Scorpio Tankers posts “strong” second quarter results

Scorpio Tankers

Scorpio Tankers reported its results for the three and six months ended June 30, 2020. 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 June 30, 2020 and 2019

For the three months ended June 30, 2020, the Company had net income of $143.9 million, or $2.63 basic and $2.40 diluted earnings per share. For the three months ended June 30, 2020, the Company had an adjusted net income (see Non-IFRS Measures section below) of $144.3 million, or $2.63 basic and $2.40 diluted earnings per share, which excludes from net income a $0.3 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

For the three months ended June 30, 2019, the Company’s net loss was $29.7 million, or $0.62 basic and diluted loss per share. There were no Non-IFRS adjustments to the net loss for the three months ended June 30, 2019.

Results for the six months ended June 30, 2020 and 2019

For the six months ended June 30, 2020, the Company had net income of $190.6 million, or $3.48 basic and $3.21 diluted earnings per share. For the six months ended June 30, 2020, the Company had an adjusted net income (see Non-IFRS Measures section below) of $190.9 million, or $3.49 basic and $3.21 diluted earnings per share, which excludes from net income a $0.3 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

For the six months ended June 30, 2019, the Company had a net loss of $15.2 million, or $0.32 basic and diluted loss per share. For the six months ended June 30, 2019, the Company’s adjusted net loss (see Non-IFRS Measures section below) was $15.0 million, or $0.31 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.

Declaration of Dividend

On August 5, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about September 29, 2020 to all shareholders of record as of September 9, 2020 (the record date). As of August 5, 2020, there were 58,807,747 common shares of the Company outstanding.

Summary of Second Quarter and Other Recent Significant Events

Below is a summary of the average daily Time Charter Equivalent (“TCE”) revenue  and duration of contracted pool voyages and time charters for the Company’s vessels thus far in the third quarter of 2020 as of the date hereof :

tbl1

Below is a summary of the average daily TCE revenue earned by the Company’s vessels in each of the pools during the second quarter of 2020:

tbl2

  • The Company’s strong second quarter results, coupled with the repayment of debt, have resulted in the Company’s net debt position decreasing by $228.8 million from $3.1 billion at March 31, 2020 to $2.9 billion at August 5, 2020.
  • The Company is in discussions with a group of financial institutions to refinance the existing debt on eight of its vessels which, if consummated, is expected to increase the Company’s liquidity by an additional $80 million, after the repayment of existing debt. These refinancings are expected to be agreed in the next few months, and the drawdowns are expected to occur before the end of 2020.
  • In July 2020, the Company repurchased $13.8 million aggregate principal amount of its Convertible Notes due 2022 at an average price of $882.23 per $1,000 principal amount, or $12.2 million.
  • In May 2020, the Company’s Senior Unsecured Notes due May 2020 matured and the outstanding principal balance of $53.8 million was repaid in full. Subsequently in May 2020, the Company issued $28.1 million aggregate principal amount of 7.0% senior unsecured notes due June 30, 2025 (the “Senior Notes due 2025”) in an underwritten public offering. This amount includes $3.1 million related to the partial exercise of the underwriters’ option to purchase additional Senior Notes due 2025 under the same terms and conditions. The aggregate net proceeds were approximately $26.5 million after deducting underwriting commissions and offering expenses.
  • In May 2020, the Company executed a credit facility for up to $225.0 million with a group of European financial institutions (the “2020 $225.0 Million Credit Facility”). The Company drew $101.2 million from this facility in June 2020, and the proceeds were used to refinance the existing debt on four LR2s that were previously financed under the ABN AMRO Credit Facility, which was scheduled to mature during the third quarter of 2020. The remaining availability under this credit facility is expected to be used to refinance the existing debt on five of the Company’s vessels and scrubbers on two LR2s.
  • In May 2020, the Company executed an agreement to upsize its $179.2 million credit facility with ING Bank N.V. to $251.4 million. The upsized portion of this facility was fully drawn in May 2020, and the proceeds were used to refinance the existing debt on five vessels, which were previously financed under the KEXIM Credit Facility.
  • Based upon the commitments received to date, which include the remaining availability under the 2020 $225.0 Million Credit Facility and certain financing transactions that have been previously announced, the Company expects to raise approximately $56 million of aggregate additional liquidity (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 several of these financings are tied to scrubber installations on the Company’s vessels.
  • In April 2020, the Company reached an agreement with its counterparty to postpone the purchase and installation of scrubbers on 19 of its vessels. The installation of these scrubbers is now expected to begin not earlier than 2021.

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 $3.8 million and $7.6 million, respectively, during the three and six months ended June 30, 2020 were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three and six months ended June 30, 2020, the Company’s basic weighted average number of shares were 54,827,479 and 54,747,345, respectively. For the three and six months ended June 30, 2020, the Company’s diluted weighted average number of shares were 56,318,815 and 56,525,701 (which includes the potentially dilutive impact of unvested shares of restricted stock and excludes the impact of the Convertible Notes due 2022), respectively, and 61,593,958 and 61,801,095, respectively, under the if-converted method. Given the Company’s results for the three and six months ended June 30, 2020, earnings per diluted share were calculated under the if-converted method as the result of this calculation was dilutive.

Novel Coronavirus (COVID-19)

Since the beginning of calendar year 2020, the outbreak of COVID-19 that originated in China and that has spread to most developed nations of the world has resulted in the implementation of numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial and commodities markets (including oil).

While the reduction of economic activity significantly reduced global demand for oil and refined petroleum products, the extreme volatility in the oil markets and the steep contango that developed in the prices of oil and refined petroleum products resulted in record increases in spot TCE rates as an abundance arbitrage and floating storage opportunities opened up. These conditions persisted for most of the second quarter of 2020 but began to abate in June 2020 as the underlying oil markets stabilized.

The Company expects that the future impact of the ongoing COVID-19 pandemic and the uncertainty in the demand for oil and refined petroleum products will continue to cause volatility in the commodities markets. The scale and duration of the impact of these factors remain unknowable but could have a material impact on our earnings, cash flow and financial condition for the remainder of 2020 and beyond. An estimate of the impact on the Company’s results of operations and financial condition cannot be made at this time.

$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 Senior Notes due 2025 (NYSE: SBBA), which were issued in May 2020, and Convertible Notes due 2022, which were issued in May and July 2018.

In July 2020, the Company repurchased $13.8 million aggregate principal amount of its Convertible Notes due 2022 at an average price of $882.23 per $1,000 principal amount, or $12.2 million. No other securities were repurchased under this program during the second quarter of 2020 and through the date of this press release.

As of the date hereof, the Company has repurchased a total of $140.6 million of its securities under the Securities Repurchase Program and has the authority to purchase up to an additional $109.4 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.

At the Market Offering Program

In June 2020, the Company sold an aggregate of 137,067 of its common shares at an average price of $18.79 per share for aggregate net proceeds of $2.6 million under its previously announced “at the market” offering program pursuant to which the Company may sell up to $100 million of its common shares. There is $97.4 million of remaining availability under this program as of August 5, 2020.

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