Scorpio Tankers reported its results for the three months ended March 31, 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 March 31, 2020 and 2019
For the three months ended March 31, 2020, the Company had a net income of $46.6 million, or $0.85 basic and $0.82 diluted earnings per share. There were no Non-IFRS adjustments to the net income for the three months ended March 31, 2020.
For the three months ended March 31, 2019, the Company had net income of $14.5 million, or $0.30 basic and diluted earnings per share. For the three months ended March 31, 2019, the Company’s adjusted net income (see Non-IFRS Measures section below) was $14.8 million, or $0.31 basic and $0.30 diluted income per share, which excludes from net income a $0.3 million, or $0.01 per basic and diluted share, write-off of deferred financing fees.
Declaration of Dividend
On May 5, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about June 15, 2020 to all shareholders of record as of June 1, 2020 (the record date). As of May 5, 2020, there were 58,672,080 common shares of the Company outstanding.
Summary of First 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 second quarter of 2020 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):
| Total |
|||||
| Pool | Average daily TCE revenue |
% of Days |
|||
| LR2 | $53,000 | 63% | |||
| LR1 | $41,000 | 60% | |||
| MR | $25,000 | 56% | |||
| Handymax | $20,000 | 60% | |||
- Below is a summary of the average daily TCE revenue earned on the Company’s vessels in each of the pools during the first quarter of 2020:
| Pool | Average daily TCE revenue |
|||||||||
| LR2 | $26,818 | |||||||||
| LR1 | $20,296 | |||||||||
| MR | $20,951 | |||||||||
| Handymax | $22,564 | |||||||||
- The Company recently received commitments for a new credit facility for up to $225.0 million in aggregate, the proceeds of which are expected to be used to refinance the existing indebtedness on nine of the Company’s vessels, including the four LR2s which are currently financed under our ABN AMRO Credit Facility, which is scheduled to mature during the third quarter of 2020. The closing of this credit facility is subject to customary conditions precedent, including the execution of definitive documentation.
- The Company recently executed an agreement to upsize its $179.2 million credit facility with ING Bank N.V. to $251.4 million. The proceeds of this upsized facility are expected to be used to refinance the existing debt on five vessels, which are currently financed under the KEXIM Credit Facility.
- Based upon the commitments received to date, which include the above two credit facilities and certain financing transactions that have been previously announced, the Company expects to raise approximately $109 million of aggregate additional liquidity (after the repayment of existing debt) once all of the agreements are closed and drawn. 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 January 2020, the Company took delivery of two scrubber-fitted MR product tankers (STI Miracleand STI Maestro), and in March 2020, the Company took delivery of an additional scrubber-fitted MR product tanker (STI Mighty) each under eight-year bareboat leases. The leasehold interests in these vessels were acquired as part of the Company’s transaction with Trafigura Maritime Logistics Pte. Ltd. (the “Trafigura Transaction”) that was announced in September 2019. The bareboat leases have similar terms and conditions as the original leased vessels in the Trafigura Transaction.
- In April 2020, the Company reached an agreement with its counterparty to postpone the purchase and installation of scrubbers on 19 of its vessels. The installation of these scrubbers is now expected to begin not earlier than 2021.
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 $1.5 million and $2.3 million, respectively, during the three months ended March 31, 2020 were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.
For the three months ended March 31, 2020, the Company’s basic weighted average number of shares was 54,667,211. For the three months ended March 31, 2020, the Company’s diluted weighted average number of shares was 56,445,893 (which includes the potentially dilutive impact of unvested shares restricted stock and excludes the impact of the Convertible Notes due 2022), and 61,692,830, under the if-converted method. Given the Company’s results for the first quarter of 2020, earnings per diluted share were calculated under the if-converted method, as the result of this calculation was dilutive.
$225.0 Million Credit Facility
The Company recently received commitments for a loan facility of up to $225.0 million with a group of European financial institutions. This loan facility is expected to consist of a $150.0 million term loan facility and $75.0 million revolving credit facility. The proceeds of this new facility are expected to be used to refinance the existing debt on nine vessels, including four vessels that are currently financed under the existing ABN AMRO Credit Facility which is scheduled to mature in the third quarter of 2020.
The borrowing amount of the facility is the lower of $225.0 million in aggregate and 55% of the fair market value of the vessels. The loan has a final maturity of five years from the closing date of the loan, is expected to bear interest at LIBOR plus a margin, and is expected to be repaid in equal quarterly installments of approximately $5.3 million per quarter, in aggregate, with a balloon payment due at maturity. This loan is expected to close before June 30, 2020. The remaining terms and conditions, including financial covenants, are expected to be similar to the Company’s existing credit facilities. The closing of this credit facility is subject to customary conditions precedent, including the execution of definitive documentation.
ING Credit Facility Upsize
In May 2020, the Company executed an agreement to upsize its $179.2 million credit facility with ING Bank N.V. to $251.4 million. The upsized portion of the loan facility consists of a $40.6 million term loan facility and $31.5 million revolving credit facility. The proceeds of this upsized facility are expected to be used to refinance the existing debt on five vessels, which are currently financed under the KEXIM Credit Facility.
The borrowing amount of the upsized loan is the lower of $72.1 million in aggregate and 50% of the fair market value of the vessels. The upsized loan has a final maturity of five years from the initial drawdown date and bears interest at LIBOR plus a margin. The upsized portion of the loan is scheduled to be repaid in equal quarterly installments of approximately $2.1 million per quarter, in aggregate, for the first twelve installments and approximately $2.0 million per quarter, in aggregate, thereafter, with a balloon payment due at maturity. The remaining terms and conditions, including financial covenants, are similar to the Company’s existing credit facilities.
Novel Coronavirus (COVID-19)
Since the beginning of the 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 the implementation of 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 markets. The reduction of economic activity has significantly reduced the global demand for oil and refined petroleum products. While recent actions taken by Saudi Arabia and other OPEC members to increase the production of oil in the near term has resulted in increased tankers rates in March and April of this year, the continued impact of these production increases is uncertain. We expect that the impact of the COVID-19 virus and the uncertainty in the supply of oil will continue to cause volatility in the commodity markets. The scale and duration of the impact of these factors remain unknowable but could have a material impact on our earnings, cash flow and financial condition for 2020. An estimate of the impact on the Company’s 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 Unsecured Notes due 2020 (NYSE: SBNA), which were issued in May 2014, and Convertible Notes due 2022, which were issued in May and July 2018.
No securities were repurchased under this program during the first quarter of 2020 and through the date of this press release.
As of the date hereof, the Company has repurchased a total of $128.4 million of its securities under the Securities Repurchase Program and has the authority to purchase up to an additional $121.6 million of its securities. The Company may 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.
Source: Scorpio Tankers
