Scorpio Tankers Posts Fourth Quarter Loss

ScorpioTankers

Scorpio Tankers Inc. reported its results for the three months and year ended December 31, 2016 and declaration of a quarterly dividend.

Results for the three months ended December 31, 2016 and 2015

For the three months ended December 31, 2016, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $29.4 million, or $0.18 basic and diluted loss per share, which excludes a $0.2 million, or $0.00 per basic and diluted share, unrealized loss on derivative financial instruments. For the three months ended December 31, 2016, the Company had a net loss of $29.7 million, or $0.18 basic and diluted loss per share.

For the three months ended December 31, 2015, the Company’s adjusted net income was $36.3 million (see Non-IFRS Measures section below), or $0.22 basic and $0.21 diluted earnings per share, which excludes (i) a $0.7 million write-off of deferred financing fees, (ii) a $0.7 million write-off of deposits made for options to construct MR product tankers that expired unexercised and (iii) a $0.7 million unrealized loss on derivative financial instruments. The adjustments resulted in an aggregate increase of the Company’s net income by $2.1 million, or $0.01 basic and diluted earnings per share. For the three months ended December 31, 2015, the Company had net income of $34.2 million, or $0.21 basic and $0.20 diluted earnings per share.

Results for the years ended December 31, 2016 and 2015

For the year ended December 31, 2016, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $10.7 million, or $0.07 basic and diluted loss per share, which excludes (i) a $2.1 million loss on sales of vessels, (ii) an aggregate write-off of $14.5 million of deferred financing fees, (iii) a $1.4 million unrealized gain on derivative financial instruments and (iv) a $1.0 million aggregate gain recorded on the repurchase of $10.0 million aggregate principal amount of the Company’s Convertible Notes. The adjustments resulted in an aggregate decrease of the Company’s net loss by $14.2 million, or $0.08 per basic and diluted share. For the year ended December 31, 2016, the Company had a net loss of $24.9 million, or $0.15 basic and diluted loss per share.

For the year ended December 31, 2015, the Company’s adjusted net income was $221.3 million (see Non-IFRS Measures section below), or $1.37 basic and $1.21 diluted earnings per share, which excludes (i) a gain of $1.2 million resulting from the sale of the Company’s investment in Dorian, (ii) a gain of $1.4 million resulting from the early termination of a contract on a time chartered-in vessel, (iii) a reserve of $1.4 million for a pool bunker supplier in bankruptcy, (iv) a $2.7 million write-off of deferred financing fees, (v) a $0.7 million write-off of deposits made for options to construct MR product tankers that expired unexercised, (vi) a net loss of $35,000 related to the gains and losses on the sales of four vessels, (vii) a $1.3 million unrealized loss on derivative financial instruments and (viii) a gain of $46,000 resulting from the repurchase of $1.5 million aggregate principal amount of the Company’s Convertible Notes. The adjustments resulted in an aggregate increase of the Company’s net income by $3.5 million or $0.02 basic and $0.01 diluted earnings per share. For the year ended December 31, 2015, the Company had net income of $217.7 million, or $1.35 basic and $1.20 diluted earnings per share.

Declaration of Dividend

On February 13, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about March 30, 2017 to all shareholders as of February 23, 2017 (the record date). As of February 10, 2017, there were 174,629,755 shares outstanding.

Diluted Weighted Number of Shares

Diluted earnings per share is determined using the if-converted method. Under this method, the Company assumes that the Convertible Notes (which were issued in June 2014) are converted into common shares at the beginning of each period and the interest and non-cash amortization expense associated with these notes of $5.4 million and $21.7 million during the three months and year ended December 31, 2016, respectively, are not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three months and year ended December 31, 2016, the Company’s basic weighted average number of shares were 161,868,161 and 161,118,654, respectively. The weighted average number of shares, both diluted and under the if-converted method, were anti-dilutive for the three months and year ended December 31, 2016 as the Company incurred a net loss. As of the date hereof, the Convertible Notes are not eligible for conversion.

Summary of Recent and Fourth Quarter Significant Events

Below is a summary of the average daily TCE revenue and duration for voyages fixed thus far in the first quarter of 2017 as of the date hereof:
For the LR2s in the pool: approximately $16,000 per day for 61% of the days
For the LR1 in the pool: approximately $14,500 per day for 50% of the days
For the MRs in the pool: approximately $14,300 per day for 53% of the days
For the ice-class 1A and 1B Handymaxes in the pool: approximately $16,500 per day for 51% of the days
Below is a summary of the average daily TCE revenue earned during the fourth quarter of 2016:
For the LR2s in the pool: $13,966 per revenue day
For the LR1 in the pool: $14,856 per revenue day
For the MRs in the pool: $11,677 per revenue day
For the Handymaxes in the pool: $10,461 per revenue day
Signed a non-binding term sheet to sell and leaseback three MR tankers to an unaffiliated third party. Upon completion, the Company’s liquidity is expected to increase by approximately $29.0 million after the repayment of debt.
Received a commitment for a credit facility of up to $81.4 million with a final maturity of December 2021 from DVB Bank SE to refinance a previous facility with DVB Bank SE, which financed four product tankers.
Received loan commitments from Macquarie Bank Limited (London Branch), DekaBank Deutsche Girozentrale, The Export-Import Bank of Korea (“KEXIM”) and Garanti-Instituttet for Eksportkreditt (“GIEK”) for a total loan facility of up to $172.0 million. The proceeds of the facility are expected to be used to partially finance eight MR product tankers that are currently under construction at Hyundai Mipo Dockyard Co., Ltd. (“HMD”).
Took delivery of STI Selatar, an LR2 product tanker that was under construction at Sungdong Shipbuilding and Marine Engineering Co., Ltd. (“SSME”), in February 2017.
Upsized the Company’s BNP Paribas Credit Facility by $27.6 million, the proceeds of which were used to refinance the existing indebtedness on two MR product tankers.
Executed a loan facility with HSH Nordbank AG which was used to refinance the existing indebtedness on two MR product tankers in February 2017.
Entered into an agreement to bareboat-in seven Handymax ice-class 1A product tankers for up to two years.
Paid a quarterly cash dividend on the Company’s common stock of $0.125 per share in December 2016.
DVB 2017 Credit Facility

In January 2017, the Company received a commitment for a credit facility of up to $81.4 million from DVB Bank SE (the “DVB 2017 Credit Facility”) to refinance its previous facility with DVB Bank SE. The new credit facility will be used to refinance the existing indebtedness on four product tankers, has a final maturity of December 2021, and bears interest at LIBOR plus a margin of 2.75% per annum. The available borrowings may be used to finance up to 63% of the fair market value of the respective vessels.

The remaining terms and conditions, including financial covenants, are similar to those set forth above in the Company’s existing credit facilities. The loan facility is subject to customary conditions precedent and the execution of definitive documentation.

2017 Credit Facility

In January 2017, the Company received commitments from a group of financial institutions led by Macquarie Bank Limited (London Branch) for a total loan facility of up to $172.0 million (the “2017 Credit Facility”). The facility includes two commercial tranches for $15.0 million and $25.0 million, a KEXIM Guaranteed Tranche for $48.0 million, a KEXIM Funded Tranche for $52.0 million, and a GIEK Guaranteed Tranche for $32.0 million.

The loan facility is expected to be used to partially finance the purchase of eight MR product tankers that are currently under construction at HMD. Drawdowns will be available at an amount equal to the lower of 60% of the contract price and 60% of the fair market value of each respective vessel. Other key terms are as follows:

The first commercial tranche of $15.0 million has a final maturity of six years from the drawdown date of each vessel, bears interest at LIBOR plus a margin of 2.25% per annum, and has a 15 year repayment profile.

The second commercial tranche of $25.0 million has a final maturity of nine years from the drawdown date of each vessel (assuming KEXIM or GIEK have not exercised their option to call for prepayment of the KEXIM and GIEK funded and guaranteed tranches by the date falling two months prior to the maturity of the first commercial tranche and in the event that the first commercial tranche has not been extended), bears interest at LIBOR plus a margin of 2.25% per annum, and has a 15 year repayment profile.

The KEXIM Funded Tranche and GIEK Guaranteed Tranche have a final maturity of 12 years from the drawdown date of each vessel (assuming the commercial tranches are refinanced through that date), bear interest at LIBOR plus a margin of 2.15% per annum, and have a 12 year repayment profile.

The KEXIM Guaranteed Tranche has a final maturity of 12 years from the drawdown date of each vessel (assuming the commercial tranches are refinanced through that date), bears interest at LIBOR plus a margin of 1.60% per annum, and has a 12 year repayment profile.

The remaining terms and conditions, including financial covenants, are similar to those set forth above in the Company’s existing credit facilities. The loan facility is subject to customary conditions precedent and the execution of definitive documentation.

Upsizing of BNP Paribas Credit Facility

In December 2016, the Company upsized its existing credit facility with BNP Paribas by $27.6 million. The $27.6 million increase of the bilateral financing bears interest at LIBOR plus a margin of 2.30% per annum and was used to refinance the existing indebtedness on two MR product tankers (2013 built). In addition, the maturity date of the facility was extended to December 2021. The terms and conditions, including covenants, of the credit facility are similar to those in the Company’s existing credit facilities.

HSH Credit Facility

In January 2017, the Company executed a loan facility with HSH Nordbank AG which was fully drawn in February 2017, and the proceeds of $31.1 million were used to refinance the existing indebtedness on two MR product tankers. The facility has a final maturity of five years from the first drawdown date, and bears interest at LIBOR plus a margin of 2.50% per annum. The remaining terms and conditions, including financial covenants, are similar to those in the Company’s existing credit facilities.

2011 Credit Facility

As of December 31, 2016, the 2011 Credit Facility, which is scheduled to mature in May 2017, had seven MR product tankers as collateral. Since January 2017, the Company has refinanced two vessels in the BNP Paribas Credit Facility, two vessels in the HSH Credit Facility, and the Company is in discussions to refinance the remaining three vessels.

Time and Bareboat Charter-in Update

In December 2016, the Company entered into agreements to bareboat-in seven Handymax ice-class 1A product tankers. The agreements include purchase options, which can be exercised through December 31, 2018. If the purchase options are not exercised, the bareboat-in agreements expire on March 31, 2019.

Three of the vessels were previously time chartered-in by the Company for $15,600 per day. These time charter-in contracts were cancelled in January 2017 and replaced by the new bareboat contracts at a rate of $7,500 per day. The remaining four vessels will be chartered-in, on a bareboat basis, for $6,000 per day. Two of these vessels were delivered in February 2017 and the remaining two are expected to be delivered within the first quarter of 2017.

In November 2016, the Company extended the time charter-in agreement for an MR product tanker that is currently time chartered-in for an additional year at $13,050 per day effective January 2017. The Company also has an option to extend the charter for an additional year at $15,000 per day.

In October 2016, the Company time chartered-in a 2006 built MR product tanker for one year at $13,500 per day. The Company also has an option to extend the charter for an additional year at $15,000 per day.

$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 currently consist of its (i) Convertible Notes, which were issued in June 2014, (ii) Unsecured Senior Notes Due 2020 (NYSE: SBNA), which were issued in May 2014, and (iii) Unsecured Senior Notes Due 2017 (NYSE: SBNB), which were issued in October 2014. As of the date hereof, the Company has the authority to purchase up to an additional $153.3 million of its securities under its Securities Repurchase Program. The Company expects to 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.

Since January 1, 2016 through the date of this press release, the Company has repurchased its securities as follows:

An aggregate of 2,956,760 of its common shares at an average price of $5.58 per share; the repurchased shares are being held as treasury shares. There were 174,629,755 shares outstanding as of February 10, 2017.
$10.0 million aggregate principal amount of its Convertible Notes at an average price of $839.28 per $1,000 principal amount.

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