• 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 fourth quarter of 2021:

• During the fourth quarter of 2021, the Company closed on the refinancing of the outstanding debt on 10 vessels (six LR2s, two LR1s, and two Handymax vessels), raising $74.3 million in aggregate new liquidity.
• The Company has received a commitment to refinance the existing indebtedness on two LR2s and two MRs, which is expected to raise $27.0 million in aggregate new liquidity (after the repayment of existing debt). These refinancings are expected to close before the end of the second quarter of 2022.
• The Company also has $14.8 million of additional liquidity available 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.
• 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 October 1, 2021 and through the date of this press release, the Company issued $2.3 million ($1.9 million in the fourth quarter of 2021) aggregate principal amount of additional Senior Notes due 2025 for aggregate net proceeds (net of sales agent commissions and offering expenses) of $2.2 million ($1.9 million in the fourth quarter of 2021). There is $32.6 million of remaining availability under this program as of February 11, 2022.
• The Company has $225.8 million in cash and cash equivalents as of February 11, 2022.

Sales of Vessels
In January 2022, the Company entered into agreements with unrelated third parties to sell two MRs (2013 built STI Fontvieille and 2019 built STI Majestic) and 12 LR1s. The sales prices of STI Fontvieille, STI Majestic, and the 12 LR1s are $23.5 million, $34.9 million, and $413.8 million, respectively. The Company is expected to raise additional liquidity of approximately $189 million after the repayment of debt and payment of estimated selling costs as a result of these transactions. The Company is also expected to record an aggregate loss of approximately $48.0 million during the first quarter of 2022 relating to these sales. These sales have not closed yet as of the date of this press release, but are expected to close in the first and second quarters of 2022.

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 $6.3 million and $20.7 million during the three months and year ended December 31, 2021, respectively, were not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive.

For the three months and year ended December 31, 2021, the Company’s basic weighted average number of shares outstanding were 55,329,821 and 54,718,709, respectively. There were 56,851,751 and 56,957,396 weighted average shares outstanding including the potentially dilutive impact of restricted shares issued under the Company’s equity incentive plan, for the three months and year ended December 31, 2021, respectively. There were 64,135,517 and 63,175,667 weighted average shares outstanding for the three months and year ended December 31, 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 throughout 2021. Nevertheless, the easing of restrictive measures and successful roll-out of vaccines in certain countries during 2021 served as a catalyst for an economic recovery in many countries throughout the world. Consequently, oil prices continue to push upward on the back of steadily increasing consumption, recently reaching highs not seen since 2014, 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.

Cuurrent Liquidity
As of February 11, 2022, the Company had $225.8 million in unrestricted cash and cash equivalents.

Drydock, Scrubber and Ballast Water Treatment Update

Set forth below is a table summarizing the drydock, scrubber, and ballast water treatment system activity that occurred during the fourth quarter of 2021 and that is in progress as of January 1, 2022.

Set forth below are the estimated expected payments to be made for the Company’s drydocks, ballast water treatment system installations, and scrubber installations through 2023 (which also include actual payments made during the first quarter of 2022 and through February 11, 2022):

Set forth below are the estimated expected number of vessels and estimated expected off-hire days for the Company’s drydocks, ballast water treatment system installations, and scrubber installations:

Debt
Set forth below is a summary of the principal balances of the Company’s outstanding indebtedness as of the dates presented.

Under this lease financing arrangement, each vessel is subject to a seven-year bareboat charter-in agreement. The lease financings bear interest at LIBOR plus a margin of 3.30% per annum and are scheduled to be repaid in equal quarterly principal installments of approximately $0.7 million on three LR2 vessels, $0.6 million on one LR2 vessel and $0.4 million per Handymax vessel. In addition, the Company has purchase options beginning at the end of the second year of each agreement, and a purchase obligation for each vessel upon the expiration of each agreement. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s existing lease financing arrangements

The credit facility is scheduled to mature five years from its drawdown date, bears interest at LIBOR plus an initial margin of 2.50% per annum, and is scheduled to be repaid in equal quarterly principal installments of approximately $1.1 million in aggregate for both vessels with a balloon payment at maturity. The margin for each vessel tranche may be adjusted on each anniversary of its drawdown date based upon the preceding calendar year’s performance of that vessel’s Annual Efficiency Ratio (“AER”) as calculated pursuant to the Poseidon Principles, where the margin may be reduced to a minimum of 2.35% per annum or increased to a maximum of 2.55% per annum. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s existing credit facilities.

Additionally, $0.5 million was released from restricted cash that was required to be held under the ABN AMRO / K-Sure Credit Facility as a result of this transaction.

Under this lease financing arrangement, each vessel is subject to a ten-year bareboat charter-in agreement. The lease financings bear interest at LIBOR plus a margin per annum and are scheduled to be repaid in equal monthly principal installments of approximately $0.2 million per vessel. In addition, the Company has purchase options to re-acquire each of the subject vessels on the fourth, fifth, and seventh anniversary dates from the effective date of each agreement, with a purchase obligation for each vessel upon the expiration of each agreement. The remaining terms and conditions, including financial covenants, are similar to those set forth in the Company’s existing lease financing arrangements.

Set forth below are the estimated expected future principal repayments on the Company’s outstanding indebtedness as of December 31, 2021, which includes principal amounts due under the Company’s secured credit facilities, Convertible Notes due 2022, Convertible Notes due 2025, lease financing arrangements, Senior Notes due 2025, and lease liabilities under IFRS 16 (which also include actual scheduled payments made during the first quarter of 2022 through February 11, 2022):

Explanation of Variances on the Fourth Quarter of 2021 Financial Results Compared to the Fourth Quarter of 2020

For the three months ended December 31, 2021, the Company recorded a net loss of $46.0 million compared to a net loss of $76.3 million for the three months ended December 31, 2020. The following were the significant changes between the two periods:

• TCE revenue, a Non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is 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 voyages, time charters, and pool charters), and it provides useful information to investors and management. The following table sets forth TCE revenue for the three months ended December 31, 2021 and 2020:

TCE revenue
• TCE revenue for the three months ended December 31, 2021 increased by $9.9 million to $147.9 million, from $138.0 million for the three months ended December 31, 2020. Overall average TCE revenue per day increased to $12,615 per day during the three months ended December 31, 2021, from $11,608 per day during the three months ended December 31, 2020.
• TCE revenue for the three months ended December 31, 2021 remained weak, but showed a slight overall improvement as compared to the three months ended December 31, 2020. This is a mixed reflection of both the positive progress made during 2021 to mitigate the impact of the COVID-19 pandemic (through the introduction of vaccines and the easing of travel restrictions and other restrictive measures) offset by the lingering negative impacts of the virus, which have arisen through the spread of more contagious and vaccine resistant variants and have hampered a full re-opening of the global economy, preventing demand for refined petroleum products from reaching pre-pandemic levels.

• Vessel operating costs for the three months ended December 31, 2021 decreased by $1.7 million to $85.1 million, from $86.8 million for the three months ended December 31, 2020 primarily as a result of a reduction in the average number of vessels operating in the fleet to 131 from 135. Vessel operating costs per day increased to $7,058 per day for the three months ended December 31, 2021 from $6,987 per day for the three months ended December 31, 2020. This increase was primarily attributable to repairs undertaken on some of the Company’s Handymax vessels during the period.
• Depreciation expense – right of use assets for the three months ended December 31, 2021 decreased by $2.2 million to $10.3 million from $12.6 million for the three months ended December 31, 2020. Depreciation expense – right of use assets reflects the straight-line depreciation expense recorded under IFRS 16 – Leases. Right of use asset depreciation expense was impacted by the expiration of the bareboat charter-in agreements on four Handymax vessels at the end of the first quarter of 2021. The Company had four LR2s and 18 MRs that were accounted for under IFRS 16 – Leases during the three months ended December 31, 2021.
• General and administrative expenses for the three months ended December 31, 2021, decreased by $1.5 million to $12.8 million, from $14.3 million for the three months ended December 31, 2020. This decrease was due to an overall reduction in costs during the three months ended December 31, 2021, including reductions in restricted stock amortization and compensation expenses.
• Financial expenses for the three months ended December 31, 2021 increased by $2.4 million to $38.3 million, from $35.9 million for the three months ended December 31, 2020. This increase was primarily attributable to the increase in the accretion of convertible notes, which increased to $4.1 million from $1.8 million for the three months ended December 31, 2021 and 2020, respectively. This increase was due to the issuance of the Convertible Notes due 2025 in March and June 2021.

Scorpio Tankers Inc. and Subsidiaries
Condensed Consolidated Statements of Income or Loss
(unaudited)

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 the amount of dividends, if any, depends on the Company’s earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.

The Company’s dividends paid during 2020 and 2021 were as follows:
On February 11, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about March 15, 2022 to all shareholders of record as of March 2, 2022 (the record date). As of February 11, 2022, there were 58,369,516 common shares of the Company outstanding.

$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), which were originally issued in May 2020, Convertible Notes due 2022, which were issued in May and July 2018, and Convertible Notes due 2025, which were issued in March and June 2021. No securities have been repurchased under the new program since its inception through the date of this press release.

At the Market Equity Offering Program
In November 2019, the Company entered into an “at the market” offering program (the “ATM Equity Program”) pursuant to which it may sell up to $100 million of its common shares, par value $0.01 per share. As part of the ATM Equity Program, the Company entered into an equity distribution agreement dated November 7, 2019 (the “Sales Agreement”), with BTIG, LLC, as sales agent (the “Equity ATM Agent”). In accordance with the terms of the Sales Agreement, the Company may offer and sell its common shares from time to time through the Equity ATM Agent by means of ordinary brokers’ transactions on the NYSE at market prices, in block transactions, or as otherwise agreed upon by the Equity ATM Agent and the Company.

We did not sell any common shares pursuant to the ATM Equity Program during the fourth quarter of 2021. There is $97.4 million of remaining availability under the ATM Equity Program as of February 11, 2022.
Source: Scorpio Tankers Inc.