Scorpio Tankers Inc. reported its results for the three months ended March 31, 2023. The Company also announced that its board of directors (the “Board of Directors”) has declared a quarterly cash dividend of $0.25 per common share.

Results for the three months ended March 31, 2023 and 2022

For the three months ended March 31, 2023, the Company had net income of $193.2 million, or $3.40 basic and $3.27 diluted earnings per share.

For the three months ended March 31, 2023, the Company had adjusted net income (see Non-IFRS Measures section below) of $195.6 million, or $3.44 basic and $3.31 diluted earnings per share, which excludes from net income a $2.3 million, or $0.04 per basic and diluted share, write-off or acceleration of the amortization of deferred financing fees on certain lease financing obligations and related extinguishment costs.

For the three months ended March 31, 2022, the Company had a net loss of $84.4 million, or $1.52 basic and diluted loss per share.

For the three months ended March 31, 2022, the Company had an adjusted net loss (see Non-IFRS Measures section below) of $14.9 million, or $0.27 basic and diluted loss per share, which excludes from the net loss (i) a $67.7 million, or $1.22 per basic and diluted share, aggregate write-down of vessels held for sale and loss on the sale of vessels, and (ii) $1.9 million, or $0.03 per basic and diluted share, write-off or acceleration of the amortization of deferred financing fees on the debt or lease financing obligations relating to these vessel sales and related debt extinguishment costs.

Declaration of Dividend

On May 1, 2023, the Board of Directors declared a quarterly cash dividend of $0.25 per common share, with a payment date of June 30, 2023 to all shareholders of record as of June 13, 2023 (the record date). As of May 1, 2023, there were 59,455,820 common shares of the Company outstanding.

Transition to a New CFO in September 2023

The Company announced that Brian Lee, the Chief Financial Officer, will be stepping down at the end of September 2023 and will be replaced by Christopher Avella. Mr. Lee has been the Chief Financial Officer of Scorpio Tankers since the start of the Company in 2010.

Mr. Avella has been with Scorpio Tankers since 2010. He is currently the Chief Accounting Officer (since 2021) and Controller (since 2014). He also served as the Chief Financial Officer of Hermitage Offshore Services Ltd. between 2019 and 2021. Prior to joining Scorpio Tankers, he was with Ernst & Young in its audit practice from 2002 through 2006 and its transaction advisory services practice from 2006 through 2010 where he was a senior manager. Mr. Avella is a certified public accountant and has a B.S. in accounting from Rutgers University, an M.B.A. from Seton Hall University, and an M.S. in finance from Georgetown University.

Emanuele Lauro, Chairman and Chief Executive Officer commented, “Brian’s leadership and experience has been instrumental in the growth and development of the Company over the last 13 years. He has been with us since the beginning and leaves the Company in its strongest financial position with a well-trained team poised to maintain high standards. While we will miss Brian’s unparalleled temperament and character, I am truly grateful for his contributions to the Company and wish him the best on a well-deserved retirement.”

Summary of First Quarter 2023 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 for the Company’s vessels (both in the pools and outside of the pools) thus far in the second quarter of 2023 as of the date hereof (See footnotes to “Other operating data” table below for the definition of daily TCE revenue):
• Below is a summary of the average daily TCE revenue earned by the Company’s vessels during the first quarter of 2023:
• The Company is in discussions with a group of financial institutions for a term loan and revolving loan of up to the aggregate of $750.0 million to $1.0 billion. This facility is expected to bear interest at SOFR plus a margin of 1.95% per annum. The proceeds of this facility are expected to mainly be used to repay (and re-finance) more expensive lease financing, along with financing certain of the Company’s unencumbered vessels. The credit facility is subject to credit approval from the banks, customary conditions precedent, and negotiation and execution of definitive documentation.
• In March 2023, the Company entered into a time charter-out agreement on an LR2, STI Jermyn, for three years at a rate of $40,000 per day. This charter commenced in April 2023. During 2022 and so far in 2023, the Company has entered into a total of 15 time-charter out agreements (ten LR2s and five MRs), the terms of which are described in the fleet list below.
• In January 2023, the Company exercised the purchase options on STI Brooklyn, STI Rambla, STI Rose and STI Ville on the AVIC Lease Financing and repaid the aggregate outstanding lease obligation of $77.8 million as part of these transactions.
• In March 2023, the Company exercised the purchase option on STI Sanctity on the Ocean Yield Lease Financing and repaid the aggregate outstanding lease obligation of $27.8 million as part of this transaction.
• The Company has also given notice to exercise the purchase options on six LR2 product tankers and eight MR product tankers that are currently financed under lease financing arrangements (STI Steadfast, STI Supreme, STI Grace, STI Jermyn, STI Lavender, STI Lobelia, STI Magnetic, STI Marshall, STI Miracle, STI Magic, STI Mystery, STI Marvel, STI Mythic, and STI Magister). These repurchases are expected to occur in the second and third quarters of 2023 and result in an aggregate debt reduction of $352.7 million.
• The Company has executed or received commitments for three separate secured credit facilities for up to $391.5 million in aggregate. These facilities are expected to be collateralized by 22 vessels and bear interest at SOFR plus margins of between 1.90% and 1.975% per annum. The proceeds of these facilities are expected to be used to repay more expensive lease financing. $274.1 million has been drawn from two of these facilities as of the date of this press release.
• Since January 1, 2023 and through the date of this press release, the Company has repurchased an aggregate of 3,614,768 of its common shares in the open market at an average price of $52.22 per share.
• On May 1, 2023, the Board of Directors authorized to reset the 2023 Securities Repurchase Program up to an aggregate of $250 million of the Company’s securities.
• In March 2023, the Board of Directors appointed Ms. Sujata Parekh Kumar as an independent director to its Board of Directors. Ms. Kumar has over 40 years of experience in entrepreneurship and industry across a number of sectors including logistics, financial services, insurance, and shipping.

Securities Repurchase Program

On February 15, 2023, the Board of Directors authorized a new Securities Repurchase Program (the “2023 Securities Repurchase Program”) to purchase up to an aggregate of $250 million of the Company’s securities which, in addition to its common shares also currently consist of its Senior Unsecured Notes Due 2025 (NYSE: SBBA).

Below are purchases of the Company’s securities made in the first quarter and second quarters of 2023.

• From January 1, 2023 through February 15, 2023, the Company purchased an aggregate of 1,891,303 of its common shares in the open market at an average price of $50.27 per share. These purchases were made under the previous securities repurchase program, which ended on February 15, 2023.
• From February 16 through the date of this press release, the Company has purchased an aggregate of 1,723,465 of its common shares in the open market at an average price of $54.37 per share.
• On May 1, 2023, the Board of Directors authorized to reset the 2023 Securities Repurchase Program up to an aggregate of $250 million of the Company’s securities.

There is $250.0 million available under the 2023 Securities Repurchase Program as of May 1, 2023.

Lease Repayments

In January 2023, the Company exercised its purchase options on two MR product tankers (STI Brooklyn and STI Ville) and two LR2 product tankers (STI Rose and STI Rambla) which were previously financed on the AVIC Lease Financing. These purchases resulted in a debt reduction of $77.8 million.

In March 2023, the Company exercised the purchase option on STI Sanctity which was previously financed on the Ocean Yield Lease Financing. This purchase resulted in a debt reduction of $27.8 million.

In March 2023, the Company gave notice to exercise its purchase options on two LR2 product tankers that are currently financed under the 2021 CSSC Lease Financing (STI Grace and STI Jermyn), in addition to one LR2 product tanker (STI Lavender), and three MR product tankers (STI Magnetic, STI Marshall, and STI Miracle) which are currently financed under the $670.0 Million Lease Financing. All of these leases bear interest at LIBOR plus a margin of 3.50% per annum. The purchases are expected to occur in May 2023 and result in a debt reduction of $149.8 million.

In April 2023, the Company gave notice to exercise its purchase options on one LR2 product tanker (STI Lobelia), and five MR product tankers (STI Magic, STI Mystery, STI Marvel, STI Mythic, and STI Magister) which are currently financed under the $670.0 Million Lease Financing. These leases bear interest at LIBOR plus a margin of 3.50% per annum. The purchases are expected to occur in June 2023 and result in a debt reduction of $147.3 million.

New Executed or Committed Financings

The Company has executed or received commitments for three separate credit facilities for up to $391.5 million in aggregate (the “New Facilities”).

The first credit facility (the “2023 $225.0 Million Credit Facility”) is from a group of European financial institutions for a credit facility of up to $225.0 million. The 2023 $225.0 Million Credit Facility was executed in January 2023 and $184.9 million was drawn in February 2023 and $40.1 million was drawn in March 2023. Thirteen product tankers (STI Opera, STI Duchessa, STI Venere, STI Virtus, STI Aqua, STI Dama, STI Regina, STI San Antonio, STI Yorkville, STI Battery, STI Milwaukee, STI Madison, and STI Sanctity) were collateralized under this facility as part of these drawdowns. The 2023 $225.0 Million Credit Facility has a final maturity of five years from the signing date and bears interest at SOFR plus a margin of 1.975% per annum. The borrowings for the MRs are expected to be repaid in equal quarterly installments of $0.63 million per vessel for the first two years, and $0.33 million per vessel for the remaining term of the loan. The borrowings for the LR2s are expected to be repaid in equal quarterly installments of $0.8 million per vessel for the first two years, and $0.45 million per vessel for the remaining term of the loan. The remaining terms and conditions of the 2023 $225.0 Million Credit Facility, including financial covenants, are similar to those set forth in the Company’s existing credit facilities.

The second credit facility (the “2023 $49.1 Million Credit Facility”) is from a North American financial institution for a credit facility of up to $49.1 million. The 2023 $49.1 Million Credit Facility was executed in February 2023 and was fully drawn in March 2023. Two LR2 product tankers, STI Rose and STI Rambla, were collateralized on this facility upon drawdown. This facility has a final maturity of five years from the drawdown date of each vessel and bears interest at SOFR plus a margin of 1.90% per annum. The borrowings are expected to be repaid in equal quarterly installments of $1.2 million in aggregate with a balloon payment at maturity. The terms and conditions of the 2023 $49.1 Million Credit Facility, including financial covenants, are similar to those set forth in the Company’s existing credit facilities.

The third credit facility commitment (the “2023 $117.4 Million Credit Facility”) is from a European financial institution for a credit facility of up to $117.4 million. The 2023 $117.4 Million Credit Facility is expected to be used to finance two Handymax product tankers, four MR product tankers and one LR2 product tanker. The 2023 $117.4 Million Credit Facility is expected to have a final maturity of five years from the drawdown date of each vessel and bear interest at SOFR plus a margin of 1.925% per annum. The terms and conditions of this credit facility, including financial covenants, will be similar to those set forth in the Company’s existing credit facilities. The 2023 $117.4 Million Credit Facility is subject to customary conditions precedent, and the execution of definitive documentation, and is expected to close in the second quarter of 2023.

The proceeds of the New Facilities are expected to be used to repay more expensive lease financing.

$750.0 Million to $1.0 Billion Term Loan and Revolving Loan

The Company is in discussions with a group of financial institutions for a term loan and revolving loan (the “Credit Facility”) of up to the aggregate of $750.0 million to $1.0 billion. The Credit Facility is expected to consist of a 50% term loan and 50% revolving loan, have a final maturity of five years from the signing date (but not later than June 30, 2028), and bear interest at SOFR plus a margin of 1.95% per annum. Proceeds from the Credit Facility, primarily, are expected to be used to repay (and re-finance) more expensive lease financing, along with financing certain of the Company’s unencumbered vessels. The terms and conditions, including financial covenants, of the Credit Facility are expected to be similar to the Company’s existing credit facilities. The Credit Facility is subject to credit approval from the banks, customary conditions precedent, and negotiation and execution of definitive documentation. There is no assurance that we will enter into the Credit Facility on the terms described above (which may be subject to change) or at all.

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 the Company’s equity incentive plan. These potentially dilutive shares are excluded from the computation of earnings or loss per share to the extent they are anti-dilutive.

For the three months ended March 31, 2023, the Company’s basic weighted average number of shares outstanding was 56,834,813. For the three months ended March 31, 2023, the Company’s diluted weighted average number of shares outstanding was 59,111,952 which included the potentially dilutive impact of restricted shares issued under the Company’s equity incentive plan.

Source: Scorpio Tankers