The Teekay Group (TK) gave their 3Q presentation on November 14, 2019. They included Teekay Tankers (TNK) performance through this date along with Q3 data. We’ll use Q3 as our starting point for comparison purposes. The data was reported as TCE or (Time charter equivalent). First, what is TCE?
“Time charter equivalent (TCE) is a shipping industry measure used to calculate the average daily revenue performance of a vessel. Time charter equivalent is calculated by taking voyage revenues, subtracting voyage expense, including canal, bunker and port costs, and then dividing the total by the round-trip voyage duration in days. It gives shipping companies a tool to measure period-to-period changes.
Understanding Time Charter Equivalent (TCE): The time charter equivalent is calculated as:
Voyage Revenues – Voyage Expenses in Round Trip Duration in Days”
TNK refers to this as net revenues per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses. This is a non-GAAP metric.
Voyage charter revenues was 173,034,000. Using the formula above for TCE voyage expenses were 92,243,600 or $17,851/day.
I’ve been compiling daily rate reports from Weber at my site (click here for more info) Using averages from 11/13 through 12/20 and comparing them to the first half of the quarter yields the following increase in rates:
I also used 9% for LR2’s based on a review of Clarksons data given on Teekay’s site.
There are a few more days available in the second half of the quarter so the days were increased by about 5%.
Combining the first half with second half projections yields:
This is an increase of over $100m from Q3. Fixing voyage expenses at $18,000/day yields 4Q GAAP revenue approximately $270m. This converts into an estimated GAAP EPS of $2.27.
If rates stay strong through 2020 TNK EPS and FCF will push the stock up from here. Based on 4Q if they can keep the average TCE around 36,000 which seems reasonable results in a FCF yield of over 40% and a forward PE of less than 3. Seems very low for a company entering the start of an up cycle in the tanker market generating large sums of cash. My 4Q19 projections:
Projecting 4Q19 free cash flow:
