HAMILTON, BERMUDA--(Marketwired - Dec. 16, 2015) - Teekay Corporation (Teekay or the Company) (NYSE:TK) today announced that its Board of Directors has approved a plan to reduce the Company's quarterly dividend to $0.055 per share, down from $0.55 per share in the third quarter of 2015, commencing with the fourth quarter of 2015 dividend payable in February 2016. The reduction in the Company's dividend amount is in response to announcements by the general partners of Teekay Offshore Partners L.P. (Teekay Offshore) and Teekay LNG Partners L.P. (Teekay LNG) that they plan to reduce their respective quarterly cash distribution amounts. Teekay Offshore and Teekay LNG now expect to use a significant portion of their internally generated cash flow to fund the equity capital requirements of their future profitable growth projects and reduce debt levels, eliminating their need to access the equity capital markets for the foreseeable future.
"Teekay Corporation is committed to being a supportive Sponsor of our two master limited partnerships," commented Peter Evensen, Teekay's President and Chief Executive Officer. "Although it is painful in the short-term to have to temporarily reduce Teekay Corporation's dividend, management and our Board of Directors believe Teekay and its shareholders will achieve greater long-term value creation by focusing on enhancing the value of our ownership interests in Teekay Offshore and Teekay LNG and being in a better position to support their continued growth and distributable cash flow generation."
Mr. Evensen added, "The underlying businesses of our two master limited partnerships remain strong, in stark contrast to the current weakness in the oil price and energy capital markets. Cash flows generated by both Teekay Offshore and Teekay LNG, which largely underpin Teekay Corporation's dividend payment, remain stable and growing, supported by large and well-diversified portfolios of fee-based contracts with blue-chip counterparties. However, Teekay Offshore and Teekay LNG require capital to fund their growth and there is currently a dislocation in the capital markets relative to the underlying stability of our MLPs' businesses. As a result, their cost of equity has increased to the point where it is currently not an economically attractive source of growth capital."
"Based on the upcoming capital requirements for Teekay Offshore's and Teekay LNG's committed growth projects and bond maturities, coupled with the uncertainty of how long it will take for the energy and capital markets to normalize, we believe the distribution reductions announced today are in the best interests of long-term investors, including shareholders of Teekay," Mr. Evensen continued. "As a result of their announced distribution reductions, our MLPs will now be able to fund their future capital commitments and reduce their debt levels with internally generated cash flow rather than permanently dilute their unitholders through the issuance of expensive equity. In addition, we believe the retention of additional cash flow will further improve Teekay Offshore's and Teekay LNG's long-term financial position and preserve the long-term growth potential of each entity."
Mr. Evensen concluded, "The effect of the distribution reductions of our two MLPs is that Teekay Corporation will temporarily forego its near-term GP cash flows. However, we fully expect the actions taken today will result in higher distributable cash flow per unit in each of our MLPs, as their committed growth projects deliver, and improve their capacity to increase distributions in the future, which in turn is expected to enhance the value of our GP interests in the longer-term."
The Company and its two master limited partnerships plan to host a joint conference call on Thursday, December 17, 2015 at 8:45 a.m. (ET) to discuss this announcement. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:
- By dialing 1-800-524-8950 or 1-416-260-0113, if outside North America, and quoting conference ID code 4020024.
- By accessing the webcast, which will be available on Teekay's website www.teekay.com (the archive will remain on the website for a period of 30 days).
Teekay Corporation operates in the marine midstream space through its ownership of the general partners and a portion of the outstanding limited partner interests in Teekay LNG Partners L.P. (NYSE:TGP) and Teekay Offshore Partners L.P. (NYSE:TOO). The general partners own all of the outstanding incentive distribution rights. In addition, Teekay has a controlling ownership interest in Teekay Tankers Ltd. (NYSE:TNK) and directly owns a fleet of vessels. The combined Teekay entities manage and operate consolidated assets of over $13 billion, comprised of over 215 liquefied gas, offshore, and conventional tanker assets. With offices in 15 countries and approximately 7,100 seagoing and shore-based employees, Teekay provides a comprehensive set of marine services to the world's leading oil and gas companies.
Teekay's common stock is listed on the New York Stock Exchange where it trades under the symbol "TK".
Forward Looking Statements
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the Company's fourth quarter 2015 cash dividend to be paid in February 2016; the strength of Teekay Offshore's and Teekay LNG's businesses; the stability and growth of Teekay Offshore's and Teekay LNG's future cash flows; Teekay Offshore's and Teekay LNG's use of internally generated cash flow to fund equity capital requirements and reduce debt levels, including the elimination of the need for Teekay Offshore and Teekay LNG to issue new equity for the foreseeable future; the impact of cash distribution reductions on Teekay Offshore's and Teekay LNG's financial position, long-term growth potential, and future distributable cash flow per unit; future energy market fundamentals; the impact of cash dividend reductions on Teekay's ability to support Teekay Offshore's and Teekay LNG's future growth and derive greater value from its general partner interests; and the potential for future dividend and distribution increases. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in production of, or demand for oil, petroleum products, LNG and LPG, either generally or in particular regions; greater or less than anticipated levels of newbuilding orders or greater or less than anticipated rates of vessel scrapping; changes in trading patterns significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; changes in the typical seasonal variations in tanker charter rates; changes in the offshore production of oil or demand for shuttle tankers, FSOs, FPSOs, UMS, and towage vessels; changes in oil production and the impact on the Company's tankers and offshore units; fluctuations in global oil prices; trends in prevailing charter rates for the Company's vessels and offshore unit contract renewals; the potential for early termination of long-term contracts and inability of the Company to renew or replace long-term contracts or complete existing contract negotiations; delays in commencement of operations of FPSO and FSO units at designated fields; changes in the Company's expenses; the Company and its publicly-traded subsidiaries' future capital expenditure requirements and the inability to access and secure financing and generate sufficient internally generated cash flow for such requirements; the amount of future cash distributions by the Company's daughter entities to the Company; failure of the respective Board of Directors of the general partners of Teekay Offshore and Teekay LNG to approve future cash distribution increases; failure by the Company's Board of Directors to approve future dividend increases; conditions in the United States capital markets; and other factors discussed in Teekay's filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2014 and Form 6-K for the quarter ended September 30, 2015. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
(December 16, 2015 - 8:00 PM EST)
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