Scorpio Tankers Inc. Reports Net Loss of $60.5 million

Scorpio Tankers Inc. yesterday reported its results for the three and nine months ended September 30, 2020. The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share on the Company’s common stock.

Results for the three months ended September 30, 2020 and 2019

For the three months ended September 30, 2020, the Company had a net loss of $20.2 million, or $0.37 basic and diluted loss per share. For the three months ended September 30, 2020, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $20.2 million, or $0.37 basic and diluted loss per share, which excludes from net loss (i) a $1.0 million, or $0.02 per basic and diluted share, gain recorded on the Company’s repurchase of its Convertible Notes due 2022 and (ii) a $1.0 million, or $0.02 per basic and diluted share, write-off of deferred financing fees and unamortized fair value discounts on sale and leaseback liabilities that were refinanced during the period.

For the three months ended September 30, 2019, the Company had a net loss of $45.3 million, or $0.93 basic and diluted loss per share. For the three months ended September 30, 2019, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $44.8 million, or $0.92 basic and diluted loss per share, which excludes from the net loss a $0.4 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

Results for the nine months ended September 30, 2020 and 2019

For the nine months ended September 30, 2020, the Company had net income of $170.4 million, or $3.11 basic and $2.95 diluted earnings per share. For the nine months ended September 30, 2020, the Company had an adjusted net income (see Non-IFRS Measures section below) of $170.6 million, or $3.11 basic and $2.95 diluted earnings per share, which excludes from net income (i) a $1.0 million, or $0.02 per basic and diluted share, gain recorded on the Company’s repurchase of its Convertible Notes due 2022 and (ii) a $1.3 million, or $0.02 per basic and diluted share, write-off of deferred financing fees and unamortized fair value discounts on sale and leaseback liabilities that were refinanced during the period.

For the nine months ended September 30, 2019, the Company had a net loss of $60.5 million, or $1.25 basic and diluted loss per share. For the nine months ended September 30, 2019, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $59.8 million, or $1.24 basic and diluted loss per share, which excludes from the net loss a $0.7 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.

Declaration of Dividend

On November 3, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about December 14, 2020 to all shareholders of record as of November 23, 2020 (the record date). As of November 4, 2020, there were 58,000,147 common shares of the Company outstanding.

Summary of Third Quarter and Other Recent Significant Events

• Below is a summary of the average daily Time Charter Equivalent (“TCE”) revenue (see Non-IFRS Measures section below) and duration of contracted pool voyages and time charters for the Company’s vessels thus far in the fourth quarter of 2020 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):

• The Company has committed financing to increase liquidity by approximately $63.9 million, which includes:
• $47.1 million from the refinancing of eight vessels (after the repayment of existing debt)
• $16.8 million from the drawdown of financing for scrubbers that have been previously paid for and installed (i.e. there are no additional payments needed in order to drawdown these funds)
• These funds will be drawn down in the coming weeks
• The Company is also in discussions with financial institutions to further increase liquidity by up to $75 million from the refinancing of 11 vessels.
• In addition to the above, the Company has $44.2 million of additional liquidity available (after the repayment of existing debt) from previously announced financings that have been committed. These drawdowns are expected to occur at varying points in the future as several of these financings are tied to scrubber installations on the Company’s vessels.
• In the third quarter of 2020, the Company repurchased $52.3 million face value of its Convertible Notes due 2022 at an average price of $894.12 per $1,000 principal amount, or $46.7 million.
• In September 2020, the Company acquired an aggregate of 1,170,000 of its common shares at an average price of $11.18 per share for a total of $13.1 million.
• In September 2020, the Company’s Board of Directors authorized a new Securities Repurchase Program to purchase up to an aggregate of $250 million of securities which, in addition to the Company’s common shares, currently consist of the Convertible Notes due 2022 and Senior Notes due 2025 (NYSE: SBBA). The aforementioned repurchases of common stock and our convertible notes were executed under the previous securities repurchase program. This program has since been terminated and any future purchases of the Company’s securities will be made under the new $250 million securities repurchase program.
• In September 2020, the Company took delivery of a scrubber-fitted MR product tanker, STI Maximus, under an eight-year bareboat charter agreement. The leasehold interest in this vessel was acquired as part of the transaction with Trafigura Maritime Logistics Pte. Ltd. (the “Trafigura Transaction”) that was announced in September 2019. The bareboat lease has similar terms and conditions as the other leased vessels in the Trafigura Transaction.

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 2022, which were issued in May and July 2018, were converted into common shares at the beginning of each period and the interest and non-cash amortization expense associated with these notes of $3.4 million and $11.0 million, respectively, during the three and nine months ended September 30, 2020 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, 2020, the Company’s basic weighted average number of shares were 54,905,361 and 54,800,402, respectively. For the three and nine months ended September 30, 2020, the Company’s diluted weighted average number of shares were 55,850,026 and 56,516,982 (which includes the potentially dilutive impact of unvested shares of restricted stock and excludes the impact of the Convertible Notes due 2022), respectively, and 60,486,468 and 61,578,016, respectively, under the if-converted method. The Company’s earnings per share for the nine months ended September 30, 2020 was calculated under the if-converted method as the result of this calculation was dilutive. The Company’s diluted loss per share for the three months ended September 30, 2020 was calculated using the basic weighted average number of shares outstanding, as the calculation using both diluted weighted average shares outstanding and under the if-converted method were anti-dilutive.

Novel Coronavirus (COVID-19)

Since the beginning of calendar year 2020, the outbreak of COVID-19 that originated in China and that has spread to most developed nations of the world has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial and commodities markets (including oil).

While the reduction of economic activity significantly reduced global demand for oil and refined petroleum products, the extreme volatility in the oil markets and the steep contango that developed in the prices of oil and refined petroleum products in March 2020 resulted in record increases in spot TCE rates during the second quarter of 2020 as an abundance of arbitrage and floating storage opportunities opened up. These market dynamics led to a build up of global oil and refined petroleum product inventories during that time period. In June 2020, the underlying oil markets stabilized and these excess inventories began to unwind which, along with customary seasonal weakness, led to a reduction in spot TCE rates through the third quarter of 2020.

We expect that the COVID-19 virus will continue to cause volatility in the commodities markets. The scale and duration of these circumstances is unknowable but could have a material impact on our earnings, cash flow and financial condition for the remainder of 2020 and beyond. An estimate of the impact on our results of operations and financial condition cannot be made at this time.

$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 Senior Notes due 2025 (NYSE: SBBA), which were issued in May 2020, and Convertible Notes due 2022, which were issued in May and July 2018.

• Between July 1, 2020 and September 7, 2020, the Company repurchased $52.3 million face value of its Convertible Notes due 2022 at an average price of $894.12 per $1,000 principal amount, or $46.7 million.
• In September 2020, the Company acquired an aggregate of 1,170,000 of its common shares at an average price of $11.18 per share for a total of $13.1 million. The repurchased shares are being held as treasury shares.

In September 2020, the Company’s Board of Directors authorized a new Securities Repurchase Program to purchase up to an aggregate of $250 million of the Company’s securities. The aforementioned repurchases of common stock and our convertible notes were executed under the previous securities repurchase program which has since been terminated and any future purchases of the Company’s securities will be made under the new $250 million securities repurchase program.
Source: Scorpio Tankers Inc.