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Scorpio Tankers Inc. Announces Financial Results for the Third Quarter of 2014 and Newbuilding Vessel Deliveries

MONACO — (Marketwired) — 10/27/14 — Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers,” or the “Company”) today reported its results for the three and nine months ended September 30, 2014.

Results for the three months ended September 30, 2014 and 2013

For the three months ended September 30, 2014, the Company had a net loss of $1.2 million, or $0.01 basic and diluted loss per share. The Company’s adjusted net loss was $1.2 million (see Non-GAAP Measure section below), or $0.01 basic and diluted loss per share, excluding a $0.1 million, or $0.00 per share unrealized gain on derivative financial instruments.

For the three months ended September 30, 2013, the Company had net income of $0.7 million, or $0.00 basic and diluted earnings per share. The Company’s adjusted net income was $0.6 million (see Non-GAAP Measure section below), or $0.00 basic and diluted earnings per share, excluding a $0.1 million, or $0.00 per share unrealized gain on derivative financial instruments.

Results for the nine months ended September 30, 2014 and 2013

For the nine months ended September 30, 2014, the Company had net income of $51.6 million, or $0.29 basic and $0.28 diluted earnings per share. The Company’s adjusted net loss was $10.6 million (see Non-GAAP Measure section below), or $0.06 basic and diluted loss per share, which excludes (i) a gain of $51.4 million, or $0.29 per share, resulting from the previously announced sales of seven Very Large Crude Carriers (‘VLCCs’) under construction, (ii) a gain of $10.9 million, or $0.06 per share, resulting from the previously announced acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian, (iii) a write-off of $0.3 million, or $0.00 per share, for deferred financing fees relating to the repayment of the STI Spirit Credit Facility in April 2014 and (iv) an unrealized gain on derivative financial instruments of $0.2 million or $0.00 per share.

For the nine months ended September 30, 2013, the Company had net income of $11.2 million or $0.08 basic and diluted earnings per share. The Company’s adjusted net income was $10.8 million (see Non-GAAP Measure section below), or $0.08 basic and diluted earnings per share, excluding a $0.5 million, or $0.00 per share unrealized gain on derivative financial instruments.

Stock Buyback Program

Since July 28, 2014, the Company has acquired $67.5 million of its common shares that are being held as treasury shares, in the open market at an average price of $8.64 per share.

During 2014, the Company has acquired an aggregate of 36,729,136 of its common shares that are being held as treasury shares, which include (i) 19,101,536 common shares that were purchased in the open market at an average price of $9.06 per share, (ii) 7,500,000 common shares that were acquired in exchange for 3,422,665 shares in Dorian and (iii) 10,127,600 common shares that were acquired in conjunction with the Company’s offering of $360 million of Convertible Senior Notes due 2019 in June 2014. There are currently 164,436,411 shares outstanding.

The Company has $82.5 million remaining under its stock buyback program as of the date of this press release. The Company expects to repurchase these shares 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 program to repurchase any shares.

Summary of Recent and Third Quarter Significant Events:

  • Recently took delivery of two ice-class 1A Handymax tankers, STI Wembley and STI Battersea, from Hyundai Mipo Dockyard Co. Ltd. (“HMD”). Including the previously announced deliveries of STI Mayfair and STI Yorkville, the Company has taken delivery of four product tankers in October 2014.
  • Took delivery of 17 vessels (four LR2, eight MR, and five ice-class 1A Handymax) during the third quarter of 2014, including STI St. Charles, a newbuilding MR product tanker that we purchased in August 2014 and was delivered from SPP in September 2014.
  • Participated in the previously announced offering of $125,250,000 in aggregate principal amount of floating rate guaranteed notes due 2019 (the “KEXIM Notes”) in July 2014. The KEXIM Notes reduced KEXIM’s funding obligations under the Company’s KEXIM Credit Facility, and will reduce the Company’s borrowing costs under such facility by 1.55% per year
  • Paid a quarterly cash dividend on the Company’s common stock of $0.10 per share in September 2014.

Vessel deliveries

In October 2014, the Company took delivery of four product tankers. STI Yorkville and STI Mayfair, MR product tankers, were delivered from HMD and SPP, respectively and STI Wembley and STI Battersea, ice-class 1A Handymax product tankers, were delivered from HMD. Upon delivery, STI Yorkville and STI Mayfair each commenced a time charter for up to 120 days at approximately $18,000 per day and STI Wembley and STI Battersea each commenced a time charter for up to 120 days at approximately $15,000 per day.

The Company has taken delivery of 21 vessels under its Newbuilding Program with HMD, SPP, Daewoo Shipbuilding & Marine Engineering Co. Ltd. (“DSME”) and Hyundai Samho Heavy Industries Co. Ltd. (“HSHI”) since June 30, 2014. These deliveries are summarized as follows:

 

                                Month
    Name                      delivered          Type     Shipyard
    ------------------ ---------------------- ---------- ----------
 1  STI Powai                 July 2014           MR         HMD
 2  STI Aqua                  July 2014           MR         SPP
 3  STI Pimlico               July 2014        Handymax      HMD
 4  STI Elysees               July 2014           LR2       HSHI
 5  STI Dama                 August 2014          MR         SPP
 6  STI Olivia               August 2014          MR         HMD
 7  STI Mythos               August 2014          MR         HMD
 8  STI Hackney              August 2014       Handymax      HMD
 9  STI Acton              September 2014      Handymax      HMD
10  STI Fulham             September 2014      Handymax      HMD
11  STI Camden             September 2014      Handymax      HMD
12  STI Benicia(1)         September 2014         MR         SPP
13  STI Regina             September 2014         MR         SPP
14  STI St. Charles        September 2014         MR         SPP
15  STI Madison            September 2014         LR2       HSHI
16  STI Park               September 2014         LR2       HSHI
17  STI Orchard            September 2014         LR2       DSME
18  STI Mayfair             October 2014          MR         SPP
19  STI Yorkville           October 2014          MR         HMD
20  STI Wembley             October 2014       Handymax      HMD
21  STI Battersea           October 2014       Handymax      HMD

(1) After delivery, this vessel began a one year time charter at a rate
    level consistent with current one year time charter contracts which
    includes a profit sharing mechanism whereby earnings in excess of the
    base time charter rate are split between the charterer and us.

 

Time charter-in update

In September 2014, we time chartered-in an LR2 tanker that is currently under construction in South Korea with delivery expected in January 2015. Upon delivery from the shipyard, the vessel will be chartered-in for one year at $21,050 per day. We also have an option to extend the charter for one year at $22,600 per day.

In September 2014, we extended the time charter on an LR1 tanker that is currently time chartered-in. The term of the agreement is for one year at $15,000 per day beginning in November 2014.

In September 2014, we extended the time charter on a Handymax tanker that is currently time chartered-in. The term of the agreement is for an additional year at $13,500 per day beginning in March 2015.

In August 2014, we extended the time charter on an LR2 tanker that is currently time chartered-in. The term of the agreement is for six months at $15,500 per day effective November 2014.

In August 2014, we extended the time charter on an LR2 tanker that is currently time chartered-in. The term of the agreement is for six months at $17,500 per day beginning in September 2014.

In July 2014, we extended the time charter on an LR2 tanker that is currently time chartered-in. The term of the agreement is for one year at $17,550 per day beginning in September 2014.

KEXIM Guaranteed Notes due 2019

On July 18, 2014, Seven and Seven Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Issuer”), completed an offering of $125,250,000 in aggregate principal amount of floating rate guaranteed notes due 2019 (the “KEXIM Notes”) in a private offering to qualified institutional buyers pursuant to the Securities Act and in offshore transactions complying with Regulation S under the Securities Act. The KEXIM Notes were issued in connection with the Company’s KEXIM Credit Facility and will reduce KEXIM’s funding obligations and the Company’s borrowing costs under such facility by 1.55% per year.

Payment of 100% of all regularly scheduled installments of principal of, and interest on, the KEXIM Notes are guaranteed by The Export-Import Bank of Korea (“KEXIM”), a statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea.

The KEXIM Notes are currently listed on the Singapore Exchange Securities Trading Limited (the “SGX-ST”). The Notes will not be listed on any other securities exchange, listing authority or quotation system.

Current Liquidity

As of October 27, 2014, the Company had $84.0 million in cash.

Debt

We made the following drawdowns from our credit facilities in July, August, September and October 2014:

 

                                Drawdown amount
        Credit facility         (in $ millions)         Collateral
    ----------------------  ---------------------- --------------------
 1  2013 Credit Facility    $                 19.8       STI Aqua
 2  2013 Credit Facility                      19.8       STI Dama
 3  2013 Credit Facility                      19.5      STI Mythos
 4  2013 Credit Facility                      19.5      STI Benicia
 5  2013 Credit Facility                      19.8      STI Regina
 6  2013 Credit Facility                      19.5    STI St. Charles
 7  2013 Credit Facility                      19.5     STI Yorkville
 8  2013 Credit Facility                      18.0      STI Wembley
 9  KEXIM Credit Facility                     18.8      STI Pimlico
10  KEXIM Credit Facility                     30.3      STI Elysees
11  KEXIM Credit Facility                     30.3      STI Madison
12  KEXIM Credit Facility                     18.8      STI Hackney
13  KEXIM Credit Facility                     19.0       STI Acton
14  KEXIM Credit Facility                     18.8      STI Fulham
15  KEXIM Credit Facility                     30.3       STI Park
16  KEXIM Credit Facility                     29.7      STI Orchard
17  KEXIM Credit Facility                     18.8      STI Camden
18  K-Sure Credit Facility                    19.8       STI Powai
19  K-Sure Credit Facility                    19.8      STI Olivia
20  K-Sure Credit Facility                    20.4      STI Mayfair
21  K-Sure Credit Facility                    18.9     STI Battersea

 

As of October 27, 2014, the Company’s outstanding debt balance, and amount available to draw, is as follows:

 

                                As of                   As of
                          September 30, 2014       October 27, 2014
                          ------------------ ---------------------------
In thousands of U.S.            Amount           Amount        Amount
 dollars                      outstanding     outstanding    available
                          ------------------ ------------- -------------
2010 Revolving Credit
 Facility                 $           43,562 $      43,562 $           -
2011 Credit Facility                 110,895       110,895             -
Newbuilding Credit
 Facility                             79,340        79,340             -
2013 Credit Facility                 276,327       313,827       207,000 (1)
K-Sure Credit Facility                79,200       118,480       339,788 (2)
KEXIM Credit Facility                252,075       252,075       177,525 (3)
Senior Unsecured Notes                53,750        53,750             -
Convertible Senior Notes             360,000       360,000             - (4)
                          ------------------ ------------- -------------
Total                     $        1,255,149$   1,331,929$     724,313
                          ================== ============= =============

(1) Availability can be used to finance the lesser of 60% of the contract
    price for a qualifying newbuilding vessel or such vessel's fair market
    value at the date of drawdown.
(2) Availability can be used to finance the lesser of 60% of the newbuilding
    contract price and 74% of the fair market value of the relevant vessel
    specified in the agreement.
(3) Availability can be used to finance the lesser of 60% of the newbuilding
    contract price and 74% of the fair market value of the relevant vessel
    specified in the agreement.  Includes $125.3 million of floating rate
    guaranteed notes due 2019 issued by Seven and Seven Ltd. in July 2014.
(4) $61.3 million of this amount has been attributed to the conversion
    feature of the Convertible Senior Notes and recorded within additional
    paid in capital on the consolidated balance sheet as of September 30,
    2014.

 

Newbuilding Program

During the third quarter of 2014, the Company made $451.2 million of installment payments on its newbuilding vessels. The Company currently has 27 newbuilding vessel orders with HMD, SPP, HSHI and DSME (14 MRs, five Handymax ice class 1-A tankers and eight LR2s). The estimated future payment dates and amounts are as follows*:

 

Q4 2014   $ 353.4 million**
Q1 2015     273.5
Q2 2015     139.4
          -------
Total     $ 766.3 million
          =======

 

*These are estimates only and are subject to change as construction progresses.
**$83.4 million has been paid prior to the date of this press release.

Explanation of Variances on the Third Quarter of 2014 Financial Results Compared to the Third Quarter of 2013

For the three months ended September 30, 2014, the Company recorded a net loss of $1.2 million compared to net income of $0.7 million in the three months ended September 30, 2013. The following were the significant changes between the two periods:

  • Time charter equivalent, or 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 charters, time charters, and pool charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended September 30, 2014 and 2013:

 

                                             For the three months ended
                                                    September 30,
                                         ----------------------------------
                                               2014              2013
                                         ----------------  ----------------
In thousands of U.S. dollars
Vessel revenue                           $         82,891  $         57,756
Voyage expenses                                      (902)           (1,249)
                                         ----------------  ----------------
TCE revenue                              $         81,989  $         56,507
                                         ================  ================

 

  • TCE revenue increased $25.5 million to $82.0 million. This increase was primarily driven by an increase in the average number of operating vessels (owned and time chartered-in) to 58.6 from 42.3 for the three months ended September 30, 2014 and 2013, respectively along with an increase in time charter equivalent revenue per day to $15,264 per day from $14,557 per day for the three months ended September 30, 2014 and 2013, respectively (see the breakdown of daily TCE averages below).
  • Vessel operating costs increased $9.8 million to $20.9 million from $11.1 million for the three months ended September 30, 2014 and 2013, respectively. This increase was primarily driven by an increase in the Company’s owned fleet to an average of 33.7 vessels from 17.3 vessels for the three months ended September 30, 2014 and 2013, respectively. The increase was offset by an overall decrease in vessel operating costs per day to $6,705 per day from $6,851 per day for the three months ended September 30, 2014 and 2013, respectively (see the breakdown of daily TCE averages below).
  • Charterhire expense increased $1.1 million to $32.9 million from $31.9 million for the three months ended September 30, 2014 and 2013, respectively. The increase is a result of a shift in the mix of time chartered-in vessels towards larger vessel classes (LR1 and LR2) offset by a reduction in exposure towards smaller vessel classes (Handymax and MR) for the three months ended September 30, 2014 and 2013, respectively. See the Company’s Fleet List below for the terms of these agreements.
  • Depreciation expense increased $5.2 million to $11.6 million from $6.4 million for the three months ended September 30, 2014 and 2013, respectively. This increase was primarily the result of an increase in the average number of owned vessels to 33.7 from 17.3 for the three months ended September 30, 2014 and 2013, respectively.
  • General and administrative expenses increased $5.2 million to $11.7 million from $6.5 million for the three months ended September 30, 2014 and 2013, respectively. This increase was driven by a $3.8 million increase in the amortization of restricted stock (non-cash) and an overall increase in other general and administrative expenses due to the significant growth in the Company’s fleet and Newbuilding Program.
  • Financial expenses increased $6.2 million to $6.7 million from $0.5 million primarily as a result in an increase in the Company’s debt balance for the three months ended September 30, 2014 and 2013, respectively. Total debt outstanding, net of deferred financing fees, was $1.2 billion at September 30, 2014 compared to $171.3 million at September 30, 2013.

 

                   Scorpio Tankers Inc. and Subsidiaries
             Condensed Consolidated Statement of Profit or Loss
                                (unaudited)

                              For the three months     For the nine months
                               ended September 30,     ended September 30,
                             ----------------------  ----------------------
In thousands of U.S. dollars
 except per share and share
 data                           2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
Revenue
  Vessel revenue             $   82,891$   57,756$  217,070$  154,213

Operating expenses
  Vessel operating costs        (20,933)    (11,137)    (47,683)    (27,635)
  Voyage expenses                  (902)     (1,249)     (5,427)     (3,782)
  Charterhire                   (32,941)    (31,877)   (109,334)    (79,345)
  Depreciation                  (11,574)     (6,377)    (24,896)    (16,665)
  General and administrative
   expenses                     (11,676)     (6,522)    (34,300)    (14,571)
  Gain on sale of VLCCs               -           -      51,419           -
  Gain on sale of Dorian
   shares                             -           -      10,924           -
                             ----------  ----------  ----------  ----------
  Total operating expenses      (78,026)    (57,162)   (159,297)   (141,998)
                             ----------  ----------  ----------  ----------
Operating income                  4,865         594      57,773      12,215
                             ----------  ----------  ----------  ----------
Other (expense) and income,
 net
  Financial expenses             (6,683)       (448)     (7,554)     (2,323)
  Realized gain on
   derivative financial
   instruments                        -           3          17          25
  Unrealized gain on
   derivative financial
   instruments                       75         118         187         483
  Financial income                  103         400         172         950
  Share of income from
   associate                        462           -       1,036           -
  Other expenses, net                19           -         (34)       (106)
                             ----------  ----------  ----------  ----------
  Total other expense, net       (6,024)         73      (6,176)       (971)
                             ----------  ----------  ----------  ----------
Net (loss) / income          $   (1,159)$      667$   51,597$   11,244
                             ==========  ==========  ==========  ==========

Earnings / (loss) per share

  Basic                      $    (0.01)$     0.00$     0.29$     0.08
  Diluted                    $    (0.01)$     0.00$     0.28$     0.08



                   Scorpio Tankers Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheet
                                (unaudited)

                                                      As of
                                     --------------------------------------
In thousands of U.S. dollars         September 30, 2014   December 31, 2013
                                     ------------------  ------------------
Assets
Current assets
Cash and cash equivalents            $          140,541  $           78,845
Accounts receivable                              80,133              72,542
Prepaid expenses and other current
 assets                                           4,040               2,277
Inventories                                       4,562               2,857
Vessels held for sale                            11,980              82,649
                                     ------------------  ------------------
Total current assets                            241,256             239,170
                                     ------------------  ------------------
Non-current assets
Vessels and drydock                           1,496,572             530,270
Vessels under construction                      484,704             649,526
Other assets                                     31,791              17,907
Investment in associate                         154,714             209,803
                                     ------------------  ------------------
Total non-current assets                      2,167,781           1,407,506
                                     ------------------  ------------------
Total assets                         $        2,409,037$        1,646,676
                                     ==================  ==================

Current liabilities
Current portion of long-term debt                98,512              10,453
Debt related to vessels held for
 sale                                             5,906              21,397
Accounts payable                                 14,263              20,696
Accrued expenses                                 12,321               7,251
Derivative financial instruments                    321                 689
                                     ------------------  ------------------
Total current liabilities                       131,323              60,486
                                     ------------------  ------------------
Non-current liabilities
Long term debt                                1,057,744             135,279
Derivative financial instruments                      -                 188
                                     ------------------  ------------------
Total non-current liabilities                 1,057,744             135,467
                                     ------------------  ------------------
Total liabilities                             1,189,067             195,953
                                     ------------------  ------------------

Shareholders' equity
Issued, authorized and fully paid in
 share capital:
  Share capital                                   2,023               1,999
  Additional paid in capital                  1,563,056           1,536,945
Treasury shares                                (316,519)             (7,938)
Hedging reserve                                    (116)               (212)
Accumulated deficit                             (28,474)            (80,071)
                                     ------------------  ------------------
Total shareholders' equity                    1,219,970           1,450,723
                                     ------------------  ------------------
Total liabilities and shareholders'
 equity                              $        2,409,037$        1,646,676
                                     ==================  ==================



                   Scorpio Tankers Inc. and Subsidiaries
               Condensed Consolidated Statement of Cash Flows
                                (unaudited)

                                                 For the nine months ended
                                                       September 30,
                                               ----------------------------
In thousands of U.S. dollars                        2014           2013
                                               -------------  -------------
Operating activities
Net income                                     $      51,597$      11,244
Gain on sale of VLCCs                                (51,419)             -
Gain on sale of Dorian shares                        (10,924)             -
Depreciation                                          24,896         16,665
Amortization of restricted stock                      22,068          6,738
Amortization of deferred financing fees                2,307            538
Straight-line adjustment for charterhire
 expense                                                   3              7
Share of income from associate                        (1,036)             -
Unrealized gain on derivative financial
 instruments                                            (187)          (483)
Amortization of acquired time charter
 contracts                                               277              -
Accretion of convertible senior notes                  2,680              -
                                               -------------  -------------
                                                      40,262         34,709
                                               -------------  -------------
Changes in assets and liabilities:
Drydock payments                                      (1,290)        (1,448)
Increase in inventories                               (1,705)        (1,328)
Increase in accounts receivable                       (7,591)       (37,523)
Increase in prepaid expenses and other current
 assets                                                 (793)        (2,942)
Increase in other assets                                (969)          (395)
Increase in accounts payable                             252          1,337
Increase / (decrease) in accrued expenses              6,140            (29)
Interest rate swap termination payment                  (274)             -
                                               -------------  -------------
                                                      (6,230)       (42,328)
                                               -------------  -------------
Net cash inflow / (outflow) from operating
 activities                                           34,032         (7,619)
                                               -------------  -------------
Investing activities
Acquisition of vessels and payments for
 vessels under construction                         (927,166)      (585,182)
Proceeds from disposal of vessels                    213,670              -
                                               -------------  -------------
Net cash outflow from investing activities          (713,496)      (585,182)
                                               -------------  -------------
Financing activities
Debt repayments                                      (64,381)       (24,102)
Issuance of debt                                     789,949         52,050
Debt issuance costs                                  (41,104)       (12,266)
Proceeds from issuance of convertible senior
 notes                                               360,000        983,537
Convertible senior notes issuance costs              (10,986)             -
Equity issuance costs                                    (42)       (35,531)
Dividends paid                                       (50,746)       (10,684)
Repurchase of common stock                          (241,530)             -
                                               -------------  -------------
Net cash inflow from financing activities            741,160        953,004
                                               -------------  -------------
Increase in cash and cash equivalents                 61,696        360,203
Cash and cash equivalents at January 1,               78,845         87,165
                                               -------------  -------------
Cash and cash equivalents at September 30,     $     140,541$     447,368
                                               =============  =============



                    Scorpio Tankers Inc. and Subsidiaries
 Other operating data for the three and nine months ended September 30, 2014
                                   and 2013
                                 (unaudited)

                               For the three months    For the nine months
                               ended September 30,     ended September 30,
                             ----------------------- -----------------------
                                 2014        2013        2014        2013
                             ----------- ----------- ----------- -----------
Adjusted EBITDA(1)(in
 thousands of U.S. dollars)  $    25,077$    10,830$    45,282$    35,537

Average Daily Results
Time charter equivalent per
 day(2)                           15,264      14,557      14,683      15,388
Vessel operating costs per
 day(3)                            6,705       6,851       6,956       6,656

Aframax/LR2
TCE per revenue day (2)           19,375      10,876      16,390      12,803
Vessel operating costs per
 day(3)                            6,594       9,112       7,419       7,799

Panamax/LR1
TCE per revenue day (2)           17,034      13,349      16,700      13,519
Vessel operating costs per
 day(3)                            7,928       8,174       8,739       7,570

MR
TCE per revenue day (2)           14,457      17,304      13,626      17,706
Vessel operating costs per
 day(3)                            6,673       5,956       6,592       5,930

Handymax
TCE per revenue day (2)           13,056      13,029      13,879      14,246
Vessel operating costs per
 day(3)                            6,122       7,157       6,969       6,690

Fleet data
Average number of owned
 vessels                            33.7        17.3        25.0        14.9
Average number of time
 chartered-in vessels               24.9        25.0        27.7        21.1

Drydock
Expenditures for drydock (in
 thousands of U.S. dollars)            -           - $     1,290           -

(1) See Non-GAAP Measure section below
(2) Freight rates are commonly measured in the shipping industry in terms of
    time charter equivalent per day (or TCE per day), which is calculated by
    subtracting voyage expenses, including bunkers and port charges, from
    vessel revenue and dividing the net amount (time charter equivalent
    revenues) by the number of revenue days in the period. Revenue days are
    the number of days the vessel is owned less the number of days the
    vessel is off-hire for drydock and repairs.
(3) Vessel operating costs per day represent vessel operating costs
    excluding non-recurring expenses (for example insurance deductible
    expenses for repairs) divided by the number of days the vessel is owned
    during the period.



                     Fleet List as of October 27, 2014

                        Year            Ice
   Vessel Name         Built    DWT    class    Employment     Vessel type
   ------------------- ----- --------- ----- ---------------- ------------
   Owned vessels
 1 STI Highlander       2007    37,145   1A      SHTP (1)       Handymax
 2 STI Brixton          2014    38,000   1A      SHTP (1)       Handymax
 3 STI Comandante       2014    38,000   1A      SHTP (1)       Handymax
 4 STI Pimlico          2014    38,000   1A        Spot         Handymax
 5 STI Hackney          2014    38,000   1A      SHTP (1)       Handymax
 6 STI Acton            2014    38,000   1A        Spot         Handymax
 7 STI Fulham           2014    38,000   1A        Spot         Handymax
 8 STI Camden           2014    38,000   1A        Spot         Handymax
 9 STI Battersea        2014    38,000   1A        Spot         Handymax
10 STI Wembley          2014    38,000   1A        Spot         Handymax
11 STI Amber            2012    52,000   -        SMRP(4)          MR
12 STI Topaz            2012    52,000   -        SMRP(4)          MR
13 STI Ruby             2012    52,000   -        SMRP(4)          MR
14 STI Garnet           2012    52,000   -        SMRP(4)          MR
15 STI Onyx             2012    52,000   -        SMRP(4)          MR
16 STI Sapphire         2013    52,000   -        SMRP(4)          MR
17 STI Emerald          2013    52,000   -        SMRP(4)          MR
18 STI Beryl            2013    52,000   -        SMRP(4)          MR
19 STI Le Rocher        2013    52,000   -        SMRP(4)          MR
20 STI Larvotto         2013    52,000   -        SMRP(4)          MR
21 STI Fontvieille      2013    52,000   -        SMRP(4)          MR
22 STI Ville            2013    52,000   -        SMRP(4)          MR
23 STI Duchessa         2014    52,000   -        SMRP(4)          MR
24 STI Opera            2014    52,000   -        SMRP(4)          MR
25 STI Texas City       2014    52,000   -   Time Charter (5)      MR
26 STI Meraux           2014    52,000   -   Time Charter (6)      MR
27 STI Chelsea          2014    52,000   -        SMRP(4)          MR
28 STI Lexington        2014    52,000   -        SMRP(4)          MR
29 STI San Antonio      2014    52,000   -   Time Charter (6)      MR
30 STI Venere           2014    52,000   -        SMRP(4)          MR
31 STI Virtus           2014    52,000   -         Spot            MR
32 STI Powai            2014    52,000   -        SMRP(4)          MR
33 STI Aqua             2014    52,000   -         Spot            MR
34 STI Dama             2014    52,000   -        SMRP(4)          MR
35 STI Olivia           2014    52,000   -        SMRP(4)          MR
36 STI Mythos           2014    52,000   -         Spot            MR
37 STI Benicia          2014    52,000   -   Time Charter (6)      MR
38 STI Regina           2014    52,000   -         Spot            MR
39 STI St. Charles      2014    52,000   -         Spot            MR
40 STI Mayfair          2014    52,000   -         Spot            MR
41 STI Yorkville        2014    52,000   -         Spot            MR
42 STI Harmony          2007    73,919   1A      SPTP (2)          LR1
43 STI Heritage         2008    73,919   1A      SPTP (2)          LR1
44 Venice               2001    81,408   1C      SPTP (2)     Post-Panamax
45 STI Elysees          2014   109,999   -       SLR2P (3)         LR2
46 STI Madison          2014   109,999   -       SLR2P (3)         LR2
47 STI Park             2014   109,999   -       SLR2P (3)         LR2
48 STI Orchard          2014   109,999   -       SLR2P (3)         LR2


                             ---------
   Total owned DWT           2,660,387
                             =========

                                                          Daily
   Vessel Name  Year    DWT     Ice  Employment  Vessel    Base  Expiry
               Built           class              type     Rate    (7)
   ----------- ----- --------- ----- ---------- -------- ------- ------
   Time
   chartered-
   in vessels
                                                                   18-
49 Kraslava     2007    37,258   1B   SHTP (1)  Handymax $13,650 May-15
   Krisjanis                                                       14-
50 Valdemars    2007    37,266   1B   SHTP (1)  Handymax $13,650 Apr-15 (8)
                                                                   28-
51 Jinan        2003    37,285   -    SHTP (1)  Handymax $12,600 Apr-15
   Iver                                                            03-
52 Prosperity   2007    37,412   -    SHTP (1)  Handymax $12,500 Mar-16 (9)
   Histria                                                         04-
53 Azure        2007    40,394   -    SHTP (1)  Handymax $13,550 Apr-15
   Histria                                                         17-
54 Coral        2006    40,426   -    SHTP (1)  Handymax $13,550 Jul-15
   Histria                                                         15-
55 Perla        2005    40,471   -    SHTP (1)  Handymax $13,550 Jul-15
                                                                   17-
56 Targale      2007    49,999   -     SMRP(4)     MR    $14,850 May-15 (10)
                                                                   25-
57 Nave Orion   2013    49,999   -     SMRP(4)     MR    $14,300 Mar-15 (11)
                                                                   06-
58 Gan-Trust    2013    51,561   -     SMRP(4)     MR    $16,250 Jan-16 (12)
                                                                   03-
59 Usma         2007    52,684   1B    SMRP(4)     MR    $14,500 Jan-15
                                                                   15-
60 SN Federica  2003    72,344   -    SPTP (2)     LR1   $11,250 May-15 (13)
                                                                   25-
61 SN Azzura    2003    72,344   -    SPTP (2)     LR1   $13,600 Dec-14
   King                                                            08-
62 Douglas      2008    73,666   -    SPTP (2)     LR1   $14,000 Nov-15 (14)
   Hellespont                                                      18-
63 Progress     2006    73,728   -    SPTP (2)     LR1   $15,000 Mar-15 (15)
   FPMC P                                                          09-
64 Eagle        2009    73,800   -    SPTP (2)     LR1   $14,525 Sep-15
                                                                   02-
65 FPMC P Hero  2011    99,995   -    SLR2P (3)    LR2   $15,250 May-15 (16)
   FPMC P                                                          09-
66 Ideal        2012    99,993   -    SLR2P (3)    LR2   $15,500 Jan-15
   Swarna                                                          11-
67 Jayanti      2010   104,895   -    SLR2P (3)    LR2   $15,000 Mar-15 (17)
   TBN Densa                                                       30-
68 Crocodile    2015   105,408   -    SLR2P (3)    LR2   $21,050 Jan-16 (18)
   Densa                                                           17-
69 Alligator    2013   105,708   -    SLR2P (3)    LR2   $17,550 Sep-15 (19)
   Khawr                                                           11-
70 Aladid       2006   106,003   -    SLR2P (3)    LR2   $15,400 Jul-15
                                                                   10-
71 Fair Seas    2008   115,406   -    SLR2P (3)    LR2   $17,500 Mar-15
                                                                   10-
72 Southport    2008   115,462   -    SLR2P (3)    LR2   $15,700 Dec-14

                     ---------
   Total time
   chartered-        1,693,507
   in DWT
                     =========

   Newbuildings currently under
   construction

                                                                    Vessel
   Vessel Name                      Yard         DWT    Ice class    type
   -------------------------------- ----      --------- --------- ----------
   Product tankers

73 Hull 2477 - TBN STI Finchley      HMD (20)    38,000     1A     Handymax
74 Hull 2478 - TBN STI Clapham       HMD (20)    38,000     1A     Handymax
75 Hull 2479 - TBN STI Poplar        HMD (20)    38,000     1A     Handymax
76 Hull 2499 - TBN STI Hammersmith   HMD (20)    38,000     1A     Handymax
77 Hull 2500 - TBN STI Rotherhithe   HMD (20)    38,000     1A     Handymax
78 Hull 2445 - TBN STI Milwaukee     HMD (20)    52,000     -         MR
79 Hull 2461 - TBN STI Battery       HMD (20)    52,000     -         MR
80 Hull 2474 - TBN STI Pontiac       HMD (20)    52,000     -         MR
81 Hull 2490 - TBN STI Osceola       HMD (20)    52,000     -         MR
82 Hull 2492 - TBN STI Notting Hill  HMD (20)    52,000     -         MR
83 Hull 2493 - TBN STI Westminster   HMD (20)    52,000     -         MR
84 Hull 2475 - TBN STI Seneca        HMD (20)    52,000     -         MR
85 Hull S1143 - TBN STI Tribeca      SPP (21)    52,000     -         MR
86 Hull S1144 - TBN STI Soho         SPP (21)    52,000     -         MR
87 Hull S1169 - TBN STI Manhattan    SPP (21)    52,000     -         MR
88 Hull S1170 - TBN STI Queens       SPP (21)    52,000     -         MR
89 Hull S1145 - TBN STI Gramercy     SPP (21)    52,000     -         MR
90 Hull S1167 - TBN STI Bronx        SPP (21)    52,000     -         MR
91 Hull S1168 - TBN STI Brooklyn     SPP (21)    52,000     -         MR
92 Hull S706 - TBN STI Sloane       HSHI (22)   109,999     -         LR2
93 Hull S709 - TBN STI Condotti     HSHI (22)   109,999     -         LR2
94 Hull S710 - TBN STI Veneto       HSHI (22)   109,999     -         LR2
95 Hull S715 - TBN STI Oxford       HSHI (22)   109,999     -         LR2
96 Hull S716 - TBN STI Connaught    HSHI (22)   109,999     -         LR2
97 Hull 5395 - TBN STI Broadway     DSME (23)   109,999     -         LR2
98 Hull 5398 - TBN STI Winnie       DSME (23)   109,999     -         LR2
99 Hull 5399 - TBN STI Lauren       DSME (23)   109,999     -         LR2


                                              ---------
   Total newbuilding product
   tankers DWT                                1,797,992
                                              =========


                                              ---------
   Total Fleet DWT                            6,151,886
                                              =========

(1)  This vessel operates in or is expected to operate in the Scorpio
     Handymax Tanker Pool (SHTP). SHTP is operated by Scorpio Commercial
     Management (SCM). SHTP and SCM are related parties to the Company.
(2)  This vessel operates in or is expected to operate in the Scorpio
     Panamax Tanker Pool (SPTP). SPTP is operated by SCM. SPTP is a related
     party to the Company.
(3)  This vessel operates in or is expected to operate in the Scorpio LR2
     Pool (SLR2P). SLR2P is operated by SCM. SLR2P is a related party to the
     Company.
(4)  This vessel operates in or is expected to operate in the Scorpio MR
     Pool (SMRP). SMRP is operated by SCM. SMRP is a related party to the
     Company.
(5)  This vessel is on a time charter agreement for two years, which also
     contains a 50% profit sharing provision whereby we split all of the
     vessel's profits above the daily base rate with the charterer.
(6)  This vessel is on a time charter agreement for one year, which also
     contains a 50% profit sharing provision whereby we split all of the
     vessel's profits above the daily base rate with the charterer.
(7)  Redelivery from the charterer is plus or minus 30 days from the expiry
     date.
(8)  The agreement also contains a 50% profit and loss sharing provision
     whereby we split all of the vessel's profits and losses above or below
     the daily base rate with the vessel's owner.
(9)  In September 2014, we declared an option to extend the charter for an
     additional year at $13,500 per day effective March 3, 2015.
(10) We have options to extend the charter for up to two consecutive one
     year periods at $15,200 per day and $16,200 per day, respectively.
(11) We have an option to extend the charter for an additional year at
     $15,700 per day.
(12) The rate for the first year of this agreement was $15,750 per day, the
     rate for the second year is $16,250 per day, and the rate for the third
     year is $16,750 per day. We have options to extend the charter for up
     to two consecutive one year periods at $17,500 per day and $18,000 per
     day, respectively.
(13) We have an option to extend the charter for an additional year at
     $12,500 per day. We have also entered into an agreement with the
     vessel's owner whereby we split all of the vessel's profits above the
     daily base rate.
(14) In September 2014, we declared an option to extend the charter for an
     additional year at $15,000 per day effective November 8, 2014.
(15) We have options to extend the charter for up to two consecutive one
     year periods at $16,250 per day and $17,250 per day, respectively.
(16) In September 2014, we declared an option to extend the charter for an
     additional six months at $15,500 per day effective November 2, 2014.
(17) We have an option to extend the charter for an additional six months at
     $16,250 per day.
(18) This vessel is currently under construction and is scheduled to be
     delivered in January 2015. We have an option to extend the charter for
     an additional year at $22,600 per day.
(19) In July 2014, we declared an option to extend the charter for an
     additional twelve months at $17,550 per day effective September 17,
     2014.
(20) These newbuilding vessels are being constructed at HMD (Hyundai Mipo
     Dockyard Co. Ltd. of South Korea). Six vessels are expected to be
     delivered in 2014 and six vessels in the first and second quarters of
     2015.
(21) These newbuilding vessels are being constructed at SPP (SPP
     Shipbuilding Co., Ltd. of South Korea). Three vessels are expected to
     be delivered in 2014 and four vessels in the first and second quarters
     of 2015.
(22) These newbuilding vessels are being constructed at HSHI (Hyundai Samho
     Heavy Industries Co., Ltd). Three vessels are expected to be delivered
     in 2014 and two vessels in the first quarter of 2015.
(23) These newbuilding vessels are being constructed at DSME (Daewoo
     Shipbuilding and Marine Engineering). One vessel is expected to be
     delivered in the fourth quarter of 2014 and two vessels in the second
     quarter of 2015.


 

Business Strategy, Dividend Policy, and Stock Buyback Program

Business Strategy
The Company’s primary objectives are to profitably grow the business and emerge as a major operator of product tanker vessels. The Company intends to acquire modern, high-quality tankers through timely and selective acquisitions. The Company is currently concentrating on these sectors because of their attractive fundamentals which the Company believes includes:

  • increasing demand for refined products.
  • increasing ton miles (distance between production and areas of demand), and
  • reduced order book.

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 amount of dividends, if any, depends on the Company’s earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in the loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.

On September 10, 2014, the Company paid a quarterly cash dividend on its common stock of $0.10 per share to all shareholders as of August 22, 2014 (the record date). On June 12, 2014, the Company paid a quarterly cash dividend on its common stock of $0.09 per share to all shareholders as of May 27, 2014 (the record date). On March 26, 2014, the Company paid a quarterly cash dividend on its common stock of $0.08 per share to all shareholders as of March 11, 2014 (the record date).

Share Buyback Program

On July 28, 2014, the Board of Directors of the Company approved a new stock buyback program with authorization to purchase up to $150 million of its common stock. This program replaced the stock buyback programs that were previously announced in July 2010, April 2014 and June 2014, which have been terminated.

The Company expects to repurchase these shares 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 program to repurchase any shares.

Since July 28, 2014, the Company has purchased an aggregate of $67.5 million of shares in the open market at an average price of $8.64 per share during 2014 and has $82.5 million remaining under its stock buyback program as of the date of this press release.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 48 tankers (four LR2 tankers, two LR1 tankers, 10 Handymax tankers, 31 MR tankers, and one post-Panamax tanker) with an average age of 1.5 years, time charters-in 24 product tankers (eight LR2, five LR1, four MR and seven Handymax tankers), and has contracted for 27 newbuilding product tankers (14 MR, eight LR2, and five Handymax ice class-1A product tankers), 13 are expected to be delivered to the Company throughout 2014 and 14 in 2015. The Company also owns approximately 16% of Dorian LPG Ltd. 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-GAAP Measures
This press release describes adjusted net income and Adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. “Non-GAAP” measure). The Non-GAAP measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.

Adjusted net income / (loss)

 

                                  For the three months ended September 30,
                                 ------------------------------------------
                                         2014                  2013
                                 --------------------  --------------------
In thousands of U.S. dollars
 except per share and share data   Amount   Per share    Amount   Per share
                                 ---------  ---------  ---------  ---------
Net (loss) / income              $  (1,159)$   (0.01)$     667$    0.00
Adjustments:
  Unrealized gain on derivative
   financial instruments               (75)     (0.00)      (118)     (0.00)
                                 ---------  ---------  ---------  ---------
Total adjustments                      (75)     (0.00)      (118)     (0.00)
                                 ---------  ---------  ---------  ---------
Adjusted net (loss) / income     $  (1,234)$   (0.01)$     549$    0.00
                                 =========  =========  =========  =========

                                   For the nine months ended September 30,
                                 ------------------------------------------
                                         2014                  2013
                                 --------------------  --------------------
                                   Amount   Per share    Amount   Per share
                                 ---------  ---------  ---------  ---------
Net income                       $  51,597$    0.29$  11,244$    0.08
Adjustments:
  Deferred financing fees write-
   off - STI Spirit                    317       0.00          -          -
  Unrealized gain on derivative
   financial instruments              (187)     (0.00)      (483)     (0.00)
  Gain on sale of VLCCs            (51,419)     (0.29)         -          -
  Gain on sale of Dorian shares    (10,924)     (0.06)         -          -
                                 ---------  ---------  ---------  ---------
Total adjustments                  (62,213)     (0.35)      (483)     (0.00)
                                 ---------  ---------  ---------  ---------
Adjusted net (loss) / income     $ (10,616)$   (0.06)$  10,761$    0.08
                                 =========  =========  =========  =========



 

Adjusted EBITDA

 

                                 For the three months   For the nine months
                                  ended September 30,   ended September 30,
                                 --------------------  --------------------
In thousands of U.S. dollars        2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
  Net (loss) / income            $  (1,159)$     667$  51,597$  11,244
  Financial expenses                 6,683        448      7,554      2,323
  Unrealized gain on derivative
   financial instruments               (75)      (118)      (187)      (483)
  Financial income                    (103)      (400)      (172)      (950)
  Depreciation                      11,574      6,377     24,896     16,665
  Depreciation component of our
   net profit from associate           526          -      1,869          -
  Amortization of restricted
   stock                             7,631      3,856     22,068      6,738
  Gain on sale of VLCCs                  -          -    (51,419)         -
  Gain on sale of Dorian shares          -          -    (10,924)         -
                                 ---------  ---------  ---------  ---------
  Adjusted EBITDA                $  25,077$  10,830$  45,282$  35,537
                                 =========  =========  =========  =========



 

Forward-Looking Statements

Matters 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,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” 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, our management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe 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 our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, 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 our operating expenses, including bunker prices, drydocking and insurance costs, the market for our 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 our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

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