Scorpio Tankers posts lower net profits for the second quarter

ScorpioTankers

Scorpio Tankers reported its results for the three and six months ended June 30, 2016 and declaration of a quarterly dividend.

Results for the three months ended June 30, 2016 and 2015

For the three months ended June 30, 2016, the Company’s adjusted net income (see Non-IFRS Measures section below) was $6.6 million, or $0.04 basic and diluted earnings per share, which excludes from net income (i) a $3.7 million write-off of deferred financing fees, (ii) a $0.4 million unrealized gain on derivative financial instruments, (iii) a $0.4 million gain recorded on the repurchase of $5.0 million aggregate principal amount of the Company’s Convertible Senior Notes due 2019 (the “Convertible Notes”) and (iv) a $0.1 million gain on sales of vessels. The adjustments resulted in an aggregate increase of net income by $2.7 million or $0.02 basic and diluted earnings per share. For the three months ended June 30, 2016, the Company had net income of $3.8 million, or $0.02 basic and diluted earnings per share (see below for further information).

For the three months ended June 30, 2015, the Company’s adjusted net income (see non-IFRS Measures section below) was $57.5 million, or $0.35 basic and $0.32 diluted earnings per share, which excludes an unrealized gain on derivative financial instruments of $0.1 million, or $0.00 per basic and diluted shares. For the three months ended June 30, 2015, the Company had net income of $57.6 million, or $0.35 basic and $0.32 diluted earnings per share.

Results for the six months ended June 30, 2016 and 2015

For the six months ended June 30, 2016, the Company’s adjusted net income (see Non-IFRS Measures section below) was $37.0 million, or $0.23 basic and $0.22 diluted earnings per share, which excludes from net income (i) a $2.1 million loss on sales of vessels, (ii) a $5.5 million write-off 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 increase of net income by $5.2 million or $0.03 basic and diluted earnings per share. For the six months ended June 30, 2016, the Company had net income of $31.9 million, or $0.20 basic and $0.19 diluted earnings per share.

For the six months ended June 30, 2015, the Company’s adjusted net income (see non-IFRS Measures section below) was $96.8 million, or $0.62 basic and $0.55 diluted earnings per share, which excludes from net income a gain of $2.0 million related to the closing of the sales of three vessels and an unrealized loss on derivative financial instruments of $0.5 million. These adjustments aggregated to a decrease of net income by $1.5 million, or $0.01 per basic and diluted shares. For the six months ended June 30, 2015, the Company had net income of $98.3 million, or $0.63 basic and $0.56 diluted earnings per share.

Declaration of Dividend

On July 28, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on September 29, 2016 to all shareholders as of September 15, 2016 (the record date). As of July 27, 2016, there were 172,378,640 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 $10.8 million during the three and six months ended June 30, 2016, respectively, are not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three and six months ended June 30, 2016, the Company’s basic weighted average number of shares were 161,381,900 and 160,931,752, respectively. The Company’s diluted weighted average number of shares for those periods were 165,943,795 and 166,306,290, respectively which excludes the impact of the Convertible Notes since the if-converted method was anti-dilutive. As of the date hereof, the Convertible Notes are not eligible for conversion.

Summary of Recent and Second Quarter Significant Events:

Below is a summary of the average daily TCE revenue and duration for voyages fixed thus far in the third quarter of 2016:
For the LR2s in the pool: approximately $17,000 per day for 47% of the days
For the LR1 in the pool: approximately $13,000 per day for 42% of the days
For the MRs in the pool: approximately $14,000 per day for 38% of the days
For the Handymaxes in the pool: approximately $11,000 per day for 32% of the days

Below is a summary of the average daily TCE revenue earned during the second quarter of 2016:
For the LR2s in the pool: $20,402 per revenue day
For the LR1 in the pool: $19,149 per revenue day
For the MRs in the pool: $16,405 per revenue day
For the Handymaxes in the pool: $12,924 per revenue day

Reduced the Company’s outstanding debt by $95.1 million between April 1, 2016 and July 27, 2016.

Received a commitment for a credit facility of up to $300 million from ABN AMRO Bank N.V, Nordea Bank Finland plc, acting through its New York branch, and Skandinaviska Enskilda Banken AB, the proceeds of which are expected to be used to refinance the existing indebtedness on 16 MR product tankers.

Executed a credit facility with NIBC Bank N.V. in June 2016 to refinance the existing indebtedness on two 2013 built MR product tankers; the loan was fully drawn in July 2016.

Took delivery of STI Jermyn, an LR2 product tanker that was under construction, from Daehan Shipbuilding Co., Ltd (“DHSC”) in June 2016.

Agreed to time charter-in three MR product tankers consisting of a 2013 built MR product tanker for one year at $15,800 per day (delivered in July 2016) and two 2011 built MR product tankers, each for two years at $15,250 per day (expected to be delivered in August 2016).

Repurchased $5.0 million aggregate principal amount of the Convertible Notes for $847.50 per $1,000 aggregate principal amount in May 2016.

Repurchased 657,154 common shares at an average price of $4.26 per share in July 2016. The repurchased shares are being held as treasury shares.

Paid a quarterly cash dividend on the Company’s common stock of $0.125 per share in June 2016.

$300 Million Credit Facility Commitment

In July 2016, the Company received a commitment for a loan facility of up to $300 million from ABN AMRO Bank N.V, Nordea Bank Finland plc, acting through its New York branch, and Skandinaviska Enskilda Banken AB. The borrowings under the loan facility are expected to be used to refinance the existing indebtedness relating to 16 MR product tankers, and the loan 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 loan facility is expected to be comprised of a term loan up to $200 million and a revolver up to $100 million, and the availability may be used to finance up to 60% of the fair market value of the respective vessels at the time of delivery. The loan facility is subject to customary conditions precedent and the execution of definitive documentation.

NIBC Credit Facility

In June 2016, the Company executed a loan facility with NIBC Bank N.V. This facility was fully drawn in July 2016, and the proceeds of $40.8 million were used to refinance the existing indebtedness on two 2013 built MR product tankers. The loan facility has a final maturity of five years from the signing date and bears interest at LIBOR plus a margin of 2.50% per annum.

Vessel deliveries

In June 2016, the Company took delivery of STI Jermyn, an LR2 product tanker from DHSC. The Company drew down $26.0 million under its ING Credit Facility to partially finance the purchase price of this vessel.

In April 2016, the Company took delivery of STI Lombard, an LR2 product tanker that was previously bareboat chartered-in, and paid the remaining 90% of the purchase price, or $53.1 million, upon delivery. The Company drew down $26.5 million from its ING Credit Facility to partially finance this transaction.

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

an aggregate of 657,154 of its common shares at an average price of $4.26 per share; the repurchased shares are being held as treasury shares. There are 172,378,640 shares outstanding as of July 27, 2016.
$5.0 million aggregate principal amount of its Convertible Notes at an average price of $847.50 per $1,000 principal amount.

Time Charter-in Update

In July 2016, the Company agreed to time charter-in two 2011 built MR product tankers, each for two years at $15,250 per day. The Company also has an option to extend each charter for an additional year at $16,000 per day. These vessels are expected to be delivered in August 2016.

In July 2016, the Company time chartered-in a 2013 built MR product tanker for one year at $15,800 per day. The Company also has an option to extend the charter for an additional year at $17,000 per day. This vessel was delivered in July 2016.

In April 2016, the Company exercised its option to extend the charter on an MR product tanker that is currently time chartered-in for an additional year at $16,350 per day effective May 2016.

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