Teekay Tankers Ltd.

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 touch tone telephone. 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'll find a copy of the TK Group's third quarter 2025 earnings presentation. Kenneth 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 those and the forward-looking statements is contained in the third quarter 2025 tk group earnings presentation available on our website i will now turn the call over to kenneth vid tk corporation and tk tankers president and ceo to begin thank you ed hello everyone and thank you very much for joining us today for the ck groups third quarter 2025 earnings conference call

Joining me on the call today for the Q&A session is Brodie Spears, TK Corporations and TK Tanger's CFO, Ryan Hamilton, our VP Finance and Corporate Development, and Kristin Waldegrave, our Director of Research. Starting on slide three of the presentation, we will cover TK Tanger's recent highlights. TK Tangers reported the best quarter in the last 12 months with gap net income of $92.1 million or $2.66 per share and adjusted net income of $53.3 million or $1.54 per share in the third quarter. Third quarter spot rates remained counter seasonally strong with rates meaningfully above the historical average for third quarter. Further, with spot rates well above our free cash flow breakeven levels, the company generated approximately $69 million in free cash flow from operations, and at the end of the quarter had a cash position of $775 million with no debt. TK Tango continues to execute on its fleet renewal strategy, delivering on its previously announced transactions. Since the beginning of the third quarter, we have completed the acquisition of one modern Suezmax and the remaining 50% ownership interest in a VLCC from our joint venture partner. In addition, the company completed the sales of four Suezmax tankers, which delivered to their new owners in the third and fourth quarters. The combined gross proceeds of the five vessel sales and is $158.5 million, and we expect an estimated book gain on sales of approximately $47.5 million recorded in the third and fourth quarters. In addition, the strength in the spot market supported the time charter market, And the company opportunistically out-chartered one Suez Max vessel for $42,500 per day and two Afromax sized vessels for an average time charter rate of $33,275 per day for periods ranging from 12 to 18 months. Two of these charters have already commenced with the remaining charter set to start in November. Looking at our fourth quarter to date, we have secured spot rates of 63,700 $45,500 and $35,200 per day for VLCC, Suezmax, and Afromax LR2 fleets, respectively, with approximately 47% to 54% of spot days booked. We believe the tanker market is well positioned for a firm winter market, which we'll discuss in more detail in the next few slides. Lastly, TK Tankers has declared its regular fixed dividend of 25 cents per share. Moving to slide four, we look at recent developments in the spot tango market. Spot tango rates improved during the third quarter of 2025 with rates on a par with a strong level seen over the past three years and well above long-term average levels. An increase in global oil supply due to the unwinding of OPEC plus supply cuts and rising production in the Atlantic basin led to a sharp increase in global seaborne crude trade volumes during September to the highest level since early 2020. Rates were further boosted by an increase in long-haul crude oil movements between the Atlantic and Pacific basins, particularly in the Suez Max and VLCC segments. As shown by the chart on the right of the slide, spot tanker rates have strengthened further at the start of the fourth quarter, with rates in October near the top of the five-year range. Turning to slide five, we look at the growth in global crude oil production and exports, which is underpinning the recent strength in spot tanker rates. Global oil production has been rising throughout the year due to increases from both OPEC Plus and non-OPEC Plus sources. The OPEC Plus group began unwinding some of the voluntary supply cuts which have been in place since 2023, at the start of April by September had completed the unwind of the first round of cuts totaling 2.2 million barrels per day. The group is now in the process of unwinding the next round of cuts totaling 1.65 million barrels per day at a rate of 137,000 barrels per day every month over the next year. Oil production has also been boosted by new supply coming online from non-OPEC plus countries, particularly in South America where new offshore production in Brazil and Guyana is in the process of ramping up. The increase has been particularly evident during the third quarter, with supply growing by 1.6 million barrels per day compared to Q2 levels. The net result of the higher oil production has been a sharp increase in seaborne crude oil trade volumes, most notably since September, as more Middle East crude has been made available for export following the end of the summer direct crude burn season. In fact, if we exclude the period in early 2020 when Saudi Arabia and Russia flooded the market with oil during the brief oil price war, global seaborne crude oil trade volumes are currently at a record high. With OPEC Plus expected to continue to unwind supply crops in the coming months, we expect global seaborne trade volumes to increase further during the fourth quarter. Turning to slide six, we look at some of the near-term oil market fundamentals, which we believe will support spot-tanger demand in the coming months. One of the consequences of higher oil production this year has been a decrease in crude oil prices, as shown by the chart on the left of the slide. For countries outside the United States, a weaker US dollar has led to an even steeper drop in real oil prices. Lower oil prices are generally positive for tankers as it spurs oil consumption and lowers bunker fuel prices, which is our largest operating cost. Lower oil prices also stimulate demand for stockpiling, both for commercial and strategic purposes. Given that global oil inventories are below long-term average levels, we believe that there is enough spare capacity to absorb a prolonged period of excess oil supply. Should global oil supply growth continue to exceed demand in the coming months, as many analysts predict, then we could even see a contango oil price structure emerge, which could further stimulate tanker demand. Turning to slide seven, we look at the geopolitical events which are creating trade inefficiencies and adding further volatility to what is already a firm underlying tanker market. In recent weeks, we've seen a number of announcements with regards to sanctions and port fees, which are serving to create uncertainty and inefficiency in the tanker market. It's positive that the U.S.-China trade agreement announced earlier today includes a postponement of the announced port and shipping fees by at least a year. As it relates to sanctions, we've seen an escalation of efforts to curb Russia's Russia's profits from oil sales via a series of new sanctions by both the EU and the United States, most notably the recent actions to sanction Rosneft and Lugoil, who together control around 50% of Russian oil production and exports. While this is a fast-evolving situation, it is reported that some refiners in India and China are backing off from Russian imports and looking to alternative suppliers in the Middle East and Atlantic Basin. This is positive for tanker market as these volumes will need to be transported via the fleet of compliant tankers rather than the fleet of shadow tankers, which currently transport the majority of Russian crude oil to India and China. We believe that these factors, coupled with the strong crude oil trade volumes described earlier, as well as normal winter seasonal factors, will help drive a firm spot tanker market in the coming months. Turning to slide eight, we review the key drivers for the medium-term outlook. Global oil demand is projected to increase by 1.1 million barrels per day in 2026, as per the average forecast from the three major oil agencies, which is in line with average growth levels since the end of the COVID pandemic. Global oil supply is also set to rise with more production due to come online from non-OPEC countries. It remains to be seen how OPEC will respond should oil inventories continue to fill and oil prices come under further pressure. However, we believe that there is still plenty of room for inventories to build in 2026, particularly in China, where the government is reportedly looking to add 169 million barrels of new strategic storage by the end of the year. The fleet supply side continues to look balanced, with the order book size stable in recent months at around 16% of the existing fleet. A continued lack of tanker scrapping means that the fleet continues to age with the average age of the global tanker fleet now at its highest point since the 1990s. In the mid-sized tanker fleet, 344 vessels, or 20% of the total fleet, is now aged 20 years or older, most of which are sanctioned vessels engaged in shadow trades. We believe that these older tankers will not return to conventional trading even in the event that sanctions are lifted. While the medium-term tanker market outlook appears well-balanced, there are a number of geopolitical uncertainties which could influence the direction of the tanker market depending on how they unfold. These include the outcome of the war in Ukraine and the fate of the shadow fleet serving Russian trade, developments in the Middle East and disruptions to Red Sea transits, the impact of tariffs and trade barriers on the global economy, and OPEC Plus production policy. Turning to slide nine, we highlight TKTanker's value proposition. First, our operating leverage remains significant, and the company is well positioned to generate substantial cash flows in nearly any tanker market. With the three new out charters and no debt, we have lowered our fleet's free cash flow breakeven from $13,000 per day to $11,300 per day, With this low free cash flow breakeven, every $5,000 per day increase in spot rates above the threshold produces $1.66 per share of annual free cash flow, or nearly 3% on a free cash flow yield basis. Second, TK Tankers has a strong balance sheet with no debt and a $775 million cash position, which provides capacity for disciplined, accretive fleet growth. Third, we continue to return capital to shareholders in a disciplined manner through our quarterly dividend. And lastly, the company's performance is underpinned by our integrated platform. We believe our in-house commercial and technical management is a competitive advantage. Combined with our 50 years of operating experience in the Tenga industry, we provide superior service to our customers and transparency through the value chain, which drives shareholder returns. In summary, The company's strategy over the last several years has been to maximize shareholder value through our exposure to the strong spot market. This year, we began taking measured action to renew our fleet by making incremental investments in more modern vessels, while at the same time selling some of our oldest tonnage. As we look ahead, our best-in-class operating platform and strong financial footing positions the company well to continue renewing our fleet earning cash flow, and building intrinsic value. With that, operator, we are now available to take questions.