Teekay Corp Ltd (TK) 2015 Q3 法說會逐字稿

Welcome to Teekay Corporation's third quarter 2015 earning results conference call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session.

(Operator Instructions)

As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to Mr. Peter Evensen, Teekay's President and Chief Executive Officer. Please go ahead, sir.

Before Mr. Evensen begins, I'd like to direct all participants to our website at www.teekay.com where you will find a copy of the third quarter 2015 earnings presentation. Mr. Evensen and Mr. Lok will review this presentation during today's conference call.

Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may different materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the third quarter 2015 earnings release and earnings presentation available on our website. I'll now turn the call over to Mr. Evensen to begin.

Thank you, Kent. Good morning, everyone, and thank you for joining us today for Teekay Corporation's third quarter of 2015 earnings call. I'm joined this morning by our CFO, Vince Lok; and for the Q&A session, we also have our Chief Strategy Officer, Kenneth Hvid; and Group Controller Brian Fortier. During our call today, we will be taking you through the earnings presentation, which can be found on our website.

Turning to slide 3 of the presentation, I will review briefly review some recent highlights for Teekay Corporation. Teekay Parent generated strong free cash flow of $59.8 million or $0.82 per share in the third quarter, an increase of 21% from the previous quarter as our general partner and limited partner cash flows benefited from the drop down sale of the Knarr FPSO and the associated 4% distribution increase declared by Teekay offshore, resulting in a strong coverage ratio of 1.49 times for the quarter. With completion of the Knarr FPSO drop down, Teekay Parent's transition into a pure play general partner controlling two MLPs is largely complete.

The dropdown allowed us to increase Teekay Parent's dividend by approximately 75% to $0.55 per share which equates to an annualized rate of $2.20 per share in the second quarter of 2015 and helps to significantly reduce Teekay Parent's net debt by approximately $900 million to $652 million as of September 30th, which further strengthens Teekay Parent's balance sheet. I will touch on this more in detail later in this presentation.

Teekay Parent's new dividend policy that was implemented in the second quarter linked future dividend increases to the growing dividend cash flows we received from our daughter entities. With a robust pipeline of approximately $6.2 billion of current known growth projects at our daughter entities stretching to 2020, and additional growth projects that our daughter entities are pursuing, we are targeting Teekay's dividend to further grow by an average of 15% to 20% per annum for at least the next three years.

Lastly, this morning we announced an opportunistic $200 million, 144-A at-on bond offering to our existing 8.5% bonds which mature in January of 2020. The net proceeds will help to rebuild Teekay Parent's liquidity after we used cash to repay our $123 million Norwegian kroner bond that matured in early October as well as increasing our financial flexibility. With the anticipated sale of the remaining fixed offshore and shipping assets, we remain committed to becoming near net debt free by the end of 2017.

Turning to slide 4, I will review some recent highlights from our three publicly traded daughter entities. For the third quarter, Teekay LNG Partners declared a cash distribution of $0.70 per unit. Based on our GP and LP ownership interests, the cash flow to receive by Teekay Parent from TGP totaled $26.4 million for the quarter.

In October, Teekay LNG's LPG joint venture with Exmar took delivery of the fifth of its12 mid-size LPG carrier new buildings which formed part of the joint venture's fleet renewal and growth strategy. This vessel is currently providing ammonia transportation services under a 10-year charter with Potash Corporation.

Looking at our other MLP, Teekay Offshore Partners increased its quarterly cash distribution by 4% declaring a cash distribution of $0.56 per unit for the third quarter. Based on our GP and LP ownership interests, the cash flows received by Teekay Parent from TLO total $29.8 million for the quarter, an increase of 65% from the previous quarter due to the issuance of $300 million of new LP units to Teekay Parent. In connection with the drop down sale of the Knarr FPSO, as well as the associated 4% distribution increase.

In early September, one of Teekay Offshore's existing shuttle tankers, the Navion Hispania, commenced operations on the East coast of Canada, which is expected to provide additional distributable cash flow growth in the fourth quarter. Earlier this year, the partnership took over as the sole provider of shuttle tankers to the oil companies operating offshore in East Coast, Canada.

The first chapter of what we expect to be a decades long relationship in this growing oil area is already being written as we are constructing three Suezmax size DP2 shuttle tanker new buildings, which will serve under the 15 year contract and deliver in 2017 and 2018. Until their delivery, the partnership will continue to end charter two shuttle tankers to service the area's transportation requirements. Teekay Offshore continues to secure long-term debt financing for its portfolio of growth projects with the recent completion of a new $185 million long-term debt facility to finance the four state of the art long distance towing and offshore installation vessel new buildings currently under construction which are scheduled for delivery throughout 2016.

For the third quarter, Teekay Tankers declared a fixed dividend of $0.03 per share. Based on our total ownership of Class A and Class B shares, Teekay Parent received a cash dividend of $1.2 million. Teekay Tankers continued to generate strong free cash flow of $59 million or $0.44 per share despite the seasonally weak third quarter.

During the fourth quarter, to date, crude spot tanker rates have strengthened and remain firm. We expect crude spot tanker rates to increase further for the remainder of 2015 and into the first quarter of 2016. In early August, Teekay Tankers announced the strategic acquisition of 12 modern Suezmax tankers for a total cost of $662 million. And the last vessel delivered into the fleet on October 15th.

With the well timed delivery of Teekay Tankers' newly acquired fleet into the rising spot market and the strong rates we see going into 2016, the Company expects to continue earning significant free cash flow which will help further reduce this balance sheet leverage. And the Company announced plans to review its dividend policy with Teekay Tankers' Board of Directors in December of 2015 which, if increased, would provide additional free cash flow to Teekay Parent.

Turning to slide 5, as I touched upon in my opening remarks, with the dropdown sale of the Knarr FPSO, Teekay Parent is at a positive inflection point with a delevering balance sheet and increasing free cash flow. Over the past three years, Teekay Parent has completed over $2 billion of dropdown sales to Teekay Offshore and has significantly delevered its balance sheet to $652 million as of September 30th.

Looking ahead, with the anticipated sale of Teekay Parent's remaining assets to Teekay Offshore or third parties, over the next two years, Teekay Parent expects to become near debt free by the end of 2017. During the same timeframe, Teekay Parent's free cash flow has continued to grow with the restart of the Banff FPSO in mid-2014, increasing general partner and limited partner cash flows from our two MLPs and the strong tanker market.

Looking ahead, we expect Teekay Parent's free cash flow will continue to grow as our underlying MLPs continue to deliver on their robust pipeline, some profitable and accretive growth projects and if Teekay Tankers increases its future dividends. With that, I will turn the call over to Vince to discuss the Company's financial results.

Thanks, Peter. Turning to slide 6, we have provided a comparative summary of Teekay Parent's Q3 and Q2 free cash flow. Our total free cash flow is separated into GP cash flows comprised of the distributions received from our daughter entities net of corporate G&A and OPCO cash flows of Teekay Parent's legacy operating assets.

Overall, Teekay Parent's free cash flow increased by 21%, resulting in a strong coverage ratio of 1.49 times. GP cash flow from daughter distributions in Q3 increased significantly compared to the prior quarter, primarily due to higher distributions from Teekay Offshore as a result of Teekay Parent taking back $300 million of Teekay Offshore common units in connection with the dropdown sale of the Knarr FPSO in July and the associated 4% distribution increase by Teekay Offshore.

Corporate G&A was lower in Q3 compared to the prior quarter, mainly due to timing differences. In Q3, OPCO cash flow decreased to $6 million from $8.3 million in the prior quarter primarily due to the dropdown of the Knarr FPSO in July 1 at Teekay Offshore; lower revenues from the Foinaven FPSO, due to a planned maintenance shut down in the third quarter; and lower spot tanker rates. Partially offset by $14 million of business development fees, Teekay Parent received from Teekay Offshore in connection with the Knarr FPSO and Logitel and Toge transactions. As a result of the above, total free cash flow was approximately $60 million or $0.82 per share in Q3 compared to $49.5 million or $0.68 per share in Q2.

The Q3 cash flow which included $14 million in business development fees in TOO was well above our new quarterly dividend of $0.55 per share, resulting in stronger distribution coverage ratio of 1.49 times in the third quarter compared to 1.24 times in the second quarter. Looking ahead, we expect GP cash flows to be consistent in Q4 compared to Q3. OPCO cash flows are expected to decrease slightly as Q3 included the business development fees I just mentioned, which will be partially offset by the Foinaven operational in sense of revenue, recognized annually in the fourth quarter of each year which we currently estimate to be approximately $10 million to $12 million this year.

As a result of the above, we are expecting a slightly lower dividend coverage ratio in Q4 compared to Q3, but still above our target range. For details on our Q4 outlook on Teekay's consolidated results, please refer to the appendix to this presentation. I will turn the call back to Peter to conclude.

Thank you, Vince. Wrapping up today's call on slide 7, Teekay Parent's current cash flow is reported primarily by the stable and growing cash flows received from our two MLPs. Growth in cash flow at Teekay Parent is supported by the large diversified portfolios of long-term fee-based contracts on existing assets and projects in construction, which total approximately $11.3 billion for Teekay LNG and $8.2 billion for Teekay Offshore measured in forward revenues. Our contracts are not directly linked to commodity prices and we are a critical component of our customer's oil production and logistics chains and, of course, the revenue generation.

Looking ahead, with the continued weakness in the energy space in MLP markets including Teekay LNG's and Teekay Offshore's equity evaluations, our two MLPs have adopted a new approach to future growth beyond the growth that we already have. First of all, our two MLPs have increased their hurdle rates for new projects, which takes into account both their ability to build and operate at a lower cost and their slightly higher all-in cost to capital.

Secondly, our two MLPs are prioritizing capital allocation first to their existing assets for contract redeployment and extensions followed by high quality on-the-water M&A opportunities over large organic-growth projects. With continued growth in LNG trade, requirement for more floating regassification and growth in offshore production, our two MLPs continue to seek new opportunities for higher return growth.

Lastly, we continue to have access to competitive bank financing and multiple capital markets including our recent signing of a $1 billion framework cooperation agreement with the export import bank of China to finance the construction or conversion of vessels from shipyards in China over the next three years. Along with our MLPs securing over $1.1 billion of long-term debt or lease financing to fund a portion of their remaining capital commitments. We remain committed to our plans for Teekay Parent to become near net debt free by the end of 2017.

Thank you all for joining us on the call today and, operator, we are now ready to take questions.

Thank you.

(Operator Instructions)

Our first question comes from the line of Michael Webber from Wells Fargo. Please go ahead.

Good morning, guys, how are you?

Good, thanks.

Peter, I just wanted to start off with the question -- maybe some color around the bond deal that I believe was announced this morning, the $200 million tack-on to the existing issue. Can you give some color around that thought process there? And how you see that folding into the existing cash structure and why that was a better option than other leverage options.

Yes, thanks for asking, but securities laws actually prevent me from discussing the bond issue beyond what I said in my prepared remarks. But, I think I pretty much covered it in my prepared remarks.

Okay. Fair enough.

You mentioned TNK floating their -- revisiting the dividend policy later this winter and we talked about those cash flows previously. But, as it stands now, considering it's a bit of a different environment, I am curious how you think about the use of those cash flows at the parent level, whether they eventually get folded in to the dividend methodology, using cash to delever? Or over the long term, how do you think about that considering it's a bit of a different style than the operating cash you have at the parent which would eventually go down to the daughters?

Sure. But, if Teekay Tankers increases its dividend, which they are going to take up at their December Board meeting, the amount that we receive as 26% owner is not that significant compared to the amount we receive from the two MLPs. So we would add that in, but that only goes to further support the 15% to 20% target that we have to grow the Teekay dividends.

Okay. That's fair.

Just in looking at the daughters and the opportunities you see within the LNG space and the offshore space right now. One, if you just take the 30,000-foot view of the theater, can you kind of weight the different opportunities you are seeing in LNG or in offshore in terms of how you think capital will be allocated? Or in terms of where you are seeing the more interesting opportunities right now. And then, relative to the kind of current cost of capital issues across the entire MLP space, how you think about utilizing the parent in that scenario?

Sure. I will cover the general and the gas and I will ask Kenneth to come in on the offshore.

So, in general, what you have seen us do is that when we have looked at acquiring assets, we are looking to acquire assets with contracts. And we had previously spent most of our time looking at competitors.

But now, speaking with our oil company customers, we are spending more time working with our customers who, we think, in the current low oil price environment are attracted to having Teekay own and operate their infrastructure assets rather than do it themselves. And it's a better use of capital for them not to own those assets -- infrastructure assets, and, instead, rededicate it back to their upstream. So, that's our focus right now.

On the LNG and LPG space, we think that gives us opportunities with customers, but we are not looking to buy distressed type of entities. We are looking to buy quality operations with customers and sale lease-back transactions in which we can get long-term contracts. That's what both of the MLPs are predicated on.

We can see that customers want Teekay that can operate safely and that's why we have this huge focus on lowering our costs because that makes us more relevant. That is how we are approaching it on the gas side. Kenneth, do you want to weigh in?

Yes. It's really much the same on the offshore side.

What we are primarily focused on is leveraging our operational platform in the North Sea and in Brazil where we are really driving cost synergies at the moment. We can see that is an attractive platform for other units to be folded into.

When we look at capital allocation in addition to the pipeline we already have of the $2.6 billion of new projects, we are first looking at how we can employ units that we already have in our fleets either by modifying them, upgrading them. That gives us a faster and more cost-efficient solution to the customers.

That is exactly what we are hearing in conversations with them that they want at the moment. Nobody wants the very big solutions for a medium-sized field. They want something that is quick and can be employed in a cost-efficient way. That's where we think our fleet is well positioned to really cater for those needs.

Secondly, we have on previous calls talked about that we are still very focused on our customers that wish to restructure their balance sheets, look at selling out their FPSOs in particular and leasing them back. And we think we are in a strong position to do that. So, I'd say those two are our first priorities in terms of growth over projects that are more organic and later start-up in nature.

Fair enough. Peter, if I can just go back to that for a second, and not trying to draw anything here, but just trying to gain some perspective or some context around this. If you were to say, roughly dollar weight, the realistic opportunities you are seeing right now, how would that split work out between LNG and Offshore?

Each one has their own balance sheet. So, it isn't that I sit and weight them. Each one has to work and be accretive.

The other question you asked was whether we would utilize Teekay parent, which we have done in the past, and that is not our plan. Our plan is to continue with our strategy of becoming a pure play GP and not owning six assets upstairs.

One more, Peter, around that, you mentioned, generally being net free, I believe you said in 2017 in your remarks, which seems like it's according to the multiyear plan here. How do we think about the parents wherewithal to provide vendor financing to facilitate in a continued growth at the MLPs in that scenario? It's a kind of derivation of the comment you just made. Warehousing acting as the parent which seems like it's a function of the past. I'm curious around assisting the MLP in terms of vendor financing?

I think that is something we employed clearly a little bit on Knarr and all of that. That isn't our preference in order to look at that. Our preference is that the daughters should be self financing.

And we haven't really set up Teekay Parent so that it can act really as a warehouser going forward. That is certainly not our preference going forward.

Okay. All right.

I will follow up off-line. Thanks for the time. I appreciate it.

And your next question is from the line of Fottis Giannakoulis with Morgan Stanley. Go ahead.

Good morning, guys. Peter, you just mentioned about the financing of the Knarr. If I understand well, there was about $100 million seller's credit to Knarr. Is that correct?

And can you tell us when do you think that this will be paid back?

Yes, hi, you are correct. There is about $100 million of vendor financing still remaining relating to the Knarr sale.

That vendor financing doesn't mature until sometime in 2016. So, there is plenty of time for that to be repaid.

Okay. Thank you, Vince.

And regarding your dividend growth targets. Obviously you said that you have adjusted the rates for new projects for the daughter companies. What kind of impact does it have on your gross targets?

You mentioned 20%. How can this be achieved? Is it because this 20% is based on projects that have already been done or because of the higher debt financing that you are planning to get on your projects?

It's really two different things. One is what you just said, which is that we already have enough growth in the book for the next three years, 2016, 2017 and 2018. We have growth all the way out to 2020, so that is why we can have that target. So, that is what is connected to our target of 15% to 20% in the GP or Teekay Parent dividend based on the known growth that we have at MLP.

However, when we talk about changing around future growth, that is growth beyond what we already have. This is growth for 2018, 2019 and 2020.

We have to recognize we have to take account of the current macro oil environment and that is, as Kenneth said, we are putting a much greater pressure on what kind of business we want to do. And, in that regard, we are sticking to our existing verticals or franchises that we do business in. But we are becoming more relevant by trying to lower our costs which we think we will be successful in.

And, in doing that, we have the chance to pick up more business and get higher hurdle rates. I guess I would say we are prioritizing the quality of the projects much more than the quantity.

Thank you, Peter. Can you also remind us what is your target coverage ratio for Teekay Parent? You are right now close to 1.5 times. What do you expect that it should be in the future?

As we laid out last year when we announced the new dividend policy, our current coverage ratio target range is about 1.15 to 1.2 times. As you said, we are well above that, although in the third quarter there was some of that is related to business development fees. We are ranging above that. We're expecting to be above that in Q4 as well.

Thank you. And one last question about your view on oil and how does these lowering prices impact your FPSO projects, particularly in the North Sea? If you can give us an update of what are the reserves in the North Sea for your FPSO projects and what is your estimated breakeven? I'm not talking about your current contracts, but are you trying to get a feeling of when these contracts come to an expiration if these vessels, they can be deployed at the same fields?

Well, what I always ask people is what was the price of oil 10 years ago. Believe it or not, it was around $30 to $35. So, when most of our North Sea projects, the Foinaven in 1998, Banff and others came online, people were working to a breakeven oil price of $15 to $20.

So, we have pretty competitive rates and the oil companies can make money on our North Sea. It's really a question of what is the physical amount of oil in the ground.

And we expect them to continue to extend and take out the physical -- there is a lot of incentives with regulators in order to get all the oil out of the ground. That is very true in both the UK sector as well as the Norwegian sector.

What we have seen, which Kenneth alluded to, is that people really want our written down units, which have a much lower capital investment rather than putting on a new build FPSO. Because a new build FPSO which could cost a $1 billion dollars, that will have such a high breakeven price or contribute to a high breakeven price that that field development won't go forward. So we have seen a lot of reverse inquiry with people saying, hey, when will your existing FPSO come off market?

Of course, the best example was the Petrojarl 1, our oldest FPSO, which we are now upgrading for a 5-year contract down in Brazil. We will have the total invested cost on that, including upgrades, of about $250 million. It will have EBITDA of about $55 million to $60 million.

So, it was competing against a new building solution that cost four times as much. And we were chosen because we would have a lower cash breakeven for that field. Otherwise the field development wouldn't have gone forward. So, our existing units are actually more relevant in the low oil price environment than in a high oil price environment.

Thank you very much, Peter.

Thank you.

Your next question comes from the line of [James Jean-Paul] of Hai.

Thanks for taking my call. I'm sorry if I missed this.

Could you give us a little more clarity or go through it one more time in terms of the new approach to future growth? I understood the part about increased hurdle rates. But in terms of organic projects versus on-the-water acquisitions versus what type of organic products may go through and which wouldn't. Could you say that again or with a little more clarity to that, please?

Sure. So, we receive tenders from around the world including Brazil in order to build new FPSOs that go on long-term contracts. We are not prioritizing. Those have the lowest priority for us right now which we have done before. The Knarr is a great example of that.

Those projects don't yield cash flow for about three or four years. What we are doing right now is prioritizing, working with customers and looking to buy existing assets that are producing. Teekay will take over operations, run them cheaper than the oil companies and with the same safety regimen that people have come to expect from Teekay. And in doing that, we will get a long-term contract and the oil company can redeploy ploy that capital into a more profitable part of their activity.

And you mentioned something about not being in the market for distressed assets.

Yes. Our offshore and our LNG, these are not companies that look to buy distressed assets. There are numerous offshore people that have some level of stress or distress, mostly in the exploration side.

We are not interested in the exploration side. We're going to stay within our existing franchises which are on the production side, because that is what oil companies are prioritizing.

The biggest thing we can do right now is to help our oil companies keep their production up and then increase production. So, a lot of people ask us, well, Teekay, you have expanded into other areas, aren't you take advantage and try to buy some distressed offshore assets? I wanted to assure our investors that is not our plan. Most of those distressed things are on the exploration side which is not of interest to us.

Okay. Thank you.

Thank you.

Your next question is from the line of Amit Mehrotra from Deutsche Bank.

Thanks so much. I wanted to get some thoughts on the 15% to 20% kicker, this dividend growth target in relation to the coverage target at the parent level.

I know you just answered this in the other question, but, the fact is, you have tailwinds in the form of extra coverage over and above the target. And that is obviously a pretty powerful lever for your ability to grow the parent dividend.

Could we expect you to pull that lever as we head into next year? And maybe next year the coverage is not that much above that 1.175 times target or would you rather prefer to pat it out given the macro backdrop that we are in today. Thanks.

Certainly the coverage ratio is an additional lever that we can use. The coverage ratio was intended to be linked to the timing of when we dropped down the remaining FPSO assets. But, given that we are above that target range right now, it is an additional lever.

Of course, in addition to all the existing growth we already have in the daughter companies, which is the main driver of the future growth of the dividend.

Okay. Maybe just one follow-up with respect to the net debt neutral by the end of 2017, that sounds really good. But just asking you, Peter, if you think, is that really an optimal structure at the parent level given the visibility of the cash inflows that are coming in? Is there some relatively modest level of debt financing that the parent company should have at all times to supplement the growth above and beyond what is locked in at the daughter companies?

Well, we think we are in a period of volatility. And, as a general rule, we don't think that Teekay Parent not having fixed assets should have debt. And, so, I have heard people say, well you could have some debt up there in order to make it work, but we are more conservative than that.

That's why our goal is to complete the sale of the fixed assets upstairs, and when we complete that sale, then, we are near net debt free. With the extra coverage ratio that we pick up, that gives us excess cash flow to become net debt free. So, that remains our plan.

We think that is the more sustainable way, which is what our investors are looking for, that we have sustainable cash flows going up. That's why we don't want to be in a situation where we add debt on top of the parent.

Right. Okay. That's very clear.

Thanks very much. Have a good weekend, guys, thank you.

Thank you.

Your next question will come from the line of TJ Schultz of RBC Capital Markets.

Great. Just looking for any update on the remaining FPSOs at the parent on contracts or how you view the potential of timing to drop in the context, especially, of facilitating that debt reduction and considering TOO valuation?

I think that what you are hearing from us is we want to -- and as you heard from me before, TJ, is that I think a dollar is a dollar and I want to maximize the value that we get for selling the FPSOs in the one conventional tanker that we have. I think that we probably in today's climate -- people asked me yesterday on the calls, would we reduce the price in order to make the deal more accretive given that the cost of capital is higher at the MLPs? And that actually isn't what we prefer.

I think our shareholders would like us to contribute to the growth in an accretive way. And given the volatility that we've seen in the MLP prices, we think we can find a better time that will make the deal more accretive rather than just mark it down in order to make it accretive. That is our philosophy, which is why we are giving ourselves perhaps a little bit longer runway to drop the assets down.

But, you heard me say earlier about the FPSOs having greater value. If we can attach, as you know, better contracts, that just means that they are worth more to our MLPs and, therefore, Teekay Parent will make more money in the end of the day.

Okay. So, just to be clear, the plan still is to drop them, just wait for a better market and -- ideally, with better contracts.

That is correct.

Okay. Just lastly, I know you're early in the dividend policy, but just any current thoughts on the potential to do buybacks, just given some of the excess coverage at the parent? And that's it for me, thanks.

That isn't part of our plan right now.

Thank you.

Your next question comes from the line of [George Bermann] of ISS Securities.

Good morning, gentlemen. Thanks for taking my call. Congratulations with the quarter.

I have got a quick question on your consolidated adjusted statement of income. Could you quickly go into the appendix A, item 1 here on the realized unrealized gains on the derivative instruments which amounts to about $94.3 million.

Yes, hi, George, you typically see that each quarter. That goes through our P&L.

That is basically -- most of that is related to unrealized gains and losses on interest rate swaps that we use as economic hedges. So, they have no impact on our cash flows. They are simply mark to market changes. And given that interest rates have moved down during third quarter, that's why you see unrealized loss in the third quarter.

Okay. So, that doesn't affect your cash flow operating earnings in either way?

That's correct.

Okay. The previous caller asked about a stock buyback bond. Do you have any comments on where the price level, market value that your company stock is trading at the moment?

You had nice talk last year when you announced the intention to increase the dividends further and we're basically half off of that now. Do you think that is due to the overall weakness in various other unrelated MLP market? Or what do you suggest? Because it seems to me, as you said in your statement, you are not directly related in any way, shape or form to lower oil prices.

That's a great question. Since we have so many equity analysts, I think that's what they get paid to do. I get paid to create value and operate assets.

But I will just give my personal view that I think the whole -- it's a macro move that the whole energy space has been affected. We saw this in 2009 and that's why we are trying to stress the stability of our niche in the energy market.

So we didn't make extra money when oil was at $100, but we likewise aren't losing money when oil is down in the $40s and $50s. But obviously, everyone is concerned about the energy market now.

But what we continue to see is that our customers require us to move their cargo and produce oil and that's our part of it. So we are the picks and shovels, if you will. And our customers, we can see a continuing need for that.

And we can also see that the depletion that you have on existing oil fields means that people have to really go and look for the big oil fields and the only place you can find those are offshore. Similarly, on the LNG side, we continue to see that there will be a net need for LNG carriers, just for the existing liquefaction that is being put in place. So, we continue to see that our offshore and our LNG markets will continue to grow, albeit not as fast as people had thought.

All right. Nevertheless, we seem to get punished in the same way with low oil prices, huh?

Yes, but maybe it's an opportunity instead.

Do you, as the parent to your daughter companies, are you allowed to acquire additional ownership interest in those if prices were really, really ridiculous?

Yes and, in fact, Teekay is part of the dropdown for Knarr. We purchased $300 million of Teekay Offshore and we've just invested $75 million in Teekay Tankers. And I would note, for everyone on the call, that we never sold a share in any of our daughter companies.

So we remain a long-term holder interested in creating long-term value at our daughters. And why? Because that's good for us as the general partner and controlling shareholder.

Excellent. Thank you very much.

Thank you.

Gentlemen, there are no further questions at this time. Please continue.

All right. Thank you all very much.

We look forward to reporting back with you next quarter. Thank you.

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.