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Teekay Corporation 2012 Jefferies Conference Market Presentation

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Teekay Corporation 2012 Jefferies Conference Market Presentation

Teekay Corporation 2012 Jefferies Conference Market Presentation

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  • 1. Tanker MarketUpdateSeptember 2012
  • 2. Currently In 4th Year of Tanker Market Downturn Aframax Spot Rates Suezmax Spot Rates 80 Aframax Long Term Average Suezmax Long Term Average 70 60„000 USD / Day 50 40 30 20 10 0 Source: Clarksons • Spot tanker rates have been below the long-term average since 2009 ○ Aframax 2009-12 average of $14,400 / day vs. $25,700 / day long-term average ○ Suezmax 2009-12 average of $22,400 / day vs. $33,500 / day long-term average When will the bottom be reached and how long will the recovery take? 2 www.teekay.com
  • 3. Near Term Headwinds• Slowing global economy / oil demand ○ Europe in recession; US / Chinese economies slowing down• Reduced imports for stockpiling in the non-OECD• High oil prices – impacting on oil demand, increasing bunker costs• Potential US / IEA stock release• Widening Brent-Dubai oil price spread ○ Discourages long-haul Atlantic-Pacific oil movements BUT…• Short-term events still have the potential to create rate spikes ○ Atlantic hurricane activity, unexpected refinery outages etc. 3 www.teekay.com
  • 4. Tanker Market Outlook For 2H-2012• Seasonally weak summer market is upon us ○ Q3 traditionally the worst quarter for tanker rates ○ Uncertain global economy impacting oil demand ○ Potential for lower OPEC oil production as demand for stockpiling wanes• Stronger winter market fundamentals expected in Q4-12 ○ Heating demand in the northern hemisphere ○ Return of refineries from seasonal maintenance ○ Transit delays due to adverse weather conditions Additional Factors Which Could Move the Market Upside Downside Atlantic hurricane season  Weakening global economy Re-opening of Atlantic refineries  Potential OPEC supply cutbacks Unplanned refinery outages –  Non-OPEC supply outages increased product tanker demand (N. Sea, GoM, Sudan, Syria, Yemen) 4 www.teekay.com
  • 5. Expectations For 2013 Demand Have Weakened Evolution of the EIA’s 2013 Oil Tanker Demand Growth Tanker Fleet Growth Demand Growth Forecast 8% = Reduced Demand Estimate OECD Non-OECD Total 1.6 7% Demand Range Supply Range 1.4 6% 1.2% Growth MB / Day 1.0 5% 0.8 4% 0.6 0.4 3% 0.2 2% 0.0 -0.2 1% -0.4 0% 2011 2012E 2013E Source: Platou / Internal estimates EIA Report Date • Uncertainties with regards to the 2013 demand outlook have grown • Base case view is for supply and demand to be balanced in 2013 ○ Previous assumption was for demand to outstrip supply by ~1% 5 www.teekay.com
  • 6. Asset Prices – Yet To Reach The Bottom • 20-25% decline in asset prices in 2011; further 10% in 2012-to-date • Asset prices for older (>15 years) vessels under significant pressure • Newbuilding prices likely to see further downward pressure in 2H-12 ○ Lack of new orders putting pressure on shipyards to cut prices ○ Lower steel costs pave the way for lower prices ○ Lack of financing likely to constrain ordering Suezmax Asset Prices Aframax Asset Prices 110 90 NB 5-yr NB 5-yr 100 80 90 70 80 60$ millions $ millions 70 50 60 40 50 30 40 20 Source: Clarksons Source: Clarksons 6 www.teekay.com
  • 7. Aframax / LR2 Best Placed For Recovery 800 Tanker Fleet & Orderbook Profile By Sector 20% Orderbook as % of Fleet 700 Fleet 0-14 years Fleet 15+ years 18% On Order Obook as % of Fleet 16% 600 14% 500Vessels 12% 400 10% 300 8% 6% 200 4% 100 2% 0 0% MR LR1 Panamax LR2 Aframax Suezmax VLCC Aframax / LR2 Fleet Growth • Aframax / LR2 fleet shows virtually Deliveries Removals Net Growth no fleet growth for 2H-2012; 100 80 shrinking fleet in 2013 60Vessels • 40 20 Suezmax / VLCC with ~5-7% fleet 0 growth to come in 2013 -20 -40 -60 • New round of orders has re-inflated 2009 2010 2011 2012E 2013E 2014E the MR tanker orderbook Favorable supply outlook to support Aframax / LR2 rates in 2013 7 www.teekay.com
  • 8. Gradual Recovery Starting Late 2013 / 2014 Fleet Utilization Tanker Demand Growth Tanker Supply Growth94% 8%92% 7%90% 6%88% 5%86% 4%84% 3%82%80% 2%78% 1%76% 0%• 2012 / 13 projected to be the trough in terms of tanker fleet utilization / rates• Improvement in rates from late 2013 / 2014 due to slowing fleet growth (sub-3% p.a.) coupled with economic recovery, improved oil demand• Recovery will be gradual; pace of ordering must remain low 8 www.teekay.com
  • 9. Long-Term Crude Tanker Demand Drivers Plenty of pent-up demand in the non-OECD… …with China the main driver of demand growth 25 Oil Consumption (LHS) 1.6 China Oil Market Fundamentals 1.4 Population (Billions) Population (RHS) 16BBL / Person / Year 20 Oil Demand 1.2 14 Domestic Oil Production 1.0 12 15 Refinery Capacity 0.8 10 MB/D Crude Imports 10 8 0.6 6 0.4 5 4 0.2 2 Source: IEA / BP 0 0.0 0 2012E 2013E 2014E 2015E 2016E 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011• Future oil demand growth to come almost entirely from non-OECD ○ Increasing wealth to drive demand for transportation fuels• China is expected to account for the majority of growth in crude imports ○ Supply sourced from Middle East and, increasingly, Atlantic Basin (long haul)• Growth in crude trade partially offset by a decline in US seaborne imports 9 www.teekay.com
  • 10. Long-Term Product Tanker Demand Drivers Product tanker tonne-miles set to grow… …as fleet growth slows to a 10-year low Fleet Growth* (mdwt) Fleet Growth (%) 10 14% Million Deadweight 9 % Fleet Growth 12% 8 7 10% 6 8% 5 4 6% 3 4% 2 1 2% 0 0% 2011 2005 2006 2007 2008 2009 2010 2012E 2013E Source: IEA / Internal Source: Clarksons / Internal estimates• Global refining capacity set to increase by ~8 mb/d during 2012-2016 ○ ~40% of new capacity is from export-oriented facilities in India / MEG• Older / less efficient refineries in the Atlantic Basin becoming marginalized ○ Displaced in part by long-haul product imports from the East• Growth in long-haul product tanker trade to benefit LR2s / LR1s the most 10 www.teekay.com
  • 11. Wild Card – US Tight Oil Production US Oil Production & Canadian Imports • Development of shale oil reserves is having a significant impact on US oil supply / demand dynamics. • According to some estimates, by 2020 North America could have a hydrocarbon surplus. • Potentially very negative for US Source: Citi seaborne crude imports (though could lower global oil prices and US Net Product Imports / Exports stimulate demand elsewhere) • US has the potential to become a major exporter of refined products. • The US is expected to have a large surplus of naphtha by 2015 as NGLs push naphtha out of domestic petrochemical markets. Source: Citi 11 www.teekay.com
  • 12. LNG MarketUpdateSeptember 2012
  • 13. Current Market Snapshot Short Term Shipping Rates Remain Firm; Depend on Duration, Start Date LNG Shipping Spot Rates 160 140 • Spot / short-term shipping rates with„000 USD / Day 120 100 prompt delivery command a steep 80 premium (>$150,000 / day) 60 40 20 0 • Longer duration / forward starting charters likely to earn closer to long- term average (~$70-90,000 / day) Source: Various Broker Estimates Pace of LNG Vessel Orders Has Slowed 25 LNG Vessel Orders • 17 new LNG carrier orders in 2012 to date versus 50 in 2011. No. Vessels 20 15 10 • Enquiry for new tonnage has fallen in 5 recent weeks on concerns that the 0 orderbook is sufficient to meet near- term demand (i.e. up to 2015) Source: Clarksons 13 www.teekay.com
  • 14. “Golden Age of Gas”• Natural gas gaining market share from oil and coal due to its low cost, abundance, and cleaner burning properties• Demand driven by the power sector (gas displacing coal)• Non-OECD accounts for ~85% of natural gas demand growth to 2035 Fossil Fuel Demand Growth Outlook (2010-35) 2.5% IEA EIA BP Exxon Average: 1.9% p.a. 2.0% Average: 1.0% p.a.CAGR (%) 1.5% Average: 0.9% p.a. 1.0% 0.5% 0.0% Oil Coal Natural Gas 14 www.teekay.com
  • 15. LNG Demand Primarily Driven By China & India• LNG is a cornerstone of China’s energy mix• Chinese LNG imports expected to double to ~25-30 MT by 2015• Domestic gas shortfall prompting India to turn to LNG• India planning to double regasification capacity by end-2015 Chinese LNG Purchase Agreements Indian Regasification Capacity 18 Australia Qatar Indonesia 40 Million Tonnes Per Annum 16 Malaysia PNG Portfolio 35Million Tonnes 14 30 12 25 10 20 8 15 6 4 10 2 5 0 0 Current Secured by MOU 2012 2013 2014 2015 2016 2016 Source: Thomson Reuters Source: Ambit Capital 15 www.teekay.com
  • 16. Japan and the “Fukushima Effect”• Nuclear accounted for 30% of Japan’s electricity generation pre-Fukushima• Without nuclear Japan depends on fossil fuel imports (vulnerable to price shocks)• Only 2 of Japan’s 50 nuclear Source: Thomson Reuters reactors are currently online – Japanese LNG Imports no clear timeline for activation 90 of remaining reactors Million Tonnes 80 70 60• Backwardation in LNG 50 40 charter rates reflect the 30 20 Fukushima effect lasting 10 through end 2013 0 16 www.teekay.com
  • 17. Wave of New LNG Supply From 2015• Australia expected to add ~80 MTPA of LNG supply by 2020• US is a wild card: 100+ MTPA of planned export projects, but how much will come online?• Requirement for additional newbuildings to move new LNG volumes LNG Capacity Additions By Region 500 OthersMillion Tonnes Per Annum (MTPA) 450 170 MTPA by 2020 = Middle East 170 incremental LNG carriers Canada 400 Other Asia 350 Africa USA 300 Russia 250 Australia 200 Existing 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Multiple Sources / Internal Estimates 17 www.teekay.com
  • 18. US Exports Competitive at $5-6 Henry Hub or Lower Henry Hub Price $5.40 / mmbtu • US LNG export model based on cheap domestic natural gas $4.00 / mmbtu prices. $2.60 / mmbtu • At current prices US exports are competitive with Australia despite longer transportation distances. • US LNG exports remain competitive until the price exceeds $5-6 / mmbtu. • New projects on hold until US government assesses the impact of LNG exports on domestic gas prices Source: Deutsche Bank 18 www.teekay.com
  • 19. Changing Nature of LNG Trade• Spot and short-term LNG trade currently make up 25% of total trade (up from 5% in 2000)• Trend expected to continue towards short-term / flexible volumes Spot and Short-term LNG Trade 70 35% Spot LNG Trade (MTPA) % of Total Trade Million Tonnes Per Annum 60 30% 50 25% (MTPA) 40 20% 30 15% 20 10% 10 5% 0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: GIIGNL 19 www.teekay.com
  • 20. Orderbook Reflective of Strong Spot Market• Orderbook of 76 vessels represents 20% of the fleet size ○ 32 LNGCs on order are currently uncommitted to long-term charters• Move towards standardized size of 160-170 kcbm ○ New technologies (MEGI engine, new containment systems) LNG Carrier Fleet and Orderbook 60 Long Term Contract Short Term Contract / Uncommitted 50Number of Vessels 40 30 20 10 0 Source: Clarksons 20 www.teekay.com
  • 21. LNG Carrier Supply / Demand Balance2012-2015• Market likely to remain tight through 2013 on elevated Japanese demand• Risk of a softening in spot / short-term charter rates once the orderbook starts to deliver in 2013 / 14• Bulk of new LNG liquefaction capacity comes online post-20152016-2020• Significant ramp-up in LNG export volumes and therefore transportation demand• Estimated 100 LNGs over and above the current orderbook required to satisfy projected demand by 2020• Demand for floating regasification set to grow in tandem with increased LNG export volumes and global infrastructure build-out 21 www.teekay.com
  • 22. OffshoreMarket UpdateSeptember 2012
  • 23. Linking Rig to Refinery Leading indicators for offshore Teekay’s role in the production, storage and offshore value chain transportation demand 23 www.teekay.com
  • 24. Drilling Activity a Key Leading Indicator• 81 mobile drilling unit (MODU) orders placed in 2011 ○ Highest since 1980• Growth strongest in the deepwater / ultra-deepwater drilling fleet• Deepwater wells yielding the biggest results ○ Average discovery size in 2010 for wells >1,500m depth was 1,000+ mboe MODU Orders Versus Oil Price 100 120 Jack Ups Semi-subs and Drillships Oil Price (USD) 80 100 $ / BBL Oil Price MODU Orders 80 60 60 40 40 20 20 0 0 Source: Clarksons, Douglas Westwood, BP 24 www.teekay.com
  • 25. North Sea Market – Resurgent Activity• Resurgence in North Sea Norwegian Exploration Wells Drilled* drilling activity yielding Record high level of exploration results ○ 1.7 - 3.3 billion barrel Johan Sverdrup find was biggest of 2011• New finds tend to suit an FPSO and shuttle tanker solution *Source: Norwegian Petroleum Directorate• Enhanced Oil Recovery Barents Sea (emerging leading to renewed shuttle region) production in mature areas Norwegian Sea• Move into Barents Sea (existing shuttle region) requires high-specification shuttle tankers and FPSOs North Sea (existing shuttle area) 25 www.teekay.com
  • 26. Brazil Market – More Growth to Come Brazil Offshore Production Fleet Development 140 120 100 Installed On Order Planned 80 60 40 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: IMA• Brazilian offshore production fleet set to double in 2011-18 ○ Growth in offshore production drives demand for shuttle tankers and FPSOs• Petrobras is aggressively increasing its production capability• Other oil companies also have shuttle requirements in offshore Brazil 26 www.teekay.com
  • 27. Strong Future Demand For FPSOs FPSOs in the Planning Stage FPSO Forecast (Next 5 Years) 30 28 Source: IMA Source: IMA 24End-06 68 25 20 20 15End-08 96 15 10 10 5Apr-12 141 0 Avg. Avg. Orders Orders Low Low Base Base High High Orders Jan-Apr Case Case Case 0 50 100 150 Orders per year Jan-Apr 2012 Case Case Case per year 2012 Next 5 Years (2007 – 2011)• The number of projects which could require an FPSO has doubled in the past five years• Estimate of 20-28 FPSO orders per year over the next five years depending on the global economy, oil demand and energy prices• Operational and engineering expertise required to be successful in the leased FPSO business creates a high barrier to entry 27 www.teekay.com
  • 28. Increased Demand for FSO Solutions• Resurgence in offshore activity creating new FSO opportunities ○ Re-emergence of FSO demand in the North Sea ○ New development in S.E. Asia• 22 projects currently considering the use of an FSO ○ 11 in Asia; 4 in North Sea Planned FSO Projects Top Leased FSO Operators12 10 11 4 Owners with 2 units10 19 Owners with 1 unit 8 7 8 6 5 6 4 4 4 4 4 3 3 2 2 1 1 2 0 0 S.E. Asia North MED GoM Brazil Africa Tanker Teekay Modec Trada MISC Sea Pacific Maritime 28 www.teekay.com