Scorpio Tankers Inc. Announces Financial Results for the Fourth Quarter of 2015 and Declaration of a Quarterly Dividend

ID: 1418223
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(businesspress24) - MONACO -- (Marketwired) -- 02/29/16 -- Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers," or the "Company") today reported its results for the three months and year ended December 31, 2015 and declaration of a quarterly dividend.

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 aggregated to an increase of adjusted 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.

For the three months ended December 31, 2015, the Company''s basic and diluted weighted average number of shares were 163,792,076 and 202,210,591, respectively. The diluted weighted average number of shares includes the potentially dilutive shares relating to the Company''s Convertible Senior Notes due 2019 (the "Convertible Notes") representing 31,791,435 potential common shares that the Company may issue upon conversion (see below for further information).

For the three months ended December 31, 2014, the Company''s adjusted net income was $18.3 million (see Non-IFRS Measures Section below), or $0.12 basic and diluted earnings per share, which excludes (i) a $13.9 million write down from the discontinuation of equity method accounting for the Company''s investment in Dorian LPG Ltd. ("Dorian"), (ii) a $4.0 million write down from the designation of two vessels as held for sale, and (iii) a $0.1 million unrealized gain on derivative financial instruments. The adjustments aggregated to an increase of adjusted net income by $17.8 million or $0.12 basic and diluted earnings per share. For the three months ended December 31, 2014, the Company had net income of $0.5 million, or $0.00 basic and diluted earnings 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 $1.2 million gain from the sale of the Company''s investment in Dorian, (ii) a $1.4 million gain from the early termination of the contract on a time chartered-in vessel, (iii) a $1.4 million reserve 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 $35,000 net loss related to the sales of four vessels during 2015, (vii) a $1.3 million unrealized loss on derivative financial instruments, and (viii) a $46,000 gain from the repurchase of $1.5 million face value of the Company''s Convertible Notes. The adjustments aggregated to an increase of adjusted 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.

For the year ended December 31, 2014, the Company''s adjusted net income was $7.7 million (see Non-IFRS Measures section below), or $0.04 basic and diluted earnings per share, which excludes (i) a $51.4 million gain from the sales of seven Very Large Crude Carriers (''VLCCs'') under construction in March 2014, (ii) a $10.9 million gain from the acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian in June 2014, (iii) a $13.9 million write down from the discontinuation of equity method accounting for the Company''s investment in Dorian, (iv) a $4.0 million write down from the designation of two vessels as held for sale, (v) a $0.3 million write-off of deferred financing fees and (vi) a $0.3 million unrealized gain on derivative financial instruments. The adjustments aggregated to a decrease of adjusted net income by $44.4 million or $0.26 basic and diluted loss per share. For the year ended December 31, 2014, the Company had net income of $52.1 million, or $0.30 basic and diluted earnings per share.

On February 25, 2016, the Company''s Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on March 30, 2016 to all shareholders as of March 10, 2016 (the record date). As of February 26, 2016, there were 173,035,794 shares outstanding.

Diluted earnings per share for the three months and year ended December 31, 2015 includes the potentially dilutive shares relating to the Convertible Notes representing 31,791,435 potential common shares that the Company may issue upon conversion. The Convertible Notes were issued in June 2014. The dilutive impact of the Convertible Notes is determined using the if-converted method. Under this method, the Company assumes that the Convertible Notes 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 $21.4 million during the three months and year ended December 31, 2015, respectively, are not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive. The Convertible Notes are currently ineligible for conversion.

Below is a summary of the voyages fixed thus far in the first quarter of 2016:

For the LR2s in the pool: approximately $28,000 per day for 80% of the days

For the LR1s in the pool: approximately $24,000 per day for 74% of the days

For the MRs in the pool: approximately $19,000 per day for 72% of the days

For the Handymaxes in the pool: approximately $18,000 per day for 66% of the days

Below is a summary of the TCE revenue earned during the fourth quarter of 2015:

For the LR2s in the pool: $26,464 per day

For the LR1s in the pool: $21,013 per day

For the MRs in the pool: $19,800 per day

For the MRs outside of the pool: $18,086 per day

For the Handymaxes in the pool: $18,562 per day

Reached an agreement with an unrelated third party to sell five 2014 built MR tankers for approximately $33.3 million each. Two of these sales are expected to close in March 2016, and the remaining three sales are expected to close in the second quarter of 2016.

Repurchased an aggregate of 5,220,971 of the Company''s common shares since October 1, 2015 that are being held as treasury shares at an average price of $7.35 per share.

Entered into time charter out agreements with an unrelated third party for two ice-class 1B MRs, STI Notting Hill and STI Westminster, each for three years at $20,500 per day. These charters commenced in November 2015 and December 2015, respectively.

Entered into a time charter out agreement with an unrelated third party for an LR2 product tanker, STI Rose, for three years at $28,000 per day. This charter commenced in February 2016.

Entered into time charter out agreements with an unrelated third party for two ice-class 1A Handymaxes, STI Poplar and STI Pimlico, each for three years at $18,000 per day. These charters commenced in January and February 2016, respectively.

Received a commitment from Scotiabank Europe plc for a loan facility of up to $36.0 million, which will be utilized to refinance the existing indebtedness on an LR2 product tanker (2015 built). The loan facility has a maturity of three years from the drawdown date and bears interest at LIBOR plus a margin of 1.50% per annum.

Received a commitment to upsize the previously announced $87.0 million credit facility with ING Bank N.V. to $132.5 million. The proceeds from the upsizing will be utilized to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015 built).

Executed a loan facility for $34.5 million with BNP Paribas. The facility bears interest at LIBOR plus a margin of 1.95% per annum, and the proceeds were utilized to partially finance the purchase of STI Memphis and refinance the existing indebtedness on STI Battery.

Paid a quarterly cash dividend on the Company''s common stock of $0.125 per share in December 2015.

Reached agreements with Hyundai Mipo Dockyard of South Korea ("HMD") in October 2015 to construct four MR product tankers for $36.0 million each with deliveries scheduled in the third and fourth quarters of 2017.

Sold the 2007 built Handymax product tanker, STI Highlander, for a selling price of $19.35 million in October 2015.

In February 2016, the Company reached an agreement with an unrelated third party to sell five 2014 built MR product tankers (STI Powai, STI Lexington, STI Chelsea, STI Olivia and STI Mythos) for approximately $33.3 million each. The sales of two vessels are expected to close in March 2016, and the sales of the remaining three vessels are expected to close in the second quarter of 2016. The Company expects to record a write-down of approximately $3.2 million during the first quarter of 2016 in connection with the entry into this agreement.

In November 2015, the Company received a commitment from Scotiabank Europe plc for a loan facility of up to $36.0 million. The facility will bear interest at LIBOR plus a margin of 1.50% per annum, and the proceeds are expected to be used to refinance the existing indebtedness on one LR2 product tanker (2015 built).

The facility has a final maturity of three years from the drawdown date and is subject to customary conditions precedent and the execution of definitive documentation.

In December 2015, the Company executed a senior secured term loan facility for $34.5 million with BNP Paribas. The facility bears interest at LIBOR plus a margin of 1.95% per annum, and the proceeds were used to partially finance the purchase of STI Memphis and to refinance the existing indebtedness on STI Battery.

The facility has a 15 year repayment profile and a final maturity of five years from the signing date of the loan for each vessel. The terms and conditions, including covenants, are similar to those in the Company''s existing credit facilities.

In January 2016, the Company received a commitment to upsize its previously announced $87.0 million credit facility with ING Bank N.V. to $132.5 million. The facility bears interest at LIBOR plus a margin of 1.95% per annum, and the proceeds from the upsizing are expected to be used to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015 built).

The terms and conditions, including covenants, are similar to those in the Company''s existing credit facilities.

In May 2015, 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 common stock and bonds, 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. This program replaces the Company''s stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program.

Since January 2015 through the date of this press release, the Company has acquired the following:

an aggregate of 10,573,315 of its common shares that are being held as treasury shares at an average price of $8.49 per share (9,826,676 shares were purchased at an average price of $8.53 under the May 2015 $250 million Securities Repurchase Program; the remaining shares were purchased in the first quarter of 2015 under the previous buyback program). There are 173,035,794 shares outstanding as of February 26, 2016.

$1.5 million face value of its Convertible Notes at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the May 2015 $250 million Securities Repurchase Program).

The Company has $164.5 million remaining under its Securities Repurchase Program as of the date of this press release. The Company expects to repurchase any 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 program to repurchase any securities.

In December 2015, the Company entered into time charter-out agreements with an unrelated third party on two ice class 1A Handymax product tankers, STI Poplar and STI Pimlico. The term of each agreement is for three years at $18,000 per day. These charters commenced in January and February 2016, respectively.

In October 2015, the Company entered into time charter-out agreements with an unrelated third party on two ice class 1B MR product tankers, STI Notting Hill and STI Westminster. The term of each agreement is for three years at $20,500 per day. These charters commenced in November 2015 and December 2015, respectively.

In October 2015, the Company entered into a time charter-out agreement with an unrelated third party for an LR2 product tanker, STI Rose. The term of the agreement is for three years at $28,000 per day. This charter commenced in February 2016.

In February 2016, the Company extended the time charter on an LR1 tanker that is currently time chartered-in. The term of the agreement is for an additional year at $17,250 per day effective March 2016.

In November 2015, the Company declared an option to extend the charter on an LR2 product tanker that is currently time chartered-in for an additional year at $22,600 effective February 2016.

In October 2015, the Company declared an option to extend the time charter on an MR product tanker that is currently time chartered-in for an additional year at $17,500 per day effective January 2016. The Company also has an option to extend the charter for an additional year at $18,000 per day.

The Company will have a conference call on February 29, 2016 at 10:30 AM Eastern Standard Time and 4:30 PM Central European Time.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1-888-797-2998 (U.S.) or +1-913-312-0664 (International). The conference participant passcode is 4772057. 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.

Slides and Audio Webcast:

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

Webcast URL:

As of February 26, 2016, the Company had $169.9 million in cash.

The Company made the following drawdowns from its credit facilities since September 30, 2015 and through the date of this press release:

As of February 26, 2016, the Company''s outstanding debt balance, and amount available to draw, is as follows:

Newbuilding Program

During the fourth quarter of 2015, the Company made $42.1 million of installment payments on its newbuilding vessels.

The Company currently has 12 newbuilding vessel orders with HMD, Daehan Shipbuilding Co., Ltd ("DHSC"), and Sungdong Shipbuilding and Marine Engineering Co., Ltd. ("SSME") (eight MRs and four LR2s), and one LR2 vessel (STI Lombard) to be acquired in April 2016 at the conclusion of its bareboat charter-in agreement. The estimated first quarter of 2016 and future payments are as follows*:

*These are estimates only and are subject to change as construction progresses.

For the three months ended December 31, 2015, the Company recorded net income of $34.2 million compared to net income of $0.5 million for the three months ended December 31, 2014. The following were the significant changes between the two periods:

Time charter equivalent, or 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 charters, time charters, and pool charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended December 31, 2015 and 2014:

TCE revenue increased $54.5 million to $178.1 million. This increase was driven by an increase in the average number of operating vessels (owned and time chartered-in) to 92.2 from 72.8 for the three months ended December 31, 2015 and 2014, respectively, along with an increase in time charter equivalent revenue per day to $21,057 per day from $18,664 per day for the three months ended December 31, 2015 and 2014, respectively (see the breakdown of daily TCE below). Product tanker market fundamentals continued to show strength during the fourth quarter of 2015 as the continuing glut of crude oil supplies has led to lower worldwide oil prices and thus higher demand for refined products. As such, global refinery utilization has increased which, along with increased refining capacity in the Middle East and India, has resulted in increased demand across all of the Company''s vessel classes.

Vessel operating costs increased $19.8 million to $50.9 million from $31.1 million for the three months ended December 31, 2015 and 2014, respectively. This increase was primarily driven by an increase in the Company''s owned fleet to an average of 80.3 vessels from 50.8 vessels for the three months ended December 31, 2015 and 2014, respectively. Additionally, overall vessel operating costs per day increased to $6,891 per day from $6,662 per day for the three months ended December 31, 2015 and 2014, respectively (see the breakdown of daily vessel operating costs below). This increase was primarily attributable to increased crewing and spares and stores costs incurred in our MR and LR2 operating segments during the quarter.

Charterhire expense decreased $11.6 million to $18.2 million from $29.8 million for the three months ended December 31, 2015 and 2014, respectively. This decrease was driven by a decrease in the Company''s time chartered-in fleet to an average of 11.9 vessels from 22.0 vessels for the three months ended December 31, 2015 and 2014, respectively.

Depreciation expense increased $13.2 million to $30.9 million from $17.7 million for the three months ended December 31, 2015 and 2014, respectively. This increase was the result of an increase in the average number of owned vessels to 80.3 from 50.8 for the three months ended December 31, 2015 and 2014, respectively.

General and administrative expenses increased $4.4 million to $18.2 million from $13.8 million for the three months ended December 31, 2015 and 2014, respectively. This increase is due to the significant growth in the Company''s fleet to an average of 92.2 owned and time chartered-in vessels from an average of 72.8 owned and time chartered-in vessels during the three months ended December 31, 2015 and 2014, respectively.

The write down of vessels held for sale and loss from sale vessels of $4.0 million for the three months ended December 31, 2014 is attributable to the designation of STI Harmony and STI Heritage as held for sale at that date.

The write-off of vessel purchase options of $0.7 million for the three months ended December 31, 2015 is the write-off of deposits made for options to construct MR product tankers that expired unexercised in December 2015.

The re-measurement of the Company''s investment in Dorian for the three months ended December 31, 2014 is from the change in the accounting method of this investment from the equity method to the available for sale method in October 2014 which resulted in a write-down of $13.9 million. The Company''s investment in Dorian was sold in July 2015 for a gain of $1.2 million.

Financial expenses increased $10.9 million to $24.1 million from $13.2 million primarily as a result of:

an increase in average debt outstanding to $2.1 billion from $1.4 billion for the three months ended December 31, 2015 and 2014, respectively;

a decrease in the amount of interest capitalized of $2.8 million;

a write-off of $0.7 million of deferred financing fees as a result of the refinancing of the amounts borrowed for STI Pontiac during the three months ended December 31, 2015.

Dividend Policy

The declaration and payment of dividends is subject at all times to the discretion of the Company''s Board of Directors. The timing and amount of dividends, if any, depends on the Company''s earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in the loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.

The Company''s dividend history is as follows:

On February 25, 2016, the Scorpio Tankers'' Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on March 30, 2016 to all shareholders as of March 10, 2016 (the record date). As of February 26, 2016 there were 173,035,794 shares outstanding.

Securities Repurchase Program


In May 2015, 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 common stock and bonds, 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. This program replaces the Company''s stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program.

During 2015 (through the date of this press release), the Company has acquired the following:

an aggregate of 10,573,315 of its common shares that are being held as treasury shares at an average price of $8.49 per share (9,826,676 shares were purchased at an average price at $8.53 under the May 2015 $250 million Securities Repurchase Program; the remaining shares were purchased in the first quarter of 2015 under the previous buyback program). There are 173,035,794 shares outstanding as of February 26, 2016.

$1.5 million face value of its Convertible Notes at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the May 2015 $250 million Securities Repurchase Program).

The Company has $164.5 million remaining under its Securities Repurchase Program as of the date of this press release. The Company expects to repurchase any 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 program to repurchase any securities.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 79 product tankers (18 LR2, 14 Handymax, and 47 MR tankers) with an average age of 1.4 years and time or bareboat charters-in 11 product tankers (three LR2, one LR1, four MR and three Handymax tankers). The Company has contracted for 12 newbuilding product tankers (eight MR and four LR2 tankers). The four LR2s are expected to be delivered in 2016 (one per quarter), and the eight MRs are expected to be delivered throughout 2017. The Company has also reached an agreement to sell five of its 2014 built MR product tankers. Additional information about the Company is available at the Company''s website , which is not a part of this press release.

This press release describes adjusted net income and adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. "Non-IFRS" measures). The Non-IFRS measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company''s management evaluates the Company''s operating performance. These Non-IFRS measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management''s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.



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Date: 02/29/2016 - 05:15
Language: English
News-ID 1418223
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