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Text: Before we begin, I'd like to direct all participants to our website, www.
We hope that you and your families are all safe and healthy.
Before I hand the call over to Kenneth, I will briefly review our financial results for the first quarter of 2021.
In the first quarter, we reported consolidated adjusted net income of 11 million, or $0.11 per share, up from 3 million, or $0.03 per share in the prior quarter.
We also generated total adjusted EBITDA of 202 million, up slightly from the previous quarter.
Compared to Q4, we recorded higher results in each of our entities, supported by our large portfolio of long-term contracts in our gas shipping business, higher spot tanker rates in our oil shipping business, and higher revenues from our marine services business in Australia.
All of this despite the continued weakness in the spot conventional tanker market.
Looking ahead, we are expecting the second quarter to be lower than the first quarter, mainly due to a heavy dry dock schedule in both our gas and tanker fleets, certain non-recurring items in the first quarter and the recent expiration of fixed rate charters in our tanker fleet that were locked in last year at higher rates.
Since reporting earnings in February, we have made significant positive progress toward the strategic objective of winding down our FPSO segment, which we expect will result in a material reduction in our total asset retirement obligations in the second quarter.
Kenneth will discuss this in more detail on the next slide.
Over the last couple of quarters, we discussed our ESG strategy, and we are now excited to have published our 11th consecutive Teekay Group sustainability report last month, which aligns with global frameworks such as GRI and SASB.
We have included a link to our latest sustainability report on this slide and it is also available on our website.
And as Vince just mentioned, we have made good progress on winding down our FPSO segment.
Starting with the Banff.
As highlighted last quarter, we have successfully completed Phase 1 of our decommissioning project with net costs below budget.
With respect to the recycling of the Banff, our Q1 cost came in lower than expected as the repositioning of the unit to its recycling yard was delayed while awaiting regulatory approvals.
However, we are pleased to say that the unit departed by tow for its final voyage from the U.K. on May 2 and will safely handed over to the mass recycling shipyard in Denmark on May 11, where it will be recycled in accordance with the EU Ship Recycling Regulation over the next several months.
As such, in Q2, we expect to incur approximately $5 million to $6 million of costs relating to the towage and initial milestone payments to the recycling yard, which represents the most part of our remaining cost associated with the unit, with only minimal cost expected to be incurred after Q2.
Separately, in April, we entered into a conditional agreement with CNR, whereby the customer will take over our remaining Phase 2 decommissioning responsibilities on the Banff field, which, when finalized, will effectively conclude and eliminate our remaining obligations related to the Banff field after over 20 years of successful operations.
This agreement should enable CNR to achieve synergies when combining this with their own existing subsea decommissioning work scopes.
regulatory authorities that Teekay has completed all of its obligations in relation to Phase 1 of the decommissioning project.
We're currently on track to satisfy these conditions by the end of May.
The Foinaven FPSO is now expected to be redelivered to us in the first half of 2022 as a result of BP's recent decision to suspend production on the Foinaven field.
As a reminder, the unit has been operating under a bareboat contract at a nominal day rate since we received an upfront cash payment of $67 million in April 2020.
Following the redelivery, we expect to green recycle the unit with the associated cost expected to be covered by a fixed contractual lump-sum payment from the customer, which was also part of our new bareboat contract.
The redelivery of the Foinaven is happening earlier than what was previously expected.
However, this will not have a material economic impact to Teekay since our day rate is only nominal.
And, in fact, our cost to recycle the unit may be slightly less in 2022 compared to doing it after many years of additional usage, while the lump sum amount we will receive is the same irrespective of whether it is redelivered in 2022, or say, 2025.
As a result of these recent developments, we soon expect to have largely eliminated our remaining exposure to both the Banff and Foinaven FPSOs.
Assuming the conditions precedent relating to the Banff decommissioning agreement are met by June 2021, we expect this to result in a material reduction in our net asset retirement obligation or ARO liabilities in the second quarter.
We'll provide an update on this in due course.
Lastly, the Hummingbird FPSO continues to operate on the Chestnut field under a fixed rate contract with the charterer having the right to terminate the contract with three months prior notice if the field is deemed uneconomic.
However, the current level of oil production is stable at approximately 4,000 barrels per day, and oil prices are more than double the level that we experienced at this time one year ago.
Meanwhile, the unit continues to generate stable positive cash flow for Teekay.
On Slide 5, I will briefly touch on the results and highlights of our daughter companies.
Starting with Teekay LNG.
The partnership generated adjusted net income of $60 million, or $0.61 per unit, which is slightly better than the prior quarter.
We've been experiencing strong counter seasonal demand for LNG carriers since late March with increases in both the spot and time charter LNG shipping markets.
Teekay LNG has taken advantage of this improvement by recently securing three new time charters, including one spot market linked contract.
The partnership's LNG fleet is now 98% fixed for the remainder of 2021 and 89% fixed for 2022.
Lastly, Teekay LNG recently increased its quarterly common unit distribution by 15% to $1.15 per unit per annum.
This represents the third consecutive annual double-digit increase to the partnership's common unit distribution.
This distribution level, which is supported by a large and diversified portfolio of long-term contracts, enables Teekay LNG to continue delevering its balance sheet, which provides financial flexibility to optimally allocate capital as the global demand for LNG continues to grow while adding $6 million per year to TK parent's free cash flow for a total of $43 million per year in cash distributions from TGP.
Lastly, Teekay Tankers recorded an adjusted net loss of $22 million or, $0.65 per share, which is an improvement of $19 million, or $0.56 per share compared to last quarter.
Although the near-term outlook is uncertain due to the continued impact of COVID-19, we are seeing positive indicators that point toward an anticipated tanker market recovery, including improvements in the global economy, a continued decline in global oil inventories, an upcoming increase in OPEC+ production and positive tanker fleet supply fundamentals.
Teekay Tankers is also maintaining its strong balance sheet with healthy liquidity and low leverage, which enables Teekay Tankers to continue reducing its overall cost of capital by unwinding expensive sale leasebacks and replacing them with lower-cost financings.
We're not out of the woods yet, especially in relation to the devastation that India is currently experiencing.
But we successfully managed through uniquely challenging circumstances last year, and we're confident that we are taking all measures to manage through the current situation.
In addition, we continue to see a strong correlation between global vaccination programs and the increase in oil demand, which we estimate to be approximately 5% lower currently compared to the pre-pandemic levels.
As the world recovers from the pandemic, we expect the demand for oil and gas and related transportation services to gradually return to 2019 levels, which we believe will be positive for our core gas and oil shipping businesses and for the Teekay Group overall.
With that, operator, we are now available to take questions.

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compname reports qtrly adjusted net income per share $0.11.
teekay corp - qtrly adjusted net income attributable to shareholders per share $0.11.

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