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A Look at Teekay Tankers’ 3Q17 Cost Side

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Teekay Tankers’ costs

Teekay Tankers’ (TNK) central cash costs include voyage expenses and vessel operating expenses. In 3Q17, its vessel operating expenses made up ~39% of its total operating expenses, while its voyage expenses represented 17% of its total operating expenses.

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3Q17 costs

Vessel operating expenses include crewing, repair and maintenance, insurance, storage, and communications. Teekay Tankers along with other crude tanker companies such as Frontline (FRO), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), Euronav (EURN), and DHT Holdings (DHT) incur vessel operating expenses regardless of whether they employ their vessels in spot or time charter markets.

Teekay Tankers’ vessel operating expenses fell to ~$40.9 million in 3Q17 compared to ~$46.8 million in 2Q17 and $44.7 million in 3Q16. Below are a few key takeaways:

  • TNK’s vessel operating expenses fell, but its revenues fell by a greater magnitude, which had a negative impact on its expense-to-revenue ratio. The ratio rose to 45% in 3Q17 compared to 43% in the previous quarter and 41% in 3Q16.
  • TNK’s voyage expenses were ~$18.3 million in 3Q17 compared to ~$19.4 million in 2Q17 and $14.6 million in 3Q16.
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Future vessel operating expenses

In the fourth quarter of 2017, Teekay expects its vessel operating expenses to increase by $5 million due to the expected merger with TIL in December and also higher expenses resulting from more forecasted support services activities in 4Q17. This will be partially offset by the sale of two Aframax vessels.

General and administrative expenses: 3Q17 and 4Q17 guidance

Teekay Tankers’ general and administrative expenses amounted to $7.6 million in the third quarter of 2017 compared with $8.3 million in the prior quarter and $8.2 million in 3Q16. In the fourth quarter, Teekay expects this cost to increase by $1.5 million from the third quarter especially due to the expected merger with TIL in December 2017.

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