORPORATION Corporate Structure Supports Business Strategy Teekay Corporation Teekay LNG Teekay Offshore Partners L.P. NYSE: TK Partners L.P. NYSE: TGP NYSE: TOO Conventional Tankers Shuttle Tankers LNG Carriers FPSOs LPG Carriers G.P. of G.P. of TGP TOO FSOs 22 TEEKAY – THE MARINE MIDSTREAM
Slide 22: Teekay’s Sum of Parts Value
TEEKAY CORPORATION Teekay’s Sum of Parts Value $67.04 Per Teekay share Teekay Offshore Teekay LNG Teekay Parent Partners Partners NYSE: TOO NYSE: TGP NYSE: TK & OPCO $23.96Per Teekay share $10.78 $32.30Per Teekay share Per Teekay share Assumptions Assumptions and and reconciliations reconciliations
Slide 23: Today’s Teekay
TEEKAY CORPORATION Today’s Teekay f Teekay is a leading asset management company focused on the Marine Midstream space f To create value, Teekay will utilize four key components: f Spot trading f Operating Expertise f Project Management f Corporate Structure f Our asset management platform reduces r
Slide 24: Teekay – More than a Shipping Company
TEEKAY CORPORATION Teekay – More than a Shipping Company What’s in a name……? Teekay Shipping Corporation Teekay Corporation Name change to be voted on by shareholders at 2007 AGM 25 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 25: Overview of Teekay Offshore Partners L.P.
Overview of Teekay Offshore Partners L.P. f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 26: Teekay Offshore Partners L.P. – Ownership Structure
TEEKAY CORPORATION Teekay Offshore Partners L.P. – Ownership Structure Teekay Shipping Public Corp. GP Unitholders NYSE: TK 58% 2% 40% Teekay Offshore Partners L.P. 74% NYSE: TOO 26% (Includes 100% of GP interest) Teekay Offshore Operating L.P. (OPCO) 36 4 9 Shuttle Tankers FSO Units Conventional Ta
Slide 27: Significant Offshore and Deepwater Growth
TEEKAY CORPORATION Significant Offshore and Deepwater Growth f Deepwater offshore Increasing Trend Towards Deepwater Oil Production oil production is one of the fastest growing 27 10 areas in the energy Shallow water industry 26 8 f Only significant 25 6 opportunity to add MB / Day MB / Day Deepwate
Slide 28: Growing Investment in Offshore Oil and Gas Sector
TEEKAY CORPORATION Growing Investment in Offshore Oil and Gas Sector SHUTTLE TANKER FPSO FSO Seismic Exploration / Subsea Production Storage Transportation Terminal Drilling Development $163 billion in 2005 expenditures Run-rate of $247 billion annually by 2010 Source: Douglas Westwood. 29 TEEKAY –
Slide 29: Offshore Oil Transportation, Storage and Production
TEEKAY CORPORATION Offshore Oil Transportation, Storage and Production Shuttle Tanker FSO FPSO Specially designed Provides on-site Oil production and to transport oil from storage for oil fields storage vessel offshore installations to refineries Majority of contracts Contracts are Contracts are are
Slide 30: Shuttle Tankers: “Floating Pipelines” for Offshore Oil
TEEKAY CORPORATION Shuttle Tankers: “Floating Pipelines” for Offshore Oil Advantages Over Pipelines f Less costly – especially for remote areas f Vessel interchangeability allows undisrupted oil movement f Destination flexibility for the customer f Segregation of cargo Shuttle tanker connected to ST
Slide 31: Dominant Position in an Expanding Market
TEEKAY CORPORATION Dominant Position in an Expanding Market World’s Largest Owner and Operator f OPCO operates 62% of the world’s shuttle tankers Geographic Presence in Growing Markets f Only foreign flag operator in Brazil (8 vessels) Low Threat of Substitution f Integral part of offshore oil produ
Slide 32: Increasing Demand for FSOs
TEEKAY CORPORATION Increasing Demand for FSOs Projected FSO Fleet Growth Opportunity to Add Incremental FSOs 31 - 41 6-8 Additional per Vessels Expected year 6 Newbuilds 86 86 Existing Fleet Existing Fleet July 2006 Next 5 Years Source: International Maritime Associates (IMA). 33 TEEKAY – THE MARINE
Slide 33: Increasing Demand for FPSOs
TEEKAY CORPORATION Increasing Demand for FPSOs Projected FPSO Fleet Growth f Current operating fleet expected to nearly double over next 5 years 87 – 98 17 - 20 f FPSO usage Additional per increasingly Vessels year popular in Expected 36 Newbuilds geographic regions with growing 111 111 offshore act
Slide 34: Significant Growth Opportunities
TEEKAY CORPORATION Significant Growth Opportunities f Teekay Shipping’s 50% FPSO JV with Teekay Petrojarl Opportunity is actively bidding on S ON (Petrojarl) new projects TI BU RI ST May Acquire DI Additional f Teekay may sell 74% NG interest in OPCO over time SI Interests in EA OPCO CR IN f 1 Afram
Slide 35: Our Growth Markets
TEEKAY CORPORATION Our Growth Markets North North Sea Sea Caribbean Caribbean Brazil Developed market Africa Growing market Australia Emerging market Since 2001, We Have Operated In 5 Continents 36 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 36: Long-term, Diverse Contract Portfolio
TEEKAY CORPORATION Long-term, Diverse Contract Portfolio Conventional Shuttle Tankers FSO Units Tankers f Majority of CoA volumes Average f 5 years f 8 years are life of field (16 year Contract average field life) – 21 (plus 5 one-year Life options) vessels f Time / bareboat charter 6 years – 15 ves
Slide 37: Teekay Offshore Partners Tax Arrangement
TEEKAY CORPORATION Teekay Offshore Partners Tax Arrangement A legal partnership that is electing to be taxed as a corporation in the U.S. Structure f However, the partnership pays no U.S. income tax since its business is considered “offshore” for tax purposes Investors receive standard Form 1099s Be
Slide 38: Summary Financial Information – OPCO
TEEKAY CORPORATION Summary Financial Information – OPCO Forecast Twelve Months Ending December 31, 2007 (Dollars in millions) MLP Also Has Option Voyage Revenues to Purchase Directly $749.3 from Sponsor Voyage Expenses 146.7 Time-Charter Hire Expense 146.4 Vessel Operating Expense 124.0 f 2 shuttle
Slide 39: Overview of Teekay LNG Partners L.P.
Overview of Teekay LNG Partners L.P. f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 40: Teekay’s Gas Business
TEEKAY CORPORATION Teekay’s Gas Business Long Term Growth Strategy: f Expand our LNG and LPG fleets on a build-to- suit basis f Grow through newbuildings, joint ventures and acquisitions f Leverage customer and supplier relationships f Provide superior vessel operations f Deliver competitive rates b
Slide 41: LNG Shipments: 7% Expected Annual Growth
TEEKAY CORPORATION LNG Shipments: 7% Expected Annual Growth f Global demand for natural gas is expected to continue to grow significantly f Growing shortfall of natural gas in key consuming countries f LNG shipments are the obvious solution to address this shortfall f Creates increased demand for LN
Slide 42: LPG Shipments: 7% Expected Annual Growth
TEEKAY CORPORATION LPG Shipments: 7% Expected Annual Growth f Rapid growth in China and India will lead worldwide consumption of LPG f As a by-product of natural gas production and liquefaction, LPG supply will increase with new LNG projects f Over half of the supply growth will originate from the M
Slide 43: Stable Long-Term Cash Flows
TEEKAY CORPORATION Stable Long-Term Cash Flows f Attractive fixed-rate contracts “locking in” cash flows: f 20 - 25 years initial length for LNG carriers f High credit quality customers f Cost escalation provisions f Long remaining contract life for all vessels: f LNGs: 20 years f Tankers: 14 years
Slide 44: Multi-year, Built-in Growth
TEEKAY CORPORATION Multi-year, Built-in Growth TANGGUH (70%) (2 LNG Carriers) RASGAS 3 (40%) (4 LNG Carriers) Skaugen (3 LPG) Dania Sp. LPG RASGAS II (70%) (3 LNG Carriers) SUEZMAX ACQUISITION (3 Vessels) INITIAL FLEET (4 LNG Carriers) (5 Suezmax Vessels) 2005 2006 2007 2008 2009 This portfolio of p
Slide 45: Teekay LNG Partners LP – Ownership Structure
TEEKAY CORPORATION Teekay LNG Partners LP – Ownership Structure 100% 100% Teekay Teekay Shipping Shipping Corporation Corporation Public Public Teekay Teekay GP GP L.L.C. L.L.C. 65.8% 65.8% (General Unitholders Unitholders (General Partner) Partner) 2% 2% Teekay LNG 32.2% 32.2% Partners L.P. www.tee
Slide 46: Overview of Teekay Parent: The Asset Manager
Overview of Teekay Parent: The Asset Manager f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 47: World Leader in Conventional Tanker Business
TEEKAY CORPORATION World Leader in Conventional Tanker Business 80 f Commercial management 70 and growth of Teekay’s 60 Exist NB's Aframax / Suezmaxes conventional tanker fleet 50 f 1 billion barrels of oil 40 shipped in 2006 30 20 f 420 million barrels under 10 contract 0 Teekay Novo. + MISC Allian
Slide 48: Unique Global Organisation
TEEKAY CORPORATION Unique Global Organisation Stavanger London 16 8 Vancouver 16 Tokyo 6 Houston 7 Singapore 7 f24 hour global market coverage through 6 commercial offices located in major shipping markets f58 commercial employees worldwide fDevolved authority = speed of response for customers fSupp
Slide 49: Customer Benefits from Teekay Scale & Breadth
TEEKAY CORPORATION Customer Benefits from Teekay Scale & Breadth f Global Reach - the only truly global tanker company able to meet the worldwide need of our customers f Customer Service - interchangeability of ships increases on time performance f Teekay’s tanker franchise has the ability to undert
Slide 50: Leader in Ship-to-Ship Transfer Logistics
TEEKAY CORPORATION Leader in Ship-to-Ship Transfer Logistics 50% owner of Skaugen PetroTrans (SPT) X Bundled logistics service involving offtake tankers, transfer equipment, support boat and mooring masters X Handles more than 10% of U.S. seaborne crude oil imports X Expanding globally - recently ac
Slide 51: Tanker Market Discussion
Tanker Market Discussion f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 52: Today’s Agenda
TEEKAY CORPORATION Today’s Agenda f 2006 Summary f Rates stronger than most estimates even with no major “events” f Fundamentals – Distance, volume and bunker consumption leading to higher ton mile demand f 2007 Outlook f Oil fundamentals – Price moderation supports demand growth f Refining – Upgrad
Slide 53: Aframax Tanker Rates – Winter Spike Even as OPEC Cutback
TEEKAY CORPORATION Aframax Tanker Rates – Winter Spike Even as OPEC Cutback 2004 2005 2006 2007 100,000 75,000 US $ / Day 50,000 25,000 0 Q1 Q2 Q3 Q4 Source : CRS (Aframax average) 54 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 54: MR Tanker Rates – Seasonal Upturn in Rates During Q4-06
TEEKAY CORPORATION MR Tanker Rates – Seasonal Upturn in Rates During Q4-06 2004 2005 2006 2007 50,000 40,000 30,000 US $ / Day 20,000 10,000 0 Q1 Q2 Q3 Q4 Source : CRS (MR average) 55 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 55: 2006 Estimates vs. Actuals – Market Surprised on Upside
TEEKAY CORPORATION 2006 Estimates vs. Actuals – Market Surprised on Upside Early 2006 End 2006 Estimates Actual Tanker Supply 6 to 7% 5.8% Growth Oil Demand 1.1 to 1.8 mb/d 0.8 mb/d Growth (1.3 to 2.2%) (0.9%) Aframax Average $40,000 / day $24 – 34,000 / day Earnings (Clarkson) Sources : Various / T
Slide 56: Longer Haul Trades Underpinning Market Strength
TEEKAY CORPORATION Longer Haul Trades Underpinning Market Strength Examples: f Venezuelan crude to China instead of US (1 mdwt incremental tanker demand for 0.3 mb/d) f West African crude to China (0.6 mdwt incremental tanker demand for every 0.1 mb/d increase) f Atlantic basin to Asia fuel oil move
Slide 57: Stock Building and Understated Bunker Demand
TEEKAY CORPORATION Stock Building and Understated Bunker Demand f Global Oil inventories – Rose by 0.4 mb/d on average during 2006 Understated Bunker Demand f 2005 – 10: IEA estimates 0.2 mb/d bunker demand growth f Based on current world orderbook – bunker demand growth estimated ~2.0 mb/d over 200
Slide 58: Global Oil Demand – Moderating Prices Support Growth
TEEKAY CORPORATION Global Oil Demand – Moderating Prices Support Growth Oil Demand Growth 3.5 3.0 2.5 Million B/D 2.0 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E Source: IEA 59 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 59: Non OPEC Supply Growth Estimates
TEEKAY CORPORATION Non OPEC Supply Growth Estimates Non OPEC Supply Growth Angola Growth 2.0 1.5 1.0 Million B/D 0.5 0.0 -0.5 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E Source: IEA 60 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 60: Average VLCC TCE’s vs. MEG OPEC Output
TEEKAY CORPORATION Average VLCC TCE’s vs. MEG OPEC Output Production VLCC TCE 22.0 160,000 20.5 120,000 Production (MB/D) TCE (USD / Day) 19.0 80,000 17.5 40,000 16.0 0 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Source: IEA/CRS 61 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 61: OPEC – Crude Output vs. Quota Limits
TEEKAY CORPORATION OPEC – 10 Crude Output vs. Quota Limits OPEC 10 Output Spare Capacity Quota Limit 32.0 28.0 Production (MB/D) 24.0 20.0 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07E Source: IEA/CRS 62 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 62: Global Refinery Capacity (CDU) Growth
TEEKAY CORPORATION Global Refinery Capacity (CDU) Growth Asia Middle East North America South America Africa Europe/ FSU Oil Demand Growth 7 6 5 Million B/D 4 3 2 1 0 2007E 2008E 2009E 2010E 2011E Source: Industry Sources 63 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 63: Tanker Fleet Changes – Rising Discrimination Against Older Units
TEEKAY CORPORATION Tanker Fleet Changes – Rising Discrimination Against Older Units Deliveries Deletions Fcst Deletions (Drop Dead 2010) On Order Net Change 50 40 30 20 10 0 M Dwt -10 -20 -30 -40 -50 -60 -70 2000 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E Source: CRS 64 TEEKAY – THE MARIN
Slide 64: 2007 Fundamentals – Supply / Demand Balance Remains Tight
TEEKAY CORPORATION 2007 Fundamentals – Supply / Demand Balance Remains Tight Key Fundamentals f Robust economic outlook f Moderation in oil prices – positive for oil demand growth f Non OPEC supply growth. OPEC cutbacks not fully implemented f Longer haul trades f Supply growth - conversion removals
Slide 65: 2007 Estimates – Outlook Becoming Brighter
TEEKAY CORPORATION 2007 Estimates – Outlook Becoming Brighter Early 2007 End 2007 Estimates Actual ? Tanker Supply Growth 6 to 7% 1.1 to 1.5 mb/d Oil Demand Growth (1.3 to 1.8%) Tanker Demand Growth (1.7% oil demand growth 5% and multiplier of 3) Aframax Average $23 – 33,000 / Earnings day Sources :
Slide 66: Aframax Ship Values – At Record Highs
TEEKAY CORPORATION Aframax Ship Values – At Record Highs 5-Year Old NB Resale NB 80 70 60 50 M illion US $ 40 30 20 10 0 1q90 1q91 1q92 1q93 1q94 1q95 1q96 1q97 1q98 1q99 1q00 1q01 1q02 1q03 1q04 1q05 1q06 Source : CRS 67 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 67: Innovative Corporate Structure
Innovative Corporate Structure f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 68: Ownership Structure
TEEKAY CORPORATION Ownership Structure 32.2% 2% G.P. Units 2% 40% Public Public G.P. Units 65.8% 100% L.P. Units 58% ~74% L.P. Units Teekay Parent Teekay LNG Partners OPCO Teekay NYSE: TGP L.P. Offshore Partners (~26% of OPCO) 69 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 69: Overview of Master Limited Partnerships (MLPs)
Overview of Master Limited Partnerships ((MLPs) MLPs) f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 70: MLP Overview
TEEKAY CORPORATION MLP Overview f Distinct class of tax-advantaged yield-oriented publicly traded partnerships (similar to REITs, Income Trusts, etc.) f Over 60 energy partnerships trading in US markets, with total market capitalization of over $100 billion f Over $28.8 billion of MLP issuance since
Slide 71: What is an MLP?
TEEKAY CORPORATION What is an MLP? A Master Limited Partnership (MLP) is a legal form, similar to a C-Corp. but with important tax advantages f Based on the U.S. tax laws How did the MLP structure arise? f Allows publicly traded partnerships for “natural resource” businesses f Expect stable cash dis
Slide 72: Valuation of MLPs
TEEKAY CORPORATION Valuation of MLPs MLPs tend to trade at lower yields than their shipping C-Corp peers 10.0% 9.5% 8.4% 8.0% D ividend Yield 6.2% 5.6% 5.4% 6.0% 4.0% 2.0% 0.0% Yield-oriented Other Shipping MLPs Pipeline MLPs Teekay LNG Partners Teekay Offshore Shipping C-Corps (USS, KSP) Partners (
Slide 73: Valuation of MLPs
TEEKAY CORPORATION Valuation of MLPs MLPs tend to trade at higher valuations than their shipping C-Corp peers 16.0 15.0 13.8 11.8 11.6 12.0 E V /E BIT DA 10.1 8.0 4.0 0.0 Yield-oriented Other Shipping Pipeline MLPs Teekay LNG Teekay Offshore Shipping C-Corps MLPs (USS, KSP) Partners Partners (SFL, D
Slide 74: Overview of General Partner Interests (GPs)
Overview of General Partner Interests (GPs) f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 75: G.P. Interests
TEEKAY CORPORATION G.P. Interests f MLPs have one asset base, but 2 cash flow streams: f Cash flow to LP Unit holders f Cash flow to GP Unit holders f Initial split: 98% to LP units, 2% to GP units f G.P. controls MLP ~ must consolidate f Incentive Distributions Rights (IDRs) allow GP to increase it
Slide 76: Teekay Illustration
TEEKAY CORPORATION Teekay Illustration Assumptions TGP Initial Quarterly Distribution Rate 0.4625 Quarterly Distribution in 2q07 0.525 Annual Distribution Growth Rate: 10% LP Unit Issuance per annum 10% L.P. units O/S in MLP Jan 1, 2007 34,999,000 TOO Initial Quarterly Distribution Rate 0.35 Annual
Slide 77: Teekay Illustration cont’d
TEEKAY CORPORATION Teekay Illustration cont’d Distribution Schedules TGP Marginal Percentage Interest in Distributions Total Quarterly Distribution Target Amount Unitholders General Partner Minimum Quarterly Distribution $0.4125 98% 2% First Target Distribution up to $0.4625 98% 2% Second Target Dis
Slide 78: TGP and TOO G.P. Cash Flow Growth - Illustrative
TEEKAY CORPORATION TGP and TOO G.P. Cash Flow Growth - Illustrative $90 $80 $70 $60 (millions) $50 $40 $30 $20 $10 $ 2007 2008 2009 2010 2011 2012 TGP G.P. Distribution TOO G.P. Distribution FOR FOR ILLUSTRATION ILLUSTRATION PURPOSES PURPOSES ONLY: ONLY: Based Based on on assumptions assumptions det
Slide 79: Publicly Traded GP Valuations
TEEKAY CORPORATION Publicly Traded GP Valuations Public G.P. Comps GP Valuation Comp Table Price Current DCF P/DCF 3-Year Dist. GP Ticker (12/4/06) Distribution 2006 2007 Yield 2006 2007 CAGR Valero GP Holdings, LLC VEH $21.14 $1.20 $1.25 $1.38 5.7% 16.9x 15.3x 8.8% Buckey GP Holdings, L.P BGH $15.6
Slide 80: TGP and TOO G.P. Value - Illustrative
TEEKAY CORPORATION TGP and TOO G.P. Value - Illustrative Rapid Escalation of Value of G.P.s $26.19 per $2,000 Teekay share $1,600 (Millions) $1,200 $800 $0.92 per Teekay share $400 $ 2007 2008 2009 2010 2011 2012 Value of TGP GP Interest Value of TOO GP Interest Values based on a comparative multipl
Slide 81: TGP and TOO L.P. Cash Flow Growth - Illustrative
TEEKAY CORPORATION TGP and TOO L.P. Cash Flow Growth - Illustrative $120 $100 $80 (millions) $60 $40 $20 $ 2007 2008 2009 2010 2011 2012 TGP L.P. Units TOO L.P. Units Assumes Teekay does not subscribe to additional units as assets are ‘dropped-down’ FOR FOR ILLUSTRATION ILLUSTRATION PURPOSES PURPOSE
Slide 82: Why Carve-out Assets into MLPs
TEEKAY CORPORATION Why Carve-out Assets into MLPs Capitalize on growing fixed-rate investment opportunities f Provides currency for project or acquisition opportunities in LNG, Offshore (shuttle, FSO and now FPSO) that could not be completed under Teekay’s original structure Lower cost of capital f
Slide 83: Teekay’s MLPs: Platforms for Accelerating Growth
TEEKAY CORPORATION Teekay’s MLPs: Platforms for Accelerating Growth f Substantial liquidity available for investment: TOO Liquidity: $400m TGP Liquidity: $466m f Access to abundant and competitively priced equity capital throughout the cycle f Strong operating platforms in oil and gas sectors key to
Slide 84: Teekay’s Shareholders Benefit When our MLPs Grow
TEEKAY CORPORATION Teekay’s Shareholders Benefit When our MLPs Grow Growing businesses within the MLP structure benefits Teekay shareholders f Value of L.P. units increases with every accretive transaction f Value of G.P. grows with every project “dropped down” to MLPs from Teekay f “Virtuous cycle”
Slide 85: Illustrative Economics of Investments within an MLP
TEEKAY CORPORATION Illustrative Economics of Investments within an MLP LP Units: Incremental distributable $5.2m Assumptions: cash flow to L.P. unitholders An LNG costs Teekay’s share $2.6m $220m (assume 50% excl. GP interests) Current TGP multiple of $1.90/ TCE rate calculated 15.4x distributable c
Slide 86: Combined Cash Flows
TEEKAY CORPORATION Combined Cash Flows $200 $150 (millions) $100 $50 $ 2007 2008 2009 2010 2011 2012 TGP L.P Distribution TOO L.P. Distribution TGP G.P. Distribution TOO G.P. Distribution FOR FOR ILLUSTRATION ILLUSTRATION PURPOSES PURPOSES ONLY: ONLY: Based Based on on assumptions assumptions detail
Slide 87: Teekay “Sum-of-Parts” Valuation
TEEKAY CORPORATION Teekay “Sum-of-Parts” Valuation * Teekay Offshore Partners Teekay LNG ‘Core’ Teekay Assets L.P. and OPCO Partners L.P. TOO market TGP market Owned Fleet capitalization @ $524m capitalization @ $1,144m FMV ‘on-the-water’ $26.45/unit $32.71 /unit $1,477m vessels Teekay’s L.P. 57.75%
Slide 88: Current Teekay Parent Valuation
TEEKAY CORPORATION Current Teekay Parent Valuation Implied Value of Teekay Parent Based on Current Teekay Share Price Teekay Parent is Teekay Share Price (Jan 22, 07) $ 45.13 not currently Equity Value of TGP 10.78 valued! Equity Value of OPCO & TOO 23.96 Implied Teekay Parent Value $ 10.39 Shares O
Slide 89: Teekay “Sum of Parts” Valuation
TEEKAY CORPORATION Teekay “Sum of Parts” Valuation f Excludes f Expected MLP uplift from: f RasGas 3 f Tangguh f Brazil shuttle tankers and FSO to be offered to Teekay Offshore f Future value of G.P.s and L.P.s f Siri project f Petrojarl upside on contract rollovers 90 TEEKAY – THE MARINE MIDSTREAM
Slide 90: Financial Discussion
Financial Discussion f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 91: Financing Strategy
TEEKAY CORPORATION Financing Strategy f Maintain high liquidity to fund future growth: f Teekay Parent total liquidity: ~$1.1bn f Teekay Offshore total liquidity: ~$400m f Teekay LNG total liquidity: $466m f Minimize cost of debt: f Utilize cost effective forms of debt and equity financing: f Banks,
Slide 92: Ownership Structure
TEEKAY CORPORATION Ownership Structure 32.2% 2% G.P. Units 2% 40% Public Public G.P. Units 65.8% 100% L.P. Units 57.8% ~74% L.P. Units Teekay Parent Teekay LNG Partners OPCO L.P. Teekay Offshore Partners (~26% of OPCO) 93 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 93: Free Cash Flow Structure
TEEKAY CORPORATION Free Cash Flow Structure Public G.P. Units G.P. Units New Public $21.3m $1.3m Investors $0.6m $11.2m L.P. Units 100% L.P. Units $43.4m $92.1m $16.2m Teekay LNG Partners Teekay Parent OPCO Teekay L.P. Offshore Partners Daily Aframax rates & Distribution per unit: associated CFVO: T
Slide 94: Free Cash Flow to Teekay: Current
TEEKAY CORPORATION Free Cash Flow to Teekay: Current Current FCF per share: $4.06 share price FCF yield: 9% $45.13 $297m $143m $44.7m less: $50m depr. – normalized CAPEX $92.1m $16.8m less: $11.8m interest on Teekay debt Teekay LNG Partners Teekay Parent OPCO Teekay L.P. Offshore Partners $205m EBIT
Slide 95: Financial Strategy for Cash Generated
TEEKAY CORPORATION Financial Strategy for Cash Generated 1. Delever the Balance 2. Fund profitable growth Sheet f Maintain sufficient liquidity to take advantage of growth f Net debt to capitalization opportunities expected to rise with inclusion of Petrojarl debt f Acquisitions and organic growth f
Slide 96: Teekay’s Progressive Dividend Policy
TEEKAY CORPORATION Teekay’s Progressive Dividend Policy $1.00 = 22% $0.95 GR Annualized Dividend C A $0.83 $0.80 $0.60 $0.50 $0.55 $0.43 $0.40 $0.20 $- 2002 2003 2004 2005 2006 97 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 97: Each Successful Project Creates Value for Teekay Shareholders
TEEKAY CORPORATION Each Successful Project Creates Value for Teekay Shareholders Successful Repurchase Teekay 8-10x Projects Stock or Invest in Fixed-rate EBITDA New Projects ees F bl e e c ta Teekay Stock an ibu orm istr ) Trading at e rf f D low Equity Capital (Cash) P o F 6-7x EBITDA . P % s h G.
Slide 98: Share Repurchase Summary and Policy
TEEKAY CORPORATION Share Repurchase Summary and Policy Repurchased during period Then Remaining Time period $ value # of shares $ value Nov. 2004 to Dec. $555 million 13 million $229 million 6, 2005 Dec. 6, 2005 to Feb. 21, 2006 $165 million 4.2 million $64 million Policy opportunistically Feb. 21,
Slide 99: Summary
TEEKAY CORPORATION Summary f Teekay is more than just a ‘shipping’ company f With two MLPs, Teekay has now illuminated the value of its fixed-rate project businesses f Teekay will continue to create substantial value as the MLPs grow f The value of Teekay’s L.P. and G.P. units will only increase as
Slide 100: Questions
Questions f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 101: Appendix
Appendix f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 102: Significant Operating Leverage
TEEKAY CORPORATION Significant Operating Leverage $1.75 $1.50 Q4 2006: Spot Rate increase EPS Increase $1,000 TCE/day ~ $0.06 / qtr $1.25 above $15,500 / day Quarterly Earnings Per Share $1.00 $0.75 $0.50 $0.25 $- $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 Afram ax Rate s ($ pe
Slide 103: Newbuilds
TEEKAY CORPORATION Newbuilds Newbuild Delivery Schedule 1Q07 2Q07 3Q07 4Q07 2007 Spot 1 1 2 Fixed Rate 1 0 1 LNG 2* 2 Total 4 1 0 0 5 1Q08 2Q08 3Q08 4Q08 2008 Spot 1 1 2 4 Fixed Rate 1 1 2 LNG 1 4 2 7 Total 2 6 1 4 13 1Q09 2Q09 3Q09 4Q09 2009 Spot 2 1 3 6 Fixed Rate 0 LNG 1 1 2 Total 3 1 3 1 8 *Incl
Slide 104: Capex
TEEKAY CORPORATION Capex Capex by Segment (in millions) 2007 2008 2009 Total Fixed-Rate Tanker Segment $143 $59 - $202 Fixed-Rate LNG & LPG Segment 357 191 54 602 Spot Tanker Segment 128 261 226 615 Total $628 $511 $280 $1,419 105 TEEKAY – THE MARINE MIDSTREAM COMPANY® www.teekay.com
Slide 105: Highly Profitable In-charter Portfolio
TEEKAY CORPORATION Highly Profitable In-charter Portfolio Avg. Spot Rates # of remaining Ship Avg. rate as of Jan ships (in years) Years ($/day) 19, '07* Suezmax 4 0.6 2.2 $ 24,100 $ 54,600 Aframax 12 2.0 24.3 $ 21,900 $ 52,600 LRII 1 5.5 5.5 $ 19,000 $ 26,100 MR 6 1.8 10.8 $ 21,900 $ 25,000 Small P
Slide 106: TOO Fleet
TEEKAY CORPORATION TOO Fleet Spot Conventional Tankers - owned Percent Ownership DWT Year Built Suezmax Navion Saga 100% 149,000 1991 Fixed-Rate Shuttle Tankers - owned Percent Ownership DWT Year Built Nordic Spirit 100% 151,294 2001 Stena Spirit** 50% 151,293 2001 Nordic Rio 50% 151,294 2004 Nordic
Slide 107: TOO Fleet cont’d
TEEKAY CORPORATION TOO Fleet cont’d Fixed-Rate Shuttle Tankers - in-chartered Percent Ownership DWT Year Built Sallie Knutsen * 153,617 1999 Karen Knutsen * 153,617 1999 Grena * 148,553 2003 Gerd Knutsen * 146,273 1996 Elisabeth Knutsen * 124,768 1997 Randgrid * 124,502 1995 Tordis Knutsen * 123,848
Slide 108: TOO Fleet cont’d
TEEKAY CORPORATION TOO Fleet cont’d TOO Number of Vessels Chartered-in Owned Vessels Vessels Newbuildings on Order Total Spot Tanker Fleet: Suezmaxes 1 - - 1 Aframaxes - - - Large Product Tankers - - - - Small Product Tankers - - Total Spot Tanker Segment 1 - - 1 Fixed-rate Tanker Segment Shuttle Ta
Slide 109: TGP Fleet
TEEKAY CORPORATION TGP Fleet Fixed Rate LNG Carriers Hispania Spirit 100% 79,363 2002 Catalunya Spirit 100% 79,363 2003 Galicia Spirit 100% 79,364 2004 Madrid Spirit 100% 79,363 2004 Al Marrouna 100% 78,520 2006 Al Areesh 100% 78,520 2007 6 2003.8 Fixed Rate LNG Carrier Newbuildings Al Daayen 100% 7
Slide 110: TGP Fleet cont’d
TEEKAY CORPORATION TGP Fleet cont’d LPG Carrier - owned Percent Ownership DWT Year Built Dania Spirit 100% 8,669 2000 Subtotal 1 2000 LPG Tanker Newbuildings WZL 0501 - (expected delivery Q1, 2008) 100% 8,200 2008 WZL 0502 - (expected delivery Q4, 2008) 100% 8,200 2008 WZL 0503 - (expected delivery
Slide 111: TGP Fleet cont’d
TEEKAY CORPORATION TGP Fleet cont’d TGP Number of Vessels Chartered-in Owned Vessels Vessels Newbuildings on Order Total Spot Tanker Fleet: Suezmaxes - - - - Aframaxes - - - Large Product Tankers - - - - Small Product Tankers - - Total Spot Tanker Segment - - - - Fixed-rate Tanker Segment Shuttle Ta
Slide 112: Teekay Parent Fleet
TEEKAY CORPORATION Teekay Parent Fleet Spot Spot Conventional Conventional Tankers Tankers -- owned owned Percent Percent Ownership Ownership DWT DWT Year Year Built Built Suezmax Suezmax Tanker Tanker Newbuildings Newbuildings BH BH 508-4 508-4 Suezmax Suezmax -- (expected (expected delivery delive
Slide 113: Teekay Parent Fleet cont’d
TEEKAY CORPORATION Teekay Parent Fleet cont’d Large Large Product Product Tankers Tankers -- owned owned Rainier Rainier Spirit Spirit 100% 100% 114,880 114,880 2005 2005 Donegal Donegal Spirit Spirit 100% 100% 105,200 105,200 2006 2006 Kanata Kanata Spirit Spirit 100% 100% 113,022 113,022 1999 1999
Slide 114: Teekay Parent Fleet cont’d
TEEKAY CORPORATION Teekay Parent Fleet cont’d Small Product Tankers 1 x MCT Ship * 19,900 1999 Stenberg * 16,626 2003 Sten Idun * 16,613 2002 Stenheim * 16,614 2003 Stenstraum * 13,610 2001 Bregen * 13,941 1994 Falcon * 13,610 2004 Sten Odin * 13,781 1998 Sten Embla * 13,781 1999 Sten Tor * 13,863 1
Slide 115: TOO Fleet List cont’d
TEEKAY CORPORATION TOO Fleet List cont’d Fixed Rate Conventional Tanker - in chartered Percent Ownership DWT Year Built VLCC Venture Spirit * 298,287 2003 Aframax Koa Spirit * 113,333 1999 Subtotal 2 2003 Fixed Rate Conventional Tanker Newbuildings Aframax - Hull 1328 - SPT (Q1 2008) 50% 106,000 200
Slide 116: Teekay Parent Fleet
TEEKAY CORPORATION Teekay Parent Fleet* Teekay Parent Number of Vessels Chartered-in Owned Vessels Vessels Newbuildings on Order Total Spot Tanker Fleet: Suezmaxes - 4 10 14 Aframaxes 12 12 24 Large Product Tankers 6 7 2 15 Small Product Tankers - 11 11 Total Spot Tanker Segment 18 34 12 64 Fixed-ra
Slide 117: Reconciliations and Assumptions
T E E K A Y O F F S H O R E P A R T N E R S L.P. Reconciliations and Assumptions f TEEKAY – THE MARINE MIDSTREAM COMPANY® SM www.teekay.com
Slide 118: Reconciliation of CFVO to Net Operating Cash Flow
TEEKAY CORPORATION Reconciliation of CFVO to Net Operating Cash Flow (Dollars in millions) Forecast EBITDA for Twelve Months Ending December 31, 2007 Net Operating Cash Flow $188.1 Add: Interest Expense, Net 68.7 Foreign Currency Exchange Gain and Other, Net 1.0 Expenditures for Drydocking 20.6 CFVO
Slide 119: Reconciliation of Non-GAAP Financial Measures
TEEKAY CORPORATION Reconciliation of Non-GAAP Financial Measures Teekay ‘Standalone’ Daily Aframax rates & associated EBITDA: $20,000 => $62m $25,000 => $134m $30,000 => $205m $35,000 => $277m Every $5k thereafter:=> $72m (millions) EBITDA $62.2 $133.8 $205.4 $277.0 Depreciation & Amortization $48.5
Slide 120: Sum of the Parts Support
TEEKAY CORPORATION Sum of the Parts Support Teekay Teekay Offshore Offshore Operating Operating Partners Partners (OPCO) (OPCO) Teekay Teekay LNG LNG Partners Partners Teekay Teekay Standalone Standalone OPCO OPCO EBITDA EBITDA == $278.4 $278.4 OPCO OPCO NetNet Debt Debt == $1,227.4 $1,227.4 in in (
Slide 121: Sum of the Parts Support con’t
TEEKAY CORPORATION Sum of the Parts Support con’t FFro romm Teekay Teekay O Offsh ffshoore re FF-1 -1 All All fig figuures res fro fromm 3Q 3Q06 06 FF/S /S O OPPC COON Net et D Deb ebtt C Calcu alculatio lationn TTeekay eekay LLN NGGN Net et D Deb ebtt C Calcu alculatio lationn C Cash ash 90.0 90.0
Slide 122: Teekay Parent Fleet
TEEKAY CORPORATION Teekay Parent Fleet Year Spot - In-chartered Spot - owned Built FMV* Year Year Aframax Built Built Everest Spirit 2004 $ 74.0 Suezmax Large Product Tankers Esther Spirit 2004 $ 74.0 Roviken 2006 Stavanger Prince 2002 Axel Spirit 2004 $ 74.0 SCF Khibiny 2002 Horizon 2004 Erik Spiri
Slide 123: Free Cash Flow to Teekay: Current
TEEKAY CORPORATION Free Cash Flow to Teekay: Current Current FCF per share: $4.06 ** share price FCF yield: 9% $45.13 **73.1m shares outstanding at Sept. 30, 2006 $297m $143m $44.7m less: $50m depr. – normalized CAPEX $92.1m $16.8m * less: $11.8m interest on Teekay debt Teekay LNG Partners Teekay Pa