UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2019
Commission File Number: 001-34677

SCORPIO TANKERS INC.
(Translation of registrant’s name into English)

9, Boulevard Charles III, Monaco 98000
(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [X] Form 40-F [  ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b) (1): [  ]

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [  ]

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

















INFORMATION CONTAINED IN THIS FORM 6-K REPORT

This Report on Form 6-K contains Management’s Discussion and Analysis of Financial Condition and Results of Operations and the unaudited interim condensed consolidated financial statements, and the accompanying notes thereto, for the six-month period ended June 30, 2019 of Scorpio Tankers Inc. (the “Company”), which is attached hereto as Exhibit 99.1.

The information contained in this Report on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 (File No. 333-230469) that was filed with the U.S. Securities and Exchange Commission with an effective date of March 22, 2019.









































SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
 
 
 
 
 
 
 
 
 
SCORPIO TANKERS INC.
 
 
 
 
(registrant)
Dated: September 24, 2019
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Brian Lee
 
 
 
 
 
 
Brian Lee
 
 
 
 
 
 
Chief Financial Officer






Document

Exhibit 99.1
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2019 and June 30, 2018
The following presentation of management’s discussion and analysis of results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes thereto which are included herein, the discussion included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission, or the SEC, on March 20, 2019, and other financial information appearing elsewhere in this report. We prepare our financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We have a fiscal year end of December 31. The unaudited condensed consolidated financial statements as of June 30, 2019 and for the six months ended June 30, 2019 and 2018 have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, or IAS 34. The unaudited condensed consolidated financial statements are presented in U.S. Dollars unless otherwise indicated. Any amounts converted from another non-U.S. currency to U.S. Dollars in this report are at the rate applicable at the relevant date or the average rate during the applicable period or to the extent it relates to the balance sheet at the balance sheet date.
As used herein, “we,” “us,” “our” and the "Company” all refer to Scorpio Tankers Inc. and its subsidiaries. The term “Scorpio Pools” refers to the spot market-oriented pools of similarly sized vessels which are operated by companies affiliated with us.
Information on the Company
General
We are a provider of marine transportation of petroleum products worldwide. As of September 20, 2019, we owned or finance leased 109 product tankers (38 LR2, 12 LR1, 45 MR and 14 Handymax) that have a weighted average age of 4.1 years and bareboat chartered-in 10 product tankers (three MR and seven Handymax), which we refer to collectively as our Operating Fleet.
The following table presents summary information concerning our Operating Fleet as of September 20, 2019:
 
Vessel Name
 
Year Built
 
DWT
 
Ice class
 
Employment
 
Vessel type
 
 
Owned or finance leased vessels
 
 
 
 
 
 
 
 
 
 
 
1

STI Brixton
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
2

STI Comandante
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
3

STI Pimlico
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
4

STI Hackney
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
5

STI Acton
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
6

STI Fulham
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
7

STI Camden
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
8

STI Battersea
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
9

STI Wembley
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
10

STI Finchley
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
11

STI Clapham
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
12

STI Poplar
 
2014
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
13

STI Hammersmith
 
2015
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
14

STI Rotherhithe
 
2015
 
38,734

 
1A
 
 SHTP (1)
 
Handymax
 
15

STI Amber
 
2012
 
49,990

 
 
SMRP (2)
 
MR
 
16

STI Topaz
 
2012
 
49,990

 
 
SMRP (2)
 
MR
 
17

STI Ruby
 
2012
 
49,990

 
 
SMRP (2)
 
MR
 
18

STI Garnet
 
2012
 
49,990

 
 
SMRP (2)
 
MR
 
19

STI Onyx
 
2012
 
49,990

 
 
SMRP (2)
 
MR
 

1



20

STI Fontvieille
 
2013
 
49,990

 
 
SMRP (2)
 
MR
 
21

STI Ville
 
2013
 
49,990

 
 
SMRP (2)
 
MR
 
22

STI Duchessa
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
23

STI Opera
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
24

STI Texas City
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
25

STI Meraux
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
26

STI San Antonio
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
27

STI Venere
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
28

STI Virtus
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
29

STI Aqua
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
30

STI Dama
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
31

STI Benicia
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
32

STI Regina
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
33

STI St. Charles
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
34

STI Mayfair
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
35

STI Yorkville
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
36

STI Milwaukee
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
37

STI Battery
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
38

STI Soho
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
39

STI Memphis
 
2014
 
49,990

 
 
SMRP (2)
 
MR
 
40

STI Tribeca
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
41

STI Gramercy
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
42

STI Bronx
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
43

STI Pontiac
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
44

STI Manhattan
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
45

STI Queens
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
46

STI Osceola
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
47

STI Notting Hill
 
2015
 
49,687

 
1B
 
SMRP (2)
 
MR
 
48

STI Seneca
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
49

STI Westminster
 
2015
 
49,687

 
1B
 
SMRP (2)
 
MR
 
50

STI Brooklyn
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
51

STI Black Hawk
 
2015
 
49,990

 
 
SMRP (2)
 
MR
 
52

STI Galata
 
2017
 
49,990

 
 
SMRP (2)
 
MR
 
53

STI Bosphorus
 
2017
 
49,990

 
 
SMRP (2)
 
MR
 
54

STI Leblon
 
2017
 
49,990

 
 
SMRP (2)
 
MR
 
55

STI La Boca
 
2017
 
49,990

 
 
SMRP (2)
 
MR
 
56

STI San Telmo
 
2017
 
49,990

 
1B
 
SMRP (2)
 
MR
 
57

STI Donald C Trauscht
 
2017
 
49,990

 
1B
 
SMRP (2)
 
MR
 
58

STI Esles II
 
2018
 
49,990

 
1B
 
SMRP (2)
 
MR
 
59

STI Jardins
 
2018
 
49,990

 
1B
 
SMRP (2)
 
MR
 
60

STI Excel
 
2015
 
74,000

 
 
SLR1P (3)
 
LR1
 
61

STI Excelsior
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
62

STI Expedite
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
63

STI Exceed
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
64

STI Executive
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
65

STI Excellence
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 

2



66

STI Experience
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
67

STI Express
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
68

STI Precision
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
69

STI Prestige
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
70

STI Pride
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
71

STI Providence
 
2016
 
74,000

 
 
SLR1P (3)
 
LR1
 
72

STI Elysees
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
73

STI Madison
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
74

STI Park
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
75

STI Orchard
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
76

STI Sloane
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
77

STI Broadway
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
78

STI Condotti
 
2014
 
109,999

 
 
SLR2P (4)
 
LR2
 
79

STI Rose
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
80

STI Veneto
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
81

STI Alexis
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
82

STI Winnie
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
83

STI Oxford
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
84

STI Lauren
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
85

STI Connaught
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
86

STI Spiga
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
87

STI Savile Row
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
88

STI Kingsway
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
89

STI Carnaby
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
90

STI Solidarity
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
91

STI Lombard
 
2015
 
109,999

 
 
SLR2P (4)
 
LR2
 
92

STI Grace
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
93

STI Jermyn
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
94

STI Sanctity
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
95

STI Solace
  
2016
  
109,999

 
 
SLR2P (4)
 
LR2
 
96

STI Stability
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
97

STI Steadfast
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
98

STI Supreme
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
99

STI Symphony
 
2016
 
109,999

 
 
SLR2P (4)
 
LR2
 
100

STI Gallantry
 
2016
 
113,000

 
 
SLR2P (4)
 
LR2
 
101

STI Goal
 
2016
 
113,000

 
 
SLR2P (4)
 
LR2
 
102

STI Nautilus
 
2016
 
113,000

 
 
SLR2P (4)
 
LR2
 
103

STI Guard
 
2016
 
113,000

 
 
SLR2P (4)
 
LR2
 
104

STI Guide
 
2016
 
113,000

 
 
SLR2P (4)
 
LR2
 
105

STI Selatar
 
2017
 
109,999

 
 
SLR2P (4)
 
LR2
 
106

STI Rambla
 
2017
 
109,999

 
 
SLR2P (4)
 
LR2
 
107

STI Gauntlet
 
2017
 
113,000

 
 
SLR2P (4)
 
LR2
 
108

STI Gladiator
 
2017
 
113,000

 
 
SLR2P (4)
 
LR2
 
109

STI Gratitude
 
2017
 
113,000

 
 
SLR2P (4)
 
LR2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total owned or finance leased DWT
 
 
 
7,883,190

 
 
 
 
 
 
 

3



 
Vessel Name
 
Year Built
 
DWT
 
Ice class
 
Employment
 
Vessel type
 
Charter type
 
Daily Base Rate
 
Expiry (5)
 
 
Bareboat chartered-in vessels
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110

Silent
 
2007
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-20
 
111

Single
 
2007
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-20
 
112

Star I
 
2007
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-20
 
113

Sky
 
2007
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-21
 
114

Steel
 
2008
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-21
 
115

Stone I
 
2008
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-21
 
116

Style
 
2008
 
37,847

 
1A
 
 SHTP (1)
 
Handymax
 
Bareboat
 
$
6,300

 
31-Mar-21
 
117

STI Beryl
 
2013
 
49,990

 
 
SMRP (2)
 
MR
 
Bareboat
 
$
8,800

 
18-Apr-25
(6)
118

STI Le Rocher
 
2013
 
49,990

 
 
SMRP (2)
 
MR
 
Bareboat
 
$
8,800

 
21-Apr-25
(6)
119

STI Larvotto
 
2013
 
49,990

 
 
SMRP (2)
 
MR
 
Bareboat
 
$
8,800

 
28-Apr-25
(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total bareboat chartered-in DWT
 
 
 
414,899

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Fleet DWT
 
 
 
8,298,089

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
This vessel operates in the Scorpio Handymax Tanker Pool, or SHTP. SHTP is a Scorpio Pool and is operated by Scorpio Commercial Management S.A.M., or SCM. SHTP and SCM are related parties to the Company.
(2)
This vessel operates in the Scorpio MR Pool, or SMRP. SMRP is a Scorpio Pool and is operated by SCM. SMRP and SCM are related parties to the Company.
(3)
This vessel operates in the Scorpio LR1 Pool, or SLR1P. SLR1P is a Scorpio Pool and is operated by SCM. SLR1P and SCM are related parties to the Company.
(4)
This vessel operates in the Scorpio LR2 Pool, or SLR2P. SLR2P is a Scorpio Pool and is operated by SCM. SLR2P and SCM are related parties to the Company.
(5)
Redelivery from the charterer is plus or minus 30 days from the expiry date.
(6)
In April 2017, we sold and leased back this vessel, on a bareboat basis, for a period of up to eight years for $8,800 per day. The sales price was $29.0 million per vessel, and we have the option to purchase this vessel beginning at the end of the fifth year of this agreement through the end of the eighth year of the agreement, at market based prices. Additionally, a deposit of $4.35 million per vessel was retained by the buyer and will either be applied to the purchase price of the vessel if a purchase option is exercised or refunded to us at the expiration of the agreement.


4



RECENT DEVELOPMENTS
Convertible Senior Notes due 2019
In July 2019, our Convertible Senior Notes due 2019 matured and we repaid the entire outstanding balance of $142.7 million.
Convertible Senior Notes due 2022
On September 10, 2019, the conversion rate of our Convertible Senior Notes due 2022 was adjusted to reflect the Company's expected payment of a cash dividend on or about September 27, 2019 to all shareholders of record as of September 10, 2019. The new conversion rate for the Convertible Senior Notes due 2022 is 25.6637 shares of the Company’s common shares per $1,000 principal amount, representing an increase to the prior conversion rate of 0.0870 shares for each $1,000 principal amount of the Convertible Senior Notes due 2022.
Declaration of Dividend
On July 30, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about September 27, 2019 to all shareholders of record as of September 10, 2019 (the record date).
Scrubber Financing
The Company has received commitments for seven different facilities to partially finance the purchase and installation of exhaust gas cleaning systems, or scrubbers, on certain of the Company's vessels.  These commitments are expected to increase the Company’s liquidity by approximately $87 million. The Company is in discussions with a different group of financial institutions to finance additional purchases of scrubbers which, if consummated, are expected to increase the Company’s liquidity by an additional $35 million. All of these agreements, if consummated, are expected to be signed in the next few months and the drawdowns will occur as the scrubbers are installed throughout the remainder of 2019 and 2020.
2013 Equity Incentive Plan
In July 2019, the Company's Board of Directors approved the reloading of the 2013 Equity Incentive Plan, or the Plan, and reserved an additional 134,893 common shares, par value $0.01 per share, of the Company for issuance pursuant to the Plan.

In July 2019, we issued 230,170 shares of restricted stock to our employees for no cash consideration pursuant to the Plan.  The share price on the issuance date was $26.23 per share.  The vesting schedule of the restricted stock is (i) one-third of the shares vest on May 24, 2022, (ii) one-third of the shares vest on May 23, 2023, and (iii) one-third of the shares vest on May 22, 2024.


5



Overview
We, or the commercial pools that we operate in, generate revenues by charging customers for the transportation of their refined oil and other petroleum products using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships:
Voyage charters, which are charters for short intervals that are priced on current, or “spot,” market rates.
Time or bareboat charters, which are vessels chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.
Commercial pools, whereby we participate with other shipowners to operate a large number of vessels as an integrated transportation system, which offers customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools negotiate charters primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and contracts of affreightment (described below), thus generating higher effective time charter equivalent, or TCE, revenues than otherwise might be obtainable in the spot market.
For all types of vessels in contractual relationships, we are responsible for crewing and other vessel operating costs for our owned, finance leased or bareboat chartered-in vessels and for the charterhire expense for vessels that we time or bareboat charter-in.
The table below illustrates the primary distinctions among these different employment arrangements:
 
 
Voyage Charter
 
Time Charter
 
Bareboat Charter
 
Commercial Pool
Typical contract length
 
Single voyage
 
One year or more
 
One year or more
 
Varies
Hire rate basis(1)
 
Varies
 
Daily
 
Daily
 
Varies
Voyage expenses(2)
 
We pay
 
Customer pays
 
Customer pays
 
Pool pays
Crewing and other vessel operating costs for owned, finance leased, or bareboat chartered-in vessels(3)
 
We pay
 
We pay
 
Customer pays
 
We pay
Charterhire expense for time or bareboat chartered-in vessels(3)
 
We pay
 
We pay
 
We pay
 
We pay
Off-hire(4)
 
Customer does not pay
 
Customer does not pay
 
Customer pays
 
Pool does not pay
(1)
“Hire rate” refers to the basic payment from the charterer for the use of the vessel.
(2)
“Voyage expenses” refers to expenses incurred due to a vessel’s traveling from a loading port to a discharging port, such as fuel (bunker) cost, port expenses, agent’s fees, canal dues and extra war risk insurance, as well as commissions.
(3)
"Vessel operating costs" and "Charterhire expense" are defined below under “Important Financial and Operational Terms and Concepts.”
(4)
“Off-hire” refers to the time a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydockings. For time chartered-in vessels, we do not pay the charterhire expense when the vessel is off-hire.
Please see our fleet list for a description of the employment arrangement for each of our vessels.
Our vessels are commercially managed by SCM and technically managed by Scorpio Ship Management S.A.M., or SSM, pursuant to a Master Agreement, as amended and restated from time to time. SCM and SSM are controlled by the Lolli-Ghetti family, of which Emanuele Lauro, our founder, Chairman and Chief Executive Officer, and Filippo Lauro, our Vice President, are members. We expect that additional vessels that we may acquire in the future will also be managed under the Master Agreement or on substantially similar terms as those contained in the Master Agreement.
SCM’s commercial management services include securing employment, in the spot market and on time charters, for our vessels. SCM also manages the Scorpio Pools in which our vessels are employed.

6



SSM’s technical management services include day-to-day vessel operations, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support.
We have also entered into an Amended Administrative Services Agreement with Scorpio Services Holding Limited, or SSH, an entity controlled by the Lolli-Ghetti family. The administrative services provided under this agreement primarily include the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. We reimburse SSH for direct or indirect expenses it incurs in providing us with the administrative services described above. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio group of companies, or Scorpio. Further, SSH has agreed, on behalf of itself and other members of Scorpio, that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt.
Our Amended Administrative Agreement may be terminated by us upon two years’ notice.
Important Financial and Operational Terms and Concepts
We use a variety of financial and operational terms and concepts. These include the following:
Vessel revenues. Vessel revenues primarily include revenues from time and bareboat charters, pool revenues and voyage charters (in the spot market). Vessel revenues are affected by hire rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time and bareboat charter, vessels in pools and vessels operating on voyage charter. Revenues from vessels in pools and on voyage charter are more volatile, as they are typically tied to prevailing market rates.
Voyage charters. Voyage charters or spot voyages are charters under which the customer pays a transportation charge for the movement of a specific cargo between two or more specified ports. We pay all of the voyage expenses for these types of charters.
Voyage expenses. Voyage expenses primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters. These expenses are subtracted from voyage charter revenues to calculate TCE revenues.
Vessel operating costs. For our owned, finance leased or bareboat chartered-in vessels, we are responsible for vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees. The two largest components of our vessel operating costs are crew costs, and repairs and maintenance. Expenses for repairs and maintenance tend to fluctuate from period to period because most repairs and maintenance typically occur during periodic drydocking. Please read “Drydocking” below. We expect these expenses to increase as our fleet matures and to the extent that it expands.
Additionally, these costs include technical management fees that we paid to SSM, a related party which is controlled by the Lolli-Ghetti family. Pursuant to our Master Agreement, SSM provides us with technical services, and we provide them with the ability to subcontract technical management of our vessels with our approval.
Charterhire. Charterhire is the amount we pay the owner for time or bareboat chartered-in vessels. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.
Time chartered-in vessels. The vessel's owner is responsible for the vessel operating costs.
Bareboat chartered-in vessels. The charterer is responsible for the vessels operating costs.
Drydocking. We periodically drydock each of our owned or finance leased vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, each vessel is drydocked every 30 to 60 months. We capitalize a substantial portion of the costs incurred during drydocking and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. We immediately expense costs for routine repairs and maintenance performed during drydocking that do not improve or extend the useful lives of the assets. The number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures.
Depreciation. Depreciation expense typically consists of:
charges related to the depreciation of the historical cost of our owned or finance leased vessels (less an estimated residual value) over the estimated useful lives of the vessels; and

7



charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking.

TCE revenue or rates. We report TCE revenue, a non-IFRS measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable IFRS measures, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) 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 bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors. TCE revenue is vessel revenue less voyage expenses, including bunkers and port charges. The TCE rate achieved on a given voyage is expressed in U.S. dollars per day and is generally calculated by taking TCE revenue and dividing that figure by the number of revenue days in the period.

8



The following table reflects our daily TCE and operating expenses for the six months ended June 30, 2019 and 2018. For a reconciliation of TCE revenue, deduct voyage expenses from revenue on our unaudited condensed consolidated statements of income or loss. See the section below entitled "Results of Operations" for the reconciliation of these amounts.
 
 
For the six months ended June 30,
 
 
2019
 
2018
Average Daily Results
 
 
 
 
TCE per revenue day (1)
 
$
16,470

 
$
12,816

Vessel operating costs per day(2)
 
$
6,414

 
$
6,507

 
 
 
 
 
LR2
 
 
 
 
TCE per revenue day (1)
 
$
19,948

 
$
13,572

Vessel operating costs per day(2)
 
$
6,748

 
$
6,650

Average number of owned or finance leased vessels
 
38.0

 
38.0

Average number of time chartered-in vessels
 

 
1.7

 
 
 
 
 
LR1
 
 
 
 
TCE per revenue day (1)
 
$
16,221

 
$
10,608

Vessel operating costs per day(2)
 
$
6,377

 
$
6,805

Average number of owned or finance leased vessels
 
12.0

 
12.0

Average number of time chartered-in vessels
 

 

 
 
 
 
 
MR
 
 
 
 
TCE per revenue day (1)
 
$
14,594

 
$
13,049

Vessel operating costs per day(2)
 
$
6,235

 
$
6,384

Average number of owned or finance leased vessels
 
45.0

 
44.8

Average number of time chartered-in vessels
 
0.2

 
5.9

Average number of bareboat chartered-in vessels
 
3.0

 
3.0

 
 
 
 
 
Handymax
 
 
 
 
TCE per revenue day (1)
 
$
14,644

 
$
12,096

Vessel operating costs per day(2)
 
$
6,240

 
$
6,357

Average number of owned or finance leased vessels
 
14.0

 
14.0

Average number of time chartered-in vessels
 

 
1.1

Average number of bareboat chartered-in vessels
 
7.0

 
7.0

 
 
 
 
 
Fleet data
 
 
 
 
Average number of owned vessels
 
109.0

 
108.8

Average number of time chartered-in vessels
 
0.2

 
8.7

Average number of bareboat chartered-in vessels
 
10.0

 
10.0

 
 
 
 
 
Drydock
 
 
 
 
Capital Expenditures(3) (in thousands of U.S. dollars)
 
$
59,688

 
$
2,136

(1) 
Freight rates are commonly measured in the shipping industry in terms of TCE per day, which is calculated by subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (TCE revenue) by the number of revenue days in the period. Revenue days are the number of days the vessel is owned or finance leased or chartered-in less the number of days the vessel is off-hire for drydock and repairs.

9



(2) 
Vessel operating costs per day represent vessel operating costs divided by the number of operating days during the period. Operating days are the total number of available days in a period with respect to the owned, finance leased or bareboat chartered-in vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned, finance leased or bareboat chartered-in vessels, not our time chartered-in vessels.
(3) 
Includes payments for drydock, scrubbers and ballast water treatment systems, or BWTS.
Revenue days. Revenue days are the total number of calendar days our vessels were in our possession during a period, less the total number of off-hire days during the period associated with major repairs or drydockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net vessel revenues between periods.
Average number of vessels. Historical average number of owned or finance leased vessels consists of the average number of vessels that were in our possession during a period. We use average number of vessels primarily to highlight changes in vessel operating costs and depreciation and amortization.
Contract of affreightment. A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and shipowner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the shipowner may use different vessels to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators, such as pools or shipowners with large fleets of the same vessel type. When our vessels are employed on COAs, we pay the voyage expenses while the freight rate normally is agreed on a per cargo ton basis.
Commercial pools. To increase vessel utilization and revenues, we participate in commercial pools with other shipowners and operators of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenue than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers.
Operating days. Operating days are the total number of available days in a period with respect to the owned, finance leased or bareboat chartered-in vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned, finance leased or bareboat chartered-in vessels, not our time chartered-in vessels.
Items You Should Consider When Evaluating Our Results
You should consider the following factors when evaluating our historical financial performance and assessing our future prospects:
Our vessel revenues are affected by cyclicality in the tanker markets. The cyclical nature of the tanker industry causes significant increases or decreases in the revenue we earn from our vessels, particularly those vessels we trade in the spot market. We employ a chartering strategy to capture upside opportunities in the spot market while using fixed-rate time charters to reduce downside risks, depending on our outlook for freight rates, oil tanker market conditions and global economic conditions. Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of, and demand for, tanker capacity. The supply of tanker capacity is influenced by the number and size of new vessels built, vessels scrapped, converted and lost, the number of vessels that are out of service, and regulations that may effectively cause early obsolescence of tonnage. The demand for tanker capacity is influenced by, among other factors:
global and regional economic and political conditions;
increases and decreases in production of and demand for crude oil and petroleum products;
increases and decreases in OPEC oil production quotas;
the distance crude oil and petroleum products need to be transported by sea; and
developments in international trade and changes in seaborne and other transportation patterns.
Tanker rates also fluctuate based on seasonal variations in demand. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower

10



oil consumption in the northern hemisphere and refinery maintenance that is typically conducted in the summer months. In addition, unpredictable weather patterns during the winter months in the northern hemisphere tend to disrupt vessel routing and scheduling. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months. As a result, revenues generated by our vessels have historically been weaker during the quarters ended June 30 and September 30, and stronger during the quarters ended March 31 and December 31.
Our expenses were affected by the fees we pay SCM, SSM, and SSH for commercial management, technical management and administrative services, respectively. SCM, SSM and SSH, companies controlled by the Lolli-Ghetti family of which our founder, Chairman and Chief Executive Officer and our Vice President are members, provide commercial, technical and administrative management services to us, respectively. We pay fees under our Master Agreement with SCM and SSM for our vessels that operate both within and outside of the Scorpio Pools.  When our vessels are operating in one of the Scorpio Pools, SCM, the pool manager, charges fees of $300 per vessel per day with respect to our LR1/Panamax and Aframax vessels, $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus 1.50% commission on gross revenues per charter fixture. For commercial management of our vessels that are not operating in any of the Scorpio Pools, we pay SCM a fee of $250 per vessel per day for each LR1/Panamax and LR2/Aframax vessel and $300 per vessel per day for each Handymax and MR vessel, plus 1.25% commission on gross revenues per charter fixture. Additionally, in September 2018, we entered into an agreement with SCM whereby SCM reimbursed a portion of the commissions that SCM charges our vessels to effectively reduce such commissions to 0.85% of gross revenue per charter fixture, effective from September 1, 2018 and ended on June 1, 2019.
Pursuant to the Master Agreement, the fixed annual technical management fee that we pay to SSM was reduced from $250,000 per vessel to $175,000, effective January 1, 2018 and certain services previously provided as part of the fixed fee are now itemized.  The aggregate cost, including the costs that are now itemized, for the services provided under the technical management agreement did not and are not expected to materially differ from the annual management fee charged prior to the amendment.
We also reimburse SSH for direct or indirect expenses it incurs in providing us with the administrative services described above.


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Table of Contents

Results of Operations
Results of Operations for the six months ended June 30, 2019 compared to the six months ended June 30, 2018
 
 
For the six months ended June 30,
 
 Change
 
 Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
 Change
Vessel revenue
 
$
346,635

 
$
298,241

 
$
48,394

 
16
 %
Vessel operating costs
 
(138,152
)
 
(139,904
)
 
1,752

 
1
 %
Voyage expenses
 
(1,622
)
 
(4,372
)
 
2,750

 
63
 %
Charterhire
 
(4,399
)
 
(35,169
)
 
30,770

 
87
 %
Depreciation
 
(88,183
)
 
(87,547
)
 
(636
)
 
(1
)%
Depreciation - right of use assets
 
(8,030
)
 

 
(8,030
)
 
N/A

General and administrative expenses
 
(31,240
)
 
(26,972
)
 
(4,268
)
 
(16
)%
Merger transaction related costs
 

 
(271
)
 
271

 
100
 %
Financial expenses
 
(96,083
)
 
(88,367
)
 
(7,716
)
 
(9
)%
Loss on exchange of Convertible Senior Notes due 2019
 

 
(16,968
)
 
16,968

 
100
 %
Financial income
 
5,843

 
730

 
5,113

 
700
 %
Other income (expenses), net
 
(13
)
 
(96
)
 
83

 
86
 %
Net loss
 
$
(15,244
)
 
$
(100,695
)
 
$
85,451

 
85
 %
Net loss. Net loss for the six months ended June 30, 2019 was $15.2 million, an improvement of $85.5 million, or 85%, from the net loss of $100.7 million for the six months ended June 30, 2018. The differences between the two periods are discussed below.

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Table of Contents

Vessel revenue. Vessel revenue for the six months ended June 30, 2019 was $346.6 million, an increase of $48.4 million, or 16%, from revenue of $298.2 million for the six months ended June 30, 2018. The increase in vessel revenue was driven by an increase in TCE revenue per day to $16,470 per day for the six months ended June 30, 2019 from $12,816 per day for the six months ended June 30, 2018. TCE revenue per day, by operating segment is discussed below. The increase in vessel revenue was offset by a decrease in revenue days to 20,948 from 22,930 days for the six months ended June 30, 2019 and 2018, respectively.
The following table depicts the components of our revenue, our TCE per revenue day and revenue days for the six months ended June 30, 2019 and 2018.
 
 
For the six months ended June 30,
 
 Change
 
 Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
 Change
Pool revenue by operating segment
 
 
 
 
 
 
 
 
MR
 
$
123,427

 
$
117,171

 
$
6,256

 
5
 %
LR2
 
131,985

 
90,689

 
41,296

 
46
 %
Handymax
 
51,916

 
41,803

 
10,113

 
24
 %
LR1
 
35,177

 
22,772

 
12,405

 
54
 %
Total pool revenue
 
342,505

 
272,435

 
70,070

 
26
 %
Voyage revenue (spot market)
 
1,579

 
7,248

 
(5,669
)
 
(78
)%
Time charter-out revenue
 
2,551

 
18,558

 
(16,007
)
 
(86
)%
Gross revenue
 
346,635

 
298,241

 
48,394

 
16
 %
Voyage expenses
 
(1,622
)
 
(4,372
)
 
2,750

 
63
 %
TCE revenue (1)
 
$
345,013


$
293,869

 
$
51,144

 
17
 %
 
 
 
 
 
 
 
 
 
Daily pool TCE by operating segment: (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MR pool
 
$
14,593

 
$
12,785

 
$
1,808

 
14
 %
LR2/Aframax pools
 
19,919

 
13,565

 
6,354

 
47
 %
Handymax pool
 
14,820

 
11,576

 
3,244

 
28
 %
LR1/Panamax pools
 
16,221

 
10,826

 
5,395

 
50
 %
Consolidated daily pool TCE
 
16,502

 
12,633

 
3,869

 
31
 %
Voyage (spot market) - daily TCE
 
8,594

 
7,725

 
869

 
11
 %
Time charter-out - daily TCE
 
16,858

 
19,930

 
(3,072
)
 
(15
)%
Consolidated daily TCE
 
16,470

 
12,816

 
3,654

 
29
 %
 
 
 
 
 
 
 
 
 
Pool revenue days per operating segment
 
 
 
 
 
 
 
 
MR
 
8,443

 
9,151

 
(708
)
 
(8
)%
LR2/Aframax
 
6,618

 
6,680

 
(62
)
 
(1
)%
Handymax
 
3,503

 
3,607

 
(104
)
 
(3
)%
LR1/Panamax
 
2,167

 
2,104

 
63

 
3
 %
Total pool revenue days
 
20,731

 
21,542

 
(811
)
 
(4
)%
Voyage (spot market) revenue days
 
89

 
486

 
(397
)
 
(82
)%
Time charter-out revenue days
 
128

 
902

 
(774
)
 
(86
)%
Total revenue days
 
20,948

 
22,930

 
(1,982
)
 
(9
)%
(1) We report TCE revenues, a non-IFRS measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable IFRS measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance

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Table of Contents

irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors.
Pool revenue. Pool revenue for the six months ended June 30, 2019 was $342.5 million, an increase of $70.1 million, or 26%, from $272.4 million for the six months ended June 30, 2018. The increase in pool revenue was due to an increase in pool TCE per day across all of our operating segments. The product tanker market experienced a period of prolonged weakness during most of 2018 culminating with a sharp recovery that began in the fourth quarter of 2018 and continued through the six months ended June 30, 2019. This was a result of several factors including, but not limited to (i) an increase in global demand for refined commodities against the backdrop of moderating supply of the global product tanker fleet, (ii) the opening of arbitrage windows on several trading routes, and (iii) the reduction of global product inventory drawdowns, increasing demand for refined petroleum product imports. The increase was offset by a decrease in pool revenue days to 20,731 for the six months ended June 30, 2019 from 21,542 for the six months ended June 30, 2018 as a result of a decrease in the number of vessels chartered-in during six months ended June 30, 2019 as compared to the six months ended June 30, 2018.
MR pool revenue. MR pool revenue for the six months ended June 30, 2019 was $123.4 million, an increase of $6.3 million, or 5% from $117.2 million for the six months ended June 30, 2018. The increase in pool revenue was driven by an increase in pool TCE revenue to $14,593 per day from $12,785 per day during the six months ended June 30, 2019 and 2018, respectively. This increase was offset by a decrease in pool revenue days to 8,443 from 9,151 during the six months ended June 30, 2019 and 2018, respectively, primarily due to the reduction in the average number of time chartered-in MRs to 0.2 from 5.9 during the six months ended June 30, 2019 and 2018, respectively. Seven time chartered-in MRs, which were in the Scorpio MR pool for an aggregate of 1,038 days during the six months ended June 30, 2018, were redelivered throughout 2018. Additionally, eight owned MRs were offhire for 242 days for drydock and scrubber installations during the six months ended June 30, 2019, which reduced the number of pool revenue days. The decrease in pool revenue days was offset by four owned MRs that were operating in the pool for an additional 522 days during the six months ended June 30, 2019 but were time-chartered out or operated in the spot market during the six months ended June 30, 2018.
LR2 pool revenue. LR2 pool revenue for the six months ended June 30, 2019 was $132.0 million, an increase of $41.3 million, or 46%, from $90.7 million for the six months ended June 30, 2018. The increase in pool revenue was driven by an increase in pool TCE revenue per day to $19,919 from $13,565 during the six months ended June 30, 2019 and 2018, respectively. This increase was offset by a decrease in pool revenue days to 6,618 from 6,680 days during the six months ended June 30, 2019 and 2018, respectively, which was the result of (i) five LR2 vessels being offhire for scrubber installations (resulting in an aggregate of 191 offhire days during the six months ended June 30, 2019) and (ii) the redelivery of two time chartered-in vessels in 2018 (resulting in a decrease of an aggregate of 310 pool revenue days). The decrease in pool revenue days for the LR2 vessels was offset by seven LR2 vessels that operated in the Scorpio LR2 pool for an aggregate of 405 days during the six months ended June 30, 2019. These vessels were time-chartered out or operated in the spot market for a portion of the six months ended June 30, 2018.
Handymax pool revenue. Pool revenue from Handymax vessels for the six months ended June 30, 2019 was $51.9 million, an increase of $10.1 million, or 24%, from $41.8 million for the six months ended June 30, 2018. The increase in pool revenue was primarily driven by an increase in TCE revenue to $14,820 per day from $11,576 per day during the six months ended June 30, 2019 and 2018, respectively.
The increase in pool TCE revenue was partially offset by a decrease in pool revenue days to 3,503 from 3,607 days during the six months ended June 30, 2019 and 2018, respectively. This was the result of (i) the redelivery of two time chartered-in Handymax vessels (resulting in an aggregate reduction of 194 pool revenue days) and (ii) three Handymax vessels that were offhire for drydock and ballast water treatment system installations during the six months ended June 30, 2019 (resulting in an aggregate reduction of 73 pool revenue days). The decrease in pool revenues days was offset by two Handymax vessels that were operating in the Scorpio Handymax Tanker pool during the six months ended June 30, 2019 (resulting in 222 additional pool revenue days) but were time chartered-out during the six months ended June 30, 2018.
LR1 pool revenue. Pool revenue from LR1 vessels for the six months ended June 30, 2019 was $35.2 million, an increase of $12.4 million, or 54%, from $22.8 million for the six months ended June 30, 2018. The increase in pool revenue was primarily the result of an increase in pool TCE per revenue day to $16,221 from $10,826 during the six months ended June 30, 2019 and 2018, respectively. The increase in pool revenue was also driven by an increase in pool revenue days to 2,167 days from 2,104 days during the six months ended June 30, 2019 and 2018, respectively. Two LR1 product tankers were operating in the spot market during the six months ended June 30, 2018 but these vessels operated in the Scorpio LR1 pool for the entire six months ended June 30, 2019 (resulting in an aggregate of 67 additional pool revenue days).

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Table of Contents

Voyage revenue (spot market). Voyage revenue for the six months ended June 30, 2019 was $1.6 million, a decrease of $5.7 million, or 78%, from $7.2 million for the six months ended June 30, 2018. This decrease was primarily the result of a reduction in the number of days our vessels operated in the spot market, or on short-term time charter, during the six months ended June 30, 2019. The mix of these employment types is summarized as follows:
Spot market voyages: Five product tankers operated in the spot market on voyage charters for an aggregate of 89 days during the six months ended June 30, 2019. Six LR2 and two LR1 product tankers operated in the spot market on voyage charters for an aggregate of 302 days during the six months ended June 30, 2018.
Short-term time charters: We consider short-term time charters (less than one year) as spot market voyages. We did not have any vessels employed on short-term time charters during the six months ended June 30, 2019. We had three MR and two LR2 product tankers employed on short-term time charters (ranging from 45 days to 120 days) for an aggregate of 184 revenue days during the six months ended June 30, 2018.
Time charter-out revenue. Time charter-out revenue (representing time charters with initial terms of one year or greater) for the six months ended June 30, 2019 was $2.6 million, a decrease of $16.0 million, or 86%, from $18.6 million for the six months ended June 30, 2018. Time charter-out revenue, by operating segment, consists of the following:
 
 
For the six months ended June 30,
 
 Change
 
 Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
 Change
Handymax
 
$
1,681

 
$
6,434

 
$
(4,753
)
 
(74
)%
LR2
 
870

 
5,004

 
(4,134
)
 
(83
)%
MR
 

 
7,120

 
(7,120
)
 
(100
)%
LR1
 

 

 

 
N/A

Total voyage revenue (spot market)
 
$
2,551

 
$
18,558

 
$
(16,007
)
 
(86.3
)%
The following table summarizes the terms of our time chartered-out vessels during the six months ended June 30, 2019 and 2018, respectively:
 
Name
 
Year built
 
Type
 
Delivery Date to the Charterer
 
Charter Expiration
 
Rate ($/ day)
 
1

STI Pimlico
 
2014
 
Handymax
 
February-16
 
March-19
 
$
18,000

 
2

STI Poplar
 
2014
 
Handymax
 
January-16
 
February-19
 
$
18,000

 
3

STI Notting Hill
 
2015
 
MR
 
November-15
 
October-18
 
$
20,500

 
4

STI Westminster
 
2015
 
MR
 
December-15
 
October-18
 
$
20,500

 
3

STI Rose
 
2015
 
LR2
 
February-16
 
February-19
 
$
28,000

 
Vessel operating costs. Vessel operating costs for the six months ended June 30, 2019 were $138.2 million, a decrease of $1.8 million, or 1%, from $139.9 million for the six months ended June 30, 2018. The overall decrease was due to a slight reduction in the daily vessel operating costs to $6,414 from $6,507 during the six months ended June 30, 2019 and 2018, respectively.

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The following table is a summary of our vessel operating costs by operating segment:
 
 
For the six months ended June 30,
 
 Change
 
 Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
 change
Vessel operating costs
 
 
 
 
 
 
 
 
MR
 
$
54,173

 
$
55,224

 
$
1,051

 
2
 %
LR2
 
46,411

 
45,736

 
(675
)
 
(1
)%
Handymax
 
23,717

 
24,163

 
446

 
2
 %
LR1
 
13,851

 
14,781

 
930

 
6
 %
Total vessel operating costs
 
$
138,152

 
$
139,904

 
$
1,752

 
1
 %
 
 
 
 
 
 
 
 
 
Vessel operating costs per day
 
 
 
 
 
 
 
 
MR
 
$
6,235

 
$
6,384

 
$
149

 
2
 %
LR2
 
6,748

 
6,650

 
(98
)
 
(1
)%
Handymax
 
6,240

 
6,357

 
117

 
2
 %
LR1
 
6,377

 
6,805

 
428

 
6
 %
Consolidated vessel operating costs per day
 
6,414

 
6,507

 
93

 
1
 %
 
 
 
 
 
 
 
 
 
Operating days
 
 
 
 
 
 
 
 
MR
 
8,688

 
8,651

 
37

 
 %
LR2
 
6,878

 
6,878

 

 
 %
Handymax
 
3,801

 
3,801

 

 
 %
LR1
 
2,172

 
2,172

 

 
 %
Total operating days
 
21,539

 
21,502

 
37

 
 %

MR vessel operating costs. Vessel operating costs for MR vessels owned, finance leased, or bareboat chartered-in for the six months ended June 30, 2019 were $54.2 million, a decrease of $1.1 million, or 2%, from $55.2 million for the six months ended June 30, 2018. This reduction was primarily due to an improvement in managing our vessel operating costs, which resulted in a decrease in operating costs per day to $6,235 from $6,384 during the six months ended June 30, 2019 and 2018, respectively. Operating days for MR vessels owned, finance leased, or bareboat chartered-in increased slightly to 8,688 from 8,651 days during the six months ended June 30, 2019 and 2018, respectively.
LR2 vessel operating costs. Vessel operating costs for LR2 vessels owned or finance leased for the six months ended June 30, 2019 were $46.4 million, an increase of $0.7 million, or 1%, from $45.7 million for the six months ended June 30, 2018. The daily LR2 vessel operating costs increased to $6,748 from $6,650 during the six months ended June 30, 2019 and 2018, respectively. Operating days for LR2 vessels owned or finance leased remained consistent at 6,878 days during the six months ended June 30, 2019 and 2018.
Handymax vessel operating costs. Vessel operating costs for Handymax vessels owned, finance leased, or bareboat chartered-in for the six months ended June 30, 2019 were $23.7 million, a decrease of $0.4 million, or 2%, from $24.2 million for the six months ended June 30, 2018. The daily Handymax vessel operating costs decreased to $6,240 from $6,357 during the six months ended June 30, 2019 and 2018. Operating days for Handymax vessels owned, finance leased, or bareboat chartered-in remained consistent at 3,801 days during the six months ended June 30, 2019 and 2018.
LR1 vessel operating costs. Vessel operating costs for LR1 vessels owned or finance leased, for the six months ended June 30, 2019 were $13.9 million, a decrease of $0.9 million, or 6%, from $14.8 million for the six months ended June 30, 2018. The daily LR1 vessel operating costs decreased to $6,377 from $6,805 during the six months ended June 30, 2019 and 2018, respectively. During the six months ended June 30, 2018, we incurred increased costs on certain LR1 vessels as several of these vessels transitioned technical managers. These costs did not recur during the six months ended June 30, 2019. Operating days for LR1 vessels owned or finance leased remained consistent at 2,172 days during the six months ended June 30, 2019 and 2018.
Charterhire. Charterhire expense for the six months ended June 30, 2019 was $4.4 million, a decrease of $30.8 million, or 87%, from $35.2 million during the six months ended June 30, 2018. The decrease was driven by a reduction in the number of time chartered-in vessels in addition to the adoption of IFRS 16 - Leases on January 1, 2019. The average number of time chartered-in vessels decreased

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to 0.2 from 8.7 for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Additionally, as of June 30, 2019, we had 10 bareboat chartered-in vessels, which are being accounted for under IFRS 16 - Leases, as right of use assets and related lease liabilities. Under IFRS 16 - Leases, 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). During the six months ended June 30, 2019, we had an average of 6.5 bareboat chartered-in vessels that were classified as right of use assets and an average of 3.5 bareboat chartered-in vessels that were not classified as right of use assets (seven bareboat chartered-in contracts expired during 2019), and during the six months ended June 30, 2018 the expense for the 10 bareboat chartered-in vessels was recorded to charterhire expense.
Depreciation. Depreciation expense for the six months ended June 30, 2019 was $88.2 million, an increase of $0.6 million, or 1%, from $87.5 million during the six months ended June 30, 2018. The average number of owned and financed leased vessels increased slightly to 109.0 from 108.8 vessels for the six months ended June 30, 2019 and 2018, respectively. This increase was primarily the result of (i) the delivery of two newbuilding MRs during the six months ended June 30, 2018, which were depreciated for a partial period during the six months ended June 30, 2018 compared to entire six months ended June 30, 2019 and, (ii) the installation of BWTS and scrubbers on certain of our vessels during the six months ended June 30, 2019.
Depreciation - right of use assets. Depreciation - right of use assets for the six months ended June 30, 2019 was $8.0 million, which reflects the straight-line depreciation expense recorded as a result of the Company's transition to the right of use assets, as per IFRS 16 - Leases on January 1, 2019. 
General and administrative expenses. General and administrative expenses for the six months ended June 30, 2019 were $31.2 million, an increase of $4.3 million, or 16% from $27.0 million during the six months ended June 30, 2018. This increase was primarily driven by an increase in compensation expenses and restricted stock amortization.
Merger transaction related costs. There were no merger transaction related costs for the six months ended June 30, 2019. The merger transaction related costs for the six months ended June 30, 2018 were $0.3 million. Merger transaction related costs represent expenses incurred as part of the merger with Navig8 Product Tankers Inc., or NPTI, in 2017.
Financial expenses. Financial expenses for the six months ended June 30, 2019 were $96.1 million, an increase of $7.7 million, or 9%, from $88.4 million during the six months ended June 30, 2018. The change was the result of (i) an increase in interest expense payable on our outstanding borrowings due to an increase in LIBOR rates, (ii) an increase in borrowing costs associated with the lease financing arrangements that were entered into throughout 2018, and (iii) the implementation of IFRS 16 - Leases. These increases are partially offset by a decrease in the write-off and amortization of deferred financing fees.
The increase in our interest expense was the result of (i) an increase in our average debt outstanding to $2.9 billion from $2.8 billion and (ii) an increase in LIBOR rates during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. These increases were partially offset by an increase of capitalized interest to $1.3 million during the six months ended June 30, 2019 from $0.2 million during the six months ended June 30, 2018.
During the six months ended June 30, 2019, we wrote-off an aggregate of $0.3 million of deferred financing fees as a result of the full repayment of the Company's Unsecured Senior Notes due 2019, made in March 2019. During the six months ended June 30, 2018, we wrote-off an aggregate of $7.0 million of deferred financing fees consisting of (i) $1.1 million related to the exchange of Convertible Senior Notes due 2019 in May 2018, (ii) $3.3 million related to the refinancing of the existing indebtedness on five vessels in the ABN/SEB Credit Facility and (iii) $2.6 million on the acceleration of a portion of the deferred financing fees related to the credit facilities that were refinanced in the third and fourth quarters of 2018.
IFRS 16 - Leases, which required the recognition of right of use asset and corresponding liabilities on the basis of the discounted remaining future minimum lease payments, relating to three bareboat chartered-in MR vessels that were previously reported as operating leases for the full year-end December 31, 2018 and seven new contracts for bareboat chartered-in vessels in 2019. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. During the six months ended June 30, 2019, we recognized $1.8 million of interest expense related to leases which are being accounted for under IFRS 16.
Financial expenses for the six months ended June 30, 2019 consisted of interest expense of $82.9 million, non-cash accretion of our convertible senior notes of $7.0 million, write-offs and accelerations of deferred financing fees of $0.3 million, amortization of deferred financing fees of $4.1 million, and non-cash accretion or amortization of the fair value adjustments recorded upon the assumption of indebtedness from Navig8 Product Tankers Inc. of $1.8 million.
Financial expenses for the six months ended June 30, 2018 consisted of interest expense of $66.8 million, non-cash accretion of our Convertible Senior Notes due 2019 and 2022 of $6.4 million, write-offs and accelerations of deferred financing fees of $7.0 million, amortization of deferred financing fees of $6.2 million and non-cash accretion or amortization of the fair value adjustments recorded upon the assumption of indebtedness from Navig8 Product Tankers Inc. of $1.9 million.

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Loss on exchange of convertible senior notes. Loss on exchange of convertible senior notes for the six months ended June 30, 2018 was $17.0 million. In May 2018, we exchanged $188.5 million in aggregate principal amount of the Convertible Senior Notes due 2019 for $188.5 million in aggregate principal amount of the new Convertible Senior Notes due 2022. We recorded a loss of $17.0 million on this exchange during the six months ended June 30, 2018.
Financial income. Financial income for the six months ended June 30, 2019 was $5.8 million, an increase of $5.1 million, or 700%, from $0.7 million during the six months ended June 30, 2018. Financial income primarily related to interest income earned on our interest bearing cash accounts. Cash balances in these accounts were significantly higher in the six months ended June 30, 2019 as compared to June 30, 2018, due to the receipt of net proceeds of $319.6 million from an underwritten offering of common shares in the fourth quarter of 2018.

Liquidity and Capital Resources
Our primary source of funds for our short-term and long-term liquidity needs will be the cash flows generated from our vessels, which primarily operate in the Scorpio Pools or on time charter, in addition to cash on hand. The Scorpio Pools reduce volatility because (i) they aggregate the revenues and expenses of all pool participants and distribute net earnings to the participants based on an agreed upon formula and (ii) some of the vessels in the pool are on time charter.  Furthermore, spot charters provide flexibility and allow us to fix vessels at prevailing rates.
Economic conditions in the product tanker market were challenging during the year ended December 31, 2018, with freight rates at their lowest levels since 2009, resulting in the incurrence of significant losses during that period. The Company raised $319.6 million in additional liquidity in an underwritten offering of our common shares in October 2018 and economic conditions in the product tanker market subsequently improved during the six months ended June 30, 2019. Our Senior Unsecured Notes due 2020 are scheduled to mature in May of 2020 and our ABN AMRO Credit Facility is scheduled to mature in the third quarter of 2020 (depending on the tranche). While we believe our current financial position is adequate to address the maturity of these instruments, a deterioration in economic conditions could cause us to pursue other means to raise liquidity, such as through the sale of vessels, to meet these obligations. Moreover, a deterioration in economic conditions could cause us to breach our debt covenants, and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Based on internal forecasts and projections, we believe that we have adequate financial resources to continue in operation and meet our financial commitments (including but not limited to debt service obligations and charterhire commitments) for a period of at least twelve months from September 20, 2019.
As of June 30, 2019, our cash balance was $467.2 million, which was lower than our cash balance of $593.7 million as of December 31, 2018.
We continuously evaluate potential transactions that we believe will be accretive to earnings, enhance shareholder value, or are in the best interests of the Company, which may include the pursuit of other business combinations, the acquisition of vessels or related businesses, the expansion of our operations, repayment of existing debt, share repurchases, short-term investments or other uses. In connection with any transaction, we may enter into additional financing arrangements, refinance existing arrangements or raise capital through public or private debt or equity offerings of our securities. Any funds raised by us may be used for any corporate purpose. There is no guarantee that we will grow the size of our fleet or enter into transactions that are accretive to our shareholders.
Our long-term liquidity needs as of June 30, 2019 consisted of our debt repayment obligations for our secured credit facilities, lease financing arrangements, Senior Unsecured Notes Due 2020, Convertible Senior Notes due 2022, obligations under our bareboat charter-in arrangements and obligations for the purchase of scrubbers and BWTS.


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Cash Flows
The table below summarizes our sources and uses of cash for the six months ended June 30, 2019 and 2018, respectively.
 
For the six months ended June 30,
In thousands of U.S. dollars
2019
 
2018
Cash flow data
 
 
 
 Net cash inflow / (outflow)
 
 
 
 Operating activities
$
121,277

 
$
52,728

 Investing activities
(59,688
)
 
(28,193
)
 Financing activities
(188,022
)
 
(46,419
)
Cash flows from operating activities
Six Months Ended June 30, 2019 compared to 2018
The following table sets forth the components of our operating cash flows for the six months ended June 30, 2019 and June 30, 2018, along with descriptions of the significant changes thereunder.

 
 
For the six months ended June 30,
 
 Change
 
Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
Change
Vessel revenue (1)
 
$
346,635

 
$
298,241

 
$
48,394

 
16
 %
Vessel operating costs (1)
 
(138,152
)
 
(139,904
)
 
1,752

 
1
 %
Voyage expenses (1)
 
(1,622
)
 
(4,372
)
 
2,750

 
63
 %
Charterhire (1)
 
(4,399
)
 
(35,169
)
 
30,770

 
87
 %
General and administrative expenses - cash (2)
 
(17,380
)
 
(13,792
)
 
(3,588
)
 
(26
)%
Merger transaction related costs - cash (3)
 

 
(271
)
 
271

 
100
 %
Financial expenses - cash (4)
 
(82,898
)
 
(66,797
)
 
(16,101
)
 
(24
)%
Change in working capital (5)
 
13,263

 
14,158

 
(895
)
 
(6
)%
Financial income - cash
 
5,579

 
481

 
5,098

 
1,060
 %
Other
 
251

 
153

 
98

 
64
 %
Operating cash flow
 
$
121,277

 
$
52,728

 
$
68,549

 
130
 %
(1)
See "Results of Operations" for information on these variations for the six months ended June 30, 2019 and 2018.
(2)
Cash general and administrative expenses are General and administrative expenses from our unaudited condensed consolidated statements of income or loss excluding the amortization of restricted stock of $13.9 million and $13.2 million for the six months ended June 30, 2019 and 2018, respectively.
(3)
Cash merger transaction related costs are transaction costs related to the merger with NPTI in 2017.
(4)  
Cash financial expenses are Financial expenses from our unaudited condensed consolidated statements of income or loss excluding the following non-cash items: (i) the write-off and amortization of deferred financing fees of $4.4 million and $13.2 million for the six months ended June 30, 2019 and 2018, respectively, (ii) accretion of our Convertible Senior Notes due 2019 and 2022 of $7.0 million and $6.4 million for the six months ended June 30, 2019 and 2018, respectively, (iii) accretion or amortization of the fair value measurement applied to the debt and finance lease obligations assumed in the merger with NPTI. of $1.8 million and $1.9 million for the six months ended June 30, 2019 and 2018, respectively.

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(5)  
The change in working capital for the six months ended June 30, 2019 was driven by a decrease in accounts receivable, and increases in accrued expenses, accounts payable, and other assets. The increase in other assets was driven by an increase in pool working capital contributions as a result of two Handymax product tankers and a LR2 product tanker that entered the Scorpio Pools during the six months ended June 30, 2019. The changes in accounts receivable, accrued expenses, and accounts payable were driven by the timing of cash receipts and payments.
The change in working capital for the six months ended June 30, 2018 was driven by decreases in accounts receivable, prepaid expenses and other current assets and an increase in accounts payable, offset by an increase in other assets and a decrease in accrued expenses. The decrease in accounts receivable was driven by overall reductions in TCE revenues earned across all of our operating segments during the six months ended June 30, 2018, which had a corresponding impact on amounts due from the Scorpio pools. The increase in other assets was driven by an increase in pool working capital contributions as a result of additional LR2 vessels entering the Scorpio LR2 Pool during the six months ended June 30, 2018. The decreases in prepaid expenses, other current assets and accrued expenses along with the increase in accounts payable were driven by the timing of payments affecting these accounts.
Cash flows from investing activities
The following table depicts the components of our investing activities for the six months ended June 30, 2019 and June 30, 2018, along with descriptions of the significant changes thereunder.
 
 
For the six months ended June 30,
 
 Change
 
Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
Change
Cash outflows
 
 
 
 
 
 
 
 
Acquisition of vessels and payments for vessels under construction(1)
 

 
(26,057
)
 
26,057

 
100
 %
Drydock, scrubber and BWTS payments (owned and bareboat-in vessels)(2)
 
(59,688
)
 
(2,136
)
 
(57,552
)
 
(2,694
)%
 
 
 
 
 
 
 
 
 
Net cash outflow from investing activities
 
(59,688
)
 
(28,193
)
 
(31,495
)
 
(112
)%
(1) Represents installment payments and other capitalized costs (including capitalized interest) associated with vessels that were under construction and/or delivered during the six months ended June 30, 2018.
(2) Drydock, scrubbers and BWTS payments represent the cash paid for the six months ended June 30, 2019 and 2018 for the drydocking of our vessels, and installment payments made as part of the agreements to purchase scrubbers and ballast water treatment systems. See the below section entitled "Capital Expenditures," for further discussion on vessels that were drydocked and had scrubber or BWTS installations during the six months ended June 30, 2019 and 2018.

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Table of Contents

Cash flows from financing activities
The following table depicts the components of our financing activities for the six months ended June 30, 2019 and 2018 along with descriptions of the significant changes thereunder.
 
 
For the six months ended June 30,
 
 Change
 
Percentage
In thousands of U.S. dollars
 
2019
 
2018
 
 favorable / (unfavorable)
 
Change
Cash inflows
 
 
 
 
 
 
 
 
Drawdowns from our secured credit facilities(1)
 
$

 
$
142,025

 
$
(142,025
)
 
(100
)%
Total financing cash inflows
 

 
142,025

 
(142,025
)
 
(100
)%
 
 
 
 
 
 
 
 
 
Cash outflows
 
 
 
 
 
 
 
 
Repayments on our secured credit facilities (1)
 
(51,886
)
 
(142,491
)
 
90,605

 
64
 %
Payments under our finance leases (1)
 
(57,369
)
 
(25,000
)
 
(32,369
)
 
(129
)%
Payments under our Unsecured Senior Notes due 2019(1)
 
(57,500
)
 

 
(57,500
)
 
N/A

Debt issuance costs (2)
 
(1,288
)
 
(13,473
)
 
12,185

 
90
 %
Right of use finance lease repayments (1)
 
(7,129
)
 

 
(7,129
)
 
N/A

Increase in restricted cash (3)
 
(9
)
 
(897
)
 
888

 
99
 %
Repayment of Convertible Senior Notes due 2019(4)
 
(2,266
)
 

 
(2,266
)
 
N/A

Equity issuance costs (5)
 
(295
)
 
(4
)
 
(291
)
 
(7,275
)%
Dividends paid (6)
 
 
(10,279
)
 
(6,579
)
 
(3,700
)
 
(56
)%
Repurchase of common stock (7)
 
(1
)