MONACO — (Marketwire) — 05/03/12 — Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers,” or the “Company”) today reported its results for the three months ended March 31, 2012.
The Company recorded a net loss of $5.1 million or $0.14 basic and diluted loss per share, which included a non-cash charge of $4.5 million, or $0.12 basic and diluted loss per share relating to the loss on sales of the STI Conqueror, STI Matador, and STI Gladiator for the three months ended March 31, 2012. Excluding the non-cash charge, the net loss would have been $0.6 million, or $0.02 basic and diluted loss per share. This is compared to a net loss of $1.4 million or $0.06 basic and diluted loss per share for the three months ended March 31, 2011.
Summary of Recent and First Quarter Significant Events:
Closed on a Registered Direct Placement of 4,000,000 shares of common stock at an offering price of $6.75 per share, receiving net proceeds of $25.8 million.
Closed on the sales of the STI Conqueror, STI Matador, and STI Gladiator.
Signed contracts with Hyundai Mipo Dockyard Co., Ltd. of South Korea (“HMD”) in February and March 2012 to construct the Company–s seventh and eighth newbuilding vessels.
Took delivery of the MR product tanker, Pacific Duchess (2009 built, 46,697 DWT) in March 2012 on a one year time charter-in agreement.
Agreed to charter-in four other MR product tankers, the Targale (2007 built, 49,999 DWT), Pacific Marchioness (2010 built, 46,697 DWT), STX Ace6 (2007 built, 46,161 DWT) and Freja Lupus (2012 build, 50,385 DWT), all of which are expected to be delivered by the end of May 2012.
Emanuele Lauro, chief executive officer and chairman of the board commented, “We are pleased by our quarterly results, especially in light of several transitory but negative factors. First, the unseasonably warm weather in the Northern Hemisphere dampened demand for heating oil and other products that we carry on our vessels. Second, our operating expenses were higher than planned which we attribute to the positioning of our fleet. Third, since several major refinery closures were announced, we have witnessed significant changes in market activity as industry participants prepare for new trading patterns and increased freight rate volatility that will come as a result.”
Mr. Lauro continued, “We remain focused on growing our modern fleet and our operating leverage to capture improving fundamentals. The sale of three of our older vessels, along with our successful registered direct placement of four million shares of common stock, has enabled us to free up necessary capital to pursue our strategy of acquiring modern, high quality vessels while maintaining sensible operating leverage.”
Follow-on offering
On April 18, 2012, the Company closed on the sale of 4,000,000 shares of its common stock in a registered direct placement of common shares at an offering price of $6.75 per share. The Company received net proceeds of approximately $25.8 million, after deducting the placement agents– discount and offering expenses.
Vessel sales
The Company closed on the sales of three of its Handymax vessels: the STI Conqueror for $21.2 million in March 2012, the STI Matador for $16.2 million in April 2012, and the STI Gladiator for $16.2 million in May 2012. As a result of the disposals, the Company recorded a $4.5 million loss in the first quarter of 2012. In connection with these sales, the availability of the Company–s 2010 Revolving Credit Facility decreased by approximately $31.0 million.
Newbuilding Vessel Agreements
The Company signed contracts with HMD to construct two newbuilding vessels for $36.0 million each, which are the Company–s seventh and eighth 52,000 DWT MR product tanker newbuildings with HMD. These vessels are scheduled to be delivered to the Company in April and May 2013, respectively.
Time charter-in agreements
In February 2012, the Company agreed to charter-in a 2009 built MR product tanker (46,697 DWT), the Pacific Duchess. The vessel will be chartered-in for one year at $13,800 per day and was delivered in March 2012. The agreement includes an option for the Company to extend the charter for an additional year at $14,800 per day.
In February 2012, the Company agreed to charter-in a 2007 built MR product tanker (49,999 DWT), the Targale. The vessel will be chartered in for two years at $14,500 per day and is expected to be delivered in May 2012. The agreement includes three consecutive options for the Company to extend the charter for up to three consecutive one year periods at $14,850 per day, $15,200 per day, and $16,200 per day, respectively.
In March 2012, we agreed to charter-in a 2010 built MR product tanker, the Pacific Marchioness. The vessel will be chartered-in for one year at $13,900 per day and is expected to be delivered in May 2012. The agreement includes an option for the Company to extend the charter for an additional year at $14,900 per day.
In March 2012, we agreed to charter-in a 2007 built MR product tanker, the STX Ace6. The vessel will be chartered-in for two years at $14,150 per day and is expected to be delivered in May 2012. The agreement includes an option for the Company to extend the charter for an additional year at $15,150 per day.
In March 2012, we agreed to charter-in a 2012 built MR product tanker, the Freja Lupus. The vessel will be chartered-in for two years at $14,760 per day and is expected to be delivered in May 2012. The agreement includes an option for the Company to extend the charter for an additional year at $16,000 per day.
The Company will have a conference call on May 3, 2012 at 11:30 AM eastern daylight time.
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(888)-254-3595 (U.S.) or 1(913) 312-0388 (International). The conference participant passcode is 9224879. 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.
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 May 2, 2012, the Company had $73.8 million in cash and $16.8 million available to draw down from its 2010 Credit Facility.
Debt Balance and Repayments
In April 2012, we repaid $16 million into our 2010 Revolving Credit Facility. The funds can be redrawn when needed. As of May 2, 2012, the Company–s outstanding debt balance is as follows:
2012 Debt Repayments
The second quarter 2012 debt repayment for the STI Spirit Credit Facility and 2011 Credit Facility is $1.1 million in aggregate. There are no principal payments due for the 2010 Revolving Credit Facility since the amount available is greater than the amount drawn.
Payments for the Eight Newbuildings
We made $22.3 million of installment payments on our newbuilding vessels during the first quarter of 2012.
The current estimated future payment dates and amounts are as follows*:
*These are estimates only and are subject to change as the construction progresses. For expected delivery dates of the newbuildings, see the Fleet List below.
For the three months ended March 31, 2012, the Company incurred a net loss of $5.1 million compared to a net loss of $1.4 million in the three months ended March 31, 2011. The following were the significant changes between the two periods:
Vessel revenue increased by $11.9 million to $28.9 million as a result of an increase in the average number of operating vessels to 17.98 from 12.66 for the three month periods ended March 31, 2012 and 2011, respectively. This increase was partially offset by a decrease in daily time charter equivalent per vessel, to $14,385 from $14,997 (see the breakdown of daily TCE averages below).
Vessel operating costs increased by $1.5 million to $8.8 million as a result of the increase in the average number of owned vessels to 11.88 from 10.00 for the three month periods ended March 31, 2012 and 2011, respectively.
Voyage expenses increased by $5.5 million. The STI Coral, STI Diamond, and Pacific Duchess operated in the spot market for 197 days in the three months ended March 31, 2012. STI Coral and STI Diamond were acquired in May 2011, and the time charter for the Pacific Duchess began in March 2012; therefore, there were no operating days in the three months ended March 31, 2011 (though certain nominal voyage expenses were incurred).
Charterhire expense increased by $4.0 million to $7.1 million as a result of an increase in average number of chartered-in vessels to 6.10 from 2.66 for the three months ended March 31, 2012 and 2011, respectively. See the Company–s Fleet List below for the terms of these agreements.
Loss from sale of vessel and write down of vessels held for sale, which is a non-cash charge, increased $4.5 million as a result of the STI Conqueror being sold during the period, and STI Matador and STI Gladiator being treated as held for sale and therefore written down to their expected net sale proceeds (their fair value less costs to sell). This resulted in the Company recording a $4.5 million loss in the first quarter of 2012. The sales of STI Matador and STI Gladiator were subsequently completed in April and May, respectively.
Depreciation expense decreased by $0.3 million to $3.6 million as a result of a $66.6 million impairment charge recorded at December 31, 2011 which decreased the depreciable basis. This decrease was offset by an increase in the average number of owned vessels to 11.88 from 10.00 for the three month periods ended March 31, 2012 and 2011, respectively.
Financial expenses, which consist of interest expense, amortization of deferred financing fees and commitment fees increased by $0.1 million to $1.4 million. Interest expense for the three months ended March 31, 2012 consisted of interest on bank loans ($0.8 million), commitment fees on undrawn portions of the Company–s credit facilities ($0.3 million) and amortization of deferred financing fees ($0.3 million). Interest expense for the three months ended March 31, 2011 consisted of interest on bank loans ($1.2 million), which at the time consisted of the 2010 Revolving Credit Facility and STI Spirit Credit Facility, and amortization of deferred financing fees ($0.1 million).
Business Strategy
The Company–s primary objectives are to profitably grow the business and emerge as a major operator of medium-sized tanker vessels. The Company intends to acquire modern, high-quality tankers through timely and selective acquisitions. The Company is currently concentrating on product or coated tankers because of the fundamentals of this segment, which the Company believes includes:
increasing demand for refined products;
increasing ton miles (distance between new refiners and areas of demand); and
reduced order book.
Dividend Policy
The Company does not have immediate plans to pay dividends but will continue to assess the dividend policy. In the future, the board of directors may determine it is in the best interest of the Company to pay dividends.
Share Buyback Program
On July 9, 2010, the board of directors authorized a share buyback program of up to $20 million. Scorpio Tankers expects to repurchase these shares 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 shares.
As of May 2, 2012, the Company has purchased $5.5 million of shares in the open market.
Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns one LR2 tanker, four LR1 tankers, one Handymax tanker, two MR tankers, and one post-Panamax tanker with an average age of 5.9 years and time charters-in eleven vessels (five MR tankers and six Handymax tankers) and has contracted for eight newbuilding MRs, which are expected to be delivered to the Company between July 2012 and May 2013. Additional information about the Company is available at the Company–s website . Information on the Company–s website is not a part of this press release.
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.
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.
This press release describes EBITDA, which is not a measure prepared in accordance with IFRS (i.e. “Non GAAP” measure). The Non GAAP measure is presented in this press release as we believe that it provides investors with a means of evaluating and understanding how the Company–s management evaluates the Company–s cash performance. This Non GAAP measure should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.