Scorpio Tankers Announces Financial Results for the First Quarter of 2021

Scorpio Tankers

Scorpio Tankers reported its results for the three months ended March 31, 2021. 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 March 31, 2021 and 2020

For the three months ended March 31, 2021, the Company had a net loss of $62.4 million, or $1.15 basic and diluted loss per share. For the three months ended March 31, 2021, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $57.3 million, or $1.05 basic and diluted loss per share, which excludes from the net loss $3.9 million, or $0.07 per basic and diluted share, of losses recorded on the transaction to exchange $62.1 million in aggregate principal amount of its existing Convertible Notes due 2022 for $62.1 million in aggregate principal amount of new Convertible Notes due 2025, described in detail below, and $1.3 million, or $0.02 per basic and diluted share, write-offs of deferred financing fees related to the refinancing of certain credit facilities.

For the three months ended March 31, 2020, the Company had net income of $46.6 million, or $0.85 basic and $0.82 diluted earnings per share. There were no Non-IFRS adjustments to the net income for the three months ended March 31, 2020.

Declaration of Dividend

On May 6, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about June 15, 2021 to all shareholders of record as of May 21, 2021 (the record date). As of May 6, 2021, there were 58,369,516 common shares of the Company outstanding.

Summary of First Quarter and Other Recent Significant Events

  • Below is a summary of the average daily Time Charter Equivalent (“TCE”) revenue (see Non-IFRS Measures section below) and duration of contracted pool voyages and time charters for the Company’s vessels thus far in the second quarter of 2021 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):
Total
Pool Average daily
TCE revenue
% of Days
LR2 $14,700 48 %
LR1 $13,700 41 %
MR $13,000 52 %
Handymax $11,900 42 %
  • Below is a summary of the average daily TCE revenue earned by the Company’s vessels in each of the pools during the first quarter of 2021:
Pool Average daily TCE revenue
LR2 $11,980
LR1 $11,292
MR $11,326
Handymax $9,065
  • In March 2021, the Company completed the exchange of $62.1 million in aggregate principal amount of its Convertible Notes due 2022 for $62.1 million in aggregate principal amount of new 3.00% Convertible Notes due 2025 (the “Convertible Notes due 2025”), pursuant to separate, privately negotiated, agreements with certain holders of the Convertible Notes due 2022. Simultaneously, the Company issued and sold $76.1 million in aggregate principal amount of Convertible Notes due 2025 pursuant to separate, privately negotiated, agreements with certain investors in a private offering.
  • In January 2021, the Company entered into a note distribution agreement with B. Riley Securities, Inc., as sales agent, pursuant to which the Company may offer and sell, from time to time, up to $75.0 million of additional aggregate principal amount of its 7.00% Senior Unsecured Notes due 2025 (the “Senior Notes due 2025”). Since the inception of this program and through the date of this press release, the Company issued $17.9 million aggregate principal amount of additional Senior Notes due 2025 for aggregate net proceeds (net of sales agent commissions and offering expenses) of $17.5 million.
  • The Company has received a commitment to refinance the existing indebtedness on two LR2s, which is expected to raise $20.5 million in new liquidity (after the repayment of existing debt). These refinancings are expected to close before the end of the second quarter of 2021.
  • The Company is also in discussions with financial institutions to further increase its liquidity by up to $46.7 million in connection with the refinancing of 11 vessels.
  • In addition to the above, the Company has $20.0 million of additional liquidity available (after the repayment of existing debt) from previously announced financings that have been committed. These drawdowns are expected to occur at varying points in the future as these financings are tied to scrubber installations on the Company’s vessels.
  • The Company has $280.1 million in cash and cash equivalents as of May 6, 2021.

March 2021 Exchange Offer and New Issuance of Convertible Notes

In March 2021, the Company completed the exchange of $62.1 million in aggregate principal amount of Convertible Notes due 2022 for $62.1 million in aggregate principal amount of the Convertible Notes due 2025, pursuant to separate, privately negotiated, agreements with certain holders of the Convertible Notes due 2022 (the “March 2021 Exchange”). Simultaneously with the March 2021 Exchange, the Company issued and sold $76.1 million in aggregate principal amount of Convertible Notes due 2025 pursuant to separate, privately negotiated, agreements with certain investors in a private offering (the “March 2021 Convertible Notes Offering”).

The Convertible Notes due 2025 are the Company’s senior, unsecured obligations and bear interest at a rate of 3.00% per year. Interest is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on May 15, 2021. The Convertible Notes due 2025 will mature on May 15, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms.

The conversion rate of the Convertible Notes due 2025 is initially 26.6617 common shares per $1,000 principal amount of Convertible Notes due 2025 (equivalent to an initial conversion price of approximately $37.507 per common share), and is subject to adjustment upon the occurrence of certain events as set forth in the indenture governing the Convertible Notes due 2025 (such as the payment of dividends).

Commencing on the issue date of the Convertible Notes due 2025, principal will accrete on the principal amount, compounded semi-annually, at a rate of approximately 5.52% per annum, which principal amount, together with any accretions thereon, is the “Accreted Principal Amount”. The Accreted Principal Amount at maturity will equal 125.3% of par, which together with the 3.00% interest rate, compounds to a yield-to-maturity of approximately 8.25%.

The Convertible Notes due 2025 are freely convertible at the option of the holder and prior to the close of business on the 5th business day immediately preceding the maturity date. Upon conversion of the Convertible Notes due 2025, holders will receive shares of the Company’s common stock. The Company may, subject to certain exceptions, redeem the Convertible Notes due 2025 for cash, if at any time the per share volume-weighted average price of our common shares equals or exceeds 125.4% of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the applicable redemption date; and (ii) the trading day immediately before such date of the redemption notice.

The Company recorded a loss on the extinguishment of the Convertible Notes due 2022 of $3.9 million as a result of the March 2021 Exchange, which primarily arose from the difference between the carrying value and the face value of the Convertible Notes due 2022 on the date of the exchange.

Distribution Agreement of Additional Senior Notes due 2025

In January 2021, the Company entered into a note distribution agreement (the “Distribution Agreement”) with B. Riley Securities, Inc., as sales agent (the “Agent”), under which the Company may offer and sell, from time to time, up to an additional $75.0 million aggregate principal amount of its Senior Notes due 2025 (the “Additional Notes”).

Any Additional Notes sold will be issued under the Indenture pursuant to which the Company previously issued $28.1 million aggregate principal amount of the Senior Notes due 2025 on May 29, 2020 (the “Initial Notes”). The Additional Notes will have the same terms as (other than date of issuance), form a single series of debt securities with and have the same CUSIP number and be fungible with, the Initial Notes immediately upon issuance, including for purposes of notices, consents, waivers, amendments and any other action permitted under the Indenture. The Senior Notes due 2025 are listed on the New York Stock Exchange (the “NYSE”) under the symbol “SBBA.”

Sales of the Additional Notes may be made over a period of time, and from time to time, through the Agent, in transactions involving an offering of the Senior Notes due 2025 into the existing trading market at prevailing market prices.

During the first quarter of 2021, the Company issued $14.1 million in aggregate principal amount of Additional Notes for aggregate net proceeds (net of sales agent commissions and offering expenses) of $13.8 million. Since the inception of this program and through the date of this press release, the Company issued $17.9 million aggregate principal amount of Additional Notes for aggregate net proceeds (net of sales agent commissions and offering expenses) of $17.5 million.

Diluted Weighted Number of Shares

The computation of earnings or loss per share is determined by taking into consideration the potentially dilutive shares arising from (i) the Company’s equity incentive plan, and (ii) the Company’s Convertible Notes due 2022 and Convertible Notes due 2025. These potentially dilutive shares are excluded from the computation of earnings or loss per share to the extent they are anti-dilutive.

The impact of the Convertible Notes due 2022 and Convertible Notes due 2025 on earnings or loss per share is computed using the if-converted method. Under this method, the Company first includes the potentially dilutive impact of restricted shares issued under the Company’s equity incentive plan, and then assumes that its Convertible Notes due 2022 and Convertible Notes due 2025, which were issued in May and July 2018 and March 2021, respectively, were converted into common shares at the beginning of each period. The if-converted method also assumes that the interest and non-cash amortization expense associated with these notes of $3.1 million during the three months ended March 31, 2021 were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

The Company’s basic weighted average number of shares outstanding were 54,318,792 for the three months ended March 31, 2021. There were 56,019,369 weighted average shares outstanding including the potentially dilutive impact of restricted shares, and 60,168,137 weighted average shares outstanding under the if-converted method. Since the Company was in a net loss position, the potentially dilutive shares arising from both the Company’s restricted shares and under the if-converted method, were anti-dilutive for purposes of calculating the loss per share. Accordingly, basic weighted average shares outstanding were used to calculate both basic and diluted loss per share for this period.

COVID-19

Initially, the onset of the COVID-19 pandemic in March 2020 resulted in a sharp reduction in economic activity and a corresponding reduction in the global demand for oil and refined petroleum products. This period of time was marked by extreme volatility in the oil markets and the development of a steep contango in the prices of oil and refined petroleum products. Consequently, an abundance of arbitrage and floating storage opportunities opened up, which resulted in record increases in spot TCE rates late in the first quarter of 2020 and throughout the second quarter of 2020. These market dynamics, which were driven by arbitrage trading rather than underlying consumption, led to a build-up of global oil and refined petroleum product inventories.

In June 2020, as underlying oil markets stabilized and global economies began to recover, the excess inventories that built up during this period began to slowly unwind. Nevertheless, global demand for oil and refined petroleum products remained subdued as governments around the world continued to impose travel restrictions and other measures in an effort to curtail the spread of the virus. These market conditions had an adverse impact on the demand for our vessels beginning in the third quarter of 2020 and continuing through the first quarter of 2021. Recently, the easing of restrictive measures and successful roll-out of vaccines in certain countries have begun to stimulate oil demand and have manifested into sequential improvements in market conditions to start the second quarter of 2021.

We expect that the COVID-19 virus will continue to cause volatility in the commodities markets. The scale and duration of these circumstances is unknowable but could have a material impact on our earnings, cash flow and financial condition in 2021. An estimate of the impact on our results of operations and financial condition cannot be made at this time.

$250 Million Securities Repurchase Program

In September 2020, the Company’s Board of Directors authorized a new 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 Senior Notes due 2025 (NYSE: SBBA), which were originally issued in May 2020, Convertible Notes due 2022, which were issued in May and July 2018, and Convertible Notes due 2025, which were issued in March 2021. No securities have been repurchased under the new program since its inception through the date of this press release.

Conference Call

The Company has scheduled a conference call on May 7, 2021 at 8:30 AM Eastern Daylight Time and 2:30 PM Central European Summer Time. The dial-in information is as follows:

US Dial-In Number: +1 (855) 861-2416
International Dial-In Number: +1 (703) 736-7422
Conference ID: 1796885

Participants should dial into the call 10 minutes before the scheduled time. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.

There will also be a simultaneous live webcast over the internet, through the Scorpio Tankers Inc. website www.scorpiotankers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

Webcast URL: https://edge.media-server.com/mmc/p/7nx97or2

Current Liquidity

As of May 6, 2021, the Company had $280.1 million in unrestricted cash and cash equivalents.

Drydock, Scrubber and Ballast Water Treatment Update

Set forth below is a table summarizing the drydock, scrubber, and ballast water treatment system activity that occurred during the first quarter of 2021 and that is in progress as of April 1, 2021:

Number of
Vessels
Drydock Ballast Water
Treatment
Systems
Scrubbers Aggregate
Costs ($ in
millions)
(1)
Aggregate Off-
hire Days in Q1
2021
Completed in the first quarter of 2021
LR2 3 3 1 $6.2 76
LR1 3 3 3.2 61
MR
Handymax
6 6 1 $9.4 137
In progress as of April 1, 2021
LR2 1 1 $0.2 1
LR1
MR
Handymax
1 1 $0.2 1

(1) Aggregate costs for vessels completed in the quarter represent the total costs incurred, some of which may have been incurred in prior periods. Aggregate costs for vessels in progress as of April 1, 2021 represent the total costs incurred through that date, some of which may have been incurred in prior periods.

Set forth below are the estimated expected payments to be made for the Company’s drydocks, ballast water treatment system installations, and scrubber installations through 2022 (which also include actual payments made during the first quarter of 2021 and through May 6, 2021):

In millions of U.S. dollars As of March 31, 2021 (1) (2)
Q2 2021 – payments made through May 6, 2021 $ 1.8
Q2 2021 – remaining payments 8.6
Q3 2021 10.1
Q4 2021 6.1
FY 2022 40.5

(1) Includes estimated cash payments for drydocks, ballast water treatment system installations and scrubber installations.  These amounts include installment payments that are due in advance of the scheduled service and may be scheduled to occur in quarters prior to the actual installation. In addition to these installment payments, these amounts also include estimates of the installation costs of such systems.  The timing of the payments set forth are estimates only and may vary as the timing of the related drydocks and installations finalize.

(2) Based upon the commitments received to date, which include the remaining availability under certain financing transactions that have been previously announced, the Company expects to raise approximately $20.0 million of aggregate additional liquidity to finance the purchase and installations of scrubbers (after the repayment of existing debt) once all of the agreements are closed and drawn.  These drawdowns are expected to occur at varying points in the future as these financings are tied to scrubber installations on the Company’s vessels.

Set forth below are the estimated expected number of ships and estimated expected off-hire days for the Company’s drydocks, ballast water treatment system installations, and scrubber installations (1):

Q2 2021
Ships Scheduled for (2): Off-hire
Drydock Ballast Water
Treatment Systems
Scrubbers Days (3)
LR2 4 80
LR1 3 60
MR
Handymax
Total Q2 2021 7 140
Q3 2021
Ships Scheduled for (2): Off-hire
Drydock Ballast Water
Treatment Systems
Scrubbers Days (3)
LR2 2 40
LR1 2 40
MR
Handymax
Total Q3 2021 4 80
Q4 2021
Ships Scheduled for (2): Off-hire
Drydock Ballast Water
Treatment Systems
Scrubbers Days (3)
LR2 2 40
LR1 2 40
MR
Handymax
Total Q4 2021 4 80
FY 2022
Ships Scheduled for (2): Off-hire
Drydock Ballast Water
Treatment Systems
Scrubbers Days (3)
LR2 5 1 140
LR1 3 120
MR 11 5 4 320
Handymax
Total FY 2022 16 5 8 580

(1) The number of vessels in these tables reflect a certain amount of overlap where certain vessels are expected to be drydocked and have ballast water treatment systems and/or scrubbers installed simultaneously.  Additionally, the timing set forth may vary as drydock, ballast water treatment system installation and scrubber installation times are finalized.
(2) Represents the number of vessels scheduled to commence drydock, ballast water treatment system, and/or scrubber installations during the period. It does not include vessels that commenced work in prior periods but will be completed in the subsequent period.
(3) Represents total estimated off-hire days during the period, including vessels that commenced work in a previous period.

Debt

Set forth below is a summary of the principal balances of the Company’s outstanding indebtedness as of the dates presented.

In thousands of U.S. Dollars Outstanding
Principal as of
December 31,
2020
Drawdowns and
(repayments),
net
Outstanding
Principal as of
March 31, 2021
Drawdowns and
(repayments),
net
Outstanding
Principal as of
May 6, 2021
1 KEXIM Credit Facility (1) $ 15,931 $ (15,931 ) $ $
2 ING Credit Facility (2)(3)(4)(8) 191,348 (121,001 ) 70,347 70,347
3 2018 NIBC Credit Facility (4) 31,066 (31,066 )
4 Credit Agricole Credit Facility 82,160 (2,142 ) 80,018 80,018
5 ABN AMRO / K-Sure Credit Facility 41,827 (963 ) 40,864 40,864
6 Citibank / K-Sure Credit Facility 86,818 (2,104 ) 84,714 84,714
7 ABN / SEB Credit Facility (2) 97,856 (3,087 ) 94,769 (16,076 ) 78,693
8 Hamburg Commercial Credit Facility 40,315 (823 ) 39,492 39,492
9 Prudential Credit Facility 50,378 (1,386 ) 48,992 (924 ) 48,068
10 2019 DNB / GIEK Credit Facility 52,563 (1,778 ) 50,785 50,785
11 BNPP Sinosure Credit Facility (5) 94,733 1,915 96,648 (5,167 ) 91,481
12 2020 $225.0 Million Credit Facility 208,890 (5,250 ) 203,640 203,640
13 2021 $21.0 Million Credit Facility (1) 21,000 21,000 21,000
14 Ocean Yield Lease Financing 138,508 (2,733 ) 135,775 (911 ) 134,864
15 BCFL Lease Financing (LR2s) (6) 86,197 1,277 87,474 (895 ) 86,579
16 CSSC Lease Financing 134,308 (2,732 ) 131,576 (911 ) 130,665
17 CSSC Scrubber Lease Financing 4,443 (980 ) 3,463 (327 ) 3,136
18 BCFL Lease Financing (MRs) (6) 77,748 2,394 80,142 (1,250 ) 78,892
19 2018 CMBFL Lease Financing 124,993 (3,252 ) 121,741 (836 ) 120,905
20 $116.0 Million Lease Financing (6) 103,801 (401 ) 103,400 (848 ) 102,552
21 AVIC Lease Financing 119,732 (3,332 ) 116,400 116,400
22 China Huarong Lease Financing (7) 110,250 5,791 116,041 116,041
23 $157.5 Million Lease Financing 123,800 (3,536 ) 120,264 120,264
24 COSCO Lease Financing 68,750 (1,925 ) 66,825 66,825
25 2020 CMBFL Lease Financing 44,573 (810 ) 43,763 43,763
26 2020 TSFL Lease Financing 47,250 (831 ) 46,419 46,419
27 2020 SPDBFL Lease Financing 96,500 (1,624 ) 94,876 94,876
28 2021 AVIC Lease Financing (4) 97,325 97,325 97,325
29 2021 CMBFL Lease Financing (2) 58,800 58,800 20,250 79,050
30 2021 TSFL Lease Financing (3) 57,663 57,663 57,663
31 IFRS 16 – Leases – 7 Handymax (9) 2,247 (2,247 )
32 IFRS 16 – Leases – 3 MR 36,936 (1,843 ) 35,093 (623 ) 34,470
33 $670.0 Million Lease Financing 593,291 (11,134 ) 582,157 (3,993 ) 578,164
34 Unsecured Senior Notes Due 2025 (10) 28,100 14,133 42,233 3,755 45,988
35 Convertible Notes Due 2022 (11) 151,229 (62,088 ) 89,141 89,141
36 Convertible Notes Due 2025 (11) 138,188 138,188 138,188
Gross debt outstanding $ 3,086,541 $ 113,487 $ 3,200,028 $ (8,756 ) $ 3,191,272
Cash and cash equivalents 187,511 269,538 280,053
Net debt $ 2,899,030 $ 2,930,490   $ 2,911,219

(1) In February 2021, the Company drew down $21.0 million on a term loan facility with a European financial institution (the “2021 $21.0 Million Credit Facility”). The proceeds of this loan facility were used to refinance the outstanding debt on an LR2 product tanker, STI Madison, that was previously financed under the KEXIM Credit Facility. The Company repaid the outstanding indebtedness of $15.9 million related to this vessel on the KEXIM Credit Facility in January 2021 upon its maturity. The 2021 $21.0 Million Credit Facility has a final maturity of December 2022, bears interest at LIBOR plus a margin of 2.65% per annum, and is scheduled to be repaid in equal quarterly installments of approximately $0.6 million, with a balloon payment due upon maturity. The remaining terms and conditions, including financial covenants, are similar to those set forth in our existing credit facilities.

(2) In March 2021, the Company received a commitment to sell and leaseback four Handymax vessels (STI Comandante, STI Brixton, STI Pimlico and STI Finchley) and one MR vessel (STI Westminster) from CMB Financial Leasing Co. Ltd, or CMBFL (the “2021 CMBFL Lease Financing”). In March 2021, the Company closed on the sale and leaseback of the four aforementioned Handymax vessels for aggregate proceeds of $58.8 million. The Company repaid the outstanding indebtedness of $46.7 million related to these vessels on the ING Credit Facility as part of these transactions. In April 2021, the Company closed on the sale and leaseback of STI Westminster for aggregate proceeds of $20.25 million. The Company repaid the outstanding indebtedness of $16.1 million related to this vessel on the ABN/SEB Credit Facility as part of this transaction.

Under the 2021 CMBFL Lease Financing, each vessel is subject to a seven-year bareboat charter-in agreement. The lease financings bear interest at LIBOR plus a margin of 3.25% per annum for the Handymax vessels and 3.20% for the MR vessel and are scheduled to be repaid in equal quarterly principal installments of approximately $0.3 million per each Handymax vessel and $0.4 million for the MR vessel. Each agreement contains purchase options to re-acquire each of the subject vessels beginning on the third anniversary date from the delivery date of the respective vessel, with a purchase option for each vessel upon the expiration of each agreement. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s other sale and leaseback arrangements.

This transaction is being accounted for as a financing transaction under IFRS 9 as the transaction does not qualify as a ‘sale’ under IFRS 15 given the Company’s right to repurchase the asset during the lease period. Accordingly, no gain or loss is recorded, and the Company will continue to recognize the vessel as an asset and recognize a financial liability (i.e. debt) for the consideration received (similar to the Company’s other sale and leaseback transactions).

(3) In March 2021, the Company closed on the sale and leaseback of three MR vessels (STI Black Hawk, STI Notting Hill and STI Pontiac) with Taiping & Sinopec Financial Leasing Co., Ltd. for aggregate proceeds of $57.7 million (the “2021 TSFL Lease Financing”). The Company repaid the outstanding indebtedness of $40.7 million related to these vessels on the ING Credit Facility as part of these transactions.

Under the 2021 TSFL Lease Financing, each vessel is subject to a seven-year bareboat charter-in agreement. The lease financings bear interest at LIBOR plus a margin of 3.20% per annum and are scheduled to be repaid in equal quarterly principal installments of approximately $0.4 million per vessel. Each agreement contains purchase options to re-acquire each of the subject vessels beginning on the second anniversary date from the delivery date of the respective vessel, with a purchase option for each vessel upon the expiration of each agreement. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s other sale and leaseback arrangements.

This transaction is being accounted for as a financing transaction under IFRS 9 as the transaction does not qualify as a ‘sale’ under IFRS 15 given the Company’s right to repurchase the asset during the lease period. Accordingly, no gain or loss is recorded, and the Company will continue to recognize the vessel as an asset and recognize a financial liability (i.e. debt) for the consideration received (similar to the Company’s other sale and leaseback transactions).

(4) In February 2021, the Company closed on the sale and leaseback of two vessels (STI Memphis and STI Soho) with AVIC International Leasing Co., Ltd. for aggregate proceeds of $44.2 million. The Company repaid the outstanding indebtedness of $30.0 million related to these vessels on the 2018 NIBC Credit Facility as part of these transactions. Additionally, in March 2021, the Company closed on the sale and leaseback of two additional vessels (STI Lombard and STI Osceola) under the 2021 AVIC Lease Financing for aggregate proceeds of $53.1 million. The Company repaid the outstanding indebtedness of $29.6 million related to these vessels on the ING Credit Facility as part of these transactions. These sale and leaseback transactions are collectively referred to as the “2021 AVIC Lease Financing”.

Under the 2021 AVIC Lease Financing, each vessel is subject to a nine-year bareboat charter-in agreement. The lease financings bear interest at LIBOR plus a margin of 3.45% per annum and are scheduled to be repaid in equal aggregate quarterly repayments of approximately $1.8 million. Each agreement contains purchase options to re-acquire each of the subject vessels beginning on the second anniversary date from the delivery date of the respective vessel, with a purchase obligation upon the expiration of each agreement. Additionally, we are required to deposit with the lessor, 1% of the borrowing amount, or $1.0 million in aggregate. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s other sale and leaseback arrangements.

This transaction is being accounted for as a financing transaction under IFRS 9 as the transaction does not qualify as a ‘sale’ under IFRS 15 given the Company’s right to repurchase the asset during the lease period. Accordingly, no gain or loss is recorded, and the Company will continue to recognize the vessel as an asset and recognize a financial liability (i.e. debt) for the consideration received (similar to the Company’s other sale and leaseback transactions).

(5) In January 2021, the Company signed an agreement to extend the availability period under this loan facility to June 15, 2022 from March 15, 2021. In March 2021, the Company drew down $1.9 million from the BNPP Sinosure Credit Facility to partially finance the purchase and installation of a scrubber on a MR product tanker.

(6) In January 2021, the Company drew down an aggregate of $11.4 million, which consisted of (i) $3.8 million under the BCFL Lease Financing (LR2s); (ii) $5.8 million under the BCFL Lease Financing (MRs) and (iii) $1.9 million under the $116.0 Million Lease Financing to partially finance the purchase and installations of scrubbers on six product tankers. All of these scrubber related borrowings are scheduled to be repaid over a period of three years from each drawdown date in fixed monthly installments (which includes interest) of approximately $50,000 to $60,000 per vessel.

(7) In January 2021, the Company drew down $10.0 million from the China Huarong Lease Financing to partially finance the purchase and installations of scrubbers on five MR product tankers. These borrowings bear interest at LIBOR plus a margin of 3.50% and are scheduled to be repaid in equal quarterly installments of approximately $0.2 million per vessel through November 2023.

(8) In January 2021, the Company drew down $2.1 million from its ING Credit Facility to partially finance the purchase and installations of scrubbers on two LR2 product tankers. These borrowings bear interest at LIBOR plus a margin of 1.95% and are scheduled to be repaid in equal quarterly installments of approximately $0.2 million per vessel through June 2022.

(9) The remaining terms on the bareboat-in agreements for Handymax vessels under these agreements expired in March 2021.

(10) In January 2021, the Company entered into the Distribution Agreement with the Agent, under which the Company may offer and sell, from time to time, up to an additional $75.0 million aggregate principal amount Additional Notes. The Additional Notes will have the same terms as (other than date of issuance), form a single series of debt securities with and have the same CUSIP number and be fungible with, the Initial Notes immediately upon issuance. Sales of the Additional Notes may be made over a period of time, and from time to time, through the Agent, in transactions involving an offering of the Senior Notes due 2025 into the existing trading market at prevailing market prices. During the first quarter of 2021, the Company issued $14.1 million aggregate principal amount of Additional Notes for aggregate net proceeds (net of sales agent commissions and offering expenses) of $13.8 million. Since inception of this program and through the date of this press release, the Company issued $17.9 million aggregate principal amount of Additional Notes for aggregate net proceeds (net of sales agent commissions and offering expenses) of $17.5 million.

(11) In March 2021, the Company completed the exchange of approximately $62.1 million in aggregate principal amount of Convertible Notes due 2022 for approximately $62.1 million in aggregate principal amount of Convertible Notes due 2025 as part of the March 2021 Exchange. Simultaneously with the March 2021 Exchange, the Company issued and sold $76.1 million in aggregate principal amount of Convertible Notes due 2025 as part of the March 2021 Convertible Notes Offering.

The conversion rate of the Convertible Notes due 2025 is initially 26.6617 common shares per $1,000 principal amount of Convertible Notes due 2025 (equivalent to an initial conversion price of approximately $37.507 per common share), and is subject to adjustment upon the occurrence of certain events as set forth in the indenture governing the Convertible Notes due 2025 (such as the payment of dividends).

Commencing on the issue date of the Convertible Notes due 2025, principal will accrete on the principal amount, compounded semi-annually, at a rate of approximately 5.52% per annum, which principal amount, together with any accretions thereon, is the “Accreted Principal Amount”. The Accreted Principal Amount at maturity will equal 125.3% of par, which together with the 3.00% interest rate, compounds to a yield-to-maturity of approximately 8.25%.

The Company recorded a loss on the extinguishment of the Convertible Notes due 2022 of $3.9 million as a result of the March 2021 Exchange which primarily arose from the difference between the carrying value and the face value of the Convertible Notes due 2022 on the date of the exchange.

Set forth below are the estimated expected future principal repayments on the Company’s outstanding indebtedness as of March 31, 2021, which includes principal amounts due under the Company’s secured credit facilities, Convertible Notes due 2022, Convertible Notes due 2025, lease financing arrangements, Senior Notes due 2025, and lease liabilities under IFRS 16 (which also include actual payments made during the first quarter of 2021 and through May 6, 2021):

In millions of U.S. dollars As of March 31, 2021 (1)
Q2 2021 – principal payments made through May 6, 2021 (2) $ 32.8
Q2 2021 – remaining principal payments 61.1
Q3 2021 72.9
Q4 2021 77.9
Q1 2022 (3) 90.7
Q2 2022 (4) 265.4
Q3 2022 (5) 86.7
Q4 2022 (6) 123.1
2023 and thereafter 2,389.4
$ 3,200.0 

(1) Amounts represent the principal payments due on the Company’s outstanding indebtedness as of March 31, 2021 and do not incorporate the impact of any of the Company’s new financing initiatives which have not closed as of that date.

(2) Repayments include the payment of $16.1 million on the ABN / SEB Credit Facility which was made as part of the refinancing of the amounts borrowed for STI Westminster, which was sold and leased back under the 2021 CMBFL Lease Financing in April 2021.

(3) Repayments include the maturity of the outstanding debt related to one vessel under the Citi/K-Sure Credit Facility of $19.3 million.

(4) Repayments include the maturity of the outstanding debt related to (i) three vessels under the Citi/K-Sure Credit Facility of $57.6 million in aggregate, (ii) the Company’s Convertible Notes due 2022 of $89.1 million, and (iii) three vessels under the ING Credit Facility of $44.8 million in aggregate.

(5) Repayments include the maturity of the outstanding debt related to one vessel under the ABN AMRO/K-Sure Credit Facility of $18.4 million.

(6) Repayments include the maturity of the outstanding debt related to (i) one vessel under the ABN AMRO/K-Sure Credit Facility of $17.2 million and (ii) one vessel under the Credit Agricole Credit Facility of $16.5 million..

Explanation of Variances on the First Quarter of 2021 Financial Results Compared to the First Quarter of 2020

For the three months ended March 31, 2021, the Company recorded a net loss of $62.4 million compared to net income of $46.6 million for the three months ended March 31, 2020. The following were the significant changes between the two periods:

  • 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 voyages, time charters, and pool charters), and it provides useful information to investors and management. The following table sets forth TCE revenue for the three months ended March 31, 2021 and 2020:
For the three months ended March 31,
In thousands of U.S. dollars 2021 2020
Vessel revenue $ 134,165 $ 254,167
Voyage expenses (1,385 ) (4,220 )
TCE revenue $ 132,780 $ 249,947
  • TCE revenue for the three months ended March 31, 2021 decreased by $117.2 million to $132.8 million, from $249.9 million for the three months ended March 31, 2020. Overall average TCE revenue per day decreased to $11,166 per day during the three months ended March 31, 2021, from $22,644 per day during the three months ended March 31, 2020. Given the onset of the COVID-19 pandemic, market fundamentals and underlying TCE revenue during these periods differed significantly.
    • TCE revenue for the three months ended March 31, 2021 reflected the adverse market conditions brought on by the COVID-19 pandemic. Demand for crude and refined petroleum products remained low during this period as inventories that built up during 2020 continued to be drawn, and most countries throughout the world continued to implement restrictive policies in an effort to control the spread of the virus.
    • TCE revenue for the three months ended March 30, 2020 reflected strong market conditions that were the result of (i) the January 1, 2020 implementation date of the IMO low sulfur emissions standards and (ii) the initial market conditions brought on by the onset of the COVID-19 pandemic in March 2020. Supply and demand dynamics shifted favorably during the fourth quarter of 2019 and early in the first quarter of 2020, driven by the January 1, 2020 implementation date of the International Maritime Organization’s (“IMO”) low sulfur emissions standards. The implementation of these standards impacted the trade flows of both crude and refined petroleum products which, combined with favorable supply and demand dynamics at the time, resulted in improvements in daily spot market TCE rates.

      Towards the end of the first quarter of 2020, travel restrictions and other preventive measure to control the spread of the COVID-19 pandemic resulted in a precipitous decline in oil demand. Lack of corresponding production and refinery cuts resulted in a supply glut of oil and refined petroleum products, which was exacerbated by extreme oil price volatility from the Russia-Saudi Arabia oil price war. The oversupply of petroleum products and contango in oil prices led to record floating storage and arbitrage opportunities of both crude and refined petroleum products. These market conditions had a disruptive impact on the supply and demand balance of product tankers, resulting in significant and prolonged spikes in spot TCE rates which persisted through the second quarter of 2020.

  • Vessel operating costs for the three months ended March 31, 2021 remained consistent, increasing slightly by $1.8 million to $83.3 million, from $81.5 million for the three months ended March 31, 2020. Vessel operating costs were impacted by a net decrease of 1.5 average vessels for the three months ended March 31, 2021 when compared to the three months ended March 31, 2020. This decrease was due to the redelivery of three Handymax vessels upon the expiration of their bareboat charters in the second and third quarters of 2020, and the redelivery of four Handymax vessels in March 2021. Offsetting this decrease was the delivery of four MRs under bareboat charter-in agreements; three of which were delivered during the first quarter of 2020, and one was delivered during the third quarter of 2020.

    Vessel operating costs per day increased to $6,891 per day for the three months ended March 31, 2021 from $6,592 per day for the three months ended March 31, 2020. This increase was primarily attributable to (i) costs incurred to transition technical managers for certain MRs that were acquired from Trafigura Maritime Logistics Pte. Ltd. in 2019, and (ii) costs incurred upon the expiration of the bareboat charters on four Handymax vessels in March 2021.

  • Depreciation expense – owned or sale leaseback vessels for the three months ended March 31, 2021 increased by $1.9 million to $48.8 million, from $46.8 million for the three months ended March 31, 2020. The increase was due to the Company’s drydock, scrubber and ballast water treatment system installations that have taken place over the preceding 12-month period.
  • Depreciation expense – right of use assets for the three months ended March 31, 2021 decreased $1.4 million to $11.8 million from $13.2 million for the three months ended March 31, 2020. Depreciation expense – right of use assets reflects the straight-line depreciation expense recorded under IFRS 16Leases. Right of use asset depreciation expense was impacted by the delivery of four vessels that were previously under construction (three MRs in the first quarter of 2020 and one MR in the third quarter of 2020), offset by the redelivery of three Handymax vessels upon the expiration of their bareboat charters in the second and third quarters of 2020 and four Handymax vessels at the end of the first quarter of 2021. The Company had four LR2s, 18 MRs, and four Handymax vessels (whose leases expired in March 2021) that were accounted for under IFRS 16 – Leases during the three months ended March 31, 2021. The right of use asset depreciation for these vessels is approximately $0.2 million per MR and $0.3 million per LR2 per month.
  • General and administrative expenses for the three months ended March 31, 2021, decreased by $3.7 million to $13.6 million, from $17.3 million for the three months ended March 31, 2020. This decrease was due to an overall reduction in costs during the three months ended March 31, 2021, including reductions in restricted stock amortization and compensation expenses.
  • Financial expenses for the three months ended March 31, 2021 decreased by $10.7 million to $34.1 million, from $44.8 million for the three months ended March 31, 2020. The decrease was primarily driven by significant decreases in LIBOR rates, which underpin all of the Company’s variable rate borrowings, and which have collapsed since the onset of the COVID-19 pandemic.

Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statements of Income or Loss
(unaudited)

For the three months ended March 31,
In thousands of U.S. dollars except per share and share data 2021 2020
Revenue
Vessel revenue $ 134,165 $ 254,167
Operating expenses
Vessel operating costs (83,302 ) (81,463 )
Voyage expenses (1,385 ) (4,220 )
Depreciation – owned or sale leaseback vessels (48,784 ) (46,841 )
Depreciation – right of use assets (11,841 ) (13,197 )
General and administrative expenses (13,560 ) (17,261 )
Total operating expenses (158,872 ) (162,982 )
Operating income (24,707 ) 91,185
Other (expense) and income, net
Financial expenses (34,067 ) (44,765 )
Loss on Convertible Notes exchange (3,856 )
Financial income 225 565
Other income and (expense), net 11 (358 )
Total other expense, net (37,687 ) (44,558 )
Net (loss) / income $ (62,394 ) $ 46,627
(Loss) / Earnings per share
Basic $ (1.15 ) $ 0.85
Diluted $ (1.15 ) $ 0.82
Basic weighted average shares outstanding 54,318,792 54,667,211
Diluted weighted average shares outstanding (1) 54,318,792 61,692,830

(1) The computation of diluted loss per share for the three months ended March 31, 2021 excludes the effect of potentially dilutive unvested shares of restricted stock and the Convertible Notes due 2022 and Convertible Notes due 2025 because their effect would have been anti-dilutive. The computation of diluted earnings per share for the three months ended March 31, 2020 includes the effect of potentially dilutive unvested shares of restricted stock and the effect of the Convertible Notes due 2022 under the if-converted method.

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

As of
In thousands of U.S. dollars March 31, 2021 December 31, 2020
Assets
Current assets
Cash and cash equivalents $ 269,538 $ 187,511
Accounts receivable 45,086 33,017
Prepaid expenses and other current assets 9,092 12,430
Inventories 8,104 9,261
Total current assets 331,820 242,219
Non-current assets
Vessels and drydock 3,964,122 4,002,888
Right of use assets 794,970 807,179
Other assets 97,274 92,145
Goodwill 8,900 8,900
Restricted cash 5,293 5,293
Total non-current assets 4,870,559 4,916,405
Total assets $ 5,202,379 $ 5,158,624
Current liabilities
Current portion of long-term debt $ 105,861 $ 172,705
Lease liability – sale and leaseback vessels 151,446 131,736
Lease liability – IFRS 16 54,442 56,678
Accounts payable 14,796 12,863
Accrued expenses 27,891 32,193
Total current liabilities 354,436 406,175
Non-current liabilities
Long-term debt 966,309 971,172
Lease liability – sale and leaseback vessels 1,311,604 1,139,713
Lease liability – IFRS 16 562,146 575,796
Total non-current liabilities 2,840,059 2,686,681
Total liabilities 3,194,495 3,092,856
Shareholders’ equity
Issued, authorized and fully paid-in share capital:
Share capital 656 656
Additional paid-in capital 2,854,716 2,850,206
Treasury shares (480,172 ) (480,172 )
Accumulated deficit (367,316 ) (304,922 )
Total shareholders’ equity 2,007,884 2,065,768
Total liabilities and shareholders’ equity $ 5,202,379 $ 5,158,624

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

For the three months ended March 31,
In thousands of U.S. dollars 2021 2020
Operating activities
Net (loss) / income $ (62,394 ) $ 46,627
Depreciation – owned or finance leased vessels 48,784 46,841
Depreciation – right of use assets 11,841 13,197
Amortization of restricted stock 6,192 7,845
Amortization of deferred financing fees 1,825 1,458
Write-off of deferred financing fees and unamortized discounts on sale and leaseback facilities 1,275
Accretion of convertible notes 1,922 2,258
Accretion of fair value measurement on debt assumed in business combinations 847 878
Loss on Convertible Notes exchange 3,856
14,148 119,104
Changes in assets and liabilities:
Decrease / (increase) in inventories 1,157 (1,221 )
Increase in accounts receivable (12,069 ) (70,363 )
(Increase) / decrease in prepaid expenses and other current assets (600 ) 2,080
(Increase) / decrease in other assets (147 ) 46
Increase / (decrease) in accounts payable 2,428 (675 )
Decrease in accrued expenses (6,745 ) (4,869 )
(15,976 ) (75,002 )
Net cash (outflow) / inflow from operating activities (1,828 ) 44,102
Investing activities
Drydock, scrubber, ballast water treatment system and other vessel related payments (owned, finance leased and bareboat-in vessels) (16,601 ) (63,486 )
Net cash outflow from investing activities (16,601 ) (63,486 )
Financing activities
Debt repayments (224,757 ) (108,617 )
Issuance of debt 273,421 73,946
Debt issuance costs (3,643 ) (1,783 )
Principal repayments on lease liability – IFRS 16 (14,856 ) (20,772 )
Issuance of convertible notes 76,100
Dividends paid (5,809 ) (5,868 )
Net cash inflow / (outflow) from financing activities 100,456 (63,094 )
Increase / (decrease) in cash and cash equivalents 82,027 (82,478 )
Cash and cash equivalents at January 1, 187,511 202,303
Cash and cash equivalents at March 31, $ 269,538 $ 119,825

Scorpio Tankers Inc. and Subsidiaries
Other operating data for the three months and three months ended March 31, 2021 and 2020
(unaudited)

For the three months ended March 31,
2021 2020
Adjusted EBITDA(1) (in thousands of U.S. dollars except Fleet Data) $ 42,121 $ 158,710
Average Daily Results
TCE per day(2) $ 11,166 $ 22,644
Vessel operating costs per day(3) $ 6,891 $ 6,592
LR2
TCE per revenue day (2) $ 11,947 $ 25,914
Vessel operating costs per day(3) $ 6,675 $ 6,742
Average number of vessels 42.0 42.0
LR1
TCE per revenue day (2) $ 11,228 $ 20,296
Vessel operating costs per day(3) $ 6,646 $ 6,678
Average number of vessels 12.0 12.0
MR
TCE per revenue day (2) $ 11,281 $ 20,866
Vessel operating costs per day(3) $ 6,974 $ 6,422
Average number of vessels 63.0 60.8
Handymax
TCE per revenue day (2) $ 8,844 $ 22,564
Vessel operating costs per day(3) $ 7,280 $ 6,734
Average number of vessels 17.3 21.0
Fleet data
Average number of vessels 134.3 135.8
Drydock
Drydock, scrubber, ballast water treatment system and other vessel related payments for owned, sale leaseback and bareboat chartered-in vessels (in thousands of U.S. dollars) $ 16,601 $ 63,486
(1) See Non-IFRS Measures 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, finance leased or chartered-in less the number of days the vessel is off-hire for drydock and repairs.
(3) Vessel operating costs per day represent vessel operating costs divided by the number of operating days during the period. Operating days are the total number of available days in a period with respect to the owned, finance leased or bareboat chartered-in vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned, finance leased or bareboat chartered-in vessels, not our time chartered-in vessels.

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