Teekay Corporation Ltd. · NYSE:TK
Teekay — Non-Deal Roadshow (June 2004)
48 slides from Teekay's roadshow presentation, June 2004
Slide 1: Teekay: The Marine Midstream Company
Teekay: The Marine Midstream Company June 2004 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 Teekay’s growth p
Slide 3: Index
Index 1. Introduction 2. Valuation and Financial Strategy 3. Spot Segment 4. Fixed-rate Segment 5. Marine Midstream Company 6. Appendix Teekay Shipping Corporation: The Marine Midstream Company 3
Slide 4: This is Teekay
This is Teekay The world’s largest tanker company, measured by market capitalization and fleet size Transporter of more than 10% of the world’s seaborne crude oil Leading industry consolidator with a track record of accretive acquisitions Large, growing fixed-rate contract portfolio Recent
Slide 5: Key Points About Teekay
Key Points About Teekay We have created a unique platform Built a position as the only true Marine Midstream Company serving our customers in the oil and gas industry Our growth has been highly profitable Disciplined and well timed growth We are positioned to capitalize on our platform I
Slide 6: Valuation of Teekay's Segments
Valuation of Teekay’s Segments Fixed-rate segment valued LNG segment valued using Spot segment valued using using cash flow multiple cash flow multiple of multiple of book value similar to other yield- comparable companies Conservatively using avg. oriented vehicles (i.e. MLPs) Growth premium impl
Slide 7: Teekay Minimum Valuation Metric
Teekay Minimum Valuation Metric In millions (except per share data) Balance Sheet and outstanding share data as at March 31, 2004 (adj. for Tapias and PEPS conversion) FIXED-RATE SEGMENT LNG SEGMENT SPOT SEGMENT Fixed-rate segment CFVO * 315 LNG fixed-rate CFVO 80 Book value of spot fleet + JVs 1,29
Slide 8: Share Value Matrix
Share Value Matrix Stock Price Multiple of Spot Book Value Matrix * 1.1x 1.2x 1.3x 1.4x 1.5x 1.6x 1.7x 1.8x 1.9x Fixed 9 30.91 32.40 33.90 35.39 36.89 38.38 39.87 41.37 42.86 Rate Segment 35.50 10 34.55 36.04 37.53 39.03 40.52 42.03 43.51 45.01 46.50 CFVO Multiple 11 38.18 39.68 41.17 42.67 44.16 45
Slide 9: P/E Multiple Comparisons
P/E Multiple Comparisons 35x 2004 Sector Price to Earnings at May 2004 During early 1998, a period of record earnings for the sector, 30x the average P/E was 12x 25x 20x 15x 10x 5x x Offshore Offshore Large Onshore Production and Average Oil Service Offshore Geophysical Maritime Teekay Drilling Tran
Slide 10: P/Cflow Multiple Comparisons
P/Cflow Multiple Comparisons 2004 Sector Price to Cashflow at May 2004 18x 16x 14x 12x 10x 8x 6x 4x 2x x Large Offshore Oil Service Offshore Average Onshore Production and Geophysical Offshore Maritime Teekay Diversified Drilling Equipment Transportation Drilling Well Services Services Construction
Slide 11: Complementary Businesses Create Cash Floor with No Ceiling
Complementary Businesses Create Cash Floor with No Ceiling Fixed-rate CFVO Spot-based CFVO 1,200 1,100 1,000 900 800 ($) millions 700 600 Floor 500 400 * 300 200 100 0 Low-cycle Mid-cycle High-cycle Super-cycle ($13,000/day) ($19,000/day) ($27,500/day) ($40,000/day) Proforma 2004 EPS $0.27 $2.26 $5.
Slide 12: Financial Strategy for Cash Generated
Financial Strategy for Cash Generated 1. Delever the Balance Sheet 2. Fund profitable growth Net debt to capitalization Maintain sufficient liquidity to take expected to rise to approx. 48% advantage of growth with inclusion of Tapias debt opportunities Over $500 million in newbuild Acquisit
Slide 13: Financial Strength and Flexibility
Financial Strength and Flexibility Strong Balance Sheet Liquidity 3/31/2004 Pro Forma for Tapias acquisition ($ millions) at Mar. 31, 2004 ($ millions) Cash 304 Total Revolving 872 Credit Facilities Debt 2,350 Undrawn Revolving 482 Net Debt 2,046 Credit Facilities Shareholders Equity 1,921 Cash 304
Slide 14: Disciplined Growth Strategy
Disciplined Growth Strategy Spot Fixed-Rate Medium-Term Long-Term Conventional Conventional Liquefied Natural Typical Tankers Tankers Gas Carriers Shipping Shuttle Tankers Assets Offshore Installations Target Leverage 0-40% up to 75% up to 90% Range mid-cycle IRR > WACC IRR > Critical WACC and Inves
Slide 15: Actively Managing the Cycle
Actively Managing the Cycle $45,000 Adding Fixed- Acquired UNS rate business L/T Contracts $40,000 Strengthening Balance Sheet Acquired Tapias Raised Flexible L/T Contracts Adding Spot Financing Exposure $35,000 Realized Aframax TCE Reduced Non-recourse Debt ConocoPhillips Financing L/T Contracts $3
Slide 16: Teekay's Spot Tanker Fleet Doubled in Years
Teekay’s Spot Tanker Fleet Doubled in 5 Years 16% CAGR 98 Spot-rate Vessels 46 Spot-rate Vessels 1998 TODAY Including N/Bs and in-chartered vessels Teekay Shipping Corporation: The Marine Midstream Company 16
Slide 17: Spot Segment: Results to Date
Spot Segment: Results to Date 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 18: Significant Operating Leverage
Significant Operating Leverage $8.00 Growing $7.00 operating 2004: leverage Spot Rate increase EPS Increase $1,000 TCE/day ~ $0.325 - $0.35 $6.00 above $13,000 / day $5.00 Earnings Per Share $4.00 $3.00 $2.00 Declining net income break-even $1.00 FY 1998 2004 $- $10,000 $14,000 $18,000 $22,000 $26,0
Slide 19: Teekay's Aframax Fleet Outperforms Its Peers
Teekay’s Aframax Fleet Outperforms Its Peers Aframax TK Worldwide Clarksons Genmar Worldwide TK DH Atlantic OSG DH Atlantic $50,000 $46,000 $42,000 $38,000 TCE (usd per day) $34,000 $30,000 Atlantic $26,000 Worldwide $22,000 $18,000 $14,000 $10,000 3q03 4q03 1q04 With ROIC >50% for Q1 2004, Teekay’s
Slide 20: Strong Tanker Market - Q1 2004
Strong Tanker Market - Q1 2004 Surge in Chinese oil demand – up 1.0 mb/d vs. 1q03 Increased oil supplies from long haul sources - global oil production up 0.4 mb/d (0.3 mb/d from OPEC) over 4q03 FSU output up 0.1 mb/d over 4q03 but 0.9 mb/d over 1q03 = above average increase in Aframax demand
Slide 21: Tanker Spot Rates
Tanker Spot Rates Aframax Suezmax VLCC 100,000 80,000 US$ per Day 60,000 40,000 20,000 0 1q99 1q00 1q01 1q02 1q03 1q04 Source: CRS Teekay Shipping Corporation: The Marine Midstream Company 21
Slide 22: OPEC Declares War On Seasonality
OPEC Declares War On Seasonality Demand decline in 2q04 not as steep as in 2q03 High oil prices - May WTI > $40/barrel. Oil price easing in early June as key Middle East producers increase production Volatility in the Persian Gulf Iraq Strong demand Speculators OPEC raises quotas by 2.
Slide 23: OPEC Quotas vs. Production
OPEC Quotas vs. Production Quota OPEC-10 prod. 28.0 26.0 million Bbls/day 24.0 22.0 20.0 1q99 2q99 3q99 4q99 1q00 2q00 3q00 4q00 1q01 2q01 3q01 4q01 1q02 2q02 3q02 4q02 1q03 2q03 3q03 4q03 1q04 2q04 Source : IEA Teekay Shipping Corporation: The Marine Midstream Company 23
Slide 24: OPEC Crude Output vs. Aframax TCE
OPEC Crude Output vs. Aframax TCE OPEC crude prod. Aframax Average 29.0 60,000 28.0 50,000 Million Bbls/Day 27.0 40,000 US$/Day 26.0 30,000 25.0 20,000 24.0 10,000 23.0 0 1q99 2q99 3q99 4q99 1q00 2q00 3q00 4q00 1q01 2q01 3q01 4q01 1q02 2q02 3q02 4q02 1q03 2q03 3q03 4q03 1q04 2q04E Source : IEA/CRS T
Slide 25: Tanker Demand for 2004
Tanker Demand for 2004 OIL DEMAND Global oil demand growth forecast to grow by 2.9% in 2004; the highest in 23 years. This translates into over 5% growth in Tanker Demand Oil demand growth led by strong economic growth in Asia (China) and US Increased ME Gulf production and Asian demand for
Slide 26: World Oil Demand vs. Supply
World Oil Demand vs. Supply IEA forecasts Global Oil Demand of 82.6 84.0 mb/d - highest ever World oil demand World oil supply 82.0 Million Bbls / Day 80.0 78.0 76.0 74.0 72.0 70.0 2q04E 3q04E 4q04E 1q99 2q99 3q99 4q99 1q00 2q00 3q00 4q00 1q01 2q01 3q01 4q01 1q02 2q02 3q02 4q02 1q03 2q03 3q03 4q03 1
Slide 27: Global Oil Demand – Growing Stronger Every Year
Global Oil Demand – Growing Stronger Every Year 83.0 2004E 81.0 2003 Million Bbls/Day 79.0 2002 2001 2000 77.0 1999 75.0 73.0 1st quarter 2nd quarter 3rd quarter 4th quarter Source : IEA Teekay Shipping Corporation: The Marine Midstream Company 27
Slide 28: China Oil Demand
China Oil Demand Dom. Prod. Imports 7.0 6.0 Million Bbls/Day 5.0 4.0 3.0 2.0 1.0 0.0 1Q1995 4Q1995 3Q1996 2Q1997 1Q1998 4Q1998 3Q1999 2Q2000 1Q2001 4Q2001 3Q2002 2Q2003 1Q2004 4Q2004 Source : IEA Teekay Shipping Corporation: The Marine Midstream Company 28
Slide 29: Chinese Net Oil Imports
Chinese Net Oil Imports Crude Prod 3.0 2.5 2.0 Million Bbls/Day 1.5 1.0 0.5 0.0 -0.5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004ytd Source : Chinese Customs Teekay Shipping Corporation: The Marine Midstream Company 29
Slide 30: India Oil Demand
India Oil Demand Dom. Prod. Imports 3.0 2.5 Million Bbls/Day 2.0 1.5 1.0 0.5 0.0 1Q1995 4Q1995 3Q1996 2Q1997 1Q1998 4Q1998 3Q1999 2Q2000 1Q2001 4Q2001 3Q2002 2Q2003 1Q2004 4Q2004 Source : IEA Teekay Shipping Corporation: The Marine Midstream Company 30
Slide 31: Tanker Supply
Tanker Supply Deliveries Deletions On Order Net Change 40 Deliveries of 59 mdwt 30 20 Million Dwt 10 0 -10 Mandatory Scrapping -20 of 34 4.5 mdwt mandatory scrapping mdwt 17.5 mdwt voluntary scrapping -30 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sourc
Slide 32: World Tanker Supply / Demand Balance to Remain Tight Through 2006
World Tanker Supply / Demand Balance to Remain Tight Through 2006 2004/2005 2006 (mdwt) (mdwt) Newbuilding deliveries 59 19 less: mandatory scrapping * 34 1 Net fleet growth 25 18 Tanker demand growth ** 29 12 Change in supply / demand -4 6 balance * excludes any voluntary scrapping ** Based on: 200
Slide 33: Tanker Utilisation vs. Aframax TCE
Tanker Utilisation vs. Aframax TCE Utilisation Aframax TCE 100 50,000 98 45,000 96 90% utilization 40,000 is considered 94 full use of the 35,000 tanker fleet US$ per day Percentage 92 30,000 90 25,000 88 20,000 86 15,000 84 10,000 82 5,000 80 0 1q94 3q94 1q95 3q95 1q96 3q96 1q97 3q97 1q98 3q98 1q99
Slide 34: Aframax Values
Aframax Values 60.0 5-Year Old NB 50.0 40.0 US$ Million 30.0 20.0 10.0 0.0 May-76 May-78 May-80 May-82 May-84 May-86 May-88 May-90 May-92 May-94 May-96 May-98 May-00 May-02 May-04 Teekay Shipping Corporation: The Marine Midstream Company 34
Slide 35: Tanker Market Conclusion
Tanker Market Conclusion Continued strong tanker market fundamentals Oil Demand / Supply At 2.9% in 2004, global oil demand growth forecast highest in 23 years Oil demand growth led by strong economic growth in Asia (China) and US Increased oil production from Middle East OPEC members prov
Slide 36: Exponential Fleet Growth Over 5 Years
Exponential Fleet Growth Over 5 Years Fixed-rate Vessels 165 Vessels 30% CAGR Spot-rate 46 Vessels Spot-rate Vessels Including N/Bs and 1998 TODAY in-chartered vessels Teekay Shipping Corporation: The Marine Midstream Company 36
Slide 37: LNG Economics
LNG Economics Based on the present newbuilding price of $170 - $175 million TCE $65,000 - $70,000 / day Cash-on-cash less: OPEX $11,500 - $12,500 / day return >10% Bareboat Rate $53,500 - $57,500 / day Assumed contract length = 20 years ROE >20% Fixed-rate Debt financing > 80% NPV of above NPV of ab
Slide 38: Tapias: Low-Risk Long Term Contracts
Tapias: Low-Risk Long Term Contracts Contracts include cost escalations, “locking in” our cash flows Loss of hire insurance in place on contracts Interest Rates: hedged to match duration of charter terms or; “flow through” to the charter party Long repayment profile of principal matches
Slide 39: The World Leader in Offshore Loading
The World Leader in Offshore Loading Approximately half of Teekay’s capital is now invested in “floating pipelines” Acquired UNS for $780 million in cash - strategic beachhead Acquired Navion for $800 million in cash – vertical integration with the leading offshore loading logistics provider I
Slide 40: Shuttle Market has Attractive Characteristics
Shuttle Market has Attractive Characteristics The North Sea Marginal fields Sophisticated technology & deepwater exploration with barriers to entry Economies of scale required Oil& Gas for efficient scheduling fields Refineries Significant long-term stable cash flow High profitability Shuttl
Slide 41: Quantum Leap in Fixed-rate Segment Cash Flow
Quantum Leap in Fixed-rate Segment Cash Flow * 450 400 350 CAGR = 58% Tapias 300 $ millions 250 Navion 200 Organic 150 Growth 100 Base 50 0 2002 2003 2004 2005 * Long-term fixed-rate cash flow from vessel operations Teekay Shipping Corporation: The Marine Midstream Company 41
Slide 42: Teekay Fixed-rate Segment Returns Analysis
Teekay Fixed-rate Segment Returns Analysis Teekay’s fixed-rate contract fleet is Q1 2004 projected to have a Capital ROIC cash-on-cash return Invested of over 13% Fixed-rate $1.84 billion 8% Segment Fixed-rate Segment ROIC Increasing 16.0% 13.0% 10.0% 7.0% ROIC IRR W.A.C.C. 4.0% 1 2 3 4 5 6 7 8 9 10
Slide 43: Building the Platform
Building the Platform CUSTOMER Navion Shuttle ConocoPhillips CEPSA L/T Skaugen VOC BHP Caltex LOGISTICS Logistics L/T Contracts Suezmax Contracts Lightering JV Navion FSO FIXED Navion Product Suezmax UNS Shuttle Specialized FSO Tapias ASSETS Bona Aframax Aframax and VLCC Tankers Atlantic Aframax LNG
Slide 44: Building the Platform
Building the Platform ….plus organic growth in each segment throughout this period CUSTOMER VOC Navion Shuttle BHP ConocoPhillips Caltex CEPSA L/T Skaugen LOGISTICS Logistics L/T Contracts Suezmax Contracts Lightering JV Navion FSO FIXED Navion Product Suezmax UNS Shuttle Specialized FSO Tapias ASSE
Slide 45: Building the Platform
Building the Platform CUSTOMER LOGISTICS FIXED ASSETS (HARDWARE) The Teekay Marine Midstream Platform OPERATIONS (SOFTWARE) TEEKAY'S GROWTH PLATFORM Teekay Shipping Corporation: The Marine Midstream Company 45
Slide 46: Investment Highlights
Investment Highlights An integrated supplier of Midstream oil services, not just a ship owner Recent acquisition provides attractive entry into high growth LNG shipping sector Financial strength to pursue continued profitable growth Positioned to benefit from strong tanker market Profitabl
Slide 47: Appendix - Fleet List
Appendix - Fleet List Fleet list as of May 31, 2004 Number of Vessels Owned Chartered-in Newbuildings Vessels Vessels on Order Total Spot Tanker Fleet: VLCC's 1 2 - 3 Suezmaxes 4 5 1 10 Aframaxes 43 15 12 70 Large Product Tankers - 5 - 5 Small Product Tankers - 10 - 10 Total Spot Tanker Fleet 48 37
Slide 48: Appendix – Reconciliation of Cash Flow from Vessel Operations
Appendix – Reconciliation of Cash Flow from Vessel Operations Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense. Cash flow from operations is included because such data is used by certain investors to measure a company's financia