TEEKAY TANKERS LTD.

Teekay Tankers Ltd. is an international provider of marine transportation to global oil industries, operating in the crude oil and product tanker markets. The tanker industry is historically cyclical, experiencing volatility in profitability due to changes in the supply of and demand for tanker capacity. Key factors influencing tanker supply include newbuilding deliveries, scrapping rates, and environmental regulations, while demand is driven by global oil supply and demand, seaborne trading patterns, and geopolitical events. The Company competes in the Suezmax (125,000 to 199,999 dwt), Aframax (85,000 to 124,999 dwt), and LR2 product tanker markets, and also provides ship-to-ship transfer services and operational and maintenance marine services in Australia.

The Company operates in a highly competitive international tanker market, competing primarily with other tanker owners, including major oil companies and independent tanker companies. Competition is based on price, location, size, age, condition, and the acceptability of the vessel and its operators. As of December 31, 2025, the Company remained one of three active STS lightering businesses in the USG, and one of two providers offering a complete full service STS offering. The Company believes its well-maintained and high-quality vessels provide a competitive advantage in an environment of increasing regulation and customer emphasis on quality.

The Company generates revenue primarily by chartering its vessels to customers under voyage charters and time charters. Under voyage charters, the shipowner is paid on the basis of moving cargo and is responsible for both vessel operating costs and voyage expenses. Under time charters, the customer pays a fixed daily rate and is responsible for voyage expenses, while the shipowner provides crewing and other services. The Company also generates revenue from its ship-to-ship transfer business, operational and maintenance marine services in Australia, and management services. The Company employs a chartering strategy that seeks to capture upside opportunities in the spot tanker market while using fixed-rate time charters to reduce downside risks.

The Tankers segment consists of the operation of all of the Company's Suezmax, Aframax/LR2, and VLCC tankers, including those employed on full service lightering contracts, and its U.S. based ship-to-ship support service operations. For the year ended December 31, 2025, the Tankers segment generated total revenues of $824.0 million ¹. The Company's fleet as of March 1, 2026, included 35 owned tankers and three chartered-in tankers, with a total capacity of approximately 4,813,100 dwt. The fleet includes Suezmax, Aframax/LR2, and VLCC tankers, with a mix of vessels trading in the spot market and under fixed-rate time charters. The Company also owns a VLCC tanker, the Singapore Spirit, which was acquired from a joint venture in August 2025 and is under contract to be sold.

The Marine Services and Other segment consists of operational and maintenance marine services provided to the Australian government, energy companies, and other third parties, as well as management services provided to Teekay and third parties. This business provides operations, supply, maintenance, and engineering support, as well as crewing and training services, primarily under long-term contracts with the Commonwealth of Australia for 11 Australian government-owned vessels. For the year ended December 31, 2025, the Marine Services and Other segment generated total revenues of $127.8 million ² and income from operations of $9.8 million ³.

During 2025, the Company sold eight Suezmax tankers and three Aframax/LR2 tankers for a total price of $341.0 million ⁴, resulting in an aggregate gain on sales of $100.5 million ⁵. The Company also completed the purchase of one Aframax/LR2 tanker for $63.0 million ⁶, one Suezmax tanker for $64.3 million ⁷, and one VLCC tanker for $63.0 million ⁸. In December 2025, the Company agreed to acquire three 2016-built Aframax/LR2 tankers for a total purchase price of $141.5 million ⁹. The Company also sold its entire investment in Ardmore Shipping for net proceeds of $26.3 million ¹⁰, resulting in a realized gain of $2.9 million ¹¹. In May 2025, the Board declared a special cash dividend of $1.00 per common share ¹².

For the year ended December 31, 2025, total revenues were $951.8 million ¹³, compared to $1,229.3 million ¹⁴ in 2024. Net income was $351.2 million ¹⁵, compared to $403.7 million ¹⁶ in 2024. Diluted earnings per share were $10.10 ¹⁷ in 2025, compared to $11.63 ¹⁸ in 2024. Income from operations was $309.1 million ¹⁹ in 2025, compared to $380.1 million ²⁰ in 2024. The decrease in revenues and net income was primarily due to lower overall average realized spot TCE rates and the sale of vessels, partially offset by gains on vessel sales.

The Company's primary business strategy includes expanding its fleet through acquisitions. Since its initial public offering, the Company has purchased a total of 65 tankers from Teekay Corporation or other affiliates and from third parties. The Company anticipates acquiring vessels through acquisitions of tankers or businesses from third parties, by securing additional in-chartered vessels, and by ordering newbuildings. The Company also expects to continue the process of fleet renewal in the coming years, as approximately 65% of its fleet is currently aged 15 years and older.

The Company's chartering strategy seeks to capture upside opportunities in the spot market while using fixed-rate contracts to reduce downside risks. The Company believes its experience operating through cycles in the tanker spot market will assist in employing this strategy to optimize operating results. The Company also believes its full service lightering in the USG will provide additional base cargo volume complementary to its spot trading in the Caribbean to the USG market, allowing for better optimization of fleet deployment through enhanced scheduling flexibility, higher utilization, and higher average revenues.

The Company expects vessel operating expenses to increase as its fleet matures and to the extent that it expands. The Company seeks to maintain these expenses at a stable level but expects an increase in line with inflation in respect of crew, material, and maintenance costs. The Company continues to take action aimed at improving operational efficiencies to temper the effect of inflationary and other price escalations.

The Company expects that any fleet renewal expenditures will be funded using cash on hand, the undrawn revolving credit facility, and new financing arrangements, including bank borrowings, finance leases, and potentially the issuance of debt and equity securities. The Company anticipates that its liquidity as of December 31, 2025, combined with cash it expects to generate for the 15 months following such date, will be sufficient to meet its cash requirements for at least the one-year period following the date of the Annual Report.

The Company's capital allocation plan, announced in May 2023, aims to provide sufficient capital for fleet renewal after repaying debt. The Board of Directors approved a regular, fixed quarterly cash dividend of $0.25 per outstanding Class A and B common share ²¹. In May 2023, the Board also authorized a new share repurchase program for the repurchase of up to $100 million ²² of outstanding Class A common shares. As of December 31, 2025, no shares were repurchased under this program. The Company also declared special cash dividends of $1.00 per common share in May 2023, $2.00 per common share in May 2024, and $1.00 per common share in May 2025.

The Company faces headwinds from geopolitical conflicts, including the Russia-Ukraine war, Houthi rebel attacks in the Red Sea, and the recent U.S., Israel and Iran conflict, which have disrupted energy supply chains and trading patterns. The Company also faces uncertainty from new or increased tariffs and port fees implemented by the U.S. and China, which have been suspended until October 2026. These factors have resulted in increased global economic uncertainty and could affect future vessel demand, trade routes, rates, and operating costs.

The Company faces constraints from the cyclical nature of the tanker industry, which can lead to volatile changes in charter rates and significant fluctuations in vessel utilization and profitability. The Company's exposure to the spot tanker market, which is more volatile than the tanker industry generally, makes its earnings more susceptible to market downturns. Additionally, the Company anticipates that it may need to accelerate its fleet renewal in coming years, the success of which will depend on newbuilding and second-hand vessel availability and prices, market conditions, and available financing.

The cyclical nature of the tanker industry may lead to volatile changes in charter rates and significant fluctuations in the utilization of the Company's vessels, which may adversely affect earnings. During 2025 and 2024, approximately 93.1% ²³ and 93.9% ²⁴, respectively, of the Company's aggregated net revenues from voyage charters and time charters were derived from vessels operating in the spot tanker market. Changes in the oil markets, including decreased demand for oil due to competition from alternative energy sources or economic slowdowns, could result in decreased demand for the Company's vessels and services. The Company is subject to substantial environmental and other regulations, including those related to greenhouse gas emissions, which may significantly limit operations and increase expenses. The Company's vessels operate in a highly competitive international tanker market, and its competitive position may erode over time. The Company's U.S. Gulf lightering business competes with alternative methods of delivering crude oil, which may limit its earnings in this market.

Management's message emphasizes the Company's focus on its chartering strategy to capture upside in the spot market while using fixed-rate charters to reduce downside risks. The Company highlights its belief that the near-term outlook for the tanker market remains strong, driven by positive underlying tanker supply and demand fundamentals and various geopolitical factors driving trade inefficiencies. However, management notes that the longer-term outlook is highly uncertain and will depend on how geopolitical factors develop. The strategic priorities emphasized include expanding the fleet through acquisitions, tactically managing the mix of spot, fixed-rate, and full service lightering contracts, and providing superior customer service by maintaining high reliability, safety, environmental, and quality standards.