tanker investments ltd. reports fourth quarter and annual 2015 presentation
TRANSCRIPT
Fourth Quarter
of 2015 Earnings
Presentation February 18, 2016
2
This presentation contains forward-looking statements which reflect management’s current views with
respect to certain future events and performance, including statements regarding: the crude oil and
refined product tanker market fundamentals, including the balance of supply and demand in the tanker
market; the expectation that the Company will generate strong cash flow; the Company’s financial
position and intention to return excess capital to shareholders; and the expected effect of any
acquisitions on the Company’s financial results. The following factors are among those that could cause
actual results to differ materially from the forward-looking statements, which involve risks and
uncertainties, and that should be considered in evaluating any such statement: changes in the
production of or demand for oil; changes in trading patterns significantly affecting overall vessel
tonnage requirements; greater or less than anticipated levels of tanker newbuilding orders and
deliveries or greater or less than anticipated rates of tanker scrapping; changes in applicable industry
laws and regulations and the timing of implementation of new laws and regulations; changes in interest
rates and the financial markets; delays in the delivery of any new vessels; increases in the Company's
expenses, including any dry docking expenses and associated off-hire days; and other factors
discussed in Tanker Investments Ltd.’s filings from time to time with the Financial Supervisory Authority
of Norway. The Company expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to reflect any change in the
Company’s expectations with respect thereto or any change in events, conditions or circumstances on
which any such statement is based.
Forward Looking Statements
3
• Q4-15 Results
○ Reported net income of USD 28.5 million, or USD 0.79 per share
○ Generated USD 45.9 million of cash flow from vessel operations1
○ Repurchased 3.24 million shares for USD 38.9 million; initial USD 60 million
authorization completed in early-January, 2016
○ Incurred higher OPEX than expected due to:
- Restocking of consumables and spares, and machinery repairs required
on the Suezmaxes acquired in mid-2015
- Higher repair costs related to certain machinery and deck hardware on
two vessels
• Completed the sale of two, 2010-built VLCCs for USD 155 million
○ Delivered to buyers on 19 and 20 of January 2016
• Announced the authorization of another USD 60 million share
repurchase plan; have repurchased 1.48 million shares in past week.
• Q1-16 tanker rates to-date booked in-line with strong rates achieved in
Q1-15 1 Cash flow from vessel operations (CFVO) represents income from vessel operations before depreciation and amortization expense. Cash flow from vessel operations is a non-GAAP
financial measure used by certain investors to measure the financial performance of shipping companies. Please refer to Appendix B of the Q4-15 earnings release for the reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure.
Recent Highlights
4
0
10,000
20,000
30,000
40,000
50,000
60,000
Jan
-15
Feb
-15
Mar
-15
Ap
r-1
5
May
-15
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
Oct
-15
No
v-1
5
De
c-1
5
USD
/day
2015 Crude Tanker Rates
Suezmax Aframax
0 10,000 20,000 30,000 40,000 50,000
Aframax
Suezmax
Annual Average Crude Tanker Rates
2015
2014
2013
2012
2011
2010
2009
Source: 90% Clarksons
Strong tanker market in 2015 was driven by:
• Low crude tanker fleet growth of ~2%
• 1.0 mb/d increase in OPEC crude oil production led by Saudi Arabia and Iraq
• 5-year high global oil demand growth of 1.7 mb/d
• Strong refining margins, strategic & commercial stockpiling, and lower bunker
prices were all driven by the lowest crude oil prices seen in 11 year (averaging
$52 / bbl)
2015: Strongest Crude Tanker Rates in 7 Years Low fleet growth and surging demand gave rise to rate volatility
5
Fundamentals Continue to be Strong in 2016
93.5
94.0
94.5
95.0
95.5
96.0
96.5
97.0
Q1-2016 Q2-2016 Q3-2016 Q4-2016
Millio
n b
bl /
day
Rising Global Oil Demand
Source: IEA
0
50
100
150
200
250
300
350
400
2016 Stockbuild Storage Capacity
Mill
ion
Bar
rels
2016 Stock build vs. Spare Storage Capacity
New Capacity -China
New Capacity -Other
Available US Storage
Source: IEA
• Global oil demand is expected to grow by ~1.2 mb/d
• Increase in crude trade volumes due to rising OPEC supply (Iran +0.5 mb/d)
• Inefficiencies in port infrastructures will lead to ullage delays / floating storage, creating
market volatility and tightening available tonnage lists
High oil supply leading to low oil prices are driving tanker demand
6
New Trade Opportunities for Mid-Size Tankers
US crude exports will likely be
arbitrage driven to Europe, where
older refineries desire light sweet
crude
WAF / N.Sea crude cheaper for USAC
refiners when WTI-Brent spread narrows
Condensate / product to
Asia
(Aframax / LR2 once
Panama Canal expansion is
complete in Q2-2016)
WAF – Asia movements
as Chinese buyers continue to
diversity supply regions
Changing trade patterns increases freight rate volatility
7
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
-20
0
20
40
60
80
2009 2010 2011 2012 2013 2014 2015 2016E 2017E
Nu
mb
er
of
Ve
sse
ls
Suezmax Fleet Growth
Scrapping Forecast Scrapped Delivery Forecast Delivered Net Fleet Growth (% of Fleet)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
-40
-20
0
20
40
60
80
100
120
2009 2011 2013 2015 2017E
% F
leet
Gro
wth
Aframax & LR2 Fleet Growth
70
18
7
43
14
0102030405060708090
Nu
mb
er
of
Ve
sse
ls
Suezmax Orderbook vs. 15+ Fleet
15 Years 16-18 Years 19 Years 20+ Years
Orderbook Existing Fleet 15+ years
124
45
15
93
11
0
20
40
60
80
100
120
140
160
180
Nu
mb
er
of
Ve
sse
ls
Aframax & LR2 Orderbook vs. 15+ Fleet
Orderbook Existing Fleet 15+ years
Rising Fleet Growth… But orderbook remains lower than aging fleet
8
Q1-16 Spot Earnings Update
Suezmax Aframax LR2
Q1-16 % booked
to-date 65% 65% 50%
$26,627 $25,677
$21,884
$38,825
$32,189
$28,473
$-
$10,000
$20,000
$30,000
$40,000
$50,000
Suezmax Aframax RSA LR2
Q4-14 Actual Q4-15 Actual
$39,451
$31,058
$24,666
$40,800
$28,850 $26,750
$-
$10,000
$20,000
$30,000
$40,000
$50,000
Suezmax Aframax RSA LR2
Q1-15 Actual Q1-16 to-date
9
kr 0.0
kr 5.0
kr 10.0
kr 15.0
kr 20.0
kr 25.0
kr 30.0
kr 35.0
kr 40.0
kr 45.0
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000
An
nu
al C
AD
/sh
are
(NO
K)
Aframax Tanker Rates ($ per day)
Well-positioned to Generate Strong Cash Flow
Break-even rate, after
interest expense & drydock:
~$12,600/day
10-yr avg. Aframax
rate $28,000/day
Note: Above calculations on an Aframax Equivalent basis: VLCCs at 1.4x, Suezmaxes at 1.2x; CAD, or Cash Available for Distribution represents Cash Flow from Vessel Operations less interest expense
and drydock amortization; Assumes exchange rate of 8.49 USD to NOK.
Cash yield at
10-yr avg.
Aframax spot
tanker rates
and stock price
of NOK 82
35%
Operating leverage
• Tanker Investments no longer pursuing additional vessel acquisitions ○ Significant operating leverage to tanker market remains after sale of VLCCs
○ Excess capital to be returned to shareholders in the form of share buybacks or dividends