Teekay Tankers - Expect losses to decline amid positive outlook

Expect losses to decline amid positive outlook
Teekay Tankers (TNK) recently announced its 1Q21 results, although the company’s TCE revenue inched up 6.5% QoQ on the back of improved spot TCE rates during the quarter across vessel class compared to 4Q20. However, in 1Q21 spot TCE rates for oil tankers were substantially lower than the surge seen last year. TNK’s operating revenue slumped 58.2% YoY and its TCE revenue plunged 66.9%
YoY as average TCE rates of Suezmaxes and Aframaxes owned by the company nosedived ~64% YoY to USD 16,787pd and USD 12,333pd respectively. Average TCE rate of TNK’s LR2s fell 61% YoY to USD 13,328pd. The sharp decline in spot TCE earnings of oil tankers was primarily due to the ongoing impact of the Covid-19 pandemic on global oil demand, ample supply on major trading routes and continued inventory drawdown from floating storage. However, the mid-size oil tankers experienced some pockets of strength during the latter part of the 1Q21 due to the impact of weather events in the Atlantic Basin and the blockage of the Suez Canal in late-March 2021. Operating expenses fell 16.6% YoY to USD 85.5mn primarily due to a contracted fleet as the company sold five tankers in past one year. The company’s EBITDA slumped 90.1% YoY to USD 14.8mn in 1Q21 from USD 149.8mn in 1Q20. TNK reported a net loss of USD 21.4mn in 1Q21 compared with a substantially higher net profit of USD 106.8mn in 1Q20, which translates to a loss of USD 0.63 per share compared with an EPS of USD 3.15 in 1Q20. TNK’s earnings has remained in the red since 3Q20, we expect net losses to increase
in 2Q21 because of weak demand due recent surge in Covid infections but losses will shrink rapidly in 2H21 and we estimate TNK will report net profits in 1H22 as spot TCE rates of oil tankers will increase with recovery in oil demand over next one year.