Teekay Tankers' Q3 2025 Earnings Call: Contradictions in Fleet Strategy, Capital Allocation, and Sanctions Impact

Date of Call: October 30, 2025

Financials Results

• EPS: GAAP net income $92.1M, $2.66 per share; adjusted net income $53.3M, $1.54 per share (best quarter in last 12 months)

Guidance:

• Q4-to-date secured spot rates: VLCC $63,700/day, Suezmax $45,500/day, Aframax/LR2 $35,200/day with ~47%–54% of spot days booked.
• Expect a firm winter market supported by rising seaborne crude volumes as OPEC+ unwinds cuts.
• Lowered fleet free-cash-flow breakeven to $11,300/day (from $13,000) after new out-charters; further charters would reduce breakeven more.
• Declared regular fixed dividend of $0.25 per share.

Business Commentary:

• Tanker Market Strength and Spot Rates:
• Teekay Tankers reported the best quarter in the last 12 months with GAAP net income of $92.1 million or $2.66 per share and adjusted net income of $53.3 million or $1.54 per share for Q3 2025.
• The company generated approximately $69 million in free cash flow from operations and ended the quarter with a cash position of $775 million with no debt.

• The tanker market's strength and unseasonably strong spot rates contributed to these results, with rates much higher than historical average levels for Q3.

• Spot Tanker Rates and Market Dynamics:

• Spot tanker rates improved significantly during Q3 2025, parallel to strong levels of the past 3 years and well above long-term average levels.
• Rates were boosted by an increase in global oil supply and long-haul crude oil movements between the Atlantic and Pacific Basins, particularly in the Suezmax and VLCC segments.

• As of early Q4 2025, rates have further strengthened, with October rates near the top of the 5-year range.

• Fleet Renewal and Strategic Investments:

• Teekay Tankers continued its fleet renewal strategy, with acquisitions of 1 modern Suezmax and 50% ownership in a VLCC, and the sale of 4 Suezmax tankers.
• The strategic investments and sales are part of an incremental approach to modernize the fleet while selling older tonnage, contributing to a lower fleet free cash flow breakeven of $11,300 per day.
• These actions are aligned with the company's goal to maximize shareholder value by strengthening its financial position and increasing exposure to the strong spot market.

Sentiment Analysis:

Overall Tone: Positive

• Management called this the "best quarter in the last 12 months" with GAAP net income of $92.1M and ~ $69M free cash flow; cash position $775M with no debt; stated spot rates are "well above free cash flow breakeven" and the market is "well positioned for a firm winter market."

Q&A:

• Question from Omar Nokta (Jefferies): Can you talk about how VLCC, Suezmax and Aframax segments interact and what's driving the recent strength in the midsized segments?
  Response: All segments are strengthening; historically larger vessels (VLCCs) now lead and pull up Suezmax and Aframax rates amid record seaborne volumes, restoring more traditional market dynamics.

• Question from Omar Nokta (Jefferies): If you were to deploy more capital, would you scale into MR/product tankers or invest further in VLCCs or stay focused on Suezmax/Aframax?
  Response: Core focus remains on medium-sized tankers (Aframax/Suezmax); MR remains opportunistic but incremental value is best captured in the core franchise today.

• Question from Timothy Chiang (Bank of America): After selling 11 vessels YTD and accelerating fleet renewal, are you close to a minimum fleet size and will you buy new Aframaxes/Suezmaxes to offset sales?
  Response: Yes — management believes they are approaching their minimum fleet size.

• Question from Timothy Chiang (Bank of America): Given favorable time-charter rates, do you expect to engage in more long-term charters into 2026?
  Response: They will opportunistically lock attractive time-charters with good counterparties to lower free-cash-flow breakeven; it's evaluated deal-by-deal, not a fixed fleet-percentage target.

• Question from Frode Morkedal (Clarksons Securities): Does the China–U.S. agreement (port fees suspended one year) improve Aframax opportunities, U.S. Gulf exports or lightering?
  Response: The agreement is positive for the industry by reducing inefficiencies, but it has no significant or material impact on Teekay's fleet exposure.

• Question from Frode Morkedal (Clarksons Securities): Given high TSR, how confident are you that the market will reward your value-first approach versus a higher payout, and what closes the NAV discount?
  Response: They prioritize value creation and a strong balance sheet over a higher payout; maintaining low breakeven and disciplined buy/sell decisions will build intrinsic value that they expect markets to recognize over time.

Contradiction Point 1

Fleet Size Strategy and Renewal

It involves differing perspectives on the timing and strategy for renewing and optimizing the fleet, which directly impacts the company's capital allocation and long-term fleet size strategy.

Are you near the minimum fleet size? Are you planning to purchase new core Afras and Suez to offset future sales? - Timothy Chiang (Bank of America)

2025Q3: We are close to the minimum fleet size. - Kenneth Hvid(CEO)

Can you clarify if the comments about purchasing the latest ship and adjusting sales/renewal pace refer to accelerating acquisitions or rightsizing the purchase-to-sale ratio? - Omar Mostafa Nokta (Jefferies LLC, Research Division)

2025Q2: We've been active in selling older ships (11 in total) and adding newer ones, including Suezmaxes and simplifying ownership structures. The selling phase is largely done for now, and we'll recycle capital from sales to gradually add newer ships to the fleet. - Kenneth Hvid(CEO)

Contradiction Point 2

Capital Deployment Strategy

It reflects differing views on the company's approach to capital deployment, which is crucial for its financial strategy and fleet growth.

How do you plan to deploy additional capital during fleet renewal? Are you targeting your core asset class or considering other segments? - [Tim Chang] (Bank of America)

2025Q3: Our priority is finding good purchase candidates within core segments of Aframaxes and Suezmaxes. We're looking to recycle capital into younger assets where we see good value and relative price movements to create a positive arbitrage. Over time, we might consider larger or other asset classes, but the near-term focus is on reloading core assets. - Kenneth Hvid(CEO)

Are you accelerating acquisition pace or adjusting the buy-sell balance due to renewal needs? - Omar Mostafa Nokta (Jefferies LLC, Research Division)

2025Q2: Our core business is medium-sized tankers, and we look for incremental value in our core and adjacent sectors. While there may be opportunities in the MR sector, we believe better value is to allocate capital towards our core segments of Aframaxes and Suezmaxes. - Kenneth Hvid(CEO)

Contradiction Point 3

Capital Allocation and Sector Focus

It demonstrates differing views on the optimal use of capital and the focus on core versus adjacent sectors, which impacts investment decisions and future growth strategies.

If considering deploying more capital, would you deepen product focus, scale into VLCCs, or stay within core business? - Omar Nokta (Jefferies)

2025Q3: Our core business is medium-sized tankers, and we look for incremental value in our core and adjacent sectors. While there may be opportunities in the MR sector, we believe better value is to allocate capital towards our core segments of Aframaxes and Suezmaxes. - Kenneth Hvid(CEO)

Should capital be redeployed into different sectors instead of tankers given strong spot market performance? - Omar Nokta (Jefferies)

2025Q1: In terms of capital, we are very focused on adjacencies to our core business, and we think that we have a great position in the market today in the medium range, which is a position we want to maintain. But you can be reasonably sure that in the next year or two, we are going to find attractive entry levels in different areas as well. - Kenneth Hvid(CEO)

Contradiction Point 4

Market Impact of Sanctions

It highlights differing perspectives on the impact of sanctions on the Aframax market, which could influence Teekay's strategic decisions and market positioning.

Will you increase time charter out agreements with high rates in 2026? - Timothy Chiang(Bank of America)

2025Q3: We consider deals opportunistically based on timing and outlook. Strong time charter rates provide lower free cash flow breakeven, making it prudent to lock in favorable rates when circumstances are right. - Kenneth Hvid(CEO)

Have you seen an impact of the sanctions on the Aframax market yet? How do you expect the market to be affected if the sanctions are lifted? - Ken Hoexter(Bank of America)

2024Q4: We have seen an impact from the sanctions that were placed on January 10. Over 150 tankers were sanctioned, mostly serving the Russian Far East trade out of Cosmino. We've seen difficulties in Russia getting that out of Cosmino into China. We've also seen India having to look at alternative sources. It's created volatility, especially in the larger crude tanker asset classes. - Christian Waldegrave(Research Director)