MONACO — (Marketwire) — 02/25/13 — Scorpio Tankers Inc. (NYSE: STNG) (“Scorpio Tankers,” or the “Company”) today reported its results for the three months and year ended December 31, 2012.
For the three months ended December 31, 2012, the Company had an adjusted net loss of $3.6 million (see Non-GAAP Measure section below), or $0.08 basic and diluted loss per share, excluding a $1.3 million, or $0.03 per share, unrealized loss on derivative financial instruments.
For the three months ended December 31, 2011, the Company had an adjusted net loss of $5.1 million (see Non-GAAP Measure section below), or $0.16 basic and diluted loss per share, excluding a $66.6 million, or $2.05 per share impairment charge.
For the three months ended December 31, 2012, the Company recorded a net loss of $4.9 million, or $0.11 basic and diluted loss per share. This is compared to a net loss of $71.7 million or $2.21 basic and diluted loss per share for the three months ended December 31, 2011.
For the year ended December 31, 2012, the Company had an adjusted net loss of $11.9 million (see Non-GAAP Measure section below), or $0.29 basic and diluted loss per share, excluding (i) a $10.4 million, or $0.25 per share, loss from sales of five vessels, (ii) a $3.0 million, or $0.07 per share, write-off of deferred financing fees attributable to the extension of the 2011 Credit Facility, and (iii) a $1.2 million, or $0.03 per share, unrealized loss on derivative financial instruments.
For the year ended December 31, 2011, the Company had an adjusted net loss of $16.1 million (see Non-GAAP Measure section below), or $0.56 basic and diluted loss per share, excluding a $66.6 million, or $2.32 per share impairment charge.
For the year ended December 31, 2012, the Company recorded a net loss of $26.5 million or $0.64 basic and diluted loss per share. This is compared to a net loss of $82.7 million or $2.88 basic and diluted loss per share for the year ended December 31, 2011.
Summary of Recent and Fourth Quarter Significant Events:
Signed a commitment letter for a $267.0 million credit facility with Nordea Bank Finland plc, acting through its New York branch, ABN AMRO Bank N.V and Skandinaviska Enskilda Banken AB in February 2013.
Closed on a registered direct placement of 30,672,000 shares of common stock at an offering price of $7.50 per share receiving net proceeds of approximately $222.1 million in February 2013.
Exercised options with Hyundai Mipo Dockyard Co. Ltd. of South Korea (“HMD”) for the construction of four Handymax, ice class 1A product tanker newbuildings (38,000 DWT) for approximately $31.3 million each in February 2013.
Signed contracts with SPP Shipbuilding Co., Ltd. of South Korea (“SPP”) for the construction of four MR product tanker newbuildings for approximately $32.5 million each in February 2013.
Signed contracts with HMD for the construction of two MR product tanker newbuildings for approximately $32.5 million each in January 2013.
Took delivery of the sixth vessel under the Company–s Newbuilding program, STI Sapphire, in January 2013.
Closed on a registered direct placement of 21,639,774 shares of common stock at an offering price of $6.10 receiving net proceeds of $127.2 million in December 2012.
Exercised options with HMD for the construction of two MR product tanker newbuildings and reached an agreement with SPP for the construction of four MR product tanker newbuildings in December 2012 for approximately $33.0 million each.
Took delivery of six previously announced time chartered-in product tankers, two LR2–s, an LR1 and three MR–s in January 2013.
Emanuele Lauro, chief executive officer and chairman of the board, commented, “The first quarter has been marked by seasonal refinery turnarounds in the East and lower export volumes, yet we have experienced firm markets so far, particularly in the Atlantic basin as a result of increasing US Gulf exports. Going forward, we expect improvement in volumes and rates as several major refineries resume production.
“We continue to see confirmation of our longer-term thesis, that there will be significant increases in product tanker demand days as refining capacity inexorably shifts to more competitive locations. This shift is lengthening steaming distances, expanding the opportunity set for commodity traders, and solidifying the role of the product tanker as inexpensive and flexible storage as port infrastructure — both in the developed and developing world — is constrained.”
Mr. Lauro concluded, “Our new vessels are performing well, realizing the fuel savings we previously announced, and we are confident that our newbuilding program is well-timed. We see a very attractive competitive landscape to match our profile for growth.”
Follow-on offering
In February 2013, the Company closed on the sale of 30,672,000 shares of common stock in a registered direct placement of common shares at an offering price of $7.50 per share. The Company received net proceeds of approximately $222.1 million, after deducting the placement agents– discount and offering expenses and now has 94,499,846 shares outstanding.
Newbuilding vessel orders
In February 2013, the Company exercised options with Hyundai Mipo Dockyard Co. Ltd. of South Korea (“HMD”) for the construction of four Handymax, ice class 1A product tankers (38,000 DWT) for approximately $31.3 million each. These fuel efficient vessels will be delivered in the third quarter of 2014. In conjunction with these contracts, the Company received four new fixed price options for similar vessels which would be delivered in the first half of 2015.
In February 2013, the Company reached an agreement with SPP Shipbuilding Co., Ltd. of South Korea (“SPP”) for the construction of four MR product tankers for approximately $32.5 million each, two of which are the exercise of options from a previous contract. These vessels will be delivered in the third and fourth quarters of 2014. In conjunction with these contracts, the Company received extensions on several previously agreed options and received four new fixed price options for similar vessels which would be delivered in 2015.
In January 2013, the Company reached an agreement with HMD for the construction of two MR product tankers for approximately $32.5 million each. These vessels will be delivered in May and June 2014.
The Company currently has a total of 20 product tanker newbuilding orders with HMD and SPP (16 MR and four Handymax). Two of the newbuildings are expected to be delivered to the Company by April 2013 and the remaining 18 by the end of 2014. The Company also has fixed-price options to construct a total of 14 additional newbuilding product tankers at these yards.
2013 Credit Facility
In February 2013, the Company signed a commitment letter for a $267.0 million credit facility (“2013 Credit Facility”) with Nordea Bank Finland plc, acting through its New York branch, ABN AMRO Bank N.V and Skandinaviska Enskilda Banken AB.
The 2013 Credit Facility, which will be split into a term loan and a revolving loan, will be used to finance up to 60% of the purchase price of vessels, including newbuildings upon delivery. The credit facility matures six years after the loan is signed. The covenants and other conditions are similar to the Company–s existing credit facilities.
Delivery of STI Sapphire
The Company took delivery of the sixth vessel under its Newbuilding program, STI Sapphire, in January 2013. Upon delivery, the vessel began a time charter for up to 80 days at $20,750 per day. The vessel was partially financed by the Company–s 2011 Credit Facility.
Time chartered-in vessels
In January 2013, the Company agreed to time charter-in and took delivery of a 2007 built MR ice-class 1B product tanker (49,999 DWT) on a one year time charter-in agreement at $14,000 per day. The agreement also contains an option for the Company to extend the charter by one year at $15,000 per day.
In January 2013, the Company took delivery of a previously announced 2013 built MR product tanker (51,561 DWT). This vessel is a sister ship of our newbuilding vessels from HMD. The vessel will be chartered-in for three years at $15,750 per day in year one, $16,250 per day in year two and $16,750 per day in year three. The agreement includes two consecutive options for the Company to extend the charter for up to two consecutive one year periods at $17,500 per day and $18,000 per day.
In January 2013, the Company took delivery of a previously announced 2007 built MR ice-class 1B product tanker (52,684 DWT) on a one year time charter-in agreement at $13,500 per day. The agreement includes an option for the Company to extend the charter for an additional year at $14,500 per day.
In January 2013, the Company took delivery of a previously announced 2003 built LR1 product tanker (72,344 DWT) on a two year time charter-in agreement at $11,250 per day with a 50% profit sharing provision whereby the Company splits any of the vessel–s profits above $11,250 per day with the vessel owner. The agreement includes an option for the Company to extend the charter for an additional year at $12,500 per day with a 50% profit sharing provision.
In January 2013, the Company took delivery of a previously announced 2012 built LR2 product tanker (99,993 DWT) on a six month time charter-in agreement at $14,750 per day. The Company has options to extend the charter for three consecutive six month periods at $15,000 per day, $15,250 per day, and $15,500 per day respectively.
In January 2013, the Company took delivery of a previously announced 2008 built LR2 product tanker (115,406 DWT) on a six month time charter-in agreement at $16,000 per day. The Company has options to extend the charter for three consecutive six month periods at $16,250 per day, $16,500 per day, and $16,750 per day respectively.
Follow-on offering
In December 2012, the Company closed on the sale of 21,639,774 shares of common stock in a registered direct placement of common shares at an offering price of $6.10 per share. The Company received net proceeds of approximately $127.2 million, after deducting the placement agents– discount and offering expenses.
Newbuilding vessel orders
In December 2012, the Company exercised options with HMD for the construction of two MR product tanker newbuildings, and it also reached an agreement with SPP Shipbuilding Co., Ltd. of South Korea (“SPP”) for the construction of four MR product tanker newbuildings. The six newbuildings are scheduled to be delivered to the Company in the second and third quarters of 2014. The contract price for each of the newbuildings is approximately $33.0 million.
Time chartered-in vessels
In December 2012, the Company took delivery of a 2007 built LR1 product tanker (73,669 DWT) on a one year time charter-in agreement at $12,500 per day. The agreement includes an option for the Company to extend the charter for an additional six months at $14,250 per day.
In December 2012, the Company agreed to extend the charter on a 2007 built Handymax product tanker (40,394 DWT), which is already time chartered-in by the Company for one additional year, commencing in April 2013, at $12,600 per day. The agreement includes an option for the Company to extend the charter for an additional year at $13,550 per day.
The Company will have a conference call on February 26, 2013 at 11:00 AM Eastern Standard Time.
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(877)-719-9789 (U.S.) or 1(719) 325-4933 (International). The conference participant passcode is 7673945. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.
There will also be a simultaneous live webcast over the internet, through the Scorpio Tankers Inc. website . Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
Webcast URL
As of February 25, 2013, the Company had $271.7 million in cash and $67.4 million available to draw down from its 2010 Revolving Credit Facility.
As of February 25, 2013, the Company–s outstanding debt balance is as follows:
2010 Revolving Credit Facility
In December 2012, the Company repaid $50.0 million into the 2010 Revolving Credit Facility.
2011 Credit Facility
In January 2013, the Company drew down $17.0 million from the 2011 Credit Facility to partially finance the delivery of the Company–s sixth newbuilding vessel, STI Sapphire.
STI Spirit Credit Facility Repayment
The credit facility with DVB Bank SE requires that the charter-free market value of STI Spirit shall be no less than 140% of the then outstanding loan balance. In order to stay in compliance with this covenant, the Company made a prepayment of $1.3 million in December 2012, which will be applied to the next four quarterly payments.
2013 Debt Repayments
The first quarter of 2013 debt repayment for the Newbuilding Credit Facility and 2011 Credit Facility will be $1.8 million. There are no principal payments due for the 2010 Revolving Credit Facility since the amount available is greater than the amount drawn. There are no principal payments due for the STI Spirit Credit Facility as a result of the $1.3 million prepayment made in December 2012.
Newbuilding Program
During the fourth quarter of 2012, the Company made $13.6 million of installment payments on its newbuilding vessels. The Company currently has 20 product tanker newbuilding orders with HMD and SPP (16 MR and four Handymax). The estimated future payment dates and amounts including the newbuilding contracts signed in 2013 are as follows*:
*These are estimates only and are subject to change as construction progresses.
**$42.3 million has been paid as of the date of this press release which includes the final installment payment of $22.2 million relating to the delivery of STI Sapphire in January 2013.
For the three months ended December 31, 2012, the Company incurred a net loss of $4.9 million compared to a net loss of $71.7 million in the three months ended December 31, 2011. The following were the significant changes between the two periods:
Time charter equivalent, or TCE revenues, a non-IFRS measure, is vessel revenues less voyage expenses (including bunkers and port charges). TCE revenue is also 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 charters, time charters and bareboat charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended December 31, 2012 and 2011:
TCE revenue increased by $8.4 million to $28.3 million as a result of an increase in the average number of operating vessels (owned and time chartered-in) to 23.81 from 17.48 for the three month periods ended December 31, 2012 and 2011, respectively. Additionally, the Company experienced an increase in time charter equivalent per day to $13,392 per day from $11,912 per day for the three months ended December 31, 2012 and 2011, respectively (see the breakdown of daily TCE averages below).
Vessel operating costs remained consistent, increasing by $0.2 million to $8.2 million as the average number of owned vessels was 12.00 for both the three months ended December 31, 2012 and 2011. Operating costs per day were $7,348 for the three months ended December 31, 2012, an increase of $109 per day from $7,239 during the three months ended December 31, 2011 (see the breakdown of daily operating expense averages below). Operating costs for our five newbuilding vessels were $5,711 per day for the three months ended December 31, 2012. The lower costs incurred on these vessels were offset by higher operating costs from vessels in our Aframax/LR2 and Handymax segments, which resulted from repairs made during the period on certain vessels within these segments.
Charterhire expense increased $7.0 million to $14.2 million as a result of an increase in the average number of time chartered-in vessels to 11.81 from 5.48 for the three months ended December 31, 2012 and 2011, respectively. See the Company–s Fleet List below for the terms of these agreements.
The Company recorded a $66.6 million non-cash impairment charge during the three months ended December 31, 2011. There was no such charge during the three months ended December 31, 2012.
Depreciation expense decreased by $0.4 million to $4.6 million as a result of a (i) a $66.6 million impairment charge recorded at December 31, 2011 which decreased the depreciable basis of the Company–s vessels and (ii) the sales of STI Conqueror, STI Matador and STI Gladiator during the first and second quarters of 2012 along with the sales of STI Diamond and STI Coral during the third quarter of 2012. This fleet reduction was offset by the delivery of the first five vessels under the Company–s Newbuilding program in the third quarter of 2012.
Financial expenses, which consist of interest expense, amortization of deferred financing fees and commitment fees increased by $0.2 million to $1.9 million. This increase was primarily driven by an increase in interest expense which was the result of a higher average debt balance during the three months ended December 31, 2012 when compared to the three months ended December 31, 2011. This increase was partially offset by a decrease in commitment fees which was driven by the higher average debt balance (and hence lower available balance) for the three months ended December 31, 2012 and 2011, respectively.
Unrealized loss on derivative financial instruments consists of (i) a $1.0 million loss attributable to the discontinuation of hedge accounting on three of the Company–s interest rate swaps which resulted in the reclassification of the fair value of these swaps previously recorded in other comprehensive income (within equity) to the statement of profit or loss and (ii) the decrease in the fair value of derivatives related to profit and loss agreements on time chartered-in vessels with third parties of $0.2 million.
Earnings from profit or loss sharing agreements include $0.2 million of earnings under these agreements during the three months ended December 31, 2012. There were no profit or loss agreements in place for the three months ended December 31, 2011.
Business Strategy
The Company–s primary objectives are to profitably grow the business and emerge as a major operator of medium-sized tanker vessels. The Company intends to acquire modern, high-quality tankers through timely and selective acquisitions. The Company is currently concentrating on product or coated tankers because of the fundamentals of this segment, which the Company believes includes:
increasing demand for refined products;
increasing ton miles (distance between new refiners and areas of demand); and
reduced order book.
Dividend Policy
The Company does not have immediate plans to pay dividends but will continue to assess the dividend policy. In the future, the board of directors may determine it is in the best interest of the Company to pay dividends.
Share Buyback Program
On July 9, 2010, the board of directors authorized a share buyback program of up to $20 million. Scorpio Tankers expects to repurchase these shares 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 program to repurchase any shares.
As of February 25, 2013, the Company has purchased $7.9 million of shares in the open market at an average price of $6.78.
About Scorpio Tankers Inc.
Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 13 tankers (one LR2 tanker, four LR1 tankers, one Handymax tanker, six MR tankers, and one post-Panamax tanker) with an average age of 4.6 years, time charters-in 19 product tankers (three LR2, three LR1, eight MR and five Handymax tankers), and has contracted for 20 newbuilding product tankers (16 MR and four Handymax vessels), two of which are expected to be delivered to the Company by April 2013 and the remaining 18 by the end of 2014. Additional information about the Company is available at the Company–s website , which is not a part of this press release.
Forward-Looking Statements
Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.
The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management–s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.
This press release describes adjusted net loss and Adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. “Non-GAAP” measure). The Non-GAAP measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company–s management evaluates the Company–s operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.