MONACO — (Marketwired) — 07/29/13 — Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers,” or the “Company”) today reported its results for the three and six months ended June 30, 2013.
For the three months ended June 30, 2013, the Company had an adjusted net income of $3.6 million (see Non-GAAP Measure section below), or $0.03 basic and diluted earnings per share, excluding a $0.3 million, or $0.00 per share of unrealized gain on derivative financial instruments. Including the unrealized gain on derivative financial instruments, the Company had net income of $4.0 million, or $0.03 basic and diluted earnings per share.
For the three months ended June 30, 2012, the Company had a net loss of $4.0 million, or $0.10 basic and diluted loss per share.
For the six months ended June 30, 2013, the Company had an adjusted net income of $10.2 million (see Non-GAAP Measure section below), or $0.09 basic and diluted earnings per share, excluding a $0.4 million, or $0.00 per share unrealized gain on derivative financial instruments. Including the unrealized gain on derivative financial instruments, the Company had net income of $10.6 million or $0.09 basic and diluted earnings per share.
For the six months ended June 30, 2012, the Company had an adjusted net loss of $4.6 million, or $0.12 basic and diluted loss per share, excluding a $4.5 million, or $0.11 basic and diluted loss per share relating to the loss from sales of STI Conqueror, STI Matador, and STI Gladiator. Including the loss from the sales of vessels, the Company had a net loss of $9.1 million or $0.23 basic and diluted loss per share.
On July 29, 2013, the Scorpio Tankers– board of directors declared a quarterly cash dividend of $0.035 per share, payable on September 25, 2013 to all shareholders as of September 10, 2013 (the record date). There are currently 164,656,424 shares outstanding.
Emanuele Lauro, chief executive officer and chairman of the board, commented, “Our year-over-year performance continues to improve both as a result of stronger market fundamentals and a stronger Company. The seasonal weakness which we typically experience in the second and third quarter has been particularly short-lived in the Atlantic basin this year. Burgeoning exports of refined products from the United States has contributed to a significant counter-seasonal swing in MR vessel freight rates since the end of June, reaching levels in excess of $20,000 per day.
“We are confident in the outlook for freight markets in the Eastern hemisphere and as well for the LPG trade as major global infrastructure develops. Finally, our conviction in sustained profitability for the Company has led our Board of Directors to authorize an increase in our quarterly dividend by 40%.”
Summary of Recent and Second Quarter Significant Events:
Executed the previously announced $525.0 million 2013 Credit Facility in July 2013 (see additional information below).
Reached agreements with Hyundai Samho Heavy Industries (“HSHI”) and Daewoo Shipbuilding and Marine Engineering Co., Ltd. (“DSME”) in July 2013 for the construction of a minimum of five and up to 10 Very Large Gas Carriers (“VLGCs”) for approximately $75.0 million each, with deliveries scheduled in 2015.
Declared and paid a quarterly cash dividend on the Company–s common stock of $0.025 per share in June 2013.
Took delivery of the eighth, ninth and tenth MR tankers under the Company–s Newbuilding Program, STI Beryl, STI Le Rocher and STI Larvotto in April, June and July 2013, respectively. After delivery, each vessel began a time charter for up to 120 days at approximately $19,000 per day.
Closed on a registered direct placement of common shares in May 2013, raising aggregate net proceeds of $289.1 million.
Reached agreements in May 2013 with two shipyards to construct four 114,000 dwt LR2 product tankers for approximately $50.5 million each, two at HSHI and two at DSME. These vessels are scheduled to be delivered in the first and second quarters of 2015.
Reached an agreement in May 2013 with SPP Shipbuilding Co., Ltd. of South Korea (“SPP”) to construct four 52,000 dwt MR product tankers for approximately $32.5 million each. These vessels are scheduled to be delivered in the first and second quarters of 2015.
Reached agreements in May 2013 with Hyundai Mipo Dockyard Co. Ltd. of South Korea (“HMD”) for the construction of six Handymax ice class-1A tankers for approximately $31.6 million each with expected deliveries in the third quarter of 2014.
Reached an agreement in April 2013 with an unaffiliated third party for the purchase of four MR tankers currently under construction at HMD for approximately $36.5 million each. The first two vessels under this agreement, STI Le Rocher and STI Larvotto were delivered in June and July 2013, respectively and the third and fourth vessels are expected to be delivered in August and September 2013.
VLGC Newbuilding Agreements
In July 2013, the Company reached agreements with HSHI and DSME for the construction of a minimum of five and up to 10 VLGCs for approximately $75.0 million each. The vessels are 84,000 cubic meter tankers designed for the carriage of liquefied petroleum gas (“LPG”). Of the first five vessels, two are scheduled to be delivered in the second quarter of 2015, one in the third quarter of 2015, and two in the fourth quarter of 2015. These agreements replace the previously announced agreement to construct four LR2 vessels at Samsung Heavy Industries.
2013 Credit Facility
In July 2013, we executed final documentation for the previously announced $525.0 million 2013 Credit Facility. The 2013 Credit Facility consists of a $260.0 million delayed draw term loan facility and a $265.0 million revolving credit facility. Drawdowns under the 2013 Credit Facility will be secured by certain vessels for which we have entered into newbuilding contracts (“Collateral”).
A single drawdown of the term loan may occur in connection with the delivery of each newbuilding vessel that provides security for this credit facility in an amount equal to the lesser of 60% of (i) the contract price for such vessel or (ii) its fair market value. The drawdowns under the revolving loan may occur in connection with the delivery of certain newbuilding vessels and is also capped at the lesser of 60% of the loan amount or fair market value, with such amount, once drawn, available on a revolving basis. In general, drawdowns under the term loan are available until January 31, 2015 and drawdowns under the revolving loan are available until July 31, 2015 and each will bear interest at LIBOR plus an applicable margin of 3.50%.
The term loan is payable and the revolving loans reduced, in each case, in an amount equal to 1/60th of such loan on a consecutive quarterly basis until final maturity on the sixth anniversary of the facility.
The 2013 Credit Facility includes financial covenants that are similar to the covenants in the other credit facilities.
Time chartered-in update
In July 2013, the Company agreed to time charter-in and took delivery of a 2008 built, 73,666 dwt, LR1 product tanker for one year for approximately $14,000 per day. This agreement contains an option for the Company to extend the charter for an additional year at $15,000 per day.
In July 2013, the Company entered into new agreements on two vessels that are currently time chartered-in. The agreements are for two Handymax product tankers for one year at $12,800 per day (2005 built, 40,471 dwt and 2006 built, 40,426 dwt). These agreements commenced in July 2013 upon expiration of the prior agreements. These agreements also contain options for the Company to extend the charters for an additional year at $13,550 per day.
The Company will have a conference call on July 29, 2013 at 2:30 PM Eastern Daylight Time and 8:30 PM Central European Time
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(888)-211-4495 (U.S.) or 1(913) 312-0949 (International). The conference participant passcode is 2139106. 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.
As of July 26, 2013, the Company had $431.9 million in cash and $78.5 million available to draw down from its 2010 Revolving Credit Facility.
As of July 29, 2013, the Company–s outstanding debt balance is as follows:
2010 Revolving Credit Facility
In June 2013, the Company repaid $17.2 million into its 2010 Revolving Credit Facility. There is currently $78.5 million available to draw down under this facility.
STI Spirit Credit Facility
The credit facility with DVB Bank SE requires that the charter-free market value of STI Spirit shall be no less than 140% of the then outstanding loan balance. The Company posted additional cash collateral of $2.8 million into an escrow account in June 2013 to maintain compliance with this covenant. The amount held in escrow will be re-evaluated at the next measurement date, December 31, 2013.
2011 Credit Facility
In April 2013, the Company drew down $17.7 million from the 2011 Credit Facility to partially finance the delivery of the Company–s eighth newbuilding vessel, STI Beryl.
Newbuilding Program
During the second quarter of 2013, the Company made $162.3 million of installment payments on its newbuilding vessels. The Company currently has 53 newbuilding vessel orders with HMD, SPP, HSHI and DSME (24 MRs, 12 Handymaxes, 12 LR2s and five VLGCs). The estimated future payment dates and amounts are as follows*:
*These are estimates only and are subject to change as construction progresses.
**$63.2 million has been paid prior to the date of this press release, including the final installment payment of $18.4 million relating to the delivery of STI Larvotto.
For the three months ended June 30, 2013, the Company recorded net income of $4.0 million compared to a net loss of $4.0 million in the three months ended June 30, 2012. The following were the significant changes between the two periods:
Time charter equivalent, or TCE revenues, a non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is also 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 June 30, 2013 and 2012:
TCE revenue increased by $30.5 million to $50.2 million as a result of an increase in the average number of operating vessels (owned and time chartered-in) to 35.9 from 17.8 for the three month periods ended June 30, 2013 and 2012, respectively. Additionally, the Company experienced an increase in time charter equivalent revenue per day to $15,444 per day from $12,258 per day for the three months ended June 30, 2013 and 2012, respectively (see the breakdown of daily TCE averages below).
Vessel operating costs increased $1.5 million to $8.5 million from $7.0 million. This increase was driven by an increase in the Company–s owned fleet to an average of 14.69 vessels from 9.55 vessels for the three months ended June 30, 2013 and 2012, respectively. This increase was offset by a decrease in operating costs per day to $6,262 per day from $7,942 per day for the three months ended June 30, 2013 and 2012, respectively. The improvement in operating costs per day was primarily driven by the mix of vessels in the Company–s fleet.
The Company–s fleet for the three months ended June 30, 2013 included the first eight vessels under the Company–s Newbuilding program for all or part of the period. Daily operating costs for these vessels were $5,945 per day. The Company–s fleet for three months ended June 30, 2012 did not include such vessels and included STI Matador, STI Gladiator, STI Diamond and STI Coral, which were sold during 2012. Daily operating costs for these vessels were $8,241 per day.
Charterhire expense increased $17.2 million to $27.0 million as a result of an increase in the average number of time chartered-in vessels to 21.19 from 8.25 for the three months ended June 30, 2013 and 2012, respectively. See the Company–s Fleet List below for the terms of these agreements.
Depreciation expense increased $2.3 million to $5.5 million primarily as a result of (i) an increase in the average number of owned vessels to 14.69 from 9.55 for the three months ended June 30, 2013 and 2012, and (ii) a change in the mix vessels in the Company–s fleet. Both were driven by the deliveries of the first eight vessels under the Company–s Newbuilding program offset by the sales of STI Matador, STI Gladiator, STI Diamond and STI Coral in 2012.
General and administrative expenses increased $2.6 million to $5.3 million. This increase was driven by (i) a $1.5 million increase in restricted stock amortization (non-cash) as a result of restricted stock issued during the second quarter under the Company–s Equity Incentive Plan and (ii) an overall increase in other general and administrative expenses due to the significant growth in the Company–s fleet and Newbuilding program.
Business Strategy
The Company–s primary objectives are to profitably grow the business and emerge as a major operator of medium-sized tanker vessels and gas carriers. The Company intends to acquire modern, high-quality tankers and gas carriers through timely and selective acquisitions. The Company is currently concentrating on product or coated tankers and gas carriers because of the fundamentals of these segments, which the Company believes includes:
increasing demand for refined products and LPG;
increasing ton miles (distance between new refiners and areas of demand); and
reduced order book.
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.
On July 29, 2013, the Company–s board of directors declared a quarterly cash dividend of $0.035 per share, payable on September 25, 2013 to all shareholders as of September 10, 2013 (the record date). On June 25, 2013, the Company paid a quarterly cash dividend on its common stock of $0.025 per share to all shareholders as of June 11, 2013 (the record date).
Share Buyback Program
On July 9, 2010, the Company–s board of directors authorized a share buyback program of up to $20 million. The Company 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 July 29, 2013, the Company has purchased $7.9 million of shares in the open market at an average price of $6.78.
This press release describes adjusted net income and Adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. “Non-GAAP” measure). The Non-GAAP measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company–s management evaluates the Company–s operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.
About Scorpio Tankers Inc.
Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 17 tankers (one LR2 tanker, four LR1 tankers, one Handymax tanker, ten MR tankers, and one post-Panamax tanker) with an average age of 4.1 years, time charters-in 27 product tankers (eight LR2, four LR1, eight MR and seven Handymax tankers), and has contracted for 53 newbuilding vessels (24 MR, 12 LR2, and 12 Handymax ice class-1A product tankers, and 5 Very Large Gas Carriers), two of which are expected to be delivered to the Company by September 2013, 38 within 2014 and the remaining 13 by the end of 2015. Additional information about the Company is available at the Company–s website , which is not a part of this press release.
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.
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.