TEEKAY TEEKAY TANKERS INVESTOR DAY September 30, 2014
KEVIN MACKAY President & CEO, Teekay Tankers Photo credit: Alexandr Lyakhov Australian Spirit 2
Forward Looking Statements This presentation contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance. All statements included in or accompanying this presentation, other than statements of historical fact, are forward-looking statements. Forward-looking statements are not guarantees and actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements in this presentation include, among others, statements regarding: the crude oil and refined product tanker market fundamentals, including the balance of supply and demand in the tanker market, estimated growth in the world tanker fleet during 2014 through 2016, estimated growth in global oil demand and crude oil tanker demand in during 2014 through 2016, estimated crude supply and refining capacity in 2014 to 2019, and tanker fleet utilization and spot tanker rates during 2014 through 2016; the Company s financial position and ability to take advantage of growth opportunities in an expected future tanker market recovery and its ability to invest in newbuildings; the Company s plans regarding increased spot market exposure and growth in capacity through in-charters; the Company s fixed-rate coverage for the next 12 months; the Company s growth strategy; the effect of the Company s operating leverage on cash available for distribution per share; and the Company s 2015 expected fleet profile. 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; changes in commercial tanker pools; 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; the potential for early termination of short- or medium-term contracts and inability of the Company to renew or replace short- or medium-term contracts; changes in interest rates and the financial markets; increases in the Company's expenses, including any dry docking expenses and associated off-hire days; failure to realize expected benefits of the acquisition of an interest in Teekay Operations; failure of Teekay Tankers Board of Directors and its Conflicts Committee to accept future acquisitions of vessels that may be offered by Teekay Corporation or third parties; and other factors discussed in Teekay Tankers filings from time to time with the United States Securities and Exchange Commission, including its Report on Form 20-F for the fiscal year ended December 31, 2013. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forwardlooking 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. 3
INVESTMENT HIGHLIGHTS Leading Market Position Strong Operating Leverage Trusted Operating Franchise Stable Financial Platform One of the world s largest tanker owners and operators Every $5,000 increase in spot rates increases earnings by $0.45 per share Over 40 years of leading commercial and technical management expertise $250 million of liquidity and proven access to capital 4
TEEKAY TANKERS AT A GLANCE Largest Operator Of Mid-Sized Tankers 2000 Seafarers 82 Teekay Tankers 64 58 52 48 30 30 Sovcomflot Heidmar AET Navig8 Minerva Thenamaris 82 Vessels Commercially Managed 700M barrels Cargo Lifted in 2013 125+ Global Customers $7.37 per share Dividends Paid Since IPO 5
BUSINESS OVERVIEW 6
LTIF 40 YEARS OF OPERATIONAL EXCELLENCE Commitment to high HSEQ standards is key to winning and maintaining business and is the essence of the Teekay brand. 1.5 HSEQ KPIs (Per Million Man Hours) 3 1 0.5 2 1 TRCF 0 2011 2012 2013 TRCF: Total Recordable Case Frequency LTIF: Loss Time Injury Frequency 0 Photo credit: Aaron Lobo Al Marrouna 7
Global and Diverse Customer Network Customer relationships spanning 40 years based on our reputation for reliability and operational excellence Provides access to diverse cargo streams and agility to respond to changing market dynamics 8
World-Class Operating Franchise Broad commercial footprint Over 80 vessels under commercial management Variety of contracts provide access to global trade volumes Commercial tonnage pools consistently outperform peers and indices Technical management leverages power of One Teekay Over 2,000 seafarers managed directly through manning offices in Glasgow, Manila, and Mumbai Procurement economies of scale Shipyard access and negotiating power 9
Number of Vessels Number of Vessels Well-Positioned for Tanker Market Recovery Transitioned portfolio and added in-chartered vessels for higher spot exposure Increased liquidity by monetizing investment in term loans ($154m) Purchased a 50% interest in Teekay s conventional tanker franchise Co-created Tanker Investments Limited (TIL) 2012 Fleet Profile 40 35 Pro forma 2015 Fleet Profile 35 30 81% Spot Exposure 30 25 8 25 20 15 10 5 48% Spot Exposure 16 15 20 15 10 5 7 21 0 0 Fixed rate vessels Spot (owned vessels) Spot (in-chartered vessels) 10
Strong Operating Leverage For every $5,000 per day increase in spot rates, TNK s CAD* increases by $0.45 per share Low current CAD break-even rate of ~$10,500 per day A 10% increase in vessel values increases net asset value by ~$0.90 per share $2.50 $2.00 $1.50 $1.00 $0.50 TNK CAD* Per Share Spot Rate Sensitivity $- $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 Aframax Equivalent TCE (12 months ended June 30, 2015) * Cash Available for Distribution represents net income (loss) excluding depreciation and amortization, unrealized (gains) losses from derivatives, any non-cash items or write-offs of other non-recurring items. 11
TANKER MARKET OVERVIEW 12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ 000s / day % GDP Growth 2009 2013: Depressed Tanker Market Tanker rates during 2009-2013 were well below the long-term average 70 60 Global GDP Growth Aframax Spot Rates Suezmax Spot Rates 7% 6% 50 40 30 20 10 0 5% 4% 3% 2% 1% 0% -10-1% Source: Clarksons / IMF 2013 2009-13 Avg Long-term Avg* Suezmax $14,000 / day $18,500 / day $38,700 / day Aframax $13,100 / day $13,000 / day $28,500 / day *For the period 2002-2013 13
2014 Earnings Indicate Rising Market Mid-sized crude tankers outpacing recovery in other segments 2014 Change Over 2013 Earnings (Jan-Sep) VLCC $5,600 Suezmax $7,900 Aframax $7,500 LR2 $2,200 MR -$3,500-4,000-2,000 0 2,000 4,000 6,000 8,000 TCE ($ / day) Source: 90% of Clarksons Reported Rates 14
Flows of Crude are Moving West to East 15
Crude Supply Increasing West of Suez Change 2014-2019 West of Suez East of Suez 2.7 1.1 0.3 0.2 0.2 0.6-0.2 0.2 North America Latin America OPEC West Africa FSU OPEC East Asia Australia Source: IEA 16
Crude Supply Increasing West of Suez Change 2014-2019 West of Suez East of Suez +3.8 mb/d +0.6 mb/d Source: IEA 17
Refining Capacity Increasing East of Suez Change 2014-2019 West of Suez East of Suez 2.4 2.2 0.8 0.7 0.3 0.2-0.6 0.7 0.6 0.1-0.4 North America Latin America FSU Africa Europe China Middle India Other East Asia FSU OECD Asia Source: IEA 18
Refining Capacity Increasing East of Suez Change 2014-2019 West of Suez East of Suez +1.4 mb/d +5.5 mb/d Source: IEA 19
Suezmax Benchmark Routes are Changing WAF- Euro +74% WAF - US -70% MEG - Asia +280% WAF - Asia +75% Source: SSY * Spot routes with greatest tonne-mile in given period 20
Aframaxes Remain the Workhorse of the Fleet Existing Trade Routes Potential New Routes Source: SSY * Spot routes with greatest tonne-mile in given period 21
Changes in Long-Haul Refined Product Trade To Asia / Pacific Refined product surplus Refined product deficit Source: IEA 22
Number of Vessels Number of Vessels Mid-Sized Tanker Fleet Age Profile Mid-sized tankers aged 15+ years exceed orderbook Aframax Suezmax Aframax 20+ Years 19 Years 16-18 Years 15 Years 14 Years Orderbook 160 90 160 140 80 140 120 70 18 120 15 15 60 100 9 100 35 35 50 80 40 60 30 40 20 50 30 4 80 60 40 43 11 43 11 10 20 42 19 20 42 30 30 00 Orderbook Existing Fleet >14 Years 0 Orderbook Existing Fleet >14 Years Source: Clarksons / Internal Estimates Note: Uncoated vessels only 23
2010 2011 2012 2013 2014E 2015E 2016E 2010 2011 2012 2013 2014E 2015E 2016E Number of Vessels Number of Vessels Shrinking Mid-Sized Fleet Declining mid-size crude tanker fleet driving a sustained market recovery Suezmax Fleet Growth Aframax Fleet Growth Scrapping Forecast Scrapped Delivery Forecast Delivered Net Fleet Growth (% of Fleet) 50 10% 50 5% 40 8% 40 30 3% 30 6% 20 20 10 4% 2% 10 0-10 1% -1% 0 0% -20-10 -2% -30-40 Uncoated vessels only -3% -20-4% -50-5% Source: Clarksons / Internal Estimates 24
2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Fleet Utilization Supply/Demamd Growth Higher Fleet Utilization Beginning in 2014 Driver for increased rates and asset prices 92% Tanker Demand Growth Tanker Supply Growth Fleet Utilization 8% 90% 88% 86% 84% 82% 80% 7% 6% 5% 4% 3% 2% 1% 78% 0% Source: Platou/Internal Estimates 25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $ millions $ millions Asset Values Remain Below 10-Year Averages Suezmax Asset Values Aframax Asset Values 105 95 85 NB 5y-old 30% 9% Upside to 10y avg. 90 80 70 NB 5y-old 21% 10% Upside to 10y avg. 75 60 65 50 55 40 45 30 35 20 NB 5 yr old 10 yr avg NB 10 yr avg 5 yr old Source: Clarksons 26
STRATEGIC FOCUS 27
Teekay Tankers Strategy for Growth Invest and operate throughout the tanker cycle using a variety of levers Actively pursue in-charters while managing out-charter portfolio Utilize TNK s operating platform to pursue consolidation and investment opportunities Invest in newbuildings Increase fee revenues from commercial and technical management Photo credit: Benhur Villavicencio Mahanadi Spirit 28
Positioning TNK for Greater Upside to Tanker Market Recovery Rebalancing our portfolio mix Continue to reduce our fixed-rate cover to increase spot fleet 75% of fleet will trade in spot market over the next 12 months Further grow our spot fleet capacity through in-charters Recent in-charters added 2,000 operating days Pursue medium-term contracts to increase in-charter portfolio by an additional 15 ship years Increase vessels under management and fee-based revenues Grow existing commercial pools Develop new operating segments to leverage our commercial and technical expertise 29
The Competitive Landscape Has Changed Since the Financial Crisis: Several competitors have restructured or exited Non-traditional financial backers have entered the market with shorter investment horizons Many new entrants do not have a full operating platform Presents TNK with opportunities for consolidation Photo credit: Benhur Villavicencio Mahanadi Spirit 30
TNK: Strong Platform for Consolidation Deep customer relationships Growing commercial management platform Variety of cargo contracts Global footprint and experience Commercial Operational 40 years of Operational Excellence Size to deliver reliable and flexible operations Ability to maximize vessel performance and voyage returns Technical Financial Industry leading HSEQ Leveraging power of One Teekay Technical and engineering expertise Strong liquidity Financial expertise and access to diversified sources of capital NYSE listing 31
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