Earnings call transcript: Teekay Q2 2025 sees mixed results, stock fluctuates

Teekay Corporation’s recent earnings call for Q2 2025 revealed a complex financial picture. The company reported a GAAP net income of $62.6 million, equivalent to $1.81 per share, while adjusted net income stood at $48.7 million, or $1.41 per share. According to InvestingPro analysis, Teekay maintains a "GREAT" financial health score of 3.4 out of 5, with the stock currently appearing undervalued based on comprehensive Fair Value analysis. Despite these positive earnings, the stock experienced volatility, with a 7.22% decline in after-hours trading following the announcement of a negative EPS of -$0.50, which failed to meet market expectations. The company reported revenue of $231.69 million for the quarter, contributing to trailing twelve-month revenue of $992.52 million.

Key Takeaways

• Teekay reported a GAAP net income of $62.6 million, with an EPS of $1.81.
• Stock price dropped by 7.22% in after-hours trading post-earnings release.
• The company sold 11 vessels in 2025, generating $340 million in sales.
• Global oil demand is projected to rise, potentially benefiting Teekay.
• Teekay has no debt and maintains a strong cash position with $712 million in cash and short-term investments.

Company Performance

Teekay Corporation demonstrated strong operational performance in Q2 2025, driven by strategic vessel acquisitions and sales. The company acquired a modern Suezmax vessel and the remaining 50% ownership in the Hong Kong Spirit VLCC. Additionally, Teekay agreed to sell four Suezmaxes and one LR2 vessel, contributing to a total of 11 vessels sold in 2025 for $340 million. The company generated $128 million in free cash flow during the first half of the year, highlighting its robust financial health.

Financial Highlights

• Revenue: $231.69 million
• GAAP net income: $62.6 million ($1.81 per share)
• Adjusted net income: $48.7 million ($1.41 per share)
• Free cash flow from operations: $62.8 million
• Cash and short-term investments: $712 million
• No debt on the balance sheet

Market Reaction

Following the earnings announcement, Teekay’s stock experienced a significant drop of 7.22% in after-hours trading. The stock’s price fell from $7.76 to $7.2, reflecting investor disappointment in the negative EPS of -$0.50. However, the stock later showed some recovery, with a last close value of $7.55, representing a 1.89% increase from the aftermarket low.

Outlook & Guidance

Teekay’s management remains optimistic about future market conditions, anticipating potential market tailwinds in late 2025. The company expects increased oil production from OPEC+ and non-OPEC sources, which could drive demand for its services. Teekay is focusing on fleet renewal in the Aframax and Suezmax segments and is considering newbuildings in the medium term.

Executive Commentary

CEO Ken Fidd emphasized the company’s disciplined capital allocation strategy, stating, "We remain disciplined in our capital allocation as our financial strength positions the company well for future fleet renewal." Christian Waldegrave, Director of Research, noted the seasonal strength expected in the winter months, which could positively impact Teekay’s operations.

Risks and Challenges

• Market volatility due to geopolitical factors could impact oil demand.
• A constrained shipyard space may limit fleet expansion opportunities.
• Global economic uncertainties could affect oil prices and demand.
• The aging global tanker fleet poses challenges for operational efficiency.
• Potential rate increases in Q4 remain uncertain, as discussed during the earnings call.

Q&A

During the earnings call, analysts inquired about Teekay’s fleet renewal strategy and potential rate increases in the fourth quarter. Omar Nokta from Jefferies asked about the company’s approach to fleet renewal, while Tim Chang from Bank of America focused on expected rate increases in Q4. Management discussed the anticipated increase in oil exports from the Middle East and Atlantic Basin, which could influence future performance.

Full transcript - Teekay Corp (TK) Q2 2025:

Conference Operator: Welcome to the Teekay Group Second Quarter twenty twenty five Earnings Results Conference participate in a question and answer session. Be mode. Afterwards, As a a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn it over to the company. Please go ahead.

Ed, Unspecified Introducer, Teekay Group: Before we begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of The Teekay Group’s second quarter twenty twenty five 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 second quarter twenty twenty five Teekay Group earnings presentation available on our website.

I’ll now turn the call over to Ken Fidd, Teekay Corporation and Teekay Tankers’ President and CEO to begin.

Ken Fidd, 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 second quarter twenty twenty five earnings conference call. Joining me on the call today for the Q and A session is Brody Spears, Teekay Corporation’s and Teekay Tankers’ CFO Ryan Hamilton, our VP, Finance and Corporate Development and Christian Waldegrave, our Director of Research. Starting on slide three of the presentation, we will cover Teekay Tankers’ recent highlights. Teekay Tankers reported GAAP net income of $62,600,000 or $1.81 per share and adjusted net income of $48,700,000 or $1.41 per share in the second quarter.

Second quarter spot rates were counter seasonally strong with rates outperforming the last two quarters and above long term averages for second quarter. Further, with spot rates well above our free cash flow breakeven levels, the company generated approximately $62,800,000 in free cash flow from operations and at the end of the quarter had a cash and short term investment position of $712,000,000 and no debt. With strong free cash flow generation and cash position, Teekay Tankers is well positioned to continue actively executing on our fleet renewal strategy. This includes reducing our exposure to 18 to 19 year old vessels as well as opportunistically selling some 2,009 built Suezmaxes in today’s historically higher asset price environment as well as making incremental purchases of modern vessels. In July, we acquired one modern Suezmax, and we agreed to acquire the remaining 50% ownership interest in the Hong Kong Spirit VLCC from our joint venture partner.

Christian Waldegrave, Director of Research, Teekay Corporation: This

Ken Fidd, President and CEO, Teekay Corporation and Teekay Tankers: VLCC acquisition was opportunistic based on relative market values and our belief in the near term strength of the tanker market. In addition, the company agreed to sell four Suezmaxes and one LR2, which will be delivered to the new owners in the third and fourth quarters for a combined total of $158,500,000 which we expect to result in an estimated book gain on sale of approximately $46,000,000 So far in 2025, we have sold or agreed to sell 11 vessels for total gross proceeds of $340,000,000 and estimated bookings on sale of approximately $100,000,000 Although our sales have outpaced our purchases so far this year, the plan is to gradually change the pace of buying as we remain focused on renewing and growing our fleet in an accretive manner to future earnings. Looking at our third quarter to date rates, we have secured spot rates of $31,400 day and $28,200 per day for our Suezmax and Aframax LR2 fleets, respectively, with approximately 43% of our spot days booked. We believe there are potential tailwinds for the tanker markets towards the end of the year and that the fundamentals for the medium term remain balanced, but with more uncertainty due to the complex geopolitical landscape.

We’ll discuss the drivers of the market in the next few slides. Lastly, Teekay Tankers has declared its regular quarterly fixed dividend of $0.25 per share. Moving to slide four, we look at recent developments in the spot market. Spot tanker rates improved during the second quarter compared to the last two quarters, and rates were above long term average levels for a second quarter. The strength in tanker rates was primarily due to longer average voyage distances during April, though rates subsequently softened during the remainder of the quarter in line with normal seasonal trends.

The market saw a brief period of volatility in the June following the escalation of hostilities between Israel and Iran. However, there was no material disruption to regional oil production, exports or tanker movements with several spot charters, failing subjects and rates quickly reverting to prior levels once a ceasefire was announced. Turning to Slide five, we look at near term oil fundamentals, which we believe could give support to tanker rates during the second half of the year. Global oil production is expected to increase sharply in the coming months due to the unwinding of OPEC plus supply cuts and higher production from South America. The OPEC plus group has accelerated their unwind and at the current pace will have fully unwound the 2,200,000 barrels per day of voluntary supply cuts by September 2025, a full year ahead of schedule.

This should translate into increased tanker ton mile demand, particularly from September onwards as reduced domestic demand will allow Middle Eastern producers led by Saudi Arabia to increase seaborne exports. New offshore oil production coming online in Brazil and Guyana should also increase volumes and support crude tanker ton miles demand during the second half of the year. As shown by the chart on the left of the slide, global oil supply is expected to exceed demand in the coming quarters, leading to an expected build in global oil inventories. The chart on the right shows that oil inventories outside of China are currently below average levels. Therefore, we expect that the market will be able to absorb the additional supply that is due to come online.

Periods of oil inventory builds have historically been positive for tanker rates, and we believe this could be another tailwind for rates as we move into the seasonally stronger winter months. Turning to Slide six, we review the key drivers of the medium term outlook, but also some of the uncertainties which add a layer of complexity. Global oil demand is projected to increase by 700,000 barrels per day in both 2025 and 2026 as per the IEA. While this is lower than projections made at the start of the year, it still represents healthy growth and would push total oil demand to a record high of almost 105,000,000 barrels per day. As mentioned on the previous slide, growing oil supply from both OPEC plus and non OPEC plus sources will help meet this demand growth and provide positive tanker ton miles demand growth, particularly as we anticipate that a growing portion of new oil supply coming online in the Atlantic Basin will be moved long haul to meet growing demand in Asia.

Turning to global fleet supply. The pace of new tanker orders has slowed significantly since the start of the year with 11,000,000 deadweight of new orders placed in the first six months compared to 42,000,000 deadweight in the same period of 2024. The order book, when measured as a percentage of the global tanker fleet, has stabilized in recent months at approximately 15%. Meanwhile, a lack of tanker scrapping means that the fleet continues to age, with the average age of the global tanker fleet at twenty five year high of fourteen years. Should tanker market conditions worsen, there could be increased pressure on the large and growing pool of scrap candidates to leave the market, providing a mechanism to rebalance the global fleet.

We believe the combination of the current order book and aging tanker fleet and constraints on available yard space points towards a balanced fleet supply outlook and should result in continued low levels of tanker fleet growth over the medium term. While underlying tanker market fundamentals look positive, a number of geopolitical factors add complexity to the outlook and will likely influence the direction of spot tanker rates. I’ll not go into each point in detail, but I note that in September alone, we expect that the OPEC plus group will complete the unwinding of their 2,200,000 barrels per day of voluntary supply cuts. The EU will introduce a new price cap of $0.04 $7.06 $0 per barrel on Russian crude oil exports. President Trump’s fifty day ultimatum to Russia is set to expire, though this time line could be moved up given Trump’s recent comments.

And as we saw yesterday, The U. S. Just announced sanctions on additional 50 vessels moving Iranian crude oil. As such, we anticipate that the market will continue to exhibit volatility going forward, both in the short and medium term. Turning to Slide seven, we highlight how Teekay Tankers continues to build value while remaining patient for future fleet renewal.

With our operating leverage and low free cash flow breakevens of $13,000 per day, Teekay Tankers generated $128,000,000 in free cash flow in the first half of the year. With no debt on our balance sheet, the company continues to build its financial strength and flexibility. Looking ahead, the company is well positioned to continue generating free cash flows To emphasize, for every $5,000 increase in spot rates above our breakeven produces $1.89 per share of annual free cash flow or over four percent on a free cash flow yield basis. In summary, Teekay Tankers is an operating company in a cyclical capitals capital intensive business. We remain disciplined in our capital allocation as our financial strength positions the company well for future fleet renewal while enabling us to continue to build value in a complex tanker market outlook.

In the near term, with a low cash flow breakeven, we expect to continue generating strong cash flows and taking incremental steps on fleet renewal while returning capital to shareholders. With that, operator, we’re now available to take questions.

Conference Operator: Thank please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach the equipment. Again, press star 1 to ask a question. If you are in the event via web interface and would like to ask a question, simply type your question in the ask a question box and click send. Our first question is gonna come from Omar Nokta from Jeff Jefferies.

Please go ahead.

Omar Nokta, Analyst, Jefferies: Kenneth. Hi, guys. Good after, good morning. Thanks for the update. Just wanted to, yeah, just wanted to ask quickly, maybe if you wouldn’t mind just expanding on the comments you made early in the presentation.

You’re referencing the purchasing of the latest ship and then some of the sales you did. And you mentioned that you would be looking to change the pace given the need to renew. And so I just wanted a bit more clarity. Are you talking about accelerating the pace of acquisitions or maybe rightsizing the ratio between purchasing and selling?

Ken Fidd, President and CEO, Teekay Corporation and Teekay Tankers: Yeah. Morning, Omar. Thanks for thanks for that question. I think what we wanted to to point out as as everybody can see, we’ve been fairly fairly active in selling some of our older ships in in the first half of of this year. So we sold a total of 11 ships.

And then at the same time, we’ve started picking up a couple of younger ships. Last year, we picked up a couple of Aframaxes. We did a Suezmax now, and then we simplified the ownership structure around the VLGC that we own 50% off. So point that we’re making here is that I think we said that the selling is largely done for now. And what we’re looking to do is we are going to recycle a lot of the capital that we, will be collecting from those sales and gradually start adding newer ships to the fleet again.

Omar Nokta, Analyst, Jefferies: Okay. Thank you. And you mentioned the opportunistic transaction to take the, full ownership of the VLCC. You’ve also got, I guess, the opportunistic stake in Ardmore, given your exposure to MRs and obviously have your bread and butter so it’s not that from Max. How are you thinking about, you know, further capital deployment as you renew the fleet?

Are you looking within the same, you know, your your your your your main asset class, or do you look, towards a larger or perhaps a smaller segment?

Ken Fidd, President and CEO, Teekay Corporation and Teekay Tankers: Yeah. I would say our our number one priority is is finding good purchase candidates within our core segments of of Aframaxes and and and Suezmaxes. We’re, of course, looking at at at where we are and trying to square, making sense of of selling at at what we think are are are quite strong prices for for the older assets and then recycling the capital into younger assets where we can find good value. And there’s there’s some relative price movements there, and we think that there are the odd opportunity that allows us to kind of create a positive arbitrage on that. So in the near term, I think that you will see us finding single vessels in our core segments, Aframaxes and Suezmaxes.

And over the medium term, we might be going in a little bit bigger with with newbuildings if if you think that that’s the right time, or or we may be looking at at other asset classes. But the priority right now and and in the near term here is is really just reloading on our core asset classes.

Omar Nokta, Analyst, Jefferies: Okay. Very good and very clear. Thanks, Kenneth. I’ll pass it back. Appreciate it.

Thanks, Omar.

Conference Operator: And our next question is going to come from Ken Hoexter from Bank of America. Please go ahead. And, Ken, are you there? Do you perhaps have your mute function button on?

Tim Chang, Analyst, Bank of America: Hi. This is Tim Chang on for Ken Hoexter with D. You mentioned OpEx plus unwinding production cuts in September, an increase in non OPEC production in the Atlantic Basin as favorable for demand uplift later in the year. Do you see this lifting rates mainly in 4Q just given that rate softening due to seasonality in the third quarter?

Christian Waldegrave, Director of Research, Teekay Corporation: Yeah. Hi. It’s Christian here. Yeah. We definitely see more oil volumes coming on the market later in the year with OPEC plus It’s not just the production increase, but the fact that, you know, the Middle Eastern countries have been keeping more oil domestically during the summer months of power generation.

So as we get through the summer and probably into September, we should see more Middle East volumes hitting the water, and then we do expect more oil coming from Guyana and Brazil in the second half as well. And we still have the normal seasonality in tanker rates. You know, the the summer months, as we’ve seen in the last couple of months here, tend to be a bit flatter. The the winter do do tend to be seasonally stronger months. So with more export volumes coming online in the second half and also some of the geopolitical complexities as well that Kenneth touched on in terms of, more sanctions on Russia and Iran, which just makes trade in general less efficient, we certainly think that there’ll be some more volatility and stronger rates as we go into the latter part of the year.

Tim Chang, Analyst, Bank of America: Got it. Thank you. And then secondly, other revenue stepped up materially to $42,000,000 from around $33,000,000 last quarter. How should we think about run rate going forward there?

Brody Spears, CFO, Teekay Corporation and Teekay Tankers: Yeah. Hi. This is Brody. Yeah. The other revenues were a bit higher this quarter because we had a one time restructuring charge in our Australian business that was funded by one of our customers for a for an FPSO that the the contract had expired on.

So it’s about 6,000,000 higher this quarter than it otherwise would be because of that. So so that was a a flow through cost to TK.

Tim Chang, Analyst, Bank of America: Got it. Very clear. Thank you for taking my question.

Conference Operator: And there are no further questions in the queue at this moment. I’ll turn the conference back over to the company for any additional or closing remarks.

Ken Fidd, President and CEO, Teekay Corporation and Teekay Tankers: Well, thank you very much for tuning into our call this morning, and we look forward to reporting back to you next quarter. Have a great day.

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