MONACO, Feb. 19, 2020 (GLOBE NEWSWIRE) — Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers”, or the “Company”) today reported its results for the three months and year ended December 31, 2019. The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share on the Company’s common stock.
Results for the three months ended December 31, 2019 and 2018For the three months ended December 31, 2019, the Company had a net income of $12.0 million, or $0.22 basic and $0.21 diluted earnings per share. For the three months ended December 31, 2019, the Company’s adjusted net income (see Non-IFRS Measures section below) was $12.8 million, or $0.23 basic and diluted earnings per share, which excludes from the net income a $0.7 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.For the three months ended December 31, 2018, the Company had a net loss of $17.7 million, or $0.38 basic and diluted loss per share. For the three months ended December 31, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $17.4 million, or $0.38 basic and diluted loss per share, which excludes from the net loss a $0.3 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.Results for the year ended December 31, 2019 and 2018For the year ended December 31, 2019, the Company had a net loss of $48.5 million, or $0.97 basic and diluted loss per share. For the year ended December 31, 2019, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $47.0 million, or $0.94 basic and diluted loss per share, which excludes from the net loss a $1.5 million, or $0.03 per basic and diluted share, write-off of deferred financing fees.For the year ended December 31, 2018, the Company had a net loss of $190.1 million, or $5.46 basic and diluted loss per share. For the year ended December 31, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $158.7 million, or $4.56 basic and diluted loss per share, which excludes from the net loss (i) an aggregate loss of $17.8 million recorded on the Company’s exchange of an aggregate of $203.5 million principal amount of its Convertible Notes due 2019 in the second and third quarters of 2018, (ii) a $13.2 million write-off of deferred financing fees, and (iii) $0.3 million of transaction costs related to the 2017 merger with Navig8 Product Tankers Inc, together resulting in an aggregate reduction of the Company’s net loss of $31.3 million or $0.90 per basic and diluted share.Declaration of DividendOn February 18, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about March 13, 2020 to all shareholders of record as of March 2, 2020 (the record date). As of February 17, 2020, there were 58,672,080 common shares of the Company outstanding.Summary of Other Recent and Fourth Quarter Significant EventsBelow is a summary of the average daily Time Charter Equivalent (TCE) revenue (see Non-IFRS Measures section below) and duration for voyages fixed for the Company’s vessels thus far in the first quarter of 2020 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):• For the LR2s in the pool (which includes both scrubber fitted and non-scrubber fitted vessels): an average of approximately $25,000 per day for 70% of the days. Scrubber fitted vessels earned a premium of approximately $5,300 per day during January 2020 when compared to non-scrubber fitted vessels in the pool.• For the MRs in the pool (which includes both scrubber fitted and non-scrubber fitted vessels): an average of approximately $22,000 per day for 60% of the days. Scrubber fitted vessels earned a premium of approximately $2,800 per day during January 2020 when compared to non-scrubber fitted vessels in the pool.
• For the ice-class 1A Handymaxes in the pool: an average of approximately $24,000 per day for 60% of the days.Below is a summary of the average daily TCE revenue earned on the Company’s vessels during the fourth quarter of 2019:• For the LR2s in the pool: an average of $25,230 per revenue day.• For the LR1s in the pool: an average of $17,653 per revenue day.• For the MRs in the pool: an average of $17,429 per revenue day.• For the ice-class 1A Handymaxes in the pool: an average of $19,294 per revenue day.In November 2019, the Company entered into an “at the market” offering program (the “ATM Program”) pursuant to which the Company may sell up to $100 million of its common shares, par value $0.01 per share. No shares have been sold under this Program through the date of this press release.In November and December 2019, the Company executed two term loan facilities with Hamburg Commercial Bank AG and Prudential Private Capital, respectively, for approximately $99.1 million in aggregate. These facilities were partially drawn in December 2019 and the proceeds were used to refinance the existing indebtedness on five vessels that were previously financed under the Company’s KEXIM Credit Facility. The Company’s liquidity increased by approximately $31.0 million in aggregate as a result of these transactions. There is currently $1.5 million available to be drawn under the facility with Hamburg Commercial Bank AG, which is expected to be utilized to partially finance the purchase and installation of a scrubber on one of the Company’s LR2 tankers.In December 2019, the Company drew down an aggregate of approximately $11.0 million from an upsized lease financing arrangement with CSSC (Hong Kong) Shipping Company Limited (“CSSC”) to partially finance the purchase and installation of scrubbers on seven of its vessels.As of the date of this press release, the Company has received commitments from financial institutions for an additional eight different facilities to partially finance the purchase and installation of scrubbers on certain of the Company’s vessels. These commitments are expected to increase the Company’s liquidity by approximately $118.7 million, after the repayment of existing indebtedness. Subject to the negotiation and execution of definitive documentation for these facilities, the drawdowns are expected to occur as the scrubbers are installed throughout the remainder of 2020.In December 2019, the Company paid a quarterly cash dividend with respect to the third quarter of 2019 on the Company’s common stock of $0.10 per common share.In January 2020, the Company took delivery of two scrubber-fitted 2020-built MR product tankers (STI Miracle and STI Maestro) under eight-year bareboat leases. The leasehold interests in these vessels were acquired as part of the Company’s transaction with Trafigura Maritime Logistics Pte. Ltd. ( the “Trafigura Transaction”) that was announced in September 2019. The bareboat leases have similar terms and conditions as the original leased vessels in the Trafigura Transaction.At the Market Share Issuance ProgramIn November 2019, the Company entered into the ATM Program pursuant to which the Company may sell up to $100 million of its common shares, par value $0.01 per share. As part of the ATM Program, the Company entered into an equity distribution agreement dated November 7, 2019 (the “Sales Agreement”), with BTIG, LLC, as sales agent (the “Agent”). In accordance with the terms of the Sales Agreement, the Company may offer and sell its common shares from time to time through the Agent by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, in block transactions, or as otherwise agreed upon by the Agent and the Company. The Company intends to use the net proceeds from any sales under the Program for general corporate and working capital purposes.No shares have been sold under the ATM Program through the date of this press release.Diluted Weighted Number of SharesDiluted earnings per share is determined using the if-converted method. Under this method, the Company assumes that its Convertible Notes due 2022, which were issued in May and July 2018, were converted into common shares at the beginning of each period and the interest and non-cash amortization expense associated with these notes of $3.7 million and $14.7 million, respectively, during the three months and year ended December 31, 2019 were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.For the three months and year ended December 31, 2019, the Company’s basic weighted average number of shares were 54,626,119 and 49,857,998, respectively. For the three months and year ended December 31, 2019, the Company’s diluted weighted average number of shares were 56,780,849 and 51,735,977, respectively, excluding the impact of the Convertible Notes due 2022, and 62,009,488 and 57,656,484, respectively, under the if-converted method.The diluted weighted average number of shares was anti-dilutive for the year ended December 31, 2019 as the Company incurred a net loss.The weighted average number of shares under the if-converted method was anti-dilutive for the three months and year ended December 31, 2019.$250 Million Securities Repurchase ProgramIn May 2015, the Company’s Board of Directors authorized a Securities Repurchase Program to purchase up to an aggregate of $250 million of the Company’s securities which, in addition to its common shares, currently consist of its Unsecured Senior Notes due 2020 (NYSE: SBNA), which were issued in May 2014, and Convertible Notes due 2022, which were issued in May and July 2018.No securities were repurchased under this program during the fourth quarter of 2019 and through the date of this press release.As of the date hereof, the Company has repurchased a total of $128.4 million of its securities under the Securities Repurchase Program and has the authority to purchase up to an additional $121.6 million of its securities. The Company may repurchase its securities in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the Securities Repurchase Program to repurchase any of its securities.Conference CallThe Company has scheduled a conference call on February 19, 2020 at 8:30 AM Eastern Standard Time and 2:30 PM Central European Time. The dial-in information is as follows:US Dial-In Number: 1 (855) 861-2416International Dial-In Number: +1 (703) 736-7422Conference ID: 9755054Participants should dial into the call 10 minutes before the scheduled time. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.There will also be a simultaneous live webcast over the internet, through the Scorpio Tankers Inc. website www.scorpiotankers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.Webcast URL: https://edge.media-server.com/mmc/p/8jjse99mCurrent LiquidityAs of February 17, 2020, the Company had $164.7 million in unrestricted cash and cash equivalents.Drydock, Scrubber and Ballast Water Treatment UpdateSet forth below is a table summarizing the drydock, scrubber and ballast water treatment system activity that occurred during the fourth quarter of 2019 and that is in progress as of January 1, 2020:Set forth below are the estimated expected payments for the Company’s drydocks, ballast water treatment system installations, and scrubber installations through 2020 (which also include actual payments made during the first quarter of 2020 through February 17, 2020):Set forth below are the expected, estimated number of ships and estimated off-hire days for the Company’s drydocks, ballast water treatment system installations, and scrubber installations (2):
Debt
Set forth below is a summary of the Company’s outstanding indebtedness as of the dates presented:Set forth below are the estimated expected future principal repayments on the Company’s outstanding indebtedness as of December 31, 2019, which includes principal amounts due under secured credit facilities, the Senior Unsecured Notes due 2020, lease financing arrangements, and lease liabilities under IFRS 16 (which also include actual payments made during the first quarter of 2020 through February 17, 2020):
Explanation of Variances on the Fourth Quarter of 2019 Financial Results Compared to the Fourth Quarter of 2018
For the three months ended December 31, 2019, the Company recorded a net income of $12.0 million compared to a net loss of $17.7 million for the three months ended December 31, 2018. The following were the significant changes between the two periods:TCE revenue, a Non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot voyages, time charters, and pool charters), and it provides useful information to investors and management. The following table sets forth TCE revenue for the three months ended December 31, 2019 and 2018:TCE revenue for the three months ended December 31, 2019 increased by $51.9 million to $219.1 million, from $167.2 million for the three months ended December 31, 2018. The increase was the result of quarter over quarter improvements in TCE revenue per day across all of the Company’s operating segments. Overall average TCE revenue per day increased to $19,910 per day during the three months ended December 31, 2019, from $15,008 per day during the three months ended December 31, 2018. The fourth quarter of 2019 reflected significant improvements in TCE revenue per day, both sequentially, and as compared to the fourth quarter of 2018. Supply and demand dynamics shifted favorably during the fourth quarter of 2019, driven by the January 1, 2020 implementation date of the International Maritime Organization’s (“IMO”) low sulfur emissions standards. The implementation of these standards has impacted the trade flows of both crude and refined petroleum products which, combined with favorable supply and demand dynamics, has resulted in improvements in daily spot market TCE rates across all of the Company’s operating segments during the fourth quarter of 2019.
These results were mitigated by several factors including (i) higher than expected offhire days during the fourth quarter of 2019 as a result of port congestion and delays at the shipyards where the Company’s drydocks, ballast water treatment system and scrubber installations are taking place, (ii) below-market positioning voyages both to and from these shipyards as vessels deviated from their normal trading patterns, and (iii) the purchase and consumption of higher cost low sulfur fuel in anticipation of the IMO’s January 1, 2020 implementation date for the Company’s vessels that do not yet have scrubbers installed.
The increase in TCE revenue in the fourth quarter of 2019 as compared to the fourth quarter of 2018 was also affected by an increase in the number of the Company’s vessels to an average of 134.0 operating vessels during the three months ended December 31, 2019 from an average of 121.9 operating vessels during the three months ended December 31, 2018, which was primarily the result of the acquisition of 15 vessels (11 MRs and four LR2s) in connection with the Trafigura Transaction in September 2019. This increase was offset by the redelivery of time chartered-in vessels in the fourth quarter of 2018 and in the first quarter of 2019.
Vessel operating costs for the three months ended December 31, 2019 increased by $14.2 million to $85.4 million, from $71.2 million for the three months ended December 31, 2018. This increase was primarily due to the acquisition of 15 vessels (11 MRs and four LR2s) that were acquired in connection with the Trafigura Transaction in September 2019. Vessel operating costs per day increased to $6,928 per day for the three months ended December 31, 2019 from $6,505 per day for the three months ended December 31, 2018. This increase was largely due to timing, in addition to various miscellaneous repairs that were undertaken while certain vessels were drydocked for scrubber or ballast water treatment system installations during the period.Charterhire expense for the three months ended December 31, 2019 decreased by $10.6 million to $0.0 million, from $10.6 million for the three months ended December 31, 2018. This decrease was the result of (i) a decrease in the number of time chartered-in vessels when comparing the three months ended December 31, 2019 to the three months ended December 31, 2018, and (ii) the implementation of IFRS 16 – Leases beginning on January 1, 2019. The Company’s time and bareboat chartered-in fleet consisted of 27 bareboat chartered-in vessels for the three months ended December 31, 2019, which operated for the entire period. The Company’s time and bareboat chartered-in fleet consisted of an average of 2.9 time chartered-in vessels and 10 bareboat chartered-in vessels for the three months ended December 31, 2018. As of December 31, 2019, the Company had 27 bareboat chartered-in vessels which are being accounted for under IFRS 16 as right of use assets and related lease liabilities. Under IFRS 16, there is no charterhire expense for these vessels as the right of use assets are depreciated on a straight-line basis (through depreciation expense) over the lease term and the lease liability is amortized over that same period (with a portion of each payment allocated to principal and a portion allocated to interest expense).Depreciation expense – owned or finance leased vessels for the three months ended December 31, 2019 increased slightly by $1.9 million to $46.5 million, from $44.6 million for the three months ended December 31, 2018. Depreciation expense in future periods is expected to increase as the Company installs ballast water treatment systems and/or scrubbers on certain of its vessels in 2020. The Company expects to depreciate the majority of the cost of this equipment over each vessel’s remaining useful life.Depreciation expense – right of use assets for the three months ended December 31, 2019 was $12.6 million. Depreciation expense – right of use assets reflects the straight-line depreciation expense recorded during the three months ended December 31, 2019, as a result of the Company’s transition to IFRS 16 – Leases on January 1, 2019. Right of use asset depreciation is approximately $0.2 million per vessel per month for the 10 vessels (seven Handymax and three MR) previously bareboat chartered-in prior to the Trafigura Transaction in September 2019. Additionally, as part of the Trafigura Transaction, the Company acquired the leasehold interests in 15 vessels (11 MR and four LR2), which are being accounted for as right of use assets under IFRS 16. The right of use asset depreciation for these vessels is approximately $0.2 million per MR per month and $0.3 million per LR2 per month. Additionally, in January 2020, the Company took delivery of two MRs that were previously under construction and were acquired as part of the Trafigura Transaction. The right of use asset depreciation for these vessels is expected to be similar to the MR vessels acquired in September 2019.General and administrative expenses for the three months ended December 31, 2019, increased by $2.8 million to $15.8 million, from $12.9 million for the three months ended December 31, 2018. This increase was primarily driven by compensation expenses, including an increase in restricted stock amortization. General and administrative expenses in future periods are expected to reflect a similar run-rate to that which was incurred in the fourth quarter of 2019.Financial expenses for the three months ended December 31, 2019 decreased by $0.9 million to $47.3 million, from $48.2 million for the three months ended December 31, 2018. The decrease was primarily driven by an increase of $0.8 million of capitalized interest expense during the three months ended December 31, 2019 as a result of the Company’s scrubber and ballast water treatment system investments. No interest was capitalized during the three months ended December 31, 2018.
Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statements of Income or Loss
(unaudited)Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)As described in the preceding sections, on September 26, 2019, the Company acquired subsidiaries of Trafigura which have leasehold interests in 19 product tankers under bareboat charter agreements with subsidiaries of an international financial institution for aggregate consideration of $803 million. Of the 19 vessels, 15 (consisting of 11 MRs and four LR2s) were delivered during 2019, two were delivered in January 2020, and two MRs are currently under construction. For the delivered vessels in 2019, the Company assumed the obligations under the bareboat charter agreements of $531.5 million and issued 3,981,619 shares of common stock at $29.00 per share to a nominee of Trafigura with an aggregate market value of $115.5 million. For the four vessels under construction as of September 26, 2019, the Company agreed to assume the commitments on the bareboat charter agreements of $138.9 million and issued 591,254 shares of common stock at $29.00 per share to a nominee of Trafigura with an aggregate market value of $17.1 million. The obligations under the bareboat charter agreements for the undelivered vessels will be recorded upon the delivery of each vessel (the lease commencement date).This transaction represents a significant non-cash transaction that occurred during the year ended December 31, 2019.
Scorpio Tankers Inc. and Subsidiaries
Other operating data for the three months and year ended December 31, 2019 and 2018
(unaudited)
Fleet list as of February 17, 2020
Dividend Policy
The declaration and payment of dividends is subject at all times to the discretion of the Company’s Board of Directors. The timing and the amount of dividends, if any, depends on the Company’s earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.The Company’s dividends paid during 2018 and 2019 were as follows:On February 18, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on or about March 13, 2020 to all shareholders of record as of March 2, 2020 (the record date). As of February 17, 2020, there were 58,672,080 common shares of the Company outstanding.Securities Repurchase ProgramIn May 2015, the Company’s Board of Directors authorized a Securities Repurchase Program to purchase up to an aggregate of $250 million of the Company’s securities which, in addition to its common shares, currently consist of its Unsecured Senior Notes due 2020 (NYSE: SBNA), which were issued in May 2014, and Convertible Notes due 2022, which were issued in May and July 2018.No securities were repurchased under this program during the fourth quarter of 2019 and through the date of this press release.As of the date hereof, the Company has repurchased a total of $128.4 million of its securities under the Securities Repurchase Program and has the authority to purchase up to an additional $121.6 million of its securities. The Company may repurchase its securities in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the Securities Repurchase Program to repurchase any of its securities.About Scorpio Tankers Inc.Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns or finance leases 126 product tankers (42 LR2 tankers, 12 LR1 tankers, 58 MR tankers and 14 Handymax tankers) with an average age of 4.1 years and bareboat charters-in 10 product tankers (three MR tankers and seven Handymax tankers). In addition, the Company will bareboat charter-in two MR tankers that are currently under construction and are scheduled to be delivered in 2020 (one in March, and one in September). Additional information about the Company is available at the Company’s website www.scorpiotankers.com, which is not a part of this press release.Non-IFRS MeasuresReconciliation of IFRS Financial Information to Non-IFRS Financial InformationThis press release describes time charter equivalent revenue, or TCE revenue, adjusted net income or loss and adjusted EBITDA, which are not measures prepared in accordance with IFRS (“Non-IFRS” measures). The Non-IFRS measures are presented in this press release as we believe that they provide investors and other users of our financial statements, such as our lenders, with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. These Non-IFRS measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.The Company believes that the presentation of TCE revenue, adjusted net income or loss with adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA are useful to investors or other users of our financial statements, such as our lenders, because they facilitate the comparability and the evaluation of companies in the Company’s industry. In addition, the Company believes that TCE revenue, adjusted net income or loss with adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA are useful in evaluating its operating performance compared to that of other companies in the Company’s industry. The Company’s definitions of TCE revenue, adjusted net income or loss with adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA may not be the same as reported by other companies in the shipping industry or other industries.TCE revenue is reconciled above in the section entitled “Explanation of Variances on the Fourth Quarter of 2019 Financial Results Compared to the Fourth Quarter of 2018”.Reconciliation of Net Income / (Loss) to Adjusted Net Income / (Loss)
(1) Summation differences due to rounding.Reconciliation of Net Income / (Loss) to Adjusted EBITDAForward-Looking StatementsMatters discussed in this press release may constitute forward‐looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward‐looking statements in order to encourage companies to provide prospective information about their business. Forward‐looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “likely,” “may,” “will,” “would,” “could” and similar expressions identify forward‐looking statements.The forward‐looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although management believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, there can be no assurance that the Company will achieve or accomplish these expectations, beliefs or projections. The Company undertakes no obligation, and specifically declines any obligation, except as required by law, to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise.In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward‐looking statements include unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the Company’s operations, risks relating to the integration of assets or operations of entities that it has or may in the future acquire and the possibility that the anticipated synergies and other benefits of such acquisitions may not be realized within expected timeframes or at all, the failure of counterparties to fully perform their contracts with the Company, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in the Company’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Company’s vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off‐hires, and other factors. Please see the Company’s filings with the SEC for a more complete discussion of certain of these and other risks and uncertainties.Scorpio Tankers Inc.
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