Teekay Corporation Ltd. · NYSE:TK
Teekay — Investor Day (September 2014)
66 slides from Teekay's investor day presentation, Sep 30, 2014
Slide 1: Teekay Group Investor Day
TEEKAY TEEK AY TEEKAY GROUP INVESTOR DAY September 30, 2014
Slide 2: Agenda & Speakers
Agenda & Speakers Teekay Peter Evensen President & CEO Kenneth Hvid Chief Strategy Officer 8:00 – 9:30 am Corporation Vince Lok Chief Financial Officer Teekay LNG David President, Teekay 9:30 – 10:15 am Partners Glendinning Gas Services Coffee Break 10:15 – 10:30 am Teekay Offshore Kenneth Hvid Chie
Slide 3: Peter Evensen
PETER EVENSEN President and CEO Photo credit: Ainoa Juan Catalunya Spirit 3
Slide 4: Experienced Leadership
EXPERIENCED Peter Evensen LEADERSHIP President and Chief Executive Officer Vince Lok David Glendinning Executive Vice President President, and Chief Financial Officer Teekay Gas Services Kenneth Hvid Ingvild Sæther Executive Vice President President, and Chief Strategy Officer Teekay Shuttle and Off
Slide 5: Forward Looking Statements
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. All statements included in or accompanying t
Slide 6: Investment Highlights
Photo credit: Ivan Kryukovskikh Summit Spirit Investment Highlights Transformation New Strong Multiple Ways to into a Dividend Industry Grow GP Pure-Play GP Policy Fundamentals Cash Flow 6
Slide 7: Teekay Group at a Glance
TEEKAY GROUP 40+ Years of Experience AT A GLANCE (since 1973) 2014 $4B+ TK Market Cap 1995 4 NYSE TK TGP TOO TNK Listings 6700 $12B 185 Employees In Assets Vessels $ 7
Slide 8: Teekay's Transformation into a Pure-Play GP Nearing Completion
Teekay’s Transformation into a Pure-Play GP Nearing Completion 8
Slide 9: Teekay's Transition to Pure Play Structure
Teekay’s Transition to Pure Play Structure SHAREHOLDERS Portfolio Manager & Teekay Corporation Project GP Developer (TK) (TK) MLPs Teekay LNG Teekay Offshore Asset Teekay Tankers Owners Partners Partners (TNK) (TGP) (TOO) SHAREHOLDERS 9
Slide 10: Gas and Offshore Have Become Core to Teekay's Growth
Gas and Offshore Have Become Core to Teekay’s Growth Invested Capital by Segment Invested Capital by Segment (Consolidated) (Consolidated) 100% $2B 49% $12B 41% Total Assets Total Assets At December At June 1999 2014 10% Tankers Offshore Gas 10
Slide 11: Diverse, Fee-Based Revenues from Strong Customer Base
Teekay Has Diverse, Fee-Based Revenues from Strong Customer Base Forward Fee-Based Revenues Average Remaining Contract Length by Segment by Segment Gas 14 years 30% FPSO 6 years 52% $20.3B Total Forward Fee- Based Revenues Offshore 5 years Logistics 16% 2% Tankers 2 years Note: Forward fee-based rev
Slide 12: Teekay's Transformation into a Pure-Play GP Nearing Completion
Teekay’s Transformation into a Pure-Play GP Nearing Completion Dropdowns Organic Growth M&A Nearly Complete Pursued by Daughters Directly 12
Slide 13: Growth Now Taking Place Directly at Daughters
Growth Now Taking Place Directly at Daughters Dropdowns Organic Growth M&A Before Ownership by Teekay Parent Ordered and warehoused by Acquired by Teekay Parent Teekay Parent before dropdown before dropdown to daughter to daughter companies companies 5 FPSOs remain at Teekay Ordered and warehoused b
Slide 14: Introduction to Teekay's New Dividend Policy
Introduction to Teekay’s New Dividend Policy 14
Slide 15: Teekay's New Dividend Policy
Teekay’s New Dividend Policy Reflects the next step in Teekay’s transformation into a pure-play GP • Dividend to be linked to the cash flows Illustrative Dividend Growth2 $4.50 received from Daughter entities CAGR: 20% $4.00 • Initial dividend increase of 75%-80% to $3.87 $3.50 $2.20 - $2.30 per sha
Slide 16: Teekay Positioned to Benefit from Strong Industry Fundamentals
Teekay Positioned to Benefit from Strong Industry Fundamentals 16
Slide 17: Teekay is a Play on the Global Energy Build-Out
Teekay is a Play on the Global Energy Build-Out Offices Offshore Gas Tankers 17
Slide 18: Population Growth Drives Energy Demand
Population Growth Drives Energy Demand Which in turn drives the global energy trade Source: ExxonMobil Key Growth countries: Brazil, Indonesia, Saudi Arabia, Iran, South Africa, Nigeria, Thailand, Egypt, Mexico and Turkey 18
Slide 19: Gas is the Fastest Growing Fossil Fuel
Gas is the Fastest Growing Fossil Fuel Dislocation of production and consumption creates LNG transport demand Energy Demand Growth to 2030 LNG Export / Import Countries 1,200 2021 – 2030 2011 – 2020 1,000 Million Tonnes of Oil Equivalent 800 600 400 200 LNG Exporter 0 LNG Importer Gas Coal Oil LNG E
Slide 20: Deepwater Oil Production Set to Double
Deepwater Oil Production Set to Double World is turning to new sources of oil to offset existing field decline Oil Production Outlook Deepwater Oil Production by Company 120 12 Noble 100 10 Others Statoil Million Barrels Per Day Eni 80 ExxonMobil Statoil 8 Eni ExxonMobil Million boe/d 60 Shell 6 BP
Slide 21: Challenging Oil and Gas Cost Environment
Challenging Oil and Gas Cost Environment Oil companies concentrating on the most profitable developments E&P Capex per Barrel • E&P costs have been rising at a far quicker rate than oil and gas revenues • Oil & gas companies have been divesting non-core Source: Barclays Capital assets and concentrat
Slide 22: Multiple Ways to Grow GP Cash Flow
Multiple Ways to Grow GP Cash Flow 22
Slide 23: Ramping Up Growth at MLPs
Ramping Up Growth at MLPs Teekay GPs will benefit from $5.7 billion of known accretive growth Teekay Offshore Partners Teekay LNG Partners 92% 63% $3.2B $2.5B Known Capex Known Capex 37% 8% FPSOs Offshore Logistics LNG Carriers LPG Carriers 23
Slide 24: Significant Future Growth in our Core Markets
Significant Future Growth in our Core Markets Over $100 billion of new industry Capex required by 2020 Teekay Offshore Partners Teekay LNG Partners 200 100 160 35 FPSO FSO Shuttle FAU $30B 180 90 140 30 $80B 160 80 120 Number of vessels 140 70 25 Number of units 120 60 100 $ billions $ billions 20 1
Slide 25: Power of One Teekay
Power of One Teekay 25
Slide 26: One Teekay
Customers Suppliers ONE TEEKAY People Operations Finance Banks Shipyards 26
Slide 27: BG Customer Relationship Case Study
BG Customer Relationship Case Study Leveraged offshore relationship to obtain new gas business Awarded 4 shuttle tanker newbuild Awarded Hi-Load Awarded COA Offshore contracts front-end shuttle tanker Teekay Offshore engineering and contracts for Awarded Knarr design (FEED) Knarr field FPSO newbuild
Slide 28: Working Together to Achieve Operational Excellence
WORKING TOGETHER TO ACHIEVE OPERATIONAL EXCELLENCE Photo credit: Kanwar Ghei Yamuna Spirit 28
Slide 29: 2013: Best Safety Performance in Teekay's History
2013: BEST SAFETY PERFORMANCE IN TEEKAY’S HISTORY HSEQ KPIs (Per Million Man Hours) 2.03 TRCF 0.14 LTIF 2008 2009 2010 2011 2012 2013 TRCF: Total Recordable Case Frequency LTIF: Loss Time Injury Frequency 29
Slide 30: Barrels of Cargo Shipped and Oil Lost to Sea
1,300,000,000 barrels of cargo shipped in 2013 <0.5 barrels of oil lost to sea in 2013 30
Slide 31: Safety & Sustainability
S afety & Sustainability P assion I ntegrity R eliability I nnovation T eamwork Photo credit: Give Ganza Axel Spirit 31
Slide 32: #TeekaySpirit
#TeekaySpirit Photo credit: Akesh Hiralal Al Marrouna 32
Slide 33: Strategy
STRATEGY 33
Slide 34: Kenneth Hvid
KENNETH HVID Chief Strategy Officer Photo credit: Kanwar Deep Ghei Yamuna Spirit 34
Slide 35: Teekay's Dual-Track Approach to Growth
Teekay’s Dual-Track Approach to Growth Since June 2012 Investor Day, Teekay Group has committed $4.8 billion of new growth Capex Growth in Existing Core Growth through New Adjacent Businesses Businesses • Offshore Production (TOO) • Floating Accommodation (TOO) ○ Libra FPSO ○ Acquisition of Logitel
Slide 36: Growth of Existing Platforms Enables Further Growth into New Areas
Growth of Existing Teekay Platforms Enables Further Growth into New Areas TOO Ocean HiLoad DP Towage FPSO (Cylindrical) Floating Shuttle Accommodation Tankers FPSO (Shipshape) FSO Offshore Offshore FPSO Shuttle Production Logistics (Shipshape) Tankers TIL Tankers TGP TNK ONE Commercial LPG LNG LNG T
Slide 37: Selective and Disciplined Approach to Growth
Photo credit: Kanwar Ghei Yamuna Spirit Selective and Disciplined Approach to Growth • Does the opportunity fit with an existing core business? ○ Same market drivers Funnel ○ Same customers Approach ○ Same market geographies • Can we use our competitive strengths to enhance value? ○ Will the opportu
Slide 38: Teekay's Competitive Advantage
Corporate Access to Low Engineering Governance Cost Capital Financial Balance Expertise Sheet Teekay’s Business Development Competitive Project Execution Advantage Strategic Industry Partnerships Expertise Customer Market Operational Relationships Insight Excellence 38
Slide 39: Partnering for Growth
Partnering for Growth Partnering allows Teekay to expand its business footprint more quickly, and at a lower cost, compared to in-house innovation alone Customer • Access to new markets Relationships & and new lines of Market Expertise business LPG Engineering • Intellectual property Expertise • Inn
Slide 40: Case Study: Sevan Marine
Case Study: Sevan Marine Operating/Constructing FPSO Floating, Production, Storage and Offloading FAU Floating Accommodation Developer Owner • Engineering • Financing Bidding on Projects • Intellectual + • Operational Property Excellence • Customer FSO Floating Storage Relationships Offtake Future O
Slide 41: Focused on Staying Agile as We Get Bigger
Focused on Staying Agile as We Get Bigger Maintain balance between scale benefits and entrepreneurial spirit • Access to capital • Agility to evolve Entrepreneurial • Scale and move in economies and out of Benefits • segments Scale Common vision Spirit and values • Flexible • Industry business relat
Slide 42: Financial Discussion
FINANCIAL DISCUSSION 42
Slide 43: Vince Lok
VINCE LOK Chief Financial Officer Photo credit: Axel Kryukovskikh Summit Spirit 43
Slide 44: Primary Financial Objective: Increase Free Cash Flow Per Share
Primary Financial Objective: Increase Teekay Parent’s Free Cash Flow Per Share 44
Slide 45: Key Components of Financial Strategy
Key Components of Financial Strategy • Legacy FPSO debt will be novated to TOO as assets are Delever Teekay dropped down Parent Balance • Net proceeds from legacy asset Sheet dropdowns/sales can be used to repay corporate level debt • New growth focused directly at Grow GP and LP Daughter level Cash
Slide 46: Teekay is Focused on Sustainable Long-Term Value Creation
TEEKAY IS FOCUSED ON SUSTAINABLE LONG-TERM VALUE CREATION 46
Slide 47: Teekay Group Structured for Sustainable Growth
Teekay Group Structured for Sustainable Growth Balance Sheet Strength Access to Capital and Financial Flexibility to Fund Daughter Growth 47
Slide 48: Teekay Parent Closer to Net Debt Free After Knarr Dropdown
Teekay Parent Closer to Net Debt Free After Knarr Dropdown Strong balance sheet is a key component of Teekay’s transformation to a pure-play GP Pro Forma Teekay Parent Net Debt Reduction $2,000 $1,417 $1,500 $ millions $1,000 $500 $385 $0 Net Debt, Near-term Asset SalesAsset Sales(1) Proceeds Net De
Slide 49: TGP and TOO Have Financial Capacity to Support Their Own Growth
TGP and TOO Have Financial Capacity to Support Their Own Growth $ millions TGP TOO Market Capitalization1 ($ billions) $3.3 $2.9 Annual Equity Issuance Capacity $500 $435 (15% of Market Capitalization) Annual Debt Capacity2 $930 $650 TOTAL Annual Investment Capacity $1,430 $1,085 $2,515 Growth capac
Slide 50: Consistent Access to Equity Capital
Consistent Access to Equity Capital Teekay Daughter Equity Issuances $800 $700 $600 $500 $ millions $400 $300 $200 $100 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TGP TOO TNK Cumulative Equity: $1,580m $1,505m $652m $3.7 billion of third party equity raised by Teekay Daughters since 2005 5
Slide 51: Continuing to Diversify Sources of Capital
Continuing to Diversify Sources of Capital Teekay Group Sources of Capital (December 31, 2008 – Present) Commercial Bank Debt $ millions Export Credit Agency (ECA) Facilities $927 $3,216 Daughter Equity U.S. Corporate Bonds $10.1B Consolidated Norwegian Kroner Bonds $3,596 $750 U.S. Project Bonds $9
Slide 52: Defining Teekay's New Dividend Policy
DEFINING TEEKAY’S NEW DIVIDEND POLICY 52
Slide 53: Defining Teekay Parent's Cash Flows
Defining Teekay Parent’s Cash Flows “GPCO” “OPCO” Long-term cash flows from Cash flows related Teekay Parent’s equity to Teekay Parent’s legacy ownership in Daughter entities operating assets • GP Incentive Distribution • Remaining FPSOs Rights (IDRs) • VLCC • LP Distributions • Remaining In-Charter
Slide 54: Teekay Parent at Positive Inflection Point
Teekay Parent at Positive Inflection Point Teekay Parent Free Cash Flows (GPCO + OPCO) Timing is right for new Teekay $250 dividend policy: $200 1. Transition to asset-light, $150 net debt free corporate $100 $ millions structure nearly complete $50 $0 2. OPCO no longer a cash -$50 flow drag -$100 3
Slide 55: Future Dividends Linked to Daughter Cash Flows
Future Dividends Linked to Daughter Cash Flows GPCO GP Cash Flows + LP Cash Flows + Other Dividends - Corp. G&A - Reserves Teekay = Dividend Target Coverage Ratio • Initial dividend increase to $2.20 - $2.30 per share (annualized)* ○ ~75% - 80% increase from current annual dividend of $1.265 per sha
Slide 56: Illustrative Teekay Parent Free Cash Flow
Illustrative Teekay Parent Free Cash Flow Forecast Assumptions CAGR (IPO – 2014) 2015 2016 2017 2018 LP Distribution TOO 6% 7.5% 5% 5% 5% Growth Per Unit LP Unit Growth* 12% 8% 9% 10% LP Distribution TGP 6% 0% 2.5% 4% 4% Growth Per Unit LP Unit Growth* 5% 6% 10% 10% • Other Dividends: $3 million per
Slide 57: Illustrative Teekay Parent Dividend Growth
Illustrative Teekay Parent Dividend Growth Illustrative Dividend Growth* $5.00 $4.83 CAGR: 28% $4.50 Annual Teekay Dividend Per Share CAGR: 25% $4.42 $4.00 $3.86 CAGR: 20% $3.50 $3.87 $3.53 $3.08 $3.00 $3.20 $2.82 $2.50 $2.65 $2.25 $2.00 2015 2016 2017 2018 Illustrative Case +1% Additional LP Distri
Slide 58: Over 80% of Growth Capex Already Booked
Over 80% of Growth Capex Already Booked to Achieve 20% CAGR Through 2017 Actively bidding on additional gas and offshore opportunities to drive further free cash flow growth TGP and TOO Growth Capex – Committed vs. Illustrative Target $3.87 7,000 82% of Capex Annual Capital Investment ($millions) Il
Slide 59: Illustrative Teekay Parent Dividend Growth
Illustrative Teekay Parent Dividend Growth Illustrative Dividend Growth* $5.00 $4.83 CAGR: 28% $4.50 Annual Teekay Dividend Per Share CAGR: 25% $4.42 $4.00 $3.86 CAGR: 20% $3.87 $3.50 GP Multiplier $3.53 $3.08 Effect: $3.00 $3.20 An additional $2.82 1% annual increase in LP distributions from both $
Slide 60: Intend to Reduce Target Coverage Ratio As OPCO Winds Down
Intend to Reduce Target Coverage Ratio As OPCO Winds Down Remaining Drop down to Teekay Offshore or sold (by end-2016) FPSOs VLCC Sell to third party buyer Redeliver vessels to owners following expiry of In-charters in-charter contracts (by end-2018) Use dropdown proceeds and retained cash to repay
Slide 61: Illustrative Teekay Parent Dividend Growth
Illustrative Teekay Parent Dividend Growth Illustrative Dividend Growth* Coverage Ratio Illustrative Dividend Growth* Effect: $5.00 A 0.1x reduction $4.83 in Coverage Ratio would CAGR: 28% 29% increase Teekay’s $4.50 dividend CAGR by a Annual Teekay Dividend Per Share CAGR: 25% $4.42 further 4% $4.0
Slide 62: Benchmark to GP Peers Implies Teekay Valuation Upside
Benchmark to GP Peers Implies Teekay Valuation Upside 25% WGP Illustrative TK 4-Year Dividend CAGR (2014E - 2018E) ENLC ETE 2015E Dividend Yield 20% ($2.25 @ $58 per share)* TRGP WMB 15% PAGP SE KMI 10% OKE 5% R² = 0.7615 NSH 0% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% Current 2015E Dividend Yield So
Slide 63: Teekay is Positioned for Significant Free Cash Flow Growth
TEEKAY IS POSITIONED FOR SIGNIFICANT FREE CASH FLOW GROWTH • Strong industry fundamentals • Leading market positions in core businesses • Strong balance sheet and access to capital • Flexible corporate structure with two GPs 63
Slide 64: Appendix
APPENDIX 64
Slide 65: Teekay Parent Illustrative Free Cash Flow Forecast
Teekay Parent Illustrative Free Cash Flow Forecast Cash Flow Forecast Q1-14 Q2-14 Q3-14E Q4-14E 2014E Q1-15E OPCO EBITDA 0.2 (20.1) (3.1) 42.5 19.5 17.1 * FPSO Interest Expense (3.3) (3.2) (3.1) (3.0) (12.6) (2.9) Corporate Net Interest Expense (12.9) (11.8) (13.5) (11.9) (50.1) (11.3) Drydocking Ex
Slide 66: Bringing Energy to Life
BRINGING ENERGY TO