SOURCE: Scorpio Tankers Inc.

Scorpio Tankers Inc.

May 10, 2011 10:50 ET

Scorpio Tankers Inc. Announces 1st Quarter Results and Delivery of STI Coral and STI Diamond

MONACO--(Marketwire - May 10, 2011) - Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers", or the "Company") today reported its results for the three months ended March 31, 2011.

The Company recorded a net loss of $1.4 million or $0.06 basic and diluted loss per share for the three months ended March 31, 2011 compared to net income of $1.2 million or $0.21 basic and diluted earnings per share for the three months ended March 31, 2010. The weighted average number of shares outstanding was 24,066,455 (basic and diluted) for the three months ended March 31, 2011, and 5,589,147 (basic and diluted) for the three months ended March 31, 2010.

Highlights to date include:

--  Delivery of two product tankers, STI Coral and STI Diamond
--  Signing of new $150 million credit facility in May 2011
--  Net cash flow from operating activities before changes in assets and
    liabilities was $3.4 million (see Appendix A)

Emanuele Lauro, chief executive officer and chairman of the board, commented, "We are beginning to see signs of a recovery as TCE rates have improved for product tankers, and particularly in the smaller ships. Though the breadth and duration remains unclear, it is welcome news that validates our strategy of pursuing growth in the product tanker market."

Mr. Lauro further commented, "With the delivery of STI Coral and STI Diamond, along with the signing of a new $150 million credit facility, we continue to demonstrate our commitment to growing at a swift, but sensible pace in this market."

Recent Highlights

Delivery of STI Coral and STI Diamond

On May 10, 2011, Scorpio Tankers took delivery of the STI Coral and STI Diamond, product tankers that we previously agreed to acquire for an aggregate purchase price of $70.0 million. The ships were built in 2008 at the STX shipyard in Korea and are charter free.

Time charter-in agreement

On April 5, 2011, the Company entered into a time charter agreement for a 2007 built Handymax ice class 1B product tanker, the Kazdanga. This vessel will be chartered-in for one year at $12,345 per day and is expected to be delivered in June 2011. The agreement includes an option to extend the charter for an additional year at $13,335 per day.

New $150 Million Credit Facility (2011 Credit Facility)

On May 4, 2011, the Company executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA, acting through its New York branch, and ABN AMRO Bank N.V. for a senior secured term loan facility of up to $150 million ("2011 Credit Facility"). Borrowings under the 2011 Credit Facility are available until May 3, 2012. The credit facility matures in six years and will be used to finance up to 50% of the cost of future vessel acquisitions, which vessels would be the collateral for the credit facility.

On May 6, 2011, we drew down an aggregate of $35 million to finance the delivery of STI Coral and STI Diamond.

1st Quarter Highlights

Delivery of time chartered-in vessels

On January 26, 2011, the Company took delivery of Kraslava, a 2007 built Handymax ice-class 1B product tanker, which we previously agreed to time charter-in. This vessel was chartered-in for one year at $12,070 per day.

On February 6, 2011, Scorpio Tankers took delivery of Histria Azure, a 2007 built Handymax product tanker, which we previously agreed to time charter-in. This vessel was chartered-in for one year at $12,250 per day. The agreement includes an option for Scorpio Tankers to extend for an additional year at $13,750 per day or $12,250 per day with a 50% profit sharing agreement.

On March 1, 2011, the Company took delivery of Krisjanis Valdemars, a 2007 built Handymax ice-class 1B product tanker, which the Company previously agreed to time charter-in. This vessel was chartered-in for 10 months at $12,000 per day. The agreement also includes a profit and loss sharing provision whereby 50% of all profits and losses (the difference between the vessel's pool earnings and the charter hire expense) will be shared with the owner of the vessel.

STI Spirit Credit Facility

On March 17, 2011, Scorpio Tankers drew down $27.3 million from a senior secured term loan facility with DVB Bank SE. The loan is secured by the STI Spirit, which was acquired on November 10, 2010. The credit facility matures on March 17, 2018, and the loan bears interest at LIBOR plus a margin of 2.75% per annum. The loan will be repaid over 28 equal quarterly installments and a lump sum payment at maturity. The quarterly installments, which commence three months after the drawdown, are calculated using an 18 year amortization profile.

Current Liquidity

As of May 10, 2011, we had $48.2 million in cash.

Debt and Drydocks for 2011

As of May 10, 2011, Scorpio Tankers' outstanding debt balance was $203.4 million.

Debt Repayments

The 2011 debt repayments for the 2010 Credit Facility, STI Spirit Facility, and 2011 Credit Facility are:

2nd Quarter: $4.5 million
3rd Quarter: $5.1 million
4th Quarter: $5.1 million

Drydocks

The Venice is scheduled to be drydocked in the third quarter of 2011 for an estimated cost of $0.9 million and 20 days of offhire.

Explanation of Variances on the First Quarter Results

For the three months ended March 31, 2011, the Company incurred a net loss of $1.4 million compared to net income of $1.2 million in the three months ended March 31, 2010. The following were the significant changes between the two periods:

--  Vessel revenue increased $10.9 million to $17.0 million as a result of
    an increase in the average number of operating vessels for the three
    month periods ended March 31, 2010 and 2011 from 3.00 to 10.00,
    respectively.  This increase was offset by a decrease in daily time
    charter equivalent per vessel, from $22,798 to $14,997 (see the
    breakdown of daily TCE averages below).

--  Vessel operating costs increased $4.9 million to $7.3 million as a
    result of the increase in the average number of operating vessels
    noted above offset by a decrease in daily operating expenses from
    $8,836 to $8,145 for the three month periods ended March 31, 2010 and
    2011, respectively.

--  Charterhire expense increased $3.1 million as a result of the delivery
    of the BW Zambesi on December 11, 2010 on a one year time charter-in
    agreement along with the Kraslava, Histria Azure and Krisjanis
    Valdemars as discussed above.

--  The increase in depreciation expense of $2.2 million is a result of an
    increase in the average number of owned vessels for the three month
    periods ended March 31, 2010 and 2011 from 3.00 to 10.00, respectively.
    This increase was offset by a decrease in depreciation expense as a
    result of the modification of our vessel useful lives from 20 to 25
    years, which took effect from the second quarter of 2010, and an
    increase in the estimated residual value of our owned vessels from the
    final quarter 2010 onwards which was driven by an increase in scrap
    rate assumptions.

--  The increase in general and administrative expense of $2.6 million to
    $2.8 million was primarily driven by an increase in the Company's
    overhead expenses as a result of incremental costs incurred to operate
    as a public company.  This was specifically driven by an increase in
    officers' salaries, amortization of restricted stock issued in June
    2010 and January 2011, professional fees, and other related expenses
    (the Company's initial public offering closed on April 6, 2010).

--  Interest expense increased $1.3 million to $1.4 million.
    --  The three months ended March 31, 2011 included:
        --  Interest expense of $1.2 million from the 2010 Credit Facility
            and STI Spirit Credit Facility.  (The average outstanding loan
            balance for the three months was $149.4 million.)

        --  $0.1 million of amortization of deferred financing fees.

    --  The three months ended March 31, 2010 included:
        --  Interest expense on the 2005 Credit Facility of $0.1 million,
            which was repaid from the proceeds of the initial public
            offering. (The average outstanding loan balance for the three
            months was $39.4 million).

--  The decrease of $0.4 million in realized and unrealized losses on
    derivative financial instruments was due to changes in the fair value
    of an interest rate swap, which was related to the 2005 Credit
    Facility. This swap was terminated on April 9, 2010.

--  The decrease in other expense, net of $0.3 million was due to
    non-recurring expenses incurred in connection with our IPO, which was
    completed in April 2010.





              Scorpio Tankers Inc. and Subsidiaries
       Condensed Consolidated Statement of Comprehensive Income
                              (unaudited)



                                                For the Three Months Ended
                                                        March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
Revenue:
  Vessel revenue                                $ 17,015,949  $  6,155,440
Operating expenses:
  Vessel operating costs                          (7,330,293)   (2,385,846)
  Voyage expenses                                    (10,230)            -
  Charter hire                                    (3,099,208)            -
  Depreciation                                    (3,897,616)   (1,652,055)
  General and administrative expenses             (2,768,903)     (146,051)
                                                ------------  ------------
  Total operating expenses                       (17,106,250)   (4,183,952)
                                                ------------  ------------
Operating (loss)/income                              (90,301)    1,971,488
                                                ------------  ------------
Other (expense) and income, net:
  Interest expense--bank loan                     (1,350,233)      (94,624)
  Realized loss on derivative financial
   instruments                                             -      (222,796)
  Unrealized loss on derivative financial
   instruments                                             -      (146,696)
  Interest income                                     34,613            78
  Other expense, net                                  (6,711)     (342,930)
                                                ------------  ------------
  Total other expense, net                        (1,322,331)     (806,968)
                                                ------------  ------------
Net (loss)/ Income                              $ (1,412,632) $  1,164,520
                                                ============  ============
  Attributable to:
  Equity holders of the parent                  $ (1,412,632) $  1,164,520
(Loss)/earnings per share
  Basic                                         $      (0.06) $       0.21
  Diluted                                       $      (0.06) $       0.21

  Basic and Diluted Weighted average shares
   outstanding (1)                                24,066,455     5,589,147


(1)   The effect of diluted weighted shares outstanding for the three month
      period ended March 31, 2011 would be anti-dilutive since the Company
      is in a net loss position.  There were no potentially dilutive shares
      in existence during the three month period ended March 31, 2010.  As
      such, there is no difference between basic and diluted earnings per
      share for those periods.





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


                                                      As of
                                      ------------------------------------
                                        March 31, 2011   December 31, 2010
                                      -----------------  -----------------
 Assets
 Current assets
 Cash and cash equivalents            $      88,102,287  $      68,186,902
 Accounts receivable                         11,207,772          7,354,252
 Prepaid expenses                             1,315,709            460,680
 Inventories                                  1,338,622          1,286,507
                                      -----------------  -----------------
 Total current assets                       101,964,390         77,288,341
 Non-current assets
 Vessels and drydock                        329,527,771        333,425,386
 Other assets                                 2,774,831          1,554,713
                                      -----------------  -----------------
 Total non-current assets                   332,302,602        334,980,099
                                      -----------------  -----------------
 Total assets                         $     434,266,992  $     412,268,440
                                      =================  =================

 Current liabilities
 Bank loan                                   17,278,081         15,826,314
 Accounts payable                             2,843,724          3,173,505
 Accrued expenses                             1,162,554          1,123,351
                                      -----------------  -----------------
 Total current liabilities                   21,284,359         20,123,170
 Non-current liabilities
 Bank loan                                  148,858,904        127,362,088
                                      -----------------  -----------------
 Total non-current liabilities              148,858,904        127,362,088
                                      -----------------  -----------------
 Total liabilities                          170,143,263        147,485,258
                                      -----------------  -----------------

 Shareholders' equity
 Issued, authorized and fully paid in
  share capital:
 Share capital                                  251,691            248,791
 Additional paid-in capital                 255,754,263        255,003,984
 Merger reserve                              13,292,496         13,292,496
 Treasury shares                             (2,647,807)        (2,647,807)
 Cumulative deficit                          (2,526,914)        (1,114,282)
                                      -----------------  -----------------
 Total shareholders' equity                 264,123,729        264,783,182
                                      -----------------  -----------------
 Total liabilities and shareholders'
  equity                              $     434,266,992  $     412,268,440
                                      =================  =================






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



                                          For the Three Months Ended March
                                                        31,
                                          --------------------------------
                                                2011             2010
                                          ---------------  ---------------
Operating activities
Net (loss)/income                         $    (1,412,632) $     1,164,520
Depreciation                                    3,897,616        1,652,055
Amortization of restricted stock                  753,179                -
Amortization of deferred financing fees           116,619                -
                                          ---------------  ---------------
                                                3,354,782        2,816,575
                                          ---------------  ---------------
Changes in assets and liabilities:
Drydock payments                                  (11,582)         (99,958)
Increase in inventories                           (52,115)         (64,814)
Increase in accounts receivable                (3,853,520)        (167,353)
Increase in prepaid expenses                     (855,030)        (787,582)
(Decrease)/increase in accounts payable          (318,199)         933,147
Increase in accrued expenses                       39,203          449,098
Decrease in the value of derivative
 financial instruments                                  -          146,696
Decrease in shareholder receivable                      -        1,928,253
Increase in other assets                       (1,220,118)               -
                                          ---------------  ---------------
                                               (6,271,361)       2,337,487
                                          ---------------  ---------------
Net cash (outflow)/inflow from operating
 activities                                    (2,916,579)       5,154,062
                                          ---------------  ---------------
Financing activities
Bank loan repayment                            (4,067,755)        (900,000)
Proceeds of long term-debt                     27,307,500                -
Debt issuance fees                               (407,781)        (937,500)
Payments for stock offering                             -         (417,669)
                                          ---------------  ---------------
Net cash inflow/(outflow) from financing
 activities                                    22,831,964       (2,255,169)
                                          ---------------  ---------------
Increase in cash and cash equivalents          19,915,385        2,898,893
Cash and cash equivalents at January 1,        68,186,902          444,497
                                          ---------------  ---------------
Cash and cash equivalents at March 31,    $    88,102,287  $     3,343,390
                                          ===============  ===============
Supplemental information:
Interest paid                             $     1,329,076  $       164,327






 Average Daily Results for the three months ended March 31, 2011 and 2010


                                                      For the Three Months
                                                         Ended March 31,
                                                    -----------------------
                                                       2011        2010
                                                    ----------- -----------
Average Daily Results
Time charter equivalent per day(1)                  $    14,997 $    22,798
Vessel operating costs per day(2)                         8,145       8,836

Aframax/LR2
TCE per revenue day - pool                               12,970           -
TCE per revenue day - time charters                      15,457
Vessel operating costs per day(2)                         7,334           -
Panamax/LR1
TCE per revenue day - pool                               14,678      18,852
TCE per revenue day - time charters                      23,954      24,771
Vessel operating costs per day(2)                         8,550       8,836
Handymax
TCE per revenue day - pool                               13,695           -
Vessel operating costs per day(2)                         7,840           -

Fleet data
Average number of owned vessels                           10.00        3.00
Average number of time chartered-in vessels                2.66           -
Drydock
Expenditures for drydock                            $         - $         -


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





                          Fleet List as of May 10, 2011


                              Year             Ice                 Vessel
    Vessel Name               Built    DWT    Class  Employment     type
  ------------------          ------ -------- ------ -----------  ---------
  Owned vessels
1 STI Highlander                2007   37,145     1A     SHTP (2)  Handymax
2 STI Gladiator                 2003   40,083      -     SHTP (2)  Handymax
3 STI Matador                   2003   40,096      -     SHTP (2)  Handymax
4 STI Conqueror                 2005   40,158     1B     SHTP (2)  Handymax
5 STI Coral                     2008   49,900      -        Spot         MR
6 STI Diamond                   2008   49,900      -        Spot         MR
                                                            Time
7 Noemi                         2004   72,515      -  Charter (3)       LR1
8 Senatore                      2004   72,514      -     SPTP (4)       LR1
9 STI Harmony                   2007   73,919     1A     SPTP (4)       LR1
10 STI Heritage                 2008   73,919     1A     SPTP (4)       LR1
                                                                      Post-
11 Venice                       2001   81,408     1C     SPTP (4)   Panamax
12 STI Spirit                   2008  113,100      -    SLR2P (5)       LR2
                                     --------
    Owned DWT                         744,657
                                     ========


    Time Chartered-In vessels

13 Kraslava                     2007   37,258     1B     SHTP (2)  Handymax
14 Krisjanis Valdemars          2007   37,266     1B     SHTP (2)  Handymax
15 Histria Azure                2007   40,394      -     SHTP (2)  Handymax
16 BW Zambesi                   2010   76,577      -     SPTP (4)       LR1
                                     --------
    TC-IN DWT                         191,495
                                     ========

                                     --------
    Total DWT                         936,152
                                     ========


  Time Charter Info
----------------------
Daily Base
   Rate     Expiry (1)
----------  ----------
$   12,070   26-Jan-12
$   12,000   14-Dec-11 (6)
$   12,250   06-Feb-12 (7)
$   13,850   11-Dec-11 (8)



(*) On April 5, 2011, we entered into a time charter agreement for a 2007
    built Handymax ice class 1B product tanker, the Kazdanga.  This vessel
    will be chartered-in for one year at $12,345 per day and is expected
    to be delivered in June 2011.  The agreement includes an option to
    extend the charter for an additional year at $13,335 per day.
(1) Redelivery from the charterer is plus or minus 30 days from the expiry
    date.
(2) These vessels operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP
    is operated by Scorpio Commercial Management (SCM).  SHTP and SCM are
    related parties to the Company.
(3) Noemi is time chartered by King Dustin, which is a related party. The
    daily time charter rate is $24,500 and the time charter expires on
    January 21, 2012, plus or minus 30 days.
(4) The vessel operates in Scorpio Panamax Tanker Pool (SPTP). SPTP is
    operated by SCM.  SPTP is a related party to the Company.
(5) This vessel operates in the Scorpio LR2 Pool (SLR2P). SLR2P is
    operated by SCM.  SLR2P is a related party to the Company.
(6) The agreement contains a 50% profit and loss sharing agreement with the
    vessel owner
(7) The agreement contains an optional second year for a rate of $13,750/
    day or $12,250/ day with a 50% profit sharing agreement.
(8) The agreement contains an optional second year for a rate of $14,850/
    day.



                            Appendix A:
    Operating Cash Flow before Changes in Assets and Liabilities


                                              For the Three Months Ended
                                                      March 31,
                                            -------------------------------
                                                 2011            2010
                                            --------------  ---------------
Net (loss)/income                           $   (1,412,632) $     1,164,520
Depreciation                                     3,897,616        1,652,055
Amortization of restricted stock                   753,179                -
Amortization of deferred financing fees            116,619                -
                                            --------------  ---------------
Cash flow from operating activities before
 changes in assets and liabilities               3,354,782        2,816,575
                                            --------------  ---------------


Business Strategy, Dividend Policy, and Share Buyback Program

Business Strategy

The Company's primary objectives are to profitably grow the business and emerge as a major operator of medium-sized tanker vessels. The Company intends to acquire modern, high-quality tankers through timely and selective acquisitions. It is currently concentrating on product or coated tankers because of the fundamentals of this segment, which the Company believes includes:

--  Increasing demand for refined products
--  Increasing ton miles (distance between new refiners and areas of
    demand)
--  Reduced order book

Dividend Policy

The Company does not have immediate plans to pay dividends but will continue to assess the dividend policy. In the future, the board of directors may determine it is in the best interest of the Company to pay dividends.

Share Buyback Program

On July 9, 2010, the Board of Directors authorized a share buyback program of up to $20 million. Scorpio Tankers expects to repurchase these shares in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any shares. As of May 10, 2011, the Company has repurchased 244,146 shares for $2.6 million at an average price per share, including commissions, of $10.85. The most recent transaction was in September 2010.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns one LR2 tanker, four LR1 tankers, four Handymax tankers, two MR tankers, and one post-Panamax tanker with an average age of 5.3 years. Additional information about the Company is available at the Company's website www.scorpiotankers.com.

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.