SBBA - Scorpio Tankers Inc. Announces Financial Results for the Fourth Quarter of 2023 and an Increase to its Quarterly Dividend

MONACO, Feb. 14, 2024 (GLOBE NEWSWIRE) -- Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers" or the "Company") today reported its results for the three months and year ended December 31, 2023. The Company also announced that its board of directors (the "Board of Directors") has declared a quarterly cash dividend on its common shares of $0.40 per share.

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

For the three months ended December 31, 2023, the Company had net income of $120.9 million, or $2.43 basic and $2.34 diluted earnings per share.

For the three months ended December 31, 2023, the Company had adjusted net income (see Non-IFRS Measures section below) of $142.2 million, or $2.85 basic and $2.75 diluted earnings per share, which excludes from net income (i) a $7.3 million, or $0.15 per basic and $0.14 per diluted share, write-off or acceleration of the amortization of deferred financing fees on certain lease financing obligations and related debt extinguishment costs, (ii) a $4.9 million, or $0.10 per basic and $0.09 per diluted share, gain on the sale of a vessel, (iii) an $8.4 million, or $0.17 per basic and $0.16 per diluted share, acceleration of the amortization of restricted stock awards which was triggered by the departure of the Company’s former CFO in October 2023, and (iv) a $10.5 million, or $0.21 per basic and $0.20 per diluted share, write-off of previously incurred costs related to the options to purchase scrubbers on 11 MR product tankers which expired unexercised (discussed below).

For the three months ended December 31, 2022, the Company had net income of $264.4 million, or $4.74 basic and $4.37 diluted earnings per share.

For the three months ended December 31, 2022, the Company had adjusted net income (see Non-IFRS Measures section below) of $256.0 million, or $4.59 basic and $4.24 diluted earnings per share, which excludes from net income (i) a $12.7 million, or $0.23 per basic and $0.21 per diluted share, gain recorded upon the reversal of a previously recorded impairment, and (ii) $4.3 million, or $0.08 per basic and $0.07 per diluted share, write-off or acceleration of the amortization of deferred financing fees on certain debt or lease financing obligations and related debt extinguishment costs.

Results for the year ended December 31, 2023 and 2022

For the year ended December 31, 2023, the Company had net income of $546.9 million, or $10.44 basic and $10.03 diluted earnings per share.

For the year ended December 31, 2023, the Company had adjusted net income (see Non-IFRS Measures section below) of $570.3 million, or $10.89 basic and $10.46 diluted earnings per share, which excludes from net income (i) a $16.5 million, or $0.32 per basic and $0.30 per diluted share, write-off or acceleration of the amortization of deferred financing fees on certain lease financing obligations and related debt extinguishment costs, (ii) a $12.0 million, or $0.23 per basic and $0.22 per diluted share, gain on the sale of vessels, (iii) an $8.4 million, or $0.16 per basic and $0.15 per diluted share, acceleration of the amortization of restricted stock awards which was triggered by the departure of the Company’s former CFO in October 2023, and (iv) a $10.5 million, or $0.20 per basic and $0.19 per diluted share, write-off of costs related to the options to purchase scrubbers on 11 MR product tankers which expired unexercised.

For the year ended December 31, 2022, the Company had net income of $637.3 million, or $11.49 basic and $10.34 diluted earnings per share.

For the year ended December 31, 2022, the Company had adjusted net income (see Non-IFRS Measures section below) of $702.0 million, or $12.66 basic and $11.36 diluted earnings per share, which excludes from net income (i) a $66.5 million, or $1.20 per basic and $1.05 per diluted share, aggregate net loss on the sale of vessels, (ii) a $12.7 million, or $0.23 per basic and $0.20 per diluted share, gain recorded upon the reversal of a previously recorded impairment, (iii) $11.5 million, or $0.21 per basic and $0.18 per diluted share, write-off or acceleration of the amortization of deferred financing fees on debt or lease financing obligations and related debt extinguishment costs, and (iv) $0.5 million, or $0.01 per basic and $0.01 per diluted share, gain recorded on the repurchases of the Company’s Convertible Notes Due 2025.

Declaration of Dividend

On February 13, 2024, the Board of Directors declared a quarterly cash dividend of $0.40 per common share, with a payment date of March 27, 2024 to all shareholders of record as of March 8, 2024 (the record date). As of February 14, 2024, there were 53,107,765 common shares of the Company outstanding.

Summary of Fourth 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 first quarter of 2024 as of the date hereof (See footnotes to "Other operating data" table below for the definition of daily TCE revenue):

⁽¹⁾ Expected Revenue Days are the total number of calendar days in the quarter for each vessel, less the total number of expected off-hire days during the period associated with major repairs or drydockings. Consequently, Expected Revenue Days represent the total number of days the vessel is expected to be available to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. The Company uses revenue days to show changes in net vessel revenues between periods.

• Below is a summary of the average daily TCE revenue earned by the Company's vessels during the fourth quarter of 2023:

• In February 2024, the Company gave notice to exercise the purchase options on four lease financed product tankers consisting of two MRs ( STI Gramercy and STI Queens ) and two LR2s ( STI Oxford and STI Selatar ) that are currently financed on the 2022 AVIC Lease Financing. The purchases, which are expected to close in the second quarter of 2024, will result in a debt reduction of $102.4 million.
• In January 2024, the Company gave notice to exercise its purchase options on one 2015 built MR product tanker ( STI Westminster ) and four 2014 built Handymax product tankers ( STI Brixton , STI Comandante , STI Pimlico and STI Finchley ) which are currently financed on the 2021 CMBFL Lease Financing. The purchases, which are expected to close in the first half of 2024, will result in a debt reduction of $61.1 million.
• In January 2024, the Company entered into an agreement to sell the 2015 built MR vessel, STI Tribeca , for $39.1 million. The sale of this vessel is expected to close within the first quarter of 2024. The Company expects there will be no debt repayment as a result of this sale, as this vessel is in the process of being replaced by one of its unencumbered vessels, STI Galata, as collateral on the 2023 $1.0 Billion Credit Facility.
• During the fourth quarter of 2023, the Company made $497.1 million in unscheduled debt and lease repayments and from January 1 through February 13, 2024, the Company made an additional $171.1 million of unscheduled debt and lease repayments.
• In December 2023, the Company gave notice to exercise its purchase options on three 2015 built MR product tankers ( STI Black Hawk, STI Notting Hill and STI Pontiac ) that are currently financed on the 2021 TSFL Lease Financing. The purchases, which are expected to close in the first quarter of 2024, will result in a debt reduction of $45.6 million.
• In November 2023, the Company sold the 2012 built MR product tanker, STI Amber , for $33.7 million. Prior to the closing of this transaction, the Company exercised the purchase option on this vessel on the BCFL Lease Financing (MRs) for a purchase price of $8.2 million.
• In October 2023, the Company drew down $50.2 million from the 2023 $94.0 Million Credit Facility and placed two LR2 product tankers as collateral under this facility.
• During the fourth quarter of 2023, the Company drew down $324.6 million from the 2023 $1.0 Billion Credit Facility (split evenly between the term loan and the revolver) and placed eight LR2 product tankers and five MR product tankers as collateral under the facility. In January 2024, the Company drew down $99.0 million from this credit facility and placed two Handymax product tankers and four MR Product tankers as collateral under the facility.
• The Company’s options to purchase scrubbers on 11 MR product tankers recently expired unexercised. As a result, the Company will not incur an estimated $23.1 million in incremental equipment and installation costs and an estimated 355 days that the vessels were expected to be off-hire during 2024. In the fourth quarter of 2023, the Company wrote-off $10.5 million relating to previously incurred deposits and installation costs on these scrubbers due to the expiration of this agreement. The Company currently has 86 scrubbers installed on its fleet.

Securities Repurchase Program

From October 1, 2023 through February 13, 2024, the Company repurchased 241,288 of its common shares in the open market at an average price of $49.88 per share under the 2023 Securities Repurchase Program.

On November 9, 2023, the Company’s Board of Directors replenished the 2023 Securities Repurchase Program to purchase up to an aggregate of $250.0 million of the Company’s securities which, in addition to its common shares also consist of its Senior Unsecured Notes Due 2025 (NYSE: SBBA). This program reset the program that was previously replenished on May 31, 2023.

There is $250.0 million available under the 2023 Securities Repurchase Program as of February 13, 2024.

Diluted Weighted Number of Shares

The computation of earnings 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 per share to the extent they are anti-dilutive.

For the three months and year ended December 31, 2023, the Company’s basic weighted average number of shares outstanding were 49,799,818 and 52,369,269 respectively. For the three months and year ended December 31, 2023, the Company’s diluted weighted average number of shares outstanding were 51,637,739 and 54,527,747, respectively, which included the potentially dilutive impact of restricted shares issued under the Company's equity incentive plan.

Conference Call

On Wednesday, February 14, 2024, the Company plans to issue its fourth quarter 2023 earnings press release in the morning (Eastern Standard Time) and host a conference call at 9:00 AM Eastern Standard Time and 3:00 PM Central European Time.

Title: Scorpio Tankers Inc. Fourth Quarter 2023 Conference Call

Date: Wednesday, February 14, 2024

Time: 9:00 AM Eastern Standard Time and 3:00 PM Central European Time.

The conference call will be available over the internet, through the Scorpio Tankers Inc. website www.scorpiotankers.com and the webcast link:

https://edge.media-server.com/mmc/p/q3f2wm2d

Participants for the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

The conference will also be available telephonically:

US/CANADA Dial-In Number: 1 833-636-1321

International Dial-In Number: 1 412-902-4260

Please ask to join the Scorpio Tankers Inc call

Participants should dial into the call 10 minutes before the scheduled time.

Current Liquidity

As of February 13, 2024, the Company had $440.5 million in unrestricted cash and cash equivalents and $288.2 million of availability under the revolving portion of the 2023 $1.0 Billion Credit Facility.

Debt

The following table sets forth the unscheduled debt and lease repayments that the Company has recently completed or are pending, including those announced as of February 13, 2024.

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

⁽¹⁾ Refer to the preceding table for a description of unscheduled payment activity that has recently occurred or is expected to occur.

⁽²⁾ In November and December 2023, the Company drew down an aggregate of $324.6 million from this facility (split evenly between the term loan and the revolver) and 13 of the Company's vessels ( STI Lotus , STI Lily , STI Gladiator , STI Gratitude , STI Goal , STI Stability , STI Solace , STI Solidarity , STI Maximus , STI Leblon , STI Bosphorus , STI Donald C Trauscht and STI Esles II ) were placed as collateral under the facility. In January 2024, the Company drew down an aggregate of $99.0 million from this facility (split evenly between the term loan and the revolver) and six of the Company's vessels ( STI Acton, STI Camden, STI Jardins, STI Osceola, STI Soho and STI San Telmo ) were placed as collateral under the facility.   There is currently $288.2 million available under the revolving portion of this facility and no further amounts available to draw under the term portion.

The amounts drawn, and the currently available $288.2 million under the revolving portion of the facility, are scheduled to be repaid and/or permanently reduced in aggregate amounts of $33.1 million per quarter through June 30, 2025 and gradually decreasing from $26.4 million to $21.3 million per quarter in years three through five of the loan, with a balloon payment due at the maturity date.

⁽³⁾ In October 2023, the Company drew down $50.2 million from the 2023 $94.0 Million Credit Facility and two vessels ( STI Guide and STI Gauntlet ) were placed as collateral under the facility. The facility, including amounts previously drawn, is scheduled to be repaid in aggregate repayments of $2.4 million per quarter with a balloon payment due at maturity.

^{( 4 )} Amounts reflect the balances as of February 13, 2024, adjusted for previously announced unscheduled debt and lease repayments which are expected to occur between February 14, 2024 and June 30, 2024.

Set forth below are the estimated expected future principal repayments on the Company's outstanding indebtedness as of December 31, 2023, which includes principal amounts due under the Company's secured credit facilities, lease financing arrangements and Senior Notes Due 2025 (which also include actual scheduled payments made from January 1, 2024 through February 13, 2024):

⁽¹⁾ Amounts represent the principal payments due on the Company’s outstanding indebtedness as of December 31, 2023.

⁽²⁾ Includes the unscheduled payment activity that has recently occurred or is expected to occur as described in the preceding section describing unscheduled debt and lease repayments.

⁽³⁾ Includes the scheduled maturity payment of $55.4 million on the BNPP Sinosure Credit Facility.

^{( 4 )} Reflects the scheduled repayments on the amounts borrowed in January 2024 on the 2023 $1.0 Billion Credit Facility.

Drydock and Ballast Water Treatment Update

Set forth below is a table summarizing the drydock and ballast water treatment system ("BWTS") activity that occurred during the fourth quarter of 2023 and the estimated expected payments to be made, and off-hire days that are expected to be incurred, for the Company's drydocks and ballast water treatment system installations through 2024 and 2025:

⁽¹⁾ These costs include estimated cash payments for drydocks and ballast water treatment system installations. These amounts may include costs incurred for previous projects for which payments may not be due until subsequent quarters, or installment payments that are due in advance of the scheduled service and may be scheduled to occur in quarters prior to the actual installation. In addition to these installment payments, these amounts also include estimates of the installation costs of such systems. The timing of the payments set forth are estimates only and may vary as the timing of the related drydocks and installations finalize.

⁽²⁾ Represents the total estimated off-hire days during the period, including vessels that commenced work in a previous period.

⁽³⁾ Represents the number of vessels scheduled to commence drydock and/or ballast water treatment system installations during the period. It does not include vessels that commenced work in prior periods but will be completed in the subsequent period. The number of vessels in these tables may reflect a certain amount of overlap where certain vessels are expected to be drydocked and have ballast water treatment systems installed simultaneously. Additionally, the timing set forth in these tables may vary as drydock and ballast water treatment system installation times are finalized.

^(a) Includes one BWTS installation.

^{( b )} The Company’s options to purchase scrubbers on 11 MR product tankers recently expired unexercised. In the fourth quarter of 2023, the Company wrote-off $10.5 million relating to previously incurred deposits and installation costs on these scrubbers due to the expiration of this agreement.

Explanation of Variances on the Fourth Quarter of 2023 Financial Results Compared to the Fourth Quarter of 2022

For the three months ended December 31, 2023, the Company recorded net income of $120.9 million compared to net income of $264.4 million for the three months ended December 31, 2022. 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, 2023, and 2022:

• TCE revenue for the three months ended December 31, 2023 decreased by $126.2 million to $334.1 million, from $460.3 million for the three months ended December 31, 2022. Overall, the average daily TCE revenue decreased to $32,949 per day during the three months ended December 31, 2023, from $45,679 per day during the three months ended December 31, 2022.   The average number of vessels was 111.5 during the three months ended December 31, 2023 as compared to 113.0 during the three months ended December 31, 2022.
  • TCE revenue for the three months ended December 31, 2023 remained strong despite a decline in daily TCE rates when compared to the same period in the prior year. The fourth quarter of 2022 reflected several key events and market conditions (discussed below) occurring simultaneously, which led to a spike in daily TCE rates. The fourth quarter of 2023 reflected a more normalized seasonal pattern whereby demand increased from the third quarter of 2023 as the northern hemisphere entered into the winter months. This increase was partially offset by elevated refinery maintenance in the U.S., Middle East and Asia which led to a slight reduction in seaborne volumes. Despite this elevated refinery maintenance, demand for the Company's vessels remained robust in the fourth quarter of 2023, driven by growing underlying consumption for refined petroleum products set against the backdrop of a modest newbuilding orderbook.
  • TCE revenue for the three months ended December 31, 2022 reflected the strength in the product tanker market that began in the first quarter of 2022 as a result of several catalysts. Initially, the easing of COVID-19 restrictions around the globe resulted in increased personal mobility which served as a catalyst for underlying demand for refined petroleum products. This demand, combined with low global refined petroleum product inventories and strong refining margins, incentivized refiners to increase and maintain high utilization levels which drove substantial increases in refined petroleum product export volumes throughout the world. Additionally, the volatility brought on by the conflict in Ukraine disrupted supply chains for crude oil and refined petroleum products, changing volumes and trade routes, and thus increasing ton-mile demand for the seaborne transportation of refined petroleum products. Export volumes also spiked during the fourth quarter of 2022 as European inventories built-up immediately prior to the implementation of sanctions on the export of Russian refined petroleum products, which took effect in February 2023.

The Company also had an increased number of vessels operating outside of the Scorpio pools during the three months ended December 31, 2022, which led to an increase in voyage revenue and voyage expenses for that period.

• Vessel operating costs for the three months ended December 31, 2023, decreased by $2.2 million to $83.9 million, from $86.2 million for the three months ended December 31, 2022. Vessel operating costs per vessel per day decreased to $8,181 per day for the three months ended December 31, 2023 from $8,289 per day for the three months ended December 31, 2022. Vessel operating costs per day decreased slightly among the LR2 and MR vessel classes with the largest decreases within stores and spares expenses. In the three months ended December 31, 2022, the easing of supply chain congestion (leading to a high volume of spares and stores deliveries), the completion of deferred repairs and maintenance, and generalized inflationary pressures all contributed to the higher operating costs during the period. The three months ended December 31, 2023 were also impacted by generalized inflationary pressures. In both the three months ended December 31, 2023 and 2022, crewing expenses included $2.0 million allocated to a provident fund dedicated to the Company's seafarers.
• Depreciation expense – owned or sale leaseback vessels for the three months ended December 31, 2023, increased by $7.1 million to $48.6 million, from $41.4 million for the three months ended December 31, 2022. This increase was attributable to the exercise of purchase options on all 21 lease financed vessels throughout 2023 that were previously accounted for as IFRS 16 - Leases consisting of nine in the second quarter; six in the third quarter; and six in the fourth quarter. The carrying values of these vessels were reclassified to Vessels from Right of Use Assets on the Company's balance sheet on the dates of purchase. Depreciation expense going forward from the dates of repurchase are recorded as a part of owned vessels.
• Depreciation expense - right of use assets for the three months ended December 31, 2023, decreased by $7.7 million to $2.1 million from $9.8 million for the three months ended December 31, 2022. Depreciation expense - right of use assets reflects the straight-line depreciation expense recorded under IFRS 16 - Leases. This decrease was attributable to the exercise of purchase options on all 21 lease financed vessels throughout 2023 that were previously accounted for as IFRS 16 - Leases consisting of nine in the second quarter; six in the third quarter; and six in the fourth quarter. The carrying values of these vessels were reclassified to Vessels from Right of Use Assets on the Company's balance sheet on the dates of purchase. Depreciation expense going forward from the dates of repurchase are recorded as a part of owned vessels.
• General and administrative expenses for the three months ended December 31, 2023, increased by $5.7 million to $32.1 million, from $26.4 million for the three months ended December 31, 2022. This increase was primarily due to a one-time non-cash charge of $8.4 million for the acceleration of restricted stock amortization which was triggered by the departure of the Company's former CFO in October 2023. This increase was partially offset by an aggregate decrease in compensation related costs.

• Write-off of deposits on scrubbers for the three months ended December 31, 2023, of $10.5 million related to previously incurred deposits and installation costs on these scrubbers due to the recent expiration of the Company’s options to purchase scrubbers on 11 MR product tankers. As a result, the Company will not incur an estimated $23.1 million in incremental equipment and installation costs and an estimated 355 days that the vessels were expected to be off-hire during 2024. The Company currently has 86 scrubbers installed on its fleet.
• Financial expenses for the three months ended December 31, 2023 decreased by $2.5 million to $46.3 million, from $48.8 million for the three months ended December 31, 2022. This decrease was primarily attributable to the overall reduction in interest expense on debt, as the Company's average indebtedness decreased to $1.7 billion during the three months ended December 31, 2023, as compared to $2.3 billion during the three months ended December 31, 2022. Additionally:
  • The Company recorded $7.3 million of debt extinguishment related costs during the three months ended December 31, 2023, as compared to $4.3 million during the three months ended December 31, 2022;
  • The Company incurred $1.9 million in accretion of its Convertible Notes Due 2025 during the three months ended December 31, 2022. These convertible notes were converted in December 2022 and, therefore, no expense was incurred during the three months ended December 31, 2023; and
  • The amortization of deferred financing fees increased to $2.8 million during the three months ended December 31, 2023, as compared to $1.3 million during the three months ended December 31, 2022, due to the entrance into new credit facilities during 2023.

⁽¹⁾ The computation of diluted earnings per share for the three months ended December 31, 2023, includes the effect of potentially dilutive unvested shares of restricted stock. The computation of diluted earnings per share for the three months and year ended December 31, 2022, includes the effect of potentially dilutive unvested shares of restricted stock and the effect of the Convertible Notes Due 2022 and Convertible Notes Due 2025 under the if-converted method.