dnb oil, offshore and shipping conference presentation – march 5, 2014
TRANSCRIPT
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March 5, 2014
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1. Buy and sell assets at the right time
2. Operate vessels safely and efficiently
3. Finance with competitively priced capital
How to Make Money in the Tanker Market
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Pure Play on Cyclical Recovery in Crude Tankers
• Tanker Investments Ltd. (“TIL”) is a new tanker company
focused on maximizing shareholder value by strategically
acquiring, operating and selling crude oil and product tankers
at the right time in the tanker market cycle
Profile
Strategy
• Buying and selling modern second-hand tankers at strategic
times throughout the tanker market cycle
• Operate in Teekay-managed pools to maximize profitability
• Enhance profits by investing in low-cost fuel saving vessel
modifications
• List on Oslo Stock Exchange (OSE) in Q1-14 and grow
through further accretive vessel acquisitions
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TIL Represents a Significant Teekay Group Investment
in the Crude Tanker Market Recovery
Teekay
Corporation
(NYSE:TK)
Tanker
Investments Ltd. (Marshall Island)
Teekay Group
Conventional Tanker
Franchise
- Sale and purchase
- Pools (Aframax RSA, Gemini
Suezmax Pool)
- Commercial management
- Technical management and
oversight
Financial
Investors
10.0%
80%
Services
TIL is the first significant tanker investment by the Teekay Group since 2007
Teekay
Suezmaxes
Initial
Secondhand
Aframaxes
Teekay
Tankers Ltd.1
(NYSE:TNK)
10.0%
1 Teekay Corporation currently has a 25.1% economic ownership in Teekay Tankers Ltd. and has 53.1% voting control through ownership of Class B supervoting shares
TIL Holding LLC
Additional
Secondhand
Aframax
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TIL Current Fleet Vessel Specifications
4 x Aframax specifications
Yard Hudong Zhonghua
Shipbuilding
Built 2009/2010
DWT 109,000
LOA 243m
Depth 22m
Beam 42m
4 x Suezmax specifications
Yard Bohai Shipbuilding
Built 2009
DWT 159,000
LOA 275m
Depth 24m
Beam 48m
1 Aframax
Yard Tsuneishi Shipbuilding
Company
Built 2009
DWT 107,530
LOA 244m
Depth 21m
Beam 42m
Initial fleet Add-on acquisition
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Secondhand Vessel Prices at a cyclical low
Source: Clarksons
Aframax asset prices
30
40
50
60
70
80
90
100
110
120
2013 2012 2011 2014 2009 2004 2005 2010 2007 2008 2003 2006
USDm
10y avg. 5 y-old
Suezmax 5 y-old
10y avg. NB
Suezmax NB
Suezmax asset prices
Upside to 10y avg.
12%
40% NB
5y-old
Newbuild prices have recently turned and secondhand prices have historically followed with a 3-6 month lag
20
30
40
50
60
70
80
90
100
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2014
USDm
10y avg. 5 y-old
Aframax 5 y-old
10y avg. NB
Aframax NB
Upside to 10y avg.
32%
9%
5y-old
NB
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Freight Market Has Hit Rock Bottom…
…But Rates have Recently Rallied
Suezmax
Source: Clarksons
80
60
40
160
140
120
100
20
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD/d (‘000)
10y avg. spot rate
Avg. Suezmax spot rate
10y avg. 1y TC rate
Suezmax 1y TC rate
90
30
60
Feb Jan Dec
0
USD
/day
(‘0
00
)
Aframax
2006 2005 2003 2004
90
80
70
60
50
40
30
20
10
0
2014 2013 2012 2011 2010 2009 2008 2007
USD/d (‘000)
10y avg. TC rate
Aframax 1y TC rate
10y avg. spot rate
Avg. Aframax spot rate
90
60
30
0
Feb Jan
USD
/day
(‘0
00
)
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Attractive Crude Tanker Supply Fundamentals
With a Shrinking Mid-Size Tanker Fleet
Source: Clarksons, Company estimates 1Orderbook adjusted to deduct for vessels being built at distressed shipyards in China and Brazil 2 Indicates orders that are at distressed shipyards in China and Brazil
Aframax fleet set to shrink by 5-6% Suezmax fleet to increase by 1% or
less depending on yards at risk
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Kashagan field online from 2014 – export routes
through the Black Sea / Med
Kozmino pipeline expansion creates Aframax /
Suezmax demand in the East
3 Key Trade Reasons Why Aframax / Suezmax Demand
is Set to Improve
Changing dynamics in North American trade flows
Expanded Panama
Canal opens up new
trade routes for mid-
size crude tankers
North America could
emerge as a significant
exporter of crude oil
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Current Secondhand Tanker Prices Provide Attractive
Returns as the Market Reverts to the Long-Term Average
1Average acquisition price for first 4 Aframax vessels
5 year-old Suezmax prices
40.8
66.0
0
10
20
30
40
50
60
70
USDm +38%
10y avg Acquisition price
48.0
7.2
29.0
50.0
0
10
20
30
40
50
60
70
Acquisition price1
37.0
USDm
8.0
+35%
10y avg
5 year-old Aframax prices
Current fleet is already in-the-money
Acquisition price Uplift to current FMV
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• Strategically target vessels based on class, age and quality
○ Utilize existing platform / commercial pools (Aframax, Suezmax)
○ May also opportunistically target other vessel classes (Panamax, VLCC)
○ Target 1-7 year old vessels prior to 2nd special survey
○ Focused on quality vessels that can achieve maximum pool points
• Diverse acquisition approach:
○ Single ship purchases, En bloc fleet acquisitions, Ship-for-shares transactions
• Sourced through direct relationships with shipbrokers, other ship
owners and banks
• Maintain financial and contract flexibility
○ Intend to trade all vessels in the spot market
○ Currently working with bank group to provide TIL with a revolving credit facility to
partially finance potential future tanker acquisitions
Vessel Acquisition Strategy
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Experienced Leadership Team
William Hung
CEO
Scott Gayton
CFO Mark Cave
Corporate
Secretary
1. Kenneth Hvid - Director
2. William Lawes - Director
3. Timothy Gravely - Independent Director
4. Alan Carr - Independent Director
5. Oivind Solvang – Independent Director
Strong Partner in Teekay Corporation
Executive
Board of Directors
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Operational
Financial Technical
Commercial
Trusted Partner That Brings
40 Years of Tanker Company Expertise
→ Strong customer
relationships with Oil
Majors and
Commodities Traders
→ A trusted provider of
3rd Party Commercial
Management
Services
→ Deep S&P knowledge
→ Regionally-based
commercial teams
across the globe
→ Operating one of the
world’s largest
conventional fleets
→ Recognized leader in
Operational Excellence
and Safety (HSEQ)
→ Technical expertise to
optimize vessel
performance and 24/7
management
→ Diversified access to
capital sources and
active relationships with
over 30 banks and
Export Credit Agencies
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TIL Fleet to be Commercially and Technically
Managed by the Teekay Conventional Tanker Franchise
1 As of 31 October 2013
33 vessels under management1
4 members
AFRAMAX RSA
Teekay pools provide
economies of scale
and higher utilization
27 vessels under management1
10 members
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Savings of Approximately USD 1,500 Per Day
* Based on 13-14 knots fully laden
0
10
20
30
40
50
60
70
80
US
D 0
00
’s / d
ay
Source: Clarksons
Bunker Cost vs. Spot TCE 1998-2013
Bunker Cost Aframax spot TCE
In 1998, cost of
bunkers was ~15%
of voyage revenue
In 2013, cost of
bunkers is ~67% of
voyage revenue
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Investment in Fuel-Saving Vessel Upgrades
Can enhance vessels with a variety of fuel saving modifications:
1. Propeller Boss Cap Fins
2. Mewis Ducts
3. Innovative Hull Coating
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Tanker Investments Ltd.
Right time
in the cycle to invest
Favorable
supply/demand fundamentals
Significant value
appreciation potential
Co-invest alongside
industry leader
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