Pacific Trader: How war in Ukraine became a windfall for Teekay Tankers

The Vancouver-headquartered company’s stock has almost tripled since the Russian invasion began

The stock: Russia’s invasion of Ukraine, now more than 18 months in, was disruptive to the world economy—in an opportune way, for some companies. One of those beneficiaries was Teekay Tankers (NYSE:TNK), which operates a fleet of ships for transporting crude oil. (Like its parent, Teekay Corp., TNK has an operational headquarters in Vancouver, is legally registered in Bermuda and trades on the New York Stock Exchange. So, it’s complicated.)

The drivers: The sanctions imposed on Russia forced the world’s third largest oil producer to seek new, more distant markets in China and India rather than just sending oil by pipeline to traditional markets in Europe. That triggered a scramble for ships and made average voyages longer. In large part it explains why Teekay Tankers’ stock has shot up from US$13.73 on February 25, 2022, to US$38.65 as of Tuesday (Sept. 5), an increase of 181 percent.

The sanctions took time to phase in and Russian exports have only gradually recovered, so the effect on spot rates for tankers really became evident this year. Indian and Chinese seaborne crude imports hit a record 15.6 million barrels a day in the second quarter. As a result, both Suezmax and Aframax tanker rates averaged more than US$50,000 a day during the period, well above historical averages. And yet, due to the chill on fossil fuel investment on fears the global oil trade will ultimately start to shrink, new ships are not being ordered as fast as old ones are being retired.

Amid this fortunate circumstance, Teekay Tankers’ net income was US$151.2 million or US$4.43 per share on revenues of US$370.6 million in the second quarter. That compares with earnings of just US$28.5 million or 84 cents per share a year earlier. Can the good times keep on rolling?

Word on the street: Yes, the two Wall Street analysts from Bank of America and Cleaves Securities who re-rated the stock over the past month seem to think. Their average 12-month target for TNK is US$63, indicating a gain of more than 60 percent. Just as long as peace doesn’t break out…

Coming and going: Vancouver’s Tribe Property Technologies (TSXV:TRBE) has bolstered its presence in the Ontario market with the acquisition of privately held Meritus Group Management of Toronto for $1 million in cash and shares. The purchase adds brings another 5,000 homes under Tribe’s management platform.