Welcome to Teekay Corporation's Fourth Quarter and Fiscal 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to Mr. Peter Evensen, Teekay’s President and Chief Executive Officer. Please go ahead, sir.

Before Mr. Evensen begins, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the fourth quarter and fiscal 2012 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 differ 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 fourth quarter and fiscal 2012 earnings release and earnings presentation available on our website. I will 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 Fourth Quarter and Fiscal Year 2012 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 our Group Controller, Brian Fortier. During our call today, I'll be walking through the fourth quarter and fiscal year 2012 earnings presentation, which can be found on our website. Beginning on Slide 3 of the presentation, I'll briefly review some recent highlights for Teekay Corporation and our 3 publicly-traded daughter companies. For the fourth quarter of 2012, Teekay Corporation generated $218 million of total consolidated cash flow from vessel operations or CFVO, an increase of approximately 3% from the fourth quarter of 2011. On a fiscal year basis, Teekay Corporation generated $821 million of total consolidated cash flow from vessel operations in 2012, an increase of approximately 18% from 2011. Teekay Corporation reported a consolidated adjusted net profit of $2.9 million or $0.04 per share for the fourth quarter of 2012, a slight improvement from the $0.02 per share consolidated adjusted net profit that we reported in the fourth quarter of 2011. I should note that in our reported GAAP earnings, we incurred a large vessel impairment charge in the fourth quarter, mainly relating to certain conventional tankers in Teekay Tankers, which Vince will discuss in detail later on the call. On a full year basis, the company's results highlight the continued progress made during the year toward improving profitability. For fiscal 2012, Teekay Corporation reported an adjusted net loss of $54.9 million, which is almost a 50% reduction from the adjusted net loss of $103.1 million we reported in 2011. The improvement reflects a combination of profitable growth, including contributions from…

Thanks, Peter, and good morning, everyone. Turning to Slide 6. Before I discuss the financial results for the quarter, I would like to take a moment to highlight some of the key initiatives we've undertaken during the past 2 years to improve Teekay’s profitability. First, we have added profitable growth, primarily in our fixed-rate gas and offshore businesses. This includes the acquisition of 2 FPSO units from Sevan in November 2011 and 6 LNG carriers from Maersk in February 2012. These acquisitions, combined with the delivery of LNG, LPG and shuttle tanker newbuildings during this period, have both increased our consolidated fixed-rate cash flows and provided further economies of scale in our operations. Secondly, in addition, to the adding profitable growth, we have also undertaken initiatives in each of our business units to enhance the profitability of our existing assets. This includes rechartering existing assets at higher rates in our gas and offshore business, reducing our vessel operating expenses, and an example of that is in our shuttle tanker fleet, where we've reduced our vessel OpEx by more than 20% since the start of 2011. We have also reorganized our onshore operations in our conventional tanker and shuttle tanker businesses to lower the cost structure of these businesses, which will yield run rate G&A savings of over $15 million per annum. And we have realigned our internal business units with our daughter -- external daughter company structure to drive greater P&L responsibility. Finally, we have continued to redeliver out-of-the-money conventional tanker in-charters, with 16 vessels redelivered during the past 2 years. As a result, our time-charter in [ph] expense has reduced by over $83 million in 2012 compared to 2011. And we expect this trend to continue in 2013, with 5 more vessels being redelivered, further reducing our exposure to…

Thank you, Vince. Turning to Slide 11. I would like to conclude today's call by highlighting the key priorities at each of our businesses for 2013. For Teekay Parent, 2013 will be another year of execution, with a primary focus on the FPSO newbuilding and conversion projects delivering this year, completing repairs for the Banff FPSO for restart in the fourth quarter and making progress on future redeployments for some of our existing FPSO units. Through the sale of eligible FPSO units to Teekay Offshore and the support of Teekay LNG growth initiatives, Teekay Parent will continue to focus on growing its 2 MLP daughters to enhance its GP cash flows. We will also continue to execute on the cost-saving initiatives Vince discussed on today's call and complete our current and upcoming asset financings and refinancings. Importantly, Teekay Parent will always focus on maintaining the high standards for health, safety, environment and quality, as well as operational key performance indicators across all of our fleets. For Teekay LNG, the focus in 2013 will be on growth, with a primary focus on new point-to-point LNG and floating storage regasification units or FSRU projects. Teekay LNG will also consider accretive on-the-water acquisitions with contracts. Growth will also be a priority for Teekay Offshore in 2013, with a focus on delivering the partnership's 4 shuttle tanker newbuildings and the commencements of their charters with BG in Brazil, completing the HiLoad DP unit from Remora and completing the required capital modifications for its contract with Petrobras, as well as bidding on new FPSO and FSO projects with post-2015 deliveries. Teekay Tankers will focus on strategically positioning for an eventual market recovery and will consider investments in fuel-efficient tanker newbuildings, or acquire quality on-the-water tonnage to meet its fleet renewal and growth goals. Thank you for joining us on the call today. And operator, we're now ready to take questions.

[Operator Instructions] The first question comes from Justin Yagerman of Deutsche Bank.

So just the first question is on the dividend here at Teekay Tankers and a bit of a departure from what you guys were thinking prior and how you have been proceeding. I guess from my standpoint the question is why not just set a floor and allow it to float upwards, if the market were to recover? I mean, am I to take this as a signal that you're looking at accumulating cash for buying or you need more cash on your books to act as an operator, if you want to charter-in a lot of tonnage or you're just pretty pessimistic about the market?

Wow, that's a whole bunch of choices. I would -- actually, it's the first one, which is that we're going to accumulate cash in order to reinvest in either newbuildings or buy assets. Our traditional way of financing growth has been to issue equity and follow-on offerings. But given where the share price is and given our prospects that -- and our confidence in regressing back to the mean, we don't think that follow-on equity issuances, at today's low share price, is the right thing to do. Instead, what we do -- what we think is the best is to fix the dividend and use the extra cash in order to invest in future growth, because we remain confident that the tanker market will recover, but now is not the time to issue equity.

Okay. So I guess, given the write-downs and where we are from an asset value standpoint, do you think now is an attractive point or do you think that you need to see more asset value downside? As we continue to see weakness, at least on the crude side, how do you think about what type of assets you're looking to buy, crude or product? What are you going to do with the cash?

Well, Bruce will talk more about it in about an hour. But I would say from our viewpoint, as well as from my membership on the Board of Directors at Teekay Tankers, that we actually see things as bumping along the bottom here. We can't see that things going to go down much more and so we're looking at a lot of opportunities. I would say we have looked at a lot of opportunities over the last 2 years, and we actually haven't done much. Instead, what we've done is fixed out more of our tonnage longer term, and that's turned out to be the right move. And so I would love to say that we think the market will immediately recover, but we don't see that. As Vince said, that led to the vessel impairment charge. And so -- but we do see that we're moving into an interesting time in order to be able to acquire assets countercyclically. And I guess I would just add back that Teekay Tankers was set up as a cash flow vehicle, but it isn't very good at countercyclical investing, and what you have to do now is countercyclically invest. And so to raise money down at the bottom isn't the right thing. Instead, our shareholders need to be able to have the leverage that will come when the tanker market returns, and in the meantime, we will position the company in order to get future growth.

Fair enough. And congrats on the contract on the Knarr. I wanted to see, now that we know that it's a 10-year contract, if we could get any returns, EBITDA, more color in terms of how we should think about modeling out this contract and how it will impact the P&L.

Yes, I think we've given previous guidance, Justin, on the Knarr. The rough average EBITDA per year is about -- well, actually it's about -- it's over $140 million -- $130 million, $140 million per year on a 100% basis, and it is scheduled for delivery in the first half of 2014. And so we're excited about the 10-year contract. It allows us to move forward with the long-term financing.

Great. And the last question and I'll turn it over to someone else. $200 million revolver secured by equity at daughters. Did you look at unsecured? What was the difference between the costs and what are you paying on the revolver?

Well, first of all, it isn't our plan to utilize this revolver, it's just to get some extra insurance. So we plan it just to increase our liquidity. And no, we didn't look at unsecured. I think given what's happened in the financial markets with other competitors, that's really not something that we would look at.

It's part of our strategy to diversify our sources of capital. If you look back, we did the Norwegian bond on an unsecured basis in October, and we felt that using our LP units, which are, if you look at TGP and TOO, they're valued over $1.6 billion right now, so it's a valuable asset, and this corporate [ph] leverage gives us a lot more financial flexibility.

Great. Vince, what's the rate on that $200 million?

I'd prefer not to disclose that at this time.

The next question comes from Michael Webber of Wells Fargo.

I'll save the impairment and dividend questions for the TNK call. But Peter, I want to talk a little bit about the Knarr. Obviously, it's the biggest variable that's moving through your balance sheet. So I'd like to get a sense on how close you guys are to finding a JV partner for that project. And maybe within the context of what's happening with the Banff now, I mean that's going to be offline for 2 years. If you had to pick an FPSO to be offline, it would be the Banff. But when you think about an asset the size of the Knarr, it certainly colors that operational risk in a different light. So maybe a little bit of color in terms of how you think about the operational risk associated with the Knarr and then where you guys are at in terms of finding a JV partner.

Sure. Well, first of all, the Knarr is proceeding well. We've had a timeline of having BG select what the term of the contract would be. Now that they've selected 10 years, we can move ahead with the debt financing side of it. And as we get closer to first oil, we actually de-risk the project. So we're going to put in place the debt financing and if -- and as we de-risk the project and get to first oil, we can either drop the whole project down to Teekay Offshore or we could look for joint venture partners, as other people have. We haven't decided which is the best. It would bring a lot of accretive growth to Teekay Offshore and therefore, help the GP cash flows. But as you point out and as Vince talked about with the $130 million, $140 million of EBITDA, it does represent some concentration risk. So we're open to looking at things, but whether we drop the whole vessel down to TOO or bring in some partners, in either case it will de-lever Teekay Parent and make Teekay Parent debt-free. And in terms of the concentration risk, there's -- there are other ways besides selling part of it to achieve that. We could, for example, put in place loss-of-hire insurance or business interruption insurance, and that's something we would look at naturally, if we retain 100% of that project.

Got you, all right. Now that sounds like you have a fair amount of options there. Maybe just kind of sticking with kind of the large FPSO segment for a second. I mean given that kind of backdrop in terms of kind of what you laid out and now you're thinking about the Knarr moving through your balance sheet, what else is out there from a large FPSO perspective that could potentially be warehoused at the parent? What do you think you could bite off right now, in 2013, without a JV partner for the Knarr? Or just kind of layout potential new projects at the parent level for '13. Or what's a reasonable assumption for kind of new CapEx there in '13?

Well, we have several FEED studies already underway on FPSOs that would deliver into 2016, 2017. If those ultimately culminate in contracts, then those -- then we would -- they would result in new projects. We're very careful about which projects we go after. We want projects that either fit into the Sevan design or basically fit into the Knarr design, rather than do one-off type projects. So we're restricting our marketing, if you will, to Brazil and the North Sea and projects which fit into those designs. So if you will, we're kind of going with a sister vessel concept.

Sure. That makes sense. In terms of those FEED studies that you're involved with right now, are any of them large enough that they couldn't fit directly down to TOO?

Well, our preference would be for TOO to do them direct. If we're lucky enough, and we get a lot of contracts, then maybe you -- we would have to have Teekay help, but that's not our priority game plan. Our game plan is to have TOO, which now is starting to get a market cap and a liquidity basis that it's able to do more warehousing itself. So for example, they ordered -- they have the 4 BG LN -- the 4 BG shuttle tankers. They're doing the Remora deal. They're doing the Salamander deal. And if we do some of these new FSOs, which we're also bidding on, those will be done directly at Teekay Offshore.

Got you. Are you guys in a position to give a timetable around those FEED studies and bids on new FPSO projects?

No.

Okay, all right. Just one more for me, and I'll turn it over. You mentioned the Foinaven and that tariff earlier in your remarks. And I may have missed it, but have you guys given an update in terms of where that contract negotiation stands around -- I believe it's around novation and where the Foinaven specifically fits within your drop-down pipeline now?

No, we're continuing to discuss with the charterer the successful transfer of it to -- from Teekay to Teekay Offshore Partners, so we don't have an update on that. But we need the approval of the charterer, and frankly, we've -- they and we have been more concerned with these unplanned shutdowns.

Fair enough. And I would assume that, that annual deadline that got kicked out in the middle of 2012 could be extended again in '13 without much of an issue.

I think that's right.

The next question comes from Fotis Giannakoulis of Morgan Stanley.

I want ask about your tanker operation. It seems that at the parent level it has been reduced significantly. Is there a plan to close it down, at least at the parent level, and just to operate through your daughter company? And particularly, I want to ask about the chartering-in tonnage, provided that you think that the market will start moving higher.

Well, we have said when we dropped down the 13 vessels from Teekay Corporation to Teekay Tankers that Teekay Tankers was going to be the growth vehicle for our tanker business, and none of that has changed. And therefore, what Vince was talking about is actually just leaving the existing tanker operations to roll off, which are mostly in-charters. But we do have 4 Suezmax tankers still upstairs at Teekay Parent, but we're not planning on adding more assets long term up at Teekay Corporation on the tanker side.

Does this mean that Teekay Tankers will be involved at some point at chartering in tonnage?

They are already chartering in tonnage on a short-term basis selectively, and Vince will talk about that in about an hour. So the good news about Teekay Tankers is it's able to charter out at higher levels than it in-charters, so it's successfully making a spread. But given the size of Teekay Tankers, I don't think it would ever be in -- do things on the scale that Teekay Corporation did.

Okay. And can you give us a little bit more details about the impairment charge that you took? Is this something that you decided or it was something that your auditors asked you to do? And what was the mechanisms out there that you decided the amount of the impairment?

Fotis, it's not something our auditors asked us to do. It's one of these things, it's an ongoing assessment that management does every quarter, and you have to really look at what your future estimated cash flows are, based on what market information you have. And in terms of the size of the write-down, it really is mainly related to 7 Suezmaxs, which have very high book values as a result of when we acquired them in 2007, and current fair market values. So even though the cash flow tests failed by just a small amount, you do have to actually write down to estimated fair market values based on today's low values. So that's, in summary, the investment -- or the impairment charge.

And my last question is I just want to go back a little bit about your new facility and the fact that it's been backed by assets from different daughter companies. What was the rationale? Was it pricing, the rationale that you decided to use different assets from different companies to secure this facility? And why the daughter companies did not issue a facility at their level?

Well, again, this is obviously a very valuable part of Teekay Parent’s investment portfolio, and we decided to use these assets as collateral to secure the revolvers. And I think giving that security, yes, probably it gave us some better terms on the revolver. And as Peter said, it isn't something we've drawn on, but it does give us a lot more financial flexibility going forward.

I think the main point is that if we had needed the money, we probably would have done an unsecured bond. But we don't need the money and we plan on it being undrawn, and therefore, it's just basically insurance that we're buying.

The next question comes from Brandon Oglenski of Barclays.

It's Keith Mori on for Brandon. Just wanted to kind of touch on the cost initiatives here. Are you thinking that, that's more back-ended towards 2013 or do you see that kind of being a smooth progression?

Sorry, I couldn't hear the question.

Do you believe that on the cost initiative side, that it will come more in the back end of the year or is it going to be a smooth transition throughout the year?

Well, some of the cost initiatives have already occurred. For example, the reorganization of our conventional tanker shore-based operations was completed in the fourth quarter in 2012. Our shuttle tanker reorganization is sort of during the first half of 2013, so it should be fully in place by midyear. And in terms of the vessel operating expenses, we've already achieved significant savings on the shuttle tanker side. So I guess, it depends on which initiatives you're referring to. But I would say in terms of the remaining cost initiatives, most of them should be completed by the middle of 2013.

Okay, That's helpful. And then, Peter, I know in the past you had mentioned that the tanker market, the Aframax, the smaller-sized vessels, maybe looked a little bit like they could recover first. Do you guys still see that occurring? Or do you see it kind of -- a different view now?

Actually, we do. As I'm fond of saying, we think the pig is through the python on Aframaxs. In other words, the vessels that are being delivered are equaling out to the vessels that are being scrapped. And so the charter discrimination that you're seeing on older tonnage is leading vessels to be scrapped earlier. And so basically, we see flat fleet growth on the Aframax side in the coming years. If you contrast that with Suezmax and VLCCs, those will still grow by mid-single digit numbers, 5% or 6%. And so that leads us to believe that our Aframax franchises, as well as our LR2 franchises, which is coated Aframax tankers, actually will see good incremental growth demand, particularly LR2 tankers where you're seeing greater naphtha runs and greater, longer run -- or longer haul refined products, they will move into more of the LR2 tonnage, which is why we're excited about that. And I encourage you to tune into Teekay Tankers, where Bruce will talk more about that.

There are no further questions at this time.

Thank you, all, very much. So you've seen our 2013 roadmaps, and we look forward to reporting on it next quarter. Thank you.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line, and have a great day.