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TEEKAY CURRENT TEEKAY NEWS FOR TEEKAY PERSONNEL March 2015 | Volume 34 | Issue 11 43 ISSUE HIGHLIGHTS NEWS Fourth Quarter Updates Page 1 - 2 Knarr Achieves First Oil Fourth Quarter Updates Page 2 The Editor Life At Sea – Video Page 3 “All four companies made a profit - first time since 2008!" Company Performance Factor Page 4 Peter Evensen is in fine form reviewing Q4 and the whole of 2014. Here is some of what he shares: Messages from Kenneth Hvid Page 5 “We had a great year…All of our verticals were on FIRE.” “All four public Captain Igor Danikin, 1AE Aleksandr companies made a profit – the first time since 2008!” Watch the full quarter Fadeev, and Chief Officer Igor Popleskin review from Peter here. arrive in Sabetta Page 6 (Note: Vessels without VSAT access will receive this in the Creole Spirit keeling & taking shape next Fleet DVD) Page 7 Docking of Hugli Spirit CEO update: Never a crisis, merely an opportunity Page 8 The Editor Teekay’s first Floating Accommodation Unit (FAU), Arendal Spirit With recent decline in Page 8 oil prices, Peter Evensen expects Hummingbird Spirit reaches six years with zero Lost Time Injuries 2015 to be a different Page 9 year – but is still Update on meeting between Odebrecht and optimistic. The focus? Teekay Working closely with Page 10 customers and A message from Ray McNamara suppliers for a win-win Page 11 on both ends. Farewell Lois Nahirney Page 11 In this quarterly update video, Peter explains how together we can face the strong headwinds ahead. We must know our current contracts and Market Updates Page 12 future-proof new contracts ($7b so far!) by reducing costs, changing working practices and seeking new opportunities. Best of #TeekaySpirit Page 13 And, in case you haven’t seen it already, here are Peter Evensen’s thoughts for Teekay in 2015. A must read. Stock Activity Page 14 Note: Vessels without VSAT access will receive this in the next Fleet DVD. Job Postings Page 15 BRINGING ENERGY TO THE WORLD Q4 and 2014 Review Updates from Vince Lok, CFO & Executive Vice President: The Editor Goal of returning to profitability in 2014 has been achieved! All the numbers have been crunched. Q4 was a big success and 2014 ended on a positive note - back in the black! Vince Lok brings you the details of how we made it, and also good news about the Corporate Performance Factor (CPF). For more, watch the fourth quarter CFO update. Note: Vessels without VSAT access will receive this in the next Fleet DVD. Whistler Bank Meeting 2015 The Editor Just how many billions of dollars of deals do we have to finance in 2015? Vince is joined by Greg Romaniuk to share a bit of background on the recent Whistler Bank Meeting. This biennial meeting is one of the important ways we keep our Finance partners excited about what we are doing. Greg talks about his shopping list of projects, how we stand apart from our competitors, oh and about the fun. We are not sure how much of the discussion took place on the bobsled course, see if you can tell. Watch the Whistler Bank Meeting summary video. Note: Vessels without VSAT access will receive this in the next Fleet DVD. From Peter Lytzen: Our latest FPSO new build, the Petrojarl Knarr, has achieved first oil Peter Lytzen - President and Chief Executive Officer, Teekay Petrojarl I am very happy to announce that our latest FPSO new build, the Petrojarl Knarr, has achieved first oil at the Knarr field in the North Sea. Commencement of production also marks the strengthening of our long-term relationship with BG and their partners which, beside Teekay being responsible for the production of the Knarr field, also includes the responsibility for export of the crude to shore by our existing shuttle tankers. A real testimony of BG and their partners' trust in Teekay and our capability to be a one-stop shop for our customers. Petrojarl Knarr was constructed at Samsung Heavy Industries in South Korea and is equipped with an internal turret provided by OneSubsea. The oil production capacity of Petrojarl Knarr is 63,000 bopd with gas compression and treatment facilities up to 47 mmscfd. The size of the hull is 256 m x 48 m with a storage capacity of 800,000 barrels and 2 on board we can accommodate up to 100 people. I would like to thank everyone who was involved in the planning, building, and start-up process of the Knarr FPSO. The successful commencement of production is a great achievement and I am impressed by and proud of the team work, commitment, and spirit that I have seen since we won the contract in June 2011. Well done, everyone! Click on the link below to access Press Release from BG Group. http://www.bg-group.com/111/media/press-releases Kenneth Hvid's Friday Note: A week of milestones! Kenneth Hvid - Executive Vice President and Chief Strategy Officer First Oil on Knarr, the delivery of our 3rd towage vessel into ALP, and the loading of Arendal Spirit in China for transport to Brazil - another week with important milestones to celebrate (some people even got cake). These achievements don’t come without meticulous planning, hard work and willingness to put other things in our lives on hold as this is happening. Thank you all! Our TOO unit price started out the week below $20, and closed at $22.26 today. As you are aware, the stock has been underperforming with the drop in oil price, so it’s nice to see that the market took notice of the Knarr First Oil announcement even though the FPSO technically isn’t owned by TOO yet. The stock price is important as we look to issue new equity to fund our continued growth of the company. There isn’t much we can do about macro headwinds, but what we can do is executing on our projects and operating well. I know many of you are anxious to hear about the next organizational steps. Next week we will share the selection process for the P&L lead roles in Teekay Offshore. We are only considering Teekay candidates and therefore expect to finalize the process by end of April. At that point we will be meeting with the candidates to refine the roles and responsibilities and together agree on our priorities as a leadership team. In the meantime it is business as usual. Teekay's most watched video ever? Check out life on the European Spirit. Watch the video here. Note: Vessels without VSAT access will receive this in the next Fleet DVD. 3 Company performance factor The Editor Company Performance Factor (CPF): Final CPF is 1.01 and Board has approved a discretionary increase of an extra 10% to our 2014 Short-Term Incentive Award. Company Performance Factor (CPF): 2014 Final Results and 2015 Target Key Points Final 2014 CPF is 1.01, as the CPF-based net income achieved was $11 million compared to our target of $10 million. Board has approved a discretionary increase of an extra 10% to our 2014 Short-Term Incentive Award (i.e., bonus) CPF for 2015 continues to be linked to consolidated profitability Message We are pleased to announce Teekay’s Company Performance Factor (“CPF”) for 2014. Teekay exceeded its target CPF- based net income which resulted in a CPF of 1.01. In addition, in recognition of the many achievements and significant efforts of the staff during 2014, the Teekay Board of Directors has approved a discretionary increase of 10% to the bonus or Short-Term Incentive (“STI”) pool. The result is that the 2014 Short-Term Incentive Awards for those staff that are based on the CPF will be 1.01, and that a further 10% will also be added to those bonus payments. This effectively represents an increase of over 50% compared to the 2013 CPF of 0.72. Congratulations to everyone on a successful year in which all four of our publicly-listed companies on the NYSE were profitable and it was Teekay Corporation’s first full year of positive adjusted net income since 2008. Details of 2014 CPF-based net income As a reminder, for every $1 million of CPF-based net income above our 2014 CPF target net income of $10 million, the CPF increases by 0.01. As highlighted in the attached chart, our final result for 2014 net income on a CPF basis was $1 million above the target of $10 million. (As a reminder, for CPF purposes in 2014 we start with our adjusted net income for the year of $1.5 million and then assume the Petrojarl Iwas sold on June 30, which is consistent with our budget assumptions, and results in adding back $9.5 million of losses to CPF-based net income for the second half of the year as the Petrojarl I was in layup and not earning any revenue.) This final 2014 CPF result is an improvement from our last estimate as we had stronger than forecast fourth quarter results. In summary, slightly higher than targeted results for the year are primarily due to: Higher than expected spot tanker rates; Higher interest earned from the VLCC loans earlier in the year; and Fees earned from managing our new tanker (TIL) and drybulk (BIL) entities, offset by 4 Lower than expected revenue from the Foinaven FPSO due to a combination of compressor issues and oil production shortfalls resulting from subsea issues which our customer is working to rectify As a reminder, the Short-Term Incentive formula is as follows: Salary x Target Award % x [((Individual Performance Factor x 50%) + (Team Performance Factor x 50%)) x CPF] The CPF impacts the total bonus pool which increases or decreases in size based on the success of the company in meeting its targeted CPF-based net income.