stng-20220630

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 October 2022

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, 2022 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 (Registration No. 333-264084) that was filed with the U.S. Securities and Exchange Commission with an effective date of April 1, 2022.

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: October 3, 2022

By:

/s/ Brian Lee

Brian Lee

Chief Financial Officer

Exhibit 99.1

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2022 and June 30, 2021

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, 2021 filed with the U.S. Securities and Exchange Commission, or the SEC, on March 23, 2022 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, 2022 and for the six months ended June 30, 2022 and 2021 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 October 3, 2022, we owned, lease financed or bareboat chartered-in 113 product tankers (39 LR2, 60 MR and 14 Handymax) that have a weighted average age of 6.7 years, which we refer to collectively as our Operating Fleet.

The following table presents summary information concerning our Operating Fleet as of October 3, 2022:

Vessel Name

Year Built

DWT

Ice class

Employment

Vessel type

Scrubber

Owned, sale leaseback or bareboat chartered-in vessels

STI Brixton

2014

38,734

SHTP (1)

Handymax

N/A

STI Comandante

2014

38,734

SHTP (1)

Handymax

N/A

STI Pimlico

2014

38,734

SHTP (1)

Handymax

N/A

STI Hackney

2014

38,734

SHTP (1)

Handymax

N/A

STI Acton

2014

38,734

SHTP (1)

Handymax

N/A

STI Fulham

2014

38,734

SHTP (1)

Handymax

N/A

STI Camden

2014

38,734

SHTP (1)

Handymax

N/A

STI Battersea

2014

38,734

SHTP (1)

Handymax

N/A

STI Wembley

2014

38,734

SHTP (1)

Handymax

N/A

STI Finchley

2014

38,734

SHTP (1)

Handymax

N/A

STI Clapham

2014

38,734

SHTP (1)

Handymax

N/A

STI Poplar

2014

38,734

SHTP (1)

Handymax

N/A

STI Hammersmith

2015

38,734

SHTP (1)

Handymax

N/A

STI Rotherhithe

2015

38,734

SHTP (1)

Handymax

N/A

STI Amber

2012

49,990

—

SMRP (2)

Yes

STI Topaz

2012

49,990

—

SMRP (2)

Yes

STI Ruby

2012

49,990

—

SMRP (2)

Not Yet Installed

STI Garnet

2012

49,990

—

SMRP (2)

Yes


19	STI Onyx	2012	49,990	—	SMRP (2)	MR	Yes
20	STI Ville	2013	49,990	—	SMRP (2)	MR	Not Yet Installed
21	STI Duchessa	2014	49,990	—	SMRP (2)	MR	Not Yet Installed
22	STI Opera	2014	49,990	—	SMRP (2)	MR	Not Yet Installed
23	STI Texas City	2014	49,990	—	SMRP (2)	MR	Yes
24	STI Meraux	2014	49,990	—	SMRP (2)	MR	Yes
25	STI San Antonio	2014	49,990	—	SMRP (2)	MR	Yes
26	STI Venere	2014	49,990	—	SMRP (2)	MR	Yes
27	STI Virtus	2014	49,990	—	SMRP (2)	MR	Yes
28	STI Aqua	2014	49,990	—	SMRP (2)	MR	Yes
29	STI Dama	2014	49,990	—	SMRP (2)	MR	Yes
30	STI Regina	2014	49,990	—	SMRP (2)	MR	Yes
31	STI St. Charles	2014	49,990	—	SMRP (2)	MR	Yes
32	STI Mayfair	2014	49,990	—	SMRP (2)	MR	Yes
33	STI Yorkville	2014	49,990	—	SMRP (2)	MR	Yes
34	STI Milwaukee	2014	49,990	—	SMRP (2)	MR	Yes
35	STI Battery	2014	49,990	—	SMRP (2)	MR	Yes
36	STI Soho	2014	49,990	—	SMRP (2)	MR	Yes
37	STI Memphis	2014	49,990	—	Time Charter (4)	MR	Yes
38	STI Tribeca	2015	49,990	—	SMRP (2)	MR	Yes
39	STI Gramercy	2015	49,990	—	SMRP (2)	MR	Yes
40	STI Bronx	2015	49,990	—	SMRP (2)	MR	Yes
41	STI Pontiac	2015	49,990	—	SMRP (2)	MR	Yes
42	STI Manhattan	2015	49,990	—	SMRP (2)	MR	Yes
43	STI Queens	2015	49,990	—	SMRP (2)	MR	Yes
44	STI Osceola	2015	49,990	—	SMRP (2)	MR	Yes
45	STI Notting Hill	2015	49,687	1B	SMRP (2)	MR	Yes
46	STI Seneca	2015	49,990	—	SMRP (2)	MR	Yes
47	STI Westminster	2015	49,687	1B	SMRP (2)	MR	Yes
48	STI Brooklyn	2015	49,990	—	SMRP (2)	MR	Yes
49	STI Black Hawk	2015	49,990	—	SMRP (2)	MR	Yes
50	STI Galata	2017	49,990	—	SMRP (2)	MR	Yes
51	STI Bosphorus	2017	49,990	—	SMRP (2)	MR	Not Yet Installed
52	STI Leblon	2017	49,990	—	SMRP (2)	MR	Yes
53	STI La Boca	2017	49,990	—	SMRP (2)	MR	Yes
54	STI San Telmo	2017	49,990	1B	SMRP (2)	MR	Not Yet Installed
55	STI Donald C Trauscht	2017	49,990	1B	SMRP (2)	MR	Not Yet Installed
56	STI Esles II	2018	49,990	1B	SMRP (2)	MR	Not Yet Installed
57	STI Jardins	2018	49,990	1B	SMRP (2)	MR	Not Yet Installed
58	STI Magic	2019	50,000	—	SMRP (2)	MR	Yes
59	STI Mystery	2019	50,000	—	SMRP (2)	MR	Yes
60	STI Marvel	2019	50,000	—	SMRP (2)	MR	Yes
61	STI Magnetic	2019	50,000	—	Time Charter (5)	MR	Yes
62	STI Millennia	2019	50,000	—	SMRP (2)	MR	Yes
63	STI Magister	2019	50,000	—	SMRP (2)	MR	Yes
64	STI Mythic	2019	50,000	—	SMRP (2)	MR	Yes
65	STI Marshall	2019	50,000	—	Time Charter (6)	MR	Yes


66	STI Modest	2019	50,000	—	SMRP (2)	MR	Yes
67	STI Maverick	2019	50,000	—	SMRP (2)	MR	Yes
68	STI Miracle	2020	50,000	—	Time Charter (7)	MR	Yes
69	STI Maestro	2020	50,000	—	SMRP (2)	MR	Yes
70	STI Mighty	2020	50,000	—	SMRP (2)	MR	Yes
71	STI Maximus	2020	50,000	—	SMRP (2)	MR	Yes
72	STI Elysees	2014	109,999	—	SLR2P (3)	LR2	Yes
73	STI Madison	2014	109,999	—	SLR2P (3)	LR2	Yes
74	STI Park	2014	109,999	—	SLR2P (3)	LR2	Yes
75	STI Orchard	2014	109,999	—	SLR2P (3)	LR2	Yes
76	STI Sloane	2014	109,999	—	SLR2P (3)	LR2	Yes
77	STI Broadway	2014	109,999	—	SLR2P (3)	LR2	Yes
78	STI Condotti	2014	109,999	—	SLR2P (3)	LR2	Yes
79	STI Rose	2015	109,999	—	SLR2P (3)	LR2	Yes
80	STI Veneto	2015	109,999	—	SLR2P (3)	LR2	Yes
81	STI Alexis	2015	109,999	—	SLR2P (3)	LR2	Yes
82	STI Winnie	2015	109,999	—	SLR2P (3)	LR2	Yes
83	STI Oxford	2015	109,999	—	SLR2P (3)	LR2	Yes
84	STI Lauren	2015	109,999	—	SLR2P (3)	LR2	Yes
85	STI Connaught	2015	109,999	—	SLR2P (3)	LR2	Yes
86	STI Spiga	2015	109,999	—	SLR2P (3)	LR2	Yes
87	STI Kingsway	2015	109,999	—	SLR2P (3)	LR2	Yes
88	STI Solidarity	2015	109,999	—	SLR2P (3)	LR2	Yes
89	STI Lombard	2015	109,999	—	Time Charter (8)	LR2	Yes
90	STI Grace	2016	109,999	—	SLR2P (3)	LR2	Yes
91	STI Jermyn	2016	109,999	—	SLR2P (3)	LR2	Yes
92	STI Sanctity	2016	109,999	—	SLR2P (3)	LR2	Yes
93	STI Solace	2016	109,999	—	SLR2P (3)	LR2	Yes
94	STI Stability	2016	109,999	—	SLR2P (3)	LR2	Yes
95	STI Steadfast	2016	109,999	—	SLR2P (3)	LR2	Yes
96	STI Supreme	2016	109,999	—	SLR2P (3)	LR2	Yes
97	STI Symphony	2016	109,999	—	SLR2P (3)	LR2	Yes
98	STI Gallantry	2016	113,000	—	SLR2P (3)	LR2	Yes
99	STI Goal	2016	113,000	—	Time Charter (9)	LR2	Yes
100	STI Guard	2016	113,000	—	Time Charter (10)	LR2	Yes
101	STI Guide	2016	113,000	—	Time Charter (11)	LR2	Yes
102	STI Selatar	2017	109,999	—	SLR2P (3)	LR2	Yes
103	STI Rambla	2017	109,999	—	SLR2P (3)	LR2	Yes
104	STI Gauntlet	2017	113,000	—	Time Charter (12)	LR2	Yes
105	STI Gladiator	2017	113,000	—	Time Charter (11)	LR2	Yes
106	STI Gratitude	2017	113,000	—	Time Charter (13)	LR2	Yes
107	STI Lobelia	2019	110,000	—	SLR2P (3)	LR2	Yes
108	STI Lotus	2019	110,000	—	SLR2P (3)	LR2	Yes
109	STI Lily	2019	110,000	—	SLR2P (3)	LR2	Yes
110	STI Lavender	2019	110,000	—	SLR2P (3)	LR2	Yes
111	STI Beryl	2013	49,990	—	SMRP (2)	MR	Not Yet Installed


112	STI Le Rocher	2013	49,990	—	SMRP (2)	MR	Not Yet Installed
113	STI Larvotto	2013	49,990	—	SMRP (2)	MR	Not Yet Installed

	Total owned, finance leased or bareboat chartered-in DWT		7,852,182


(1)			This vessel operates in, or is expected to operate in, the Scorpio Handymax Tanker Pool, or SHTP. SHTP is a Scorpio Pool and is operated by Scorpio Commercial Management S.A.M. (SCM). SHTP and SCM are related parties to the Company.
(2)			This vessel operates in, or is expected to operate 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, or is expected to operate 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.
(4)			This vessel commenced a time charter in June 2022 for three years at an average rate of $21,000 per day. The first six months of this time charter payable at $30,000 per day, the next 6 months are payable at $20,000 per day, and years two and three are payable at $19,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $22,500 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $24,000 per day.
(5)			This vessel commenced a time charter in July 2022 for three years at an average rate of $23,000 per day. The daily rate is the average rate over the three year period, which is payable in years one, two, and three at $30,000 per day, $20,000 per day, and $19,000 per day, respectively. The charterer has the option to extend the term of this agreement for an additional year at $24,500 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $26,000 per day.
(6)			This vessel commenced a time charter in July 2022 for three years at a rate of $23,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $24,000 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $25,000 per day. If this second option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $26,000 per day.
(7)			This vessel commenced a time charter in August 2022 for three years at a rate of $21,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $22,500 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $24,000 per day.
(8)			This vessel commenced a time charter in September 2022 for three years at an average rate of $32,750 per day. The charterer has the option to extend the term of this agreement for an additional year at $34,750 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $36,750 per day.
(9)			This vessel commenced a time charter in August 2022 for three years at a rate of $30,380 per day. The charterer has the option to extend the term of this agreement for an additional year at $32,380 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $34,380 per day.
(10)			This vessel commenced a time charter in July 2022 for five years at a rate of $28,000 per day. The charterer has the option to convert the term of this agreement to three years at $30,000 per day, which must be declared within 30 months after the delivery date.
(11)			This vessel commenced a time charter in July 2022 for three years at an average rate of $28,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $31,000 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $33,000 per day.
(12)			This vessel is expected to commence a time charter in Q4 2022 for three years at a rate of $32,750 per day.
(13)			This vessel commenced a time charter in May 2022 for three years at an average rate of $28,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $31,000 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $33,000 per day.

RECENT DEVELOPMENTS

Declaration of dividend

In July 2022, our Board of Directors declared a quarterly cash dividend of $0.10 per common share, which was paid on September 15, 2022 to all shareholders of record as of August 11, 2022.

Vessels sales

In July 2022, we closed on the sale of the MR tanker, STI Benicia. In advance of the closing of the sale, we repaid the aggregate outstanding lease obligation of $14.2 million relating to this vessel on the $157.5 Million Lease Financing in June 2022.

In August 2022, we closed on the sale of the LR2 tanker, STI Nautilus. In advance of the closing of the sale, we repaid the outstanding balance of $20.0 million relating to this vessel on the 2020 $225.0 Million Credit Facility in July 2022.

Repurchase of Common Shares

In July, September, and October 2022, we repurchased an aggregate of 1,397,220 of our common shares in open market transactions at an average price of $38.32 per share. In August 2022, we repurchased 1,293,661 of our common shares from Eneti Inc., a related party, at $38.65 per share.

Repurchase of Convertible Notes Due 2025

In July 2022, we repurchased $1.5 million face value of our Convertible Notes Due 2025 in the open market at an average price of $1,145.00 per $1,000.00 principal amount, or $1.7 million. The consideration paid includes the accreted principal balance, which has accrued since the issuance date and equaled approximately 107% as of the repurchase date.

Exercise of Purchase Option on Six Leased Vessels

In August 2022, we exercised the purchase options on six 2014 built MR product tankers that were previously financed under the China Huarong Lease Financing (STI Opera, STI Virtus, STI Venere, STI Aqua, STI Dama, and STI Regina) and repaid the aggregate outstanding lease obligation of $95.0 million as part of these transactions.

Exercise of Purchase Options on Nine Leased Vessels

In September 2022, we have given notice to exercise the purchase options on two Handymax product tankers (STI Battersea and STI Wembley), four MR product tankers (STI Ville, STI Texas City, STI Meraux and STI Brooklyn), and three LR2 product tankers (STI Rose, STI Rambla and STI Sanctity). These vessels are currently financed under the AVIC Lease Financing, the COSCO Lease Financing and the Ocean Yield Lease Financing. The purchases, which are expected to occur in the fourth quarter of 2022 and the first quarter of 2023, are expected to result in a debt reduction of $160.8 million.

Time Charter Out Agreements

In July 2022, we entered into a time charter-out agreement on an LR2 product tanker, STI Goal, for three years at the rate of $30,380 per day. The charterer has the option to extend the term of this agreement for an additional year at $32,380 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $34,380 per day.

In August 2022, we entered into a time charter-out agreement on an LR2 product tanker, STI Lombard, for three years at the rate of $32,750 per day. The charterer has the option to extend the term of this agreement for an additional year at $34,750 per day. If this option is declared, the charterer has the option to further extend the term of this agreement for an additional year at $36,750 per day.

In September 2022, we entered into a time charter-out agreement on an LR2 product tanker, STI Gauntlet, for three years at the rate of $32,750 per day.

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 are expected to 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, lease financed 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

Varies

Hire rate basis(1)

Varies

Daily

Varies

Voyage expenses(2)

We pay

Customer pays

Pool pays

Crewing and other vessel operating costs for owned, lease financed, or bareboat chartered-in vessels(3)

We pay

Customer pays

We pay

Charterhire expense for time or bareboat chartered-in vessels(3)

We pay

Off-hire(4)

Customer does not pay

Varies

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 (the "Master Agreement"). 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.

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 (the "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 Services 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 including 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 pool, spot and time charter rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time 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, lease financed 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.

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 vessel 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

•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.

The following table reflects our daily TCE and operating expenses for the six months ended June 30, 2022 and 2021. 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,
Average Daily Results	2022		2021
Fleet
TCE per revenue day (1)	$	25,444	$	11,552
Vessel operating costs per day (2)	$	7,173	$	6,848
Average number of vessels	124.6		132.7

LR2
TCE per revenue day (1)	$	25,287	$	11,949
Vessel operating costs per day (2)	$	7,258	$	6,687
Average number of vessels	41.9		42.0

LR1
TCE per revenue day (1)	$	13,690	$	11,378
Vessel operating costs per day (2)	$	7,286	$	6,618
Average number of vessels	6.7		12.0

MR
TCE per revenue day (1)	$	25,583	$	11,871
Vessel operating costs per day (2)	$	7,166	$	6,963
Average number of vessels	62.0		63.0

Handymax
TCE per revenue day (1)	$	29,119	$	9,286
Vessel operating costs per day (2)	$	6,890	$	6,994
Average number of vessels	14.0		15.7

Drydock
Expenditures for drydock, scrubbers and BWTS(3) (in thousands of U.S. dollars)	$	22,779	$	27,308

(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, lease financed, or chartered-in less the number of days the vessel is off-hire for drydock and repairs.

(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, lease financed, 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, lease financed, 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 lease financed 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 are intended to 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, lease financed, 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 or spot market oriented pools. 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 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 Revised 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 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 and LR2 vessel and $300 per vessel per day for each Handymax and MR vessel, plus 1.25% commission on gross revenues per charter fixture.

Pursuant to the Revised 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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Results of Operations

Results of Operations for the six months ended June 30, 2022 compared to the six months ended June 30, 2021


	For the six months ended June 30,				Change		Percentage
In thousands of U.S. dollars	2022		2021		favorable / (unfavorable)		Change
Vessel revenue	$	579,120	$	273,607	$	305,513	112	%
Vessel operating costs	(161,755)		(163,900)		2,145		1	%
Voyage expenses	(25,508)		(2,781)		(22,727)		(817)	%
Depreciation - owned or sale leaseback vessels	(85,159)		(98,006)		12,847		13	%
Depreciation - right of use assets	(19,488)		(22,041)		2,553		12	%
General and administrative expenses	(35,257)		(26,884)		(8,373)		(31)	%
Loss on sales of vessels	(69,218)		—		(69,218)		N/A
Financial expenses	(78,710)		(69,973)		(8,737)		(12)	%
Loss on convertible notes exchange	—		(5,504)		5,504		100	%
Financial income	1,024		412		612		149	%
Other income and (expenses), net	1,634		(106)		1,740		1,642	%
Net income / (loss)	$	106,683	$	(115,176)	$	221,859	193	%

Net income / (loss). Net income for the six months ended June 30, 2022 was $106.7 million, an increase of $221.9 million from the net loss of $115.2 million for the six months ended June 30, 2021. The differences between the two periods are discussed below.

Vessel revenue. Vessel revenue for the six months ended June 30, 2022 was $579.1 million, an increase of $305.5 million, or 112%, from vessel revenue of $273.6 million for the six months ended June 30, 2021. Consolidated TCE revenue per day increased to $25,444 per day for the six months ended June 30, 2022 from $11,552 per day for the six months ended June 30, 2021.

Overall vessel revenue for the six months ended June 30, 2022 reflected a structural change in the supply and demand balance for product tankers. A confluence of events served as a catalyst to a substantial increase in ton-mile demand beginning in March 2022 and continuing through the date of this report. First, the continued easing of COVID-19 restrictions around the globe has resulted in increased personal mobility thus stimulating underlying demand for refined petroleum products. Second, record refining margins combined with low global refined petroleum product inventories have incentivized refiners to increase and maintain high utilization levels, resulting in substantial increases in refined petroleum product export volumes throughout the world. Third, the volatility brought on by the ongoing conflict in Ukraine has disrupted supply chains for crude oil and refined petroleum products, changing volumes and trade routes, and thus increasing ton-mile demand for refined petroleum products.

We also had an increased number of vessels operating outside of the Scorpio pools during the six months ended June 30, 2022 which led to an increase in voyage revenue and voyage expenses for this period.

Overall vessel revenue for the six months ended June 30, 2021 reflected the adverse market conditions brought on by the COVID-19 pandemic. Demand for crude and refined petroleum products remained below pre-pandemic levels given the efforts around the world at that time to control the spread of the virus, particularly in countries with low vaccine uptake. Additionally, inventories continued to be drawn during the six months ended June 30, 2021, which had an adverse impact on the demand for the seaborne transportation of refined petroleum products.

The increase during the six months ended June 30, 2022 was partially offset by a decrease in the number of operating vessels to an average of 124.6 operating vessels during the six months ended June 30, 2022 from an average of 132.7 operating vessels during the six months ended June 30, 2021. This reduction was primarily the result of the sales of 16 vessels during the six months ended June 30, 2022. Daily TCE revenue by operating segment is discussed below.

The following table depicts the components of our revenue, our daily TCE revenue and revenue days for the six months ended June 30, 2022 and 2021.

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	For the six months ended June 30,				Change		Percentage
In thousands of U.S. dollars	2022		2021		favorable / (unfavorable)		Change
Pool and spot market revenue by operating segment
MR	$	289,382	$	136,202	$	153,180	112	%
LR2	188,986		88,278		100,708		114	%
Handymax	88,508		25,783		62,725		243	%
LR1	11,169		23,344		(12,175)		(52)	%
Total pool and spot market revenue	578,045		273,607		304,438		111	%
Time charter-out revenue	1,075		—		1,075		N/A
Gross revenue	579,120		273,607		305,513		112	%
Voyage expenses	(25,508)		(2,781)		(22,727)		(817)	%
TCE revenue (1)	$	553,612	$	270,826	$	282,786	104	%

Daily pool and spot market TCE per revenue day by operating segment: (1)

MR pool and spot market	$	25,586	$	12,066	$	13,520	112	%
LR2 pool and spot market	25,279		11,982		13,297		111	%
Handymax pool and spot market	29,119		9,461		19,658		208	%
LR1 pool and spot market	13,690		11,411		2,279		20	%
Consolidated daily pool and spot market TCE	25,443		11,680		13,763		118	%
Time charter-out - daily TCE	26,224		—		26,224		N/A
Consolidated daily TCE	25,444		11,552		13,892		120	%

Pool and spot market revenue days per operating segment
MR	11,110		11,288		(178)		(2)	%
LR2	7,290		7,368		(78)		(1)	%
Handymax	2,503		2,725		(222)		(8)	%
LR1	816		2,046		(1,230)		(60)	%
Total pool and spot market revenue days	21,719		23,427		(1,708)		(7)	%
Time charter-out revenue days	40		—		40		N/A
Total revenue days	21,759		23,427		(1,668)		(7)	%

(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 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.

MR pool and spot market revenue. MR pool and spot market revenue for the six months ended June 30, 2022 was $289.4 million, an increase of $153.2 million, or 112% from $136.2 million for the six months ended June 30, 2021. The increase in MR pool and spot market revenue was driven by the aforementioned shifts in global supply and demand dynamics, which benefited all vessel classes. Record refining margins, high refinery utilization, and low inventory levels drove significant increases in product exports in regions where MRs traditionally trade, such as the U.S. Gulf. This backdrop drove increased demand for MR tankers, and daily pool and spot market TCE revenue increased significantly as a result to $25,586 per day during the six months ended June 30, 2022 from $12,066 per day during the six months ended June 30, 2021.

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LR2 pool and spot market revenue. LR2 pool and spot market revenue for the six months ended June 30, 2022 was $189.0 million, an increase of $100.7 million, or 114%, from $88.3 million for the six months ended June 30, 2021. In addition to the uplift provided by the overall improved demand fundamentals in the market, LR2s also benefited from increased demand for longer-haul voyages, particularly as European countries began to shift their product imports (such as diesel) from further afield. As a result, daily pool and spot market TCE revenue increased to $25,279 per day during the six months ended June 30, 2022 from $11,982 per day during the six months ended June 30, 2021.

Handymax pool and spot market revenue. Handymax pool and spot market revenue for the six months ended June 30, 2022 was $88.5 million, an increase of $62.7 million, or 243%, from $25.8 million for the six months ended June 30, 2021. Our ice class Handymax vessels trade on shorter haul routes, and while the backdrop of improving demand fundamentals throughout the world has benefited the demand for these vessels, the supply disruptions caused by the conflict in Ukraine have also positively impacted the daily rates earned by these vessels. As a result of these factors, daily pool and spot market TCE revenue for our Handymax vessels increased to $29,119 per day during the six months ended June 30, 2022 from $9,461 per day during the during the six months ended June 30, 2021.

LR1 pool and spot market revenue. LR1 pool and spot market revenue for the six months ended June 30, 2022 was $11.2 million, a decrease of $12.2 million, or 52%, from $23.3 million for the six months ended June 30, 2021. This decrease was primarily driven by the sale of all 12 LR1 vessels during the six months ended June 30, 2022, with pool revenue days decreasing to 816 days during the six months ended June 30, 2022 from 2,046 days during the six months ended June 30, 2021.

Time charter out revenue. Time charter out revenue for the six months ended June 30, 2022 was $1.1 million and zero for the six months ended June 30, 2021. During the second quarter of 2022, two of our vessels were time chartered out for a total of 40 days. During the six months ended June 30, 2022, we entered into time charter-out agreements on eight vessels, the terms of which are summarized as follows:

Vessel

Vessel class

Term

Rate

Commencement date

STI Gratitude

LR2

Three years

$28,000/day

May 2022

STI Memphis

Three years

$21,000/day

June 2022

STI Marshall

Three years

$23,000/day

July 2022

STI Magnetic

Three years

$23,000/day

July 2022

STI Gladiator

LR2

Three years

$28,000/day

July 2022

STI Guide

LR2

Three years

$28,000/day

July 2022

STI Guard

LR2

Five years

$28,000/day

July 2022

STI Miracle

Three years

$21,000/day

August 2022

Vessel operating costs. Vessel operating costs for the six months ended June 30, 2022 were $161.8 million, a decrease of $2.1 million, or 1%, from $163.9 million for the six months ended June 30, 2021. This decrease was mainly driven by a decrease in operating days to 22,552 during the six months ended June 30, 2022 from 24,010 during the six months ended June 30, 2021. This decrease was partially offset by an increase in vessel operating costs from $7,173 per day for the six months ended June 30, 2022 from $6,848 per day during the six months ended June 30, 2021. Vessel operating expenses, by operating segment, are discussed below.

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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	2022		2021		favorable / (unfavorable)		change
Vessel operating costs
MR	$	80,371	$	79,187	$	(1,184)	(1)	%
LR2	55,077		50,834		(4,243)		(8)	%
Handymax	17,460		19,814		2,354		12	%
LR1	8,847		14,065		5,218		37	%
Total vessel operating costs	$	161,755	$	163,900	$	2,145	1	%

Vessel operating costs per day
MR	$	7,166	$	6,963	$	(203)	(3)	%
LR2	7,258		6,687		(571)		(9)	%
Handymax	6,890		6,994		104		1	%
LR1	7,286		6,618		(668)		(10)	%
Consolidated vessel operating costs per day	7,173		6,848		(325)		(5)	%

Operating days
MR	11,215		11,403		(188)		(2)	%
LR2	7,589		7,602		(13)		—	%
Handymax	2,534		2,833		(299)		(11)	%
LR1	1,214		2,172		(958)		(44)	%
Total operating days	22,552		24,010		(1,458)		(6)	%

MR vessel operating costs. Vessel operating costs for MR vessels for the six months ended June 30, 2022 were $80.4 million, an increase of $1.2 million, or 1%, from $79.2 million for the six months ended June 30, 2021. Daily vessel operating costs increased to $7,166 per day during the six months ended June 30, 2022 from $6,963 per day during the six months ended June 30, 2021. This increase was the result of general inflationary pressures, with increases in crewing related costs and repairs and maintenance costs as the most impacted during the six months ended June 30, 2022.

LR2 vessel operating costs. Vessel operating costs for LR2 vessels for the six months ended June 30, 2022 were $55.1 million, an increase of $4.2 million, or 8%, from $50.8 million for the six months ended June 30, 2021. Daily LR2 vessel operating costs increased to $7,258 per day during the six months ended June 30, 2022 from $6,687 per day during the six months ended June 30, 2021. This increase was the result of general inflationary pressures, with increases in crewing related costs and spares and stores related costs as the most impacted expenses during the six months ended June 30, 2022.

Handymax vessel operating costs. Vessel operating costs for Handymax vessels for the six months ended June 30, 2022 were $17.5 million, a decrease of $2.4 million, or 12%, from $19.8 million for the six months ended June 30, 2021. This decrease was primarily driven by the redelivery of four Handymax vessels upon the expiration of their bareboat charters at the end of the first quarter of 2021, as vessel operating days decreased to 2,534 during the six months ended June 30, 2022 from 2,833 days during the six months ended June 30, 2021. The redelivery of these four vessels during the six months ended June 30, 2021 also resulted in the incurrence of certain additional costs related to the redelivery of these vessels. These costs did not recur during the six months ended June 30, 2022, however this operating segment was also impacted by the generalized inflationary pressures affecting the other vessel classes during this period.

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LR1 vessel operating costs. Vessel operating costs for LR1 vessels for the six months ended June 30, 2022 were $8.8 million, a decrease of $5.2 million, or 37%, from $14.1 million for the six months ended June 30, 2021. During the six months ended June 30, 2022, we sold all 12 LR1 vessels in the fleet, resulting in a decrease in operating days to 1,214 days during the six months ended June 30, 2022, from 2,172 days during the during the six months ended June 30, 2021. Daily LR1 vessel operating costs increased to $7,286 per day during the six months ended June 30, 2022 from $6,618 per day during six months ended June 30, 2021. Vessel operating costs per day increased during the six months ended June 30, 2022 as a result of the general inflationary pressures seen across all vessel operating segments.

Depreciation - owned or sale leaseback vessels. Depreciation expense on owned or sale leaseback vessels for the six months ended June 30, 2022 was $85.2 million, a decrease of $12.8 million, or 13%, from $98.0 million during the six months ended June 30, 2021. This decrease was primarily driven by 17 vessels being classified as held for sale during the six months ended June 30, 2022, at which point depreciation ceased.

Depreciation - right of use assets. Depreciation - right of use assets for the six months ended June 30, 2022 was $19.5 million, a decrease of $2.6 million, or 12%, from $22.0 million during the six months ended June 30, 2021. Depreciation expense – right of use assets reflects the straight-line depreciation expense recorded under IFRS 16 – Leases. This decrease was primarily driven by the redelivery of four Handymax vessels upon the expiration of their bareboat charter-in agreements at the end of the first quarter of 2021, in addition to one vessel being classified as held for sale during the first quarter of 2022, at which point depreciation ceased.

General and administrative expenses. General and administrative expenses for the six months ended June 30, 2022 were $35.3 million, an increase of $8.4 million, or 31% from $26.9 million during the six months ended June 30, 2021. This increase was primarily driven by an increase in compensation related expenses.

Loss on sales of vessels. During the six months ended June 30, 2022, we entered into agreements to sell 18 vessels, consisting of three LR2s, 12 LR1s, and three MRs. Seventeen of these vessels were written down to their fair value less estimated selling costs. One vessel sale, which closed in August 2022, is expected to result in a gain on sale which will be recorded during the third quarter of 2022. Sixteen of the sales closed during the six months ended June 30, 2022 and the remaining two closed in July and August 2022.

Financial expenses. Financial expenses for the six months ended June 30, 2022 were $78.7 million, an increase of $8.7 million, or 12%, from $70.0 million during the six months ended June 30, 2021.

Financial expenses for the six months ended June 30, 2022 consisted of interest expense, net of capitalized interest, of $60.3 million, non-cash accretion of our Convertible Notes due 2022 and 2025 of $7.7 million, write-offs of deferred financing fees and debt extinguishment costs of $5.8 million, amortization of deferred financing fees of $3.5 million, and non-cash accretion or amortization of the fair value adjustments recorded upon the assumption of indebtedness from a previous merger of $1.4 million.

Financial expenses for the six months ended June 30, 2021 consisted of interest expense, net of capitalized interest, of $57.9 million, non-cash accretion of our Convertible Notes due 2022 and 2025 of $5.4 million, write-offs of deferred financing fees and debt extinguishment costs of $1.3 million, amortization of deferred financing fees of $3.7 million and non-cash accretion or amortization of the fair value adjustments recorded upon the assumption of indebtedness from a previous merger of $1.7 million.

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The increase in interest expense, net of capitalized interest, for the six months ended June 30, 2022, was primarily attributable to an increase in LIBOR rates as compared to the six months ended June 30, 2021, which was partially offset by a reduction in the average debt balance to $2.9 billion for the six months ended June 30, 2022 from $3.1 billion for the six months ended June 30, 2021. The reduction in the average debt balance was primarily due to (i) the vessels sales (and corresponding debt repayments) described in Note 4 of the attached Unaudited Condensed Consolidated Financial Statements, and (ii) the repayment of $69.7 million of our Convertible Notes Due 2022 upon maturity in May 2022. LIBOR rates during the six months ended June 30, 2021 were at historically low levels given the ongoing headwinds caused by COVID-19 pandemic at the time. During the six months ended June 30, 2022, LIBOR rates began to increase as central banks around the world began raising benchmark interest rates in an effort to stem the rise in inflation

The increase in non-cash accretion of our Convertible Notes due 2022 and 2025 was attributable to a full six months of accretion during 2022 on the Convertible Notes Due 2025 that were issued in June 2021.

The write-offs of deferred financing fees and debt extinguishment costs during the six months ended June 30, 2022 include (i) $3.8 million of write-offs of deferred financing fees related to the refinancing of existing indebtedness on certain vessels, the repayment of debt on vessels prior to sale and the expiration of the availability period on certain facilities, (ii) $0.7 million of write-offs of the discounts related to the repayment of debt on certain vessels prior to sale, and (iii) $1.2 million of debt extinguishment costs related to the refinancing of the existing indebtedness on certain vessels and the repayment of debt of vessels prior to their sale.

The write-offs of deferred financing fees and debt extinguishment costs during the six months ended June 30, 2021 relates to the write-offs of deferred financing fees related to the refinancing of existing indebtedness.

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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, in the spot market, or on time charter, in addition to cash on hand. The Scorpio Pools generally 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.

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 our debt service obligations, obligations under sale and leaseback arrangements and commitments under other leasing arrangements) for a period of at least twelve months from the date of this report.

Since the beginning of calendar year 2020, the outbreak of COVID-19 has spread throughout the world and has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and volatility in the global financial and commodities markets, including oil and refined petroleum products. We expect that the COVID-19 pandemic will continue to cause volatility in the commodities markets. The scale and duration of these circumstances is unknowable but could have a material impact on our earnings, cash flow and financial condition for the remainder of 2022 and into 2023.

The ongoing military conflict in Ukraine has had a significant direct and indirect impact on the trade of refined petroleum products. This conflict has resulted in the United States, United Kingdom, and the European Union, among other countries, implementing sanctions and executive orders against citizens, entities, and activities connected to Russia. Some of these sanctions and executive orders target the Russian oil sector, including a prohibition on the import of oil from Russia to the United States or the United Kingdom, and the European Union’s recent ban on Russian crude oil and petroleum products which took effect, or are scheduled to take effect in December 2022 and February 2023, respectively. We cannot foresee what other sanctions or executive orders may arise that affect the trade of petroleum products. Furthermore, the conflict and ensuing international response has disrupted the supply of Russian oil to the global market, and as a result, the price of oil and petroleum products has experienced significant volatility. We cannot predict what effect the higher price of oil and petroleum products will have on demand, and it is possible that the current conflict in Ukraine could adversely affect our financial condition, results of operations, and future performance.

As of June 30, 2022, our cash balance was $359.5 million, which was $129.1 million higher than our cash balance of $230.4 million as of December 31, 2021.

We continuously evaluate potential transactions that we believe would be accretive to earnings, enhance shareholder value, or that would be in the best interests of the Company, which may include the pursuit of 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, 2022 consisted of our debt repayment obligations for our secured credit facilities, sale and leaseback arrangements, Senior Notes Due 2025, Convertible Notes Due 2025, obligations under our bareboat charter-in arrangements (which are accounted for under IFRS 16 - Leases) and remaining obligations for the purchase of scrubbers and ballast water treatment systems.

Cash Flows

The table below summarizes our sources and uses of cash for the six months ended June 30, 2022 and 2021, respectively.


	For the six months ended June 30,
In thousands of U.S. dollars	2022		2021
Cash flow data
Net cash inflow / (outflow)
Operating activities	$	139,802	$	25,922
Investing activities	518,648		(27,308)
Financing activities	(529,337)		96,104

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Cash flows from operating activities

Six Months Ended June 30, 2022 compared to 2021

The following table sets forth the components of our operating cash flows for the six months ended June 30, 2022 and June 30, 2021, along with descriptions of the significant changes thereunder.


	For the six months ended June 30,				Change		Percentage
In thousands of U.S. dollars	2022		2021		favorable / (unfavorable)		Change
Vessel revenue (1)	$	579,120	$	273,607	$	305,513	112	%
Vessel operating costs (1)	(161,755)		(163,900)		2,145		1	%
Voyage expenses (1)	(25,508)		(2,781)		(22,727)		(817)	%
General and administrative expenses - cash (1) (2)	(24,581)		(14,401)		(10,180)		(71)	%
Financial expenses - cash (1) (3)	(61,539)		(57,888)		(3,651)		(6)	%
Change in working capital (4)	(168,048)		(9,021)		(159,027)		1,763	%
Financial income - cash	298		116		182		157	%
Other	1,815		190		1,625		855	%
Operating cash flow	$	139,802	$	25,922	$	113,880	439	%

(1) See "Results of Operations" for information on these variations for the six months ended June 30, 2022 and 2021.

(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 $10.7 million and $12.5 million for the six months ended June 30, 2022 and 2021, respectively.

(3) 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 $8.0 million and $5.0 million for the six months ended June 30, 2022 and 2021, respectively; (ii) accretion of our Convertible Notes due 2022 and 2025 of $7.7 million and $5.4 million for the six months ended June 30, 2022 and 2021, respectively; and (iii) accretion or amortization of the fair value measurement applied to the debt and sale and leaseback obligations assumed in a previous merger of $1.4 million and $1.7 million in each of the six months ended June 30, 2022 and 2021, respectively.

(4) The change in working capital for the six months ended June 30, 2022 was primarily driven by increases in accounts receivable, prepaid expenses, other assets and accrued expenses offset by decreases in inventories and accounts payable. The most significant change was the increase in accounts receivable which was driven by the overall improvement in the market during the six months ended June 30, 2022. Our revenues are primarily derived from the Scorpio Pools. Accounts receivable due from the Scorpio Pools are generally driven by market conditions in the months preceding the end of the period, since all revenues, except time charters, are paid in arrears. The revenues earned by our vessels operating in the Scorpio Pools in the months preceding June 30, 2022 were significantly greater than the months preceding December 31, 2021, thus leading to the increase in accounts receivable.

The change in working capital for the six months ended June 30, 2021 was driven by decreases in accrued expenses, accounts payable, increases in prepaid expenses and other current and non-current assets offset by increases in accounts receivable and inventories. The most significant change was the decrease in accrued expenses which was due to a decrease in compensation expenses during the six months ended June 30, 2021. The other changes were primarily driven by the timing of cash receipts and payments.

Cash flows from investing activities

The following table depicts the components of our investing activities for the six months ended June 30, 2022 and 2021, along with descriptions of the significant changes thereunder.

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	For the six months ended June 30,		Change	Percentage
In thousands of U.S. dollars	2022	2021	favorable / (unfavorable)	Change
Cash outflows
Net proceeds from the sales of vessels(1)	541,187	—	541,187	N/A
Distributions from joint venture(2)	240	—	240	N/A
Cash inflow from investing activities	541,427	—	541,427	N/A

Drydock, scrubber and BWTS and other vessel related payments (owned, finance leased and bareboat-in vessels)(3)	(22,779)	(27,308)	4,529	17	%
Net cash outflow from investing activities	518,648	(27,308)	545,956	1,999	%

(1) During the six months ended June 30, 2022, we entered into agreements to sell 18 vessels, consisting of three LR2s, 12 LR1s, and three MRs. The sales prices of each of the three LR2s (STI Savile Row, STI Carnaby and STI Nautilus) were $43.0 million, $43.0 million and $42.7 million, respectively. The sales price of the 12 LR1s (STI Excelsior, STI Executive, STI Excellence, STI Pride, STI Providence, STI Prestige, STI Experience, STI Express, STI Exceed, STI Excel, STI Expedite, and STI Precision) was $413.8 million in aggregate. The sales prices of each of the three MRs (STI Fontvieille, STI Benicia, and STI Majestic) were $23.5 million, $26.5 million, and $34.9 million, respectively. The sales of 16 vessels closed during the six months ended June 30, 2022, and the remaining two sales closed in July and August 2022.

(2) In August 2021, we acquired a minority interest in a portfolio of nine product tankers, consisting of five dual-fuel MR methanol tankers (built between 2016 and 2021) which, in addition to traditional petroleum products, are designed to both carry methanol as a cargo and to consume it as a fuel, along with four ice class 1A LR1 product tankers. The dual-fuel MR methanol tankers are currently on long-term time charter contracts greater than five years. As part of this agreement, we acquired a 50% interest in a joint venture that ultimately has a minority interest in the entities that own the vessels for final consideration of $6.7 million.

The joint venture issued a cash distribution of $0.2 million during this period during the six months ended June 30, 2022.

(3) Drydock, scrubbers and BWTS payments represent the cash paid for the six months ended June 30, 2022 and 2021 for the drydocking of our vessels, and payments made as part of the agreements to purchase and install scrubbers and BWTS. 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, 2022 and 2021.

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Cash flows from financing activities

The following table depicts the components of our financing activities for the six months ended June 30, 2022 and 2021 along with descriptions of the significant changes thereunder.


	For the six months ended June 30,				Change		Percentage
In thousands of U.S. dollars	2022		2021		favorable / (unfavorable)		Change
Cash inflows
Drawdowns from our secured credit facilities (1)	$	5,075	$	25,043	$	(19,968)	(80)	%
Issuance of Unsecured Senior Notes Due 2025 (1)	358		30,551		(30,193)		(99)	%
Proceeds from sale and leaseback transactions (1)	117,204		311,984		(194,780)		(62)	%
Issuance of Convertible Notes Due 2025 (1)	—		119,419		(119,419)		(100)	%

Total financing cash inflows	122,637		486,997		(364,360)		(75)	%

Cash outflows
Repayments on our secured credit facilities (1)	(295,376)		(264,424)		(30,952)		(12)	%
Repayments under sale and leaseback transactions (1)	(212,388)		(77,025)		(135,363)		(176)	%
Repayments under IFRS 16 lease liabilities (1)	(52,568)		(28,674)		(23,894)		(83)	%
Repurchase / repayment of convertible notes(1)	(82,251)		—		(82,251)		N/A
Dividend payments (2)	(11,778)		(11,646)		(132)		(1)	%
Debt issuance costs (3)	(1,621)		(9,124)		7,503		82	%
Decrease in restricted cash(4)	4,008		—		4,008		N/A
Total financing cash outflows	(651,974)		(390,893)		(261,081)		(67)	%

Net cash outflow from financing activities	$	(529,337)	$	96,104	$	(625,441)	(651)	%

(1) Cash drawdowns and repayments on our secured credit facilities, unsecured debt, lease financing arrangements and leases being accounted for under IFRS 16 - Leases during the six months ended June 30, 2022 and 2021 consisted of:


	For the six months ended June 30,
	2022		2021
In thousands of U.S. dollars	Drawdowns	Repayments	Drawdowns	Repayments
KEXIM Credit Facility	—	—	—	(15,932)
ING Credit Facility	—	—	2,128	(161,090)
2018 NIBC Credit Facility	—	—	—	(31,066)
Credit Agricole Credit Facility	—	(73,591)	—	(4,283)
ABN AMRO / K-Sure Credit Facility	—	—	—	(1,926)
Citibank / K-Sure Credit Facility	—	(78,401)	—	(4,208)
ABN AMRO / SEB Credit Facility