SOURCE: Scorpio Tankers Inc.

Scorpio Tankers Inc.

July 28, 2014 08:27 ET

Scorpio Tankers Inc. Announces Financial Results for the Second Quarter of 2014, Newbuilding Vessel Deliveries, Declaration of a Quarterly Dividend, and New Stock Buyback Plan

MONACO--(Marketwired - Jul 28, 2014) - Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers," or the "Company") today reported its results for the three and six months ended June 30, 2014.

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

For the three months ended June 30, 2014, the Company had a net loss of $0.6 million, or $0.00 basic and diluted loss per share. The Company's adjusted net loss was $11.2 million (see Non-GAAP Measure section below), or $0.06 basic and diluted loss per share, which excludes (i) 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 LPG Ltd ("Dorian"), (ii) 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 (iii) an unrealized gain on derivative financial instruments of $64,769, or $0.00 per share. For the three months ended June 30, 2013, the Company had net income of $4.0 million, or $0.03 basic and diluted earnings per share. The Company's adjusted net income was $3.6 million (see Non-GAAP Measure section below), or $0.03 basic and diluted earnings per share, which excludes a $0.3 million, or $0.00 per share unrealized gain on derivative financial instruments.

Results for the six months ended June 30, 2014 and 2013

For the six months ended June 30, 2014, the Company had net income of $52.8 million, or $0.28 basic and diluted earnings per share. The Company's adjusted net loss was $9.4 million (see Non-GAAP Measure section below), or $0.05 basic and diluted loss per share, which excludes (i) a gain of $51.4 million, or $0.27 per share, resulting from the previously announced sales of seven Very Large Crude Carriers ("VLCCs") under construction, (ii) a gain of $10.9 million, or $0.06 per share, resulting from the previously announced acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian, (iii) a write-off of $0.3 million, or $0.00 per share, for deferred financing fees relating to the repayment of the STI Spirit Credit Facility in April 2014 and (iv) an unrealized gain on derivative financial instruments of $0.1 million or $0.00 per share. 

For the six months ended June 30, 2013, the Company had net income of $10.6 million or $0.09 basic and diluted earnings per share. The Company's adjusted net income was $10.2 million (see Non-GAAP Measure section below), or $0.09 basic and diluted earnings per share, excluding a $0.4 million, or $0.00 per share unrealized gain on derivative financial instruments.

Declaration of Dividend

On July 28, 2014, the Scorpio Tankers' board of directors declared a quarterly cash dividend of $0.10 per share, payable on September 10, 2014 to all shareholders as of August 22, 2014 (the record date). As of July 25, 2014, there are 172,206,301 shares outstanding.

New $150 Million Stock Buyback Program

On July 28, 2014, the Board of Directors approved a new stock buyback program with authorization to purchase up to $150 million of shares of the Company's common stock. This program replaces the Company's stock buyback program that was previously announced in June 2014, which is being terminated effective immediately.

During 2014, the Company has acquired 28,954,246 of its common shares that are being held as treasury shares, which include (i) 11,326,646 common shares that were purchased in the open market at an average price of $9.35 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 (as further described below).

The Company expects to repurchase these shares in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any shares.

Summary of Recent and Second Quarter Significant Events:

  • Took delivery of four vessels (one LR2, two MR, and one ice-class 1A Handymax) in July 2014 and eight vessels (six MR and two ice-class 1A Handymax) during the second quarter of 2014. 
  • Issued $360 million of 2.375% Convertible Senior Notes due June 2019 in a private offering to qualified institutional buyers. Used a portion of the proceeds to make a concurrent repurchase of 10,127,600 shares of the Company's common stock. 
  • Issued $53.8 million of 6.75% Senior Unsecured Notes due May 2020.
  • Participated in an offering of $125,250,000 in aggregate principal amount of floating rate guaranteed notes due 2019 (the "KEXIM Notes") in July 2014. The KEXIM Notes will reduce KEXIM's funding obligations under the Company's KEXIM Credit Facility, and reduce the Company's borrowing costs under such facility by 1.55% per year.
  • Exchanged 3,422,665 shares of Dorian for 7,500,000 common shares of the Company, which resulted in a gain of $10.9 million, or $0.06 per share. 
  • Declared and paid a quarterly cash dividend on the Company's common stock of $0.09 per share in June 2014.
  • Closed on the sale of two vessels, Senatore and STI Spirit, in April 2014.

Vessel deliveries

The Company has taken delivery of 12 vessels under its Newbuilding Program since April 2014. These deliveries are summarized as follows:

  • STI Powai, an MR product tanker, was delivered in July 2014 from Hyundai Mipo Dockyard of South Korea ("HMD"). Upon delivery, this vessel began a time charter for up to 120 days at approximately $18,000.
  • STI Aqua, an MR product tanker, was delivered in July 2014 from SPP Shipyard of South Korea ("SPP"). Upon delivery, this vessel began a time charter for up to 120 days at approximately $18,000 per day.
  • STI Pimlico, a Handymax Ice Class 1A product tanker, was delivered from HMD in July 2014. Upon delivery, this vessel began a time charter for up to 120 days at approximately $15,000 per day.
  • STI Elysees, an LR2 product tanker, was delivered from Hyundai Samho Heavy Industries ('HSHI') in July 2014.
  • STI Brixton, a Handymax Ice Class 1A product tanker, was delivered in June 2014 from HMD. Upon delivery, this vessel began a time charter for up to 120 days at approximately $15,000 per day.
  • STI Venere and STI Virtus, MR product tankers, were delivered in June 2014 from HMD and SPP, respectively. Upon delivery, each vessel began a time charter for up to 120 days at approximately $18,000 per day.
  • STI Comandante, a Handymax Ice Class 1A product tanker, was delivered in May 2014 from HMD. Upon delivery, this vessel began a time charter for up to 120 days at approximately $15,000 per day.
  • STI Chelsea and STI Lexington, MR product tankers, were delivered in May 2014 from HMD. Upon delivery, these vessels began time charters for up to 120 days at approximately $18,000 per day.
  • STI San Antonio, and STI Meraux, MR product tankers, were delivered in May and April 2014, respectively, from SPP. After delivery, each vessel began a one year time charter at a rate level consistent with current one year time charter contracts which includes a profit sharing mechanism whereby earnings in excess of the base time charter rate are split between the Company and charterer.

Issuance of $360.0 million of 2.375% Convertible Senior Notes

In June 2014, the Company completed an offering of $360,000,000 in aggregate principal amount of 2.375% convertible senior notes due 2019 (the "Convertible Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). This amount includes the full exercise of the initial purchaser's option to purchase an additional $60,000,000 in aggregate principal amount of the Convertible Notes in connection with the offering. In conjunction with this offering, the Company used a portion of the net proceeds from the sale of the Convertible Notes to repurchase 10,127,600 common shares at $9.38 per share. 

The Convertible Notes bear interest at a rate of 2.375% per annum, payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2015. Upon conversion of the Convertible Notes at the option of holders in certain circumstances and during certain periods, holders will receive shares of the Company's common stock. The initial conversion rate for each $1,000 aggregate principal amount of the Convertible Notes is 82.0075 shares of common stock, equivalent to a conversion price of approximately $12.19 per share, and will be subject to adjustments described in the indenture governing the terms of the Convertible Notes.

Issuance of $53.75 million of 6.75% Senior Unsecured Notes

In May 2014, the Company completed a $50.0 million public offering of senior unsecured notes due 2020 (the "Notes"). In June 2014, the Company completed a $3.75 million public offering of the Notes when the underwriters partially exercised their option to purchase additional Notes on the same terms and conditions. The Notes mature on May 15, 2020, and may be redeemed in whole or in part at any time or from time to time after May 15, 2017. The Notes bear interest at a rate of 6.75% per year, payable quarterly on each February 15, May 15, August 15 and November 15, commencing on August 15, 2014.

KEXIM Guaranteed Notes due 2019

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

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

The proceeds from the initial sale of the KEXIM Notes were deposited into a deposit account and will be periodically distributed, subject to the satisfaction or waiver of applicable conditions, to the facility agent under the Company's KEXIM Credit Facility to finance advances to the borrowers thereunder to fund a portion of the purchase price of 18 new vessels, 10 of which are Handymax tankers and eight of which are LR2 tankers. Three ice class Handymax tankers, STI Comandante, STI Brixton and STI Pimlico, and one LR2 tanker, STI Elysees, were delivered on May 31, 2014, June 27, 2014, July 11, 2014 and July 21, 2014, respectively. The remaining 14 vessels are expected to be delivered to the respective borrowers between August 2014 and December 2014.

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

Acquisition of 7.5 Million Common Shares in Exchange for 3.4 million Shares in Dorian.

In May 2014, the Company acquired 7,500,000 of its common shares from an existing shareholder in exchange for the sale to said shareholder of 3,422,665 common shares the Company owned in Dorian in a privately negotiated transaction. As a result of the disposal of the Dorian shares, the Company recognized a gain of approximately $10.9 million during the second quarter of 2014, and its ownership in Dorian was reduced to 9.4 million shares, or approximately 16% of Dorian's total outstanding shares.

Time charter-in update

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

In June 2014, 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 $15,500 per day beginning in July 2014.

In May 2014, the Company extended the time charters on two Handymax tankers that are currently time chartered-in. The term of the each agreement is for one year at $13,550 per day beginning in July 2014.

In April 2014, the Company extended the time charter on an MR tanker that is currently time chartered-in. The term of the agreement is for one year at $14,850 per day beginning in May 2014. The Company has options to extend the charter for up to two consecutive one year periods at $15,200 per day and $16,200 per day, respectively. 

In April 2014, 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 $15,250 per day beginning in May 2014. The Company has an option to extend the charter for up to six months at $15,500 per day. 

Current Liquidity

As of July 25, 2014, the Company had $210.5 million in cash. 

Debt

2013 Credit Facility

In May and June 2014, the Company drew down $77.9 million from the 2013 Credit Facility, and as a result, STI Meraux, STI San Antonio, STI Virtus and STI Venere were placed as collateral into this facility.

In July 2014, the Company drew down $19.8 million from the 2013 Credit Facility. As a result, STI Aqua was placed as collateral into this facility.

K-Sure Credit Facility

In June 2014, the Company drew down an aggregate of $39.6 million from the K-Sure Credit Facility. As a result, STI Lexington and STI Chelsea were placed as collateral into this facility.

In July 2014, the Company drew down an aggregate of $19.8 million from the K-Sure Credit Facility. As a result, STI Powai was placed as collateral into this facility.

KEXIM Credit Facility

In June 2014, the Company drew down an aggregate of $37.5 million from the KEXIM Credit Facility. As a result, STI Comandante and STI Brixton were placed as collateral into this facility.

In July 2014, the Company drew down $18.8 million from the KEXIM Credit Facility. As a result, STI Pimlico was placed as collateral into this facility. 

STI Spirit Credit Facility

In April 2014, the Company repaid the outstanding balance under its STI Spirit Credit Facility of $21.4 million as a result of the sale of STI Spirit in April 2014. The Company wrote off $0.3 million of deferred financing fees as a result of this repayment in the second quarter of 2014. 

As of July 25, 2014, the Company's outstanding debt balance, and amount available to draw, is as follows:

         
    As of July 28, 2014    
In millions of U.S. dollars   Amount outstanding   Amount available    
2010 Revolving Credit Facility   $ 45.7   $ -    
STI Spirit Credit Facility     -     -    
2011 Credit Facility     112.9     -    
Newbuilding Credit Facility     80.8     -    
2013 Credit Facility     180.9     342.7   (1)
KEXIM Credit Facility     56.3     373.3   (2)
K-Sure Credit Facility     59.4     398.9   (2)
Senior Unsecured Debt - May 2014     53.8     -    
Convertible Senior Notes - June 2014     298.7     -   (3)
Total   $ 888.5   $ 1,114.9    
                 
(1)   Availability can be used to finance the lesser of 60% of the contract price for a qualifying newbuilding vessel and such vessel's fair market value at the date of drawdown.
(2)   Availability can be used to finance the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel specified in the agreement.
(3)   Convertible Senior Notes are shown net of the estimated value of the conversion feature of $61.3 million, which has been recorded as part of Additional paid-in capital.

Newbuilding Program

During the second quarter of 2014, the Company made $235.1 million of installment payments on its newbuilding vessels. The Company currently has 43 newbuilding vessel orders with HMD, SPP, HSHI and DSME (21 MRs, 11 Handymaxes and 11 LR2s). The estimated future payment dates and amounts are as follows*:

         
Q3 2014   $ 428.8   million**
Q4 2014     305.2    
Q1 2015     246.7    
Q2 2015     107.5    
Total   $ 1,088.2   million
           

*These are estimates only and are subject to change as construction progresses. 
**$102.8 million has been paid prior to the date of this press release. 

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

For the three months ended June 30, 2014, the Company recorded a net loss of $0.6 million compared to net income of $4.0 million in the three months ended June 30, 2013. The following were the significant changes between the two periods:

  • Time charter equivalent, or TCE revenue, a non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is included herein because it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters, and pool charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended June 30, 2014 and 2013:
       
    For the three months ended June 30,  
In thousands of U.S. dollars   2014     2013  
Vessel revenue   $ 57,445     $ 51,533  
Voyage expenses     (551 )     (1,333 )
TCE revenue   $ 56,894     $ 50,200  
                 
  • TCE revenue increased $6.7 million to $56.9 million. This increase was primarily driven by an increase in the average number of operating vessels (owned and time chartered-in) to 49.3 from 34.9 for the three months ended June 30, 2014 and 2013, respectively. This increase was offset by an overall decrease in time charter equivalent revenue per day to $12,733 per day from $15,444 per day for the three months ended June 30, 2014 and 2013, respectively (see the breakdown of daily TCE averages below). 

  • Vessel operating costs increased $5.2 million to $13.7 million from $8.5 million for the three months ended June 30, 2014 and 2013, respectively. This increase was primarily driven by an increase in the Company's owned fleet to an average of 21.5 vessels from 14.7 vessels for the three months ended June 30, 2014 and 2013, respectively. The increase was augmented by an overall increase in vessel operating costs per day to $6,960 per day from $6,262 per day for the three months ended June 30, 2014 and 2013, respectively (see the breakdown of daily TCE averages below).

  • Charterhire expense increased $9.2 million to $36.2 million from $27.0 million as a result of an increase in the average number of vessels time chartered-in to 27.8 from 20.2 for the three months ended June 30, 2014 and 2013, respectively. See the Company's Fleet List below for the terms of these agreements.

  • Depreciation expense increased $1.8 million to $7.4 million from $5.5 million primarily as a result of an increase in the average number of owned vessels to 21.5 from 14.7 for the three months ended June 30, 2014 and 2013, respectively.

  • General and administrative expenses increased $6.4 million to $11.6 million from $5.3 million. This increase was driven by a $5.1 million increase in the amortization of restricted stock (non-cash) and an overall increase in other general and administrative expenses due to the significant growth in the Company's fleet and Newbuilding Program.  
   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Statement of Profit or Loss  
(unaudited)  
   
   
    For the three months ended June 30,     For the six months ended June 30,  
In thousands of U.S. dollars except per share and share data   2014     2013     2014     2013  
Revenue                                
  Vessel revenue   $ 57,445     $ 51,533     $ 134,179     $ 96,457  
                                 
Operating expenses                                
  Vessel operating costs     (13,680 )     (8,527 )     (26,750 )     (16,498 )
  Voyage expenses     (551 )     (1,333 )     (4,525 )     (2,533 )
  Charterhire     (36,220 )     (26,972 )     (76,393 )     (47,469 )
  Depreciation     (7,369 )     (5,521 )     (13,322 )     (10,288 )
  General and administrative expenses     (11,649 )     (5,290 )     (22,615 )     (8,049 )
  Gain on sale of VLCCs     -       -       51,419       -  
  Gain on sale of Dorian shares     10,924       -       10,924       -  
  Total operating expenses     (58,545 )     (47,643 )     (81,262 )     (84,837 )
Operating income / (loss)     (1,100 )     3,890       52,917       11,620  
Other (expense) and income, net                                
  Financial expenses     (472 )     (476 )     (871 )     (1,875 )
  Realized (loss) / gain on derivative financial instruments     -       (46 )     17       23  
  Unrealized gain on derivative financial instruments     65       323       112       365  
  Financial income     42       369       69       550  
  Share of income from associate     898       -       573       -  
  Other expenses, net     (7 )     (92 )     (53 )     (107 )
  Total other expense, net     526       78       (153 )     (1,044 )
Net income / (loss)   $ (574 )   $ 3,968     $ 52,764     $ 10,576  
                                 
Earnings / (loss) per share                                
                                 
  Basic and diluted   $ 0.00     $ 0.03     $ 0.28     $ 0.09  
                                   
   
   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Balance Sheet  
(unaudited)  
   
   
    As of  
In thousands of U.S. dollars   June 30, 2014     December 31, 2013  
Assets                
Current assets                
Cash and cash equivalents   $ 357,307     $ 78,845  
Accounts receivable     76,104       72,542  
Prepaid expenses and other current assets     4,552       2,277  
Inventories     3,103       2,857  
Vessel held for sale     11,980       82,649  
Total current assets     453,046       239,170  
Non-current assets                
Vessels and drydock     903,596       530,270  
Vessels under construction     610,655       649,526  
Other assets     39,865       17,907  
Investment in associate     154,251       209,803  
Total non-current assets     1,708,367       1,407,506  
Total assets   $ 2,161,413     $ 1,646,676  
                 
Current liabilities                
Current debt     65,001       10,453  
Accounts payable     12,741       20,696  
Accrued expenses     8,513       7,251  
Derivative financial instruments     435       689  
Current debt related to vessel held for sale     6,182       21,397  
Total current liabilities     92,872       60,486  
Non-current liabilities                
Long term debt     736,268       135,279  
Derivative financial instruments     -       188  
Total non-current liabilities     736,268       135,467  
Total liabilities     829,140       195,953  
                 
Shareholders' equity                
Issued, authorized and fully paid in share capital:                
  Share capital     2,023       1,999  
  Additional paid in capital     1,572,281       1,536,945  
Treasury shares     (214,569 )     (7,938 )
Hedging reserve     (155 )     (212 )
Accumulated deficit     (27,307 )     (80,071 )
Total shareholders' equity     1,332,273       1,450,723  
Total liabilities and shareholders' equity   $ 2,161,413     $ 1,646,676  
                 
                 
   
Scorpio Tankers Inc. and Subsidiaries  
Condensed Consolidated Statement of Cash Flows  
(unaudited)  
   
    For the six months ended June 30,  
In thousands of U.S. dollars   2014     2013  
Operating activities                
Net income   $ 52,764     $ 10,576  
Gain on sale of VLCCs     (51,419 )     -  
Gain on sale of Dorian shares     (10,924 )     -  
Depreciation     13,322       10,288  
Amortization of restricted stock     14,436       2,882  
Amortization of deferred financing fees     468       536  
Straight-line adjustment for charterhire expense     3       (118 )
Share of income from associate     (573 )     -  
Unrealized gain on derivative financial instruments     (112 )     (365 )
Amortization of acquired time charter contracts     114       -  
Accretion of convertible senior notes     29       -  
      18,108       23,799  
Changes in assets and liabilities:                
Drydock payments     (953 )     (1,381 )
Increase in inventories     (246 )     (356 )
Increase in accounts receivable     (3,563 )     (26,410 )
Increase in prepaid expenses and other current assets     (1,230 )     (3,146 )
Increase in other assets     -       (394 )
Increase in accounts payable     5,036       1,684  
Increase / (decrease) in accrued expenses     1,736       (833 )
Interest rate swap termination payment     (274 )     -  
      506       (30,836 )
Net cash inflow / (outflow) from operating activities     18,614       (7,037 )
Investing activities                
Acquisition of vessels and payments for vessels under construction     (455,010 )     (323,548 )
Proceeds from disposal of vessels     213,670       -  
Net cash outflow from investing activities     (241,340 )     (323,548 )
Financing activities                
Debt repayments     (56,056 )     (21,452 )
Issuance of debt     417,782       52,050  
Debt issuance costs     (36,252 )     (439 )
Proceeds from issuance of convertible senior notes     360,000       -  
Convertible senior notes issuance costs     (10,803 )     -  
Gross proceeds from issuance of common stock     -       765,037  
Equity issuance costs     (42 )     (26,811 )
Dividends paid     (33,860 )     (4,116 )
Repurchase of common stock     (139,581 )     -  
Net cash inflow from financing activities     501,188       764,269  
Increase in cash and cash equivalents     278,462       433,684  
Cash and cash equivalents at January 1,     78,845       87,165  
Cash and cash equivalents at June 30,   $ 357,307     $ 520,849  
                 
 
Scorpio Tankers Inc. and Subsidiaries
Other operating data for the three and six months ended June 30, 2014 and 2013
(unaudited)
 
 
    For the three months ended June 30,   For the six months ended June 30,
    2014   2013   2014   2013
Adjusted EBITDA(1)(in thousands of U.S. dollars)   $ 4,316   $ 11,655   $ 20,212   $ 24,706
                         
Average Daily Results                        
Time charter equivalent per day(2)   $ 12,733   $ 15,444   $ 14,339   $ 15,943
Vessel operating costs per day(3)     6,960     6,262     7,052     6,529
                         
Aframax/LR2                        
TCE per revenue day (2)   $ 15,745   $ 12,681   $ 14,986   $ 14,680
Vessel operating costs per day(3)     12,881     7,301     8,233     7,131
                         
Panamax/LR1                        
TCE per revenue day (2)   $ 12,516   $ 14,242   $ 16,556   $ 13,600
Vessel operating costs per day(3)     9,306     6,553     8,729     7,264
                         
MR                        
TCE per revenue day (2)   $ 11,977   $ 17,840   $ 13,066   $ 18,000
Vessel operating costs per day(3)     6,491     5,945     6,462     5,905
                         
Handymax                        
TCE per revenue day (2)   $ 12,013   $ 13,906   $ 14,421   $ 14,979
Vessel operating costs per day(3)     6,847     6,211     8,464     6,453
                         
Fleet data                        
Average number of owned vessels     21.5     14.7     20.9     13.7
Average number of time chartered-in vessels     27.8     20.2     29.1     18.1
                         
Drydock                        
Expenditures for drydock (in thousands of U.S. dollars)   $ 1,290     -   $ 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 July 28, 2014
 
    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   Spot (5)   Handymax
3   STI Comandante   2014   38,000   1A   Spot (5)   Handymax
4   STI Pimlico   2014   38,000   1A   Spot (5)   Handymax
5   STI Amber   2012   52,000   -   SMRP(4)   MR
6   STI Topaz   2012   52,000   -   SMRP(4)   MR
7   STI Ruby   2012   52,000   -   SMRP(4)   MR
8   STI Garnet   2012   52,000   -   SMRP(4)   MR
9   STI Onyx   2012   52,000   -   SMRP(4)   MR
10   STI Sapphire   2013   52,000   -   SMRP(4)   MR
11   STI Emerald   2013   52,000   -   SMRP(4)   MR
12   STI Beryl   2013   52,000   -   SMRP(4)   MR
13   STI Le Rocher   2013   52,000   -   SMRP(4)   MR
14   STI Larvotto   2013   52,000   -   SMRP(4)   MR
15   STI Fontvieille   2013   52,000   -   SMRP(4)   MR
16   STI Ville   2013   52,000   -   SMRP(4)   MR
17   STI Duchessa   2014   52,000   -   SMRP(4)   MR
18   STI Opera   2014   52,000   -   SMRP(4)   MR
19   STI Texas City   2014   52,000   -   Time Charter (7)   MR
20   STI Meraux   2014   52,000   -   Time Charter (8)   MR
21   STI Chelsea   2014   52,000   -   SMRP(4)   MR
22   STI Lexington   2014   52,000   -   Spot (6)   MR
23   STI San Antonio   2014   52,000   -   Time Charter (8)   MR
24   STI Venere   2014   52,000   -   Spot (6)   MR
25   STI Virtus   2014   52,000   -   Spot (6)   MR
26   STI Powai   2014   52,000   -   Spot (6)   MR
27   STI Aqua   2014   52,000   -   Spot (6)   MR
28   STI Harmony   2007   73,919   1A   SPTP (2)   LR1
29   STI Heritage   2008   73,919   1A   SPTP (2)   LR1
30   Venice   2001   81,408   1C   SPTP (2)   Post-Panamax
31   STI Elysees   2014   114,000   -   SLR2P (3)   LR2
                         
    Total owned DWT       1,690,391            
                         
                                     
    Vessel Name   Year Built   DWT   Ice class   Employment   Vessel type   Daily Base Rate   Expiry (9)    
    Time chartered-in vessels                                
32   Kraslava   2007   37,258   1B   SHTP (1)   Handymax   $13,650   18-May-15    
33   Krisjanis Valdemars   2007   37,266   1B   SHTP (1)   Handymax   $13,650   14-Apr-15   (10)
34   Jinan   2003   37,285   -   SHTP (1)   Handymax   $12,600   28-Apr-15    
35   Iver Progress   2007   37,412   -   SHTP (1)   Handymax   $12,500   03-Mar-15   (11)
36   Iver Prosperity   2007   37,455   -   SHTP (1)   Handymax   $12,500   20-Oct-14   (12)
37   Histria Azure   2007   40,394   -   SHTP (1)   Handymax   $13,550   04-Apr-15    
38   Histria Coral   2006   40,426   -   SHTP (1)   Handymax   $13,550   17-Jul-15   (13)
39   Histria Perla   2005   40,471   -   SHTP (1)   Handymax   $13,550   15-Jul-15   (13)
40   Targale   2007   49,999   -   SMRP(4)   MR   $14,850   17-May-15   (14)
41   Nave Orion   2013   49,999   -   SMRP(4)   MR   $14,300   25-Mar-15   (15)
42   Gan-Trust   2013   51,561   -   SMRP(4)   MR   $16,250   06-Jan-16   (16)
43   Usma   2007   52,684   1B   SMRP(4)   MR   $14,500   03-Jan-15    
44   SN Federica   2003   72,344   -   SPTP (2)   LR1   $11,250   15-May-15   (17)
45   SN Azzura   2003   72,344   -   SPTP (2)   LR1   $13,600   25-Dec-14    
46   King Douglas   2008   73,666   -   SPTP (2)   LR1   $14,000   08-Aug-14   (18)
47   Hellespont Promise   2007   73,669   -   SPTP (2)   LR1   $14,250   14-Aug-14    
48   Hellespont Progress   2006   73,728   -   SPTP (2)   LR1   $15,000   18-Mar-15   (19)
49   FPMC P Eagle   2009   73,800   -   SPTP (2)   LR1   $14,525   09-Sep-15    
50   FPMC P Hero   2011   99,995   -   SLR2P (3)   LR2   $15,500   02-Nov-14   (20)
51   FPMC P Ideal   2012   99,993   -   SLR2P (3)   LR2   $15,250   09-Jan-15   (21)
52   Swarna Jayanti   2010   104,895   -   SLR2P (3)   LR2   $15,000   11-Mar-15   (22)
53   Densa Alligator   2013   105,708   -   SLR2P (3)   LR2   $16,500   17-Sep-15   (23)
54   Khawr Aladid   2006   106,003   -   SLR2P (3)   LR2   $15,400   11-Jul-15    
55   Fair Seas   2008   115,406   -   SLR2P (3)   LR2   $16,500   21-Aug-14    
56   Southport   2008   115,462   -   SLR2P (3)   LR2   $15,700   10-Dec-14    
57   Four Sky   2010   115,708   -   SLR2P (3)   LR2   $16,250   02-Sep-14    
                                     
    Total time chartered-in DWT       1,814,931                        
                         
    Newbuildings currently under construction                
    Vessel Name   Yard       DWT   Ice class   Vessel type
    Product tankers                    
                         
58   Hull 2454 - TBN STI Hackney   HMD   (24)   38,000   1A   Handymax
59   Hull 2462 - TBN STI Fulham   HMD   (24)   38,000   1A   Handymax
60   Hull 2476 - TBN STI Acton   HMD   (24)   38,000   1A   Handymax
61   Hull 2463 - TBN STI Camden   HMD   (24)   38,000   1A   Handymax
62   Hull 2464 - TBN STI Battersea   HMD   (24)   38,000   1A   Handymax
63   Hull 2465 - TBN STI Wembley   HMD   (24)   38,000   1A   Handymax
64   Hull 2477 - TBN STI Finchley   HMD   (24)   38,000   1A   Handymax
65   Hull 2478 - TBN STI Clapham   HMD   (24)   38,000   1A   Handymax
66   Hull 2479 - TBN STI Poplar   HMD   (24)   38,000   1A   Handymax
67   Hull 2499 - TBN STI Hammersmith   HMD   (24)   38,000   1A   Handymax
68   Hull 2500 - TBN STI Rotherhithe   HMD   (24)   38,000   1A   Handymax
69   Hull 2392 - TBN STI Mythos   HMD   (24)   52,000       MR
70   Hull 2450 - TBN STI Olivia   HMD   (24)   52,000       MR
71   Hull 2460 - TBN STI Yorkville   HMD   (24)   52,000       MR
72   Hull 2445 - TBN STI Milwaukee   HMD   (24)   52,000       MR
73   Hull 2461 - TBN STI Battery   HMD   (24)   52,000       MR
74   Hull 2474 - TBN STI Pontiac   HMD   (24)   52,000       MR
75   Hull 2490 - TBN STI Osceola   HMD   (24)   52,000       MR
76   Hull 2492 - TBN STI Notting Hill   HMD   (24)   52,000       MR
77   Hull 2493 - TBN STI Westminster   HMD   (24)   52,000       MR
78   Hull 2475 - TBN STI Seneca   HMD   (24)   52,000       MR
79   Hull S5125 - TBN STI Benicia   SPP   (25)   52,000       MR
80   Hull S1140 - TBN STI Dama   SPP   (25)   52,000       MR
81   Hull S1141 - TBN STI Regina   SPP   (25)   52,000       MR
82   Hull S1142 - TBN STI Mayfair   SPP   (25)   52,000       MR
83   Hull S1143 - TBN STI Tribeca   SPP   (25)   52,000       MR
84   Hull S1144 - TBN STI Soho   SPP   (25)   52,000       MR
85   Hull S1169 - TBN STI Manhattan   SPP   (25)   52,000       MR
86   Hull S1170 - TBN STI Queens   SPP   (25)   52,000       MR
87   Hull S1145 - TBN STI Gramercy   SPP   (25)   52,000       MR
88   Hull S1167 - TBN STI Bronx   SPP   (25)   52,000       MR
89   Hull S1168 - TBN STI Brooklyn   SPP   (25)   52,000       MR
90   Hull S704 - TBN STI Madison   HSHI   (26)   114,000       LR2
91   Hull S705 - TBN STI Park   HSHI   (26)   114,000       LR2
92   Hull S706 - TBN STI Sloane   HSHI   (26)   114,000       LR2
93   Hull S709 - TBN STI Condotti   HSHI   (26)   114,000       LR2
94   Hull S710 - TBN STI Veneto   HSHI   (26)   114,000       LR2
95   Hull S715 - TBN STI Oxford   HSHI   (26)   114,000       LR2
96   Hull S716 - TBN STI STI Connaught   HSHI   (26)   114,000       LR2
97   Hull 5394 - TBN STI Orchard   DSME   (27)   114,000       LR2
98   Hull 5395 - TBN STI Broadway   DSME   (27)   114,000       LR2
99   Hull 5398 - TBN STI Winnie   DSME   (27)   114,000       LR2
100   Hull 5399 - TBN STI Lauren   DSME   (27)   114,000       LR2
                         
                         
    Total newbuilding product tankers DWT           2,764,000        
                         
                         
    Total Fleet DWT           6,269,322        
     
(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 short term time charter for up to 120 days at approximately $15,000 per day.
(6)   This vessel is on a short term time charter for up to 120 days at approximately $18,000 per day.
(7)   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.
(8)   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.
(9)   Redelivery from the charterer is plus or minus 30 days from the expiry date.
(10)   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.
(11)   We have an option to extend the charter for an additional year at $13,500 per day.
(12)   We have an option to extend the charter for an additional year at $13,250 per day.
(13)   In May 2014, we declared options to extend the charters for an additional year at $13,550 per day effective July 17 and July 15, 2014, respectively.
(14)   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.
(15)   We have an option to extend the charter for an additional year at $15,700 per day.
(16)   The daily base rate represents the average rate for the three year duration of the agreement. The rate for the first year is $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.
(17)   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.
(18)   We have an option to extend the charter for an additional year at $15,000 per day.
(19)   We have options to extend the charter for up to two consecutive one year periods at $16,250 per day and $17,250 per day, respectively.
(20)   We have an option to extend the charter for an additional six months at $15,500 per day.
(21)   In June 2014, we declared an option to extend the charter for an additional six months at $15,500 per day effective July 9, 2014.
(22)   We have an option to extend the charter for an additional six months at $16,250 per day.
(23)   In July 2014, we declared an option to extend the charter for an additional twelve months at $17,550 per day effective September 17, 2014.
(24)   These newbuilding vessels are being constructed at HMD (Hyundai Mipo Dockyard Co. Ltd. of South Korea). Fifteen (15) vessels are expected to be delivered in 2014 and six (6) vessels in the first and second quarters of 2015.
(25)   These newbuilding vessels are being constructed at SPP (SPP Shipbuilding Co., Ltd. of South Korea). ). Seven (7) vessels are expected to be delivered in 2014 and four (4) vessels in the first and second quarters of 2015.
(26)   These newbuilding vessels are being constructed at HSHI (Hyundai Samho Heavy Industries Co., Ltd Five (5) vessels are expected to be delivered in the third and fourth quarters of 2014 and two (2) vessels in the first quarter of 2015.
(27)   These newbuilding vessels are being constructed at DSME (Daewoo Shipbuilding and Marine Engineering). Two (2) vessels are expected to be delivered in the fourth quarter of 2014 and two (2) vessels in the second quarter of 2015.
     

Business Strategy, Dividend Policy, and Stock Buyback Program

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

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

Dividend Policy

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

On July 28, 2014, the Company's board of directors declared a quarterly cash dividend of $0.10 per share, payable on September 10, 2014 to all shareholders as of August 22, 2014 (the record date).

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

Share Buyback Program

On July 28, 2014, the Board of Directors approved a new stock buyback program with authorization to purchase up to $150 million of shares of the Company's common stock. This program replaces the Company's stock buyback program that was previously announced in June 2014, which is being terminated effective immediately.

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. 

During 2014, the Company has purchased an aggregate of $105.9 million of shares in the open market at an average price of $9.35 during 2014.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 31 tankers (one LR2 tanker, two LR1 tankers, four Handymax tankers, 23 MR tankers, and one post-Panamax tanker) with an average age of 2.0 years, time charters-in 26 product tankers (eight LR2, six LR1, four MR and eight Handymax tankers), and has contracted for 43 newbuilding product tankers (21 MR, 11 LR2, and 11 Handymax ice class-1A product tankers), 29 are expected to be delivered to the Company throughout 2014 and 14 in 2015. The Company also owns approximately 16% of Dorian LPG Ltd. Additional information about the Company is available at the Company's website www.scorpiotankers.com, which is not a part of this press release.

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

 
Adjusted net income / (loss)
 
    For the three months ended June 30,  
    2014     2013  
In thousands of U.S. dollars except per share and share data   Amount     Per share     Amount     Per share  
  Net (loss) / income   $ (574 )   $ 0.00     $ 3,968     $ 0.03  
  Adjustments:                                
    Gain on sale of Dorian shares     (10,924 )     (0.06 )     -       0.00  
    Write-off of the deferred financing sale of STI Spirit     317       0.00        -       -  
    Unrealized gain on derivative financial instruments     (65 )     (0.00 )     (323 )     (0.00 )
  Total adjustments     (10,672 )     (0.06 )     (323 )     (0.00 )
  Adjusted net (loss) / income   $ (11,246 )   $ (0.06 )   $ 3,645     $ 0.03  
                                 
    For the six months ended June 30,  
    2014     2013  
    Amount     Per share     Amount     Per share  
  Net (loss) / income   $ 52,764     $ 0.28     $ 10,576     $ 0.09  
  Adjustments:                                
    Gain on sale of Dorian shares     (10,924 )     (0.06 )     -       0.00  
    Gain on sale of VLCCs     (51,419 )     (0.27 )                
    Write-off of the deferred financing sale of STI Spirit     317       0.00        -        -  
    Unrealized gain on derivative financial instruments     (112 )     (0.00 )     (365 )     (0.00 )
  Total adjustments     (62,138 )     (0.33 )     (365 )     (0.00 )
  Adjusted net (loss) / income   $ (9,374 )   $ (0.05 )   $ 10,211     $ 0.09  
                                   
                                   
   
Adjusted EBITDA  
   
    For the three months ended June 30,     For the six months ended June 30,  
In thousands of U.S. dollars   2014     2013     2014     2013  
  Net income / (loss)   $ (574 )   $ 3,968     $ 52,764     $ 10,576  
  Financial expenses     472       476       871       1,875  
  Unrealized gain on derivative financial instruments     (65 )     (323 )     (112 )     (365 )
  Financial income     (42 )     (369 )     (69 )     (550 )
  Depreciation     7,369       5,521       13,322       10,288  
  Depreciation component of our net profit from associate     599       -       1,343       -  
  Amortization of restricted stock     7,481       2,382       14,436       2,882  
  Gain on sale of VLCCs     -       -       (51,419 )     -  
  Gain on sale of Dorian shares     (10,924 )     -       (10,924 )     -  
  Adjusted EBITDA   $ 4,316     $ 11,655     $ 20,212     $ 24,706  
                                   

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.