Teekay Tankers profit up tenfold, LR2s hit seven-year high

“Our second quarter results benefited from the prevailing counter-seasonally strong crude spot tanker rates during the quarter,” commented Teekay Tankers ceo Kevin Mackay. “We believe the ongoing strength in the tanker market reflects the continuing positive tanker market fundamentals of low fleet growth, growing global oil demand and an increase in long-haul tanker movements as more crude oil moves from the Atlantic to Pacific basins.”

Time charter equivalent daily earnings doubled across the board compared to Q2 2015 for the company's fleet; suezmax rates averaged $38,767 per day, aframax $33,843 per day, LR2 $28,996 per day and MR vessels brought in an average of $22,040 per day. The quarter's average LR2 rates represent the strongest earnings for seven years, as refinery utilisation remained high, demand increased for gasoline and diesel, and some petrochemical plants switched feedstock to LPG as oil prices held low.

Spot revenue days increased significantly for each vessel type, the result of Teekay's move to spot trading for its vessels to take advantage of a strong market.

Of its 63 owned and chartered-in vessels, 43 are trading on the spot market, with 14 on fixed-rate contracts and six ship to ship transfer support vessels. For the first six months of 2015, total revenues rose to $211.4m compared to $106.1m in the same period last year.

“Over the past year, we have substantially increased the company’s exposure to the strong spot market at the right point in the tanker market cycle by building an attractive portfolio of 12 chartered-in tankers and securing accretive acquisitions of 17 high-quality on-the-water tankers. This includes the 12 modern on-the-water suezmax tankers that the company agreed to acquire this past week.”

Teekay Tankers stated in its earnings release that low oil prices are expected to support tanker demand through into 2016, supported by low fleet growth.