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Scorpio Tankers Inc. Announces Financial Results for the Third Quarter of 2018 and Declaration of a Quarterly Dividend

Scorpio Tankers Inc. Announces Financial Results for the Third Quarter of 2018 and Declaration of a Quarterly Dividend

MONACO, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Scorpio Tankers Inc. (STNG) ("Scorpio Tankers", or the "Company") today reported its results for the three and nine months ended September 30, 2018.

Results for the three months ended September 30, 2018 and 2017

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 $0.21 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 (as described below), 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 $0.02 per basic and diluted share. For the three months ended September 30, 2018, the Company had a net loss of $71.7 million, or $0.23 basic and diluted loss per share.

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 the net loss (i) $2.3 million of transaction costs related to the merger with Navig8 Product Tankers Inc. ("NPTI"), 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.

Results for the nine months ended September 30, 2018 and 2017

For the nine months ended September 30, 2018, the Company's adjusted net loss was $141.3 million (see Non-IFRS Measures section below), or $0.46 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 (as described below), (ii) a $12.9 million write-off of deferred financing fees, and (iii) $0.3 million of transaction costs related to the merger with NPTI. The adjustments resulted in an aggregate reduction of the Company's net loss by $31.1 million or $0.10 per basic and diluted share. For the nine months ended September 30, 2018, the Company had a net loss of $172.4 million, or $0.56 basic and diluted loss per share.

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 the net loss (i) a $23.3 million loss on sales of vessels, (ii) $34.8 million of transaction costs related to the merger with NPTI, (iii) a $5.4 million gain recorded on the 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 per basic and diluted 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.

Declaration of Dividend

On October 30, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.01 per share, payable on or about December 13, 2018 to all shareholders of record as of December 5, 2018 (the record date). As of October 30, 2018, there were 515,893,564 shares outstanding.

Summary of Other Recent and Third Quarter Significant Events

  • 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 2018 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: approximately $13,000 per day for 45% of the days.

    — For the LR1s in the pool: approximately $12,750 per day for 46% of the days.

    — For the MRs in the pool: approximately $12,000 per day for 46% of the days.

    — For the ice-class 1A and 1B Handymaxes in the pool: approximately $11,000 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 2018:

    — For the LR2s in the pool: $12,160 per revenue day.

    — For the LR1s in the pool: $8,335 per revenue day.

    — For the MRs in the pool: $9,494 per revenue day.

    — For the ice-class 1A and 1B Handymaxes in the pool: $8,852 per revenue day.

  • From June 2018 through October 2018, the Company closed on agreements to refinance a total of 41 of its vessels through a series of bank loans and lease financing arrangements raising $321.7 million in aggregate of new liquidity, after the repayment of the existing secured debt related to these vessels. These agreements are described below.

  • In September and October 2018, the Company entered into an agreement to retrofit 23 of its LR2s with Exhaust Gas Cleaning Systems (“Scrubbers”), and agreed letters of intent (which are subject to the execution of definitive documentation) with suppliers, engineering firms, and ship repair facilities to cover the purchase and installation of Scrubbers on substantially all of its remaining owned and financed leased LR2, LR1, and MR tanker vessels (approximately 67 vessels) between the second quarter of 2019 and the second quarter of 2020. The Scrubbers and their installation are expected to cost between $1.5 and $2.2 million per vessel, and the Company anticipates that between 60-70% of these costs will be financed.

  • In October 2018, the Company raised estimated net proceeds of $319.7 million in an underwritten public offering of 182.2 million shares of common stock (including 20.0 million shares of common stock issued when the underwriters partially exercised their overallotment option to purchase additional shares) at a public offering price of $1.85 per share. Scorpio Bulkers Inc., or SALT, and Scorpio Services Holding Limited, or SSH, each a related party, purchased 54.1 million common shares and 5.4 million common shares, respectively, at the public offering price.

  • In September 2018, the Company entered into an agreement with its commercial manager, Scorpio Commercial Management S.A.M., or SCM, whereby SCM will reimburse certain of the commissions that SCM charges the Company's vessels to effectively reduce such to 0.85% of gross revenue per charter fixture, effective from September 1, 2018 and ending on June 1, 2019.

  • In September 2018, the Company entered into agreements with certain of its lenders who are party to credit facilities with the Company, to permanently remove the minimum interest coverage ratio financial covenant from the terms of each facility. As a result, the Company is no longer required to maintain a ratio of EBITDA to net interest expense on any of its secured credit facilities or lease financing arrangements.

  • In September 2018, the Company paid a quarterly cash dividend with respect to the second quarter of 2018 on the Company's common stock of $0.01 per share.

  • In July 2018, the Company exchanged $15.0 million in aggregate principal amount of its Convertible Senior Notes due 2019 (the "Convertible Notes due 2019") for $15.0 million in aggregate principal amount of its Convertible Senior Notes due 2022 (the "Convertible Notes due 2022").

Refinancing Initiatives

The table and discussion set forth below summarizes the Company’s previously announced refinancing initiatives, all of which have closed as of the date of this press release.

 
      In thousands of U.S. dollars  
  Agreement Closing date Facility
amount
Existing
debt
repayment
New
liquidity
Number of
vessels
refinanced
1   ABN AMRO/SEB Credit Facility Q2 2018 $ 120,575   $ 87,575   $ 33,000   Five
2   $88.0 Million Sale and Leaseback Q3 2018 88,000   57,408   30,592   Four
3   ING Credit Facility Upsize Q3 2018 38,675   26,854   11,821   Two
4   $35.7 Million Term Loan Facility Q3 2018 35,658   26,450   9,208   Two
5   China Huarong Shipping Sale and Leaseback Q3 2018 144,000   92,729   51,271   Six
6   AVIC International Sale and Leaseback Q3 2018 145,000   100,056   44,944   Five
7   2018 CMB Sale and Leaseback Q3 2018 141,600   87,491   54,109   Six
8   $116.0 Million Sale and Leaseback Q3 2018 116,000   73,020   42,980   Four
9   $157.5 Million Sale and Leaseback Q4 2018 157,500   113,701   43,799   Seven
      $ 987,008   $ 665,284   $ 321,724   41 vessels
 

ABN AMRO/SEB Credit Facility

In June 2018, the Company executed a senior secured term loan facility with ABN AMRO Bank N.V. and Skandinaviska Enskilda Banken AB for $120.6 million. This loan was fully drawn in June 2018, and the proceeds were used to refinance the existing indebtedness of $87.6 million on the K-Sure Credit Facility relating to five vessels consisting of one Handymax product tanker (STI Hammersmith), one MR product tanker (STI Westminster), and three LR2 product tankers (STI Connaught, STI Winnie and STI Lauren).

The ABN AMRO/SEB Credit Facility has a final maturity of June 2023 and bears interest at LIBOR plus a margin of 2.60% per annum. The loan will be repaid in equal quarterly installments of $2.9 million per quarter, in aggregate, for the first eight installments and $2.5 million per quarter, in aggregate, thereafter, with a balloon payment due upon maturity. The terms and conditions, including financial covenants, of the ABN AMRO/SEB Credit Facility are similar to those in the Company’s existing credit facilities.

$88.0 Million Sale and Leaseback

In July 2018, the Company reached an agreement to sell and leaseback two Handymax product tankers (STI Battersea and STI Wembley) and two MR product tankers (STI Texas City and STI Meraux) to an international financial institution. The borrowing amounts under the arrangement were $21.2 million per Handymax and $22.8 million per MR ($88.0 million in aggregate), and these agreements, which have been accounted for as financing arrangements, closed in September 2018. The proceeds were utilized to repay $14.8 million of the outstanding indebtedness on the DVB 2017 Credit Facility, $12.6 million of the outstanding indebtedness on the K-Sure Credit Facility, and $30.0 million of the outstanding indebtedness on the 2016 Credit Facility for these vessels.

Each agreement is for a fixed term of eight years, and the Company has options to purchase the vessels beginning at the end of the second year of each agreement. The leases bear interest at LIBOR plus a margin of 3.6% per annum and will be repaid in quarterly installments of $0.5 million per vessel. Each agreement also has a purchase obligation at the end of the eighth year, which is equal to the outstanding principal balance at that date. The Company is subject to certain additional terms and conditions under this arrangement, including financial covenants, which are similar to those set forth in its existing lease financing arrangements.

ING Credit Facility Upsize

In June 2018, the Company executed an agreement to upsize its $132.5 million credit facility with ING Bank N.V. to $171.2 million. In September 2018, the Company drew down $38.7 million from this facility and placed STI Rotherhithe and STI Notting Hill as collateral under this agreement. The proceeds were used to refinance the existing indebtedness of $26.9 million on the Company’s K-Sure Credit Facility relating to one Handymax product tanker (STI Rotherhithe) and one MR product tanker (STI Notting Hill).

The upsized portion of the loan facility has a final maturity of June 2022 and bears interest at LIBOR plus a margin of 2.40% per annum. The loan will be repaid in equal quarterly installments of $1.0 million per quarter, in aggregate, for the first eight installments and $0.8 million per quarter, in aggregate, thereafter, with a balloon payment due upon maturity. The remaining terms and conditions of the upsized portion, including financial covenants, are similar to those set forth in the Company’s existing credit facilities.

$35.7 Million Term Loan Facility

In June 2018, the Company executed an agreement with a leading European financial institution for a term loan facility of $35.7 million. The loan facility was drawn in August 2018 and the proceeds were used to repay $26.5 million of the existing indebtedness on the BNP Paribas Credit Facility related to two MR product tankers (STI Memphis and STI Soho).

The loan facility has a final maturity of June 2021, bears interest at LIBOR plus a margin of 2.50% per annum and will be repaid in equal quarterly installments of $0.8 million, in aggregate, with a balloon payment due upon maturity. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s existing credit facilities.

China Huarong Shipping Sale and Leaseback

In May 2018, the Company reached an agreement to sell and leaseback six 2014 built MR product tankers (STI Opera, STI Virtus, STI Venere, STI Aqua, STI Dama and STI Regina) to China Huarong Shipping Financial Leasing Co., Ltd. The borrowing amount under the arrangement was $144.0 million in aggregate. These agreements, which have been accounted for as financing arrangements, closed in August 2018, and the proceeds were utilized to repay $92.7 million of the outstanding indebtedness under the 2016 Credit Facility.

Each agreement is for a fixed term of eight years, and the Company has options to purchase the vessels beginning at the end of the third year of each agreement. The leases bear interest at LIBOR plus a margin of 3.5% per annum and will be repaid in equal quarterly principal installments of $0.6 million per vessel. Each agreement also has a purchase obligation at the end of the eighth year, which is equal to the outstanding principal balance at that date. The Company is subject to certain additional terms and conditions under this arrangement, including financial covenants, which are similar to those set forth in its existing lease financing arrangements.

AVIC International Sale and Leaseback

In July 2018, the Company executed an agreement to sell and leaseback three MR product tankers (STI Ville, STI Fontvieille and STI Brooklyn) and two LR2 product tankers (STI Rose and STI Rambla) to AVIC International Leasing Co., Ltd. The borrowing amounts under the arrangement are $24.0 million per MR and $36.5 million per LR2 ($145.0 million in aggregate). These agreements, which have been accounted for as financing arrangements, closed in August and September 2018, and the proceeds were utilized to repay $32.7 million of the outstanding indebtedness on the NIBC Credit Facility, $13.0 million of the outstanding indebtedness on the K-Sure Credit Facility, $28.3 million of the outstanding indebtedness on the Scotiabank Credit Facility, and $26.1 million of the outstanding indebtedness on the Credit Suisse Credit Facility for these vessels.

Each agreement is for a fixed term of eight years, and the Company has options to purchase the vessels beginning at the end of the second year of each agreement. The leases bear interest at LIBOR plus a margin of 3.7% per annum and will be repaid in quarterly principal installments of $0.5 million per MR and $0.8 million per LR2. Each agreement also has a purchase obligation at the end of the eighth year, which is equal to the outstanding principal balance at that date. The Company is subject to certain additional terms and conditions under this arrangement, including financial covenants, which are similar to those set forth in its existing lease financing arrangements.

2018 CMB Sale and Leaseback

In July 2018, the Company executed an agreement to sell and leaseback six MR product tankers (STI Battery, STI Milwaukee, STI Tribeca, STI Bronx, STI Manhattan and STI Seneca) to CMB Financial Leasing Co., Ltd. The borrowing amount under the arrangement was $141.6 million in aggregate, and these agreements, which have been accounted for as financing arrangements, closed in August 2018. The proceeds were utilized to repay $33.5 million of the outstanding indebtedness on the DVB 2017 Credit Facility, $39.7 million of the outstanding indebtedness on the K-Sure Credit Facility, and $14.4 million of the outstanding indebtedness on the BNP Paribas Credit Facility for these vessels.

Each agreement is for a fixed term of eight years, and the Company has options to purchase the vessels at the start of the fourth year of each agreement. The leases bear interest at LIBOR plus a margin of 3.2% per annum and will be repaid in quarterly principal installments of $0.4 million per vessel. Each agreement also has a purchase obligation at the end of the eighth year, which is equal to the outstanding principal balance at that date. The Company is subject to certain additional terms and conditions under this arrangement, including financial covenants, which are similar to those set forth in its existing lease financing arrangements.

$116.0 Million Sale and Leaseback

In June 2018,the Company reached an agreement to sell and leaseback two MR product tankers (STI Gramercy and STI Queens) and two LR2 product tankers (STI Oxford and STI Selatar) in two separate transactions to an international financial institution. The borrowing amounts under the arrangement were $24.0 million per MR and $34.0 million per LR2 ($116.0 million in aggregate), and these agreements, which have been accounted for as financing arrangements, closed in August 2018. The proceeds were utilized to repay $26.5 million of the outstanding indebtedness on the Credit Suisse Credit Facility and $46.6 million of the outstanding indebtedness on the K-Sure Credit Facility for these vessels.

Under the terms of these agreements, the Company will make a fixed payment, which includes principal and interest, for seven years at $7,935 per day for each MR and $11,040 per day for each LR2. In addition, the Company has purchase options beginning at the end of the third year of each agreement, and a purchase obligation for each vessel upon the expiration of each agreement. We are subject to certain additional terms and conditions under this arrangement, which are similar to those set forth in our existing lease financing arrangements.

$157.5 Million Sale and Leaseback

In July 2018, the Company agreed to sell and leaseback six MR product tankers (STI San Antonio, STI Benicia, STI St. Charles, STI Yorkville, STI Mayfair and STI Duchessa) and one LR2 product tanker (STI Alexis) to an international financial institution. The borrowing amount under the arrangement was $157.5 million in aggregate, and these agreements, which will be accounted for as financing arrangements, closed in October 2018. In September 2018, the Company repaid the outstanding indebtedness for two vessels consisting of $14.2 million on the HSH Credit Facility and $13.6 million on the K-Sure Credit Facility, in advance of the October closing of these transactions. Upon closing, the proceeds were utilized to repay the outstanding indebtedness of $59.2 million on the 2016 Credit Facility and the outstanding indebtedness of $25.8 million on the DVB 2017 Credit Facility for the remaining five vessels.

Each agreement is for a fixed term of seven years, and the Company has options to purchase the vessels beginning at the end of the third year of each agreement. The leases bear interest at LIBOR plus a margin of 3.0% per annum and will be repaid in equal quarterly principal installments of $0.5 million per MR and $0.6 million for the LR2. Each agreement also has a purchase obligation at the end of the seventh year. The Company is subject to certain additional terms and conditions under this arrangement, including financial covenants, which are similar to those set forth in its existing lease financing arrangements.

$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 due 2019, which were issued in June 2014, (ii) Unsecured Senior Notes Due 2020 (SBNA), which were issued in May 2014, (iii) Unsecured Senior Notes Due 2019 (SBBC), which were issued in March 2017, and (iv) Convertible Notes due 2022, which were issued in May and July 2018.

No securities were repurchased under this program during the period commencing January 1, 2018 and ending on the date of this press release.

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.

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 2019 and Convertible Notes due 2022 (which were issued in June 2014 and May 2018, respectively) were converted into common shares at the beginning of each period and the interest and non-cash amortization expense associated with these notes of $6.0 million and $17.5 million during the three and nine months ended September 30, 2018, 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, 2018, the Company's basic weighted average number of shares was 310,032,639 and 309,291,442, 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, 2018, respectively, as the Company incurred net losses.

As of the date hereof, the Convertible Notes due 2019 and Convertible Notes due 2022 are not eligible for conversion.

Amendment of Minimum Interest Coverage Ratio

In September 2018, the Company entered into agreements with certain of its lenders who are party to credit facilities with the Company, to permanently remove the minimum interest coverage ratio financial covenant from the terms of each facility. As a result, the Company is no longer required to maintain a ratio of EBITDA to net interest expense on any of its secured credit facilities or lease financing arrangements.

As part of these agreements, and for certain of the facilities (as detailed below), the minimum threshold for the aggregate fair market value of the vessels as a percentage of the then aggregate principal amount of each facility was revised to be no less than the following:

 
Facility Minimum ratio
KEXIM Credit Facility 155%
2017 Credit Facility 155%
2016 Credit Facility 145% through June 30, 2019, 150% thereafter
ABN Credit Facility 145% through June 30, 2019, 150% thereafter
DVB Credit Facility 145% through June 30, 2019, 150% thereafter
   

Convertible Notes Exchange

In July 2018, the Company exchanged $15.0 million in aggregate principal amount of its Convertible Notes due 2019 for $15.0 million in aggregate principal amount of its Convertible Notes due 2022. The new notes issued in this exchange have identical terms, are fungible with and are part of the series of Convertible Notes due 2022 which were issued in May 2018. This exchange was executed with certain holders of the Convertible Notes due 2019 via separate, privately negotiated agreements.

This transaction was accounted for as an extinguishment of debt and the Company recorded a loss on extinguishment of $0.9 million during the third quarter of 2018 as a result.

The Convertible Notes due 2022 bear interest at a coupon rate of 3.0%, which is payable semi-annually on November 15 and May 15 of each year and carried an initial conversion rate of 250 shares of the Company's common stock per $1,000 principal amount ($4.00 per share). The conversion rate is subject to adjustment from time to time upon the occurrence of certain events (such as the payment of dividends). The conversion rate was adjusted to 252.1317 shares of the Company's common stock per $1,000 principal amount in September 2018 due to the scheduled payment of a quarterly dividend. The Convertible Notes due 2022 mature on May 15, 2022 and are non-redeemable. The remaining terms and conditions are similar to those set forth in the Company's Convertible Notes due 2019.

Conference Call

The Company has scheduled a conference call on October 31, 2018 at 8:00 AM Eastern Daylight Time and 1:00 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: 7996914

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/c8zombh7

Current Liquidity

As of October 30, 2018, the Company had $648.8 million in unrestricted cash and cash equivalents.

Drydock Update

Two of the Company’s 2013 built MR product tankers were drydocked in accordance with their scheduled, class required special survey during the third quarter of 2018. These vessels were offhire for an aggregate of 42 days and the aggregate drydock cost was $1.5 million.

The Company has two 2014 built MRs that are scheduled for drydock during the remainder of 2018 and estimates that these vessels will be offhire for an aggregate of 40 days with estimated aggregate drydock costs of approximately $2.0 million.

Debt

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

 
  In thousands of U.S. dollars   Outstanding
as of June
30, 2018

Drawdowns,
(repayments),
and
exchanges, net
Outstanding
as of
September
30, 2018

Drawdowns,
and
(repayments),
net
Outstanding
as of
October 30,
2018

1 K-Sure Credit Facility   $ 152,345   $ (152,345 ) $   $   $  
2 KEXIM Credit Facility   316,125   (16,825 ) 299,300     299,300  
3 Credit Suisse Credit Facility   53,488   (53,488 )      
4 ABN AMRO Credit Facility   108,868   (6,222 ) 102,646   (537 ) 102,109  
5 ING Credit Facility   109,844   37,517   147,361   (1,071 ) 146,290  
6 BNP Paribas Credit Facility   40,825   (40,825 )      
7 Scotiabank Credit Facility   28,860   (28,860 )      
8 NIBC Credit Facility   33,691   (33,691 )      
9 $35.7 Million Term Loan Facility     35,658   35,658   (808 ) 34,850  
10 2016 Credit Facility   185,457   (126,268 ) 59,189   (59,189 )  
11 HSH Nordbank Credit Facility   14,620   (14,620 )      
12 2017 Credit Facility   157,057   (9,659 ) 147,398     147,398  
13 DVB 2017 Credit Facility   75,480   (49,680 ) 25,800   (25,800 )  
14 Credit Agricole Credit Facility   103,579   (2,142 ) 101,437     101,437  
15 ABN AMRO/K-Sure Credit Facility   51,456   (964 ) 50,492     50,492  
16 Citi/K-Sure Credit Facility   107,858   (2,104 ) 105,754     105,754  
17 ABN AMRO/SEB Credit Facility   120,575   (2,875 ) 117,700     117,700  
18 Ocean Yield Lease Financing   165,598   (2,651 ) 162,947   (909 ) 162,038  
19 CMBFL Lease Financing   64,425   (1,227 ) 63,198     63,198  
20 BCFL Lease Financing (LR2s)   104,455   (1,822 ) 102,633   (614 ) 102,019  
21 CSSC Lease Financing   255,180   (4,326 ) 250,854   (1,442 ) 249,412  
22 BCFL Lease Financing (MRs)   104,130   (2,652 ) 101,478   (863 ) 100,615  
23 2018 CMB Sale and Leaseback     139,071   139,071     139,071  
24 $116.0 Million Sale and Leaseback
    114,255   114,255   (512 ) 113,743  
25 AVIC International Sale and Leaseback     142,052   142,052     142,052  
26 China Huarong Shipping Sale and Leaseback     140,625   140,625     140,625  
27 $157.5 Million Sale and Leaseback         155,621   155,621  
28 $88.0 Million Sale and Leaseback     86,075   86,075     86,075  
29 2020 Senior Unsecured Notes   53,750     53,750     53,750  
30 2019 Senior Unsecured Notes   57,500     57,500     57,500  
31 Convertible Notes due 2019   160,000   (15,000 ) 145,000     145,000  
32 Convertible Notes due 2022   188,500   15,000   203,500     203,500  
      $ 2,813,666   $ 142,007   $ 2,955,673   $ 63,876   $ 3,019,549  
 

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

     
In millions of U.S. dollars As of October 30, 2018
Q4 2018 - principal payments made to date (1) $ 8.6  
Q4 2018 - remaining principal payments 38.7  
Q1 2019 62.9  
Q2 2019 (2) 103.9  
Q3 2019 (3) 208.3  
Q4 2019 46.6  
2020 and thereafter 2,559.2  
   
  $ 3,028.2  
(1) Excludes the repayment of $85.0 million relating to the refinancing of the existing indebtedness on five product tankers that are part of the $157.5 million sale and leaseback that closed in October 2018.
(2) Repayments include $57.5 million due upon the maturity of the Company's 2019 Senior Unsecured Notes.
(3) Repayments include $145.0 million due upon the maturity of the Company's Convertible Notes due 2019.
 

Explanation of Variances on the Third Quarter of 2018 Financial Results Compared to the Third Quarter of 2017

For the three months ended September 30, 2018, the Company recorded a net loss of $71.7 million compared to a net loss of $36.9 million for the three months ended September 30, 2017. The following were the significant changes between the two periods:

  • 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, 2018 and 2017:
             
    For the three months ended September 30,
In thousands of U.S. dollars   2018   2017
Vessel revenue   $ 119,281     $ 123,119  
Voyage expenses   (470 )   (1,276 )
TCE revenue   $ 118,811     $ 121,843  
                 
  • TCE revenue for the three months ended September 30, 2018 decreased $3.0 million to $118.8 million, from $121.8 million for the three months ended September 30, 2017. This decrease was the result of a reduction in TCE revenue per day, which decreased to $10,519 per day during the three months ended September 30, 2018, from $12,395 per day during the three months ended September 30, 2017. The spot market for product tankers continues to face adverse market conditions as a result of an unfavorable global supply and demand imbalance resulting primarily from weaker global refining margins, a lack of arbitrage opportunities, and the continued absorption of an influx of prior year newbuilding deliveries. This decrease in TCE revenue per day was partially offset by the growth of the Company's fleet to an average of 124.2 operating vessels during the three months ended September 30, 2018 from an average of 108.9 operating vessels during the three months ended September 30, 2017. This fleet growth was the result of the merger with NPTI, which resulted in the delivery of 23 vessels in September 2017, and the delivery of six vessels under the Company's newbuilding program (four vessels during the third and fourth quarters of 2017 and two vessels during the first quarter of 2018.)

  • Vessel operating costs for the three months ended September 30, 2018 increased $10.9 million to $69.3 million, from $58.4 million for the three months ended September 30, 2017. This increase was the result of an increase in the average number of owned and bareboat chartered-in vessels for the three months ended September 30, 2018 to 119.0 vessels from 99.3 vessels for the three months ended September 30, 2017. This growth was the result of (i) the merger with NPTI, which resulted in the delivery of 23 vessels in September 2017, and (ii) the delivery of a total of six vessels under the Company's newbuilding program during the third and fourth quarters of 2017 and the first quarter of 2018.

  • Charterhire expense for the three months ended September 30, 2018 decreased $5.1 million to $13.8 million, from $18.9 million for the three months ended September 30, 2017. This decrease was the result of a decrease in the number of time chartered-in vessels during those periods. The Company's time and bareboat chartered-in fleet consisted of an average of 5.2 time chartered-in vessels and 10.0 bareboat chartered-in vessels for the three months ended September 30, 2018, and the Company's time and bareboat chartered-in fleet consisted of an average of 9.6 time chartered-in vessels and 10.0 bareboat chartered-in vessels for the three months ended September 30, 2017. The average daily base rates on the Company's time chartered-in fleet during the three months ended September 30, 2018 and three months ended September 30, 2017 were $14,254 per vessel per day and $13,718 per vessel per day, respectively. The average daily base rates for the Company's bareboat chartered-in fleet during the three months ended September 30, 2018 and three months ended September 30, 2017 were $7,642 per vessel per day and $7,309 per vessel per day, respectively.

  • Depreciation expense for the three months ended September 30, 2018 increased $8.2 million to $44.6 million, from $36.3 million for the three months ended September 30, 2017. This increase was primarily driven by (i) the delivery of a total of six vessels under the Company's newbuilding program during the third and fourth quarters of 2017 and the first quarter of 2018, and (ii) the delivery of eight LR1 and 15 LR2 vessels acquired from NPTI in September 2017.

  • Financial expenses for the three months ended September 30, 2018 increased $19.2 million to $50.1 million, from $30.9 million for the three months ended September 30, 2017. The increase in financial expenses was primarily a result of (i) increased interest expense incurred as a result of the assumption of $806.4 million of indebtedness as part of the September 2017 closing of the Company's merger with NPTI, (ii) increases in LIBOR rates when compared to the third quarter of 2017, and (iii) the write-off or acceleration of $5.9 million of deferred financing fees during the third quarter of 2018 as a result of the July 2018 $15.0 million convertible notes exchange, the refinancing of the existing indebtedness on 29 vessels during the third quarter of 2018, and the acceleration of the deferred financing fees related to the existing indebtedness on seven vessels that was refinanced in October 2018.
 
Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statements of Income or Loss
(unaudited)
                                 
    For the three months ended
September 30,
  For the nine months ended
September 30,
In thousands of U.S. dollars except per share and share data
2018   2017   2018   2017
Revenue                              
  Vessel revenue $ 119,281     $ 123,119     $ 417,521     $ 364,338  
                 
Operating expenses              
  Vessel operating costs (69,337 )   (58,418 )   (209,241 )   (156,403 )
  Voyage expenses (470 )   (1,276 )   (4,842 )   (4,720 )
  Charterhire (13,819 )   (18,886 )   (48,988 )   (57,790 )
  Depreciation (44,584 )   (36,341 )   (132,131 )   (97,883 )
  General and administrative expenses (12,373 )   (12,539 )   (39,344 )   (36,141 )
  Gain / (loss) on sale of vessels     7         (23,345 )
  Merger transaction related costs     (2,285 )   (272 )   (34,815 )
  Bargain purchase gain             5,417  
  Total operating expenses (140,583 )   (129,738 )   (434,818 )   (405,680 )
Operating loss (21,302 )   (6,619 )   (17,297 )   (41,342 )
Other (expense) and income, net              
  Financial expenses (50,106 )   (30,927 )   (138,473 )   (77,621 )
  Loss on exchange of convertible notes (870 )       (17,838 )    
  Realized loss on derivative financial instruments             (116 )
  Financial income 820     665     1,550     1,154  
  Other expenses, net (251 )   (67 )   (346 )   1,195  
  Total other expense, net (50,407 )   (30,329 )   (155,107 )   (75,388 )
Net loss $ (71,709 )   $ (36,948 )   $ (172,404 )   $ (116,730 )
                 
Loss per share              
                 
  Basic $ (0.23 )   $ (0.16 )   $ (0.56 )   $ (0.61 )
  Diluted $ (0.23 )   $ (0.16 )   $ (0.56 )   $ (0.61 )
  Basic weighted average shares outstanding 310,032,639     232,062,058     309,291,442     192,304,650  
  Diluted weighted average shares outstanding (1) 310,032,639     232,062,058     309,291,442     192,304,650  
 
(1) The dilutive effect of (i) unvested shares of restricted stock and (ii) the potentially dilutive securities relating to the Company's Convertible Notes due 2019 and Convertible Notes due 2022 were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2018 because their effect would have been anti-dilutive. Weighted average shares under the if-converted method (which includes the potential dilutive effect of the unvested shares of restricted stock, and the Convertible Notes due 2019 and the Convertible Notes due 2022) were 378,781,784 and 363,998,811 for the three and nine months ended September 30, 2018, respectively.


Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
       
  As of
In thousands of U.S. dollars September 30, 2018   December 31, 2017
Assets      
Current assets      
Cash and cash equivalents $ 267,826     $ 186,462  
Accounts receivable 54,862     65,458  
Prepaid expenses and other current assets 21,564     17,720  
Inventories 8,355     9,713  
Total current assets 352,607     279,353  
Non-current assets      
Vessels and drydock 4,040,438     4,090,094  
Vessels under construction     55,376  
Other assets 63,275     50,684  
Goodwill 11,539     11,482  
Restricted cash 12,285     11,387  
Total non-current assets 4,127,537     4,219,023  
Total assets $ 4,480,144     $ 4,498,376  
Current liabilities      
Current portion of long-term debt $ 307,719     $ 113,036  
Finance lease liability 100,089     50,146  
Accounts payable 16,779     13,044  
Accrued expenses 22,361     32,838  
Total current liabilities 446,948     209,064  
Non-current liabilities      
Long-term debt 1,277,846     1,937,018  
Finance lease liability 1,195,982     666,993  
Total non-current liabilities 2,473,828     2,604,011  
Total liabilities 2,920,776     2,813,075  
Shareholders' equity      
Issued, authorized and fully paid-in share capital:      
Share capital 3,838     3,766  
Additional paid-in capital 2,329,987     2,283,591  
Treasury shares (443,816 )   (443,816 )
Accumulated deficit (1) (330,641 )   (158,240 )
Total shareholders' equity 1,559,368     1,685,301  
Total liabilities and shareholders' equity $ 4,480,144     $ 4,498,376  
 
(1) Accumulated deficit reflects the impact of the adoption of IFRS 15, Revenue from Contracts with Customers, which is effective for annual periods beginning on January 1, 2018. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption (the "modified retrospective method"). We have applied the modified retrospective method upon the date of transition. Accordingly, the cumulative effect of the application of this standard resulted in a $3,888 reduction in the opening balance of Accumulated deficit on January 1, 2018.


Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(unaudited)
 
  For the nine months ended September 30,
In thousands of U.S. dollars 2018   2017
Operating activities              
Net loss $ (172,404 )   $ (116,730 )
Loss on sales of vessels     23,345  
Depreciation 132,131     97,883  
Amortization of restricted stock 19,403     17,480  
Amortization of deferred financing fees 8,271     10,369  
Write-off of deferred financing fees 12,946     1,497  
Bargain purchase gain     (5,417 )
Share-based transaction costs     5,973  
Accretion of convertible notes 9,811     9,109  
Accretion of fair value measurement on debt assumed from NPTI 2,849     510  
Loss on exchange of convertible notes 17,838      
  30,845     44,019  
Changes in assets and liabilities:      
Decrease / (increase) in inventories 1,480     (1,761 )
Decrease in accounts receivable 10,556     4,230  
(Increase) / decrease in prepaid expenses and other current assets (841 )   10,842  
Increase in other assets (1,436 )   (18,590 )
Increase in accounts payable 3,459     15,222  
Decrease in accrued expenses (9,057 )   (14,983 )
  4,161     (5,040 )
Net cash inflow from operating activities 35,006     38,979  
Investing activities      
Acquisition of vessels and payments for vessels under construction (26,057 )   (200,735 )
Proceeds from disposal of vessels     127,372  
Net cash paid for the merger with NPTI     (23,062 )
Drydock, scrubber and BWTS payments (owned and bareboat-in vessels) (12,543 )   (2,803 )
Net cash outflow from investing activities (38,600 )   (99,228 )
Financing activities      
Debt repayments (733,255 )   (409,452 )
Issuance of debt 850,958     425,890  
Debt issuance costs (21,945 )   (12,386 )
(Increase) / decrease in restricted cash (898 )   10,762  
Gross proceeds from issuance of common stock     200,000  
Equity issuance costs (4 )   (11,291 )
Dividends paid (9,898 )   (6,298 )
Redemption of NPTI Redeemable Preferred Shares     (39,495 )
Net cash inflow from financing activities 84,958     157,730  
Increase in cash and cash equivalents 81,364     97,481  
Cash and cash equivalents at January 1, 186,462     99,887  
Cash and cash equivalents at September 30, $ 267,826     $ 197,368  


Scorpio Tankers Inc. and Subsidiaries
Other operating data for the three and nine months ended September 30, 2018 and 2017
(unaudited)
 
  For the three months ended
September 30,
  For the nine months ended
September 30,
  2018   2017   2018   2017
Adjusted EBITDA(1) (in thousands of U.S. dollars)   $ 29,254     $ 37,808     $ 134,163     $ 127,844  
                                 
Average Daily Results                                
Time charter equivalent per day(2)   $ 10,519     $ 12,395     $ 12,058     $ 13,289  
Vessel operating costs per day(3)   $ 6,333     $ 6,393     $ 6,448     $ 6,379  
                 
LR2                
TCE per revenue day (2)   $ 12,532     $ 13,234     $ 13,222     $ 14,768  
Vessel operating costs per day(3)   $ 6,652     $ 6,469     $ 6,650     $ 6,448  
Average number of owned or finance leased vessels   38.0     27.9     38.0     23.9  
Average number of time chartered-in vessels   1.6     1.6     1.7     1.3  
                 
LR1                
TCE per revenue day (2)   $ 8,335     $ 11,787     $ 9,843     $ 11,588  
Vessel operating costs per day(3)   $ 6,232     $ 6,525     $ 6,612     $ 6,399  
Average number of owned or finance leased vessels   12.0     6.6     12.0     2.5  
Average number of time chartered-in vessels               0.5  
                 
MR                
TCE per revenue day (2)   $ 9,875     $ 13,041     $ 12,009     $ 13,183  
Vessel operating costs per day(3)   $ 6,193     $ 6,208     $ 6,319     $ 6,220  
Average number of owned or finance leased vessels   45.0     40.8     44.9     41.4  
Average number of time chartered-in vessels   3.6     6.0     5.1     6.9  
Average number of bareboat chartered-in vessels   3.0     3.0     3.0     1.8  
                 
Handymax                
TCE per revenue day (2)   $ 9,529     $ 10,062     $ 11,273     $ 12,036  
Vessel operating costs per day(3)   $ 6,135     $ 6,635     $ 6,282     $ 6,631  
Average number of owned or finance leased vessels   14.0     14.0     14.0     14.0  
Average number of time chartered-in vessels       2.0     0.7     2.1  
Average number of bareboat chartered-in vessels   7.0     7.0     7.0     5.8  
                 
Fleet data                
Average number of owned or finance leased vessels   109.0     89.3     108.9     81.8  
Average number of time chartered-in vessels   5.2     9.6     7.5     10.8  
Average number of bareboat chartered-in vessels   10.0     10.0     10.0     7.5  
                 
Drydock                
Drydock, scrubber, and BWTS payments for owned or bareboat-in vessels (in thousands of U.S. dollars)   $ 10,407     $ 4,799     $ 12,543     $ 5,156  
 
(1) See Non-IFRS Measures section below.
(2) Freight rates are commonly measured in the shipping industry in terms of time charter equivalent per day (or TCE per day), which is calculated by subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (time charter equivalent revenues) by the number of revenue days in the period. Revenue days are the number of days the vessel is owned or chartered-in less the number of days the vessel is off-hire for drydock and repairs.
(3) Vessel operating costs per day represent vessel operating costs divided by the number of operating days during the period. Operating days are the total number of available days in a period with respect to the owned or bareboat chartered-in vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned, finance leased or bareboat chartered-in vessels, not our time chartered-in vessels.


null
Fleet list as of October 30, 2018
 
  Vessel Name   Year
Built
  DWT   Ice
class
  Employment   Vessel
type
  Owned or finance leased vessels                    
1   STI Brixton