Teekay Corporation's (TK) second quarter loss narrowed as the tanker-ship company saw revenue rise and voyage expenses decline. The company also recorded a foreign exchange gain. Teekay has posted mixed results in recent quarters as derivatives affect its bottom line and a glut of tanker space pressures sport market rates. Last month Moody's lowered its outlook on Teekay to negative from stable. They are concerned about management's plan to use more equity capital when funding investments or possible asset sales to one of several publicly listed subsidiaries. Teekay reported a loss of $47.3 million, smaller than its loss the year prior of $96.5 million.
In past years Teekay has spun off several operations. It still holds stakes in Teekay LNG Partners LP (TGP), Teekay Tankers Ltd. (TNK), and Teekay Offshore Partners LP (TOO). Teekay LNG Partners LP is the third largest independent owner of liquefied natural gas carriers and has grown approximately 23% since December. This is due in large part to the growing global demand for liquefied natural gas as a substitute for coal and oil. There was also a decrease in construction costs for LNG vessels and an increase in distributable cash flow from successful acquisitions. The company's first quarter earnings increased year over year by 22%.
Teekay Tankers was formed by Teekay Corporation in 2007 as part of its strategy to expand its conventional oil tanker business. Teekay Tankers recently reported that second quarter earnings as well as revenues beat expectations for the period. Sales were 69% higher year over year as margins dropped across the board. Even though revenues beat expectations they still dropped 11%. Revenue after adjusting voyage expenses also fell 11% in the second quarter.
Teekay Offshore is an international provider of marine transportation, oil production and storage services to the offshore oil industry focusing on the fast-growing, deepwater offshore oil regions of the North Sea and Brazil. Teekay Offshore saw its second quarter loss widen to $12.1 million from the year prior's loss of $11.4 million. Vessel operating expenses were in line with the previous quarter. Also, increases and in maintenance and repairs were offset by reduced costs in other areas.
For the majority, the Teekays are experiencing costly and heavy reductions in earnings and revenues. The one unit that seems to be fairing well for the company is Teekay LNG. As the demand for natural gas continues to grow, this unit likewise will continue to grow and outperform its Teekay counterparts. If these companies were still under one corporation perhaps their strengths would offset the others' weaknesses. But at this point each spinoff is on its own. There might have been a time when keeping different business segments separate made sense. However, in these economic conditions diversification is giving companies the upper hand.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.