Scorpio Tankers Inc. reported its results for the three and nine months ended September 30, 2021. 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, 2021 and 2020
For the three months ended September 30, 2021, the Company had a net loss of $73.3 million, or $1.34 basic and diluted loss per share.
For the three months ended September 30, 2021, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $76.1 million, or $1.39 basic and diluted loss per share, which excludes from the net loss a $2.9 million, or $0.05 per basic and diluted share, gain recorded as part of the refinancing of the lease financing for five vessels (the accounting for which is described below under the section entitled ‘Debt’).
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 the 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.
Results for the nine months ended September 30, 2021 and 2020
For the nine months ended September 30, 2021, the Company had a net loss of $188.4 million, or $3.46 basic and diluted loss per share.
For the nine months ended September 30, 2021, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $184.5 million, or $3.38 basic and diluted loss per share, which excludes from the net loss (i) a $2.9 million, or $0.05 per basic and diluted share, gain recorded as part of the refinancing of the lease financing for five vessels (the accounting for which is described below under the section entitled ‘Debt’), (ii) $5.5 million, or $0.10 per basic and diluted share, of aggregate losses recorded on the March 2021 and June 2021 transactions to exchange the Company’s existing Convertible Notes due 2022 for new Convertible Notes due 2025, and (iii) a $1.3 million, or $0.02 per basic and diluted share, write-off of deferred financing fees related to the refinancing of certain credit facilities.
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.
Emanuele A. Lauro, Chairman and Chief Executive Officer, commented, “We are pleased with our current liquidity, and we are seeing a significant improvement in rates while the global energy markets are tightening.”
Declaration of Dividend
On November 10, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about December 15, 2021 to all shareholders of record as of December 3, 2021 (the record date). As of November 10, 2021, there were 58,369,516 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 voyages and time charters in the pools (excluding voyages outside of the pools) for the Company’s vessels thus far in the fourth quarter of 2021 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 | $13,750 | 58% | ||
| LR1 | $12,500 | 55% | ||
| MR | $10,500 | 55% | ||
| Handymax | $8,700 | 52% | ||
- Below is a summary of the average daily TCE revenue earned by the Company’s vessels in each of the pools (excluding voyages outside of the pools) during the third quarter of 2021:
| Pool | Average daily TCE revenue | |
| LR2 | $10,871 | |
| LR1 | $10,015 | |
| MR | $10,320 | |
| Handymax | $7,457 | |
- In August 2021, the Company acquired a minority interest in a portfolio of nine product tankers, among which are five dual-fuel MR methanol tankers (built between 2016 and 2021). These five vessels carry methanol as well as traditional petroleum products, and they are powered either by methanol or by traditional marine fuels.
- In January 2021, the Company entered into a note distribution agreement with B. Riley Securities, Inc., as sales agent, pursuant to which the Company may offer and sell, from time to time, up to $75.0 million of additional aggregate principal amount of its 7.00% Senior Unsecured Notes due 2025 (the “Senior Notes due 2025”). Since July 1, 2021 and through the date of this press release, the Company issued $10.6 million aggregate principal amount of additional Senior Notes due 2025 for aggregate net proceeds (net of sales agent commissions and offering expenses) of $10.3 million. There is $33.8 million of remaining availability under this program as of November 10, 2021.
- In September 2021, the Company closed on the refinancing of the outstanding debt on five LR2s, raising $11.8 million in aggregate new liquidity.
- In November 2021, the Company closed on the refinancing of the outstanding debt on six vessels (four LR2s and two Handymax vessels), raising $41.3 million in aggregate new liquidity.
- The Company is in discussions with certain financial institutions to further increase its liquidity by up to $34.1 million in connection with the refinancing of six vessels.
- The Company also has $18.0 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 these financings are tied to scrubber installations on the Company’s vessels.
- The Company has $228.9 million in cash and cash equivalents as of November 10, 2021.
Investment in Dual Fuel Tankers
In August 2021, the Company acquired a minority interest in a portfolio of nine product tankers, consisting of five dual-fuel MR methanol tankers (built between 2016 and 2021) which, in addition to traditional petroleum products, are designed to both carry methanol as a cargo and to consume it as a fuel, along with four ice class 1A LR1 product tankers. The dual-fuel MR methanol tankers are currently on long-term time charter contracts greater than five years. As part of this agreement, the Company acquired a 50% interest in a joint venture that ultimately has a minority interest in the entities that own the vessels for final consideration of $6.7 million.
Diluted Weighted Number of Shares
The computation of earnings or loss per share is determined by taking into consideration the potentially dilutive shares arising from (i) the Company’s equity incentive plan, and (ii) the Company’s Convertible Notes due 2022 and Convertible Notes due 2025. These potentially dilutive shares are excluded from the computation of earnings or loss per share to the extent they are anti-dilutive.
The impact of the Convertible Notes due 2022 and Convertible Notes due 2025 on earnings or loss per share is computed using the if-converted method. Under this method, the Company first includes the potentially dilutive impact of restricted shares issued under the Company’s equity incentive plan, and then assumes that its Convertible Notes due 2022 and Convertible Notes due 2025, which were issued in March and June 2021 were converted into common shares at the beginning of each period. The if-converted method also assumes that the interest and non-cash amortization expense associated with these notes of $6.0 million and $14.4 million during the three and nine months ended September 30, 2021, 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, 2021, the Company’s basic weighted average number of shares outstanding were 54,757,241 and 54,512,767, respectively. There were 56,702,496 and 56,766,685 weighted average shares outstanding including the potentially dilutive impact of restricted shares issued under the Company’s equity incentive plan, for the three and nine months ended September 30, 2021, respectively. There were 63,936,546 and 62,625,888 weighted average shares outstanding for the three and nine months ended September 30, 2021, respectively, under the if-converted method. Since the Company was in a net loss position in both periods, the potentially dilutive shares arising from both the Company’s restricted shares issued under the Company’s equity incentive plan and under the if-converted method were anti-dilutive for purposes of calculating the loss per share. Accordingly, basic weighted average shares outstanding were used to calculate both basic and diluted loss per share for this period.
COVID-19
Initially, the onset of the COVID-19 pandemic in March 2020 resulted in a sharp reduction in economic activity and a corresponding reduction in the global demand for oil and refined petroleum products. This period of time was marked by extreme volatility in the oil markets and the development of a steep contango in the prices of oil and refined petroleum products. Consequently, an abundance of arbitrage and floating storage opportunities opened up, which resulted in record increases in spot TCE rates late in the first quarter of 2020 and throughout the second quarter of 2020. These market dynamics, which were driven by arbitrage trading rather than underlying consumption, led to a build-up of global oil and refined petroleum product inventories. In June 2020, as underlying oil markets stabilized and global economies began to recover, the excess inventories that built up during this period began to slowly unwind thus causing demand for the seaborne transportation of refined petroleum products to decline.
These market conditions, coupled with underlying oil consumption that has yet to reach pre-pandemic levels, have had an adverse impact on spot TCE rates beginning in the third quarter of 2020 and continuing through the third quarter of 2021. Nevertheless, during the second quarter of 2021, the easing of restrictive measures and successful roll-out of vaccines in certain countries served as a catalyst for an economic recovery in many countries throughout the world. Consequently, oil prices have recently reached multi-year highs on the back of steadily increasing consumption, and existing inventories of refined petroleum products have fallen below multi-year averages. Though these dynamics have set the stage for a long-term recovery, spot TCE rates have remained subdued as demand has yet to reach pre-pandemic levels.
The Company expects 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 continue to have a material impact on the Company’s earnings, cash flow and financial condition. 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 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 which, in addition to its common shares, currently consist of its Senior Notes due 2025 (NYSE: SBBA), Convertible Notes due 2022, and Convertible Notes due 2025. No securities have been repurchased under the new program since its inception through the date of this press release.
