Earnings call transcript: Teekay Corporation’s Q3 2025 earnings reveal strong cash flow

Teekay Corporation reported robust financial results for the third quarter of 2025, showcasing a significant increase in net income and free cash flow. The company declared a quarterly dividend of $0.25 per share and highlighted strategic acquisitions and sales within its tanker fleet. Despite a slight dip in stock price, Teekay’s debt-free status and strong cash position underscore its competitive edge in the maritime industry.

Key Takeaways

• Teekay reported a GAAP net income of $92.1 million, translating to $2.66 per share.
• The company generated $69 million in free cash flow from operations.
• Teekay maintains a strong cash position of $775 million with no outstanding debt.
• The stock price decreased by 0.63%, closing at $9.5.
• Teekay declared a quarterly dividend of $0.25 per share.

Company Performance

Teekay Corporation demonstrated strong performance in Q3 2025, driven by strategic fleet management and favorable market conditions in the oil shipping industry. The company completed the acquisition of a modern Suezmax tanker and secured three time charter contracts, enhancing its operational leverage. The sale of five Suezmax tankers for $158.5 million contributed to a book gain of $47.5 million, further strengthening its financial position.

Financial Highlights

• Revenue: $228.49 million
• GAAP net income: $92.1 million ($2.66 per share)
• Adjusted net income: $53.3 million
• Free cash flow: $69 million
• Cash position: $775 million
• Quarterly dividend: $0.25 per share

Market Reaction

Teekay’s stock experienced a slight decrease of 0.63%, closing at $9.5. This movement comes despite strong financial results, possibly reflecting broader market trends or investor caution. The stock remains within its 52-week range, indicating stable performance in a volatile market.

Outlook & Guidance

Teekay anticipates a firm winter tanker market, focusing on renewing its core fleet in the Aframax and Suezmax segments. The company plans to optimize its fleet further, leveraging its strong cash position to navigate potential geopolitical uncertainties. The outlook remains positive, with global oil demand expected to rise by 1.1 million barrels per day in 2026.

Executive Commentary

CFO Brody Speers emphasized the company’s focus on medium-sized tankers, stating, "Our core business is absolutely the medium-sized tankers." CEO Kenneth Hvid highlighted Teekay’s strategic positioning, noting, "We are in a very strong position to continue to build intrinsic value."

Risks and Challenges

• Geopolitical uncertainties could impact global oil trade.
• Market saturation in the tanker industry may pressure rates.
• Fluctuating oil prices could affect shipping demand.
• Regulatory changes in maritime emissions standards may incur additional costs.
• Potential disruptions in global supply chains could affect operations.

Q&A

During the earnings call, analysts inquired about the dynamics across different tanker segments and the potential for time charter agreements. Teekay’s management confirmed their focus on medium-sized tankers and discussed the impact of US-China trade agreements on their operations.

Full transcript - Teekay Corp (TK) Q3 2025:

Conference Call Operator: Welcome to the Teekay Group Third Quarter 2025 Earnings Results Conference Call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question and answer session. At that time, if you have a question, participants will be asked to press Star one to register for a question. For assistance during the call, please press Star zero on your touchtone telephone. As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead.

Ed, Unspecified Company Representative, Teekay Group: Before we begin, I would like to direct all participants to our website at www.teekay.com where you’ll find a copy of the Teekay Group’s third quarter 2025 earnings presentation. Kenneth will review this presentation during today’s conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the third quarter 2025 Teekay Group earnings presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation and Teekay Tankers President and CEO, to begin.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Thank you, Ed. Hello everyone, and thank you very much for joining us today for the Teekay Group’s third quarter 2025 earnings conference call. Joining me on the call today for.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: The Q&A session is Brody.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Speers, Teekay Corporation and Teekay Tankers CFO.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Ryan Hamilton, our Vice President, Finance and Corporate Development, and Christian Waldegrave, our Director of Research.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Starting on slide 3 of the presentation, we will cover Teekay Tankers’ recent highlights. Teekay Tankers reported the best quarter in the last 12 months with GAAP net income of $92.1 million or $2.66 per.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Share, an adjusted net income of $53.3 million.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: million or $1.54 per share in the third quarter. Third quarter spot rates remained counter seasonally strong, with rates meaningfully above the historical average for the third quarter. Further, with spot rates well above our free cash flow break even levels, the company generated approximately $69 million in free cash flow from operations, and at the end of the quarter had a cash position of $775 million with no debt. Teekay Tankers continues to execute on its Fleet Renewal strategy, delivering on its previously announced transactions. Since the beginning of the third quarter, we have completed the acquisition of one modern Suezmax and the remaining 50% ownership interest in a VLCC from our joint venture partner. In addition, the company completed the sales of five Suezmax tankers, which delivered to their new owners in the third and fourth quarters.

The combined gross proceeds of the five vessel sales is $158.5 million, and we expect an estimated book gain on sales of approximately $47.5 million recorded in the third and fourth quarters. In addition, the strength in the spot market supported the time charter market, and the company opportunistically out-chartered one Suezmax vessel for $42,500 per day and two Aframax sized vessels for an average time charter rate of $33,275 per day for periods ranging from 12 to 18 months. Two of these charters have already commenced, with the remaining charter set to start in November. Looking at our fourth quarter to date, we have secured spot rates of $63,745, $45,500, and $35,200 per day for our VLCC, Suezmax, and Aframax/LR2 fleets respectively, with approximately 47% to 54% of spot days booked.

We believe the tanker market is well positioned for a firm winter market, which we’ll discuss in more detail in the next few slides. Lastly, Teekay Tankers has declared its regular fixed dividend of $0.25 per share. Moving to slide 4, we look at recent developments in the spot tanker market. Spot tanker rates improved during the third quarter of 2023, with rates on a par with the strong level seen over the past three years and well above long term average levels. An increase in global oil supply due to the unwinding of OPEC supply cuts and rising production in the Atlantic Basin led to a sharp increase in global seaborne crude trade volumes during September to the highest level since early 2020.

Rates were further boosted by an increase in long haul crude oil movements between the Atlantic and Pacific basins, particularly in the Suezmax and VLCC segments, as shown by the chart on the right of the slide. Spot tanker rates have strengthened further at the start of the fourth quarter, with rates in October near the top of the five year range. Turning to slide five, we look at the growth in global crude oil production and exports, which is underpinning the recent strength in spot tanker rates. Global oil production has been rising throughout the year due to increases from both OPEC and non-OPEC sources. The OPEC group began unwinding some of the voluntary supply cuts which had been in place since 2023 at the start of April. By September, had completed the unwind of the first round of cuts totaling 2.2.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Million barrels per day.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: The group is now in the process of unwinding the next round of cuts, totaling 1.65 million barrels per day at a rate of 137,000 barrels per day every month over the next year. Oil production has also been boosted by new supply coming online from non-OPEC countries, particularly in South America, where new offshore production in Brazil and Guyana is in the process of ramping up. The increase has been particularly evident during the third quarter, with supply growing by 1.6 million barrels per day compared to Q2 levels. The net result of the higher oil production has been a sharp increase in seaborne crude oil trade volumes, most notably since September as more Middle East crude has been made available for export following the end of the seaborne summer direct crude burn season. In fact, if we exclude the period.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: In early 2020, when Saudi Arabia and.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Russia flooded the market with oil during the brief oil price war, global seaborne crude oil trade volumes are currently at a record high. With OPEC expected to continue to unwind supply cuts in the coming months, we expect global seaborne trade volumes to increase further during the fourth quarter. Turning to Slide 6, we look at some of the near term oil market fundamentals which we believe will support spot tanker demand in the coming months. One of the consequences of higher oil production this year has been a decrease in crude oil prices, as shown by the chart on the left of the slide. For countries outside the United States, a weaker U.S. dollar has led to an even steeper drop in real oil prices.

Lower oil prices are generally positive for tankers as it spurs oil consumption and lowers bunker fuel prices, which is our largest operating cost. Low oil prices also stimulate demand for stockpiling both for commercial and strategic purposes. Given that global oil inventories are below long term average levels, we believe that there is enough spare capacity to absorb a prolonged period of excess oil supply. Should global oil supply growth continue to exceed demand in the coming months, as many analysts predict, then we could even see a contango oil price structure emerge which could further stimulate tanker demand. Turning to Slide 7, we look at the geopolitical events which are creating trade inefficiencies and adding further volatility to what is already a firm underlying tanker market.

In recent weeks we’ve seen a number of announcements with regards to sanctions and port fees which are serving to create uncertainty and inefficiency in the tanker market. It’s positive that the U.S.-China Trade Agreement announced earlier today includes a postponement of the announced port and shipping fees by at least a year. As it relates to sanctions, we’ve seen an escalation of efforts to curb Russia’s profits from oil sales via a series of new sanctions by both the EU and the United States, most notably the recent actions to sanction Rosneft and Lukoil, who together control around 50% of Russian oil production and exports. While this is a fast evolving situation, it is reported that some refiners in India and China are backing off from Russian imports and looking to alternative suppliers in the Middle East and Atlantic Basin.

This is positive for the tanker market as these volumes will need to be transported via the fleet of compliant tankers rather than the fleet of shadow tankers which currently transport the majority of Russian crude oil to India and China. We believe that these factors, coupled with the strong crude oil trade volumes described earlier as well as normal winter seasonal factors, will help drive a firm spot tanker market in the coming months. Turning to Slide 8, we review the key drivers for the medium term outlook. Global oil demand is projected to increase by 1.1 million barrels per day in 2026 as per the average forecast from the three major oil agencies, which is in line with the average growth level since the end of the COVID pandemic. Global oil supply is also set to rise with more production due to coming online from non-OPEC countries.

It remains to be seen how OPEC will respond should oil inventories continue to fill and oil prices come under further pressure. However, we believe that there is still plenty of room for inventories to build in 2026, particularly in China where the government is reportedly looking to add 169 million barrels of new strategic storage by the end of the year. The fleet supply side continues to look balanced, with the order book size stable in recent months at around 16% of the existing fleet. A continued lack of tanker scrapping means that the fleet continues to age, with the average age of the global tanker fleet now at its highest point since the 1990s. In the mid-sized tanker fleet, 344 vessels, or 20% of the total fleet, are now aged 20 years or older, most of which are sanctioned vessels engaged in shadow trades.

We believe that these older tankers will not return to conventional trading even in the event that sanctions are lifted. While the medium term tanker market outlook appears well balanced, there are a number of geopolitical uncertainties which could influence the direction of the tanker market depending on how they unfold. These include the outcome of the war in Ukraine and the fate of the shadow fleet serving Russian trade, developments in the Middle East and disruptions to Red Sea transits, the impact of tariffs and trade barriers on the global economy, and OPEC production policy. Turning to Slide 9, we highlight Teekay Tankers’ value proposition. First, our operating leverage remains significant and the company is well positioned to generate substantial cash flows in nearly any tanker market.

With the three new out charters and no debt, we have lowered our fleet’s free cash flow break even from $13,000 per day to $11,300 per day. With this low free cash flow breakeven, every $5,000 per day increase in spot rates above the threshold produces $1.66 per share of annual free cash flow or nearly 3% on a free cash flow yield basis. Second, Teekay Tankers has a strong balance sheet with no debt and a $775 million cash position, which provides capacity for disciplined accretive fleet growth. Third, we continue to return capital to shareholders in a disciplined manner through our quarterly dividend. Lastly, the company’s performance is underpinned by our integrated platform. We believe our in-house commercial and technical management is a competitive advantage.

Combined with our 50 years of operating experience in the tanker industry, we provide superior service to our customers and transparency through the value chain, which drives shareholder returns. In summary, the company’s strategy over the last several years has been to maximize shareholder value through our exposure to the strong spot market. This year we began taking measured action to renew our fleet by making incremental investments in more modern vessels, while at the same time selling some of our oldest tonnage. As we look ahead, our best-in-class operating platform and strong financial footing positions the company well to continue renewing our fleet, earning cash flow, and building intrinsic value. With that, operator, we are now available to take questions.

Conference Call Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing STAR 1 on your telephone keypad. If you’re using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press STAR 1 to ask a question. We will go first to Omar Nokta with Jefferies LLC.

Omar Nokta, Analyst, Jefferies LLC: Thank you.

Hi Kenneth, thank you for the update. I just wanted to ask, maybe I had a couple questions, maybe first just on the market and kind of where things sit right now. Clearly, things have gotten much stronger, and when we think, I think a lot of times when we sort of talk about or think about rising OPEC production, we think a lot about, say, VLCCs, and certainly those rates have shot towards past $100,000 a day. We’re also seeing some real strength in the Suezmax and Aframax segments, which are your bread and butter. Can you just talk a little bit about how these segments maybe interact with each other or maybe move together, and what’s really been driving some of the strength we’ve seen in the midsize segments here recently?

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Yeah, thanks, Omar.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: You are absolutely right. I mean, I think when we look at this year, the second half of the year has definitely been one going from strength to strength, and I would argue maybe even stronger than most of us expected. What we’ve seen just over the last week, really, is that that strength just continues to pick up. The weakest, finishing stronger, both in the VLCC, the Suezmax, and the Aframax segments, as well as the LR2s.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Right.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: It is really moving up in all of the categories. If you look back over the last, well, since April 2022, what we had was that we had a period where the Aframax absolutely outperformed.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: All sectors, as you know.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: I think what we’ve kind of reverted to is more the traditional dynamics where the largest ships lead the way. They pull up the Suezmaxes.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: That pull up the Afromaxes.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Underlying that, of course, is that we have a very strong product trade as well.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: That’s happening.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Everything is really working in all of the different segments where maybe it’s more a matter of that. In the last three years, the Aframaxes were really the outliers because we really outperformed everything. Now we’re kind of back to what you say would be the normal.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Dynamics in a strong tanker market where everything is balanced.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: I think what we’re seeing now is that we have, as we say.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: A record number of barrels.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Being transported on the water. Of course, most of these barrels, in a traditional sense, always go on the most efficient vessels, which are VLCCs. When there’s this much oil and.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: This tighter supply, it just pulls up the whole market.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: I think, in all simplicity.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: What we’re seeing here.

Yeah, thank you for that helpful color. I guess maybe just kind of thinking about where Teekay stands. Clearly, you guys have been in a very strong financial position for the past, well, several quarters, perhaps several years, cash is building. You know, you’ve reiterated, you know, several times, be patient, be patient, which makes a whole lot of sense given all the unknowns as we kind of think about where you’re headed. I think it was last quarter or maybe the quarter before you had talked, you know, when it came time to maybe reinvest or add more exposure, you were kind of looking to scale more perhaps into the MR segment into product. Is that still the case?

If you kind of think about where you stand, if you wanted to deploy more capital or more net capital, would you want to go into products more deeply or do you feel you’d want to either scale up into the VLCCs or perhaps maybe just stay within your, you know, you’re back to using the term bread and butter, but the Suezmax, Aframax segments.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Yeah, that’s a great question. Just to be very clear, our core business is absolutely the medium sized tankers.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: We constantly look for.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Where we can find incremental value both in our core but also the adjacent sectors. I think when we had this call almost a year ago, we talked about the MR, which looked interesting at the time relative to some of the other sectors. I think as we’re sitting here today, we are one year further down the road here and looking at how we’ve renewed the fleet or have taken action.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: On some of our older tankers.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Started to renew our core fleet. Our focus is our number one priority right now is investing in our core franchise. I wouldn’t say that there never would be an opportunity in MR, but relatively speaking, now we actually think that the better value for us is to allocate capital towards our core segments.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Which are Aframax and Suezmaxes.

Okay, that’s very clear. I appreciate that.

Omar Nokta, Analyst, Jefferies LLC: Thank you. I’ll pass it back. Thanks.

Conference Call Operator: We’ll go next to Kenneth Hvid with Bank of America.

Tim Chang, Analyst, Bank of America: Hi, this is Tim Chang on for Ken Hexter. Thanks for taking my question to kind of extend on Omar’s question. You’ve sold 11 vessels year to date, and while sales kind of outpace purchases thus far, you mentioned last quarter you’re focusing on an accelerating pace of fleet renewal going forward. Do you feel you’re close to the minimum fleet size now, and do you perhaps aim for purchases of new core Aframax and Suezmax to offset any following sales?

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: I think the short answer is yes.

Tim Chang, Analyst, Bank of America: Got it. I saw your new time charter out agreement with three vessels locking in very favorable rates. Do you expect to engage in more of those given elevated rates near term in 2026?

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Yeah, that’s a good question.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: I mean, we look at every deal opportunistically. There’s always a timing, and we consider what is the outlook, and it’s very dynamic. We think it’s prudent when you see strong time charter rates to log it in, especially if it’s with good customers. It’s an ongoing dialogue.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: It’s not a state of strategy.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: We need to have an X% of our fleet. We have to have spot exposure. At these levels, we know in historical terms are very strong levels.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Can log it in.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: As we pointed out in our prepared remarks, every time we do that, we lower our free cash flow break even further. You can see it’s a very, very strong position that we’re in in terms of generating cash flows in the spot market. At the same time, even if we did another couple of these at these levels, our free cash break even would go down even further.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: We look at it as a.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Portfolio and on a deal-by-deal basis.

Tim Chang, Analyst, Bank of America: Thanks. Appreciate all the insight.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Thanks for the questions.

Conference Call Operator: We’ll go next to Omar Nokta with Jefferies LLC.

Omar Nokta, Analyst, Jefferies LLC: Thank you. Hi guys. My first question is on this new China U.S. deal. I guess the Aframax is under the previous USTR regulation was not exempt, right? Now with the USTR port fees being suspended for a year, does that improve the aforementioned opportunities for you guys? Maybe they’ll, you know, of course the export out of the U.S. Gulf, but also maybe lightering opportunities. Any call you have on that, please?

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Yeah, obviously the deal is very, very new.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: I think the position we.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: When the USTR came in and recently also the China port fees, with the way that our fleet is composed, we don’t have massive exposure to either sector. Therefore, I think the outcome of this agreement overall is positive for the industry. I don’t think it has any significant impact on Teekay per se in the same way as the port fees didn’t have a significant impact on us either.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Overall, I think it’s a positive.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: As it was clearly driving some inefficiencies, which I don’t think serves the industry well over the long term. Let’s see, so far it’s only one year. We note that’s been agreed.

Omar Nokta, Analyst, Jefferies LLC: Yeah, sure. Makes sense.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Next question.

Omar Nokta, Analyst, Jefferies LLC: I guess more generally speaking, you’ve clearly proven that you have high total shareholder returns, right? TSR, which doesn’t really require a high payout model. You know, how confident are you that the stock market would appreciate that approach today? You know, given that there’s still a slight discount, what might close the remaining valuation gap in your view?

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Yeah, I think over the past seven years, we have been very, very clear on that. We first focus on value before we focus on valuation, and valuation follows. I think to your point, that is what we’re happy to see that’s actually being recognized by the market. When we look at it through a five year lens, you’re absolutely right. I think that model is right. A company should always focus on value creation, and that’s what we’re focused on here. I think in any business in shipping, it is about that we continue to have a strong balance sheet, that we can act at times when.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: We see good buying opportunities that we.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: Can act when we see good selling opportunities. We have a strong operating platform with low cash flow breakeven. That’s the fortunate position that we, after many years of hard work, have put Teekay back in, and operating with that model delivers value every day. We think we’re in a very strong position to continue to build intrinsic value. We fundamentally believe that that will.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Always be recognized by the markets, ultimately.

Omar Nokta, Analyst, Jefferies LLC: Yeah, I agree. Thank you very much.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Thank you for the questions.

Conference Call Operator: Thank you. With no additional questions holding, I’ll now turn the conference back to the company for any additional or closing remarks.

Kenneth Hvid, President and CEO, Teekay Corporation and Teekay Tankers: Thank you for listening in to our call today.

Brody Speers, CFO, Teekay Corporation and Teekay Tankers: We look forward to reporting back to you next year.

Have a great day.

Conference Call Operator: Thank you. Ladies and gentlemen, that will conclude today’s call. We thank you for your participation. You may disconnect at this time.

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