Teekay Shows Some Improvement

On June 4, 2009, Teekay Corporation (TK - Analyst Report) reported 2008 fourth quarter results for the period ending December 31, 2008. For the quarter, net voyage revenue rose 20% to $616 million from $514 million recorded in fourth quarter 2007. TK reported a net loss of $660.8 million or a loss of $9.12 per diluted share.

Excluding nonoperating items, net earnings were $53.2 million, or $0.73 per diluted share, up 132% versus fourth quarter 2007’s $23.0 million, or $0.31 per diluted share. This was a penny below consensus, but above our estimate of $0.58, as both revenues and G&A expense were better than we had estimated.

The third quarter witnessed improved revenues in all segments, with net revenues growing 44% to $252 million in the spot tanker segment (reflecting the increased size of TK’s spot tanker fleet and higher spot tanker rates); 40% to $75 million in the fixed-rate tanker segment (due the increased size of the fixed-rate tanker fleet); 13% to $54 million in the liquefied gas segment (due to the inclusion of two Kenai LNG carriers acquired in December 2007); and 4% to $234 million in the offshore segment.

The increase in spot tanker net revenues reflected a 3% rise in revenue days to 7,635 days, and increases in some spot tanker rates. Average Suezmax tanker spot rates gained 3% year over year to $48,959 per day, Aframax spot rates advanced 33% to $33,736 per day, large/medium-size product tanker spot rates rose 64% year over year to $35,774 per day, and small product tanker spot rates increased 13% year over year to $14,416 per day.

At December 31, 2008, the company had total liquidity of $1.9 billion, consisting of $805 million in cash and cash equivalents and $1,066 million in undrawn credit facilities. In addition, TK had approximately $1.11 billion in remaining capital commitments relating to its portion of newbuildings on order, for which the company has arranged $1.07 billion in long-term financing.

We are cutting our 2009 diluted EPS estimate to $0.35 from $1.15, as we have moderated our revenue assumptions. Results should reflect the impact of global economic weakening on both spot rates and shipping volumes.

TK recently announced a 15% increase in the annual dividend rate to $1.265 and a $200 million stock repurchase plan. However, we would not be surprised to see a dividend cut and suspension of stock repurchases in the event of a protracted economic downturn.