Scorpio Tankers Ends Year in Red

Scorpio Tankers Inc. yesterday announced its financial results.

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.

Results for the year ended December 31, 2012 and 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 a $10.4 million, or $0.25 per share, loss from sales of five vessels, 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 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.

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.”

Newbuilding vessel orders

In February 2013, the company exercised an 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 also 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.

[mappress]
Scorpio Tankers, February 26, 2013