Teekay Tankers Ltd.

Fourth 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 1 to register for a question. For assistance during the call, please press star 0 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.tk.com, where you will find a copy of the fourth quarter and annual 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 fourth quarter and annual 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 fourth quarter and annual 2023 earnings conference call. Joining me today on the call is Stuart Andrade, TK Tanker's CFO. Moving to our recent highlights on slide three of the presentation, TK Tankers reported adjusted net income of $99.5 million, or $2.91 per share, an increase from last quarter's levels of $76.6 million, or $2.24 per share, respectively. The company's 2023 adjusted net income of $500.5 million, or $14.65 per share, was more than double our strong 2022 earnings and established a new record for TK Tanker's highest ever annual net income. Amid historically strong spot rates, the significant value of our high operating leverage is clear. As a reminder, for every $5,000 increase in tanker rates above our free cash flow breakeven of $16,000 per day, we expect to generate approximately $2.50 of annual free cash flow per share. We will provide further information of this later in the presentation. In January, we gave notice to repurchase the remaining eight vessels on sale leaseback arrangements for $137 million. Once complete, this repurchase will bring the total number of vessels repurchased since March 2023 to 27 vessels for a total of $501 million, reducing our total debt outstanding to zero and decreasing our cash breakeven rates. In line with our fixed quarterly dividend policy, we have declared a cash dividend of $0.25 per share for the fourth quarter of 2023. In the market, 2023 turned out to be the best year for mid-sized tanker spot rates in TNK's history due to a combination of strong oil demand growth, longer voyage distances, and low fleet growth. Rates have remained firm at the start of 2024, with seasonal and geopolitical factors adding to an already tight tanker market. Looking further ahead, we believe that strong tanker supply and demand fundamentals will continue to support tanker fleet utilization and rates over the next two to three years, albeit with periods of pronounced spot rate volatility. Finally, we sold two 2004-built Afromaxes during the fourth quarter for total proceeds of $46.5 million, recording a gain on sale of $10.4 million in December and an expected gain of approximately $11.5 million in Q1 of this year. Both of these vessels have now been delivered to their new owners. Turning to slide four, we look at dynamics in the spot tanker market. As mentioned on the highlights slide, midsize spot tanker rates during 2023 were the highest in TK tankers history, with rates averaging around $48,500 per day. Global oil demand grew by approximately 1.9 million barrels per day in 2023 per the IEA. as the world continued to rebound from the COVID-19 pandemic, with particularly robust growth from China following the removal of travel restrictions at the start of the year, as well as from India. As a result, global oil demand moved above pre-pandemic levels for the first time to a record high of around 101 million barrels per day, and has remained strong in the early part of 2024. Global oil supply also saw robust growth in 2023, despite OPEC Plus supply cuts due to high output from non-OPEC countries. Oil supply growth was particularly strong in the Americas, with U.S. crude oil exports reaching a record high of over 4 million barrels per day. Tanker demand saw a further boost from longer voyage distances during the year, which was the first full year following the EU's ban on Russian crude oil imports and the G7's price cap, which came into effect in late 2022. As a result, over 90% of Russian crude oil exports moved long haul to India and China during the year. While TK Tankers does not participate in this trade, there has nonetheless been a significant overall boost to midsize tanker demand. Finally, despite an almost total absence of tanker recycling, the global tanker fleet saw less than 2% growth in 2023 due to a very small order book. This was far outweighed by tanker ton-mile demand growth of well over 7%, leading to an increase in fleet utilization and strong rates. Spot tanker rates have remained firm at the start of 2024 due to a combination of strong underlying fundamentals, seasonal factors such as weather delays, and various regional disruptions. I'll give more detail on these factors later in the presentation. Turning to slide 5, we provide an update on our Suezmax and Afromax size spot rates in the first quarter to date. Based on approximately 68% and 67% of revenue days booked, TK Tanker's first quarter to date Suezmax and Afromax size vessel bookings have averaged approximately $50,100 per day and $50,900 per day respectively. Importantly, I once again highlight the value being created by TNK's eight-vessel chartered-in fleet, with seven ships trading in the strong spot market. With an average in-charter rate level of $25,400 per day, the chartered-in fleet has a current mark-to-market value of approximately $60 million, which is in addition to our owned fleet. Turning to slide six, we look at tanker supply and demand fundamentals, which we believe will continue to support high tanker fleet utilization for at least the next two to three years. Global oil demand is projected to grow by around 1.4 million barrels per day in 2024, as per the EIA, with further growth of 1.3 million barrels per day in 2025. This is in line with pre-pandemic levels of growth and indicates that demand growth for oil remains robust, with consumption projected to reach 103.7 million barrels per day by the end of 2025, 3 million barrels per day higher than the levels seen prior to the COVID-19 pandemic. Meanwhile, the outlook for tanker fleet supply remains extremely positive with minimal tanker fleet growth expected over the next two to three years. This is especially true for 2024 with just 9 million deadweight tons scheduled to be delivered, the lowest annual total since 1997. The tanker order book remains small by historical standards at around 7% of the existing fleet size, while forward order book cover at global shipyards stands at three and a half years, meaning there is little spare shipyard capacity until 2027. The combination of a low order book, an aging tanker fleet, and a lack of shipyard capacity until 2027 should lead to exceptionally low levels of tanker fleet growth over the next three years, including virtually no fleet growth in 2024. As shown by the chart on the bottom of the slide, tanker ton-mile demand growth is expected to outstrip fleet supply growth this year and in 2025, continuing the trend that started in 2022 and extended into 2023. This compounding impact of demand growth exceeding supply growth should continue to support high levels of tanker fleet utilization and firm tanker rates. Turning to slide seven, we look at various events that are impacting tanker trades this year, which are creating additional rate volatility in an already tight market. Starting on the right side of the slide, Russian crude oil exports flowing long haul to India and China via the shadow fleet should continue to support midsize tanker demand in 2024. In addition, there have been increased attacks on Russian refineries and storage facilities in recent weeks, which may cut Russia's ability to produce refined oil products and lead to more crude oil being available for export. In terms of oil supply, the majority of production growth in 2024 is expected to come from non-OPIC countries in the Atlantic Basin, led by the United States, Brazil and Guyana. Given that oil demand growth is expected to be concentrated in Asia, there could be an increase in Atlantic to Pacific crude oil movements, which would be beneficial for tanker ton mile demand. Disruptions to vessel transits in both the Panama and Suez canals are also impacting the tanker market this year. While the Panama Canal is not a major transit corridor for crude oil tankers, the inability to transit the canal limits tankers' owners' ability to reposition ships between the Pacific and Atlantic basins, and therefore creates inefficiencies, which from a tanker market perspective is generally positive as it leads to increased tanker utilizations. With regards to the Red Sea, the increase in attacks on merchant shipping since last December is having an impact on tanker trade patterns. This is a dynamic situation, but in recent weeks there have been an increasing number of ship owners and operators avoiding the region and seeking alternative routes that involve longer voyages. For many vessels, this means sailing around the Cape of Good Hope, adding a significant number of voyage days and creating additional tanker ton mile demand. For example, a Suezmax voyage from Basra, Iraq to the Mediterranean is about 4,000 nautical miles or 13 days via the Suez Canal, compared to around 12,000 nautical miles or 40 days via the Cape of Good Hope. While it is impossible to predict how this situation will evolve, the rerouting of cargoes is likely to continue creating additional tanker demand in the near term. Finally, the expansion of the Trans Mountain pipeline to Vancouver Canada later this year will lead to a new source of Afromax specific demand. This pipeline with an increasing capacity of 590,000 barrels per day is intended to provide a new seaborne outlet for Canadian crude oil exports. Given that the terminal is restricted to AfriMax-sized vessels, it is anticipated that the expansion could result in up to 30 to 35 AfriMax loadings per month. This is an exciting development and has the potential to create significant AfriMax demand once the pipeline is up and running, with the operator currently expecting the start of oil flows through the pipeline during the second quarter of 2024. So in sum, the numerous changes to trade patterns around the world, which I've just described, are leading to increased complexity and supply chain inefficiency, creating additional tanker demand as a result and spot rate volatility in what is already a fundamentally very tight market. I'll now turn the call over to Stuart to cover the next two slides.