Scorpio Tankers Inc.: Scorpio Tankers Inc. Announces Financial Results for the Third Quarter of 2017

Tickers: STNG
MONACO, Nov. 16, 2017 (GLOBE NEWSWIRE) -- Scorpio Tankers Inc. (NYSE:STNG) ('Scorpio Tankers,' or the 'Company') today reported its results for the three and nine months ended September 30, 2017.

Results for the three months ended September 30, 2017 and 2016

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For the three months ended September 30, 2017, the Company's adjusted net loss (see Non-IFRS Measures section below) was $34.0 million, or $0.15 basic and diluted loss per share, which excludes from net loss (i) $2.3 million of transaction costs related to the previously announced merger with Navig8 Product Tankers Inc ('NPTI') (see Merger with Navig8 Product Tankers Inc below) and (ii) a $0.6 million write-off of deferred financing fees. The adjustments resulted in an aggregate reduction of the Company's net loss by $2.9 million, or $0.01 basic and diluted loss per share. For the three months ended September 30, 2017, the Company had a net loss of $36.9 million, or $0.16 basic and diluted loss per share.

For the three months ended September 30, 2016, the Company's adjusted net loss (see Non-IFRS Measures section below) was $18.3 million, or $0.11 basic and diluted loss per share, which excludes from net loss (i) an aggregate write-off of $9.0 million of deferred financing fees and (ii) a $0.2 million unrealized gain on derivative financial instruments. The adjustments resulted in an aggregate reduction of the Company's net loss by $8.8 million, or $0.06 basic and diluted loss per share. For the three months ended September 30, 2016, the Company had a net loss of $27.1 million, or $0.17 basic and diluted loss per share.

Results for the nine months ended September 30, 2017 and 2016

For the nine months ended September 30, 2017, the Company's adjusted net loss was $62.5 million (see Non-IFRS Measures section below), or $0.33 basic and diluted loss per share, which excludes from net loss (i) a $23.3 million loss on sales of vessels, (ii) $34.8 million of transaction costs related to the previously announced merger with NPTI, (iii) a $5.4 million gain recorded on the previously announced purchase of the four NPTI subsidiaries that own four LR1 tankers, and (iv) a $1.5 million write-off of deferred financing fees. The adjustments resulted in an aggregate reduction of the Company's net loss by $54.2 million, or $0.28 basic and diluted loss per share. For the nine months ended September 30, 2017, the Company had a net loss of $116.7 million, or $0.61 basic and diluted loss per share.

For the nine months ended September 30, 2016, the Company's adjusted net income (see Non-IFRS Measures section below) was $18.7 million, or $0.12 basic and $0.11 diluted earnings per share, which excludes from net income (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 $1.6 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 $14.0 million, or $0.09 basic and $0.08 diluted earnings per share. For the nine months ended September 30, 2016, the Company had net income of $4.8 million, or $0.03 basic and diluted earnings per share.

Declaration of Dividend

On November 14, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about December 28, 2017 to all shareholders as of December 13, 2017 (the record date). As of November 14, 2017, there were 281,095,755 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 $5.6 million and $16.7 million during the three and nine months ended September 30, 2017, respectively, are not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three and nine months ended September 30, 2017, the Company's basic weighted average number of shares were 232,062,058 and 192,304,650, respectively. 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, 2017 as the Company incurred net losses.

For the three and nine months ended September 30, 2016, the Company's basic weighted average number of shares were 160,844,168 and 160,902,344, respectively. The weighted average number of shares, both diluted and under the if-converted method, were anti-dilutive for the three months ended September 30, 2016 as the Company incurred a net loss. The Company's diluted weighted average number of shares for the nine months ended September 30, 2016 was 166,839,648 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 Third Quarter Significant Events

  • Completed the acquisition of NPTI and its fleet of 12 LR1 and 15 LR2 product tankers in exchange for 55 million shares of common stock and the assumption of NPTI's debt. Four of the LR1 product tankers were acquired on June 14, 2017, and the remaining vessels were acquired upon the closing of the merger on September 1, 2017. See 'Merger with Navig8 Product Tankers Inc' below.
  • Below is a summary of the average daily TCE revenue and duration for voyages fixed for the Company's vessels thus far in the fourth quarter of 2017 as of the date hereof:
    • For the LR2s in the pool: approximately $16,500 per day for 60% of the days.
    • For the LR1s in the pool: approximately $10,750 per day for 60% of the days.
    • For the MRs in the pool: approximately $11,750 per day for 55% of the days.
    • For the ice-class 1A and 1B Handymaxes in the pool: approximately $9,200 per day for 60% of the days.
  • Below is a summary of the average daily TCE revenue earned on the Company's vessels during the third quarter of 2017:
    • For the LR2s in the pools: $12,903 per revenue day (includes the LR2s purchased from NPTI and operated in the Navig8 Alpha8 pool for a portion of the third quarter 2017).
    • For the LR1s in the pools: $12,037 per revenue day (includes the LR1s purchased from NPTI and operated in the Navig8 LR8 pool for all or a portion of the third quarter 2017).
    • For the MRs in the pool: $12,788 per revenue day.
    • For the Handymaxes in the pool: $9,370 per revenue day.
  • Entered into finance lease agreements for five 2012 built MR product tankers (STI Amber, STI Topaz, STI Ruby, STI Garnet and STI Onyx) with an unaffiliated third party. The financing for three of the vessels closed in September 2017, and the financing for one of the vessels closed in October 2017, resulting in an increase to the Company's liquidity of $29.4 million in aggregate, after the repayment of outstanding debt. The financing for the remaining vessel is expected to close before December 31, 2017 and is expected to result in an additional increase in the Company's liquidity of $7.1 million, after the repayment of outstanding debt. See 'Finance Lease Agreements' below.
  • Took delivery of STI Leblon, STI La Boca, STI San Telmo and STI Donald C Trauscht, four MR product tankers that were under construction, from Hyundai Mipo Dockyard Co. Ltd. of South Korea ('HMD'). STI Leblon and STI La Boca were delivered in July 2017, STI San Telmo was delivered in September 2017, and STI Donald C Trauscht was delivered in October 2017. As part of these deliveries, the Company drew down $21.0 million, $21.0 million, $20.6 million and $20.7 million in June, July, September and October 2017, respectively, from its 2017 Credit Facility to partially finance the purchase of these vessels.
  • Paid a quarterly cash dividend on the Company's common stock of $0.01 per share in September 2017.
Merger with Navig8 Product Tankers Inc

On May 23, 2017, the Company entered into definitive agreements to acquire NPTI, including its fleet of 12 LR1 and 15 LR2 product tankers for 55 million common shares of the Company and the assumption of NPTI's debt. The key events and corresponding timeline of the merger were as follows:

  • On May 30, 2017, the Company issued 50 million shares of common stock in an underwritten public offering at an offering price of $4.00 per share for net proceeds of approximately $188.7 million, after deducting underwriters' discounts and offering expenses. The completion of this offering was a condition to closing the merger with NPTI.
  • On June 14, 2017, the Company acquired certain of NPTI's subsidiaries that own four LR1 tankers for an aggregate acquisition price of $156.0 million, consisting of $42.2 million of cash and $113.8 million of assumed indebtedness (including accrued interest). The cash portion of the acquisition price (after considering cash flows from operations) formed part of the balance sheet of the combined company upon the closing of the merger on September 1, 2017.
  • On September 1, 2017, the merger with NPTI closed, and the Company acquired the remaining eight LR1 and 15 LR2 tankers. As of November 14, 2017, all of the vessels acquired from NPTI have exited the Navig8 pools in which they were operating and have entered, or are expected to enter, the Scorpio Group pools before December 31, 2017.
  • The Company assumed NPTI's aggregate outstanding indebtedness of $806.4 million as of the date of closing.
Finance Lease Agreements

In September 2017, the Company entered into finance lease agreements for five 2012 built MR product tankers (STI Amber, STI Topaz, STI Ruby, STI Garnet and STI Onyx) to an unaffiliated third party for a sales price of $27.5 million per vessel. The financing for three of the vessels closed in September 2017 and the financing for one of the vessels closed in October 2017, resulting in an increase in the Company's liquidity of $29.4 million in aggregate, after the repayment of outstanding debt. The financing for the remaining vessel is expected to close before December 31, 2017 and is expected to result in an additional increase in the Company's liquidity of $7.1 million, after the repayment of outstanding debt.

Each agreement is for a fixed term of seven years at a bareboat rate of $9,025 per vessel per day, and the Company has three consecutive one-year options to extend each charter beyond the initial term. Furthermore, the Company has the option to purchase these vessels beginning at the end of the fifth year of the agreements through the end of the tenth year of the agreements. A deposit of $5.1 million per vessel was retained by the buyer and will either be applied to the purchase price of the vessel if a purchase option is exercised, or refunded to the Company at the expiration of the agreement (as applicable).

As a result of these transactions, the Company repaid the outstanding debt balance of (i) $44.6 million in aggregate for three vessels on its 2016 Credit Facility and (ii) $13.8 million on its HSH Credit Facility for the remaining vessel. These agreements are being accounted for as financing transactions. Upon the closing of the final sale, the Company expects to repay $14.9 million on its 2016 Credit Facility.

Time Charter-in Update

In November 2017, the Company extended the time charter-in agreement for an MR that is currently time chartered-in for an additional six months at $13,250 per day effective December 2017. The Company also has an option to extend the charter for an additional year at $14,500 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, in addition to its common shares, 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 2019 (NYSE:SBBC), which were issued in March 2017.

In April 2017, we acquired an aggregate of 250,419 of our Unsecured Senior Notes due 2017 for aggregate consideration of $6.3 million, which was the result of the cash tender offer of such notes. These notes matured and were repaid in full in October 2017.

As of the date hereof, the Company has the authority to purchase up to an additional $147.1 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.

Conference Call

The Company has scheduled a conference call on November 16, 2017 at 8:30 AM Eastern Standard Time and 2:30 PM Central European Time. The dial-in information is as follows:

US Dial-In Number: 1 (855) 861-2416

International Dial-In Number: +1 (703) 736-7422

Conference ID: 3439099

Participants should dial into the call 10 minutes before the scheduled time. 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 www.scorpiotankers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

Webcast URL: https://edge.media-server.com/m6/p/uheiuc6g

Current Liquidity

As of November 14, 2017, the Company had $120.8 million in unrestricted cash and cash equivalents.

Drydock Update

Five of the Company's 2012 built MR product tankers were drydocked in accordance with their scheduled, class required special survey during the third quarter of 2017 and for a portion of October 2017. These vessels were offhire for an aggregate of 102 days and the aggregate estimated drydock cost is approximately $6.0 million.

The Company has five MRs that are scheduled for drydock throughout 2018 and estimates that these vessels will be offhire for an aggregate of 100 days with estimated aggregate drydock costs of approximately $4.0 million.

Debt

Set forth below is a summary of the Company's outstanding indebtedness as of the dates presented:

(1) In September 2017, the Company repaid $44.6 million on its 2016 Credit Facility as a result of the closing of the previously announced finance lease for STI Topaz, STI Ruby and STI Garnet. In October 2017, the Company repaid $13.8 million on its HSH Credit Facility as a result of the closing of the finance lease for STI Onyx.

(2) The Company drew down $21.0 million in July 2017, $20.6 million in September and $20.7 million in October 2017 from the 2017 Credit Facility to partially finance the purchases of STI La Boca, STI San Telmo and STI Donald C Trauscht, respectively.

(3) In June 2017, prior to the closing of the merger with NPTI, the Company acquired certain of NPTI's subsidiaries that own four LR1 tankers (STI Excel, STI Excelsior, STI Expedite and STI Exceed). This transaction closed on June 14, 2017, and the Company assumed the outstanding indebtedness under NPTI's Credit Agricole Credit Facility upon closing. Repayments will be made in equal quarterly installments of $2.1 million in aggregate in accordance with a 15-year repayment profile with a balloon payment due upon maturity, which occurs between November 2022 and February 2023 (depending on the vessel). The facility bears interest at LIBOR plus a margin of 2.75%. The remaining terms and conditions, including financial covenants, have been amended to be similar to those in the Company's existing credit facilities.

(4) The Company assumed the outstanding indebtedness under NPTI's senior secured credit facility with ABN AMRO Bank N.V. and Korea Trade Insurance Corporation ('K-Sure'), which we refer to as the ABN AMRO/K-Sure Credit Facility, upon the closing of the merger with NPTI in September 2017. Two LR1s (STI Precision and STI Prestige) are collateralized under this facility, and the facility consists of two separate tranches, an $11.5 million commercial tranche and a $42.8 million K-Sure tranche (which represents the amounts outstanding at September 30, 2017). The commercial tranche bears interest at LIBOR plus 2.75%, and the K-Sure tranche bears interest at LIBOR plus 1.80%. Repayments on the K-Sure tranche will be made in equal quarterly installments of $1.0 million in accordance with a 12-year repayment profile from the date of delivery from the shipyard, with a balloon payment due upon maturity, and the commercial tranche will be repaid via a balloon payment upon maturity in September and November 2022 (depending on the vessel). The K-Sure tranche fully matures in September and November 2028 (depending on the vessel), and K-Sure has an option to require repayment upon the maturity of the commercial tranche if the commercial tranche is not refinanced by its maturity dates. The remaining terms and conditions, including financial covenants, have been amended to be similar to those in the Company's existing credit facilities.

(5) The Company assumed the outstanding indebtedness under NPTI's senior secured credit facility with Citibank N.A., London Branch, Caixabank, S.A., and K-Sure, which we refer to as the Citi/K-Sure Credit Facility, upon the closing of the merger with NPTI in September 2017. Four LR1s (STI Excellence, STI Executive, STI Experience, and STI Express) are collateralized under this facility. The facility consists of two separate tranches, a $25.1 million commercial tranche and a $89.0 million K-Sure tranche (which represents the amounts outstanding at September 30, 2017). The commercial tranche bears interest at LIBOR plus 2.50%, and the K-Sure tranche bears interest at LIBOR plus 1.60%. Repayments on the K-Sure tranche will be made in equal quarterly installments of $2.1 million in accordance with a 12-year repayment profile from the date of delivery from the shipyard, with a balloon payment due upon maturity, and the commercial tranche is scheduled to be repaid via a balloon payment upon maturity which occurs between March and May 2022 (depending on the vessel). The K-Sure tranche fully matures between March and May 2028 (depending on the vessel), and K-Sure has an option to require repayment upon the maturity of the commercial tranche if the commercial tranche is not refinanced by its maturity dates. The remaining terms and conditions, including financial covenants, have been amended to be similar to those in the Company's existing credit facilities.

(6) The Company assumed the obligations under NPTI's finance lease arrangement with Ocean Yield ASA for four LR2 tankers (STI Sanctity, STI Steadfast, STI Supreme, and STI Symphony) upon the closing of the merger with NPTI in September 2017. Under this arrangement, each vessel is subject to a 13-year bareboat charter, which expires between February and August 2029 (depending on the vessel). Charterhire, which is paid monthly in advance, includes a quarterly adjustment based on prevailing LIBOR rates.

These arrangements are being accounted for as financing transactions, with a portion of the fixed rate attributed to interest expense and the remaining portion applied against the principle balance. Future principal payments are approximately $0.2 million gradually increasing to $0.3 million per vessel per month until the expiration of the agreement. The interest component of the leases approximates LIBOR plus 5.40%. The Company also has purchase options to re-acquire each of the vessels during the bareboat charter period, with the first of such options exercisable beginning at the end of the seventh year from the delivery date of the subject vessel. The Company is subject to certain terms and conditions, including financial covenants, under this arrangement which have been amended to be similar to those in the Company's existing credit facilities.

(7) The Company assumed the obligations under NPTI's finance lease arrangement with CMB Financial Leasing Co. Ltd ('CMBFL') for two LR1 tankers (STI Pride and STI Providence) upon the closing of the merger with NPTI in September 2017. Under this arrangement, each vessel is subject to a seven-year bareboat charter which expires in July or August 2023 (depending on the vessel). Charterhire under the arrangement is comprised of a fixed, quarterly repayment amount of $0.6 million per vessel plus a variable component calculated at LIBOR plus 3.75%. The Company has purchase options to re-acquire each of the subject vessels during the bareboat charter period, with the first of such options exercisable on the third anniversary from the delivery date of the respective vessel. There is also purchase obligation for each vessel upon the expiration of the agreement for $40.2 million in aggregate. These arrangements are being accounted for as financing transactions. The Company is subject to certain terms and conditions, including financial covenants, under this arrangement which have been amended to be similar to those in the Company's existing credit facilities.

(8) The Company assumed the obligations under NPTI's finance lease arrangement with Bank of Communications Finance Leasing Co Ltd., ('BCFL') for three LR2 tankers (STI Solace, STI Solidarity, and STI Stability) upon the closing of the merger with NPTI in September 2017. Under the arrangement, each vessel is subject to a 10-year bareboat charter, which expires in July 2026. Charterhire under the arrangement is determined in advance, on a quarterly basis and is calculated by determining the payment based off of the then outstanding balance, the time to expiration and an interest rate of LIBOR plus 3.50%. At current, prevailing interest rates, future principal payments are estimated to be $0.2 million gradually increasing to $0.3 million per vessel per month until the expiration of the agreement. The Company has purchase options to re-acquire each of the subject vessels during the bareboat charter period, with the first of such options exercisable at the end of the fourth year from the delivery date of the respective vessel. There is also purchase obligation for each vessel upon the expiration of the agreement for $29.7 million in aggregate. These arrangements are being accounted for as financing transactions.

(9) The Company assumed the obligations under NPTI's finance lease arrangement with CSSC (Hong Kong) Shipping Company Limited ('CSSC') for eight LR2 tankers (STI Gallantry, STI Nautilus, STI Guard, STI Guide, STI Goal, STI Gauntlet, STI Gladiator and STI Gratitude) upon the closing of the merger with NPTI in September 2017. Under the arrangement, each vessel is subject to a 10-year bareboat charter which expires throughout 2026 and 2027 (depending on the vessel). Charterhire under the arrangement is comprised of a fixed repayment amount of $0.2 million per month per vessel plus a variable component calculated at LIBOR plus 4.60%. The Company has purchase options to re-acquire each of the subject vessels during the bareboat charter period, with the first of such options exercisable at the end of the fourth year from the delivery date of the respective vessel. There is also a purchase obligation for each vessel upon the expiration of the agreement for $111.4 million in aggregate. These arrangements are being accounted for as financing transactions.

(10) In September 2017, the Company entered into finance lease agreements with BCFL for five 2012 built MR product tankers (STI Amber, STI Topaz, STI Ruby, STI Garnet and STI Onyx) for a sales price of $27.5 million per vessel. The financing for three of the vessels closed in September 2017 and the financing for one of the vessels closed in October 2017 resulting in an increase to the Company's liquidity of $29.4 million in aggregate, after the repayment of outstanding debt. The financing for the remaining vessel is expected to close before the end of the year and is expected to result in an additional increase to the Company's liquidity of $7.1 million, after the repayment of outstanding debt. Each agreement is for a fixed term of seven years at a bareboat rate of $9,025 per vessel per day and the Company has three consecutive one year options to extend each charter beyond the initial term. The Company also has the option to purchase these vessels beginning at the end of the fifth year of the agreements through the end of the tenth year of the agreements. A deposit of $5.1 million per vessel was retained by the buyer and will either be applied to the purchase price of the vessel if a purchase option is exercised, or refunded to the Company at the expiration of the agreement (as applicable). These agreements are being accounted for as financing transactions.

(11) In October 2017, the Company's 7.50% Senior Notes matured and were repaid in full.

Set forth below are the expected, estimated future principal repayments on the Company's outstanding indebtedness which includes amounts due under sale and finance leaseback arrangements:

Newbuilding Program

As of September 30, 2017, the Company had three MR product tankers under construction with HMD. In October 2017, one of these three vessels, STI Donald C Trauscht was delivered from HMD. The Company refers to these vessels under construction as its Newbuilding Program.

During the third quarter of 2017, the Company made installment payments of $48.7 million relating to vessels under its Newbuilding Program, which included the deliveries of STI La Boca and STI San Telmo.

Set forth below are the expected installment payments and estimated debt drawdowns to partially finance the purchase vessels under construction as of September 30, 2017 :

The installment payments and debt drawdowns are estimates only and are subject to change as construction progresses.

As of September 30, 2017, the Company had $63.9 million available under its 2017 Credit Facility to partially finance the purchase of three MR product tankers that were under construction at HMD. In October 2017, the Company drew down $20.7 million to partially finance the purchase of STI Donald C Trauscht, which was delivered in October 2017.

Explanation of Variances on the Third Quarter of 2017 Financial Results Compared to the Third Quarter of 2016

For the three months ended September 30, 2017, the Company recorded a net loss of $36.9 million compared to a net loss of $27.1 million for the three months ended September 30, 2016. 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 September 30, 2017 and 2016:
  • TCE revenue increased $7.8 million to $121.8 million from $114.0 million for the three months ended September 30, 2017 and 2016, respectively. This increase was driven by the growth of the Company's fleet to an average of 108.9 operating vessels during the three months ended September 30, 2017 from an average of 90.3 operating vessels during the three months ended September 30, 2016. This increase was partially offset by a decrease in overall time charter equivalent revenue per day to $12,395 per day from $13,737 per day for the three months ended September 30, 2017 and 2016, respectively (see the breakdown of daily TCE below). TCE revenue per day reflects unfavorable market conditions, which have been driven by an unfavorable supply and demand imbalance throughout 2017.
  • Vessel operating costs increased $12.5 million to $58.4 million from $45.9 million for the three months ended September 30, 2017 and 2016, respectively. This increase was the result of an increase in the average number of owned and bareboat chartered-in vessels to 99.3 vessels from 77.0 vessels for the three months ended September 30, 2017 and 2016, respectively. This increase was partially offset by an overall decrease in vessel operating costs per day to $6,393 per day from $6,482 per day for the three months ended September 30, 2017 and 2016, respectively which was driven by improvements in our LR2 and MR operating segments (see the breakdown of daily vessel operating costs below).
  • Charterhire expense decreased $2.1 million to $18.9 million from $21.0 million for the three months ended September 30, 2017 and 2016, respectively. This decrease was driven by lower average daily base rates on the Company's time chartered-in fleet to an average of $13,658 per vessel per day from an average of $16,918 per vessel per day for the three months ended September 30, 2017 and 2016, respectively. The Company's time and bareboat chartered-in fleet increased to an average of 19.6 vessels, (9.6 time chartered-in vessels and 10.0 bareboat chartered-in vessels) from an average of 13.3 time chartered-in vessels for the three months ended September 30, 2017 and 2016, respectively. There were no bareboat chartered-in vessels during the three months ended September 30, 2016. The average daily base rate for the Company's bareboat chartered-in fleet was $7,309 per vessel per day for the three months ended September 30, 2017.
  • Depreciation expense increased $5.7 million to $36.3 million from $30.7 million for the three months ended September 30, 2017 and 2016, respectively. This increase was primarily driven by the delivery of two LR2 and five MR tankers under our Newbuilding Program during the nine months ended September 30, 2017, the delivery of the four LR1 vessels acquired from NPTI in June 2017 and the delivery of eight LR1 and 15 LR2 vessels acquired from NPTI in September 2017. These deliveries were offset by the sales of five MR vessels during 2017.
  • Merger transaction related costs of $2.3 million during the three months ended September 30, 2017 represent legal and advisory costs incurred as part of the merger with NPTI.
  • Financial expenses decreased $0.2 million to $30.9 million from $31.2 million for the three months ended September 30, 2017 and 2016, respectively. Financial expenses during the three months ended September 30, 2016 reflect a $9.0 million write-off of deferred financing fees as compared to a $0.6 million write-off of deferred financing fees that was recorded during the three months ended September 30, 2017. The increase in financial expenses, after removing the effect of deferred financing fee write-offs, was a result of (i) increased interest expense incurred as a result of the assumption of $806.4 million of indebtedness upon the closing of the merger with NPTI, (ii) increases in LIBOR rates when compared to the third quarter of 2016, (iii) interest incurred on the Company's newly issued Senior Notes due 2019, and (iv) a decrease in capitalized interest as a result of the decrease in the number of vessels under construction.
The dilutive effect of (i) unvested shares of restricted stock and (ii) the potentially dilutive securities relating to the Company's Convertible Notes were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2017 because their effect would have been anti-dilutive. Weighted average shares under the if-converted method (which includes the potential dilutive effect of both the unvested shares of restricted stock and our Convertible Notes) were 270,697,114 and 231,888,265 for the three and nine months ended September 30, 2017, respectively.

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 dividends paid during 2016 and 2017 were as follows:

On November 14, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about December 28, 2017 to all shareholders as of December 13, 2017 (the record date). As of November 14, 2017, there were 281,095,755 shares outstanding.

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 (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 2019 (NYSE:SBBC), which were issued in March 2017.

In April 2017, we acquired an aggregate of 250,419 of our Unsecured Senior Notes due 2017 for aggregate consideration of $6.3 million, which was the result of the cash tender offer of such notes. These notes matured and were repaid in full in October 2017.

As of the date hereof, the Company has the authority to purchase up to an additional $147.1 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.

About Scorpio Tankers Inc.

Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns or finance leases 107 product tankers (38 LR2 tankers, 12 LR1 tankers, 43 MR tankers, 14 Handymax tankers) with an average age of 2.3 years and time or bareboat charters-in 19 product tankers (one LR2 tanker, nine MR tankers and nine Handymax tankers). The Company has contracted for two newbuilding MR product tankers, one of which is expected to be delivered before the end of 2017 and the other in the first quarter of 2018. Additional information about the Company is available at the Company's website www.scorpiotankers.com, which is not a part of this press release.

Non-IFRS Measures

Reconciliation of IFRS Financial Information to Non-IFRS Financial Information

This press release describes adjusted net income or loss 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 and other users of our financial statements, such as our lenders, 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.

The Company believes that the presentation of adjusted net income or loss with adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA are useful to investors other users of our financial statements, such as our lenders, because they facilitate the comparability and the evaluation of companies in the Company's industry. In addition, the Company believes that adjusted net income or loss with adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA are useful in evaluating its operating performance compared to that of other companies in the Company's industry. The Company's definitions of adjusted net income or loss with the adjusted earnings or loss per share, basic and diluted, and adjusted EBITDA may not be the same as reported by other companies in the shipping industry or other industries.

Reconciliation of Net (Loss) / Income to Adjusted Net (Loss) / Income

Summation differences due to rounding

Reconciliation of Net (Loss) / Income to Adjusted EBITDA

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, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of our operations, risks relating to the integration of the operations of Navig8 Product Tankers Inc. ('NPTI') and the possibility that the anticipated synergies and other benefits of the acquisition of NPTI will not be realized or will not be realized within the expected timeframe, the outcome of any legal proceedings related to the merger with NPTI and the related transactions, 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 Scorpio Tankers' filings with the U.S. Securities and Exchange Commission for a more complete discussion of certain of these and other risks and uncertainties.

Scorpio Tankers Inc.
212-542-1616

Source: Scorpio Tankers Inc.

Scorpio Tankers Inc. published this content on 16 November 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 November 2017 11:50:10 UTC.