Teekay Tankers Ltd

NYSE:TNK

Earnings Call Analysis

Record Earnings and Strategic Outlook for Teekay Tankers

In 2023, Teekay Tankers set a record with $500.5 million adjusted net income, a dramatic rise from 2022. The firm's Q4 adjusted net income reached $99.5 million ($2.91 per share), growing from the prior quarter's $76.6 million ($2.24 per share). Notably, Teekay's operational leverage means that each $5,000 rate increase above a $16,000 daily breakeven could generate $2.50 per share annually. Strategic vessel repurchases have reduced debt to zero and lowered cash breakeven rates, enhancing financial flexibility. Shareholders received a $0.25 per share dividend for Q4. The company predicts strong market conditions, with projected oil demand growth and minimal tanker fleet expansion supporting high utilization and rates for the next two to three years.

Impressive Full-Year Financial Performance

Teekay Tankers has achieved its highest ever annual net income in 2023, more than doubling its strong earnings from 2022 to $500.5 million, or $14.65 per share. The company reported robust quarterly income as well, with adjusted net income of $99.5 million for the fourth quarter.

Attractive Free Cash Flow Leverage

The company's future profitability outlook is highly sensitive to changes in tanker rates, where every $5,000 increase above the breakeven rate of $16,000 per day could lead to an additional $2.50 of annual free cash flow per share.

Generous Dividend Amid Market Highs

A quarterly dividend of $0.25 per share has been declared, reflecting the successful year for midsized tanker spot rates driven by growing oil demand, longer voyage distances, and minimal growth in fleet size.

Strong Market Fundamentals Signal Continued Support for Tanker Rates

The underlying supply and demand dynamics are expected to maintain strong tanker fleet utilization and rates, despite a likely presence of spot rate volatility into the foreseeable future.

Clever Asset Sales Boosting Profits

The strategic sale of older vessels in the fourth quarter harvested total proceeds of $46.5 million, translating into significant expected gains, thereby enhancing earnings.

Robust Global Oil Demand Sustaining Strong Rates

With global oil demand growth at 1.9 million barrels per day in 2023, rates have stayed elevated, averaging around $48,500 per day, propelled by demand recovery in China and India.

Changing Trade Patterns Amplify Tanker Demand

New trade exigencies due to political measures, such as the EU's ban on Russian crude, prompted a massive re-routing of oil exports to long-haul destinations like India and China, further increasing tanker demand and voyage distances.

Inaugural Fleet Growth Stifled Amid Soaring Tonne-Mile Demand

The company experienced subdued fleet growth, less than 2% in 2023, which was overshadowed by tonne-mile demand growth of over 7%, thereby fostering increased fleet utilization and supporting strong rates.

Consistently High Charter Rates Indicate a Flourishing Start to 2024

Early vessel bookings in 2024 have continued at a lively pace, averaging rates just above $50,000 per day, speaking to a valuable chartered fleet with a substantial mark-to-market value of about $60 million.

Promising Oil Demand Projections with Muted Fleet Growth

Oil demand is forecasted to expand by 1.4 million barrels per day in 2024, while tanker fleet growth is projected to be virtually nonexistent, setting the stage for continued strong utilization and rates.

New Trade Dynamics Providing Tailwinds to Demand

Global changes in shipping routes, including additional voyages around the Cape of Good Hope, and the expected surge in Aframaxes due to the Trans Mountain pipeline expansion, signal further demand and market complexity.

Impressive Operational Performance and Shareholder Value Growth

Teekay Tankers ended 2023 with pristine operational metrics and a transformed balance sheet, paving the way to eliminate debt entirely by the next quarter's end. This financial prudence has led to a striking shareholder return of 109% since the beginning of the year.

Projected Free Cash Flow Signifies Healthy Market Position in 2024

With the strength of the current market conditions, the company anticipates robust free cash flow, estimated at around $16.30 per share for the year, signifying confidence in generating considerable shareholder value in another promising year for the tanker market.

Optimistic Outlook on Midsized Tanker Market

Teekay Tankers believes its spot market focus and midsized tanker business will benefit greatly from the projected market trajectory, reinforcing its advantageous position in seizing the market's upside potential.

Earnings Call Transcript 2023-Q4

[Operator]

Welcome to the Teekay Tankers Limited Fourth Quarter 2023 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 the company. Please go ahead.

[Unknown Executive]

Before we begin, 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 annual 2023 earnings presentation. Kevin and Stewart 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 annual 2023 earnings release and earnings presentation available on our website.

I will now turn the call over to Kevin Mackay, Teekay Tankers' President and CEO, to begin.

[Kevin Mackay, executive]

Thank you, Ed. Hello, everyone, and thank you very much for joining us today for Teekay Tankers Fourth Quarter and Annual 2023 Earnings Conference Call. Joining me today on the call is Stewart Andrade, Teekay Tankers' CFO.

Moving to our recent highlights on Slide 3 of the presentation. Teekay Tankers reported adjusted net income of $99.5 million or $2.91 per share, an increase from last quarter's levels of $76.6 million or $2.24 per share, respectively. The company's 2023 adjusted net income of $500.5 million or $14.65 per share was more than double our strong 2022 earnings and established a new record for Teekay Tankers' highest ever annual net income.

Amid historically strong spot rates, the significant value of our high operating leverage is clear. As a reminder, for every $5,000 increase in tanker rates above our free cash flow breakeven of $16,000 per day, we expect to generate approximately $2.50 of annual free cash flow per share. We will provide further information on this later in the presentation.

In January, we gave notice to repurchase the remaining 8 vessels on sale-leaseback arrangements for $137 million. Once complete, this repurchase will bring the total number of vessels repurchased since March 2023 to 27 vessels for a total of $501 million, reducing our total debt outstanding to 0 and decreasing our cash breakeven rates. In line with our fixed quarterly dividend policy, we have declared a cash dividend of $0.25 per share for the fourth quarter of 2023. In the market, 2023 turned out to be the best year for midsized tanker spot rates in TNK's history due to a combination of strong oil demand growth, longer voyage distances and low fleet growth. Rates have remained firm at the start of 2024 with seasonal and geopolitical factors adding to an already tight tanker market.

Looking further ahead, we believe that strong tanker supply and demand fundamentals will continue to support tanker fleet utilization and rates over the next 2 to 3 years albeit with periods of pronounced spot rate volatility. Finally, we sold 2 2004-built Aframaxes during the fourth quarter for total proceeds of $46.5 million recording a gain on sale of $10.4 million in December and an expected gain of approximately $11.5 million in Q1 of this year. Both of these vessels now have been delivered to their new owners.

Turning to Slide 4. We look at dynamics in the spot tanker market. As mentioned on the highlights slide, midsized spot tanker rates during 2023 were the highest in Teekay Tankers' history with rates averaging around $48,500 per day. Global oil demand grew by approximately 1.9 million barrels per day in 2023 per the IEA. As the world continue to rebound from the COVID-19 pandemic, with particularly robust growth from China following the removal of travel restrictions at the start of the year as well as from India. As a result, global oil demand moved above Preneed-pandemic levels for the first time to a record high of around 101 million barrels per day and has remained strong in the early part of 2024.

Global oil supply also saw robust growth in 2023 despite OPEC+ supply cuts due to high output from non-OPEC countries. Oil supply growth was particularly strong in the Americas, with U.S. crude oil exports reaching a record high of over 4 million barrels per day. Tanker demand saw a further boost from longer voyage distances during the year which was the first full year following the EU ban on Russian crude oil imports and the G7's price cap, which came into effect in late 2022.

As a result, over 90% of Russian crude oil exports moved long haul to India and China during the year. While Teekay Tankers does not participate in this trade, there is nonetheless been a significant overall boost to midsized tanker demand. Finally, despite an almost total absence of tanker recycling, the global tanker fleet saw less than 2% growth in 2023 due to a very small order book. This far outweighed -- this was far outweighed by tanker tonne-mile demand growth of well over 7% leading to an increase in fleet utilization and strong rates. Spot tanker rates have remained firm at the start of 2024 due to a combination of strong underlying fundamentals seasonal factors such as weather delays and various regional disruptions. I'll give more detail on these factors later in the presentation.

Turning to Slide 5. We provide an update on our Suezmax and Aframax size spot rates in the first quarter to date. Based on approximately 68% and 67% of revenue days booked, Teekay Tankers' first quarter-to-date Suezmax and Aframax size vessel bookings have averaged approximately $50,100 per day and $50,900 per day, respectively. Importantly, I once again highlight the value being created by TNK's 8 vessel chartered in fleet with 7 ships trading in the strong spot market. With an average in-charter rate level of $25,400 per day, the chartered-in fleet has a current mark-to-market value of approximately $60 million, which is in addition to our owned fleet.

Turning to Slide 6. We look at tanker supply and demand fundamentals, which we believe will continue to support high tanker fleet utilization for at least the next 2 to 3 years. Global oil demand is projected to grow by around 1.4 million barrels per day in 2024 as per the EIA with further growth of 1.3 million barrels per day in 2025. This is in line with prepandemic levels of growth and indicates that demand growth for oil remains robust with consumption projected to reach 103.7 million barrels per day by the end of 2025. 3 million barrels per day higher than the levels seen prior to the COVID-19 pandemic.

Meanwhile, the outlook for tanker fleet supply remains extremely positive with minimal tanker fleet growth expected over the next 2 to 3 years. This is especially true for 2024 with just 9 million deadweight tons scheduled to be delivered the lowest annual total since 1997. The tanker order book remains small by historical standards at around 7% of the existing fleet size while forward order book cover at global shipyards stands at 3.5 years, meaning there is little spare shipyard capacity until 2027. The combination of a low order book and aging tanker fleet and a lack of shaped yard capacity until 2027 should lead to exceptionally low levels of tanker fleet growth over the next 3 years, including virtually no fleet growth in 2024.

As shown by the chart on the bottom of the slide, tanker tonne-mile demand growth is expected to outstrip fleet supply growth this year and in 2025 continuing the trend that started in 2022 and extended into 2023. This compounding impact of demand growth exceeding supply growth should continue to support high levels of tanker fleet utilization and firm tanker rates.

Turning to Slide 7. We look at various events that are impacting tanker trades this year, which are creating additional rate volatility in an already tight market. Starting on the right side of the slide, Russian crude oil exports slowing long haul to India and China via the shadow fleet should continue to support midsized tanker demand in 2024. In addition, there have been increased attacks on Russian refineries and storage facilities in recent weeks, which may cut Russia's ability to produce refined oil products and lead to more crude oil being available for export.

In terms of oil supply, the majority of production growth in 2024, is excepted to come from non-OPEC countries in the Atlantic basement led by the United States, Brazil, and Guyana. Given the oil demand growth, it is expected to be concentrated in Asia. There could be an increase in Atlantic to Pacific crude oil movements which would be beneficial for tanker tonne-mile demand. Disruptions to vessel transits in both the Panama and Suez canals are also impacting the tanker market this year. While the Panama Canal is not a major transit corridor for crude oil tankers, the inability to transit the canal, limits tankers' owner's ability to reposition ships between the Pacific and Atlantic basins, and therefore, creates inefficiencies, which from a tanker market perspective is generally positive as it leads to increased tanker utilization.

With regards to the Red Sea, the increase in attacks on merchant shipping since last December is having an impact on tanker trade patterns. This is a dynamic situation but in recent weeks, there have been an increasing number of shipowners and operators avoiding the region and seeking alternative routes that involve longer voyages. For many vessels, this means sailing around the Cape of Good Hope adding a significant number of voyage days and creating additional tanker ton mile demand. For example, Suezmax voyage from Basra Iraq to the Mediterranean is about 4,000 nautical miles or 13 days via the Suez Canal compared to around 12,000 nautical miles or 40 days via the Cape of Good Hope. While it is impossible to predict how this situation will evolve, the rerouting of cargoes is likely to continue creating additional tanker demand in the near term.

Finally, the expansion of the Trans Mountain pipeline to Vancouver, Canada later this year will lead to a new source of Aframax specific demand. This pipeline with an increasing capacity of 590,000 barrels per day is intended to provide a new seaborne outlet for Canadian crude oil exports. Given that the terminal is restricted to Aframax size vessels, it is anticipated that the expansion could result in up to 30 to 35 Aframax loadings per month. This is an exciting development and has the potential to create significant Aframax demand once the pipeline is up and running, with the operator currently expecting the start of oil flows through the pipeline during the second quarter of 2024.

So in sum, the numerous changes to trade patterns around the world, which I've just described, are leading to increased complexity and supply chain inefficiency creating additional tanker demand as a result and spot rate volatility in what is already a fundamentally very tight market.

I'll now turn the call over to Stewart to cover the next 2 slides.

[Stewart Andrade, executive]

Thanks, Kevin. Turning to Slide 8. We outlined some of Teekay Tankers' key accomplishments in 2023. As noted earlier in the presentation, financially 2023 was a record-breaking year with the company generating just over $0.5 billion of adjusted net income and over $575 million of free cash flow. These strong results allowed us to transform our balance sheet, repurchasing 19 vessels from sale-leaseback arrangements and refinancing them with a new $350 million revolving credit facility, which provides us with greater financial flexibility.

In addition, TNK ended the year with a net cash position of $226 million. As a reminder, after the repurchase of our final 8 vessels in sale-leaseback arrangements, we expect to be completely debt-free by the end of the first quarter. 2023 was also a year of strong operational performance with 99.8% fleet availability and 0 lost time injuries. A metric that we don't often touch on during these quarterly investor calls, but which is extremely important for our -- for the safety of our crews and the reliability of our operations.

Commercially, we continue to manage our lucrative time charter portfolio by extending in charges at rates well below the current spot market, enabling us to profit significantly from the spread. With all of these accomplishments in 2023, the successful execution of our strategy has created significant value for our shareholders through a combination of returning capital via dividends and the appreciation of our share price. Since the beginning of 2023, we have generated total shareholder return of 109%, which further builds on the significant shareholder value Teekay Tankers created in 2022.

Turning to Slide 9. We highlight the potential for TNK to continue creating significant shareholder value in 2024, a year that we expect to be another strong tanker market. With 98% of our 51 vessel fleet operating in a strong spot tanker market that is supported by robust tanker supply and demand fundamentals and driven further by the various factors we have talked about today, we feel confident about our ability to continue creating shareholder value.

As a demonstration, if we use the trailing 12-month average of TNK's realized spot rates and project that forward, our annualized free cash flow would be approximately $16.30 per share or a free cash flow yield of approximately 28%. With this kind of operating leverage, strong prospects for midsized tankers moving forward and a growing cash position, we're making progress in building Teekay Tankers' strategic optionality for future fleet reinvestment.

I will now turn the call back to Kevin to conclude.

[Kevin Mackay, executive]

Thanks, Stewart. In summary, as we experienced in 2023, the fundamentals of our business continue to be highly supportive for what could be a protracted period of midsized tanker market strength. Most notably, a very positive tanker supply outlook grounded by a negligible multiyear newbuild delivery schedule. Oil demand continues to grow past the post-pandemic rebound. But beyond the fundamentals, a range of factors are introducing complexity and inefficiency into the market tightening the supply and demand balance still further. Overall, we believe that our midsized tanker focus and spot market strategy places Teekay Tankers in an ideal position to continue capturing upside and realizing shareholder value moving forward.

With that, operator, we're now available to take questions.

[Operator]

[Operator Instructions] We will take our first question from Jon Chappell with Evercore.

[Jonathan Chappell, analyst]

First question is simply what's next. You pointed out a great outlook for the industry. Your operating leverage is immense, you'll be debt-free in a matter of weeks. What comes next the deleveraging is done?

[Kevin Mackay, executive]

Yes, John, it's a good question. And I think it's really more of the same. I think we've been clear over the last few quarters in explaining what our focus is. Our strategy is to continue to both build the strong cash position to reinvest in our fleet and to reinvest in our business. [indiscernible] to reward shareholders through some of the capital allocation tools that we laid out in our capital allocation plan. So I think just because we've crossed the -- or we will cross the milestone of being debt-free, the strategy will remain the same.

[Jonathan Chappell, analyst]

It seems like since the special dividend, I think 9 months ago now, there's been no real acceleration in the capital allocation. I don't think there's been much in the terms of buybacks despite trading at a pretty big discount to most estimates of NAV. Do you think that, that's something that accelerates now in 2024 as you wait for the opportunity to reinvest in the fleet?

[Kevin Mackay, executive]

It is definitely something as I said is in our tool [indiscernible] 9 months ago when we rolled out our capital allocation plan, it was based on a holistic view of our needs as well as what shareholders are looking for. I wouldn't read into the fact that we may not have used 1 or 2 of the tools so far. We put them in there for a specific reason. And the discussion that we have at management level and with the Board is always a holistic one around where we're going, where can we add the best value and what should we do with the money we're generating?

I think I wouldn't read into the fact that we haven't used anything so far as something that indicates that we won't be using them in the future.

[Jonathan Chappell, analyst]

Just one more quick one. I mean selling older assets makes a ton of sense, especially at these levels, and you're continuing to do that. Should we maybe think about renewing the fleet through sale and then just creating this massive buffer for when the cycle inevitably turns and then being opportunistic at some point in the medium to distant future?

[Kevin Mackay, executive]

I think there's a lot of ways you can look at it. And we're not agnostic -- sorry, we are agnostic to where we can bring the most value to shareholders over time. So in terms of what we're looking at, whether it's small acquisitions, large acquisitions, fleet dispositions, exiting individual ship assets as we did last quarter. Those are all in the discussion that we have both management and board level.

[Operator]

We will take our next question from Omar Nokta with Jefferies.

[Omar Nokta, analyst]

I do have a couple definitely continuing the theme of John's questions. Stewart, you mentioned in your opening comments about you're getting to the point now where you have optionality for future fleet reinvestment. And it's -- you've been selling the older vessels makes sense. You haven't been replacing them with modern ones. So just wanted to check kind of and how you're sort of thinking about the planned -- perhaps planned retooling of Teekay Tankers. Is it given the fact that asset values have started to really run away. Are we sort of -- are you thinking that maybe you close the book on reinvestment in this up cycle? And is the plan basically you build a war chest and be prepared for investment when the market eventually rolls over. That's one sort of way -- one question I have and then maybe the second part of that is perhaps is tankers where you want to be long term? Or are you thinking of diverting down the line?

[Stewart Andrade, executive]

Thanks for the very good questions. So maybe taking the first one first. So we've been selling some vessels, a couple of vessels, our 2004 built, which are -- which were about to turn 20 years old and were dry-dock do. So that's sort of just a normal part of of moving those vessels on.

In terms of looking at reinvestment, I guess there's a couple of ways to look at it. Yes, asset prices are quite high. We also have a view that the tanker market is going to be very robust over the next few years. So part of the consideration is always what are you paying for those assets, how much cash flow can you generate from them over the next few years and potentially paying them down to a level that you would be comfortable at. So just like time charters in and out are always looked out. We're also looking at S&P. So I don't think that we've closed the book on the opportunity to buy vessels. So it's not that we haven't closed the book and we said, well, we'll just come back when asset values come down. So it's something that we're always evaluating. There's -- with our growing financial strength, we look at all sorts of opportunities, including the potential to acquire fleets, M&A, everything. So we are, as Kevin likes to say, we are agnostic over the approach that we would take. And we look at all those things as opportunities to reinvest in the fleet. So we are committed to reinvestment, and we will -- if we can do it sooner, and there's opportunities that we think will create value for shareholders. Then we'll go ahead and do that. If we have to be more patient and wait, then we'll do that. So it's -- so we -- our eyes are always open, and we're looking for opportunities.

In terms of the second part of your question about other segments, we're a tanker company. We've been in tankers since we were formed in 2007, and that is where our focus is. If we end up in a situation where we have a lot of capital to deploy and tankers and there isn't -- the window isn't open for tankers, but there's other opportunities in other segments. Then, of course, as a company, we would consider wherever we can create shareholder value. But we are a tanker company, and that's what we've been focused on. And at the moment, there's no intention to pivot away from that.

[Omar Nokta, analyst]

Yes, I just was wondering if perhaps maybe the reason why we haven't seen the reinvestment is, perhaps thinking a bit more strategically outside of tankers. And I guess at what point do you think as you highlighted, at the end of the quarter, you'll pay off the capital leases, the cash is going to start to really accrue fairly rapidly in the next few quarters, assuming obviously, the market remains a float. And as you highlighted, you think it can last a couple 2 or 3 years. Is there a point at which point you start to think, wow, the cash is building too much, we need to now move this. Have you thought about that? And is there sort of like a cash balance trigger that really starts to make you think, okay, we have to put this capital to work.

[Stewart Andrade, executive]

I don't think there's any trigger, first of all, let's say that. I don't think there's a number or a trigger. And when we put in the capital allocation -- our capital allocation approach, which was a sustainable quarterly dividend, which given our transformed balance sheet, we thought we would be able to continue to pay for the long term and then the flexibility to pay special dividends when deemed appropriate. We did that for that exact reason, so we could be flexible and we could make large returns of capital or small returns of capital, depending on the position of the company and how we saw our prospects going forward.

So the situation that we're in now is we -- as you said, we're generating a lot of cash flow, which at the end of the day is equity value for shareholders. And as we've seen in the last year, quite a bit of that equity value has been -- has come through in terms of our share price. And we had over 100% total shareholder return during 2023. During 2022, it was even larger than that. So we feel like that equity value is being realized in terms of our share price. But then the question becomes, well, what do we do with that cash flow or that equity value? And how do we best deploy that to create value for our shareholders and that's the conversations that we have. Should we return a certain amount to shareholders via direct capital return? Or do we think we'll create more about by having that financial strength that we can reinvest at the right time to create even more value. So that's really the basis of the conversations that we have.

And as you rightfully note as -- if this market stays strong for the next 2 years, TNK will be in a much different position than we are today. And I would expect the conversations that we have around the capital allocation would be informed by that changing -- the changing nature of our balance sheet. And again, we will use the same criteria, which is how do we create value for our shareholders, but the answers might be different as we move forward.

[Omar Nokta, analyst]

That is a great situation to be in, nonetheless. So yes, I appreciate those comments. And if I could just ask one quick one just on the market. Kevin, you were sort of highlighting the Trans Mountain pipeline. And I just wanted to get a sense from you. Does this -- you mentioned 30, 35 Aframax loadings. Is this a brand-new trade pattern that can start to evolve? Or is there already a market for Aframaxes in that region? And where do those cargoes, you think end up going?

[Kevin Mackay, executive]

It's a good question. At the moment, you have approximately one Aframax lifting a week. So it really is a significant uplift in export capacity. There's various markets that, that crude can move into, it can move down to the U.S. West Coast. It can move down to Panama to be put on VLCCs or co-loaded to send to -- further over to Asia. It may even be put through the Panama Canal.

At this point in time, we don't know. All we know is that the operator is indicating that the pipeline will open and have oil flow at some point in the second quarter of this year. In terms of the destinations of those cargoes, we'll have to wait and see how the trading or the oil trading environment picks up on that oil and where they can probably make the best bargain. So the only short thing is that you can only load an Aframax out of Vancouver. You can't take a Suezmax or VLCC in there. So from a demand perspective, it's a really exciting area that we're really keen to keep an eye on and it could bode well with our capacity that we have currently in the U.S., Gulf and with our Suezmax fleet also trading around that area. It could move a really good dynamic for the midsized tanker space overall?

[Operator]

We will take our next question from Ken Hoexter with Bank of America.

[Ken Hoexter, analyst]

Kevin and Stewart, it's amazing that this discussion so far in terms of finally getting rid of all that debt and you're going to be debt-free in a few weeks. It's just such an exciting turn. I want to talk about the market though. You haven't talked much about the market. It seemed like rates right now are about $60,000 a day or kind of trended, I guess, even in the back half of last quarter for both for Suez and you're kind of averaging $50,000, I think the stock move this morning is kind of showing a little bit of that disappointment in where rates are in the first quarter to date? And then even where you averaged in the fourth quarter. Maybe run through. Was that maybe some more moves of clean versus dirty. I don't know what [Technical Difficulty] market through the quarter.

[Kevin Mackay, executive]

Yes, I can't speak to the TNK share price movement today. But in terms of the market, I think I would I would characterize it as being a slightly less robust fourth quarter than what we had the year prior, but still a historical level. TNK's performance in the fourth quarter was hampered slightly by some of our positioning at the end of Q3 with our Suezmax fleet where we bunch up some ships and ended up having to take rates that were significantly lower at the back end of the third quarter than what we've seen since then, and that impacted our results for the fourth quarter.

But as you can see from our first quarter-to-date numbers averaging $50,000 across both segments, they're extremely healthy numbers. They're back up to close to '22 and early 2023 levels. And I think that is a function of the fact that the market is strong, demand is strong and ton-mile is being expanded by all of those issues that I highlighted in the presentation. So I think our view is the market should stay strong. There's obviously going to be volatility. You mentioned $60,000 a day. The LR2s have been at that level, but they're slowly coming off. The Aframaxes in the U.S. Gulf have been $80,000 a day points during the first quarter and have come off since then.

Other areas, the Far East is still holding fairly strong. So I think we're going to see while the fundamentals are strong, you're still going to see volatility. So capturing that and making sure that our fleet deployment is in the right areas at the right time to capture that volatility is going to be important to maintain the kind of returns that we had last year. And I'm confident that looking at what we've been doing thus far in the first quarter, we should continue to perform well quarter-over-quarter. And I don't really focus on an individual quarter because, as I said, a lot depends on where the fleet ends up being positioned based on the voyages that we fix. Over a series of quarters, I'd expect us to be robust in terms of our performance.

[Ken Hoexter, analyst]

I mean, it's great run through, Kevin, and I'm not arguing the robust. It certainly is robust. I mean that's obviously what's generating the cash flow. I'm just arguing or trying to understand why such a consistent difference or underperformance relative to kind of Clarkson averages, which would be kind of the average of all the lanes. And I think I got it now from the end of the third quarter, that impacted fourth quarter. But was there more of that as you enter the first quarter? Or are you seeing then the next level of bookings improve from where you were? Just trying to understand if there's going to be an acceleration or you mentioned a couple of pullbacks versus other regions that are really strong. So is that just more a factor of where your vessels are?

[Kevin Mackay, executive]

I think it's a factor of a broker's assessment of the market, looks purely at a singular voyage and when you're trading a fleet of 50 ships, some ships sit in demurrage, some ships are held up waiting to go through canals. A lot of operational factors come in that impacts your final returns. There's also the timing. It's not a straight average that you're getting broker calculates based on daily rates. It's fixing a certain amount of your fleet at a certain point in time in that quarter and has an impact. Sometimes, as I've said, in the back end of the third quarter, not a very good impact. Other times, the impact is really positive. So I wouldn't look at broker assessments and then judge every ship owner's performance necessarily against that on an individual quarter.

[Ken Hoexter, analyst]

Great. And then I guess 2 quick Stewart questions. One, can you talk about the new breakeven level as you get past this final debt paydown? Maybe just how we should think about that? And then secondly, you mentioned it's not the right time to buy yet. You want to keep looking at the market. Do you go back to the special dividend policy? Or do you enhance the buyback? Do you have like a favorite move in the interim if you're starting to build the cash that you were just talking previously about.

[Stewart Andrade, executive]

Thanks, Ken. In terms of the breakeven level, so once these -- once we repurchase these final vessels, expect the breakeven level to be between $15,500 and $16,000 a day depending on a few factors, but that's about where it is. So above that level, we would generate free cash flow -- positive free cash flow. And just to be clear, that's an all-in number includes CapEx, maintenance CapEx and everything else. So that's a fully baked number.

In terms of capital -- in terms of capital allocation, when we announced the capital allocation policy 3 quarters ago, we did characterize the special dividends is something that we would use periodically to return more capital to shareholders. We certainly haven't changed that. So it's not really a matter of going back to it. I guess, it's in place there, and it's what it's -- we're using it the way that we had intended to use it. And we are going to -- we'll continue to have discussions around when and how to use that special dividend.

So at the moment, I would say that if there is capital allocation in addition to our fixed quarterly that it's more likely to be in the form of special dividends and buybacks. The buybacks were put in place -- the buyback program was put in place mainly to deal with if we thought they were sustained long-term dislocations in the market, which was affecting our share price, so we could act opportunistically. But I would say that as we did in 2023, special dividends are more likely use of returning capital in the near term.

[Operator]

We will take our next question from Eirik Haavaldsen with Pareto Securities.

[Eirik Haavaldsen, analyst]

So just a follow-up. I was just curious because did I understand you correctly when you said that you don't really have a limit as to how big your cash [indiscernible] could really grow here. Because, of course, you're already at very decent levels and at current markets that's growing rapidly. So you don't see smaller cash coffers as -- and there's no limit basically to where we can be .

[Stewart Andrade, executive]

Right. So we don't have a number in mind that says, once we reach this number that we would feel compelled to do something with that capital. Again, it's looking at the opportunities in the market, the need for fleet reinvestment, our view on when those opportunities might arise, how much capital we would need to take advantage of those and then making a decision around our overall capital allocation. So where we stand today, we think that we will continue to build balance sheet strength, and we will balance that off against returning capital to shareholders via the -- our capital allocation policy that we've outlined. And we can't really look into the crystal ball and say, well, in 12 months from now, what will our decision be around capital allocation. But where we are today is that we're in the same place roughly that we -- when we announced our capital allocation 9 months ago, which is our primary focus, will continue to be on building financial strength so we can make reinvestments in the fleet, balance that off against returning capital directly to shareholders. And when we -- if and when we get to a stage that we think that's not the appropriate capital allocation policy, and we should do something different, which could be investing that capital. It could be returning it to shareholders, whatever it is. Then if we get to that stage, we will definitely communicate that to the market, and we'll go from there.

[Eirik Haavaldsen, analyst]

But I think previously, you said that [indiscernible] prices weren't really attractive or at least lead times were not really compelling. So does that change at all over the past 6 months?

[Stewart Andrade, executive]

As I mentioned earlier, I mean, the new building prices are quite high. And as I said, I think one of the things we need to balance that off against and I think probably all shipowners are is the view of the market in the next -- over the next few years and the strong cash flows that we could produce over that period and putting the context of -- or putting the cost of vessels in that context. There's also M&A potential opportunities. There's time charter opportunities. There's a number of -- there's a number of things are ways that we could deploy that capital. And those are things that we're always looking at and analyzing.

So there's nothing specific to -- there's no nothing.

[Eirik Haavaldsen, analyst]

But finally then, when you mentioned M&A and you -- I mean, you do highlight shareholder value creation here a number of times. But in terms of M&A, do you look at your price to NAV, do you feel your share price is fairly reflecting where the underlying values are at the moment? Just curious.

[Kevin Mackay, executive]

So we've traded in our shares have traded in a range over the last 52 weeks. Obviously, they've -- we started the year at the beginning of 2023 at $28 a share. We traded up to over $64 a share. So it moves in a range. Sometimes we probably thought that, that range was more reflective of the underlying value of the company than others. But I guess our focus is on running the company as best we can, creating shareholder value. and trying to illuminate our strategy and hoping that, that is reflected adequately in the share price. If we think that there is a dislocation that we can -- that can -- that gives us an opportunity to buy back shares, we have that available to us, which we can use. But again, our focus is on long-term value creation more so than short-term share price movements.

[Operator]

At this time, I would like to turn the call back over to the company.

[Kevin Mackay, executive]

Thank you for joining us today, and we'll speak to you next quarter.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.

-- welcome to the Teekay Tankers Limited Fourth Quarter 2023 Earnings Results Conference Call. During the call,