Scorpio Tankers(STNG) - 2023 Q4 - Annual Report

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS This section states that the information regarding the identity of directors, senior management, and advisers is not applicable for this report - Information regarding the identity of directors, senior management, and advisers is not applicable[16] ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE This section indicates that the offer statistics and expected timetable are not applicable for this report - Offer statistics and expected timetable are not applicable[17] ITEM 3. KEY INFORMATION This section provides key information about Scorpio Tankers Inc. and its subsidiaries, including definitions of terms and a comprehensive summary of risk factors that could significantly and negatively affect the business, financial condition, operating results, or cash flow - The occurrence of any described events could significantly and negatively affect the business, financial condition, operating results, cash available for dividends, or the trading price of securities[24] A. [Reserved] This sub-section is reserved and states that it is not applicable - This section is reserved and not applicable[21] B. Capitalization and Indebtedness This sub-section states that information regarding capitalization and indebtedness is not applicable - Information on capitalization and indebtedness is not applicable[22] C. Reasons for the Offer and Use of Proceeds This sub-section indicates that the reasons for the offer and use of proceeds are not applicable - Reasons for the offer and use of proceeds are not applicable[23] D. Risk Factors This section outlines various risks that could significantly impact the company's business, financial condition, operating results, or stock price RISKS RELATED TO OUR INDUSTRY This sub-section details the inherent risks within the tanker industry, including its cyclical and volatile nature, dependence on spot charters, potential over-supply of vessels, geopolitical conflicts, fluctuating fuel prices, seasonal demand, and the impact of environmental regulations and global economic conditions - The tanker industry is cyclical and volatile, which may adversely affect earnings and available cash flow, with continued volatility expected in market rates[31] - The company is dependent on spot-oriented pools and spot charters, and any decrease in spot charter rates in the future may adversely affect earnings[37][39] - An over-supply of tanker capacity, with the newbuilding order book equaling approximately 7.0% of the existing world tanker fleet as of February 29, 2024, may depress charter rates and limit profitability[41] - Acts of piracy and geopolitical conflicts, such as the ongoing armed conflict between Russia and Ukraine and the Houthi vessel attacks in the Red Sea, disrupt shipping routes, increase costs, and threaten political stability[43][44][45][81][82][83][85][86] - Changes in fuel (bunkers) prices, influenced by geopolitical developments and environmental regulations like the IMO's 0.5% global sulfur cap, may adversely affect profits and increase operating costs[46][47][48][49] - Tanker rates fluctuate based on seasonal variations in demand, typically stronger in winter months and weaker in summer months[50] - A shift in consumer demand from oil towards other energy sources (e.g., electricity, natural gas, hydrogen, electric vehicles) or changes in refined oil product trade patterns may have a material adverse effect on the business[51][52][53][54] - Volatility in global economic conditions, including an economic slowdown in the Asia Pacific region (especially China), could adversely impact results of operations and financial condition, affecting demand for vessels and access to financing[56][57][58][59] - Failure to meet customers' quality and compliance requirements, particularly in the oil industry, could adversely affect future performance, results of operations, cash flows, and financial position[60] - The company is subject to complex and evolving environmental laws and regulations (e.g., MARPOL, ISM Code, Hong Kong Convention, EU ETS, FuelEU Maritime, IMO GHG Strategy) that can increase liability, require costly equipment or operational changes, and affect vessel values[61][62][63][64][66][67][68][70][71][72][73] - Operating tankers worldwide exposes the company to inherent operational and international risks, including marine disasters, war, terrorism, piracy, and epidemics, which may result in damage, loss of revenue, higher insurance rates, and litigation[74][75][76][77][78][79][80] - Calling on ports in countries or territories subject to sanctions or embargoes (Sanctioned Jurisdictions) could result in monetary fines, penalties, and adversely affect reputation and the market for securities[87][88][89][90][91] - Maritime claimants could arrest or attach vessels for unsatisfied debts, claims, or damages, negatively affecting cash flows[92][93] - Governments could requisition vessels during periods of war or emergency, impacting business, financial condition, results of operations, and available cash[94] - Technological innovation could reduce charterhire income and the value of vessels if new, more efficient, or flexible tankers are built[95] - Breakdowns in information technology systems, including as a result of cyberattacks, may negatively impact business, customer service, and financial performance, leading to lost revenues, remediation costs, and legal claims[96][97][98][99][101] - Increasing scrutiny and changing expectations from investors, lenders, and market participants regarding Environmental, Social and Governance (ESG) policies may impose additional costs, expose to risks, or hinder access to capital[102][103][104][105][107][108][109][110][111] - Labor interruptions, if not resolved timely, could have a material adverse effect on business, results of operations, cash flows, financial condition, and available cash[112] RISKS RELATED TO OUR COMPANY This sub-section addresses risks specific to Scorpio Tankers Inc., including the potential for investments in exhaust gas cleaning systems (scrubbers) to not yield anticipated benefits, challenges in managing growth, increased operating costs for older vessels, potential impairment charges, stock price volatility, and the impact of tax regulations and legal jurisdiction - The company may not realize all anticipated benefits from its investment in exhaust gas cleaning systems ('scrubbers') due to factors like fuel price differentials, availability of low sulfur fuel, and changes in wash water regulations[113][114][115] - There is no assurance that internal controls and procedures over financial reporting will be sufficient, potentially leading to misstatements, increased costs, or inability to meet public company obligations[116] - The company may have difficulty managing planned growth, including identifying, purchasing, financing, developing, and integrating new tankers or businesses, which could adversely affect financial condition and cash available for dividends[117][118] - Operating secondhand vessels exposes the company to increased operating costs and, as the fleet ages, risks associated with older vessels could adversely affect the ability to obtain profitable charters[119][121] - An increase in operating costs (e.g., crew, fuel, maintenance, drydocking) would decrease earnings and available cash[122] - Additional capital expenditures will be required for fleet expansion and maintenance, which, if not funded by cash flow, may necessitate additional indebtedness or unfavorable financing arrangements[123][124][125] - Declines in charter rates and other market deterioration have caused, and could cause, the company to incur impairment charges on its vessels, negatively affecting financial condition and operating results[126][127][129] - The company's stock price has fluctuated and may be volatile in the future, potentially leading to substantial losses for investors, influenced by broad market factors, industry conditions, or phenomena like 'short squeezes'[130][131][132][133] - Decreases in the market values of vessels could limit borrowing funds, trigger financial covenants under debt facilities, or result in losses if vessels are sold[134][136][137] - Inability to operate vessels profitably in the highly competitive international tanker market would negatively affect financial condition and ability to expand[138][139] - Failure to set aside or raise funds for vessel replacement at the end of a vessel's useful life would lead to a decline in revenue[140] - The ability to obtain additional financing may be dependent on the performance of existing charters and the creditworthiness of charterers[141] - The Board of Directors cannot guarantee dividend declarations, as payments depend on earnings, financial condition, cash requirements, debt restrictions, and Marshall Islands law[142][143][144] - United States tax authorities could treat the company as a 'passive foreign investment company' (PFIC), which could have adverse United States federal income tax consequences for United States shareholders[145][146][147] - The company may have to pay tax on United States source shipping income, which would reduce earnings, if it loses the exemption under Section 883 of the Code[148][149][150] - The company is subject to counterparty risks on various contracts (charters, pooling, newbuilding, debt, lease financing); failure of counterparties to meet obligations could result in significant losses[151][152][153] - Insurance coverage may not be adequate to cover all losses from operational risks, and premiums may increase due to inherent risks, terrorist attacks, or protection and indemnity association calls[154][155][156] - Failure to comply with the U.S. Foreign Corrupt Practices Act (FCPA) could result in fines, criminal penalties, contract terminations, and an adverse effect on business and reputation[157] - Changes in tax laws and unanticipated tax liabilities, such as those from the OECD's two-pillar base erosion and profit shifting project (e.g., global minimum tax), could materially and adversely affect the company's taxes, results of operations, and financial results[158] - Incorporation in the Republic of the Marshall Islands, which has a less developed body of corporate law, may provide shareholders with fewer rights and protections compared to typical U.S. jurisdictions[159] - Operations in the Marshall Islands and Monaco, and with Marshall Islands subsidiaries, may be subject to economic substance requirements, and potential blacklisting by the EU could harm the business[160][161][162][163][164] - It may be difficult to serve process on or enforce a United States judgment against the company, its officers, and directors due to its foreign corporation status and assets/personnel located outside the U.S[165] - The international nature of operations may make the outcome of any bankruptcy proceedings difficult to predict, as non-U.S. bankruptcy laws could apply[166] RISKS RELATED TO OUR RELATIONSHIP WITH SCORPIO AND ITS AFFILIATES This sub-section highlights potential conflicts of interest arising from the company's reliance on its technical and commercial managers (SSM and SCM), which are part of the Scorpio group of companies controlled by the Lolli-Ghetti family - The company is dependent on its technical manager (SSM) and commercial manager (SCM) and their ability to hire and retain key personnel. Conflicts of interest may arise due to their affiliation with the Scorpio group of companies, potentially leading to decisions that favor other interests[167][169][170] - The founder, Chairman, and CEO (Emanuele Lauro) and Vice President (Filippo Lauro) have affiliations with the company's administrator and commercial/technical managers, which may create conflicts of interest in chartering, purchasing, selling, and operating vessels[171] - Certain officers do not devote all their time to the company's business, potentially hindering successful operations and creating fiduciary conflicts of interest[172] - The commercial and technical managers are privately held companies with little publicly available financial information, posing a risk if their financial strength is impaired[173] RISKS RELATED TO OUR INDEBTEDNESS This sub-section addresses the financial risks associated with the company's substantial indebtedness, including limitations on cash flow for other purposes, the potential loss of vessels if debt obligations cannot be met, and the impact of restrictive and financial covenants in debt and lease financing agreements - Servicing current or future indebtedness (approximately $1.6 billion as of December 31, 2023) limits funds available for other purposes, and inability to service debt may result in the loss of vessels[174][175][176] - Debt and lease financing agreements contain restrictive and financial covenants (e.g., liquidity, net worth, leverage ratios, collateral maintenance) that may limit the company's ability to conduct certain activities, pay dividends, or incur additional debt, and non-compliance could lead to default and acceleration of debt[177][178][179][180][181] ITEM 4. INFORMATION ON THE COMPANY This section provides a comprehensive overview of Scorpio Tankers Inc., covering its history, fleet development, business operations, management structure, and the broader international oil tanker shipping industry A. History and Development of the Company This sub-section outlines Scorpio Tankers Inc.'s founding, public listing, and fleet expansion, detailing recent corporate activities, including vessel sales, debt management, dividend declarations, updates to the equity incentive plan, and changes in related party management fees - Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands on July 1, 2009, and completed its initial public offering in April 2010, with common stock trading on the NYSE under 'STNG'[182] - As of March 21, 2024, the fleet consisted of 110 wholly owned or leased tankers (39 LR2, 57 MR, and 14 Handymax) with a weighted average age of approximately 8.1 years[182] - Recent Developments (March 2024): - Sold the 2015-built MR vessel, STI Tribeca, for $39.1 million; no debt repayment as collateral was replaced[184] - Entered into an agreement to sell a 2013-built MR tanker, STI Larvotto, for $36.15 million, expected to close before the end of April 2024, with no debt repayment[185] - Entered into an agreement to sell a 2013-built MR tanker, STI Le Rocher, for $36.15 million, expected to close in the second quarter of 2024, with no debt repayment[186] - Debt Activity (2024 YTD): - Early repayment of $33.7 million debt on three 2014-built Handymax tankers (STI Acton, STI Camden, STI Clapham) under the Prudential Credit Facility in January 2024[187] - Exercised purchase options on two MR product tankers (STI Jardins and STI San Telmo) under the 2020 SPDBFL Lease Financing, resulting in a debt reduction of $38.3 million in January 2024[187] - Exercised purchase options on three MR product tankers (STI Soho, STI Osceola and STI Memphis) and one LR2 product tanker (STI Lombard) under the 2021 AVIC Lease Financing, resulting in a debt reduction of $77.4 million in January 2024[187] - Exercised purchase options on three 2012-built MR product tankers (STI Topaz, STI Garnet and STI Onyx) under the BCFL Lease Financing (MRs), resulting in a debt reduction of $21.7 million in January 2024[187] - Notices delivered in December 2023 for purchase options on three 2015-built MR product tankers (STI Black Hawk, STI Notting Hill and STI Pontiac) under the 2021 TSFL Lease Financing, with an aggregate lease liability of $45.6 million expected to close in the first quarter of 2024[187] - Notices delivered in January 2024 for 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) under the 2021 CMBFL Lease Financing, with aggregate lease liabilities of $61.1 million expected to close in the first half of 2024[196] - Notices delivered in February 2024 for purchase options on four lease-financed product tankers (two MRs: STI Gramercy and STI Queens; two LR2s: STI Oxford and STI Selatar) under the 2022 AVIC Lease Financing, with aggregate lease liabilities of $102.4 million expected to close in the first half of 2024[196] - Drew down $99.0 million from the 2023 $1.0 Billion Credit Facility in January 2024, collateralizing two Handymax and four MR product tankers[189] - On February 13, 2024, the Board of Directors declared a quarterly cash dividend of $0.40 per common share, payable on March 27, 2024[190] - On February 13, 2024, an additional 1,463,294 common shares were reserved for issuance under the 2013 Equity Incentive Plan[191] - Related Party Transactions (Effective January 1, 2024): - Commercial management fees charged by SCM increased by $35 per vessel per day[192] - Annual technical management fee payable to SSM increased by $12,500 to $187,500 per vessel[193] - Entered into an agreement with Geoserve Energy Transport DMCC (majority owned by Lolli-Ghetti family) for emissions management services, with fees of $350 per vessel per month and 1.25% per carbon trade[194] - Expected licensing agreement with Fowe Eco Solutions Ltd. (related party) for Cavitech systems, with payments of approximately 33% of realized savings and expected reductions of at least 3% in fuel costs and 100,000 tons of carbon emissions annually[195] B. Business Overview This sub-section details Scorpio Tankers Inc.'s core business of seaborne transportation of refined petroleum products, its fleet composition, and chartering strategies, providing an extensive analysis of the international oil tanker shipping industry, covering demand and supply dynamics, freight market trends, newbuilding and second-hand vessel prices, and the complex regulatory landscape - As of March 21, 2024, the company's operating fleet consisted of 110 wholly owned or leased product tankers (39 LR2, 57 MR, and 14 Handymax) with a weighted average age of approximately 8.1 years[197] - The company's chartering strategy involves operating vessels in commercial pools (95 vessels as of March 21, 2024), on time charters (15 vessels as of December 31, 2023), or in the spot market to optimize revenue and manage market volatility[202][203][204][205] - Commercial management is provided by SCM and technical management by SSM, both related parties, under a revised master agreement. Administrative services are provided by SSH, also a related party[206][207][209][210] World Seaborne Tanker Trade Volumes (Million Tons) | Year | Crude Oil | Refined Products | Veg Oils/Chemicals | Total | % Y-o-Y (Total) | | :--- | :-------- | :--------------- | :----------------- | :---- | :-------------- | | 2022 | 1,955 | 1,015 | 301 | 3,271 | 3.3% | | 2023*| 2,033 | 1,025 | 319 | 3,377 | 3.2% | | 2024F| 2,047 | 1,043 | 307 | 3,397 | 0.6% | - Global seaborne tanker trade grew 3.2% in 2023, driven by robust oil demand (post-Covid rebound in China, growth in developing countries) and increased chemical trade[218] - The global tanker fleet expanded 1.7% in 2023. As of February 29, 2024, the orderbook for product and product/chemical tankers (above 10,000 dwt) comprised 322 vessels with a combined capacity of 23.9 mdwt, equivalent to 13.1% of the existing fleet[235][245] Product Tanker - Spot (TCE) Rates (US$/Day) - January 2024 | Region/DWT | Jan-24 ($/Day) | | :----------------------- | :------------- | | Algeria 25-39,999 DWT | 31,441 | | UKC 40-54,999 DWT | 17,454 | | Arabian Gulf 55-79,999 DWT | 45,144 | | Arabian Gulf 80-119,000 DWT| 55,350 | Oil Tankers: Newbuilding Prices (Millions of U.S. Dollars) - February 2024 | DWT | Feb-24 (Millions of U.S. Dollars) | | :---------- | :-------------------------------- | | 37,000 | 42.5 | | 50,000 | 48.0 | | 75,000 | 61.0 | | 110,000 | 73.0 | Oil Tanker Second-hand Prices for 5-year old vessels (Millions of U.S. Dollars) - February 2024 | DWT | Feb-24 (Millions of U.S. Dollars) | | :---------- | :-------------------------------- | | 37,000 | 40.5 | | 45,000 | 45.5 | | 75,000 | 53.0 | | 95,000 | 73.5 | - The company is committed to ESG initiatives, including pledging for net-zero emission shipping by 2030, measuring carbon intensity, and aligning with UN Sustainable Development Goals. A comprehensive sustainability report was published in May 2023[280][281][283] - The company is subject to numerous international conventions and treaties (e.g., MARPOL, SOLAS, ISM Code, BWM Convention, Anti-fouling Convention) and national laws (e.g., U.S. OPA 90, CERCLA, CWA, MTSA, EU ETS, FuelEU Maritime) related to environmental protection, safety, and security, which entail significant compliance costs and potential liabilities[285][287][288][289][291][292][293][294][295][298][299][300][301][302][303][304][305][306][307][308][309][310][311][312][313][314][315][316][318][319][320][321][322][324][325][327][328][330][331][332][334][335][336][337][338][339][340][341][342][343][345] - The company carries marine hull and machinery, protection and indemnity (P&I) insurance (including $1 billion per vessel per incident for pollution risks, with potential 'overspill' claims up to $8.2 billion through the International Group), and war risk insurance[348][349][350][352] C. Organizational Structure This sub-section refers to Exhibit 8.1 for a list of the company's significant subsidiaries, indicating that the detailed organizational structure is provided elsewhere in the report - A list of current significant subsidiaries is provided in Exhibit 8.1 to this annual report[353] D. Property, Plants and Equipment This sub-section states that the company's only material physical assets are its vessels, which are owned through separate, wholly-owned subsidiaries - The company's only material physical assets consist of its vessels, owned through separate, wholly-owned subsidiaries[354] ITEM 4A. UNRESOLVED STAFF COMMENTS This section indicates that there are no unresolved staff comments applicable to the company - There are no unresolved staff comments[355] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section provides management's discussion and analysis of the company's financial condition and results of operations, covering revenue generation, key financial and operational terms, and factors influencing performance A. Operating Results This sub-section analyzes the company's operating results for the years ended December 31, 2023, and 2022, highlighting a decrease in net income and vessel revenue, attributing changes to market conditions, fleet adjustments, and fluctuations in operating and financial expenses - Net income for the year ended December 31, 2023, was $546.9 million, a decrease of $90.4 million (14%) from $637.3 million in 2022[380] - Vessel revenue for the year ended December 31, 2023, was $1,341.2 million, a decrease of $221.7 million (14%) from $1,562.9 million in 2022[381] - TCE revenue per day (non-IFRS measure) decreased to $32,711 per day in 2023 from $34,878 per day in 2022[381] Consolidated Revenue by Revenue Type (in thousands of U.S. dollars) | Revenue Type | 2023 | 2022 | Change ($) | Change (%) | | :------------------------ | :---------- | :---------- | :---------- | :--------- | | Pool and spot market revenue | 1,187,962 | 1,514,664 | (326,702) | (22)% | | Time charter-out revenue | 153,260 | 48,209 | 105,051 | 218% | | Gross Revenue | 1,341,222 | 1,562,873 | (221,651) | (14)% | | Voyage expenses | (13,243) | (92,698) | 79,455 | 86% | | TCE Revenue | 1,327,979 | 1,470,175 | (142,196) | (10)% | Daily Pool and Spot Market TCE by Operating Segment ($/day) | Operating Segment | 2023 | 2022 | Change ($) | Change (%) | | :------------------------ | :------ | :------ | :--------- | :--------- | | MR pool and spot market | 31,258 | 33,299 | (2,041) | (6)% | | LR2 pool and spot market | 39,486 | 38,277 | 1,209 | 3% | | Handymax pool and spot market | 29,578 | 39,253 | (9,675) | (25)% | | LR1 pool and spot market | — | 13,724 | (13,724) | (100)% | | Consolidated daily pool and spot market TCE | 33,477 | 35,309 | (1,832) | (5)% | - Total revenue days decreased by 1,554 days (4%) to 40,599 in 2023, primarily due to 15 vessels entering time charter-out agreements and the sale of 2 vessels in 2023 (and 18 in 2022)[384][389] - Vessel operating costs decreased by $8.1 million (3%) to $315.6 million in 2023, despite an increase in average daily operating costs to $7,692 per day (from $7,460 in 2022) due to general inflationary pressures[401] - Voyage expenses decreased by $79.5 million (86%) to $13.2 million in 2023, mainly due to a decrease in vessels trading in the spot market outside of the Scorpio Pools[406][407] - Depreciation for owned and lease financed vessels increased by $10.3 million (6%) to $178.3 million in 2023, primarily due to the reclassification of 21 right-of-use assets to owned vessels after exercising purchase options[408] - Depreciation for right-of-use assets decreased by $14.6 million (38%) to $24.2 million in 2023, as all 21 vessels previously accounted for as right-of-use assets had their purchase options exercised[409] - General and administrative expenses increased by $18.1 million (21%) to $106.3 million in 2023, mainly driven by an increase in restricted stock amortization, including $8.4 million of accelerated amortization due to the former CFO's departure[410] - A reversal of previously recorded impairment of $12.7 million was recognized in 2022, reflecting the strength in the product tanker market and significant uplift in second-hand vessel values[411] - A write-off of deposits on scrubbers totaling $10.5 million occurred in 2023 due to the expiration of the company's option to purchase scrubbers on 11 MR product tankers[412] - Net gain on sales of vessels was $12.0 million in 2023 (from two MRs sold), compared to a net loss of $66.5 million in 2022 (from 18 vessels sold)[413] - Financial expenses increased by $13.4 million (8%) to $183.2 million in 2023, primarily due to higher benchmark interest rates (LIBOR/SOFR), partially offset by overall reductions in indebtedness[414][418] - Financial income increased by $12.2 million (178%) to $19.1 million in 2023, driven by higher interest earned on cash balances due to increased interest rates and average cash balance[419] B. Liquidity and Capital Resources This sub-section details the company's liquidity strategy, sources of funds, and capital requirements, highlighting the impact of geopolitical events on cash flows, recent debt repayments, and future capital expenditure plans - Primary sources of funds include cash flows from vessels (operating in Scorpio Pools, spot market, or time charter), cash on hand, and availability under a revolving line of credit[423] - The company projects adequate financial resources to continue operations and meet financial commitments for at least 12 months, despite geopolitical events (Ukraine conflict, Red Sea attacks) which have favorably impacted demand and ton-mile[424][425][426] - Outstanding debt and lease obligations (including IFRS 16 leases) were reduced by $343.8 million during 2023[447] - Subsequent to December 31, 2023, the company committed to $171.1 million in unscheduled repayments of credit facilities and lease purchase options, with an additional $45.6 million expected to close in the first half of 2024, and further purchase option commitments of $163.5 million also expected to close in the first half of 2024[427][1111][1116] - In January 2024, the company drew down $99.0 million from the 2023 $1.0 Billion Credit Facility, collateralizing six product tankers[189][1112] - Cash and cash equivalents were $355.6 million as of December 31, 2023, down from $376.9 million as of December 31, 2022[432] - As of December 31, 2023, $288.2 million was available under the revolving portion of the 2023 $1.0 Billion Credit Facility[432] - Aggregate outstanding indebtedness was approximately $1.6 billion as of December 31, 2023, and $1.5 billion as of March 21, 2024[432] - Securities Repurchase Programs: - Under the 2020 $250 Million Securities Repurchase Program, $12.3 million in Convertible Notes Due 2025 and 3,120,341 common shares (average price $38.66/share) were repurchased in 2022[433][680] - The 2022 $250 Million Securities Repurchase Program was authorized in October 2022. 789,532 common shares (average price $51.61/share) were repurchased in December 2022, and 1,891,303 common shares (average price $50.27/share) from January 1, 2023, through February 15, 2023[434][435][681][682] - The 2023 Securities Repurchase Program was authorized on February 15, 2023, for up to $250 million. During 2023, 8,069,020 common shares (average price $48.90/share) were repurchased. The program was replenished to $250 million on May 1, May 31, and November 9, 2023, with $250 million remaining as of December 31, 2023[436][437][438][683][684][685] - As of December 31, 2023, there were 53,107,765 common shares outstanding[439] Cash Flow Summary (in thousands of U.S. dollars) | Activity | 2023 | 2022 | Change ($) | Change (%) | | :----------------- | :-------- | :---------- | :---------- | :--------- | | Operating activities | 865,492 | 769,333 | 96,159 | 12% | | Investing activities | 43,611 | 571,956 | (528,345) | (92)% | | Financing activities | (930,422) | (1,194,834) | 264,412 | 22% | - During 2023, the company sold two MR vessels for aggregate net proceeds of $64.6 million, resulting in an aggregate gain of $12.0 million[458][850] - In 2023, 8 drydocks were completed with total costs of $14.4 million and 212 off-hire days[462] - In 2023, four vessels were retrofitted with Ballast Water Treatment Systems (BWTS) at a cost of $5.3 million, incurring 147 off-hire days. No scrubbers were installed, and $10.5 million in deposits and installation costs for unexercised scrubber options were written off[465][466][847] Material Cash Requirements as of December 31, 2023 (in thousands of U.S. dollars) | Category | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | Total | | :-------------------------------------- | :--------------- | :----------- | :----------- | :---------------- | :---------- | | Principal obligations (secured credit facilities) | 225,986 | 333,111 | 556,216 | — | 1,115,313 | | Principal obligations (sale and leaseback liabilities) | 207,575 | 49,450 | 78,761 | 96,786 | 432,572 | | Estimated interest payments (secured bank loans) | 71,788 | 80,973 | 37,024 | — | 189,785 | | Estimated interest payments (sale and leaseback liabilities) | 23,721 | 29,900 | 20,562 | 13,369 | 87,552 | | Technical management fees | 13,686 | — | — | — | 13,686 | | Commercial management fees | 21,994 | — | — | — | 21,994 | | Senior unsecured notes | — | 70,571 | — | — | 70,571 | | Senior unsecured notes - estimated interest payments | 4,940 | 2,470 | — | — | 7,410 | | Total | 569,690 | 566,475 | 692,563 | 110,155 | 1,938,883 | C. Research and Development, Patents and Licenses, Etc. This sub-section states that information regarding research and development, patents, and licenses is not applicable for this report - Information on research and development, patents, and licenses is not applicable[475] D. Trend Information This sub-section directs readers to 'Item 4. Information on the Company - B. Business Overview - The International Oil Tanker Shipping Industry' for relevant trend information - Trend information is available in 'Item 4. Information on the Company - B. Business Overview - The International Oil Tanker Shipping Industry'[476] E. Critical Accounting Estimates This sub-section indicates that the company's critical accounting judgments and sources of estimation uncertainty are detailed in Note 1 to its consolidated financial statements - Critical accounting judgments and sources of estimation uncertainty are described in Note 1 to the consolidated financial statements[476] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section provides details on the company's leadership, including directors and executive officers, their biographical information, and compensation A. Directors and Senior Management This sub-section lists the company's directors and executive officers, providing their ages, positions, and brief biographical sketches, noting the potential for conflicts of interest due to officers' involvement in other business activities - The Board of Directors consists of nine members, with six determined to be independent under NYSE and SEC rules[511] Directors and Executive Officers | Name | Age | Position | | :---------------- | :-- | :------------------------------------- | | Emanuele A. Lauro | 45 | Chairman, Class I Director, and Chief Executive Officer | | Robert Bugbee | 63 | President and Class II Director | | Cameron Mackey | 55 | Chief Operating Officer and Class III Director | | Christopher Avella| 45 | Chief Financial Officer | | Filippo Lauro | 47 | Vice President | | Auste Vizbaraite | 34 | Secretary | | Marianne Økland | 61 | Class III Director | | Jose Tarruella | 52 | Class II Director | | Reidar Brekke | 62 | Class II Director | | Merrick Rayner | 68 | Class I Director | | Sujata Parekh Kumar | 64 | Class III Director | | Niccolò Camerana | 44 | Class I Director | - Christopher Avella was appointed Chief Financial Officer in October 2023. Sujata Parekh Kumar was appointed to the Board of Directors in March 2023. Niccolò Camerana was appointed to the Board of Directors in September 2023[479] - Certain officers participate in business activities not associated with the company, which may lead to less time devoted to the company and potential conflicts of interest[478] B. Compensation This sub-section details the compensation structure for senior executive officers and non-employee directors, emphasizing the role of equity interests in aligning management with shareholder performance, and provides an overview of the 2013 Equity Incentive Plan Aggregate Compensation to Senior Executive Officers (in thousands of U.S. dollars) | Category | 2023 | 2022 | 2021 | | :------------------------ | :------ | :------ | :----- | | Short-term employee benefits (salaries) | 27,972 | 32,663 | 5,488 | | Share-based compensation | 31,702 | 13,777 | 17,476 | | Total | 59,674| 46,440| 22,964| - Non-employee directors receive $60,000 annually, plus additional fees for committee service ($10,000 per committee, $25,000 for Chairman), $35,000 for the lead independent director, and $2,000 per meeting[495] - The 2013 Equity Incentive Plan has reserved additional common shares: 386,883 in June 2021, 693,864 in October 2021, 1,785,500 in March 2023, and 1,463,294 in February 2024[497][498] - In March and April 2023, 1,817,750 shares of restricted stock were issued to employees, SSH employees, and independent directors, with vesting schedules generally ranging from one to five years[507] C. Board Practices This sub-section describes the composition and committee structure of the Board of Directors, highlighting its oversight functions, particularly for financial reporting and potential conflicts of interest, and introduces the company's Clawback Policy - The Board of Directors consists of nine directors, six of whom are independent. It has an Audit Committee, a Nominating and Corporate Governance Committee, a Compensation Committee, and a Regulatory and Compliance Committee[511] - The Audit Committee reviews external financial reporting, engages external auditors, and oversees internal audit activities and controls, including potential conflicts of interest with related parties[511] - A Clawback Policy was adopted in December 2023, in accordance with NYSE rules, allowing for the recovery of incentive-based compensation in the event of an accounting restatement or significant misconduct causing material harm[512][513] D. Employees This sub-section states the number of shore-based employees and clarifies that Scorpio Ship Management S.A.M. (SSM) and Scorpio Commercial Management S.A.M. (SCM) are responsible for the company's commercial and technical management, respectively - As of both December 31, 2023, and 2022, the company had 24 shore-based employees[514] - SSM and SCM are responsible for the company's commercial and technical management[514] E. Share Ownership This sub-section provides a table detailing the common stock ownership of the company's directors and executive officers as of March 21, 2024, including restricted shares and shares acquired through other means Common Stock Ownership by Directors and Executive Officers (as of March 21, 2024) | Name | No. of Shares | % Owned | | :---------------- | :------------ | :------ | | Emanuele A. Lauro | 594,564 | 1.12% | | Robert Bugbee | 1,150,164 | 2.17% | | Cameron Mackey | 704,643 | 1.33% | | Filippo Lauro | 552,507 | 1.04% | F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation This sub-section states that the disclosure regarding a registrant's action to recover erroneously awarded compensation is not applicable - Disclosure of a registrant's action to recover erroneously awarded compensation is not applicable[519] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. This section details the company's major shareholders and its extensive related party transactions, outlining the ownership stakes of significant investors and providing a comprehensive breakdown of financial and operational dealings with entities controlled by the Lolli-Ghetti family A. Major shareholders. This sub-section identifies the beneficial owners of more than five percent of the company's common stock as of March 21, 2024 Major Shareholders (as of March 21, 2024) | Name | No. of Shares | % Owned | | :------------------------- | :------------ | :------ | | Dimensional Fund Advisors LP | 3,760,453 | 7.1% | | Scorpio Holdings Limited | 3,706,735 | 7.0% | | BlackRock, Inc. | 3,250,917 | 6.1% | - As of March 20, 2024, 211 shareholders of record, with 53 in the United States, held 96.36% of outstanding common stock[522] B. Related Party Transactions This sub-section details the company's significant transactions and relationships with related parties, primarily entities controlled by the Lolli-Ghetti family, covering commercial and technical management agreements, participation in tanker pools, and new agreements for emission services and fuel efficiency systems - The company's vessels are commercially managed by SCM and technically managed by SSM under a Revised Master Agreement, amended effective January 1, 2024 (2024 Revised Master Agreement)[523][524][525][526][528] - SCM's fees (2023) for pool operations were $300/day (LR1), $250/day (LR2), and $325/day (Handymax/MR), plus 1.50% commission on gross revenues. For non-pool vessels, fees were $250/day (LR1/LR2) and $300/day (Handymax/MR), plus 1.25% commission. Effective January 1, 2024, flat fees increased by $35 per vessel per day[529] - SSM's fixed annual technical management fee was $175,000 per vessel (2018-2023) and increased to $187,500 per vessel effective January 1, 2024, plus itemized services[530] - The company participates in four commercial pools (Scorpio LR2 Pool, Scorpio MR Pool, Scorpio Handymax Tanker Pool, Mercury Pool) managed by SCM and Pool Entities, which are related parties[534][535] - An agreement was entered into with Geoserve Energy Transport DMCC (majority owned by the Lolli-Ghetti family), effective January 1, 2024, for emissions management services at $350 per vessel per month and a 1.25% rate per carbon trade[536] - An expected licensing agreement with Fowe Eco Solutions Ltd. (minority interest owned by Scorpio Holdings Limited) for Cavitech systems will involve payments of approximately 33% of realized savings, with expected reductions of at least 3% in fuel costs and 100,000 tons of carbon emissions annually[537] Transactions with Related Parties (in thousands of U.S. dollars) | Category | 2023 | 2022 | 2021 | | :------------------------ | :-------- | :-------- | :------ | | Pool revenue | 1,155,244 | 1,186,577 | 434,982 | | Voyage revenue | — | 5,657 | — | | Time charter-out revenue | 21,555 | 2,358 | — | | Voyage expenses | (4,495) | (9,194) | (1,461) | | Vessel operating costs | (33,061) | (33,084) | (35,427)| | Administrative expenses | (15,450) | (13,175) | (13,557)| | Purchases of bunkers | (4,784) | (45,957) | (2,561) | Balances with Related Parties (as of December 31, in thousands of U.S. dollars) | Category | 2023 | 2022 | | :-------------------------------------- | :------ | :------ | | Prepaid expenses and accounts receivable (due from the Scorpio Pools) | 201,340 | 236,389 | | Prepaid expenses (SSM) | 5,522 | 5,450 | | Other assets (pool working capital contributions) | 51,411 | 53,161 | | Accounts payable and accrued expenses (SSM) | 2,468 | 823 | | Accounts payable (owed to the Scorpio Pools) | 626 | 10,090 | - Termination fees of $0.2 million to SCM and $0.1 million to SSM were paid in 2023 due to the sale of two MR product tankers[1055] - In August 2022, the company repurchased 1,293,661 common shares from Eneti Inc., a former related party, for $38.65 per share[1058] C. INTERESTS OF EXPERTS AND COUNSEL This sub-section states that information regarding the interests of experts and counsel is not applicable for this report - Information on the interests of experts and counsel is not applicable[554] ITEM 8. FINANCIAL INFORMATION This section directs readers to the consolidated financial statements for detailed financial information, addresses legal proceedings, confirms no material adverse effects from current lawsuits, and outlines the company's dividend policy A. Consolidated Statements and Other Financial Information This sub-section refers to Item 18 for the full consolidated financial statements, discusses the company's legal proceedings, stating no material adverse effects, and details the dividend policy, including historical payments and factors influencing future declarations - The company is not currently a party to any lawsuit that, if adversely determined, would have a material adverse effect on its financial position, results of operations, or liquidity[555] - The declaration and payment of dividends are at the sole discretion of the Board of Directors, dependent on earnings, financial condition, cash requirements, loan agreement restrictions, and Marshall Islands law[556][557][558] - Aggregate dividends paid to shareholders were $57.7 million in 2023, $23.3 million in 2022, and $23.3 million in 2021[560] Dividends per Share (2023) | Date Paid | Dividends per Share | | :--------------- | :------------------ | | March 31, 2023 | $0.20 | | June 30, 2023 | $0.25 | | September 15, 2023 | $0.25 | | December 15, 2023| $0.35 | B. Significant Changes This sub-section states that there have been no significant changes since the date of the annual consolidated financial statements, other than those described in Note 23 (Subsequent Events) - No significant changes have occurred since the date of the annual consolidated financial statements, other than as described in Note 23 - Subsequent Events[562] ITEM 9. OFFER AND THE LISTING This section provides information regarding the company's securities, including their listing details on the New York Stock Exchange A. Offer and Listing Details This sub-section refers to 'Item 9. Offer and Listing - C. Markets' for details on the company's offer and listing - Offer and listing details are available in 'Item 9. Offer and Listing - C. Markets'[563] B. Plan of Distribution This sub-section states that the plan of distribution is not applicable - The plan of distribution is not applicable[563] C. Markets This sub-section confirms that the company's common stock and Senior Notes Due 2025 are listed for trading on the New York Stock Exchange - The company's common stock (STNG) and 7.00% Senior Notes due 2025 (SBBA) are listed for trading on the New York Stock Exchange (NYSE)[564] D. Selling Shareholders This sub-section states that information regarding selling shareholders is not applicable - Information on selling shareholders is not applicable[564] E. Dilution This sub-section states that information regarding dilution is not applicable - Information on dilution is not applicable[565] F. Expenses of the Issue This sub-section states that information regarding the expenses of the issue is not applicable - Information on the expenses of the issue is not applicable[566] ITEM 10. ADDITIONAL INFORMATION This section provides additional corporate and financial information, including details on share capital, the company's memorandum and articles of association, material contracts, exchange controls, and a comprehensive discussion of United States federal income tax considerations A. Share Capital This sub-section states that information regarding share capital is not applicable - Information on share capital is not applicable[567] B. Memorandum and Articles of Association This sub-section summarizes the company's corporate governance documents, including authorized share capital, rights of common and preferred shares, and provisions for director elections, shareholder meetings, and anti-takeover measures - The company's authorized capitalization includes 175,000,000 registered shares, consisting of 150,000,000 common shares (par value $0.01) and 25,000,000 preferred shares (par value $0.01)[572] - As of March 21, 2024, there were 53,107,765 common shares issued and outstanding[572] - Holders of common shares are entitled to one vote per share, ratable dividends (subject to preferred shares), and pro rata distribution of remaining assets upon dissolution. They do not have conversion, redemption, or pre-emptive rights[573] - The Board of Directors is authorized to establish one or more series of preferred stock and determine their terms and rights[574] - Directors are elected annually on a staggered basis for three-year terms by a plurality of votes. The Board can fix director compensation[575][576] - Annual shareholder meetings are held at a time and place selected by the Board. Special meetings can be called by a majority of the Board, the chairman, or an officer-director. A quorum requires one-third of total voting rights[578] - Anti-takeover provisions include blank check preferred stock, staggered board, advance notice requirements for shareholder proposals and director nominations, and limitations on shareholder actions and business combinations[587][588][589][590][591][592][594] C. Material Contracts This sub-section refers to other sections of the report for discussions of material contracts, specifically 'Item 6. Directors, Senior Management and Employees-B. Compensation-2013 Equity Incentive Plan' and 'Item 7. Major Shareholders and Related Party Transactions-B. Related Party Transactions' - Material contracts are discussed in 'Item 6. Directors, Senior Management and Employees-B. Compensation-2013 Equity Incentive Plan' and 'Item 7. Major Shareholders and Related Party Transactions-B. Related Party Transactions'[595] D. Exchange Controls This sub-section states that under Marshall Islands law, there are no restrictions on the export or import of capital, including foreign exchange controls or restrictions affecting dividend remittances to non-resident holders of common shares - Under Marshall Islands law, there are no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest, or other payments to non-resident holders of common shares[597] E. Taxation This sub-section provides an overview of the United States federal income tax consequences for the company and its shareholders, focusing on the Section 883 exemption for shipping income, potential Passive Foreign Investment Company (PFIC) status, and the taxation of distributions and vessel sales - The company may be exempt from United States federal income taxation on its United States Source Shipping Income under Section 883 of the Code if it is organized in a 'qualified foreign country' (Marshall Islands) and satisfies either the '50% Ownership Test' or the 'Publicly-Traded Test'[603][604] - The company intends to take the position that it satisfies the 'Publicly-Traded Test' for its 2023 taxable year and anticipates continuing to satisfy it for future years, as its common shares are primarily and regularly traded on the NYSE[605][606][607][608][611] - If the Section 883 exemption is unavailable, United States source shipping income would be subject to a 4% Gross Basis Tax Regime (maximum effective rate of 2% on total shipping income) or a 21% federal income tax if 'effectively connected' with a United States trade or business[612][614][615] - Gain from the sale of a vessel should be exempt from United States federal income tax if the company qualifies for the Section 883 exemption; otherwise, it would be subject to tax if the sale occurs in the United States[616] - For United States Holders, distributions are generally treated as dividends to the extent of earnings and profits. Dividends paid to United States Non-Corporate Holders may be treated as 'qualified dividend income' at preferential tax rates if certain conditions are met (e.g., shares readily tradable, not a PFIC)[621][622] - The company does not believe it has been, is, or expects to become a 'passive foreign investment company' (PFIC), based on treating income from time and voyage chartering activities as services income[625][627] - Non-United States Holders are generally not subject to United States federal income tax on dividends or gains from common shares, unless the income is effectively connected with a U.S. trade or business[634][635] - Changes in global tax laws, such as the OECD's Pillar Two global corporate minimum tax rate, could materially impact financial results. Singapore intends to adopt components from January 1, 2025, but the company does not expect a material income tax impact[643][644][645] F. Dividends and Paying Agents This sub-section states that information regarding dividends and paying agents is not applicable - Information on dividends and paying agents is not applicable[646] G. Statement by Experts This sub-section states that information regarding statements by experts is not applicable - Information on statements by experts is not applicable[647] [H. Documents on Di