Scorpio Tankers 2019 loss narrowed to $48.5 million

ScorpioTankers

Scorpio Tankers Inc. yesterday reported its results for the three months and year ended December 31, 2019. The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share on the Company’s common stock.

Results for the three months ended December 31, 2019 and 2018

For the three months ended December 31, 2019, the Company had a net income of $12.0 million, or $0.22 basic and $0.21 diluted earnings per share. For the three months ended December 31, 2019, the Company’s adjusted net income (see Non-IFRS Measures section below) was $12.8 million, or $0.23 basic and diluted earnings per share, which excludes from the net income a $0.7 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

For the three months ended December 31, 2018, the Company had a net loss of $17.7 million, or $0.38 basic and diluted loss per share. For the three months ended December 31, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $17.4 million, or $0.38 basic and diluted loss per share, which excludes from the net loss a $0.3 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

Results for the year ended December 31, 2019 and 2018

For the year ended December 31, 2019, the Company had a net loss of $48.5 million, or $0.97 basic and diluted loss per share. For the year ended December 31, 2019, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $47.0 million, or $0.94 basic and diluted loss per share, which excludes from the net loss a $1.5 million, or $0.03 per basic and diluted share, write-off of deferred financing fees.

For the year ended December 31, 2018, the Company had a net loss of $190.1 million, or $5.46 basic and diluted loss per share. For the year ended December 31, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $158.7 million, or $4.56 basic and diluted loss per share, which excludes from the net loss (i) an aggregate loss of $17.8 million recorded on the Company’s exchange of an aggregate of $203.5 million principal amount of its Convertible Notes due 2019 in the second and third quarters of 2018, (ii) a $13.2 million write-off of deferred financing fees, and (iii) $0.3 million of transaction costs related to the 2017 merger with Navig8 Product Tankers Inc, together resulting in an aggregate reduction of the Company’s net loss of $31.3 million or $0.90 per basic and diluted share.

Declaration of Dividend

On February 18, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about March 13, 2020 to all shareholders of record as of March 2, 2020 (the record date). As of February 17, 2020, there were 58,672,080 common shares of the Company outstanding.

Summary of Other Recent and Fourth Quarter Significant Events

Below is a summary of the average daily Time Charter Equivalent (TCE) revenue (see Non-IFRS Measures section below) and duration for voyages fixed for the Company’s vessels thus far in the first quarter of 2020 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):

• For the LR2s in the pool (which includes both scrubber fitted and non-scrubber fitted vessels): an average of approximately $25,000 per day for 70% of the days. Scrubber fitted vessels earned a premium of approximately $5,300 per day during January 2020 when compared to non-scrubber fitted vessels in the pool.

• For the LR1s in the pool (which includes both scrubber fitted and non-scrubber fitted vessels): an average of approximately $19,000 per day for 80% of the days. Scrubber fitted vessels earned a premium of approximately $5,400 per day during January 2020 when compared to non-scrubber fitted vessels in the pool.

• For the MRs in the pool (which includes both scrubber fitted and non-scrubber fitted vessels): an average of approximately $22,000 per day for 60% of the days. Scrubber fitted vessels earned a premium of approximately $2,800 per day during January 2020 when compared to non-scrubber fitted vessels in the pool.

• For the ice-class 1A Handymaxes in the pool: an average of approximately $24,000 per day for 60% of the days.

o Below is a summary of the average daily TCE revenue earned on the Company’s vessels during the fourth quarter of 2019:
• For the LR2s in the pool: an average of $25,230 per revenue day.

• For the LR1s in the pool: an average of $17,653 per revenue day.

• For the MRs in the pool: an average of $17,429 per revenue day.

• For the ice-class 1A Handymaxes in the pool: an average of $19,294 per revenue day.

o In November 2019, the Company entered into an “at the market” offering program (the “ATM Program”) pursuant to which the Company may sell up to $100 million of its common shares, par value $0.01 per share. No shares have been sold under this Program through the date of this press release.

o In November and December 2019, the Company executed two term loan facilities with Hamburg Commercial Bank AG and Prudential Private Capital, respectively, for approximately $99.1 million in aggregate. These facilities were partially drawn in December 2019 and the proceeds were used to refinance the existing indebtedness on five vessels that were previously financed under the Company’s KEXIM Credit Facility. The Company’s liquidity increased by approximately $31.0 million in aggregate as a result of these transactions. There is currently $1.5 million available to be drawn under the facility with Hamburg Commercial Bank AG, which is expected to be utilized to partially finance the purchase and installation of a scrubber on one of the Company’s LR2 tankers.

o In December 2019, the Company drew down an aggregate of approximately $11.0 million from an upsized lease financing arrangement with CSSC (Hong Kong) Shipping Company Limited (“CSSC”) to partially finance the purchase and installation of scrubbers on seven of its vessels.

o As of the date of this press release, the Company has received commitments from financial institutions for an additional eight different facilities to partially finance the purchase and installation of scrubbers on certain of the Company’s vessels. These commitments are expected to increase the Company’s liquidity by approximately $118.7 million, after the repayment of existing indebtedness. Subject to the negotiation and execution of definitive documentation for these facilities, the drawdowns are expected to occur as the scrubbers are installed throughout the remainder of 2020.

o In December 2019, the Company paid a quarterly cash dividend with respect to the third quarter of 2019 on the Company’s common stock of $0.10 per common share.

o In January 2020, the Company took delivery of two scrubber-fitted 2020-built MR product tankers (STI Miracle and STI Maestro) under eight-year bareboat leases. The leasehold interests in these vessels were acquired as part of the Company’s transaction with Trafigura Maritime Logistics Pte. Ltd. ( the “Trafigura Transaction”) that was announced in September 2019. The bareboat leases have similar terms and conditions as the original leased vessels in the Trafigura Transaction.

At the Market Share Issuance Program

In November 2019, the Company entered into the ATM Program pursuant to which the Company may sell up to $100 million of its common shares, par value $0.01 per share. As part of the ATM Program, the Company entered into an equity distribution agreement dated November 7, 2019 (the “Sales Agreement”), with BTIG, LLC, as sales agent (the “Agent”). In accordance with the terms of the Sales Agreement, the Company may offer and sell its common shares from time to time through the Agent by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, in block transactions, or as otherwise agreed upon by the Agent and the Company. The Company intends to use the net proceeds from any sales under the Program for general corporate and working capital purposes.

No shares have been sold under the ATM Program through the date of this press release.

Diluted Weighted Number of Shares

Diluted earnings per share is determined using the if-converted method. Under this method, the Company assumes that its Convertible Notes due 2022, which were issued in May and July 2018, were converted into common shares at the beginning of each period and the interest and non-cash amortization expense associated with these notes of $3.7 million and $14.7 million, respectively, during the three months and year ended December 31, 2019 were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three months and year ended December 31, 2019, the Company’s basic weighted average number of shares were 54,626,119 and 49,857,998, respectively. For the three months and year ended December 31, 2019, the Company’s diluted weighted average number of shares were 56,780,849 and 51,735,977, respectively, excluding the impact of the Convertible Notes due 2022, and 62,009,488 and 57,656,484, respectively, under the if-converted method.

The diluted weighted average number of shares was anti-dilutive for the year ended December 31, 2019 as the Company incurred a net loss.

The weighted average number of shares under the if-converted method was anti-dilutive for the three months and year ended December 31, 2019.

$250 Million Securities Repurchase Program

In May 2015, the Company’s Board of Directors authorized a Securities Repurchase Program to purchase up to an aggregate of $250 million of the Company’s securities which, in addition to its common shares, currently consist of its Unsecured Senior Notes due 2020 (NYSE: SBNA), which were issued in May 2014, and Convertible Notes due 2022, which were issued in May and July 2018.

No securities were repurchased under this program during the fourth quarter of 2019 and through the date of this press release.

As of the date hereof, the Company has repurchased a total of $128.4 million of its securities under the Securities Repurchase Program and has the authority to purchase up to an additional $121.6 million of its securities. The Company may repurchase its securities 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 Securities Repurchase Program to repurchase any of its securities.

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