Teekay Tankers Ltd.

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 touch tone 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 first quarter 2024 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 2024 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, Red. Hello, everyone, and thank you very much for joining us today for TK Tanker's first quarter 2024 earnings conference call. Joining me on the call today is Stuart Andrade, TK Tankers CFO, and Christian Waldegrave, our Director of Research. Moving to our recent highlights on slide three of the presentation, TK Tankers generated total adjusted EBITDA of $151 million, up from the $127 million we generated last quarter. The company reported adjusted net income of $132 million, or $3.86 per share, an increase from $100 million, or $2.91 per share in the fourth quarter of 2023. With our fleet of midsize tankers trading almost entirely in the strong spot market, TK Tanker's high operating leverage enabled us to continue generating significant earnings. 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 $2.40 of annual free cash flow per share. Stuart will provide further information on this later in the presentation. In March, we completed the repurchase of the remaining eight vessels on sale leaseback arrangements for $137 million, reaching the major milestone of being debt free. With our balance sheet strength, recent financial performance, and the positive market outlook, we continue to take a balanced approach to capital allocation. In line with our capital allocation plan, we have declared a fixed quarterly cash dividend of 25 cents per share for the first quarter of 2024. In addition, we have declared a special dividend of $2 per share. Including these dividends, TK Tankers has declared cash dividends of $4.25 per share since updating our capital allocation plan last year. TK Tanker's mid-size spot rates for the first quarter of 2024 are the second highest in the company's history, second only to last year's spot rates. These firm spot rates have continued through the first half of the second quarter as well. The recent expansion of the Trans Mountain Pipeline to Vancouver, with first cargoes planned for this month, will create a new source of AfriMax demand, which is expected to support AfriMax spot tanker rates as volumes ramp up over the coming months. I will talk more about this important development later in the presentation. Looking ahead, tanker supply and demand fundamentals remain positive and point toward continued tanker market strength in the medium term. Finally, we completed the previously announced sale of one 2004-built AfriMax during the first quarter for total proceeds of $23.5 million, recording a gain on sale of $11.6 million. Turning to slide four, we look at the dynamics in the spot tanker market. As mentioned in the highlights, Q1 saw the second highest midsize tanker spot rates for a first quarter in TK Tanker's history, second only to the exceptional rates recorded in Q1 of last year. Rates were supported by a combination of factors, including firm tanker ton mile demand, limited fleet supply growth, normal seasonality, and trade route disruptions due to geopolitical events, which led to an increase in average voyage distances. These factors have continued to support spot tanker rates during the second quarter, with rates remaining at firm levels. Looking to the second half of the year, we expect the rates will remain well supported by rising oil demand, an expected increase in crude oil supply from non-OPEC countries, predominantly in the Atlantic Basin, and the start of exports from the newly expanded Trans Mountain Pipeline. Turning to slide five, we provide an update on our Suezmax and Afromax size spot rates in the second quarter of the day. Based on approximately 59% and 54% of Revenue Day's book, TK Tanker's first quarter to date Suezmax and Afromax size vessel bookings have averaged approximately $45,100 per day and $43,900 per day, respectively. Importantly, I would once again highlight the value being created by TK Tanker's eight vessel chartered in-fleet of which seven are trading in the strong spot market. With an average intradural rate level of $25,400 per day, the chartered-in fleet has a current mark-to-market value of approximately $54 million. Turning to slide six, we look at the impact to the Trans Mountain Pipeline Expansion, or TMX, which we believe will provide a significant boost to AFROMAC-specific demand going forward. On May 1st, The Trans Mountain Pipeline expansion commenced commercial operations with first cargoes expected later this month. The new pipeline has a capacity to carry 590,000 barrels per day of Canadian crude oil for loading onto Afromax tankers, which is the maximum size of vessel that can load from the terminal due to draft restrictions. Given that the first cargoes have yet to load, there is still uncertainty regarding the ultimate destinations of the crude exported from TMX. However, we have identified four potential trades which could develop to bring this oil to market. First, given the characteristics of Canadian crude, we believe that the barrels are well-suited to refineries in the U.S. West Coast, particularly in California, where cargoes would be transported directly on Afromaxes. Secondly, we expect that Asian buyers will look to acquire Canadian oil given its price discount to equivalent grades from other sources. This oil could be transported directly to Asia on Afromaxes, and we've already seen one customer booking an Afromax for May loading dates with discharge in China. Alternatively, Asian buyers may find that their economies of scale to be gained from parceling up Afromax cargoes to a larger VLCC or Suezmax. The most likely locations for these reverse lighterings are in the Pacific Area Lightering Zone off the coast of Southern California or off Panama, where other grades of Latin American crude may be co-loaded. Again, we have already seen a customer taking this latter option with reports that a major refiner has booked Afromaxes from TMX for parceling up to a VLCC off Panama for onward delivery to India. These new trade routes are expected to increase Afromax demand going forward, particularly as Vancouver is relatively far from the main Afromax trade lanes in Asia and the U.S. Gulf, meaning that vessels will have to be pulled in from these regions to meet demand. To give some context, the distance from Vancouver to Southern California is around 1,200 nautical miles, or 12 voyage days on a round-trip basis, including load and discharge times. while the distance from Vancouver to China is around 6,000 nautical miles or 44 voyage days. Assuming a 50-50 split between these two destinations, we estimate that the Trans Mountain expansion could create incremental demand for around 25 to 30 Afromaxes once the pipeline is at full capacity. Turning to slide seven, we look at supply and demand factors, which we believe support continued tanker market strength over at least the medium term. Fleet supply fundamentals continue to look positive. Despite an increase in the pace of new tanker orders in recent months, the tanker order book is small by historic standards at 9% of the fleet, delivering over the next three years. The order book is particularly small this year there's just 2.4 million deadweight tons of new tankers delivering into the fleet during the first quarter of 2024, which is the lowest delivery total for a first quarter since 1989. Furthermore, the tanker fleet is aging, with the average age of the global fleet at its highest point since 2003, coming in at 13.2 years. While ships are not being scrapped in the current high spot rate environment, vessels that trade beyond age 20 are seeing a significant drop in utilization compared to the vessels below 20 years of age, thereby reducing effective fleet supply. As a result, we project close to zero tanker fleet growth in 2024, with modest growth of around 1% in 2025. Looking at demand, the average forecast for the major oil agencies projects healthy oil demand growth of 1.5 million barrels per day in both 2024 and 2025. The majority of this demand growth is expected to be met by increasing oil supply from the non-OPEC countries, particularly from producers in the Atlantic Basin, which suggests that tanker ton-mile demand will continue to benefit from an increase in long-haul movements from the Atlantic Basin to Asia. As shown by the chart on the right of the slide, tanker ton-mile demand growth is expected to outstrip fleet supply growth both this year and next, continuing the trend that started in 2022. This compounding impact of demand growth exceeding supply growth should continue to support high levels of tanker fleet utilization and firm tanker rates through at least the medium term. I'll now turn the call over to Stuart to cover the next slide.