Teekay Tankers Ltd.

Please stand by, we're about to begin. Welcome to TKTinkers LTD's first quarter 2023 earnings results conference call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question and answer session. At that time, if you have a question, participants will be asked to press star one to register for a question. For assistance during the call, please press star zero on your touchtone phone. As a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead.

Before we begin, I would like to direct all participants to our website at www.tktankers.com, where you'll find a copy of the first quarter 2023 earnings presentation. Kevin and Stuart 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 first quarter 2023 earnings release and earnings presentation available on our website. I will now turn the call over to Kevin McKay, TK Tanker's president and CEO, to begin.

Thank you, Ed. Hello, everyone, and thank you very much for joining us today for TK Tanker's first quarter of 2023 earnings conference call. Joining me on the call today are Stuart Andrade, TK Tanker's CFO, and Christian Waldegrave, our director of research. Moving to our recent highlights on slide three of the presentations, TK Tankers generated total adjusted EBITDA of approximately $206 million in the first quarter, an increase of approximately $26 million in the fourth quarter of 2022. We reported our highest ever quarterly adjusted net income of nearly $175 million, or $5.13 per share, an increase from a record fourth quarter of 2022 adjusted net income of approximately $148 million, or $4.33 per share. Our strong results have enabled us to reduce our net debt by almost 50% since last quarter to $192 million. We've also finalized a revolving credit facility for up to $350 million to refinance 19 vessels as we continue to exercise purchase options on vessels in sale-leaseback arrangements. With strong first quarter spot rates and our high operational leverage, TK tankers generated almost $194 million of free cash flow, including approximately $19 million from our eight chartered in-vessels. As previously mentioned, for every $5,000 above our free cash flow break-even of approximately $15,000 per day, we expect to generate $2.64 in free cash per share annually. Given the substantial progress the company has made in building financial strength and how well we are positioned to benefit from the strong tanker market, TK Tankers has transitioned to a capital allocation approach under which our existing focus on financial strength and disciplined future fleet reinvestment is supplemented by returning capital to shareholders. Namely, from this quarter, we have initiated a fixed quarterly dividend of $0.25 per share, In addition, based upon a holistic assessment of the company's position, including the last few quarters' performance and our expectations moving forward, the board has also approved a special dividend of $1 per share. Finally, we've put in place a $100 million share repurchase program, which provides us with an additional lever to create shareholder value. For mid-sized tankers, spot rates during the first quarter of 2023 were the highest ever for the first quarter of a year and remained firm, albeit volatile, in the early part of the second quarter. We've recently seen record high U.S. crude oil exports and crude volumes out of Russia remain strong, adding significant support to mid-sized tankers. Overall, global oil demand remains on track to increase by 2 million barrels per day this year, driven in large part by China's economic recovery and increased travel following the relaxation of COVID lockdowns. Perhaps most importantly, fleet supply fundamentals remain in excellent shape, with low fleet growth virtually ensured for at least the next few years. Turning to slide four, we look at recent developments in the spot tanker market. Spot tanker rates remained at historic highs in the first few months of 2023. As mentioned, spot rates in Q1 were the highest ever recorded for the first quarter of the year, given by record high crude oil exports in the U.S. Gulf, an increase in long-haul movements in the Atlantic to the Pacific, spurred by rising Chinese crude oil imports, and an increase in Russian crude oil exports, which are now moving almost exclusively on long-haul voyages to Asia. Mid-sized tanker spot rates have remained firm at the start of the second quarter, albeit with high levels of volatility, which is typical in a tight tanker market environment. We anticipate spot rates to remain volatile due to continued strong fleet utilization interspersed by typical seasonal factors in the coming months. Turning to slide five, we provide a summary of our spot rates in the second quarter to date. Average second quarter to date rates have remained historically strong. Based on approximately 44% and 41% of Revenue Days booked, TK Tanker's first quarter date UFMAX and AFMAX size vessel bookings have averaged approximately $62,400 per day and $58,500 per day, respectively. Importantly, I would highlight that TNK has eight ships currently chartered in at an average cost of $24,300 per day. with a mark-to-market value of approximately $68 million. Six of these vessels are currently trading the spot market. Turning to slide six, we look at some of the factors that have been supporting midsize tanker demand over the past few months. Firstly, U.S. crude oil exports have been on a rising trend in recent months, and in Q1 reached a record high average of 4 million barrels per day, with some weeks reaching over 5 million barrels per day. Almost half of these volumes were shipped to Europe directly on Afromax and Sirismax tankers, leading to an increase in mid-size tanker ton-mile demand, with additional volumes being transported long-haul to Asia on VLCCs, creating elevated demand for Afromax Lightring in the U.S. Gulf. Secondly, Russian seaborne crude oil exports have increased since the start of the year, with exports in Q1 reaching 3.4 million barrels per day. an increase of half a million barrels per day from Q4. Furthermore, over 90% of these volumes are now flowing long haul to India and China following the implementation of the EU ban on Russian crude oil imports, creating significant ton mile demand for midsize tankers, given that VLCCs cannot load directly from shallow draft Russian ports. While TK tankers does not transport Russian oil, the stretching of the mid-sized tanker fleet as a result of new trading patterns to import replacement oil to Europe, coupled with a growing shadow fleet of ships to service Russian trades, and which typically or generally trade less efficiently than the regular fleet, have benefited the wider mid-sized tanker market. Although Russia announced an oil supply cut of half a million barrels per day from March of 2023 onwards, this is currently not being reflected in Russian crude oil export volumes, which remained firm in the early part of Q2. Turning to slide seven, we look at the outlook for oil demand and supply through the remainder of this year. As for the IEA, global oil demand is projected to grow by 2 million barrels per day in 2023, to a record high of just under 102 million barrels per day. Non-OECD countries, led by China, are expected to account for 90% of this growth, with OECD demand being impacted by slower economic growth due to high inflation and rising interest rates. Oil demand is expected to accelerate during the second half of the year, as Chinese economic growth gathers pace, with reported GDP growth of 4.5% in the first quarter, providing a positive sign of an accelerating Chinese economy. Looking at oil supply, The OPEC Plus Group announced a surprise oil production cut of 1.16 million barrels per day from May to the end of the year, in response to lower oil prices and uncertainty of the global economy. This may negatively impact seaborne oil volumes, and although the impact will primarily be felt in the VLCC sector, given that the majority of the cuts are from Middle Eastern producers, There could also be a negative knock-on effect for all crude tanker segments in the coming months. Turning to slide 8, we look at the positive tanker supply and demand fundamentals, which we believe lay a strong foundation for extended market strength over the next few years. Fleet supply fundamentals remain very positive. The global tanker order book, when measured as a percentage of the fleet, remains at a record low of approximately 4%. Although the pace of new tanker ordering has picked up since the start of the year, most shipyards are now effectively full through the end of 2025. Furthermore, the number of new orders that have been placed is relatively small when compared to the fleet of older vessels, which will need replacing in the coming years. And therefore, at this stage, we do not feel this recent ordering uptake is having a material impact on overall fleet supply in the medium term. The combination of a small order book and little stair shipyard capacity through mid-2026 virtually ensures low fleet growth over the next two to three years, with approximately 2% fleet growth expected this year and negligible levels of fleet growth in both 2024 and 2025. As shown by the chart on the right of the slide, tanker demand growth is expected to far outweigh fleet supply growth over this time period, setting the stage for increased fleet utilization, which should drive an extended upturn in tanker spot rates over the medium term. I'll now turn the call over to Stuart to cover the financial slides.