Scorpio Tankers Posts Net Loss of Over $60 Million in 9-Month Period

Scorpio-Tankers

Scorpio Tankers Inc. yesterday reported its results for the three and nine months ended September 30, 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 September 30, 2019 and 2018

For the three months ended September 30, 2019, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $44.8 million, or $0.92 basic and diluted loss per share, which excludes from the net loss a $0.4 million, or $0.01 per basic and diluted share, write-off of deferred financing fees. For the three months ended September 30, 2019, the Company had a net loss of $45.3 million, or $0.93 basic and diluted loss per share.

For the three months ended September 30, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $64.9 million, or $2.09 basic and diluted loss per share, which excludes from the net loss (i) a $0.9 million loss recorded on the Company’s exchange of $15.0 million of its Convertible Notes due 2019, and (ii) a $5.9 million write-off of deferred financing fees. The adjustments resulted in an aggregate reduction of the Company’s net loss by $6.8 million, or $0.22 per basic and diluted share. For the three months ended September 30, 2018, the Company had a net loss of $71.7 million, or $2.31 basic and diluted loss per share.

Results for the nine months ended September 30, 2019 and 2018

For the nine months ended September 30, 2019, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $59.8 million, or $1.24 basic and diluted loss per share, which excludes from the net loss a $0.7 million, or $0.01 per basic and diluted share, write-off of deferred financing fees. For the nine months ended September 30, 2019, the Company had a net loss of $60.5 million, or $1.25 basic and diluted loss per share.

For the nine months ended September 30, 2018, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $141.3 million, or $4.57 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 $203.5 million of its Convertible Notes due 2019, (ii) a $12.9 million write-off of deferred financing fees, and (iii) $0.3 million of transaction costs related to the merger with Navig8 Product Tankers Inc. The adjustments resulted in an aggregate reduction of the Company’s net loss by $31.1 million, or $1.00 per basic and diluted share. For the nine months ended September 30, 2018, the Company had a net loss of $172.4 million, or $5.57 basic and diluted loss per share.

Declaration of Dividend

On November 6, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about December 13, 2019 to all shareholders of record as of November 25, 2019 (the record date). As of November 6, 2019, there were 58,142,400 common shares of the Company outstanding.

Summary of Other Recent and Third Quarter Significant Events

• On September 26, 2019, the Company acquired subsidiaries of Trafigura Maritime Logistics Pte. Ltd. (“Trafigura”), which have leasehold interests in 19 product tankers under bareboat charter agreements with an international financial institution for aggregate consideration of $803 million. Of the 19 vessels, 15 (consisting of 11 MRs and four LR2s) were delivered during 2019 and four MRs are currently under construction. This acquisition is referred to as the “Trafigura Transaction”.

• On September 26, 2019, the Company closed on the private placements of its common stock at $29.00 per share with Trafigura for $35 million and with Scorpio Services Holding Limited, a related party, for $15 million, for an aggregate of $50 million and 1,724,137 common shares.

• 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 fourth quarter of 2019 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: an average of approximately $26,000 per day for 47% of the days.

• For the LR1s in the pool: an average of approximately $17,000 per day for 46% of the days.

• For the MRs in the pool: an average of approximately $17,000 per day for 45% of the days.

• For the ice-class 1A Handymaxes in the pool: an average of approximately $15,000 per day for 42% of the days.

• Below is a summary of the average daily TCE revenue earned on the Company’s vessels during the third quarter of 2019:

• For the LR2s in the pool: an average of $15,960 per revenue day.

• For the LR1s in the pool: an average of $13,126 per revenue day.

• For the MRs in the pool: an average of $13,640 per revenue day.

• For the ice-class 1A Handymaxes in the pool: an average of $9,974 per revenue day.

• As of the date of this press release, the Company has received commitments for nine different facilities to partially finance the purchase and installation of exhaust gas cleaning systems (“scrubbers”) on certain of the Company’s vessels. These commitments are expected to increase the Company’s liquidity by approximately $120.2 million. Additionally, the Company is in discussions with a different group of financial institutions to finance the purchase of scrubbers which, if consummated, is expected to increase the Company’s liquidity by an additional $57.5 million. Subject to reaching agreement on satisfactory terms relating to the additional scrubber financing, all of these agreements are expected to be signed in the next few months, and the drawdowns are expected to occur as the scrubbers are installed throughout the remainder of 2019 and 2020.

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

• In July 2019, the Company’s Convertible Notes due 2019 matured and the outstanding balance of $142.7 million was fully repaid in cash upon maturity.
Acquisition of the leasehold interests in 19 product tankers

On September 26, 2019, the Company acquired subsidiaries of Trafigura, which have leasehold interests in 19 product tankers under bareboat charter agreements with subsidiaries of an international financial institution for aggregate consideration of $803 million. Of the 19 vessels, 15 (consisting of 11 MRs and four LR2s) were delivered during 2019 and four MRs are currently under construction. The consideration exchanged consisted of:

• For the delivered vessels, the assumption of the obligations under the bareboat charter agreements of $531.5 million and the issuance of 3,981,619 shares of common stock at $29.00 per share to a nominee of Trafigura with an aggregate market value of $115.5 million.

• For the four vessels under construction, the assumption of the commitments on the bareboat charter agreements of $138.9 million and the issuance 591,254 shares of common stock at $29.00 per share to a nominee of Trafigura with an aggregate market value of $17.1 million. These vessels under construction are expected to be delivered during 2020.
Each bareboat charter agreement has a term of eight years from the delivery date of the respective vessel, and the Company has purchase options beginning after the first year of each agreement. Each agreement bears interest at LIBOR plus a margin of 3.50% per annum and will be repaid in equal monthly installments of approximately $0.2 million per month per vessel. Additionally, an aggregate prepayment of $18 million ($0.8 million for each MR and $1.5 million for each LR2) will be made in equal monthly installments over the first 12 months of each bareboat charter agreement.

The Trafigura transaction was accounted for as an asset acquisition, with the acquisition of the leasehold interests accounted for under IFRS 16, Leases, which was effective from January 1, 2019. Accordingly, the Company recorded lease liabilities and corresponding right of use assets for the delivered vessels upon the closing date of the Trafigura Transaction. The right of use assets were measured based on (i) the present value of the minimum lease payments under each lease (which assumes the exercise of the purchase options at expiration), (ii) the value of the equity issued for each lease (as an initial direct cost) and (iii) other initial direct costs as part of the Trafigura Transaction.

The lease liabilities and corresponding right of use assets for the four undelivered vessels will be recorded upon the commencement date of each lease. The value of the Company’s common shares issued for the leasehold interests on the four undelivered vessels was recorded within ‘Other long-term assets’ on the balance sheet at the closing date of the Trafigura Transaction and will be reclassified to ‘Right of use assets’ upon the commencement date of each lease.

$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 third quarter of 2019 and through the date of this press release.

As of the date hereof, the Company has the authority to purchase up to an additional $121.6 million of its securities under its Securities Repurchase Program. 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.

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 $10.9 million during the three and nine months ended September 30, 2019, respectively, were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three and nine months ended September 30, 2019, the Company’s basic weighted average number of shares were 48,529,024 and 48,251,159, respectively. For the three and nine months ended September 30, 2019, the Company’s diluted weighted average number of shares were 50,169,591 and 49,735,327 respectively, excluding the impact of the Convertible Notes due 2022, and 55,394,037 and 55,890,573, respectively, under the if-converted method.

The weighted average number of shares, both diluted and under the if-converted method, were anti-dilutive for the three and nine months ended September 30, 2019 as the Company incurred net losses during those periods.

The Company’s Convertible Notes due 2019 matured in July 2019, and the outstanding balance of $142.7 million was fully repaid in cash upon maturity. As of the date hereof, the Company’s trading stock price is below the conversion price of the Convertible Notes due 2022.

LEAVE A COMMENT

×

Comments are closed.