SOURCE: Scorpio Tankers Inc.

Scorpio Tankers Inc.

March 02, 2015 08:00 ET

Scorpio Tankers Inc. Announces Financial Results for the Fourth Quarter of 2014 and Declaration of a Quarterly Dividend

MONACO--(Marketwired - Mar 2, 2015) - Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers," or the "Company") today reported its results for the three months and year ended December 31, 2014.

Results for the three months ended December 31, 2014 and 2013

For the three months ended December 31, 2014, the Company's adjusted net income was $18.3 million (see Non-GAAP Measure section below), or $0.12 basic and diluted earnings per share, which excluded (i) a write down of $17.9 million, or $0.12 per share, relating to the discontinuation of equity method accounting for our investment in Dorian LPG Ltd. ("Dorian") as of October 29, 2014 and the designation of STI Harmony and STI Heritage as held for sale and (ii) an unrealized gain on derivative financial instruments of $0.1 million, or $0.00 per share. For the three months ended December 31, 2014, the Company had net income of $0.5 million, or $0.00 basic and diluted earnings per share. 

For the three months ended December 31, 2013 the Company's adjusted net loss was $14.5 million (see Non-GAAP Measure section below), or $0.08 basic and diluted loss per share, which excluded (i) a gain of $41.4 million, or $0.23 per share, resulting from our initial investment in Dorian, (ii) a write down of $21.2 million, or $0.12 per share, resulting from the designation of certain older vessels as held for sale and (iii) an unrealized gain on derivative financial instruments of $0.1 million, or $0.00 per share. For the three months ended December 31, 2013, the Company had net income of $5.8 million, or $0.03 basic and diluted earnings per share.

Results for the year ended December 31, 2014 and 2013

For the year ended December 31, 2014, the Company's adjusted net income was $7.7 million (see Non-GAAP Measure section below), or $0.04 basic and diluted earnings per share, which excluded (i) a gain of $51.4 million, or $0.30 per share, resulting from the previously announced sales of seven Very Large Crude Carriers ('VLCCs') under construction in March 2014, (ii) a gain of $10.9 million, or $0.06 per share, resulting from the previously announced acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian in June 2014, (iii) a write down of $17.9 million, or $0.10 per share, relating to the discontinuation of equity method accounting for our investment in Dorian as of October 29, 2014, and the designation of STI Harmony and STI Heritage as held for sale, (iv) a write-off of $0.3 million, or $0.00 per share, for deferred financing fees relating to the repayment of the STI Spirit Credit Facility in April 2014 and (v) an unrealized gain on derivative financial instruments of $0.3 million, or $0.00 per share. For the year ended December 31, 2014, the Company had net income of $52.1 million, or $0.30 basic and diluted earnings per share. 

For the year ended December 31, 2013, the Company's adjusted net loss was $3.7 million (see Non-GAAP Measure section below), or $0.03 basic and diluted loss per share, which excluded (i) a gain of $41.4 million, or $0.28 per share, resulting from our initial investment in Dorian, (ii) a write down of $21.2 million, or $0.14 per share, resulting from the designation of certain older vessels as held for sale and (iii) an unrealized gain on derivative financial instruments of $0.6 million, or $0.00 per share. For the year ended December 31, 2013, the Company had net income of $17.0 million, or $0.12 basic and $0.11 diluted earnings per share.

Declaration of Dividend

On February 26, 2015, the Scorpio Tankers' board of directors declared a quarterly cash dividend of $0.12 per share, payable on March 30, 2015 to all shareholders as of March 13, 2015 (the record date). As of February 26, 2015, there were 163,827,903 shares outstanding.

First Quarter 2015 Revenue Update and Summary of Recent and Fourth Quarter Significant Events:

  • Thus far in the first quarter of 2015, we have fixed 75% of our voyage days at approximately:
    • $26,000 per day for the LR2s
    • $22,000 per day for the LR1s
    • $18,000 per day for the MRs
    • $19,500 per day for the Handymaxes
  • Recently took delivery of three vessels under the Company's Newbuilding Program, two LR2's, STI Veneto and STI Alexis and one MR, STI Bronx. The Company has taken delivery of 8 vessels under its Newbuilding Program during 2015. 
  • Reached an agreement in December 2014 with Scorpio Bulkers Inc., a related party, to purchase newbuilding contracts for four LR2 product tankers for $51.0 million each to be constructed at shipyards in South Korea and options to purchase two additional LR2 newbuilding contracts at $52.5 million each. The options expire on May 31, 2015.
  • Reached an agreement in November 2014 with an unrelated third party to purchase two LR2 product tankers under construction at Daehan Shipbuilding Co., Ltd. ("DHSC") for approximately $60.0 million each. These vessels, STI Rose and STI Alexis, were delivered in January and February 2015, respectively.
  • Issued $51.75 million of 7.50% Senior Unsecured Notes due 2017 in October 2014. 
  • Took delivery of 13 vessels under the Company's Newbuilding Program (three LR2, five MR, and five ice-class 1A Handymax) during the fourth quarter of 2014.
  • Paid a quarterly cash dividend on the Company's common stock of $0.12 per share in December 2014.
  • Reached agreements to sell three of the Company's older vessels, Venice (2001 built Post-Panamax), STI Harmony (2007 built LR1), and STI Heritage (2008 built LR1) for approximately $74.0 million in aggregate. The sales of these vessels are expected to close in March 2015.

Newbuilding Vessel deliveries

In January and February 2015, the Company took delivery of eight vessels under its Newbuilding Program.

  • STI Rose and STI Alexis, LR2 product tankers, were delivered from DHSC. Upon delivery, STI Rose began a voyage for 14 days at approximately $30,000 per day, and STI Alexis began a voyage for 52 days at approximately $33,500 per day.
  • STI Veneto, an LR2 product tanker, was delivered from Hyundai Samho Heavy Industries Co. Ltd. ("HSHI"). Upon delivery, this vessel began a voyage for 60 days at approximately $32,000 per day. 
  • STI Tribeca, STI Gramercy and STI Bronx, MR product tankers, were delivered from SPP Shipbuilding Co., Ltd. of South Korea ("SPP"). Upon delivery, each vessel began a time charter for up to 120 days at approximately $18,000 per day.
  • STI Hammersmith and STI Rotherhithe, Handymax product tankers, were delivered from Hyundai Mipo Dockyard of South Korea ("HMD"). Upon delivery, each vessel began a time charter for up to 120 days at approximately $14,000 per day.

The Company has taken delivery of 21 vessels under its Newbuilding Program with HSHI, DHSC, HMD, SPP and Daewoo Shipbuilding and Marine Engineering Co. Ltd. ("DSME") since September 30, 2014. These deliveries are summarized as follows:

               
      Month        
  Name   delivered   Type   Shipyard
1 STI Mayfair   October 2014   MR   SPP
2 STI Yorkville   October 2014   MR   HMD
3 STI Battersea   October 2014   Handymax   HMD
4 STI Wembley   October 2014   Handymax   HMD
5 STI Finchley   November 2014   Handymax   HMD
6 STI Clapham   November 2014   Handymax   HMD
7 STI Milwaukee   November 2014   MR   HMD
8 STI Battery   November 2014   MR   HMD
9 STI Sloane   November 2014   LR2   HSHI
10 STI Broadway   November 2014   LR2   DSME
11 STI Condotti   November 2014   LR2   HSHI
12 STI Poplar   December 2014   Handymax   HMD
13 STI Soho   December 2014   MR   SPP
14 STI Tribeca   January 2015   MR   SPP
15 STI Hammersmith   January 2015   Handymax   HMD
16 STI Rotherhithe   January 2015   Handymax   HMD
17 STI Rose   January 2015   LR2   DHSC
18 STI Gramercy   January 2015   MR   SPP
19 STI Veneto   January 2015   LR2   HSHI
20 STI Alexis   February 2015   LR2   DHSC
21 STI Bronx   February 2015   MR   SPP
               

Newbuilding vessel purchases

In December 2014, the Company reached an agreement with Scorpio Bulkers Inc., a related party, to purchase newbuilding contracts for four LR2 product tankers to be constructed at shipyards in South Korea and options to purchase two additional LR2 newbuilding contracts. The purchase price for each of the four LR2 newbuilding contracts is $51.0 million with scheduled vessel deliveries in the first three quarters of 2016. The purchase price for the two option contracts is fixed at $52.5 million for each contract with scheduled vessel deliveries in the fourth quarter of 2016. The options expire on May 31, 2015.

The independent members of the Company's Board of Directors unanimously approved the transaction with Scorpio Bulkers Inc. described in the preceding paragraph.

In November 2014, the Company reached an agreement with an unrelated third party to purchase two LR2 product tankers under construction at DHSC for approximately $60.0 million each. These vessels, STI Rose and STI Alexis, were delivered in January and February 2015, respectively.

Vessel sales

The Company reached agreements to sell Venice (2001 built Post-Panamax), STI Harmony (2007 built LR1), and STI Heritage (2008 built LR1) for approximately $74.0 million in aggregate. The sales of these vessels are expected to close in March 2015. In connection with the Company's entry into these vessel sale agreements, the Company recorded a write-down of approximately $4.0 million in the fourth quarter of 2014.

Time charter-in update

In February 2015, the Company took delivery of a previously announced time chartered-in-LR2 tanker that was under construction in South Korea. The vessel is chartered-in for one year at $21,050 per day and the Company also has an option to extend the charter for one year at $22,600 per day. Upon delivery from the shipyard, this vessel began a voyage for 54 days at approximately $31,000 per day.

In February 2015, the Company extended the time charter on an LR2 tanker that is currently time chartered-in. The term of the agreement is for six months at $16,250 per day beginning in March 2015.

In February 2015, the Company extended the time charter on an LR1 tanker that is currently time chartered-in. The term of the agreement is for one year at $16,250 per day beginning in March 2015.

Issuance of $51.75 million of 7.50% Senior Unsecured Notes

In October 2014, the Company completed a $51.75 million public offering of Senior Unsecured Notes due 2017. The notes will mature on October 15, 2017 and bear interest at a rate of 7.50% per year, payable in arrears on the 15th day of January, April, July and October of each year.

Stock Buyback Program Update

During 2014, the Company acquired an aggregate of 37,579,136 of its common shares that are being held as treasury shares, which include (i) 19,951,536 common shares that were purchased in the open market at an average price of $9.09 per share, (ii) 7,500,000 common shares that were acquired in exchange for 3,422,665 shares in Dorian and (iii) 10,127,600 common shares that were acquired in conjunction with the Company's offering of $360 million of Convertible Senior Notes due 2019 in June 2014.

During 2015, the Company acquired an aggregate of 746,639 of its common shares that are being held as treasury shares at an average price of $7.91 per share. There are 163,827,903 shares outstanding as of February 26, 2015.

The Company has $69.3 million remaining under its stock buyback program as of the date of this press release. The Company expects to repurchase these shares in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any shares.

Current Liquidity

As of February 27, 2015, the Company had $119.8 million in cash. 

Debt

We made the following drawdowns from our credit facilities since September 30, 2014:

               
      Drawdown amount        
  Credit facility   (in $ millions)   Drawdown date   Collateral
1 K-Sure Credit Facility $ 20.4   October 2014   STI Mayfair
2 2013 Credit Facility   19.5   October 2014   STI Yorkville
3 K-Sure Credit Facility   18.9   October 2014   STI Battersea
4 2013 Credit Facility   18.0   October 2014   STI Wembley
5 KEXIM Credit Facility   19.0   November 2014   STI Finchley
6 KEXIM Credit Facility   19.0   November 2014   STI Clapham
7 2013 Credit Facility   20.5   November 2014   STI Milwaukee
8 2013 Credit Facility   19.5   November 2014   STI Battery
9 KEXIM Credit Facility   30.3   November 2014   STI Sloane
10 KEXIM Credit Facility   29.7   November 2014   STI Broadway
11 KEXIM Credit Facility   30.3   November 2014   STI Condotti
12 KEXIM Credit Facility   19.0   November 2014   STI Poplar
13 K-Sure Credit Facility   19.9   December 2014   STI Soho
14 K-Sure Credit Facility   20.4   December 2014   STI Tribeca
15 K-Sure Credit Facility   19.2   December 2014   STI Hammersmith
16 K-Sure Credit Facility   19.2   December 2014   STI Rotherhithe
17 2013 Credit Facility   35.4   December 2014   STI Rose
18 K-Sure Credit Facility   19.9   January 2015   STI Gramercy
19 KEXIM Credit Facility   30.3   January 2015   STI Veneto
20 2013 Credit Facility   35.4   February 2015   STI Alexis
21 K-Sure Credit Facility   19.5   February 2015   STI Bronx
               

As of March 2, 2015, the Company's outstanding debt balance, and amount available to draw, is as follows:

In thousands of U.S. dollars   Amount outstanding at December 31, 2014   Amount Outstanding as of the date of this report   Availability as of the date of this report (5)    
2010 Revolving Credit Facility   $ 41,456   $ 35,395     -   (1)
2011 Credit Facility     108,911     108,911     -    
Newbuilding Credit Facility     77,841     77,841     -    
2013 Credit Facility     384,523     419,923     94,100   (2)
K-Sure Credit Facility     197,160     236,560     221,700   (3)
KEXIM Credit Facility     399,300     429,600     -    
Senior Unsecured Notes     105,500     105,500     -    
Convertible Senior Notes     360,000     360,000     -   (4)
Total   $ 1,674,691   $ 1,773,730   $ 315,800    
           
(1) A repayment of $6.1 million was made in February 2015 in connection with the sale of Venice, which is expected to close in early March 2015. 
(2) Availability can be used to finance the lesser of 60% of the contract price for a qualifying newbuilding vessel or such vessel's fair market value at the date of drawdown.
(3) Availability can be used to finance the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel specified in the agreement. 
(4) As of December 31, 2014, $56.0 million of this amount has been attributed to the conversion feature of the Convertible Senior Notes and recorded within additional paid in capital on the consolidated balance sheet. 
(5) We are currently in discussions to finance the four LR2 newbuildings that we agreed to purchase in December 2014. We expect to have agreements on the financing for these vessels before the end of the first quarter of 2015. The four vessels are scheduled to be delivered in 2016.
   

Newbuilding Program

During the fourth quarter of 2014, the Company made $454.1 million of installment payments on its newbuilding vessels. This amount includes an aggregate of $94.2 million of final installment payments made to the shipyards in connection with four vessels that were delivered in early January 2015. 

The Company currently has 16 newbuilding vessel orders with HMD, SPP, HSHI, DSME, DHSC, and Sungdong Shipbuilding & Marine Engineering Co., Ltd ("SSME") (eight MRs and eight LR2s). The estimated first quarter of 2015 and future payments are as follows*:

         
    $ in millions    
Q1 2015 - installment payments made     123.3    
Q1 2015 - remaining installment payments     75.2    
Q2 2015     258.9    
Q3 2015     27.5    
Q4 2015     24.8    
Q1 2016     52.1    
Q2 2016     44.0    
Q3 2016     29.6    
           
Total   $ 635.4   million
           

*These are estimates only and are subject to change as construction progresses. 

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

For the three months ended December 31, 2014, the Company recorded net income of $0.5 million compared to net income of $5.8 million for the three months ended December 31, 2013. The following were the significant changes between the two periods:

  • Time charter equivalent, or TCE revenue, a non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters, and pool charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended December 31, 2014 and 2013:

       
    For the three months ended December 31,  
    2014     2013  
In thousands of U.S. dollars                
Vessel revenue   $ 125,738     $ 53,367  
Voyage expenses     (2,106 )     (1,064 )
TCE revenue   $ 123,632     $ 52,303  
                 
  • TCE revenue increased $71.3 million to $123.6 million. This increase was driven by an increase in the average number of operating vessels (owned and time chartered-in) to 72.8 from 47.2 for the three months ended December 31, 2014 and 2013, respectively, along with an increase in time charter equivalent revenue per day to $18,664 per day from $12,080 per day for the three months ended December 31, 2014 and 2013, respectively (see the breakdown of daily TCE averages below). The Company experienced quarter over quarter improvements in all vessel classes. This was particularly driven by the Atlantic basin trade as U.S. Gulf Coast refinery utilization increased during the quarter, driving MR rates to recent highs. Additionally, LR2 and LR1 strength was driven by an increase in exports of refined products out of the Middle East as Saudi Arabia's Yanbu refinery began operations in 2014. 

  • Vessel operating costs increased $18.5 million to $31.1 million from $12.6 million for the three months ended December 31, 2014 and 2013, respectively. This increase was primarily driven by an increase in the Company's owned fleet to an average of 50.8 vessels from 19.0 vessels for the three months ended December 31, 2014 and 2013, respectively. The increase was offset by an overall decrease in vessel operating costs per day to $6,662 per day from $7,071 per day for the three months ended December 31, 2014 and 2013, respectively (see the breakdown of daily TCE averages below).

  • Charterhire expense decreased $6.4 million to $29.8 million from $36.2 million for the three months ended December 31, 2014 and 2013, respectively. This decrease was driven by a decrease in the Company's time chartered-in fleet to an average of 22.0 vessels from 28.2 vessels for the three months ended December 31, 2014 and 2013, respectively.

  • Depreciation expense increased $10.8 million to $17.7 million from $6.9 million for the three months ended December 31, 2014 and 2013, respectively. This increase was the result of an increase in the average number of owned vessels to 50.8 from 19.0 for the three months ended December 31, 2014 and 2013, respectively.

  • General and administrative expenses increased $2.6 million to $13.8 million from $11.2 million for the three months ended December 31, 2014 and 2013, respectively. This increase was driven by a $1.3 million increase in the amortization of restricted stock (non-cash) and an overall increase in other general and administrative expenses due to the significant growth in the Company's fleet. 

  • The write down of vessels held for sale and loss from sale of vessels decreased $17.2 million to $4.0 million from $21.2 million for the three months ended December 31, 2014 and 2013, respectively. During December 2014, we recognized an aggregate write-down of $4.0 million resulting from the designation of STI Harmony and STI Heritage as held for sale. During December 2013, we recognized a write-down of $21.2 million resulting from the designation of four vessels (Senatore, Noemi, Venice and STI Spirit) as held for sale. 

  • Gain on sale of VLGCs of $41.4 million for the three months ended December 31, 2013, relates to the gain recorded as a result of our contribution of 11 VLGCs under construction and $1.9 million in cash, to Dorian in exchange for 30% of Dorian's then outstanding shares.

  • The write down for our investment in Dorian relates to the change in the accounting method from the equity method to the available for sale method on October 29, 2014, which is the date we lost significant influence when Robert Bugbee, our President, resigned from Dorian's board of directors. As a result of the change in accounting methods, we remeasured our investment in Dorian to its fair market value on October 29, 2014, which resulted in a write down of $13.9 million, and we will no longer record our share of earnings from Dorian ("share of income from associate") in the Consolidated Statement of Profit or Loss.

  • Financial expenses increased $12.8 million to $13.2 million from $0.4 million primarily as a result in an increase in the Company's debt balance for the three months ended December 31, 2014 and 2013, respectively. Total debt outstanding, net of deferred financing fees, was $1.6 billion at December 31, 2014 compared to $167.1 million at December 31, 2013.

   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Statement of Profit or Loss  
(unaudited)  
   
  For the three months ended December 31,     For the year ended December 31,  
In thousands of U.S. dollars except per share and share data 2014     2013     2014     2013  
Revenue                              
  Vessel revenue $ 125,738     $ 53,367     $ 342,807     $ 207,580  
                               
Operating expenses                              
  Vessel operating costs   (31,140 )     (12,569 )     (78,823 )     (40,204 )
  Voyage expenses   (2,106 )     (1,064 )     (7,533 )     (4,846 )
  Charterhire   (29,834 )     (36,197 )     (139,168 )     (115,543 )
  Depreciation   (17,721 )     (6,930 )     (42,617 )     (23,595 )
  General and administrative expenses   (13,830 )     (11,216 )     (48,129 )     (25,788 )
  Write down of vessels held for sale and loss from sales of vessels   (3,978 )     (21,187 )     (3,978 )     (21,187 )
  Gain on sale of VLGCs   -       41,375       -       41,375  
  Gain on sale of VLCCs   -       -       51,419       -  
  Gain on sale of Dorian shares   -       -       10,924       -  
  Write down of investment in Dorian   (13,895 )     -       (13,895 )     -  
  Total operating expenses   (112,504 )     (47,788 )     (271,800 )     (189,788 )
Operating income   13,234       5,579       71,007       17,792  
Other (expense) and income, net                              
  Financial expenses   (13,216 )     (383 )     (20,770 )     (2,705 )
  Realized gain on derivative financial instruments   -       (22 )     17       3  
  Unrealized gain on derivative financial instruments   77       82       264       567  
  Financial income   32       197       203       1,147  
  Share of income from associate   438       369       1,473       369  
  Other expenses, net   (70 )     (51 )     (103 )     (158 )
  Total other expense, net   (12,739 )     192       (18,916 )     (777 )
Net income $ 495     $ 5,771     $ 52,091     $ 17,015  
                               
Earnings per share                              
                               
  Basic $ 0.00     $ 0.03     $ 0.30     $ 0.12  
  Diluted $ 0.00     $ 0.03     $ 0.30     $ 0.11  
   
   
   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Balance Sheet  
(unaudited)  
   
  As of  
In thousands of U.S. dollars December 31, 2014     December 31, 2013  
Assets              
Current assets              
Cash and cash equivalents $ 116,143     $ 78,845  
Accounts receivable   76,554       72,542  
Prepaid expenses and other current assets   2,420       2,277  
Inventories   6,075       2,857  
Vessels held for sale   70,865       82,649  
Total current assets   272,057       239,170  
Non-current assets              
Vessels and drydock   1,971,878       530,270  
Vessels under construction   406,524       649,526  
Other assets   23,728       17,907  
Investment in associate   -       209,803  
Available for sale investment   130,456       -  
Total non-current assets   2,532,586       1,407,506  
Total assets $ 2,804,643     $ 1,646,676  
               
Current liabilities              
Current portion of long term debt   87,163       10,453  
Debt related to vessels held for sale   32,932       21,397  
Accounts payable   14,929       20,696  
Accrued expenses   55,137       7,251  
Derivative financial instruments   205       689  
Total current liabilities   190,366       60,486  
Non-current liabilities              
Long term debt   1,451,427       135,279  
Derivative financial instruments   -       188  
Total non-current liabilities   1,451,427       135,467  
Total liabilities   1,641,793       195,953  
               
Shareholders' equity              
Issued, authorized and fully paid in share capital:              
  Share capital   2,033       1,999  
  Additional paid in capital   1,550,956       1,536,945  
Treasury shares   (351,283 )     (7,938 )
Accumulated other comprehensive loss   (10,878 )     (212 )
Accumulated deficit   (27,978 )     (80,071 )
Total shareholders' equity   1,162,850       1,450,723  
Total liabilities and shareholders' equity $ 2,804,643     $ 1,646,676  
   
   
   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Statement of Cash Flows  
(unaudited)  
   
  For the year ended December 31,  
In thousands of U.S. dollars 2014     2013  
Operating activities              
Net income $ 52,091     $ 17,015  
Gain on sale of VLGCs   -       (41,375 )
Gain on sale of VLCCs   (51,419 )     -  
Gain on sale of Dorian shares   (10,924 )     -  
Write down of investment in Dorian   13,895       -  
Write down of vessels held for sale and loss from sales of vessels   3,978       21,187  
Depreciation   42,617       23,595  
Amortization of restricted stock   29,726       13,142  
Amortization of deferred financing fees   4,834       332  
Straight-line adjustment for charterhire expense   3       53  
Share of income from associate   (1,473 )     (369 )
Unrealized gain on derivative financial instruments   (264 )     (567 )
Amortization of acquired time charter contracts   478       -  
Accretion of convertible senior notes   5,330       -  
    88,872       33,013  
Changes in assets and liabilities:              
Drydock payments   (1,290 )     (1,469 )
Increase in inventories   (3,218 )     (687 )
Increase in accounts receivable   (4,012 )     (36,104 )
Increase in prepaid expenses and other current assets   (154 )     (823 )
Increase in other assets   (2,901 )     (1,849 )
Increase / (decrease) in accounts payable   6,471       (2,021 )
Increase in accrued expenses   43,347       4,285  
Interest rate swap termination payment   (274 )     -  
    37,969       (38,668 )
Net cash inflow / (outflow) from operating activities   126,841       (5,655 )
Investing activities              
Acquisition of vessels and payments for vessels under construction   (1,404,829 )     (767,448 )
Proceeds from disposal of vessels   213,670       -  
VLGC installment payments   -       (83,070 )
Investment in associate   -       (84,583 )
Net cash outflow from investing activities   (1,191,159 )     (935,101 )
Financing activities              
Debt repayments   (74,674 )     (28,410 )
Issuance of debt   1,219,784       52,050  
Debt issuance costs   (45,670 )     (14,693 )
Proceeds from issuance of convertible senior notes   360,000       -  
Convertible senior notes issuance costs   (10,993 )     -  
Gross proceeds from issuance of common stock   -       983,537  
Equity issuance costs   (42 )     (35,695 )
Dividends paid   (70,495 )     (24,353 )
Repurchase of common stock   (276,294 )     -  
Net cash inflow from financing activities   1,101,616       932,436  
Increase / (decrease) in cash and cash equivalents   37,298       (8,320 )
Cash and cash equivalents at January 1,   78,845       87,165  
Cash and cash equivalents at December 31, $ 116,143     $ 78,845  
               
               
               
Scorpio Tankers Inc. and Subsidiaries
Other operating data for the three months and year ended December 31, 2014 and 2013
(unaudited)
 
 
  For the three months ended December 31,     For the year ended December 31,
  2014   2013     2014   2013
Adjusted EBITDA(1) (in thousands of U.S. dollars) $ 57,061   $ (681 )   $ 102,342   $ 34,852
                         
Average Daily Results                        
Time charter equivalent per day(2)   18,664     12,080       15,935     14,369
Vessel operating costs per day(3)   6,662     7,071       6,802     6,781
                         
Aframax/LR2                        
TCE per revenue day (2)   23,561     12,582       18,621     12,718
Vessel operating costs per day(3)   6,520     9,402       6,789     8,203
                         
Panamax/LR1                        
TCE per revenue day (2)   17,571     10,194       16,857     12,599
Vessel operating costs per day(3)   7,705     8,306       8,332     7,756
                         
MR                        
TCE per revenue day (2)   18,619     13,784       15,297     16,546
Vessel operating costs per day(3)   6,621     6,340       6,580     6,069
                         
Handymax                        
TCE per revenue day (2)   15,705     9,618       14,528     12,862
Vessel operating costs per day(3)   6,563     7,332       6,704     6,852
                         
Fleet data                        
                         
Average number of owned vessels   50.8     19.0       31.6     15.9
Average number of time chartered-in vessels   22.0     28.2       26.3     22.9
                         
Drydock                        
                         
Expenditures for drydock (in thousands of U.S. dollars)   -     -     $ 1,290     -
   
(1) See Non-GAAP Measure section below
(2) Freight rates are commonly measured in the shipping industry in terms of time charter equivalent per day (or TCE per day), which is calculated by subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (time charter equivalent revenues) by the number of revenue days in the period. Revenue days are the number of days the vessel is owned less the number of days the vessel is off-hire for drydock and repairs.
(3) Vessel operating costs per day represent vessel operating costs excluding non-recurring expenses (for example insurance deductible expenses for repairs) divided by the number of days the vessel is owned during the period.
   
   
   
Fleet List as of March 2, 2015
 
  Vessel Name   Year Built   DWT   Ice class   Employment   Vessel type      
  Owned vessels                          
1 STI Highlander   2007   37,145   1A   SHTP (1)   Handymax      
2 STI Brixton   2014   38,000   1A   SHTP (1)   Handymax      
3 STI Comandante   2014   38,000   1A   SHTP (1)   Handymax      
4 STI Pimlico   2014   38,000   1A   SHTP (1)   Handymax      
5 STI Hackney   2014   38,000   1A   SHTP (1)   Handymax      
6 STI Acton   2014   38,000   1A   SHTP (1)   Handymax      
7 STI Fulham   2014   38,000   1A   SHTP (1)   Handymax      
8 STI Camden   2014   38,000   1A   SHTP (1)   Handymax      
9 STI Battersea   2014   38,000   1A   SHTP (1)   Handymax      
10 STI Wembley   2014   38,000   1A   SHTP (1)   Handymax      
11 STI Finchley   2014   38,000   1A   SHTP (1)   Handymax      
12 STI Clapham   2014   38,000   1A   SHTP (1)   Handymax      
13 STI Poplar   2014   38,000   1A   Spot   Handymax      
14 STI Hammersmith   2015   38,000   1A   Spot   Handymax      
15 STI Rotherhithe   2015   38,000   1A   Spot   Handymax      
16 STI Amber   2012   52,000   -   SMRP (4)   MR      
17 STI Topaz   2012   52,000   -   SMRP (4)   MR      
18 STI Ruby   2012   52,000   -   SMRP (4)   MR      
19 STI Garnet   2012   52,000   -   SMRP (4)   MR      
20 STI Onyx   2012   52,000   -   SMRP (4)   MR      
21 STI Sapphire   2013   52,000   -   SMRP (4)   MR      
22 STI Emerald   2013   52,000   -   SMRP (4)   MR      
23 STI Beryl   2013   52,000   -   SMRP (4)   MR      
24 STI Le Rocher   2013   52,000   -   SMRP (4)   MR      
25 STI Larvotto   2013   52,000   -   SMRP (4)   MR      
26 STI Fontvieille   2013   52,000   -   SMRP (4)   MR      
27 STI Ville   2013   52,000   -   SMRP (4)   MR      
28 STI Duchessa   2014   52,000   -   SMRP (4)   MR      
29 STI Opera   2014   52,000   -   SMRP (4)   MR      
30 STI Texas City   2014   52,000   -   Time Charter (5)   MR      
31 STI Meraux   2014   52,000   -   Time Charter (6)   MR      
32 STI Chelsea   2014   52,000   -   SMRP (4)   MR      
33 STI Lexington   2014   52,000   -   SMRP (4)   MR      
34 STI San Antonio   2014   52,000   -   Time Charter (6)   MR      
35 STI Venere   2014   52,000   -   SMRP (4)   MR      
36 STI Virtus   2014   52,000   -   SMRP (4)   MR      
37 STI Powai   2014   52,000   -   SMRP (4)   MR      
38 STI Aqua   2014   52,000   -   SMRP (4)   MR      
39 STI Dama   2014   52,000   -   SMRP (4)   MR      
40 STI Olivia   2014   52,000   -   SMRP (4)   MR      
41 STI Mythos   2014   52,000   -   SMRP (4)   MR      
42 STI Benicia   2014   52,000   -   Time Charter (6)   MR      
43 STI Regina   2014   52,000   -   SMRP (4)   MR      
44 STI St. Charles   2014   52,000   -   SMRP (4)   MR      
45 STI Mayfair   2014   52,000   -   SMRP (4)   MR      
46 STI Yorkville   2014   52,000   -   SMRP (4)   MR      
47 STI Milwaukee   2014   52,000   -   SMRP (4)   MR      
48 STI Battery   2014   52,000   -   SMRP (4)   MR      
49 STI Soho   2014   52,000   -   Spot   MR      
50 STI Tribeca   2015   52,000   -   Spot   MR      
51 STI Gramercy   2015   52,000   -   Spot   MR      
52 STI Bronx   2015   52,000   -   Spot   MR      
53 STI Harmony   2007   73,919   1A   SPTP (2)   LR1      
54 STI Heritage   2008   73,919   1A   SPTP (2)   LR1      
55 Venice   2001   81,408   1C   SPTP (2)   Post-Panamax      
56 STI Elysees   2014   109,999   -   SLR2P (3)   LR2      
57 STI Madison   2014   109,999   -   SLR2P (3)   LR2      
58 STI Park   2014   109,999   -   SLR2P (3)   LR2      
59 STI Orchard   2014   109,999   -   SLR2P (3)   LR2      
60 STI Sloane   2014   109,999   -   SLR2P (3)   LR2      
61 STI Broadway   2014   109,999   -   SLR2P (3)   LR2      
62 STI Condotti   2014   109,999   -   SLR2P (3)   LR2      
63 STI Rose   2015   109,999   -   SLR2P (3)   LR2      
64 STI Veneto   2015   109,999   -   SLR2P (3)   LR2      
65 STI Alexis   2015   109,999   -   SLR2P (3)   LR2      
                             
  Total owned DWT       3,822,381                  
                                 
  Vessel Name   Year Built   DWT   Ice class   Employment   Vessel type   Daily Base Rate   Expiry (7)  
  Time chartered-in vessels                          
66 Kraslava   2007   37,258   1B   SHTP (1)   Handymax   $13,650   18-May-15  
67 Krisjanis Valdemars   2007   37,266   1B   SHTP (1)   Handymax   $13,650   14-Apr-15 (8)
68 Jinan   2003   37,285   -   SHTP (1)   Handymax   $12,600   28-Apr-15  
69 Iver Prosperity   2007   37,412   -   SHTP (1)   Handymax   $12,500   03-Mar-16 (9)
70 Histria Azure   2007   40,394   -   SHTP (1)   Handymax   $13,550   04-Apr-15  
71 Histria Coral   2006   40,426   -   SHTP (1)   Handymax   $13,550   17-Jul-15  
72 Histria Perla   2005   40,471   -   SHTP (1)   Handymax   $13,550   15-Jul-15  
73 Targale   2007   49,999   -   SMRP (4)   MR   $14,850   17-May-15 (10)
74 Nave Orion   2013   49,999   -   SMRP (4)   MR   $14,300   25-Mar-15 (11)
75 Gan-Trust   2013   51,561   -   SMRP (4)   MR   $16,250   06-Jan-16 (12)
76 SN Federica   2003   72,344   -   SPTP (2)   LR1   $11,250   15-May-15 (13)
77 SN Azzura   2003   72,344   -   SPTP (2)   LR1   $13,600   31-Mar-15  
78 King Douglas   2008   73,666   -   SPTP (2)   LR1   $15,000   08-Nov-15  
79 Hellespont Progress   2006   73,728   -   SPTP (2)   LR1   $15,000   18-Mar-16 (14)
80 FPMC P Eagle   2009   73,800   -   SPTP (2)   LR1   $14,525   09-Sep-15  
81 FPMC P Hero   2011   99,995   -   SLR2P (3)   LR2   $15,500   02-May-15  
82 Swarna Jayanti   2010   104,895   -   SLR2P (3)   LR2   $15,000   11-Sep-15 (15)
83 Densa Crocodile   2015   105,408   -   SLR2P (3)   LR2   $21,050   07-Feb-16 (16)
84 Densa Alligator   2013   105,708   -   SLR2P (3)   LR2   $17,550   17-Sep-15  
85 Khawr Aladid   2006   106,003   -   SLR2P (3)   LR2   $15,400   11-Jul-15  
86 Fair Seas   2008   115,406   -   SLR2P (3)   LR2   $17,500   10-Mar-15  
                                 
  Total time chartered-in DWT   1,425,368                      
                                 
  Newbuildings currently under construction              
                           
  Vessel Name   Yard   DWT   Ice class   Vessel type              
                                 
87 Hull 2474 - TBN STI Pontiac   HMD (17) 52,000   -   MR              
88 Hull 2490 - TBN STI Osceola   HMD (17) 52,000   -   MR              
89 Hull 2492 - TBN STI Notting Hill   HMD (17) 52,000   -   MR              
90 Hull 2493 - TBN STI Westminster   HMD (17) 52,000   -   MR              
91 Hull 2475 - TBN STI Seneca   HMD (17) 52,000   -   MR              
92 Hull S1169 - TBN STI Manhattan   SPP (18) 52,000   -   MR              
93 Hull S1170 - TBN STI Queens   SPP (18) 52,000   -   MR              
94 Hull S1168 - TBN STI Brooklyn   SPP (18) 52,000   -   MR              
95 Hull S715 - TBN STI Oxford   HSHI (19) 109,999   -   LR2              
96 Hull S716 - TBN STI Connaught   HSHI (19) 109,999   -   LR2              
97 Hull 5398 - TBN STI Winnie   DSME (20) 109,999   -   LR2              
98 Hull 5399 - TBN STI Lauren   DSME (20) 109,999   -   LR2              
99 Hull S3120 - TBN STI Selatar   SSME (21) 109,999   -   LR2              
100 Hull S3121 - TBN STI Rambla   SSME (21) 109,999   -   LR2              
101 Hull 5003 - TBN STI Grace   DHSC (22) 109,999   -   LR2              
102 Hull 5004 - TBN STI Jermyn   DHSC (22) 109,999   -   LR2              
                                 
                                 
  Total newbuilding product tankers DWT 1,295,992                      
                                 
                                 
  Total Fleet DWT       6,543,741                      
   
(1) This vessel operates in or is expected to operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP is operated by Scorpio Commercial Management (SCM). SHTP and SCM are related parties to the Company.
(2) This vessel operates in or is expected to operate in the Scorpio Panamax Tanker Pool (SPTP). SPTP is operated by SCM. SPTP is a related party to the Company.
(3) This vessel operates in or is expected to operate in the Scorpio LR2 Pool (SLR2P). SLR2P is operated by SCM. SLR2P is a related party to the Company.
(4) This vessel operates in or is expected to operate in the Scorpio MR Pool (SMRP). SMRP is operated by SCM. SMRP is a related party to the Company.
(5) This vessel is on a time charter agreement for two years, which also contains a 50% profit sharing provision whereby we split all of the vessel's profits above the daily base rate with the charterer.
(6) This vessel is on a time charter agreement for one year, which also contains a 50% profit sharing provision whereby we split all of the vessel's profits above the daily base rate with the charterer.
(7) Redelivery from the charterer is plus or minus 30 days from the expiry date.
(8) The agreement also contains a 50% profit and loss sharing provision whereby we split all of the vessel's profits and losses above or below the daily base rate with the vessel's owner.
(9) In September 2014, we declared an option to extend the charter for an additional year at $13,500 per day effective March 3, 2015.
(10) We have options to extend the charter for up to two consecutive one year periods at $15,200 per day and $16,200 per day, respectively.
(11) We have an option to extend the charter for an additional year at $15,700 per day.
(12) The rate for the first year of this agreement was $15,750 per day, the rate for the second year is $16,250 per day, and the rate for the third year is $16,750 per day. We have options to extend the charter for up to two consecutive one year periods at $17,500 per day and $18,000 per day, respectively.
(13) We have an option to extend the charter for an additional year at $12,500 per day. We have also entered into an agreement with the vessel's owner whereby we split all of the vessel's profits above the daily base rate.
(14) In February 2015, we declared an option to extend the charter for an additional year at $16,250 per day effective March 18, 2015. We have an option to extend the charter for an additional year at $17,250 per day.
(15) In February 2015, we declared an option to extend the charter for an additional six months at $16,250 per day effective March 11, 2015.
(16) This vessel was delivered in February 2015. We have an option to extend the charter for an additional year at $22,600 per day.
(17) These newbuilding vessels are being constructed at HMD (Hyundai Mipo Dockyard Co. Ltd. of South Korea). One vessel is expected to be delivered in the first quarter and four vessels in the second quarter of 2015.
(18) These newbuilding vessels are being constructed at SPP (SPP Shipbuilding Co., Ltd. of South Korea). One vessel is expected to be delivered in the first quarter and two vessels in the second quarter of 2015.
(19) These newbuilding vessels are being constructed at HSHI (Hyundai Samho Heavy Industries Co., Ltd). These two vessels are expected to be delivered in the second quarter of 2015.
(20) These newbuilding vessels are being constructed at DSME (Daewoo Shipbuilding and Marine Engineering). One vessel is expected to be delivered in the first quarter and one in the second quarter of 2015.
(21) These newbuilding vessels are being constructed at SSME (Sungdong Shipbuilding & Marine Engineering Co., Ltd). These two vessels are expected to be delivered in the second and third quarter of 2016.
(22) These newbuilding vessels are being constructed at DHSC (Daehan Shipbuilding Co. Ltd). These two vessels are expected to be delivered in the first and second quarter of 2016.
   

Business Strategy, Dividend Policy, and Stock Buyback Program

Business Strategy

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

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

Dividend Policy

The declaration and payment of dividends is subject at all times to the discretion of the Company's board of directors. The timing and amount of dividends, if any, depends on the Company's earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in the loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.

The Company paid the following dividends during 2014:

  • On December 12, 2014, the Company paid a quarterly cash dividend on the Company's common stock of $0.12 per share to all shareholders as of November 25, 2014 (the record date).
  • On September 10, 2014, the Company paid a quarterly cash dividend on its common stock of $0.10 per share to all shareholders as of August 22, 2014 (the record date). 
  • On June 12, 2014, the Company paid a quarterly cash dividend on its common stock of $0.09 per share to all shareholders as of May 27, 2014 (the record date). 
  • On March 26, 2014, the Company paid a quarterly cash dividend on its common stock of $0.08 per share to all shareholders as of March 11, 2014 (the record date).

Share Buyback Program

During 2014, the Company acquired an aggregate of 37,579,136 of its common shares that are being held as treasury shares, which include (i) 19,951,536 common shares that were purchased in the open market at an average price of $9.09 per share, (ii) 7,500,000 common shares that were acquired in exchange for 3,422,665 shares in Dorian and (iii) 10,127,600 common shares that were acquired in conjunction with the Company's offering of $360 million of Convertible Senior Notes due 2019 in June 2014.

During 2015, the Company acquired an aggregate of 746,639 of its common shares that are being held as treasury shares at an average price of $7.91. There are 163,827,903 shares outstanding as of March 2, 2015.

The Company has $69.3 million remaining under its stock buyback program as of the date of this press release. The Company expects to repurchase these shares in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any shares.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 65 tankers (ten LR2 tankers, two LR1 tankers, 15 Handymax tankers, 37 MR tankers, and one post-Panamax tanker) with an average age of 1.3 years, time charters-in 21 product tankers (six LR2, five LR1, three MR and seven Handymax tankers), and has contracted for 16 newbuilding product tankers (eight MR and eight LR2), three of which are expected to be delivered in the first quarter of 2015, nine of which are expected to be delivered in the second quarter of 2015 and the remaining four vessels throughout 2016. The Company has also reached agreements to sell three vessels of its older vessels (two LR1 tankers and one post-Panamax tanker). The Company also owns approximately 16% of Dorian LPG Ltd. Additional information about the Company is available at the Company's website www.scorpiotankers.com, which is not a part of this press release.

Non-GAAP Measures

This press release describes adjusted net income and adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. "Non-GAAP" measure). The Non-GAAP measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.

Adjusted net income / (loss)

     
  For the three months ended December 31,  
  2014     2013  
In thousands of U.S. dollars except per share and share data Amount     Per share     Amount     Per share  
  Net income $ 495     $ 0.00     $ 5,771     $ 0.03  
  Adjustments:                              
    Unrealized gain on derivative financial instruments   (77 )     (0.00 )     (82 )     (0.00 )
    Write down of vessels held for sale   3,978       0.03       21,187       0.12  
    Gain on sale of VLGCs   -       -       (41,375 )     (0.23 )
    Write down of investment in Dorian   13,895       0.09       -       -  
  Total adjustments   17,796       0.12       (20,270 )     (0.11 )
  Adjusted net income / (loss) $ 18,291       0.12     $ (14,499 )   $ (0.08 )
                               
  For the year ended December 31,  
  2014     2013  
  Amount     Per share     Amount     Per share  
  Net income $ 52,091     $ 0.30     $ 17,015     $ 0.12  
  Adjustments:                              
    Deferred financing fees write-off - STI Spirit   317       0.00       -       -  
    Unrealized gain on derivative financial instruments   (264 )     (0.00 )     (567 )     (0.00 )
    Write down of vessels held for sale   3,978       0.02       21,187       0.14  
    Gain on sale of VLGCs   -       -       (41,375 )     (0.28 )
    Gain on sale of VLCCs   (51,419 )     (0.30 )     -       -  
    Gain on sale of Dorian shares   (10,924 )     (0.06 )     -       -  
    Write down of investment in Dorian   13,895       0.08       -       -  
  Total adjustments   (44,417 )     (0.26 )     (20,755 )     (0.14 )
  Adjusted net income / (loss) $ 7,674     $ 0.04     $ (3,740 )   $ (0.03 )
                                 

Adjusted EBITDA

           
  For the three months ended December 31,     For the year ended December 31,  
In thousands of U.S. dollars 2014     2013     2014     2013  
  Net income $ 495     $ 5,771     $ 52,091     $ 17,015  
  Financial expenses   13,216       383       20,770       2,705  
  Unrealized gain on derivative financial instruments   (77 )     (82 )     (264 )     (567 )
  Financial income   (32 )     (197 )     (203 )     (1,147 )
  Depreciation   17,721       6,930       42,617       23,595  
  Depreciation component of our net profit from associate   206       297       2,075       297  
  Amortization of restricted stock   7,659       6,405       29,726       13,142  
  Write down of vessels held for sale   3,978       21,187       3,978       21,187  
  Gain on sale of VLGCs   -       (41,375 )     -       (41,375 )
  Gain on sale of VLCCs   -       -       (51,419 )     -  
  Gain on sale of Dorian shares   -       -       (10,924 )     -  
  Write down of investment in Dorian   13,895       -       13,895       -  
  Adjusted EBITDA $ 57,061     $ (681 )   $ 102,342     $ 34,852  
                                 

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.